Peapack-Gladstone Financial Corporation Reports Second Quarter Results, Quarterly Cash Dividend, and Stock Repurchase Program


BEDMINSTER, N.J., July 26, 2019 (GLOBE NEWSWIRE) -- Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market: PGC) (the “Company”) announces its second quarter 2019 results, a quarterly dividend, and a stock repurchase program. 

The Company recorded total revenue of $84.03 million, pretax income of $30.89 million, net income of $22.98 million and diluted earnings per share of $1.18 for the six months ended June 30, 2019, compared to $79.59 million, $29.76 million, $22.72 million and $1.20, respectively, for the six months ended June 30, 2018, reflecting increases of 6% in revenue and 4% in pretax income, but only 1% in net income, due to the increase in the effective tax rate in 2019. The Company’s 2019 six-month period included increases in net interest income and non-interest income of $4.44 million, partially offset by increased operating expenses of $3.61 million. The effective tax rate was 25.63% for 2019 compared to 23.68% for 2018; the increase was caused by changes in NJ State tax law.

For the quarter ended June 30, 2019, the Company recorded revenue of $42.29 million, pretax income of $14.97 million, net income of $11.55 million and diluted earnings per share of $0.59, compared to $40.98 million, $15.74 million, $11.91 million and $0.62 for the same three-month period last year. The 2019 quarter included increased non-interest income, which was offset by an increased provision for loan losses (due to loan growth late in the 2019 quarter) and increased operating expenses.  

On July 25, 2019, the Company authorized the repurchase of up to 960,000 shares, or approximately 5% of its outstanding shares, over a time-period through and including June 30, 2020. Purchases will be conducted in accordance with the limitations set forth in the SEC’s Rule 10b-18.  

Douglas L. Kennedy, President and CEO, said, “We believe our existing capital is strong and believe that purchasing our Company’s stock is an opportunity for us to effectively manage our excess capital.”

EXECUTIVE SUMMARY:

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

Year over Year Comparison

  Six Months Ended  Six Months Ended          
  June 30,  June 30,   Increase/ 
(Dollars in millions, except per share data) 2019 (A)  2018   (Decrease) 
Net interest income $59.28  $57.64   $1.64   3%
Provision for loan and lease losses  1.25   1.55    (0.30)  (19)
Net interest income after provision  58.03   56.09    1.94   3 
Wealth management fee income  18.74   16.49    2.25   14 
Other income  6.02   5.47    0.55   10 
Total other income  24.76   21.96    2.80   13 
Operating expenses  51.89   48.28    3.61   7 
Pretax income  30.90   29.77    1.13   4 
Income tax expense  7.92   7.05    0.87   12 
Net income $22.98  $22.72   $0.26   1%
Diluted EPS $1.18  $1.20   $(0.02)  (2)%
                  
Effective tax rate  25.63%  23.68%   1.95     
Return on average assets annualized  0.99%  1.06%   (0.07)    
Return on average equity annualized  9.57%  10.83%   (1.26)    
  1. The six months ended June 30, 2019 included a full six months of wealth management fee income and expense related to Lassus Wherley, which was acquired effective September 1, 2018.

June 2019 Quarter Compared to Prior Year Quarter            

  Three Months Ended   Three Months Ended         
  June 30,   June 30,  Increase/ 
(Dollars in millions, except per share data) 2019 (A)   2018  (Decrease) 
Net interest income $29.27   $29.24  $0.03   0%
Provision for loan and lease losses  1.15    0.30   0.85   283 
Net interest income after provision  28.12    28.94   (0.82)  (3)
Wealth management fee income  9.57    8.13   1.44   18 
Other income  3.45    3.61   (0.16)  (4)
Total other income  13.02    11.74   1.28   11 
Operating expenses  26.17    24.94   1.23   5 
Pretax income  14.97    15.74   (0.77)  (5)
Income tax expense  3.42    3.83   (0.41)  (11)
Net income $11.55   $11.91  $(0.36)  (3)%
Diluted EPS $0.59   $0.62  $(0.03)  (5)%
                  
Effective tax rate  22.85%   24.33%  (1.48)    
Return on average assets annualized  0.99%   1.11%  (0.12)    
Return on average equity annualized  9.49%   11.11%  (1.62)    
  1. The June 2019 quarter included a full quarter of wealth management fee income and expense related to Lassus Wherley, which was acquired effective September 1, 2018.

             

June 2019 Quarter Compared to Linked Quarter

  Three Months Ended  Three Months Ended          
  June 30,  March 31,   Increase/ 
(Dollars in millions, except per share data) 2019  2019   (Decrease) 
Net interest income $29.27  $30.01   $(0.74)  (2)%
Provision for loan and lease losses  1.15   0.10    1.05   1,050 
Net interest income after provision  28.12   29.91    (1.79)  (6)
Wealth management fee income  9.57   9.17    0.40   4 
Other income  3.45   2.56    0.89   35 
Total other income  13.02   11.73    1.29   11 
Operating expenses  26.17   25.72    0.45   2 
Pretax income  14.97   15.92    (0.95)  (6)
Income tax expense  3.42   4.49    (1.07)  (24)
Net income $11.55  $11.43   $0.12   1%
Diluted EPS $0.59  $0.58   $0.01   2%
                  
Effective tax rate  22.85%  28.20%   (5.35)    
Return on average assets annualized  0.99%  0.98%   0.01     
Return on average equity annualized  9.49%  9.65%   (0.16)    


Mr. Kennedy said, “Our results were impacted by the shape of the yield curve, competitive pressures in our markets, and the fact that our loan growth came near the end of the quarter. The current shape of the yield curve has caused market yields on assets to fall while the cost of deposits has not yet followed course. In light of this, our team has taken a number of steps to address current conditions, as noted throughout this release.”

Other highlights for the quarter included:

  • Wealth Management remains integral to our strategy and provides a diversified, predictable, and stable source of revenue over time:
    • On July 3, 2019, the Company announced its agreement to acquire Point View Wealth Management, Inc. (“Point View”), a registered investment advisor headquartered in Summit, NJ, which is expected to add approximately $300 million of assets under management and/or administration (“AUM/AUA”).
    • At June 30, 2019, the market value of AUM/AUA at the Peapack Private Wealth Management Division of Peapack-Gladstone Bank (the “Bank”) was $6.6 billion reflecting an increase of $228 million from $6.3 billion at March 31, 2019, and $874 million from $5.7 billion at June 30, 2018, reflecting growth of 15%.
    • Wealth management fee income totaled $9.57 million for the quarter ended June 30, 2019, reflecting an increase of $394,000, or 4%, from the March 2019 quarter, and an increase of $1.4 million, or 18%, from the June 2018 quarter. 
    • Wealth management fee income, which comprised approximately 23% of the Company’s total revenue for the quarter ended June 30, 2019, continues to contribute significantly to the Company’s diversified revenue sources.
  • The loan portfolio continues to shift from lower yielding multifamily to higher yielding commercial and industrial (C&I) lending (including equipment finance):
    • Total C&I loans (including equipment finance leases and loans of $504 million) at June 30, 2019 were $1.52 billion.  This reflected net growth of $449 million (42%) when compared to $1.07 billion at June 30, 2018 and reflected net growth of $108 million when compared to the March 31, 2019 balance (8% growth linked quarter; 31% annualized). 
    • As of June 30, 2019, total C&I loans comprised 38% of the total loan portfolio, as compared to 36% at March 31, 2019 and 29% at June 30, 2018. As of June 30, 2019, total multifamily loans comprised 28% of the total loan portfolio relatively flat when compared to March 31, 2019 and lower as compared to 35% a year earlier at June 30, 2018.
    • The Bank’s concentration in commercial real estate loans declined to 375% of risk-based capital at June 30, 2019 from 379% at March 31, 2019 and 425% at June 30, 2018.
  • Deposits, funding, and interest rate risk continue to be actively managed:
    • Deposits totaled $4.10 billion at June 30, 2019. This reflected net growth of $573 million (16%) when compared to $3.52 billion at June 30, 2018 and reflected net growth of $176 million when compared to the March 31, 2019 balance (5% growth linked quarter; 18% annualized). 
    • The Company’s loan-to-deposit ratio improved to 98.5% at June 30, 2019, from 99.5% at March 31, 2019, and 105.8% at June 30, 2018.   
    • The Company continues to have access to $1.4 billion of available secured funding at the Federal Home Loan Bank.
    • At June 30, 2019, the Company’s interest rate sensitivity models indicate the Company is slightly asset sensitive, and that net interest income would improve slightly in a rising rate environment but decline slightly in a falling rate environment. The Company is managing its balance sheet to be less asset sensitive and closer to interest rate neutral.
  • Capital and asset quality continue to be strong.
    • The Company’s and Bank’s capital ratios at June 30, 2019 remain strong. The Company believes its existing capital and capital generation from earnings will be more than adequate to support planned balance sheet growth and wealth acquisitions.
    • The Company authorized a 5% stock repurchase program on July 25, 2019.  
    • Despite a new nonaccrual relationship totaling $6.6 million in the quarter, asset quality metrics continued to be strong as of June 30, 2019. Nonperforming assets at June 30, 2019 were $31.2 million, or 0.64% of total assets. Total loans past due 30 through 89 days and still accruing were $432,000, or 0.01% of total loans, at June 30, 2019.

SUPPLEMENTAL QUARTERLY DETAILS:

Wealth Management Business

In the June 2019 quarter, the Bank’s wealth management business generated $9.57 million in fee income, an increase of $394,000 compared to $9.17 million for the March 2019 quarter, and an increase of $1.44 million compared to $8.13 million for the June 2018 quarter. 

When compared to the June 2018 quarter, the June 2019 quarter included three months of fee income related to Lassus Wherley ($1.1 million), which was acquired effective September 1, 2018, as well as increased fees from net organic growth in assets under management.

John P. Babcock, President of the newly-branded, “Peapack Private Wealth Management Division”, said, “I am pleased with our results; we had $485 million of new business inflows in the first half of 2019 and have a strong pipeline as we look ahead over the next two quarters. We are making significant forward progress on integrating the systems, processes and people from our 2017 and 2018 acquisitions and continue to selectively look for additional acquisitions that can add talent and expertise to our wealth management organization.”

Loans / Commercial Banking

Net loans increased by $131 million from $3.86 billion at March 31, 2019 to $3.99 billion at June 30, 2019 (3% growth linked quarter, 13% annualized). Loan/line origination levels continued to be strong ($284 million for the June 30, 2019 quarter) but were partially offset by paydown activity. Mr. Kennedy noted, “Despite our robust loan originations, our average loan balances for the quarter actually declined relative to the first quarter’s average balance, as the majority of our loan volume closed near the end of the second quarter. We will see the benefit of our second quarter loan production in the third quarter. Additionally, we have entered the third quarter with very strong loan pipelines.” Net new loan growth during the second quarter was funded by net new deposit growth.

Total commercial and industrial loans (including equipment finance leases and loans) grew $108 million (8% growth linked quarter, 31% annualized) to $1.52 billion at the end of the second quarter of 2019, compared to $1.41 billion at the end of the first quarter of 2019.

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

Mr. Kennedy also said, “Our newly expanded Corporate Advisory and Structured Finance businesses give 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.”

Kennedy went on to say, “As previously announced, Greg Smith joined us from Capital One on April 1st as EVP, Head of Commercial Banking. Greg is an accomplished commercial banking professional, whom I have known for many years.”

Funding / Liquidity / Interest Rate Risk Management

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

For the quarter ended June 30, 2019, the Company utilized its increased capital and deposit growth to fund its loan growth and increase its on balance sheet liquidity (interest-earning deposits and investment securities). 

In addition to approximately $688 million of cash, cash equivalents and investment securities on its balance sheet, the Company also had approximately $1.4 billion of secured funding available from the Federal Home Loan Bank, of which only $105 million was drawn as of June 30, 2019.
             
Mr. Kennedy noted, “We have discontinued our promotional CD programs, and we may utilize lower cost fixed rate wholesale borrowings and/or interest rate swaps, as opposed to retail deposits, to fund fixed rate loan production.”

Mr. Kennedy also noted, “As previously announced, Rick DeBel joined us from Wells Fargo on May 6th as EVP, Deposit Solutions, a newly created position. Rick’s first task was to work with our Senior Leadership Team to construct a comprehensive deposit rate reduction program, with an eye toward relationship profitability. Rate reduction targets have been established and will be phased in over time. We have actively managed our loan to deposit ratio down to approximately 98%, and our cash and cash equivalents to exceed $300 million. This provides flexibility to manage deposit rates down in the coming months.”

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

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

 Six Months Ended  Six Months Ended         
 June 30, 2019  June 30, 2018         
 NII  NIM  NII  NIM         
                        
NII/NIM excluding the below$58,467  2.73%  $56,146  2.73%         
Prepayment premiums received on loan paydowns 678  0.02%   1,169  0.05%         
Effect of maintaining excess interest earning cash during 2019 130  -0.08%   0  0.00%         
Material fees recognized on full paydowns of C&I loans 0  0.00%   321  0.01%         
NII/NIM as reported$59,275  2.67%  $57,636  2.79%         
                        
 Three Months Ended  Three Months Ended  Three Months Ended 
 June 30, 2019  March 31, 2019  June 30, 2018 
 NII  NIM  NII  NIM  NII  NIM 
                        
NII/NIM excluding the below$28,938  2.69%  $29,432  2.72%  $28,186  2.72% 
Prepayment premiums received on loan paydowns 246  0.02%   432  0.04%   736  0.07% 
Effect of maintaining excess interest earning cash during 2019 84  -0.07%   143  -0.06%   0  0.00% 
Material fees recognized on full paydowns of C&I loans 0  0.00%   0  0.00%   321  0.03% 
NII/NIM as reported$29,268  2.64%  $30,007  2.70%  $29,243  2.82% 

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

Mr. Kennedy noted, “Last quarter we said that our forecasting models indicated a net interest margin in the 2.95% to 3.00% range by the end of 2020. We also said, while we still believe our margin will improve over that same time frame, the target may be difficult to attain if the shape of the current yield curve remains for an extended period. Given the current market, we now believe the 2.95% to 3.00% target will not be achieved until the end of 2021.”    

Other Noninterest Income (other than Wealth Management fee income)

The second quarter of 2019 included $573,000 of income related to the Company’s SBA lending and sale program, compared to $419,000 generated in the March 2019 quarter, and $814,000 in the June 2018 quarter.

The second quarter of 2019 included $721,000 of loan level, back-to-back swap income compared to $270,000 in the March 2019 quarter and $900,000 in the June 2018 quarter. This program provides a borrower with a degree of interest rate protection on a variable rate loan, while still providing an adjustable rate to the Company, thus helping to manage the Company’s interest rate risk, while contributing to income.

Income from both of these programs are not linear each quarter, as some quarters will be higher than others.

Other income totaled $740,000 for the second quarter of 2019, compared to $606,000 for the first quarter of 2019, and $639,000 for the second quarter of 2018. The increase in the June 2019 quarter was due to increased commercial banking fees, particularly unused line of credit fees and letter of credit fees.

Operating Expenses

The Company’s total operating expenses were $26.17 million for the quarter ended June 30, 2019, compared to $25.72 million for the March 2019 quarter and $24.94 million for the June 2018 quarter. The June 2019 and the March 2019 quarters each included three months of expense related to Lassus Wherley (which closed in September 2018). Strategic hiring and normal salary increases also contributed to the increase for the June 2019 quarter. FDIC insurance expense for the June 2019 quarter decreased when compared to prior year (June 2018) quarter. Mr. Kennedy said, “The Company has launched a company-wide expense review, with a goal of slowing expense growth, while continuing our investment in digital and in client acquisition initiatives.”

Income Taxes

The effective tax rate for the June 2019 quarter was 22.9%, compared to 28.2% for the March 2019 quarter, and 24.3% for the June 2018 quarter. The March 2019 quarter included higher NJ State Income Tax due to the change in NJ Tax law. A portion of the additional NJ State tax accrued in the first quarter was reversed in the second quarter, when the State published certain clarifications during the second quarter. The effective tax rate for the six months ended June 30, 2019 was 25.6% compared to 23.7% for the six months ended June 30, 2018.   

Asset Quality / Provision for Loan and Lease Losses

Nonperforming assets at June 30, 2019 (which does not include troubled debt restructured loans that are performing in accordance with their terms) were $31.2 million, or 0.64% of total assets, compared to $24.9 million, or 0.53% of total assets, at March 31, 2019 and $13.6 million, or 0.32% of total assets, at June 30, 2018. Total loans past due 30 through 89 days and still accruing were $432,000 at June 30, 2019, compared to $2.5 million at March 31, 2019 and $3.5 million at June 30, 2018. The increase in the June 2019 quarter was due to one $6.6 million casual dining commercial banking relationship, which also continues to pay as agreed. A specific allowance for loan losses of $1.0 million was recorded on this loan in the June 2019 quarter. 

For the quarter ended June 30, 2019, the Company’s provision for loan and lease losses was $1.2 million compared to $100,000 for the March 2019 quarter and $300,000 for the June 2018 quarter. The Company’s provision for loan and lease losses (and its allowance for loan and lease losses) reflect, among other things, the Company’s asset quality metrics, net loan growth, net charge-offs, and the composition of the loan portfolio. The increased provision for the June 2019 quarter resulted from an increase in the loan portfolio, as well as the specific reserve noted above.

At June 30, 2019, the allowance for loan and lease losses of $39.79 million (128% of nonperforming loans and 0.99% of total loans), compared to $38.65 million at March 31, 2019 (155% of nonperforming loans and 0.99% of total loans), and $38.07 million (317% of nonperforming loans and 1.02% of total loans) at June 30, 2018. 

Capital / Dividend / Stock Repurchase Program

The Company’s capital position in the June 2019 quarter was benefitted by net income of $11.55 million. The Company’s and Bank’s capital ratios at June 30, 2019 all remain strong.  Such ratios remain well above regulatory well capitalized standards.

On July 25, 2019, the Company authorized a 5% stock repurchase program (up to 960,000 shares) and declared a cash dividend of $0.05 per share payable on August 22, 2019 to shareholders of record on August 8, 2019.

ABOUT THE COMPANY

Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $4.87 billion and wealth management assets under management and/or administration (AUM/AUA) of $6.6 billion as of June 30, 2019. Founded in 1921, Peapack-Gladstone Bank is a commercial bank that provides innovative private banking services to businesses, non-profits and consumers, which help them to establish, maintain and expand their legacy. Through its private banking locations in Bedminster, Morristown, Princeton and Teaneck, its Private Wealth Management Division, and its branch network and online platforms, Peapack-Gladstone Bank offers an unparalleled commitment to client service.

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

  • our inability to successfully grow our business and implement our strategic plan, including an inability to generate revenues to offset the increased personnel and other costs related to the strategic plan;
  • the impact of anticipated higher operating expenses in 2019 and beyond;
  • our inability to successfully integrate wealth management firm acquisitions;
  • our inability to manage our growth;
  • our inability to successfully integrate our expanded employee base;
  • an unexpected decline in the economy, in particular in our New Jersey and New York market areas;
  • declines in our net interest margin caused by the interest rate environment and/or our highly competitive market;
  • declines in value in our investment portfolio;
  • higher than expected increases in our allowance for loan and lease losses;
  • higher than expected increases in loan and lease losses or in the level of nonperforming loans;
  • changes in interest rates;
  • decline in real estate values within our market areas;
  • legislative and regulatory actions (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Basel III and related regulations) that may result in increased compliance costs;
  • successful cyberattacks against our IT infrastructure and that of our IT and third party providers;
  • higher than expected FDIC insurance premiums;
  • adverse weather conditions;
  • our inability to successfully generate new business in new geographic markets;
  • our inability to execute upon new business initiatives;
  • our lack of liquidity to fund our various cash obligations;
  • reduction in our lower-cost funding sources;
  • our inability to adapt to technological changes;
  • claims and litigation pertaining to fiduciary responsibility, environmental laws and other matters;
  • our ability to retain key employees;
  • demands for loans and deposits in our market areas;
  • adverse changes in securities markets;
  • changes in accounting policies and practices;
  • effects related to a prolonged shutdown of the federal government which could impact SBA and other government lending programs; and
  • other unexpected material adverse changes in our operations or earnings.

A discussion of these and other factors that could affect our results is included in our SEC filings, including our Annual Report on Form 10-K for the year ended December 31, 2018. We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

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

Contact:

Jeffrey J. Carfora, SEVP and CFO

Peapack-Gladstone Financial Corporation

T: 908-719-4308

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

  For the Three Months Ended 
  June 30,  March 31,  Dec 31,  Sept 30,  June 30, 
  2019  2019  2018  2018  2018 
Income Statement Data:                    
Interest income $44,603  $44,563  $42,781  $40,163  $39,674 
Interest expense  15,335   14,556   13,396   12,021   10,431 
Net interest income  29,268   30,007   29,385   28,142   29,243 
Provision for loan and lease losses  1,150   100   1,500   500   300 
Net interest income after provision for loan and
  lease losses
  28,118   29,907   27,885   27,642   28,943 
Wealth management fee income  9,568   9,174   8,552   8,200   8,126 
Service charges and fees  897   816   938   860   873 
Bank owned life insurance  326   338   351   349   345 
Gain on loans held for sale at fair value
  (Mortgage banking)
  132   47   74   87   79 
Loss on loans held for sale at lower of cost or
  fair value
        (4,392)      
Fee income related to loan level, back-to-back
  swaps
  721   270   1,838   854   900 
Gain on sale of SBA loans  573   419   277   514   814 
Other income (A)  740   606   3,571   444   639 
Securities gains/(losses), net  69   59   46   (325)  (36)
Total other income  13,026   11,729   11,255   10,983   11,740 
Salaries and employee benefits  17,543   17,156   16,372   16,025   15,826 
Premises and equipment  3,600   3,388   3,422   3,399   3,406 
FDIC insurance expense  277   277   645   593   625 
Other expenses  4,753   4,894   5,085   4,267   5,084 
Total operating expenses  26,173   25,715   25,524   24,284   24,941 
Income before income taxes  14,971   15,921   13,616   14,341   15,742 
Income tax expense  3,421   4,496   2,887   3,617   3,832 
Net income $11,550  $11,425  $10,729  $10,724  $11,910 
                     
Total revenue (B) $42,294  $41,736  $40,640  $39,125  $40,983 
Per Common Share Data:                    
Earnings per share (basic) $0.59  $0.59  $0.56  $0.56  $0.63 
Earnings per share (diluted)  0.59   0.58   0.55   0.56   0.62 
Weighted average number of common
  shares outstanding:
                    
Basic  19,447,155   19,350,452   19,260,033   19,053,849   18,930,893 
Diluted  19,568,371   19,658,006   19,424,906   19,240,098   19,098,838 
Performance Ratios:                    
Return on average assets annualized (ROAA)  0.99%  0.98%  0.96%  0.99%  1.11%
Return on average equity annualized (ROAE)  9.49%  9.65%  9.32%  9.68%  11.11%
Net interest margin (tax- equivalent basis)  2.64%  2.70%  2.72%  2.69%  2.82%
GAAP efficiency ratio (C)  61.88%  61.61%  62.81%  62.07%  60.86%
Operating expenses / average assets annualized  2.25%  2.21%  2.28%  2.24%  2.32%

(A)  The December 31, 2018 quarter includes death benefit from life insurance policy of $3.0 million related to the December 31, 2018 passing of the founder and managing principal of MCM.
(B)  Total revenue includes net interest income plus total other income.
(C)  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 Six Months Ended         
  June 30,  Change 
  2019  2018  $  % 
Income Statement Data:                
Interest income $89,166  $76,742  $12,424   16%
Interest expense  29,891   19,106   10,785   56%
Net interest income  59,275   57,636   1,639   3%
Provision for loan and lease losses  1,250   1,550   (300)  -19%
Net interest income after provision for loan and
  lease losses
  58,025   56,086   1,939   3%
Wealth management fee income  18,742   16,493   2,249   14%
Service charges and fees  1,713   1,704   9   1%
Bank owned life insurance  664   681   (17)  -2%
Gain on loans held for sale at fair value (Mortgage banking)  179   173   6   3%
Gain on loans held for sale at lower of cost or fair value          N/A 
Fee income related to loan level, back-to-back swaps  991   1,152   (161)  -14%
Gain on sale of SBA loans  992   845   147   17%
Other income  1,346   1,021   325   32%
Securities gains/(losses), net  128   (114)  242   -212%
Total other income  24,755   21,955   2,800   13%
Salaries and employee benefits  34,699   30,405   4,294   14%
Premises and equipment  6,988   6,676   312   5%
FDIC insurance expense  554   1,205   (651)  -54%
Other expenses  9,647   9,992   (345)  -3%
Total operating expenses  51,888   48,278   3,610   7%
Income before income taxes  30,892   29,763   1,129   4%
Income tax expense  7,917   7,046   871   12%
Net income $22,975  $22,717  $258   1%
                 
Total revenue (A) $84,030  $79,591  $4,439   6%
Per Common Share Data:                
Earnings per share (basic) $1.18  $1.21  $(0.03)  -2%
Earnings per share (diluted)  1.18   1.20   (0.02)  -2%
Weighted average number of common shares outstanding:                
Basic  19,399,071   18,770,492   628,579   3%
Diluted  19,528,536   18,996,979   531,557   3%
Performance Ratios:                
Return on average assets annualized (ROAA)  0.99%  1.06%  (0.07)%  -7%
Return on average equity annualized (ROAE)  9.57%  10.83%  (1.26)%  -12%
Net interest margin (tax- equivalent basis)  2.67%  2.79%  (0.12)%  -4%
GAAP efficiency ratio (B)  61.75%  60.66%  1.09%  2%
Operating expenses / average assets annualized  2.23%  2.25%  (0.02)%  -1%

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

PEAPACK-GLADSTONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION

(Dollars in Thousands)
(Unaudited)

  As of 
  June 30,  March 31,  Dec 31,  Sept 30,  June 30, 
  2019  2019  2018  2018  2018 
ASSETS                    
Cash and due from banks $5,351  $4,726  $5,914  $4,792  $4,458 
Federal funds sold  101   101   101   101   101 
Interest-earning deposits  298,575   235,487   154,758   118,111   62,231 
Total cash and cash equivalents  304,027   240,314   160,773   123,004   66,790 
Securities available for sale  378,839   384,400   377,936   368,554   346,790 
Equity security  4,847   4,778   4,719   4,673   4,710 
FHLB and FRB stock, at cost  18,338   18,460   18,533   21,561   21,533 
Residential mortgage  572,926   569,304   573,146   562,930   567,459 
Multifamily mortgage  1,129,476   1,104,406   1,138,190   1,289,458   1,320,251 
Commercial mortgage  694,674   705,221   702,165   644,900   637,705 
Commercial loans  1,518,591   1,410,146   1,398,214   1,180,774   1,069,526 
Consumer loans  53,995   54,276   58,678   64,478   76,509 
Home equity lines of credit  62,522   57,639   62,191   59,930   55,020 
Other loans  424   355   465   432   431 
Total loans  4,032,608   3,901,347   3,933,049   3,802,902   3,726,901 
Less: Allowances for loan and lease losses  39,791   38,653   38,504   37,293   38,066 
Net loans  3,992,817   3,862,694   3,894,545   3,765,609   3,688,835 
Premises and equipment  20,987   21,201   27,408   27,874   28,404 
Other real estate owned           96   1,608 
Accrued interest receivable  11,594   11,688   10,814   10,849   7,202 
Bank owned life insurance  45,744   45,554   45,353   45,181   44,980 
Goodwill and other intangible assets (A)  31,941   32,170   32,399   34,297   23,477 
Finance lease right-of-use assets (B)  5,452   5,639          
Operating lease right-of-use assets (B)  11,017   7,541          
Other assets  45,631   27,867   45,378   34,011   30,845 
TOTAL ASSETS $4,871,234  $4,662,306  $4,617,858  $4,435,709  $4,265,174 
                     
LIABILITIES                    
Deposits:                    
Noninterest-bearing demand deposits $544,431  $476,013  $463,926  $503,388  $527,453 
Interest-bearing demand deposits  1,388,821   1,268,823   1,247,305   1,148,660   1,053,004 
Savings  112,438   114,865   114,674   116,391   120,986 
Money market accounts  1,207,358   1,209,835   1,243,369   1,097,630   1,051,893 
Certificates of deposit – Retail  570,384   545,450   510,724   466,791   431,679 
Certificates of deposit – Listing Service  58,541   68,055   79,195   85,241   96,644 
Subtotal “customer” deposits  3,881,973   3,683,041   3,659,193   3,418,101   3,281,659 
IB Demand – Brokered  180,000   180,000   180,000   180,000   180,000 
Certificates of deposit – Brokered  33,682   56,165   56,147   61,193   61,254 
Total deposits  4,095,655   3,919,206   3,895,340   3,659,294   3,522,913 
Overnight borrowings           95,190   127,350 
Federal home loan bank advances  105,000   105,000   108,000   84,000   52,898 
Finance lease liability (B)  7,985   8,175   8,362   8,548   8,728 
Operating lease liability (B)  11,269   7,683          
Subordinated debt, net  83,305   83,249   83,193   83,138   83,133 
Other liabilities  74,132   57,521   53,950   51,106   33,133 
TOTAL LIABILITIES  4,377,346   4,180,834   4,148,845   3,981,276   3,828,155 
Shareholders’ equity  493,888   481,472   469,013   454,433   437,019 
TOTAL LIABILITIES AND                    
SHAREHOLDERS’ EQUITY $4,871,234  $4,662,306  $4,617,858  $4,435,709  $4,265,174 
Assets under management and / or administration at
  Peapack-Gladstone Banks Private Wealth Management
  Division (market value, not included above-dollars in billions)
 $6.6  $6.3  $5.8  $6.4  $5.7 

(A)  Includes goodwill and intangibles from the Murphy Capital Management, Quadrant Capital Management and Lassus Wherley and Associates acquisitions completed in August 2017, November 2017 and September 2018, respectively.
(B)  Resulted from the adoption of ASU No. 2016-02, “Leases (Topic 842)”.

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

  As of 
  June 30,  March 31,  Dec 31,  Sept 30,  June 30, 
  2019  2019  2018  2018  2018 
Asset Quality:                    
Loans past due over 90 days and still accruing $  $  $  $  $ 
Nonaccrual loans (A)  31,150   24,892   25,715   10,722   12,025 
Other real estate owned           96   1,608 
Total nonperforming assets $31,150  $24,892  $25,715  $10,818  $13,633 
                     
Nonperforming loans to total loans  0.77%  0.64%  0.65%  0.28%  0.32%
Nonperforming assets to total assets  0.64%  0.53%  0.56%  0.24%  0.32%
                     
Performing TDRs (B)(C) $3,772  $4,274  $4,303  $19,334  $18,665 
                     
Loans past due 30 through 89 days and still accruing $432  $2,492  $3,484  $2,528  $3,539 
                     
Classified loans $56,135  $51,306  $58,265  $51,783  $51,216 
                     
Impaired loans $34,941  $29,185  $31,300  $31,345  $30,711 
                     
Allowance for loan and lease losses:                    
Beginning of period $38,653  $38,504  $37,293  $38,066  $37,696 
Provision for loan and lease losses  1,150   100   1,500   500   300 
Charge-offs, net  (12)  49   (289)  (1,273)  70 
End of period $39,791  $38,653  $38,504  $37,293  $38,066 
                     
ALLL to nonperforming loans  127.74%  155.28%  149.73%  347.82%  316.56%
ALLL to total loans  0.987%  0.991%  0.979%  0.981%  1.021%
General ALLL to total loans (D)  0.956%  0.984%  0.972%  0.961%  0.978%

(A) Amount includes one commercial real estate loan with a loan balance of $14.6 million at June 30, 2019, $14.8 million at March 31, 2019 and $15.2 million at December 31, 2018 which continues to pay as agreed, and which the Company believes to be well secured. In addition, one hospitality relationship with a balance of $6.6 million went on nonaccrual at June 30, 2019.
(B)  Amounts reflect TDRs that are paying according to restructured terms.
(C)  Amount does not include $19.8 million at June 30, 2019, $20.0 million at March 31, 2019, $20.5 million at December 31, 2018, $5.5 million at September 30, 2018, and $6.9 million at June 30, 2018 of TDRs included in nonaccrual loans.
(D) Total ALLL less specific reserves equals general ALLL.

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

  June 30,  December 31,  June 30, 
  2019  2018  2018 
Capital Adequacy                  
Equity to total assets (A)    10.14%    10.16%    10.25%
Tangible Equity to tangible assets (B)    9.55%    9.52%    9.75%
Book value per share (C)   $25.38    $24.25    $22.99 
Tangible Book Value per share (D)   $23.74    $22.58    $21.76 


  June 30,  December 31,  June 30, 
  2019  2018  2018 
Regulatory Capital Holding Company                        
Tier I leverage $462,675  10.01%  $438,240  9.82%  $416,123  9.71% 
Tier I capital to risk-weighted assets  462,675  11.96   438,240  11.76   416,123  12.16 
Common equity tier I capital ratio
  to risk-weighted assets
  462,673  11.96   438,238  11.76   416,121  12.16 
Tier I & II capital to risk-weighted assets  585,771  15.14   559,937  15.03   537,322  15.71 
                         
Regulatory Capital Bank                        
Tier I leverage $533,043  11.54%  $504,504  11.32%  $482,545  11.27% 
Tier I capital to risk-weighted assets  533,043  13.79   504,504  13.56   482,545  14.12 
Common equity tier I capital ratio
  to risk-weighted assets
  533,041  13.79   504,502  13.56   482,543  14.12 
Tier I & II capital to risk-weighted assets  572,834  14.82   543,008  14.59   520,611  15.23 

(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)  Book value per common share is calculated by dividing shareholders’ equity by period end common shares outstanding.
(D)  Tangible book value per share is different than book value per share because it excludes intangible assets. Tangible book value per share is calculated by dividing tangible equity by period end common shares outstanding. See Non-GAAP financial measures reconciliation tables.

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

  For the Quarters Ended 
  June 30,  March 31,  Dec 31,  Sept 30,  June 30, 
  2019  2019  2018  2018  2018 
Residential loans retained $21,998  $10,839  $24,937  $14,412  $22,217 
Residential loans sold  9,785   3,090   4,686   6,717   6,488 
Total residential loans  31,783   13,929   29,623   21,129   28,705 
Commercial real estate  34,204   21,025   63,486   23,950   20,780 
Multifamily  58,604   21,122   58,175   12,328   4,743 
Commercial (C&I) loans (A) (B)  143,944   141,128   285,950   133,973   137,805 
SBA  3,740   9,050   5,695   4,800   10,740 
Wealth lines of credit (A)  6,725   7,380   5,850   6,100   11,560 
Total commercial loans  247,217   199,705   419,156   181,151   185,628 
Installment loans  1,497   558   649   1,634   1,036 
Home equity lines of credit (A)  3,626   1,607   3,625   10,273   5,091 
Total loans closed $284,123  $215,799  $453,053  $214,187  $220,460 


  For the Six Months Ended 
  June 30,  June 30, 
  2019  2018 
Residential loans retained $32,837  $33,859 
Residential loans sold  12,875   14,160 
Total residential loans  45,712   48,019 
Commercial real estate  55,229   55,165 
Multifamily  79,726   25,743 
Commercial (C&I) loans (A) (B)  285,072   256,230 
SBA  12,790   15,010 
Wealth lines of credit (A)  14,105   30,798 
Total commercial loans  446,922   382,946 
Installment loans  2,055   2,386 
Home equity lines of credit (A)  5,233   7,588 
Total loans closed $499,922  $440,939 

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

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

  June 30, 2019  June 30, 2018 
  Average  Income/      Average  Income/     
  Balance  Expense  Yield  Balance  Expense  Yield 
ASSETS:                        
Interest-earning assets:                        
Investments:                        
Taxable (A) $392,079  $2,639   2.69% $361,537  $2,072   2.29%
Tax-exempt (A) (B)  16,913   206   4.87   20,647   181   3.51 
                         
Loans (B) (C):                        
Mortgages  568,020   4,835   3.40   562,460   4,708   3.35 
Commercial mortgages  1,786,086   17,581   3.94   1,986,138   18,972   3.82 
Commercial  1,417,112   17,303   4.88   1,047,299   12,397   4.73 
Installment  54,565   585   4.29   71,933   635   3.53 
Home equity  63,112   818   5.18   62,731   685   4.37 
Other  375   10   10.67   450   11   9.78 
Total loans  3,889,270   41,132   4.23   3,731,011   37,408   4.01 
Federal funds sold  101      0.25   101      0.25 
Interest-earning deposits  241,129   1,265   2.10   94,770   395   1.67 
Total interest-earning assets  4,539,492   45,242   3.99%  4,208,066   40,056   3.81%
Noninterest-earning assets:                        
Cash and due from banks  5,280           4,660         
Allowance for loan and lease losses  (39,138)          (38,278)        
Premises and equipment  21,176           28,704         
Other assets  127,798           100,385         
Total noninterest-earning assets  115,116           95,471         
Total assets $4,654,608          $4,303,537         
                         
LIABILITIES:                        
Interest-bearing deposits:                        
Checking $1,266,909  $4,123   1.30% $1,073,108  $1,967   0.73%
Money markets  1,197,998   4,415   1.47   1,000,320   2,432   0.97 
Savings  112,693   16   0.06   123,490   17   0.06 
Certificates of deposit – retail  610,493   3,461   2.27   555,935   2,330   1.68 
Subtotal interest-bearing deposits  3,188,093   12,015   1.51   2,752,853   6,746   0.98 
Interest-bearing demand – brokered  180,000   836   1.86   180,000   804   1.79 
Certificates of deposit – brokered  46,639   326   2.80   63,364   399   2.52 
Total interest-bearing deposits  3,414,732   13,177   1.54   2,996,217   7,949   1.06 
Borrowings  105,000   838   3.19   221,340   1,155   2.09 
Capital lease obligation  8,052   97   4.82   8,794   106   4.82 
Subordinated debt  83,272   1,223   5.87   83,099   1,221   5.88 
Total interest-bearing liabilities  3,611,056   15,335   1.70%  3,309,450   10,431   1.26%
Noninterest-bearing liabilities:                        
Demand deposits  497,853           536,306         
Accrued expenses and other liabilities  58,721           29,035         
Total noninterest-bearing liabilities  556,574           565,341         
Shareholders’ equity  486,978           428,746         
Total liabilities and shareholders’ equity $4,654,608          $4,303,537         
Net interest income     $29,907          $29,625     
Net interest spread          2.29%          2.55%
Net interest margin (D)          2.64%          2.82%

(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)

  June 30, 2019  March 31, 2019 
  Average  Income/      Average  Income/     
  Balance  Expense  Yield  Balance  Expense  Yield 
ASSETS:                        
Interest-earning assets:                        
Investments:                        
Taxable (A) $392,079  $2,639   2.69% $387,566  $2,684   2.77%
Tax-exempt (A) (B)  16,913   206   4.87   17,345   210   4.84 
                         
Loans (B) (C):                        
Mortgages  568,020   4,835   3.40   571,637   4,895   3.43 
Commercial mortgages  1,786,086   17,581   3.94   1,824,371   18,021   3.95 
Commercial  1,417,112   17,303   4.88   1,379,585   16,750   4.86 
Installment  54,565   585   4.29   55,215   577   4.18 
Home equity  63,112   818   5.18   60,421   766   5.07 
Other  375   10   10.67   412   11   10.68 
Total loans  3,889,270   41,132   4.23   3,891,641   41,020   4.22 
Federal funds sold  101      0.25   101      0.25 
Interest-earning deposits  241,129   1,265   2.10   237,251   1,270   2.14 
Total interest-earning assets  4,539,492   45,242   3.99%  4,533,904   45,184   3.99%
Noninterest-earning assets:                        
Cash and due from banks  5,280           5,398         
Allowance for loan and lease losses  (39,138)          (38,948)        
Premises and equipment  21,176           21,467         
Other assets  127,798           122,102         
Total noninterest-earning assets  115,116           110,019         
Total assets $4,654,608          $4,643,923         
                         
LIABILITIES:                        
Interest-bearing deposits:                        
Checking $1,266,909  $4,123   1.30% $1,284,611  $3,710   1.16%
Money markets  1,197,998   4,415   1.47   1,208,004   4,335   1.44 
Savings  112,693   16   0.06   114,003   16   0.06 
Certificates of deposit – retail  610,493   3,461   2.27   607,178   3,234   2.13 
Subtotal interest-bearing deposits  3,188,093   12,015   1.51   3,213,796   11,295   1.41 
Interest-bearing demand – brokered  180,000   836   1.86   180,000   739   1.64 
Certificates of deposit – brokered  46,639   326   2.80   56,154   365   2.60 
Total interest-bearing deposits  3,414,732   13,177   1.54   3,449,950   12,399   1.44 
Borrowings  105,000   838   3.19   105,900   834   3.15 
Capital lease obligation  8,052   97   4.82   8,244   99   4.80 
Subordinated debt  83,272   1,223   5.87   83,213   1,224   5.88 
Total interest-bearing liabilities  3,611,056   15,335   1.70%  3,647,307   14,556   1.60%
Noninterest-bearing liabilities:                        
Demand deposits  497,853           471,265         
Accrued expenses and other liabilities  58,721           51,791         
Total noninterest-bearing liabilities  556,574           523,056         
Shareholders’ equity  486,978           473,560         
Total liabilities and shareholders’ equity $4,654,608          $4,643,923         
Net interest income     $29,907          $30,628     
Net interest spread          2.29%          2.39%
Net interest margin (D)          2.64%          2.70%

(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
SIX MONTHS ENDED
Tax-Equivalent Basis, Dollars in Thousands

  June 30, 2019  June 30, 2018 
  Average  Income/      Average  Income/     
  Balance  Expense  Yield  Balance  Expense  Yield 
ASSETS:                        
Interest-earning assets:                        
Investments:                        
Taxable (A) $389,835  $5,323   2.73% $350,608  $3,997   2.28%
Tax-exempt (A) (B)  17,128   416   4.86   22,465   379   3.37 
                         
Loans (B) (C):                        
Mortgages  569,818   9,730   3.42   568,397   9,439   3.32 
Commercial mortgages  1,805,123   35,603   3.94   1,999,558   37,379   3.74 
Commercial  1,398,452   34,053   4.87   1,008,613   22,884   4.54 
Installment  54,889   1,162   4.23   76,820   1,305   3.40 
Home equity  61,773   1,583   5.13   63,938   1,346   4.21 
Other  394   21   10.66   453   22   9.71 
Total loans  3,890,449   82,152   4.22   3,717,779   72,375   3.89 
Federal funds sold  101      0.25   101      0.25 
Interest-earning deposits  239,201   2,535   2.12   97,107   752   1.55 
Total interest-earning assets  4,536,714   90,426   3.99%  4,188,060   77,503   3.70%
Noninterest-earning assets:                        
Cash and due from banks  5,339           4,673         
Allowance for loan and lease losses  (39,044)          (37,680)        
Premises and equipment  21,321           28,979         
Other assets  124,965           99,567         
Total noninterest-earning assets  112,581           95,539         
Total assets $4,649,295          $4,283,599         
                         
LIABILITIES:                        
Interest-bearing deposits:                        
Checking $1,275,711  $7,833   1.23% $1,107,936  $3,724   0.67%
Money markets  1,202,973   8,750   1.45   1,017,036   4,378   0.86 
Savings  113,345   32   0.06   122,284   33   0.05 
Certificates of deposit – retail  608,845   6,695   2.20   555,751   4,479   1.61 
Subtotal interest-bearing deposits  3,200,874   23,310   1.46   2,803,007   12,614   0.90 
Interest-bearing demand – brokered  180,000   1,575   1.75   180,000   1,484   1.65 
Certificates of deposit – brokered  51,371   691   2.69   67,957   828   2.44 
Total interest-bearing deposits  3,432,245   25,576   1.49   3,050,964   14,926   0.98 
Borrowings  105,448   1,672   3.17   154,271   1,525   1.98 
Capital lease obligation  8,147   196   4.81   8,878   213   4.80 
Subordinated debt  83,243   2,447   5.88   83,071   2,442   5.88 
Total interest-bearing liabilities  3,629,083   29,891   1.65%  3,297,184   19,106   1.16%
Noninterest-bearing liabilities:                        
Demand deposits  484,632           538,084         
Accrued expenses and other liabilities  55,274           28,799         
Total noninterest-bearing liabilities  539,906           566,883         
Shareholders’ equity  480,306           419,532         
Total liabilities and shareholders’ equity $4,649,295          $4,283,599         
Net interest income     $60,535          $58,397     
Net interest spread          2.34%          2.54%
Net interest margin (D)          2.67%          2.79%

(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 
  June 30,  March 31,  Dec 31,  Sept 30,  June 30, 
Tangible Book Value Per Share 2019  2019  2018  2018  2018 
Shareholders’ equity $493,888  $481,472  $469,013  $454,433  $437,019 
Less:  Intangible assets, net  31,941   32,170   32,399   34,297   23,477 
Tangible equity  461,947   449,302   436,614   420,136   413,542 
                     
Period end shares outstanding  19,456,312   19,445,363   19,337,662   19,203,727   19,007,312 
Tangible book value per share $23.74  $23.11  $22.58  $21.88  $21.76 
Book value per share  25.38   24.76   24.25   23.66   22.99 
                     
Tangible Equity to Tangible Assets                    
Total assets $4,871,234  $4,662,306  $4,617,858  $4,435,709  $4,265,174 
Less: Intangible assets, net  31,941   32,170   32,399   34,297   23,477 
Tangible assets  4,839,293   4,630,136   4,585,459   4,401,412   4,241,697 
Tangible equity to tangible assets  9.55%  9.70%  9.52%  9.55%  9.75%
Equity to assets  10.14%  10.33%  10.16%  10.24%  10.25%

 

  Three Months Ended 
  June 30,  March 31,  Dec 31,  Sept 30,  June 30, 
Efficiency Ratio 2019  2019  2018  2018  2018 
Net interest income $29,268  $30,007  $29,385  $28,142  $29,243 
Total other income  13,026   11,729   11,255   10,983   11,740 
Less:  Loss/(gain) on loans held for sale                    
at lower of cost or fair value        4,392       
Less:  Income from life insurance proceeds        (3,000)      
Add:  Securities (gains)/losses, net  (69)  (59)  (46)  325   36 
Total recurring revenue  42,225   41,677   41,986   39,450   41,019 
                     
Operating expenses  26,173   25,715   25,524   24,284   24,941 
Less: ORE provision           28   204 
Total operating expense  26,173   25,715   25,524   24,256   24,737 
                     
Efficiency ratio  61.98%  61.70%  60.79%  61.49%  60.31%

 

  For the Six Months Ended 
  June 30,  June 30, 
Efficiency Ratio 2019  2018 
Net interest income $59,275  $57,636 
Total other income  24,755   21,955 
Add:  Securities (gains)/losses, net  (128)  114 
Total recurring revenue  83,902   79,705 
         
Operating expenses  51,888   48,278 
Less: ORE provision     204 
Total operating expense  51,888   48,074 
         
Efficiency ratio  61.84%  60.31%