Peapack-Gladstone Financial Corporation Reports Third Quarter Results, as Record Wealth Management Fee Income Drives Total Fee Income to 34% of Total Revenue

Thursday, 28. October 2021 15:00

Bedminster, N.J., Oct. 28, 2021 (GLOBE NEWSWIRE) -- via NewMediaWire -- Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market: PGC) (the “Company”) announces its third quarter 2021 results.

This earnings release should be read in conjunction with the Company’s Q3 2021 Investor Update (and Supplemental Financial Information), a copy of which is available on our website at www.pgbank.com and via a current report on Form 8-K on the website of the Securities and Exchange Commission at www.sec.gov. 

For the nine months ended September 30, 2021, the Company recorded total revenue of $154.13 million, net income of $41.77 million and diluted earnings per share (“EPS”) of $2.15 compared to revenue of $143.22 million, net income of $23.16 million and diluted EPS of $1.22, respectively, for the same nine-month period ended September 30, 2020. The revenue improvement was driven by increased wealth management fee income, net interest income and gain on the sale of SBA loans, partially offset by reduced gain on sale of PPP loans.  

For the quarter ended September 30, 2021, the Company recorded total revenue of $52.99 million, net income of $14.17 million and diluted earnings per share (“EPS”) of $0.74, compared to revenue of $52.36 million, net income of $13.55 million and diluted EPS of $0.71, respectively, for the same three-month period ended September 30, 2020.

The three and nine months ended September 30, 2020 included a $7.4 million gain on sale of PPP loans. The 2020 periods also included a much higher provision for loan losses than the 2021 periods, due to the environment in 2020 created by the COVID-19 pandemic, which led to increased qualitative loss factors when calculating the allowance for loan losses.

The September 2021 quarter included increased noninterest income (when excluding the $7.4 million gain on sale of PPP loans in 2020), principally record wealth management fee income and income from capital markets activities (which includes mortgage banking income, SBA loan income, and corporate advisory fee income) when compared to the same quarter in 2020.

The September 2021 quarter also included a $1.35 million swap valuation allowance recorded in operating expenses related to an allowance for termination of a loan level, back-to-back swap on a commercial real estate loan placed on nonaccrual status.  

As previously disclosed, on January 28, 2021, the Company authorized the repurchase of up to 948,735 shares, or approximately 5% of its outstanding shares. During the third quarter of 2021 the Company purchased 227,060 shares at an average price of $32.73 for a total cost of $7.43 million. Through September 30, 2021, the Company has repurchased 619,815 shares at an average price of $31.33 for a total cost of $19.42 million, under the program.

Douglas L. Kennedy, President and CEO, said, “Our third quarter results showed continued growth in our wealth management and commercial banking businesses. Our pipelines for both of these businesses continue to be robust heading into the fourth quarter.”

Mr. Kennedy also said, “In addition to record growth in wealth management fees year-to-date in 2021, we also saw strong growth in revenue from our capital markets activities. Increases in these areas year-over-year more than offset the $7.4 million of gains generated in 2020 from PPP loan sales.”  

EXECUTIVE SUMMARY:

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

September 2021 Year Compared to Prior Year

  Nine Months Ended  Nine Months Ended          
  September 30,  September 30,   Increase/ 
(Dollars in millions, except per share data) 2021  2020   (Decrease) 
Net interest income $100.85  $95.87   $4.98   5%
Wealth management fee income (A)  39.03   30.07    8.96   30 
Capital markets activity (B)  7.10   5.02    2.08   41 
Other income (C)  7.15   12.26    (5.11)  (42)
Total other income  53.28   47.35    5.93   13 
Operating expenses (A) (D)  94.46   85.71    8.75   10 
Pretax income before provision for loan losses  59.67   57.51    2.16   4 
Provision for loan and lease losses (E)  2.73   30.05    (27.32)  (91)
Pretax income  56.94   27.46    29.48   107 
Income tax expense/(benefit) (F)  15.17   4.30    10.87   253 
Net income $41.77  $23.16   $18.61   80%
Diluted EPS $2.15  $1.22   $0.93   76%
                  
Total Revenue (G) $154.13  $143.22   $10.91   8%
                  
Return on average assets annualized  0.94%  0.54%   0.40     
Return on average equity annualized  10.43%  6.07%   4.36     

(A) The September 2021 nine months included nine months of wealth management fee income and expense related to the December hires of the teams from Lucas Capital Management (“Lucas”) and Noyes Capital Management (“Noyes”) and three months of wealth management fee income and expense related to the July acquisition of Princeton Portfolio Strategies Group (“PPSG”).

(B) Capital markets activity included fee income from loan level back-to-back swaps, the SBA lending and sale program, corporate advisory activities and mortgage banking activities. The September 2021 nine months included $1.3 million of corporate advisory fee income, the majority of which related to a large investment banking advisory event, which closed in the March 2021 quarter. There were no fees related to loan level back-to-back swap activities in the nine months ended September 30, 2021, compared to $1.6 million in the same 2020 period.

(C) The 2021 nine months included a cost of $842,000 related to the termination of interest rate swaps; a $1.4 million gain on loans held at lower of cost or fair value; $722,000 of fee income related to the referral of PPP loans to a third party; and $455,000 of additional BOLI income related to receipt of life insurance proceeds.  The 2020 nine months included a $7.4 million gain on the sale of $355 million of PPP loans.

(D) The 2021 nine months included $1.5 million of severance expense related to certain corporate restructuring within several areas of the Bank; $648,000 of expense related to the redemption of subordinated debt; and $1.4 million related to a swap valuation allowance. 

(E) The 2020 nine months included a provision for loan and lease losses of $30.1 million, primarily due to the environment at that time created by the COVID-19 pandemic.

(F) The 2020 nine months included a $3.2 million tax benefit related to the carryback of tax NOLs to prior years when the Federal tax rate was 14% higher.

(G) Total revenue equals net interest income plus total other income.

September 2021 Quarter Compared to Prior Year Quarter

  Three Months Ended   Three Months Ended         
  September 30,   September 30,  Increase/ 
(Dollars in millions, except per share data) 2021   2020  (Decrease) 
Net interest income $35.21   $32.15  $3.06   10%
Wealth management fee income (A)  13.86    10.12   3.74   37 
Capital markets activity (B)  2.06    1.11   0.95   86 
Other income (C)  1.86    8.98   (7.12)  (79)
Total other income  17.78    20.21   (2.43)  (12)
Operating expenses (A) (D)  32.18    28.46   3.72   13 
Pretax income before provision for loan losses  20.81    23.90   (3.09)  (13)
Provision for loan and lease losses (E)  1.60    5.15   (3.55)  (69)
Pretax income  19.21    18.75   0.46   2 
Income tax expense  5.04    5.20   (0.16)  (3)
Net income $14.17   $13.55  $0.62   5%
Diluted EPS $0.74   $0.71  $0.03   4%
                  
Total Revenue (F) $52.99   $52.36  $0.63   1%
                  
Return on average assets annualized  0.95%   0.89%  0.06     
Return on average equity annualized  10.40%   10.53%  (0.13)    

(A) The September 2021 quarter included a full quarter of wealth management fee income and expense related to the December hires of the teams from Lucas and Noyes and the July acquisition of PPSG.

(B) Capital markets activity included fee income from loan level back-to-back swaps, the SBA lending and sale program, corporate advisory activities, and mortgage banking activities.

(C) The quarter ended September 30, 2020 included a gain on sale of $7.4 million on the sale of $355 million of PPP loans.

(D) The September 2021 quarter included $1.4 million related to a swap valuation allowance. 

(E) The September 2020 quarter included a provision for loan and lease losses of $5.2 million, primarily due to the environment at that time created by the COVID-19 pandemic.

(F) Total revenue equals net interest income plus total other income.

September 2021 Quarter Compared to Linked Quarter

  Three Months Ended  Three Months Ended          
  September 30,  June 30,   Increase/ 
(Dollars in millions, except per share data) 2021  2021   (Decrease) 
Net interest income $35.21  $33.85   $1.36   4%
Wealth management fee income (A)  13.86   13.03    0.83   6 
Capital markets activity (B)  2.06   1.46    0.60   41 
Other income (C)  1.86   3.18    (1.32)  (42)
Total other income  17.78   17.67    0.11   1 
Operating expenses (D)  32.18   30.68    1.50   5 
Pretax income before provision for loan losses  20.81   20.84    (0.03)  (0)
Provision for loan and lease losses  1.60   0.90    0.70   78 
Pretax income  19.21   19.94    (0.73)  (4)
Income tax expense  5.04   5.52    (0.48)  (9)
Net income $14.17  $14.42   $(0.25)  (2)%
Diluted EPS $0.74  $0.74   $-   0%
                  
Total Revenue (E) $52.99  $51.52   $1.47   3%
                  
Return on average assets annualized  0.95%  0.97%   (0.02)    
Return on average equity annualized  10.40%  10.86%   (0.46)    

(A) The September 2021 quarter included a full quarter of wealth management fee income and expense related to the July acquisition of PPSG.

(B) Capital markets activity included fee income from loan level back-to-back swaps, the SBA lending and sale program, corporate advisory and mortgage banking activities.

(C) The quarter ended June 30, 2021 included a cost of $842,000 related to the termination of interest rate swaps; a $1.1 million gain on the sale of PPP loans; $722,000 of fee income related to the referral of PPP loans to a third party; and $153,000 of additional BOLI income related to receipt of life insurance proceeds.

(D) The September 2021 quarter included $1.4 million related to a swap valuation allowance.   The June 2021 quarter included $648,000 of expense related to the redemption of subordinated debt.

(E) Total revenue equals net interest income plus total other income.

The Company’s priorities include:

  • Grow and expand our three primary drivers of profitability: Wealth Management, Commercial Banking and Capital Markets businesses.
  • Continued well-disciplined wealth management acquisitions.
  • Continue loan and deposit pricing discipline.
  • Continue to execute on our stock repurchase program.
  • Drive Return on Assets to greater than 1% and Return on Average Tangible Common Equity to greater than 14% over time.

Select highlights:

Peapack Private Wealth Management:

  • AUM/AUA in our Peapack Private Wealth Management Division grew to $10.3 billion at September 30, 2021 (from $8.8 billion at December 31, 2020).
  • Wealth Management fee income increased to $14 million for Q3 2021 (compared to $10 million for Q3 2020).
  • On July 1, 2021, we closed on the acquisition of PPSG.

Commercial Banking and Balance Sheet Management:

  • At September 30, 2021, loans totaled $4.55 billion (excluding $49 million of PPP loans), compared to $4.21 billion (excluding $196 million of PPP loans) at December 31, 2020, reflecting growth of 8% (or 11% annualized)  
  • Core deposits (which includes noninterest-bearing demand and interest-bearing demand, savings and money market) totaled 89% of total deposits at September 30, 2021, with an average cost of 0.17%. Noninterest bearing demand deposit accounts (included in core deposits) totaled 18% of total deposits.
  • The net interest margin improved by 4 basis points in Q3 2021 compared to Q2 2021 and improved 22 basis points when compared to Q3 2020.   

Capital Management:

  • Continued to execute on the previously approved stock repurchase program – during Q3 repurchased 227,060 shares at an average price of $32.73 for a total cost of $7.4 million. (Year-to-date through September 30, 2021, the Company has repurchased 619,815 shares).
  • Tangible book value per share increased to $26.50 at September 30, 2021 from $25.47 at December 31, 2020, despite recent stock repurchase activity. See the Non-GAAP financial measures reconciliation included in this release.

SUPPLEMENTAL QUARTERLY DETAILS:

Wealth Management

In the September 2021 quarter, the Bank’s wealth management business generated a record $13.86 million in fee income, compared to $10.12 million for the September 2020 quarter, and $13.03 million for the June 2021 quarter.

The market value of the Company’s AUM/AUA increased to $10.3 billion at September 30, 2021 from $8.8 billion at December 31, 2020, due to $715 million of organic new business, acquisitions, and favorable market conditions.

John P. Babcock, President of the Peapack Private Wealth Management division, said, “2021 showed continued strong new business, new client acquisition and client retention. We ended 2020 with a very strong Q4 and this continued into 2021 with gross inflows of $715 million for the first nine months of 2021.” Babcock went on to note, “We continue to look to grow our wealth business organically and through selective acquisitions. We continue to make significant progress on our infrastructure consolidation including launching our new trading platform, as well as adding more resources to our financial planning team.”

Loans / Commercial Banking

At September 30, 2021, loans and leases totaled $4.55 billion (excluding $49 million of PPP loans), compared to $4.21 billion (excluding $196 million of PPP loans) at December 31, 2020, reflecting year-to-date growth of $338 million or 8% (11% annualized). This growth was achieved despite over $400 million of accelerated prepayments over the nine-month period.  

Total C&I loans and leases (including the PPP loans) at September 30, 2021 were $1.83 billion or 40% of the total loan portfolio.

Mr. Kennedy noted, “Our commercial loan pipelines continue to be strong going into the fourth quarter, standing at approximately $400 million with likelihood of closing during the fourth quarter of 2021. Notwithstanding the sale and forgiveness of PPP loans and significant payoff activity, we believe that we will achieve high single digit loan growth for 2021, which was the upper end of our guidance provided in the beginning of 2021.”

Mr. Kennedy also noted, “As mentioned in the past, our Corporate Advisory business, which gives us the capability to engage in high level strategic debt, capital and valuation analysis, is enabling us to provide a unique boutique level of service. This business has gained momentum and also has a robust pipeline of new business opportunities.”

Funding / Liquidity / Interest Rate Risk Management

The Company actively manages its deposit base to reduce reliance on wholesale sourced deposits, volatility, and/or operational risk.  Total deposits at September 30, 2021 increased $558 million to $5.38 billion from $4.82 billion at December 31, 2020. Along with the deposit growth, the change in mix was favorable, as noninterest bearing demand deposits increased $153 million, interest-bearing demand increased $507 million, while higher costing CDs declined $104 million and brokered deposits declined $25 million, when comparing September 30, 2021 to December 31, 2020. 

Mr. Kennedy noted, “89% of our deposits are demand, savings, or money market, and, our noninterest bearing deposits comprise 18% of our total deposits; both metrics reinforce the “core” nature of our deposit base.”

At September 30, 2021, the Company’s balance sheet liquidity (investments, interest-earning deposits and cash) totaled $1.5 billion (or 24% of assets).  This level is much higher than the level at June 30, 2021 due to a significant increase in core deposits during Q3 2021. In addition, the Company has approximately $1.9 billion of secured funding available from the Federal Home Loan Bank and $1.1 billion of secured funding available from the Federal Reserve Discount Window.  The available funding from the Federal Home Loan Bank and the Federal Reserve is secured by the Company’s loan and investment portfolios.

Mr. Kennedy noted, “As a commercial bank, a large portion of our loans reprice when the Fed changes rates. The 150-basis point reduction in target Fed Funds near the end of the first quarter of 2020 reduced the Company’s yield on assets. However, we were able to strategically reprice our deposits over time to offset much of that decline. Further, when interest rates rise, we expect that our net interest income will improve. Our current modeling indicates that 42% of our loan portfolio will reprice within three months (54% within one-year).”

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

 Nine Months Ended  Nine Months Ended        
 September 30, 2021  September 30, 2020        
 NII  NIM  NII  NIM        
                       
NII/NIM excluding the below$97,655  2.53%  $91,901  2.51%        
Prepayment premiums received on loan paydowns 1,530  0.03%   1,005  0.02%        
Effect of maintaining excess interest earning cash (365) -0.17%   (1,000) -0.19%        
Effect of PPP loans 2,029  -0.04%   3,961  -0.01%        
NII/NIM as reported$100,849  2.35%  $95,867  2.33%        
                       
 Three Months Ended  Three Months Ended  Three Months Ended
 September 30, 2021  June 30, 2021  September 30, 2020
 NII  NIM  NII  NIM  NII  NIM
                       
NII/NIM excluding the below$34,635  2.56%  $32,446  2.56%  $30,327  2.45%
Prepayment premiums received on loan paydowns 325  0.02%   501  0.04%   104  0.01%
Effect of maintaining excess interest earning cash (46) -0.14%   (115) -0.15%   (266) -0.24%
Effect of PPP loans 297  -0.02%   1,013  -0.07%   1,984  -0.02%
NII/NIM as reported$35,211  2.42%  $33,845  2.38%  $32,149  2.20%

As shown above, the Company’s reported NIM increased 4 basis points compared to the linked quarter. The Bank strategically lowered its cost of funds and grew its average loan portfolio, both of which benefitted NIM.

Future net interest income and net interest margin should benefit from the following:

  • Robust loan pipelines to generate loan growth and utilize excess liquidity.
  • Continued downward repricing of maturing CDs.
  • An increase in target Fed funds (should that occur).

Income from Capital Markets Activities

  Three Months Ended  Three Months Ended  Three Months Ended 
  September 30,  June 30,  September 30, 
(Dollars in thousands, except per share data) 2021  2021  2020 
Gain on loans held for sale at fair value (Mortgage banking) $408  $409  $954 
Fee income related to loan level, back-to-back swaps         
Gain on sale of SBA loans  1,569   932   79 
Corporate advisory fee income  84   121   75 
Total capital markets activity $2,061  $1,462  $1,108 

Noninterest income from Capital Markets activities (detailed above) totaled $2.06 million for the September 2021 quarter compared to $1.46 million for the June 2021 quarter and $1.11 million for the September 2020 quarter.  The September 2021 and June 2021 quarter results were driven by $1.57 million and $932,000 in gains on the sale of SBA loans, respectively. The September 2020 quarter reflected increased mortgage banking activity due to greater refinance activity in the low-rate environment. During the September 2021, June 2021 and September 2020 quarter, the Company recorded minimal corporate advisory fee income.  These transactions tend to be larger and take longer to complete. As noted previously, the pipeline of such business is robust. The September 2021, June 2021 and September 2020 quarters included no income from loan level, back-to-back swap activities, as there has been, and will continue to be, minimal activity for such in the current environment.

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

                Other noninterest income (as defined above) totaled $1.86 million, $3.18 million, and $8.98 million, for the September 2021, June 2021, and September 2020 quarters, respectively. The June 2021 quarter included $153,000 of Bank Owned life Insurance income due to receipt of life insurance proceeds; a $1.13 million gain on the sale of PPP loans; and $722,000 of fee income related to referral of PPP loans to a third party. This was partially offset by an $842,000 cost on the termination of $40 million notional interest rate swaps with an all-in cost of 1.50%. The September 2020 quarter included a $7.43 million gain on the sale of PPP loans.

Operating Expenses

The Company’s total operating expenses were $32.18 million for the quarter ended September 30, 2021, compared to $30.68 million for the June 2021 quarter and $28.46 million for the September 2020 quarter. The September 2021 quarter included $1.35 million related to a swap valuation allowance.  The September 2021 quarter also included a full quarter’s worth of expense related to the teams hired from Lucas and Noyes and the acquisition of PPSG. The June 2021 quarter included $648,000 of expense related to the redemption of subordinated debt.  The June 2021 quarter also included a full quarter’s worth of expense related to the teams hired from Lucas and Noyes.

Mr. Kennedy noted, “While we continue to manage expenses closely and prudently, we will invest in digital enhancements to improve the client experience and grow and expand our core wealth management and commercial banking businesses, including lift-outs, strategic hires, and wealth M&A.”

Income Taxes

The effective tax rate for the three months ended September 30, 2021 was 26.22%, as compared to 27.69% for the June 2021 quarter and 27.75% for the quarter ended September 30, 2020.

The effective tax rate for the nine months of 2021 was 26.65% compared to 15.65% for the first nine months of 2020.  During the first quarter of 2020, the Company recorded a $3.34 million tax benefit, principally due to a $3.2 million Federal income tax benefit that resulted from a tax NOL carryback. The Company had a $23 million operating loss for tax purposes in 2018 (when the Federal tax rate was 21%) resulting from accelerated tax depreciation. Under the CARES Act, the Company was allowed to carry this NOL back to a period when the Federal tax rate was 35%, generating a permanent tax benefit. 

Asset Quality / Provision for Loan and Lease Losses

For further details, see the Q3 2021 Investor Update (and Supplemental Financial Information).

Nonperforming assets (which does not include troubled debt restructured loans that are performing in accordance with their terms) at September 30, 2021 were $25.9 million, or 0.42% of total assets, compared to $11.5 million, or 0.19% of total assets, at December 31, 2020. A single large commercial real estate loan with a large retail component, and on deferral, was placed on nonaccrual status as of September 30, 2021.  

For the quarter ended September 30, 2021, the Company’s provision for loan and lease losses was $1.6 million compared to $900,000 for the June 2021 quarter and $5.15 million for the September 2020 quarter. The decreased provision for loan and lease losses in the 2021 quarters when compared to the 2020 quarter reflect the reduced qualitative loss factors related to the unemployment rate and amount of loan deferrals and other economic qualitative factors due to the COVID-19 pandemic, when calculating the allowance for loan losses. Loans on deferral, and accruing, entered into during the COVID-19 pandemic have come down significantly from the prior year (declined from $914 million at June 30, 2020 to $13 million at September 30, 2021). The Company’s provision for loan and lease losses, and its allowance for loan and lease losses (ALLL) also reflect, among other things, the Company’s assessment of asset quality metrics, net charge-offs/recoveries, and the composition of the loan portfolio.

At September 30, 2021, the allowance for loan and lease losses was $65.13 million (1.42% of total loans), compared to $63.51 million at June 30, 2021 (1.39% of loans) and $67.31 million at December 31, 2020 (1.53% of total loans).  See page 16 in the Q3 2021 Investor Update (and Supplemental Financial Information) for a rollforward of the Company’s ALLL from June 30, 2021 to September 30, 2021. The Company will adopt CECL effective January 1, 2022 and does not expect a material adjustment upon adoption.

Capital

The Company’s capital position during the September 2021 quarter was benefitted by net income of $14.17 million, which was offset by the purchase of shares through the Company’s stock repurchase program and the quarterly dividend. During the third quarter of 2021, the Company repurchased 227,060 shares at an average price of $32.73 for a total cost of $7.4 million.  GAAP Capital at September 30, 2021 was also impacted by an increase in the unrealized loss on securities from June 30, 2021 to September 30, 2021, due to a rise in medium-term Treasury yields as of September 30, 2021.

The Company’s and Bank’s capital ratios at September 30, 2021 all remain strong.  Such ratios remain well above regulatory well capitalized standards.

As previously announced, in the fourth quarter of 2020, the Company successfully completed a private placement of $100 million in fixed-to floating rate subordinated notes due 2030 at a rate of 3.5%. Such funds benefitted the Company’s Regulatory Tier 2 Capital. At the time, the Company noted the proceeds raised would be used for general corporate purposes, which could include stock repurchases, the redemption of the Company’s existing 6% subordinated debt and acquisitions of wealth management firms. Throughout the first nine months of 2021, the Company repurchased $19 million of stock.  On June 30, 2021 the Company redeemed its 6% subordinated debt. On July 1, 2021 the Company closed on the acquisition of PPSG.

The Company employs quarterly capital stress testing run under multiple scenarios, including a no growth, severely adverse case. In such case as of June 30, 2021, the Bank remains well capitalized over a two-year stress period. With a Pandemic stress overlay on this case, the Bank still remains well capitalized over the two-year stress period. For further details, see page 26 in the Q3 2021 Investor Update (and Supplemental Financial Information).

On October 27, 2021, the Company declared a cash dividend of $0.05 per share payable on November 26, 2021 to shareholders of record on November 10, 2021.

ABOUT THE COMPANY

Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $6.2 billion and assets under management/administration of $10.3 billion as of September 30, 2021.  Founded in 1921, Peapack-Gladstone Bank is a commercial bank that provides innovative wealth management, commercial and retail solutions, including residential lending and online platforms, to businesses and consumers.  Peapack Private, the bank’s wealth management division, offers comprehensive financial, tax, fiduciary and investment advice and solutions, to individuals, families, privately-held businesses, family offices and not-for-profit organizations, which help them to establish, maintain and expand their legacy.  Together, Peapack-Gladstone Bank and Peapack Private offer an unparalleled commitment to client service.  Visit www.pgbank.com and www.peapackprivate.com for more information.

The foregoing may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements are not historical facts and include expressions about management’s confidence and strategies and management’s expectations about new and existing programs and products, investments, relationships, opportunities and market conditions.  These statements may be identified by such forward-looking terminology as “expect,” “look,” “believe,” “anticipate,” “may” or similar statements or variations of such terms.  Actual results may differ materially from such forward-looking statements.  Factors that may cause results to differ materially from such forward-looking statements include, but are not limited to:

  • our 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 2021 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 the value in our investment portfolio;
  • impact from a pandemic event on our business, operations, customers, allowance for loan losses and capital levels;
  • 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 delinquent, nonperforming, classified and criticized 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;
  • a reduction in our lower-cost funding sources;
  • our inability to adapt to technological changes;
  • claims and litigation pertaining to fiduciary responsibility, environmental laws and other matters;
  • our inability to retain key employees;
  • demands for loans and deposits in our market areas;
  • adverse changes in securities markets;
  • changes in accounting policies and practices; and
  • other unexpected material adverse changes in our operations or earnings.

Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 pandemic on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and whether the gradual reopening of businesses will result in a meaningful increase in economic activity.  As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

  • demand for our products and services may decline, making it difficult to grow assets and income;
  • if the economy is unable to substantially reopen, and higher levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;
  • collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;
  • our allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect our net income;
  • the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;
  • a material decrease in net income or a net loss over several quarters could result in an elimination or a decrease in the rate of our quarterly cash dividend;
  • our wealth management revenues may decline with continuing market turmoil;
  • a worsening of business and economic conditions or in the financial markets could result in an impairment of certain intangible assets, such as goodwill;
  • the unanticipated loss or unavailability of key employees due to the outbreak, which could harm our ability to operate our business or execute our business strategy, especially as we may not be successful in finding and integrating suitable successors;
  • we may face litigation, regulatory enforcement and reputation risk as a result of our participation in the PPP and the risk that the SBA may not fund some or all PPP loan guaranties;
  • our cyber security risks are increased as the result of an increase in the number of employees working remotely; and
  • FDIC premiums may increase if the agency experience additional resolution costs.

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, 2020.  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 
  Sept 30,  June 30,  March 31,  Dec 31,  Sept 30, 
  2021  2021  2021  2020  2020 
Income Statement Data:                    
Interest income $40,067  $39,686  $38,239  $38,532  $40,174 
Interest expense  4,856   5,841   6,446   6,797   8,025 
Net interest income  35,211   33,845   31,793   31,735   32,149 
Wealth management fee income  13,860   13,034   12,131   10,791   10,119 
Service charges and fees  959   896   846   859   785 
Bank owned life insurance  311   466   611   313   314 
Gain on loans held for sale at fair value
   (Mortgage banking) (A)
  408   409   1,025   1,470   954 
Gain/(loss) on loans held for sale at lower of cost or
   fair value(B)
     1,125   282      7,429 
Fee income related to loan level, back-to-back
   swaps (A)
               
Gain on sale of SBA loans (A)  1,569   932   1,449   375   79 
Corporate advisory fee income (A)  84   121   1,098   50   75 
Loss on swap termination     (842)         
Other income (C)  660   1,495   643   590   456 
Securities gains/(losses), net  (70)  42   (265)  (42)   
Total other income  17,781   17,678   17,820   14,406   20,211 
Salaries and employee benefits (D)  19,859   19,910   21,990   19,902   19,202 
Premises and equipment  4,459   4,074   4,113   4,189   4,109 
FDIC insurance expense  555   529   585   665   605 
FHLB prepayment penalty           4,784    
Valuation allowance loans held for sale (E)           4,425    
Swap valuation allowance  1,350             
Other expenses  5,962   6,171   4,906   5,284   4,545 
Total operating expenses  32,185   30,684   31,594   39,249   28,461 
Pretax income before provision for loan losses  20,807   20,839   18,019   6,892   23,899 
Provision for loan and lease losses (F)  1,600   900   225   2,350   5,150 
Income before income taxes  19,207   19,939   17,794   4,542   18,749 
Income tax expense  5,036   5,521   4,616   1,512   5,202 
Net income $14,171  $14,418  $13,178  $3,030  $13,547 
                     
Total revenue (G) $52,992  $51,523  $49,613  $46,141  $52,360 
Per Common Share Data:                    
Earnings per share (basic) $0.76  $0.76  $0.70  $0.16  $0.72 
Earnings per share (diluted)  0.74   0.74   0.67   0.16   0.71 
Weighted average number of common
   shares outstanding:
                    
Basic  18,763,316   18,963,237   18,950,305   18,947,864   18,908,337 
Diluted  19,273,831   19,439,439   19,531,689   19,334,569   19,132,650 
Performance Ratios:                    
Return on average assets annualized (ROAA)  0.95%  0.97%  0.89%  0.21%  0.89%
Return on average equity annualized (ROAE)  10.40%  10.86%  10.03%  2.32%  10.53%
Return on average tangible common equity (ROATCE) (H)  11.43%  11.83%  10.94%  2.51%  11.41%
Net interest margin (tax-equivalent basis)  2.42%  2.38%  2.28%  2.25%  2.20%
GAAP efficiency ratio (I)  60.74%  59.55%  63.68%  85.06%  54.36%
Operating expenses / average assets annualized  2.16%  2.06%  2.14%  2.66%  1.86%

(A) Gain on loans held for sale at fair value (mortgage banking), fee income related to loan level, back-to-back swaps, gain on sale of SBA loans and corporate advisory fee income are all included in “capital markets activity” as referred to within the earnings release.

(B) Includes gain on sale of $355 million and $57 million of PPP loans completed in the September 2020 and June 2021 quarters, respectively.

(C) Includes income of $722,000 from the referral of PPP loans to a third-party firm during the June 2021 quarter.

(D) The March 2021 quarter included $1.5 million of severance expense related to corporate restructuring.

(E) The December 2020 quarter reflects a $4.4 million write-down of a commercial real estate held for sale loan associated with an assisted living facility.

(F) The September 2020 and December 2020 quarters included a higher provision for loan and lease losses primarily due to the environment created by the COVID-19 pandemic.

(G) Total revenue equals net interest income plus total other income.

(H) Return on average tangible common equity is calculated by dividing tangible common equity by annualized net income.  See Non-GAAP financial measures reconciliation included in these tables.

(I) Calculated as total operating expenses as a percentage of total revenue.  For Non-GAAP efficiency ratio, see the Non-GAAP financial measures reconciliation included in these tables.

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

  For the Nine Months Ended         
  September 30,  Change 
  2021  2020  $  % 
Income Statement Data:                
Interest income $117,992  $127,218  $(9,226)  -7%
Interest expense  17,143   31,351   (14,208)  -45%
Net interest income  100,849   95,867   4,982   5%
Wealth management fee income  39,025   30,070   8,955   30%
Service charges and fees  2,701   2,296   405   18%
Bank owned life insurance  1,388   960   428   45%
Gain on loans held for sale at fair value (Mortgage banking) (A)  1,842   1,796   46   3%
Gain on loans held for sale at lower of cost or fair value (B)  1,407   7,426   (6,019)  -81%
Fee income related to loan level, back-to-back swaps (A)     1,620   (1,620)  -100%
Gain on sale of SBA loans (A)  3,950   1,391   2,559   184%
Corporate advisory fee income (A)  1,303   215   1,088   506%
Loss on swap termination  (842)     (842) N/A 
Other income (C)  2,798   1,257   1,541   123%
Securities gains/(losses), net  (293)  323   (616)  -191%
Total other income  53,279   47,354   5,925   13%
Salaries and employee benefits (D)  61,759   57,614   4,145   7%
Premises and equipment  12,646   12,188   458   4%
FDIC insurance expense  1,669   1,310   359   27%
Swap valuation allowance  1,350      1,350  N/A 
Other expenses  17,039   14,598   2,441   17%
Total operating expenses  94,463   85,710   8,753   10%
Pretax income before provision for loan losses  59,665   57,511   2,154   4%
Provision for loan and lease losses (E)  2,725   30,050   (27,325)  -91%
Income before income taxes  56,940   27,461   29,479   107%
Income tax expense (F)  15,173   4,299   10,874   253%
Net income $41,767  $23,162  $18,605   80%
                 
Total revenue (G) $154,128  $143,221  $10,907   8%
Per Common Share Data:                
Earnings per share (basic) $2.21  $1.23  $0.98   80%
Earnings per share (diluted)  2.15   1.22   0.93   76%
Weighted average number of common shares outstanding:                
Basic  18,891,601   18,879,688   21,913   0%
Diluted  19,390,522   19,052,605   337,917   2%
Performance Ratios:                
Return on average assets annualized (ROAA)  0.94%  0.54%  0.40%  74%
Return on average equity annualized (ROAE)  10.43%  6.07%  4.36%  72%
Return on average tangible common equity (ROATCE) (H)  11.40%  6.59%  4.81%  73%
Net interest margin (tax-equivalent basis)  2.35%  2.33%  0.02%  1%
GAAP efficiency ratio (I)  61.29%  59.84%  1.45%  2%
Operating expenses / average assets annualized  2.12%  1.99%  0.13%  7%

(A) Gain on loans held for sale at fair value (mortgage banking), fee income related to loan level, back-to-back swaps, gain on sale of SBA loans and corporate advisory fee income are all included in “capital markets activity” as referred to within the earnings release.

(B) Includes gain on sale of PPP loans of $57 million and $355 million completed in the nine months ended September 30, 2021 and 2020, respectively.

(C) Includes income of $722,000 from the referral of PPP loans to a third-party firm during the nine months ended September 2021.

(D) The nine months ended September 30, 2021 included $1.5 million of severance expense related to corporate restructuring.

(E) The nine months ended September 30, 2020 included a higher provision for loan and lease losses primarily due to the environment created by the COVID-19 pandemic.

(F) 2020 included a $3.2 million tax benefit related to the carryback of tax NOLs to prior years when the Federal tax rate was 14% higher.

(G) Total revenue equals net interest income plus total other income.

(H) Return on average tangible common equity is calculated by dividing tangible common equity by annualized net income.  See Non-GAAP financial measures reconciliation included in these tables.

(I) Calculated as total operating expenses as a percentage of total revenue.  For Non-GAAP efficiency ratio, see the Non-GAAP financial measures reconciliation included in these tables.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION

(Dollars in Thousands)
(Unaudited)

  As of 
  Sept 30,  June 30,  March 31,  Dec 31,  Sept 30, 
  2021  2021  2021  2020  2020 
ASSETS                    
Cash and due from banks $9,299  $12,684  $8,159  $10,629  $8,400 
Federal funds sold        102   102   102 
Interest-earning deposits  606,913   190,778   468,276   642,591   670,863 
Total cash and cash equivalents  616,212   203,462   476,537   653,322   679,365 
Securities available for sale  843,779   823,820   875,301   622,689   596,929 
Equity security  14,824   14,894   14,852   15,117   15,159 
FHLB and FRB stock, at cost  12,950   12,901   13,699   13,709   18,433 
Residential mortgage  510,878   504,181   498,884   520,188   532,120 
Multifamily mortgage  1,497,683   1,420,043   1,178,940   1,127,198   1,168,796 
Commercial mortgage  680,107   702,777   697,599   694,034   722,678 
Commercial loans (A)  1,833,532   1,880,830   1,982,570   1,975,337   1,930,984 
Consumer loans  30,689   31,889   36,519   37,016   51,859 
Home equity lines of credit  42,512   44,062   45,624   50,547   52,194 
Other loans  245   204   199   225   260 
Total loans  4,595,646   4,583,986   4,440,335   4,404,545   4,458,891 
Less: Allowances for loan and lease losses  65,133   63,505   67,536   67,309   66,145 
Net loans  4,530,513   4,520,481   4,372,799   4,337,236   4,392,746 
Premises and equipment  23,123   23,261   23,260   21,609   21,668 
Other real estate owned        50   50   50 
Accrued interest receivable  22,790   23,117   23,916   22,495   22,192 
Bank owned life insurance  46,510   46,605   46,448   46,809   46,645 
Goodwill and other intangible assets  49,333   43,156   43,524   43,891   39,622 
Finance lease right-of-use assets  3,769   3,956   4,143   4,330   4,517 
Operating lease right-of-use assets  10,307   9,569   10,186   9,421   10,011 
Other assets (B)  66,175   66,466   64,912   99,764   110,770 
TOTAL ASSETS $6,240,285  $5,791,688  $5,969,627  $5,890,442  $5,958,107 
                     
LIABILITIES                    
Deposits:                    
Noninterest-bearing demand deposits $986,765  $959,494  $908,922  $833,500  $838,307 
Interest-bearing demand deposits  2,355,892   1,978,497   1,987,567   1,849,254   1,858,529 
Savings  168,831   147,227   141,743   130,731   127,737 
Money market accounts  1,287,686   1,213,992   1,256,605   1,298,885   1,251,349 
Certificates of deposit – Retail  426,981   446,143   474,668   530,222   586,801 
Certificates of deposit – Listing Service  31,382   31,631   31,631   32,128   32,677 
Subtotal “customer” deposits  5,257,537   4,776,984   4,801,136   4,674,720   4,695,400 
IB Demand – Brokered  85,000   85,000   110,000   110,000   130,000 
Certificates of deposit – Brokered  33,804   33,791   33,777   33,764   33,750 
Total deposits  5,376,341   4,895,775   4,944,913   4,818,484   4,859,150 
Short-term borrowings        15,000   15,000   15,000 
FHLB advances (C)              105,000 
Paycheck Protection Program Liquidity Facility (D)  48,496   83,586   168,180   177,086   183,790 
Finance lease liability  6,063   6,299   6,528   6,753   6,976 
Operating lease liability  10,644   9,902   10,509   9,737   10,318 
Subordinated debt, net (E)  132,629   132,557   181,837   181,794   83,585 
Other liabilities (B)  123,098   125,110   120,219   154,466   156,472 
Due to brokers              15,088 
TOTAL LIABILITIES  5,697,271   5,253,229   5,447,186   5,363,320   5,435,379 
Shareholders’ equity  543,014   538,459   522,441   527,122   522,728 
TOTAL LIABILITIES AND                    
SHAREHOLDERS’ EQUITY $6,240,285  $5,791,688  $5,969,627  $5,890,442  $5,958,107 
Assets under management and / or administration at
   Peapack-Gladstone Banks Private Wealth Management
   Division (market value, not included above-dollars in billions)
 $10.3  $9.8  $9.4  $8.8  $7.6 

(A) Includes PPP loans of $49 million at September 30, 2021, $84 million at June 30, 2021, $233 million at March 31, 2021, $196 million at December 31, 2020, and $202 million at September 30, 2020.

(B) The change in other assets and other liabilities was primarily due to the change in the fair value of our back-to-back swap program.

(C) The Company prepaid $105 million of FHLB advances with a weighted-average rate of 3.20% during the December 2020 quarter.

(D) Represents funding provided by the Federal Reserve for pledged PPP loans.

(E) The increase was due to the completion of a $100 million subordinated debt offering in December 2020.  The Company redeemed $50 million of subordinated debt on June 30, 2021.


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

  As of 
  Sept 30,  June 30,  March 31,  Dec 31,  Sept 30, 
  2021  2021  2021  2020  2020 
Asset Quality:                    
Loans past due over 90 days and still accruing $  $  $  $  $ 
Nonaccrual loans (A)  25,925   5,962   11,767   11,410   8,611 
Other real estate owned        50   50   50 
Total nonperforming assets $25,925  $5,962  $11,817  $11,460  $8,661 
                     
Nonperforming loans to total loans  0.56%  0.13%  0.27%  0.26%  0.19%
Nonperforming assets to total assets  0.42%  0.10%  0.20%  0.19%  0.15%
                     
Performing TDRs (B)(C) $416  $190  $197  $201  $2,278 
                     
Loans past due 30 through 89 days and still accruing (D)(E) $1,193  $1,678  $1,622  $5,053  $6,609 
                     
Loans subject to special mention $115,935  $148,601  $166,013  $162,103  $129,700 
                     
Classified loans $51,937  $11,178  $25,714  $37,771  $41,263 
                     
Impaired loans $26,341  $6,498  $11,964  $16,204  $15,514 
                     
Allowance for loan and lease losses:                    
Beginning of period $63,505  $67,536  $67,309  $66,145  $66,065 
Provision for loan and lease losses  1,600   900   225   2,350   5,150 
(Charge-offs)/recoveries, net  28   (4,931)  2   (1,186)  (5,070)
End of period $65,133  $63,505  $67,536  $67,309  $66,145 
                     
ALLL to nonperforming loans  251.24%  1065.16%  573.94%  589.91%  768.15%
ALLL to total loans  1.42%  1.39%  1.52%  1.53%  1.48%
General ALLL to total loans (F)  1.26%  1.38%  1.45%  1.47%  1.48%

(A) Excludes one commercial loan held for sale of $5.6 million at September 30, 2021, June 30, 2021 and March 31, 2021. Excludes residential and commercial loans held for sale of $8.5 million at December 31, 2020.  Excludes one commercial loan held for sale of $10.0 million at September 30, 2020.

(B) Amounts reflect TDRs that are paying according to restructured terms.

(C) Amount excludes $4.0 million at September 30, 2021, $3.9 million at June 30, 2021, $3.9 million at March 31, 2021, $4.0 million at December 31, 2020 and $5.2 million at September 30, 2020 of TDRs included in nonaccrual loans.

(D) Excludes a residential loan held for sale of $93,000 at December 31, 2020.

(E) December 31, 2020 includes $1.3 million of residential loans that are classified as delinquent due to an escrow payment shortage due to a recent change in escrow payment requirement.

(F) Total ALLL less specific reserves equals general ALLL.

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

  September 30,  December 31,  September 30, 
  2021  2020  2020 
Capital Adequacy                  
Equity to total assets (A)(J)    8.70%    8.95%    8.77%
Tangible Equity to tangible assets (B)    7.97%    8.27%    8.16%
Tangible Equity to tangible assets excluding
   PPP loans (C)
    8.04%    8.55%    8.45%
Book value per share (D)   $29.15    $27.78    $27.62 
Tangible Book Value per share (E)   $26.50    $25.47    $25.53 


  September 30,  December 31,  September 30,
  2021  2020  2020
Regulatory Capital Holding Company                       
Tier I leverage $501,188  8.56%  $483,535  8.53%  $483,782  8.54%
Tier I capital to risk-weighted assets  501,188  10.97   483,535  11.93   483,782  11.76
Common equity tier I capital ratio
   to risk-weighted assets
  501,159  10.97   483,500  11.93   483,747  11.75
Tier I & II capital to risk-weighted assets  691,044  15.12   716,210  17.67   618,993  15.04
                        
Regulatory Capital Bank                       
Tier I leverage (F) $594,610  10.15%  $549,575  9.71%  $547,761  9.68%
Tier I capital to risk-weighted assets (G)  594,610  13.01   549,575  13.55   547,761  13.33
Common equity tier I capital ratio
   to risk-weighted assets (H)
  594,581  13.01   549,540  13.55   547,726  13.33
Tier I & II capital to risk-weighted assets (I)  651,841  14.26   600,478  14.81   599,314  14.58

(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.

(C) Tangible equity and tangible assets excluding PPP loans are calculated by excluding the balance of intangible assets from shareholders’ equity and excluding the balance of intangible assets and PPP loans from total assets. Tangible equity as a percentage of tangible assets excluding PPP loans at period end is calculated by dividing tangible equity by tangible assets excluding PPP loans at period end.  See Non-GAAP financial measures reconciliation included in these tables.

(D) Book value per common share is calculated by dividing shareholders’ equity by period end common shares outstanding

(E) Tangible book value per share 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.

(F) Regulatory well capitalized standard = 5.00% ($293 million)

(G) Regulatory well capitalized standard = 8.00% ($366 million)

(H) Regulatory well capitalized standard = 6.50% ($297 million)

(I) Regulatory well capitalized standard = 10.00% ($457 million)

(J) PPP loans with a balance of $49 million at September 30, 2021, $196 million at December 31, 2020 and $202 million at September 30, 2020 increased total assets.

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


  For the Quarters Ended 
  Sept 30,  June 30,  March 31,  Dec 31,  Sept 30, 
  2021  2021  2021  2020  2020 
Residential loans retained $36,845  $37,083  $15,814  $22,316  $32,599 
Residential loans sold  24,041   25,432   45,873   64,630   54,521 
Total residential loans  60,886   62,515   61,687   86,946   87,120 
Commercial real estate  14,944   12,243   38,363      1,613 
Multifamily  120,716   255,820   85,009   1,184   1,500 
Commercial (C&I) loans (A) (B)  143,121   141,285   129,141   218,235   118,048 
SBA (C)  11,570   15,976   58,730   8,355   4,962 
Wealth lines of credit (A)  10,020   3,200   2,475   3,925   2,000 
Total commercial loans  300,371   428,524   313,718   231,699   128,123 
Installment loans  178   25   63   690   253 
Home equity lines of credit (A)  2,535   4,140   1,899   2,330   4,759 
Total loans closed $363,970  $495,204  $377,367  $321,665  $220,255 


  For the Nine Months Ended 
  Sept 30,  Sept 30, 
  2021  2020 
Residential loans retained $89,742  $66,057 
Residential loans sold  95,346   110,973 
Total residential loans  185,088   177,030 
Commercial real estate  65,550   11,219 
Multifamily  461,545   75,458 
Commercial (C&I) loans (A) (B)  413,547   260,250 
SBA (C)  86,276   614,443 
Wealth lines of credit (A)  15,695   5,750 
Total commercial loans  1,042,613   967,120 
Installment loans  266   1,459 
Home equity lines of credit (A)  8,574   12,671 
Total loans closed $1,236,541  $1,158,280 

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

(B) Includes equipment finance.

(C) Includes PPP loans of $9.2 million for the quarter ended June 30, 2021, $47 million for the quarter ended March 31, 2021 and $596 million for the nine months ended September 30, 2020.

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

  September 30, 2021  September 30, 2020 
  Average  Income/      Average  Income/     
  Balance  Expense  Yield  Balance  Expense  Yield 
ASSETS:                        
Interest-earning assets:                        
Investments:                        
Taxable (A) $820,574  $2,824   1.38% $553,607  $2,182   1.58%
Tax-exempt (A) (B)  6,035   64   4.24   9,127   116   5.08 
                         
Loans (B) (C):                        
Mortgages  503,621   3,779   3.00   529,500   4,437   3.35 
Commercial mortgages  2,133,259   16,114   3.02   1,929,319   15,115   3.13 
Commercial  1,826,368   16,553   3.63   2,134,399   17,653   3.31 
Commercial construction  24,596   198   3.22   4,395   55   5.01 
Installment  32,219   245   3.04   52,659   377   2.86 
Home equity  43,182   357   3.31   53,373   444   3.33 
Other  252   5   7.94   283   7   9.89 
Total loans  4,563,497   37,251   3.27   4,703,928   38,088   3.24 
Federal funds sold           102      0.25 
Interest-earning deposits  413,623   142   0.14   652,832   159   0.10 
Total interest-earning assets  5,803,729   40,281   2.78%  5,919,596   40,545   2.74%
Noninterest-earning assets:                        
Cash and due from banks  8,592           7,479         
Allowance for loan and lease losses  (64,100)          (68,110)        
Premises and equipment  23,311           21,511         
Other assets  201,287           242,017         
Total noninterest-earning assets  169,090           202,897         
Total assets $5,972,819          $6,122,493         
                         
LIABILITIES:                        
Interest-bearing deposits:                        
Checking $2,098,827  $1,177   0.22% $1,828,780  $1,130   0.25%
Money markets  1,257,760   683   0.22   1,235,040   920   0.30 
Savings  152,759   20   0.05   125,016   16   0.05 
Certificates of deposit – retail  461,917   836   0.72   642,732   2,529   1.57 
Subtotal interest-bearing deposits  3,971,263   2,716   0.27   3,831,568   4,595   0.48 
Interest-bearing demand – brokered  85,000   385   1.81   130,000   636   1.96 
Certificates of deposit – brokered  33,796   266   3.15   33,742   267   3.17 
Total interest-bearing deposits  4,090,059   3,367   0.33   3,995,310   5,498   0.55 
Borrowings  64,332   57   0.35   475,465   1,221   1.03 
Capital lease obligation  6,147   74   4.82   7,054   84   4.76 
Subordinated debt  132,588   1,358   4.10   83,552   1,222   5.85 
Total interest-bearing liabilities  4,293,126   4,856   0.45%  4,561,381   8,025   0.70%
Noninterest-bearing liabilities:                        
Demand deposits  997,450           872,560         
Accrued expenses and other liabilities  137,387           173,816         
Total noninterest-bearing liabilities  1,134,837           1,046,376         
Shareholders’ equity  544,856           514,736         
Total liabilities and shareholders’ equity $5,972,819          $6,122,493         
Net interest income     $35,425          $32,520     
Net interest spread          2.33%          2.04%
Net interest margin (D)          2.42%          2.20%

(A) Average balances for available for sale securities are based on amortized cost.

(B) Interest income is presented on a tax-equivalent basis using a 21% federal tax rate.

(C) Loans are stated net of unearned income and include nonaccrual loans.

(D) Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.

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

  September 30, 2021  June 30, 2021 
  Average  Income/      Average  Income/     
  Balance  Expense  Yield  Balance  Expense  Yield 
ASSETS:                        
Interest-earning assets:                        
Investments:                        
Taxable (A) $820,574  $2,824   1.38% $884,374  $3,020   1.37%
Tax-exempt (A) (B)  6,035   64   4.24   6,891   81   4.70 
                         
Loans (B) (C):                        
Mortgages  503,621   3,779   3.00   498,594   3,826   3.07 
Commercial mortgages  2,133,259   16,114   3.02   1,941,330   15,056   3.10 
Commercial  1,826,368   16,553   3.63   1,942,802   16,984   3.50 
Commercial construction  24,596   198   3.22   20,952   180   3.44 
Installment  32,219   245   3.04   34,319   255   2.97 
Home equity  43,182   357   3.31   45,042   377   3.35 
Other  252   5   7.94   219   5   9.13 
Total loans  4,563,497   37,251   3.27   4,483,258   36,683   3.27 
Federal funds sold           91      0.06 
Interest-earning deposits  413,623   142   0.14   428,464   97   0.09 
Total interest-earning assets  5,803,729   40,281   2.78%  5,803,078   39,881   2.75%
Noninterest-earning assets:                        
Cash and due from banks  8,592           10,360         
Allowance for loan and lease losses  (64,100)          (67,593)        
Premises and equipment  23,311           23,307         
Other assets  201,287           182,421         
Total noninterest-earning assets  169,090           148,495         
Total assets $5,972,819          $5,951,573         
                         
LIABILITIES:                        
Interest-bearing deposits:                        
Checking $2,098,827  $1,177   0.22% $1,980,688  $944   0.19%
Money markets  1,257,760   683   0.22   1,235,464   727   0.24 
Savings  152,759   20   0.05   144,044   18   0.05 
Certificates of deposit – retail  461,917   836   0.72   488,148   1,027   0.84 
Subtotal interest-bearing deposits  3,971,263   2,716   0.27   3,848,344   2,716   0.28 
Interest-bearing demand – brokered  85,000   385   1.81   105,604   456   1.73 
Certificates of deposit – brokered  33,796   266   3.15   33,783   264   3.13 
Total interest-bearing deposits  4,090,059   3,367   0.33   3,987,731   3,436   0.34 
Borrowings  64,332   57   0.35   166,343   182   0.44 
Capital lease obligation  6,147   74   4.82   6,380   76   4.76 
Subordinated debt  132,588   1,358   4.10   181,317   2,147   4.74 
Total interest-bearing liabilities  4,293,126   4,856   0.45%  4,341,771   5,841   0.54%
Noninterest-bearing liabilities:                        
Demand deposits  997,450           948,851         
Accrued expenses and other liabilities  137,387           129,980         
Total noninterest-bearing liabilities  1,134,837           1,078,831         
Shareholders’ equity  544,856           530,971         
Total liabilities and shareholders’ equity $5,972,819          $5,951,573         
Net interest income     $35,425          $34,040     
Net interest spread          2.33%          2.21%
Net interest margin (D)          2.42%          2.38%

(A) Average balances for available for sale securities are based on amortized cost.

(B) Interest income is presented on a tax-equivalent basis using a 21% federal tax rate.

(C) Loans are stated net of unearned income and include nonaccrual loans.

(D) Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.

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

  September 30, 2021  September 30, 2020 
  Average  Income/      Average  Income/     
  Balance  Expense  Yield  Balance  Expense  Yield 
ASSETS:                        
Interest-earning assets:                        
Investments:                        
Taxable (A) $822,262  $8,473   1.37% $467,881  $6,749   1.92%
Tax-exempt (A) (B)  6,961   243   4.65   9,930   376   5.05 
                         
Loans (B) (C):                        
Mortgages  501,276   11,559   3.07   531,563   13,510   3.39 
Commercial mortgages  1,972,723   45,590   3.08   1,989,256   49,745   3.33 
Commercial  1,900,231   49,992   3.51   1,977,597   54,450   3.67 
Commercial construction  20,418   516   3.37   4,440   187   5.62 
Installment  34,724   777   2.98   53,165   1,212   3.04 
Home equity  45,672   1,133   3.31   54,627   1,512   3.69 
Other  239   15   8.37   321   23   9.55 
Total loans  4,475,283   109,582   3.26   4,610,969   120,639   3.49 
Federal funds sold  64      0.13   102      0.25 
Interest-earning deposits  465,287   367   0.11   468,064   820   0.23 
Total interest-earning assets  5,769,857   118,665   2.74%  5,556,946   128,584   3.09%
Noninterest-earning assets:                        
Cash and due from banks  10,018           6,149         
Allowance for loan and lease losses  (67,592)          (58,896)        
Premises and equipment  23,087           21,373         
Other assets  203,344           212,716         
Total noninterest-earning assets  168,857           181,342         
Total assets $5,938,714          $5,738,288         
                         
LIABILITIES:                        
Interest-bearing deposits:                        
Checking $1,996,663  $3,099   0.21% $1,706,558  $6,219   0.49%
Money markets  1,250,933   2,204   0.23   1,211,720   5,374   0.59 
Savings  140,066   55   0.05   118,291   47   0.05 
Certificates of deposit – retail  494,255   3,333   0.90   672,308   9,370   1.86 
Subtotal interest-bearing deposits  3,881,917   8,691   0.30   3,708,877   21,010   0.76 
Interest-bearing demand – brokered  100,110   1,334   1.78   153,358   2,259   1.96 
Certificates of deposit – brokered  33,783   791   3.12   33,729   794   3.14 
Total interest-bearing deposits  4,015,810   10,816   0.36   3,895,964   24,063   0.82 
Borrowings  138,448   448   0.43   330,324   3,360   1.36 
Capital lease obligation  6,376   229   4.79   7,266   261   4.79 
Subordinated debt  165,053   5,650   4.56   83,496   3,667   5.86 
Total interest-bearing liabilities  4,325,687   17,143   0.53%  4,317,050   31,351   0.97%
Noninterest-bearing liabilities:                        
Demand deposits  932,088           763,414         
Accrued expenses and other liabilities  143,045           149,187         
Total noninterest-bearing liabilities  1,075,133           912,601         
Shareholders’ equity  533,894           508,637         
Total liabilities and shareholders’ equity $5,934,714          $5,738,288         
Net interest income     $101,522          $97,233     
Net interest spread          2.21%          2.12%
Net interest margin (D)          2.35%          2.33%

(A) Average balances for available for sale securities are based on amortized cost.

(B) Interest income is presented on a tax-equivalent basis using a 21% federal tax rate.

(C) Loans are stated net of unearned income and include nonaccrual loans.

(D) Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
NON-GAAP FINANCIAL MEASURES RECONCILIATION

Tangible book value per share and tangible equity as a percentage of tangible assets at period end are non-GAAP financial measures derived from GAAP-based amounts.  We calculate tangible equity and tangible assets by excluding the balance of intangible assets from shareholders’ equity and total assets, respectively.  We calculate tangible book value per share by dividing tangible equity by period end common shares outstanding, as compared to book value per common share, which we calculate by dividing shareholders’ equity by period end common shares outstanding.  We calculate tangible equity as a percentage of tangible assets at period end by dividing tangible equity by tangible assets at period end.  We believe that this is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of risk-based capital ratios.

The efficiency ratio is a non-GAAP measure of expense control relative to recurring revenue.  We calculate the efficiency ratio by dividing total noninterest expenses, excluding other real estate owned provision, as determined under GAAP, by net interest income and total noninterest income as determined under GAAP, but excluding net gains/(losses) on loans held for sale at lower of cost or fair value and excluding net gains on securities from this calculation, which we refer to below as recurring revenue.  We believe that this provides a reasonable measure of core expenses relative to core revenue.

We believe 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.

(Dollars in thousands, except share data)

  Three Months Ended 
  Sept 30,  June 30,  March 31,  Dec 31,  Sept 30, 
Tangible Book Value Per Share 2021  2021  2021  2020  2020 
Shareholders’ equity $543,014  $538,459  $522,441  $527,122  $522,728 
Less:  Intangible assets, net  49,333   43,156   43,524   43,891   39,622 
Tangible equity  493,681   495,303   478,917   483,231   483,106 
                     
Period end shares outstanding  18,627,910   18,829,877   19,034,870   18,974,703   18,924,953 
Tangible book value per share $26.50  $26.30  $25.16  $25.47  $25.53 
Book value per share  29.15   28.60   27.45   27.78   27.62 
                     
Tangible Equity to Tangible Assets                    
Total assets $6,240,285  $5,791,688  $5,969,627  $5,890,442  $5,958,107 
Less: Intangible assets, net  49,333   43,156   43,524   43,891   39,622 
Tangible assets  6,190,952   5,748,532   5,926,103   5,846,551   5,918,485 
Less: PPP Loans  48,721   83,766   232,721   195,574   201,991 
Tangible Assets excluding PPP Loans  6,142,231   5,664,766   5,693,382   5,650,977   5,716,494 
Tangible equity to tangible assets  7.97%  8.62%  8.08%  8.27%  8.16%
Tangible equity to tangible assets excluding PPP loans  8.04%  8.74%  8.41%  8.55%  8.45%
Equity to assets (A)  8.70%  9.30%  8.75%  8.95%  8.77%

(A) Equity to total assets would be 8.77% if PPP loans of $47 million were excluded from total assets as of September 30, 2021. Equity to total assets would be 9.43% if PPP loans of $84 million were excluded from total assets as of June 30, 2021. Equity to total assets would be 9.11% if PPP loans of $233 million were excluded from total assets of March 31, 2021. Equity to total assets would be 9.26% if PPP loans of $196 million were excluded from total assets as of December 31, 2020. Equity to total assets would be 9.08% if PPP loans of $202 million were excluded from total assets as of September 30, 2020.


  Three Months Ended 
  Sept 30,  June 30,  March 31,  Dec 31,  Sept 30, 
Return on Average Tangible Equity 2021  2021  2021  2020  2020 
Net income $14,171  $14,418  $13,178  $3,030  $13,547 
                     
Average shareholders’ equity $544,856  $530,971  $525,643  $523,446  $514,736 
Less:  Average intangible assets, net  48,757   43,366   43,742   40,336   39,811 
Average tangible equity  496,099   487,605   481,901   483,110   474,925 
                     
Return on average tangible common equity  11.43%  11.83%  10.94%  2.51%  11.41%


  For the Nine Months Ended 
  Sept 30,  Sept 30, 
Return on Average Tangible Equity 2021  2020 
Net income $41,767  $23,162 
         
Average shareholders’ equity $533,894  $508,637 
Less:  Average intangible assets, net  45,306   40,135 
Average tangible equity  488,588   468,502 
         
Return on average tangible common equity  11.40%  6.59%


  Three Months Ended 
  Sept 30,  June 30,  March 31,  Dec 31,  Sept 30, 
Efficiency Ratio 2021  2021  2021  2020  2020 
Net interest income $35,211  $33,845  $31,793  $31,735  $32,149 
Total other income  17,781   17,678   17,820   14,406   20,211 
Add:                    
   Securities (gains)/losses, net  70   (42)  265   42    
Less:                    
   Loss/(gain) on loans held for sale                    
   at lower of cost or fair value     (1,125)  (282)     (7,429)
   Income from life insurance proceeds     (153)  (302)      
   Loss/(gain) on swap termination     842          
Total recurring revenue  53,062   51,045   49,294   46,183   44,931 
                     
Operating expenses  32,185   30,684   31,594   39,249   28,461 
Less:                    
   FHLB prepayment penalty           4,784    
   Valuation allowance loans held for sale           4,425    
   Write-off of subordinated debt costs     648          
   Swap valuation allowance  1,350             
   Severance expense        1,532       
Total operating expense  30,835   30,036   30,062   30,040   28,461 
                     
Efficiency ratio  58.11%  58.84%  60.99%  65.05%  63.34%


  For the Nine Months Ended 
  Sept 30,  Sept 30, 
Efficiency Ratio 2021  2020 
Net interest income $100,849  $95,867 
Total other income  53,279   47,354 
Add:        
   Securities (gains)/losses, net  293   (323)
Less:        
   Loss/(gain) on swap termination  842    
   Income from life insurance proceeds  (455)   
   Loss/(gain) on loans held for sale        
   at lower of cost or fair value  (1,407)  (7,426)
Total recurring revenue  153,401   135,472 
         
Operating expenses  94,463   85,710 
Less:        
   Write-off of subordinated debt costs  648    
   Swap valuation allowance  1,350    
   Severance expense  1,532    
Total operating expense  90,933   85,710 
         
Efficiency ratio  59.28%  63.27%


Contact:

Jeffrey J. Carfora, SEVP and CFO

Peapack-Gladstone Financial Corporation

T: 908-719-4308



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