Peapack-Gladstone Financial Corporation Reports Third Quarter Results

Bedminster, NJ - (NewMediaWire) - October 28, 2020 - Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market: PGC) (the “Company”) announces its third quarter 2020 results.

This earnings release should be read in conjunction with the Company’s Q3 2020 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.  

The Company recorded total revenue of $143.22 million, net income of $23.16 million and diluted earnings per share (“EPS”) of $1.22 for the nine months ended September 30, 2020, compared to $128.53 million, $35.20 million and $1.81, respectively, for the nine months ended September 30, 2019.

The 2020 nine-month period included increased net interest income and increased non-interest income due principally to earnings from the Paycheck Protection Program (“PPP”) and increased wealth management income (primarily due to the acquisition of Point View Wealth Management acquired in September 2019) , which was partially offset by increased operating expenses (due in part to the previous mentioned firm acquired in September 2019).

The 2020 nine-month period also included a tax benefit of $3.2 million recorded in the first quarter of 2020 caused by the changes in the treatment of tax net operating losses (“NOL”) under the provisions of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.   The decrease in net income and EPS for the 2020 nine-month period was the result of a $30.05 million provision for loan losses due to the current environment created by the COVID-19 pandemic, which led to increased qualitative loss factors when calculating the allowance for loan losses. This compared to a $2.05 million provision for the 2019 nine-month period.   

For the quarter ended September 30, 2020, the Company recorded revenue of $52.36 million, net income of $13.55 million and EPS of $0.71, compared to $44.51 million, $12.23 million and $0.63, respectively, for the same three-month period last year.

The 2020 quarter included increased net interest income and increased non-interest income due principally to earnings from the PPP and increased wealth management income (primarily due to the acquisition of Point View  in September 2019) , which was partially offset by increased operating expenses (due in part to the previous mentioned firm acquired in September 2019), and an increase in the provision for loan and lease losses to $5.15 million due to the current environment created by the COVID-19 pandemic, compared to an $800,000 provision for loan and lease losses for the 2019 quarter.   

Douglas L. Kennedy, President and CEO, said, “As I mentioned last quarter, our employees worked tirelessly to process approximately 2,500 PPP applications resulting in approximately $600 million in fundings. The Bank made a decision to sell a significant portion ($355 million) of its PPP loans in the third quarter, which generated a $7.4 million gain. The sale was to a well-respected firm that focuses on the forgiveness and ongoing servicing process associated with PPP loans, who will serve our clients well. Our client relationship is still maintained as we maintained all depository relationships (including those from the PPP loan fundings) and all loan relationships outside of PPP loans. Further the sale has given us the ability to free up internal resources to focus on generating new business and continuing to provide excellent service to our clients.” 

As of September 30, 2020, the Bank still holds $202 million of PPP loans (almost all of which exceed $2.0 million in original principal amount) with approximately $1.5 million of net deferred fees which will be recognized into income over the two-year maturity of the loan or as forgiven or repaid.

Mr. Kennedy also said, “The COVID-19 pandemic continues to have a devastating effect on businesses both locally and nationally. We have allowed our commercial and business clients to have their loan deferred for a six-month period. As of June 30, 2020, our deferrals stood at $914 million. As of September 30, 2020, deferrals were $828 million. An additional $247 million came off deferral status in October bringing deferrals down to $581 million. An additional $449 million is scheduled to come off in November. Further, as of this writing, our deferrals in sectors with COVID elevated residual risk (Hospitality and Food Services and Retail - Non-Grocery Anchored) totaled $95 million or 2% of total loans.”

For more information about the Company’s loan deferrals, including a breakdown by loan type and industry, as well as detail concerning our loan exposure to industries, please see the Q3 2020 Investor Update (and Supplemental financial Information).

EXECUTIVE SUMMARY:

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

Year over Year Comparison

  Nine Months Ended  Nine Months Ended          
  September 30,  September 30,   Increase/ 
(Dollars in millions, except per share data) 2020  2019   (Decrease) 
Net interest income $95.87  $89.36   $6.51   7%
Wealth management fee income (A)  30.07   28.24    1.83   6 
Capital markets activity (B)  4.81   4.93    (0.12)  (2)
Other income (C)  12.47   6.00    6.47   108 
Total other income  47.35   39.17    8.18   21 
Operating expenses  85.71   78.15    7.56   10 
Pretax income before provision for loan losses  57.51   50.38    7.13   14 
Provision for loan and lease losses (D)  30.05   2.05    28.00   1,366 
Pretax income  27.46   48.33    (20.87)  (43)
Income tax expense (E)  4.30   13.13    (8.83)  (67)
Net income $23.16  $35.20   $(12.04)  (34)%
Diluted EPS $1.22  $1.81   $(0.59)  (33)%
                  
Total Revenue $143.22  $128.53   $14.69   11%
                  
Return on average assets annualized  0.54%  0.99%   (0.45)    
Return on average equity annualized  6.07%  9.67%   (3.60)    


  1. The nine months ended September 30, 2020 included wealth management fee income and expense related to Point View Wealth Management, (“Point View”), which was acquired effective September 1, 2019. 
  2. Capital markets activity includes loan level back-to-back swap activities, the SBA lending and sale program, and mortgage banking activities.
  3. The nine months ended September 30, 2020 includes a gain on sale of $7.4 million on the sale of $355 million of PPP loans.
  4. The nine months ended September 30, 2020 included a provision for loan and lease losses of $30.05 million, which was primarily due to the current environment created by the COVID-19 pandemic.
  5. The 2020 period 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.

            September 2020 Quarter Compared to Prior Year Quarter

  Three Months Ended   Three Months Ended         
  September 30,   September 30,  Increase/ 
(Dollars in millions, except per share data) 2020   2019  (Decrease) 
Net interest income $32.15   $30.09  $2.06   7%
Wealth management fee income (A)  10.12    9.50   0.62   7 
Capital markets activity (B)  1.03    2.77   (1.74)  (63)
Other income (C)  9.06    2.15   6.91   321 
Total other income  20.21    14.42   5.79   40 
Operating expenses  28.46    26.26   2.20   8 
Pretax income before provision for loan losses  23.90    18.25   5.65   31 
Provision for loan and lease losses (D)  5.15    0.80   4.35   544 
Pretax income  18.75    17.45   1.30   7 
Income tax expense  5.20    5.22   (0.02)  (0)
Net income $13.55   $12.23  $1.32   11%
Diluted EPS $0.71   $0.63  $0.08   12%
                  
Total Revenue $52.36   $44.51  $7.85   18%
                  
Return on average assets annualized  0.89%   1.00%  (0.11)    
Return on average equity annualized  10.53%   9.87%  0.66     


  1. The September 2020 quarter included a full quarter of wealth management fee income and expense related to Point View, which was acquired effective September 1, 2019. 
  2. Capital markets activity includes loan level back-to-back swap activities, the SBA lending and sale program, and mortgage banking activities.
  3. The quarter ended September 30, 2020 includes a gain on sale of $7.4 million on the sale of $355 million of PPP loans.
  4. The September 2020 quarter included a provision for loan and lease losses of $5.15 million.  The increase in the provision for loan and lease losses was primarily due to the current environment created by the COVID-19 pandemic.

September 2020 Quarter Compared to Linked Quarter

  Three Months Ended  Three Months Ended          
  September 30,  June 30,   Increase/ 
(Dollars in millions, except per share data) 2020  2020   (Decrease) 
Net interest income $32.15  $31.97   $0.18   1%
Wealth management fee income  10.12   10.00    0.12   1 
Capital markets activity (A)  1.03   1.01    0.02   2 
Other income (B)  9.06   1.61    7.45   463 
Total other income  20.21   12.62    7.59   60 
Operating expenses  28.46   29.01    (0.55)  (2)
Pretax income before provision for loan losses  23.90   15.58    8.32   53 
Provision for loan and lease losses  5.15   4.90    0.25   5 
Pretax (loss)/income  18.75   10.68    8.07   76 
Income tax expense  5.20   2.44    2.76   113 
Net income $13.55  $8.24   $5.31   64%
Diluted EPS $0.71  $0.43   $0.28   65%
                  
Total Revenue $52.36  $44.59   $7.77   17%
                  
Return on average assets annualized  0.89%  0.56%   0.33     
Return on average equity annualized  10.53%  6.56%   3.97     


  1. Capital markets activity includes loan level back-to-back swap activities, the SBA lending and sale program, and mortgage banking activities. 
  2. The quarter ended September 30, 2020 includes a gain on sale of $7.4 million on the sale of $355 million of PPP loans.

The Company’s near-term priorities include:
                   

  • Continued emphasis on the health and safety of our employees and clients.
  • Actively manage credit risk associated with the COVID-19 pandemic.
  • Grow and expand our core wealth management and commercial banking businesses.
  • Prudently manage costs, capital and liquidity, but remain opportunistic for accretive wealth M&A and talent lift-outs.
  • Evaluate office space and branch requirements.
  • Accelerate digital enhancement initiatives to improve the client experience.
  • Grow fee income to 35% to 45% of total bank revenue.

Other select highlights for the quarter included:

  • Wealth management fee income, which comprised approximately 21% of the Company’s total revenue for the nine-months ended September 30, 2020, continues to contribute significantly to the Company’s diversified revenue sources.
  • As of September 30, 2020, total C&I loans (including PPP loans) comprised 43% of the total loan portfolio. 
  • Deposits totaled $4.86 billion at September 30, 2020.  This reflected net growth of $616 million or 15% (19% annualized) when compared to $4.24 billion at December 31, 2019. 
  • The Company’s core net interest margin stabilized in the quarter when compared to the June 2020 quarter. (See subsequent discussion of Net Interest Income / Net Interest Margin)
  • In addition to $1.3 billion (22% of total assets) of balance sheet liquidity (investments, interest-earning deposits and cash) as of September 30, 2020, the Company also has access to approximately $2.7 billion of available secured funding at the Federal Home Loan Bank and the Federal Reserve.
  • The Company’s and Bank’s capital ratios at September 30, 2020 remain strong and the Company’s tangible book value per share at September 30, 2020 was $25.53 reflecting an increase of 7% from $23.91 at September 30, 2019, despite a higher than normal provision for loan and lease losses during 2020.
  • Nonperforming assets at September 30, 2020 declined $18.1 million to $8.7 million, or 0.15% of total assets at September 30, 2020, from $26.8 million or 0.43% at June 30, 2020.   

SUPPLEMENTAL QUARTERLY DETAILS:

Wealth Management Business

In the September 2020 quarter, the Bank’s wealth management business generated $10.12 million in fee income, compared to $9.50 million for the September 2019 quarter, and $10.00 million for the June 2020 quarter. The September 2020 and June 2020 quarters included three months of fee income related to Point View, which was acquired effective September 1, 2019, while the September 2019 quarter included one month of fee income.

The market value of the Company’s assets under management and/or administration (“AUM/AUA”) increased from $7.2 billion at June 30, 2020 to a record $7.6 billion at September 30, 2020, reflecting a 6% (22% annualized) increase.

John P. Babcock, President of the “Peapack Private Wealth Management” division, said, “Client retention during the COVID-19 crisis continues to be excellent with negligible account closings and no atypical withdrawal activity. Proactive client outreach continues at full strength.” Babcock went on to note, “Year-to-date gross client inflows totaled $528 million. We continue to look to grow our wealth business organically and through acquisition, and our pipeline for both is strong.  At year-end 2020, we will combine two more of our acquired RIAs with Peapack Private to further integrate our wealth acquisitions.”

Loans / Commercial Banking 

Total loans of $4.46 billion at September 30, 2020 increased $47 million when compared to the December 31, 2019 balance, and declined $441 million from $4.90 billion at June 30, 2020. Growth as compared to December 31, 2019 was driven by robust PPP loan originations of $596 million during the second quarter of 2020, which was partially offset by the sale of $355 million of PPP loans during the third quarter of 2020. Excluding PPP loan originations, 2020 origination levels were less than 2019 due to the COVID-19 pandemic.

Total C&I loans (including equipment finance leases and loans of $686 million and $202 million of PPP loans) at September 30, 2020 were $1.93 billion.  This reflected net growth of $155 million when compared to $1.78 billion at December 31, 2019.  Excluding the $202 million of PPP loans at September 30, 2020, total C&I loans declined $47 million in 2020 due to the paydown of several large lines of credit, as well the Company’s workout and asset recovery efforts, including several nonaccrual and/or classified credits during Q3 2020.

The Company maintains a well-diversified loan portfolio, by loan type and by industry concentration, as detailed in the Q3 2020 Investor Update (and Supplemental Financial Information).

Mr. Kennedy noted, “Our commercial pipelines going into the fourth quarter are strong. Further, and as I noted in prior periods, our Corporate Advisory business complements our commercial banking and wealth management businesses by giving us 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. Our Corporate Advisory pipelines are also strong.”

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, 2020 were $4.86 billion reflecting an increase of $616 million when compared to $4.24 billion at December 31, 2019. Noninterest bearing demand deposits increased $309 million, interest bearing demand increased $348 million, brokered deposits declined $50 million, and higher costing CDs declined $62 million.  Mr. Kennedy noted, “Of our total deposits, only 17 percent are above the FDIC insurance limit, reinforcing the “core” nature of our deposit base.”

For the quarter ended September 30, 2020, the Company’s balance sheet liquidity (investments, interest-earning deposits and cash) totaled $1.3 billion (or 22% of assets).  In addition to the $1.3 billion of balance sheet liquidity, the Company also had approximately $1.7 billion of secured funding available from the Federal Home Loan Bank. Additionally, the Company also had $1.0 billion of secured funding available from the Federal Reserve Discount Window.

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 Q1 2020 reduced the Company’s interest income earned on assets. However, we were able to strategically reprice our deposits over time to offset much of that decline by the end of 2020.” 

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

 Nine Months Ended  Nine Months Ended         
 September 30, 2020  September 30, 2019         
 NII  NIM  NII  NIM         
                        
NII/NIM excluding the below$91,901  2.51%  $88,762  2.70%         
Prepayment premiums received on loan paydowns 1,005  0.02%   914  0.03%         
Effect of maintaining excess interest earning cash (1,000) -0.19%   (316) -0.08%         
Effect of PPP loans 3,961  -0.01%     0.00%         
NII/NIM as reported$95,867  2.33%  $89,360  2.65%         
                        
 Three Months Ended  Three Months Ended  Three Months Ended 
 September 30, 2020  June 30, 2020
  September 30, 2019 
 NII  NIM  NII  NIM  NII  NIM 
                        
NII/NIM excluding the below$30,327  2.45%  $29,881  2.45%  $29,896  2.67% 
Prepayment premiums received on loan paydowns 104  0.01%   376  0.03%   236  0.02% 
Effect of maintaining excess interest earning cash (266) -0.24%   (263) -0.19%   (47) -0.09% 
Effect of PPP loans 1,984  -0.02%   1,977  -0.02%     0.00% 
NII/NIM as reported$32,149  2.20%  $31,971  2.27%  $30,085  2.60% 


As shown above, the Company’s reported NIM declined 7 basis points compared to the linked quarter, while core NIM remained flat compared to the linked quarter.

Future net interest income will be benefitted by the repricing of the Company’s time certificates of deposit (“CDs”). Over the next 12-months, approximately $510 million of CDs with an average rate of approximately 1.35% will mature.

Other Noninterest Income (other than Wealth Management fee income)

Noninterest income from Capital Markets activities (loan level back-to-back swap activities, the SBA lending and sale program, and mortgage banking income) totaled $1.03 million for the September 2020 quarter compared to $1.01 million for the June 2020 quarter and $2.77 million for the September 2019 quarter.  The September 2020 quarter reflected increased mortgage banking activity due to greater refinance activity in the current low rate environment. The higher mortgage banking activity was offset by a significant decrease in loan level back-to-back swap activities and SBA lending and sale program, as there is, and will continue to be, minimal activity for such in the current environment. 

Operating Expenses

The Company’s total operating expenses were $28.46 million for the quarter ended September 30, 2020, compared to $29.01 million for the June 2020 quarter and $26.26 million for the September 2019 quarter.  The September 2020 and June 2020 quarters included three months of expenses (approximately $500,000 per quarter) related to Point View’s operations while the September 2019 quarter included one month. The June 2020 quarter also included a one-time expense of $278,000 related to the consolidation of the Whitehouse branch into the Oldwick branch. Thus far, the Bank has retained the majority of the deposits that were associated with that branch. The Company also spent $225,000 on marketing and advertising related to the PPP program during the June 2020 quarter. FDIC insurance expense increased to $605,000 in the September 2020 quarter from $455,000 in the June 2020 quarter and a credit of $277,000 in the September 2019 quarter.  The increase in FDIC expense in the September 2020 quarter was due to average asset growth, which negatively impacted some of the ratios used in calculating the quarterly assessment.

Mr. Kennedy noted, “During the fourth quarter of 2020, the Company will consolidate two of its private banking locations into existing offices which will result in future expense savings of approximately $200,000 on an annual basis. We continue to further evaluate office space and branch requirements.”

Income Taxes

The effective tax rate for the three months ended September 30, 2020 was 27.75%, as compared to 29.90% for the September 2019 quarter.  The slightly higher rate in the September 2019 quarter included higher NJ State Income Tax due to the change in NJ tax law.

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 2020 Investor Update (and Supplemental Financial Information).

Nonperforming assets at September 30, 2020 (which does not include troubled debt restructured loans that are performing in accordance with their terms) were $8.7 million, or 0.15% of total assets, down from $26.7 million, or 0.43% of total assets, at June 30, 2020 and $28.9 million, or 0.56% of total assets, at December 31, 2019.  The September 30, 2020 balance excludes one $10.0 million commercial loan classified as held for sale. Total loans past due 30 through 89 days and still accruing were $6.6 million at September 30, 2020 (of which $4.1 million made their past due payments in October), compared to $3.8 million at June 30, 2020 and $1.9 million at December 31, 2019.  During the third quarter of 2020, the Company’s asset recovery and workout efforts reduced nonperforming and classified assets.   

For the quarter ended September 30, 2020, the Company’s provision for loan and lease losses was $5.15 million compared to $4.90 million for the June 2020 quarter and $800,000 for the September 2019 quarter. The increased provision for loan and lease losses in the September and June 2020 quarters reflect the current environment created by the COVID-19 pandemic which led to increased qualitative loss factors when calculating the allowance for loan losses. The Company’s provision for loan and lease losses (and its allowance for loan and lease losses) also reflect, among other things, the Company’s assessment of asset quality metrics, net loan growth, net charge-offs/recoveries, and the composition of the loan portfolio.

At September 30, 2020, the allowance for loan and lease losses was $66.15 million (1.56% of total loans, excluding PPP loans), compared to $66.07 million at June 30, 2020 (1.52% of total loans), and $43.68 million at December 31, 2019 (0.99% of total loans). 

Capital 

The Company’s capital position during the September 2020 quarter was benefitted by net income of $13.55 million.

The Company’s and Bank’s capital ratios at September 30, 2020 all remain strong.  Such ratios remain well above regulatory well capitalized standards.

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, 2020, 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 the Q3 2020 Investor Update (and Supplemental Financial Information).

On October 27, 2020, the Company declared a cash dividend of $0.05 per share payable on November 25, 2020 to shareholders of record on November 10, 2020.

ABOUT THE COMPANY

Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $6.0 billion and AUM/AUA administration of $7.6 billion as of September 30, 2020.  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 2020 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;
  • impact on our business 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 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 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 outbreak 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 high 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 have to be increased 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;
  • as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income;
  • a material decrease in net income or a net loss over several quarters could result in 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, 2019.  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, 
  2020  2020  2020  2019  2019 
Income Statement Data:                    
Interest income $40,174  $41,649  $45,395  $45,556  $45,948 
Interest expense  8,025   9,678   13,648   14,642   15,863 
Net interest income  32,149   31,971   31,747   30,914   30,085 
Wealth management fee income  10,119   9,996   9,955   10,120   9,501 
Service charges and fees  785   695   816   893   882 
Bank owned life insurance  314   318   328   325   332 
Gain on loans held for sale at fair value  954   550   292   344   198 
   (Mortgage banking) (A)
Gain/(loss) on loans held for sale at lower of cost or  7,429      (3)  (4)  (6)
   fair value(B)
Fee income related to loan level, back-to-back     202   1,418   2,459   2,349 
   swaps (A)
Gain on sale of SBA loans (A)  79   258   1,054   929   224 
Other income  531   482   459   504   902 
Securities gains/(losses), net     125   198   (45)  34 
Total other income  20,211   12,626   14,517   15,525   14,416 
Salaries and employee benefits  19,202   19,186   19,226   17,954   17,476 
Premises and equipment  4,109   4,036   4,043   3,898   3,849 
FDIC insurance expense  605   455   250      (277)
Other expenses  4,545   5,337   4,716   4,849   5,211 
Total operating expenses  28,461   29,014   28,235   26,701   26,259 
Pretax income before provision for loan losses  23,899   15,583   18,029   19,738   18,242 
Provision for loan and lease losses (C)  5,150   4,900   20,000   1,950   800 
Income/(loss) before income taxes  18,749   10,683   (1,971)  17,788   17,442 
Income tax expense/(benefit) (D)  5,202   2,441   (3,344)  5,555   5,216 
Net income $13,547  $8,242  $1,373  $12,233  $12,226 
                     
Total revenue (E) $52,360  $44,597  $46,264  $46,439  $44,501 
Per Common Share Data:                    
Earnings per share (basic) $0.72  $0.44  $0.07  $0.64  $0.63 
Earnings per share (diluted)  0.71   0.43   0.07   0.64   0.63 
Weighted average number of common                    
   shares outstanding:
Basic  18,908,337   18,872,070   18,858,343   18,966,917   19,314,666 
Diluted  19,132,650   19,059,822   19,079,575   19,207,738   19,484,905 
Performance Ratios:                    
Return on average assets annualized (ROAA)  0.89%  0.56%  0.11%  0.98%  1.00%
Return on average equity annualized (ROAE)  10.53%  6.56%  1.08%  9.81%  9.87%
Net interest margin (tax-equivalent basis)  2.20%  2.27%  2.57%  2.60%  2.60%
GAAP efficiency ratio (F)  54.36%  65.06%  61.03%  57.50%  59.01%
Operating expenses / average assets annualized  1.86%  1.97%  2.18%  2.13%  2.16%


  1. Gain on loans held for sale at fair value (mortgage banking), fee income related to loan level, back-to-back swaps and gain on sale of SBA loans are all included in “capital markets activity” as referred to within the earnings release.
  2. Includes gain on sale of PPP loans of 355 million completed in the September quarter.
  3. The March 2020, June 2020 and September 2020 quarter included a higher provision for loan and lease losses primarily due to the current environment created by the COVID-19 pandemic.
  4. The March 2020 quarter 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.
  5. Total revenue includes net interest income plus total other income.
  6. 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
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in Thousands, except share data)
(Unaudited)

  For the Nine Months Ended         
  September 30,  Change 
  2020  2019  $  % 
Income Statement Data:                
Interest income $127,218  $135,114  $(7,896)  -6%
Interest expense  31,351   45,754   (14,403)  -31%
Net interest income  95,867   89,360   6,507   7%
Wealth management fee income  30,070   28,243   1,827   6%
Service charges and fees  2,296   2,595   (299)  -12%
Bank owned life insurance  960   996   (36)  -4%
Gain on loans held for sale at fair value (Mortgage banking) (A)  1,796   377   1,419   376%
Gain on loans held for sale at lower of cost or fair value (B)  7,426   (6)  7,432   -123867%
Fee income related to loan level, back-to-back swaps (A)  1,620   3,340   (1,720)  -51%
Gain on sale of SBA loans (A)  1,391   1,216   175   14%
Other income  1,472   2,248   (776)  -35%
Securities gains/(losses), net  323   162   161   99%
Total other income  47,354   39,171   8,183   21%
Salaries and employee benefits  57,614   52,175   5,439   10%
Premises and equipment  12,188   10,837   1,351   12%
FDIC insurance expense  1,310   277   1,033   373%
Other expenses  14,598   14,858   (260)  -2%
Total operating expenses  85,710   78,147   7,563   10%
Pretax income before provision for loan losses  57,511   50,384   7,127   14%
Provision for loan and lease losses (C)  30,050   2,050   28,000   1366%
Income before income taxes  27,461   48,334   (20,873)  -43%
Income tax (benefit)/expense (D)  4,299   13,133   (8,834)  -67%
Net income $23,162  $35,201  $(12,039)  -34%
                 
Total revenue (E) $143,221  $128,531  $14,690   11%
Per Common Share Data:                
Earnings per share (basic) $1.23  $1.82  $(0.59)  -32%
Earnings per share (diluted)  1.22   1.81   (0.59)  -33%
Weighted average number of common shares outstanding:                
Basic  18,879,688   19,370,627   (490,939)  -3%
Diluted  19,052,605   19,496,721   (444,116)  -2%
Performance Ratios:                
Return on average assets annualized (ROAA)  0.54%  0.99%  (0.45)%  -46%
Return on average equity annualized (ROAE)  6.07%  9.67%  (3.60)%  -37%
Net interest margin (tax-equivalent basis)  2.33%  2.65%  (0.32)%  -12%
GAAP efficiency ratio (F)  59.84%  60.80%  (0.95)%  -2%
Operating expenses / average assets annualized  1.99%  2.21%  (0.22)%  -10%


      (A)  Gain on loans held for sale at fair value (mortgage banking), fee income related to loan level, back-to-back swaps and gain on sale of SBA loans are all included in “capital markets activity” as referred to within the earnings release.
      (B)  Includes gain on sale of PPP loans of $355 million completed in the September quarter.
      (C)  The increase in the provision for loan and lease losses in 2020 was primarily due to the current environment created by the COVID-19 pandemic. 
      (D)   2020 year 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.
      (E)   Total revenue includes net interest income plus total other income.
      (F)  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 
  Sept 30,  June 30,  March 31,  Dec 31,  Sept 30, 
  2020  2020  2020  2019  2019 
ASSETS                    
Cash and due from banks $8,400  $5,608  $6,171  $6,591  $5,770 
Federal funds sold  102   102   102   102   101 
Interest-earning deposits  670,863   617,117   767,730   201,492   221,242 
Total cash and cash equivalents  679,365   622,827   774,003   208,185   227,113 
Securities available for sale  596,929   539,742   400,558   390,755   349,989 
Equity security  15,159   15,159   14,034   10,836   7,881 
FHLB and FRB stock, at cost  18,433   18,598   40,871   24,068   21,403 
Residential mortgage  532,120   536,015   532,063   552,019   561,543 
Multifamily mortgage  1,168,796   1,178,494   1,203,487   1,210,003   1,197,093 
Commercial mortgage  722,678   761,910   760,648   761,244   721,261 
Commercial loans (A)  1,930,984   2,316,125   1,810,214   1,776,450   1,575,076 
Consumer loans  51,859   53,111   53,365   54,372   53,829 
Home equity lines of credit  52,194   54,006   55,856   57,248   58,423 
Other loans  260   272   347   349   380 
Total loans  4,458,891   4,899,933   4,415,980   4,411,685   4,167,605 
Less: Allowances for loan and lease losses  66,145   66,065   63,783   43,676   41,580 
Net loans  4,392,746   4,833,868   4,352,197   4,368,009   4,126,025 
Premises and equipment  21,668   21,449   21,243   20,913   20,898 
Other real estate owned  50   50   50   50   336 
Accrued interest receivable  22,192   15,956   11,816   10,494   11,759 
Bank owned life insurance  46,645   46,479   46,309   46,128   45,940 
Goodwill and other intangible assets  39,622   39,943   40,265   40,588   41,111 
Finance lease right-of-use assets  4,517   4,704   4,891   5,078   5,265 
Operating lease right-of-use assets  10,011   10,810   11,553   12,132   10,328 
Other assets (B)  110,770   111,630   113,668   45,643   57,361 
TOTAL ASSETS $5,958,107  $6,281,215  $5,831,458  $5,182,879  $4,925,409 
                     
LIABILITIES                    
Deposits:                    
Noninterest-bearing demand deposits $838,307  $911,989  $581,085  $529,281  $544,464 
Interest-bearing demand deposits  1,858,529   1,804,102   1,680,452   1,510,363   1,352,471 
Savings  127,737   123,140   112,668   112,652   115,448 
Money market accounts  1,251,349   1,183,603   1,163,410   1,196,313   1,196,188 
Certificates of deposit – Retail  586,801   629,941   651,000   633,763   583,425 
Certificates of deposit – Listing Service  32,677   35,327   38,895   47,430   55,664 
Subtotal “customer” deposits  4,695,400   4,688,102   4,227,510   4,029,802   3,847,660 
IB Demand – Brokered  130,000   130,000   180,000   180,000   180,000 
Certificates of deposit – Brokered  33,750   33,736   33,723   33,709   33,696 
Total deposits  4,859,150   4,851,838   4,441,233   4,243,511   4,061,356 
Short-term borrowings  15,000   15,000   515,000   128,100   67,000 
FHLB advances  105,000   105,000   105,000   105,000   105,000 
Paycheck Protection Program Liquidity Facility (C)  183,790   535,837          
Finance lease liability  6,976   7,196   7,402   7,598   7,793 
Operating lease liability  10,318   11,116   11,852   12,423   10,619 
Subordinated debt, net  83,585   83,529   83,473   83,417   83,361 
Other liabilities (B)  156,472   163,719   160,173   91,227   94,930 
Due to brokers  15,088      10,885   7,951    
TOTAL LIABILITIES  5,435,379   5,773,235   5,335,018   4,679,227   4,430,059 
Shareholders’ equity  522,728   507,980   496,440   503,652   495,350 
TOTAL LIABILITIES AND                    
SHAREHOLDERS’ EQUITY $5,958,107  $6,281,215  $5,831,458  $5,182,879  $4,925,409 
Assets under management and / or administration at $7.6  $7.2  $6.4  $7.5  $7.0 
Peapack-Gladstone Banks Private Wealth Management
   Division (market value, not included above-dollars in billions)


(A)     Includes PPP loans of $202 million at September 30, 2020 and $547 million at June 30, 2020.
(B)    The increase in other assets and other liabilities at March 31, 2020, June 30, 2020 and September 30, 2020 was primarily due to the change in the fair value of our back-to-back swap program.
(C)     Represents funding provided by the Federal Reserve for pledged PPP loans at June 30, 2020 and September 30, 2020.


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

  As of 
  Sept 30,  June 30,  March 31,  Dec 31,  Sept 30, 
  2020  2020  2020  2019  2019 
Asset Quality:                    
Loans past due over 90 days and still accruing $  $  $  $  $ 
Nonaccrual loans (A)  8,611   26,697   29,324   28,881   29,383 
Other real estate owned  50   50   50   50   336 
Total nonperforming assets $8,661  $26,747  $29,374  $28,931  $29,719 
                     
Nonperforming loans to total loans  0.19%  0.54%  0.66%  0.65%  0.71%
Nonperforming assets to total assets  0.15%  0.43%  0.50%  0.56%  0.60%
                     
Performing TDRs (B)(C) $2,278  $2,376  $2,389  $2,357  $2,527 
                     
Loans past due 30 through 89 days and still accruing (D) $6,609  $3,785  $8,261  $1,910  $6,333 
                     
Loans subject to special mention $129,700  $27,922  $13,222  $13,643  $21,870 
                     
Classified loans $41,263  $63,562  $58,938  $58,908  $53,882 
                     
Impaired loans $15,514  $33,708  $36,369  $35,924  $36,627 
                     
Allowance for loan and lease losses:                    
Beginning of period $66,065  $63,783  $43,676  $41,580  $39,791 
Provision for loan and lease losses  5,150   4,900   20,000   1,950   800 
(Charge-offs)/recoveries, net  (5,070)  (2,618)  107   146   989 
End of period $66,145  $66,065  $63,783  $43,676  $41,580 
                     
ALLL to nonperforming loans  768.15%  247.46%  217.51%  151.23%  141.51%
ALLL to total loans (E)  1.56%  1.52%  1.44%  0.99%  1.00%
General ALLL to total loans (E)(F)  1.56%  1.42%  1.30%  0.93%  0.93%


      (A) 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 does not include $15.2 million at September 30, 2020, $23.2 million at June 30, 2020, $25.9 million at March 31, 2020, $25.8 million at December 31, 2019 and $19.7 million at September 30, 2019, of TDRs included in nonaccrual loans.
      (D) Of the $6.6 million at September 30, 2020, $4.1 million made their past due payments in October.  Includes a non-owner occupied CRE loan with a balance of $3.5 million at March 31, 2020.  This loan was brought fully current in early April 2020.  The $6.3 million at September 30, 2019 included one $4.3 million commercial real estate loan that was in process of a rate modification (not a TDR modification).  The loan was brought fully current in early October 2019.
      (E) The September 30, 2020 and June 30, 2020 ALLL coverage ratios exclude PPP loans of $202 million and $547 million, respectively, from total loans.
      (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, 
  2020  2019  2019 
Capital Adequacy                  
Equity to total assets (A)(J)    8.77%    9.72%    10.06%
Tangible Equity to tangible assets (B)    8.16%    9.01%    9.30%
Tangible Equity to tangible assets excluding    8.45%    9.01%    9.30%
   PPP loans (C)
Book value per share (D)   $27.62    $26.61    $26.07 
Tangible Book Value per share (E)   $25.53    $24.47    $23.91 


  September 30,  December 31,  September 30, 
  2020   2019   2019  
Regulatory Capital  Holding Company                        
Tier I leverage $483,782  8.54%  $463,521  9.33%  $455,179  9.43% 
Tier I capital to risk-weighted assets  483,782  11.76    463,521  11.14    455,179  11.23  
Common equity tier I capital ratio  483,747  11.75    463,520  11.14    455,177  11.23  
   to risk-weighted assets
Tier I & II capital to risk-weighted assets  618,993  15.04    590,614  14.20    580,120  14.31  
                         
Regulatory Capital  Bank                        
Tier I leverage (F) $547,761  9.68%  $527,833  10.63%  $534,351  11.08% 
Tier I capital to risk-weighted assets (G)  547,761  13.33    527,833  12.70    534,351  13.20  
Common equity tier I capital ratio  547,726  13.33    527,832  12.70    534,349  13.20  
   to risk-weighted assets (H)
Tier I & II capital to risk-weighted assets (I)  599,314  14.58    571,509  13.76    575,931  14.23  


     (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 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% ($283 million)
     (G)  Regulatory well capitalized standard = 8.00% ($329 million)
     (H)  Regulatory well capitalized standard = 6.50% ($267 million)
     (I) Regulatory well capitalized standard = 10.00% ($411 million)
     (J) PPP loans with a balance of $202 million increased total assets at September 30, 2020.  Equity to total assets would be 9.08% if PPP loans were excluded from 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, 
  2020  2020  2020  2019  2019 
Residential loans retained $32,599  $18,627  $14,831  $17,115  $19,073 
Residential loans sold  54,521   37,061   19,391   21,255   15,846 
Total residential loans  87,120   55,688   34,222   38,370   34,919 
Commercial real estate  1,613   748   8,858   52,630   43,414 
Multifamily  1,500   11,960   61,998   63,627   77,138 
Commercial (C&I) loans (A) (B)  118,048   99,294   42,908   174,946   228,903 
SBA (C)  4,962   595,651   13,830   19,195   3,510 
Wealth lines of credit (A)  2,000   500   3,250   42,575   6,980 
Total commercial loans  128,123   708,153   130,844   352,973   359,945 
Installment loans  253   950   256   984   362 
Home equity lines of credit (A)  4,759   4,280   3,632   2,414   5,631 
Total loans closed $220,255  $769,071  $168,954  $394,741  $400,857 
                     


  For the Nine Months Ended 
  Sept 30,  Sept 30, 
  2020  2019 
Residential loans retained $66,057  $51,910 
Residential loans sold  110,973   28,721 
Total residential loans  177,030   80,631 
Commercial real estate  11,219   98,643 
Multifamily  75,458   156,864 
Commercial (C&I) loans (A) (B)  260,250   513,975 
SBA (C)  614,443   16,300 
Wealth lines of credit (A)  5,750   21,085 
Total commercial loans  967,120   806,867 
Installment loans  1,459   2,417 
Home equity lines of credit (A)  12,671   10,864 
Total loans closed $1,158,280  $900,779 
         


      (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 $596 million for the three months ended June 30, 2020 and 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, 2020  September 30, 2019 
  Average  Income/      Average  Income/     
  Balance  Expense  Yield  Balance  Expense  Yield 
ASSETS:                        
Interest-earning assets:                        
Investments:                        
Taxable (A) $553,607  $2,182   1.58% $393,386  $2,477   2.52%
Tax-exempt (A) (B)  9,127   116   5.08   13,497   165   4.89 
                         
Loans (B) (C):                        
Mortgages  529,500   4,437   3.35   567,097   4,811   3.39 
Commercial mortgages  1,929,319   15,115   3.13   1,856,216   17,870   3.85 
Commercial  2,134,399   17,653   3.31   1,530,131   18,605   4.86 
Commercial construction  4,395   55   5.01   2,619.00   51   7.79 
Installment  52,659   377   2.86   53,891   560   4.16 
Home equity  53,373   444   3.33   58,573   736   5.03 
Other  283   7   9.89   396   11   11.11 
Total loans  4,703,928   38,088   3.24   4,068,923   42,644   4.19 
Federal funds sold  102      0.25   101      0.25 
Interest-earning deposits  652,832   159   0.10   256,865   1,362   2.12 
Total interest-earning assets  5,919,596   40,545   2.74%  4,732,772   46,648   3.94%
Noninterest-earning assets:                        
Cash and due from banks  7,479           5,628         
Allowance for loan and lease losses  (68,110)          (40,806)        
Premises and equipment  21,511           21,121         
Other assets  242,017           151,265         
Total noninterest-earning assets  202,897           137,208         
Total assets $6,122,493          $4,869,980         
                         
LIABILITIES:                        
Interest-bearing deposits:                        
Checking $1,828,780  $1,130   0.25% $1,410,837  $4,467   1.27%
Money markets  1,235,040   920   0.30   1,184,589   4,227   1.43 
Savings  125,016   16   0.05   113,961   16   0.06 
Certificates of deposit – retail  642,732   2,529   1.57   649,393   3,781   2.33 
Subtotal interest-bearing deposits  3,831,568   4,595   0.48   3,358,780   12,491   1.49 
Interest-bearing demand – brokered  130,000   636   1.96   180,000   901   2.00 
Certificates of deposit – brokered  33,742   267   3.17   33,688   267   3.17 
Total interest-bearing deposits  3,995,310   5,498   0.55   3,572,468   13,659   1.53 
Borrowings  475,465   1,221   1.03   114,584   886   3.09 
Capital lease obligation  7,054   84   4.76   7,866   94   4.78 
Subordinated debt  83,552   1,222   5.85   83,329   1,224   5.88 
Total interest-bearing liabilities  4,561,381   8,025   0.70%  3,778,247   15,863   1.68%
Noninterest-bearing liabilities:                        
Demand deposits  872,560           512,497         
Accrued expenses and other liabilities  173,816           83,554         
Total noninterest-bearing liabilities  1,046,376           596,051         
Shareholders’ equity  514,736           495,682         
Total liabilities and shareholders’ equity $6,122,493          $4,869,980         
Net interest income     $32,520          $30,785     
Net interest spread          2.04%          2.26%
Net interest margin (D)          2.20%          2.60%
                         


  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)

  September 30, 2020  June 30, 2020
 
  Average  Income/      Average  Income/     
  Balance  Expense  Yield  Balance  Expense  Yield 
ASSETS:                        
Interest-earning assets:                        
Investments:                        
Taxable (A) $553,607  $2,182   1.58% $437,288  $2,108   1.93%
Tax-exempt (A) (B)  9,127   116   5.08   10,137   129   5.09 
                         
Loans (B) (C):                        
Mortgages  529,500   4,437   3.35   530,087   4,497   3.39 
Commercial mortgages  1,929,319   15,115   3.13   2,083,310   16,147   3.10 
Commercial  2,134,399   17,653   3.31   2,038,530   18,204   3.57 
Commercial construction  4,395   55   5.01   3,296   44   5.34 
Installment  52,659   377   2.86   52,859   371   2.81 
Home equity  53,373   444   3.33   54,869   453   3.30 
Other  283   7   9.89   318   7   8.81 
Total loans  4,703,928   38,088   3.24   4,763,269   39,723   3.34 
Federal funds sold  102      0.25   102      0.25 
Interest-earning deposits  652,832   159   0.10   497,764   109   0.09 
Total interest-earning assets  5,919,596   40,545   2.74%  5,708,560   42,069   2.95%
Noninterest-earning assets:                        
Cash and due from banks  7,479           5,437         
Allowance for loan and lease losses  (68,110)          (64,109)        
Premises and equipment  21,511           21,462         
Other assets  242,017           234,357         
Total noninterest-earning assets  202,897           197,147         
Total assets $6,122,493          $5,905,707         
                         
LIABILITIES:                        
Interest-bearing deposits:                        
Checking $1,828,780  $1,130   0.25% $1,748,753  $1,642   0.38%
Money markets  1,235,040   920   0.30   1,207,816   1,473   0.49 
Savings  125,016   16   0.05   118,878   16   0.05 
Certificates of deposit – retail  642,732   2,529   1.57   676,498   3,147   1.86 
Subtotal interest-bearing deposits  3,831,568   4,595   0.48   3,751,945   6,278   0.67 
Interest-bearing demand – brokered  130,000   636   1.96   150,330   700   1.86 
Certificates of deposit – brokered  33,742   267   3.17   33,729   264   3.13 
Total interest-bearing deposits  3,995,310   5,498   0.55   3,936,004   7,242   0.74 
Borrowings  475,465   1,221   1.03   330,514   1,127   1.36 
Capital lease obligation  7,054   84   4.76   7,270   87   4.79 
Subordinated debt  83,552   1,222   5.85   83,496   1,222   5.85 
Total interest-bearing liabilities  4,561,381   8,025   0.70%  4,357,284   9,678   0.89%
Noninterest-bearing liabilities:                        
Demand deposits  872,560           873,926         
Accrued expenses and other liabilities  173,816           171,814         
Total noninterest-bearing liabilities  1,046,376           1,045,740         
Shareholders’ equity  514,736           502,683         
Total liabilities and shareholders’ equity $6,122,493          $5,905,707         
Net interest income     $32,520          $32,391     
Net interest spread          2.04%          2.06%
Net interest margin (D)          2.20%          2.27%
                         


  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
NINE MONTHS ENDED
(Tax-Equivalent Basis, Dollars in Thousands)

  September 30, 2020  September 30, 2019
 
  Average  Income/      Average  Income/     
  Balance  Expense  Yield  Balance  Expense  Yield 
ASSETS:                        
Interest-earning assets:                        
Investments:                        
Taxable (A) $467,881  $6,749   1.92% $391,032  $7,800   2.66%
Tax-exempt (A) (B)  9,930   376   5.05   15,904   581   4.87 
                         
Loans (B) (C):                        
Mortgages  531,563   13,510   3.39   568,902   14,541   3.41 
Commercial mortgages  1,989,256   49,745   3.33   1,822,341   53,472   3.91 
Commercial  1,977,597   54,450   3.67   1,442,827   52,659   4.87 
Commercial construction  4,440   187   5.62   883   51   8 
Installment  53,165   1,212   3.04   54,552   1,722   4.21 
Home equity  54,627   1,512   3.69   60,695   2,319   5.09 
Other  321   23   9.55   394   32   10.83 
Total loans  4,610,969   120,639   3.49   3,950,594   124,796   4.21 
Federal funds sold  102      0.25   101      0.25 
Interest-earning deposits  468,064   820   0.23   245,153   3,897   2.12 
Total interest-earning assets  5,556,946   128,584   3.09%  4,602,784   137,074   3.97%
Noninterest-earning assets:                        
Cash and due from banks  6,149           5,436         
Allowance for loan and lease losses  (58,896)          (39,638)        
Premises and equipment  21,373           21,253         
Other assets  212,716           133,830         
Total noninterest-earning assets  181,342           120,881         
Total assets $5,738,288          $4,723,665         
                         
LIABILITIES:                        
Interest-bearing deposits:                        
Checking $1,706,558  $6,219   0.49% $1,321,248  $12,299   1.24%
Money markets  1,211,720   5,374   0.59   1,196,778   12,978   1.45 
Savings  118,291   47   0.05   113,552   48   0.06 
Certificates of deposit – retail  672,308   9,370   1.86   622,509   10,476   2.24 
Subtotal interest-bearing deposits  3,708,877   21,010   0.76   3,254,087   35,801   1.47 
Interest-bearing demand – brokered  153,358   2,259   1.96   180,000   2,476   1.83 
Certificates of deposit – brokered  33,729   794   3.14   45,412   958   2.81 
Total interest-bearing deposits  3,895,964   24,063   0.82   3,479,499   39,235   1.50 
Borrowings  330,324   3,360   1.36   108,526   2,558   3.14 
Capital lease obligation  7,266   261   4.79   8,052   290   4.80 
Subordinated debt  83,496   3,667   5.86   83,272   3,671   5.88 
Total interest-bearing liabilities  4,317,050   31,351   0.97%  3,679,349   45,754   1.66%
Noninterest-bearing liabilities:                        
Demand deposits  763,414           494,023         
Accrued expenses and other liabilities  149,187           64,806         
Total noninterest-bearing liabilities  912,601           558,829         
Shareholders’ equity  508,637           485,487         
Total liabilities and shareholders’ equity $5,738,288          $4,723,665         
Net interest income     $97,233          $91,320     
Net interest spread          2.12%          2.31%
Net interest margin (D)          2.33%          2.65%
                         


  
      (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 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 
  Sept 30,  June 30,  March 31,  Dec 31,  Sept 30, 
Tangible Book Value Per Share 2020  2020  2020  2019  2019 
Shareholders’ equity $522,728  $507,980  $496,440  $503,652  $495,350 
Less: Intangible assets, net  39,622   39,943   40,265   40,588   41,111 
Tangible equity  483,106   468,037   456,175   463,064   454,239 
                     
Period end shares outstanding  18,924,953   18,905,135   18,852,523   18,926,810   18,999,241 
Tangible book value per share $25.53  $24.76  $24.20  $24.47  $23.91 
Book value per share  27.62   26.87   26.33   26.61   26.07 
                     
Tangible Equity to Tangible Assets                    
Total assets $5,958,107  $6,281,215  $5,831,458  $5,182,879  $4,925,409 
Less: Intangible assets, net  39,622   39,943   40,265   40,588   41,111 
Tangible assets  5,918,485   6,241,272   5,791,193   5,142,291   4,884,298 
Less: PPP Loans  201,991   547,004          
Tangible Assets excluding PPP Loans  5,716,494   5,694,268   5,791,193   5,142,291   4,884,298 
Tangible equity to tangible assets  8.16%  7.50%  7.88%  9.01%  9.30%
Tangible equity to tangible assets excluding PPP loans  8.45%  8.22%  7.88%  9.01%  9.30%
Equity to assets (A)  8.77%  8.09%  8.51%  9.72%  10.06%


      (A)    Equity to total assets would be 9.08% if PPP loans of $202 million were excluded from total assets as of September 30, 2020. Equity to total assets would be 8.86% if PPP loans of $547 million were excluded from total assets as of June 30, 2020.

  Three Months Ended 
  Sept 30,  June 30,  March 31,  Dec 30,  Sept 30, 
Efficiency Ratio 2020  2020  2020  2019  2019 
Net interest income $32,149  $31,971  $31,747  $30,914  $30,085 
Total other income  20,211   12,626   14,517   15,525   14,416 
Less: Loss/(gain) on loans held for sale                    
at lower of cost or fair value  (7,429)     3   4   6 
Less: Income from life insurance proceeds               
Add: Securities (gains)/losses, net     (125)  (198)  45   (34)
Total recurring revenue  44,931   44,472   46,069   46,488   44,473 
                     
Operating expenses  28,461   29,014   28,235   26,701   26,259 
Less: ORE provision               
Total operating expense  28,461   29,014   28,235   26,701   26,259 
                     
Efficiency ratio  63.34%  65.24%  61.29%  57.44%  59.04%


  For the Nine Months Ended 
  Sept 30,  Sept 30, 
Efficiency Ratio 2020  2019 
Net interest income $95,867  $89,360 
Total other income  47,354   39,171 
Add: Securities (gains)/losses, net  (323)  (162)
Less: Loss/(gain) on loans held for sale        
at lower of cost or fair value  (7,426)   
Total recurring revenue  135,472   128,369 
         
Operating expenses  85,710   78,147 
Less: ORE provision      
Total operating expense  85,710   78,147 
         
Efficiency ratio  63.27%  60.88%


Contact:

Jeffrey J. Carfora, SEVP and CFO

Peapack-Gladstone Financial Corporation

T: 908-719-4308

 

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