Form 8-K PEAPACK GLADSTONE FINANC For: Oct 28

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

October 28, 2016

Date of Report (Date of earliest event reported)

 

PEAPACK-GLADSTONE FINANCIAL CORPORATION

(Exact name of Registrant as Specified in its Charter)

 

New Jersey

(State or Other Jurisdiction of Incorporation)

 

001-16197	22-3537895
(Commission File Number)	(IRS Employer Identification No.)

 

500 Hills Drive, Suite 300

Bedminster, New Jersey 07921-1538

(Address of principal executive offices)

 

(908) 234-0700

(Registrant's telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

INFORMATION TO BE INCLUDED IN THE REPORT

 

Item 2.02

Results of Operations and Financial Condition.

 

On October 28, 2016, Peapack-Gladstone Financial Corporation issued a press release reporting earnings and other financial results for its third quarter of 2016, which ended September 30, 2016. A copy of the press release is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated by reference in its entirety.

 

The information disclosed under this Item 2.02, including Exhibit 99.1, shall be considered “furnished” but not “filed” for purposes of the Securities Exchange Act of 1934, as amended.

 

Item 9.01

Financial Statements and Exhibits.

 

(d)

Exhibits.

	Exhibit No.	Title
	99.1	Press Release dated October 28, 2016.

 

The press release disclosed in this Item 9.01 as Exhibit 99.1 shall be considered “furnished” but not “filed” for purposes of the Securities Exchange Act of 1934, as amended.

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	PEAPACK-GLADSTONE FINANCIAL CORPORATION
Dated: October 28, 2016	By: /s/ Jeffrey J. Carfora
	Jeffrey J. Carfora
	Senior Executive Vice President and Chief Financial Officer and Principal Financial Officer

 

 

 

 

 

 

EXHIBIT INDEX

 

Exhibit No.	Title
99.1	Press Release dated October 28, 2016.

 

 

Exhibit 99.1

 

Contact:

Jeffrey J. Carfora, SEVP and CFO

Peapack-Gladstone Financial Corporation

T: 908-719-4308

 

PEAPACK-GLADSTONE FINANCIAL CORPORATION

REPORTS A STRONG THIRD QUARTER AND

DECLARES ITS QUARTERLY CASH DIVIDEND

 

Bedminster, N.J. – October 28, 2016 – Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market:PGC) (the “Corporation” or the “Company”) recorded record net income of $19.17 million and diluted earnings per share of $1.17 for the nine months ended September 30, 2016, compared to $15.63 million and $1.02, respectively, for the same nine month period last year, reflecting increases of $3.54 million or 23 percent, and $0.15 per share, or 15 percent, respectively.

For the quarter ended September 30, 2016, the Corporation recorded net income of $7.12 million and diluted earnings per share of $0.43, compared to $5.38 million and $0.35 for the same three month period last year, reflecting increases of $1.73 million, or 32 percent, and $0.08 per share, or 23 percent, respectively.

The 2016 nine month and three month periods, when compared to the same periods in 2015, reflected improved net interest income and improved non-interest income, partially offset by increased expenses. The increased expenses were principally due to increased FDIC premiums, increased investment in risk management related analytics and practices, and increased salary and benefits associated with strategic hiring which was in line with the Company’s Strategic Plan.

While the third quarter 2016 FDIC premium reflected an increase of $398 thousand relative to the same quarter in 2015, the third quarter of 2016 premium declined $767 thousand from the second quarter of 2016. Beginning July 1, 2016 the FDIC assessment system was revised. Revisions for “small institutions” (under $10 billion in assets) resulted in, among other things, the elimination of risk categories and utilization of a financial ratios method to determine assessment rates. The changes reduced the Company’s assessment rate by nearly 50% in the third quarter of 2016, when compared to the second quarter 2016 assessment rate.

The following table summarizes specified financial measures for the third quarters of 2016 and 2015, respectively:

		September				September				Increase/
(Dollars in millions, except EPS)		2016				2015				(Decrease)
Net interest income		$	24.27			$	21.71			$	2.56				12	%
Provision for loan losses		$	2.10			$	1.60			$	0.50				31	%
Pretax income		$	11.54			$	8.82			$	2.72				31	%
Net income		$	7.12			$	5.38			$	1.74				32	%
Diluted EPS		$	0.43			$	0.35			$	0.08				23	%
Total revenue		$	31.80			$	27.32			$	4.48				16	%
Return on average assets			0.77	%			0.66	%			0.11				17	%
Return on average equity			9.44	%			8.19	%			1.25				15	%
Efficiency ratio (A)			57.58	%			61.14	%			(3.56	)			(6	)%
Book value per share (A)		$	18.57			$	17.33			$	1.24				7	%

 

(A)	See Non-GAAP financial measures reconciliation table on page 28.

Mr. Kennedy said, “We had a very strong third quarter of 2016, as we continued to successfully execute our Plan. We again posted record net income and near record earnings per share, despite the additional expense base in the 2016 period.”

Additional Q3 2016 highlights follow:

·

Growth in diluted EPS for Q3 2016 when compared to Q3 2015 was $0.08 per share, or 23 percent.

·

At September 30, 2016, the market value of assets under administration (AUA) at the Private Wealth Management Division of Peapack-Gladstone Bank (the “Bank”) increased to $3.50 billion.

·

Fee income from the Private Wealth Management Division totaled $4.4 million for the third quarter of 2016, compared to $4.2 million for the same quarter in 2015. Wealth management fee income, comprising approximately 14 percent of the Company’s total revenue, contributed significantly to the Company’s diversified revenue sources.

·

Loans at September 30, 2016, including multifamily loans held for sale, totaled $3.26 billion. This reflected net growth of $54 million compared to the prior quarter (2 percent compared to the prior quarter or 7 percent on an annualized basis), and $381 million (13 percent) when compared to the $2.88 billion at September 30, 2015.

·

Commercial & Industrial (C&I) loans at September 30, 2016 totaled $598 million. This reflected net growth of $22 million compared to the prior quarter (4 percent compared to the prior quarter or 15 percent on an annualized basis), and net growth of $141 million (31 percent) when compared to the $457 million at September 30, 2015.

·

Multifamily whole loans sold totaled $44 million in the third quarter of 2016, which resulted in a net gain on sale of $256 thousand.

·

Total “customer” deposit balances (defined as deposits excluding brokered CDs and brokered “overnight” interest-bearing demand deposits) totaled $3.01 billion at September 30, 2016. This reflected net growth of $191 million compared to the prior quarter (7 percent compared to the prior quarter or 27 percent on an annualized basis), and $456 million (18 percent) when compared to the $2.55 billion at September 30, 2015.

·

Asset quality metrics continued to be strong at September 30, 2016. Nonperforming assets at September 30, 2016 were just $11.4 million, or 0.30 percent of total assets. Total loans past due 30 through 89 days and still accruing were $8.2 million or 0.25 percent of total loans at September 30, 2016.

·

The Company’s net interest income for the third quarter of 2016 was $24.3 million, reflecting growth of $93 thousand (less than 1 percent for the quarter or 1 percent on an annualized basis) when compared to $24.2 million for the June 2016 quarter, but reflected growth of $2.56 million (12 percent) when compared to the $21.71 million for the quarter ended September 30, 2015.

·

The Company’s book value per share at September 30, 2016 of $18.57 reflected improvement when compared to $17.33 at September 30, 2015. Year over year growth in book value per share totaled 7 percent.

Mr. Kennedy noted, “We continue to be pleased with our progress since launching our Strategic Plan – Expanding our Reach – in early 2013, and we are particularly pleased with our progress thus far in 2016. Despite the headwinds we noted going into 2016, we have delivered solid results thus far this year.”

Net Interest Income / Net Interest Margin

Net interest income and net interest margin was $24.27 million and 2.74 percent for the third quarter of 2016, compared to $24.18 million and 2.79 percent for the second quarter of 2016, and compared to $21.71 million and 2.75 percent for the same quarter last year, reflecting growth in net interest income of $2.56 million or 12 percent when compared to the same prior year period. Net interest income for the third quarter of 2016 benefitted from loan growth during 2015 and the first nine months of 2016. Additionally, the September 2016 quarter included approximately $507 thousand of prepayment premiums received on the prepayment of certain multifamily loans, compared to $453 thousand for the June 2016 quarter, and compared to $76 thousand for the September 2015 quarter. The $507 thousand in premiums benefitted the net interest margin for the September 2016 quarter by 6 basis points.

Net interest income and net interest margin for the third quarter of 2016 was also impacted by the effect of the $50 million subordinated debt issued in June 2016. Interest on subordinated debt totaled $799 thousand for the third quarter, which reduced the net interest margin by approximately 9 basis points.

Net interest income for the third quarter of 2016 improved considerably compared to the same quarter in 2015, and net interest margin remained relatively flat at 2.74 percent for the 2016 quarter compared to 2.75 percent for the 2015 quarter. The net interest margin continues to be negatively impacted by the effect of the low interest rate environment throughout 2015 and 2016, as well as competitive pressures in attracting new loans and deposits.

The net interest margin is also affected by the maintenance of liquid assets on the Company’s balance sheet. Mr. Kennedy said, “In addition to $409 million of cash, cash equivalents and investment securities on our balance sheet, we also have over $1 billion of secured funding available from the Federal Home Loan Bank, of which we only have $72 million drawn as of September 30, 2016.”

The Company’s interest rate sensitivity models indicate that the Company’s net interest income and margin would improve in a rising rate environment.

Wealth Management Business

In the September 2016 quarter, Peapack-Gladstone Bank’s wealth management business generated $4.44 million in fee income compared to $4.90 million for the June 2016 quarter, and $4.17 million for the September 2015 quarter.   Fee income for the September 2016 quarter was $463 thousand lower than the June 2016 quarter. The June quarter of each year historically reflects a high level of tax preparation income related to the Bank’s wealth management clients.

Fee income for the September 2016 quarter increased by $267 thousand, or approximately 6 percent greater than the September 2015 quarter. Growth in fee income was due to several factors including continued healthy new business results and a positive market environment, partially offset by normal levels of disbursements and outflows. This net positive contribution to revenue from our wealth management business was partially offset by the broader market declines in the latter part of 2015, as well as the first quarter of 2016, which negatively impacted assets under administration (“AUA”) and the correlated investment fee revenue at the outset of 2016. 

The market value of the AUA of the wealth management division was $3.50 billion at September 30, 2016, increasing by $77 million, or 2 percent (9 percent on an annualized basis), from June 30, 2016 and increasing $244 million, (8 percent), from $3.25 billion at September 30, 2015.

John P. Babcock, President of PGB Private Wealth Management, said, “We continue to execute on our advice-led strategy, incorporating a wealth management conversation into every relationship we have with clients, across all business lines.  We will continue to grow our professional team as well as expand the products, services, and the advice we deliver to our clients.  Our continued growth will be driven by our continued successful new business generation, strategic new hires, and the possible acquisition of wealth management firms in the Tri-State area.  Over the past two quarters we have added talented, proven and experienced new team members in wealth advisory, portfolio management and fiduciary roles”. Mr. Babcock went on to note, “While the broader market declines in the latter part of 2015 and the beginning of 2016 impacted fee revenue at the start of the year, we have been able to generate fee income in the September 2016 quarter greater than the September quarter of 2015 due to new business and positive net flows. We are cautiously optimistic about the market in the medium-to-longer term and have a solid new business pipeline.  Notwithstanding market fluctuations, our business continues to grow and will be a significant driver of enhanced shareholder value as we move ahead.”

Loan Originations / Loans

At September 30, 2016, loans, including multifamily loans held for sale, totaled $3.26 billion compared to $3.21 billion three months ago at June 30, 2016 and compared to $2.88 billion one year ago at September 30, 2015, representing net increases of $54 million compared to the prior quarter (2 percent compared to the prior quarter or 7 percent on an annualized basis), and $381 million (13 percent) compared to the prior year September 30 period. Mr. Kennedy noted, “We continue to believe we have a very high quality loan portfolio, as evidenced by very strong asset quality metrics.”

For the quarter ended September 30, 2016, residential mortgage originations totaled $68 million. When comparing September 30, 2016 to September 30, 2015, residential mortgage loans grew $27 million, or 6 percent, to $497 million at September 30, 2016 from $470 million one year ago at September 30, 2015. We believe that residential mortgage volumes and the portfolio will increase through the remainder of 2016, and into 2017.

For the September 2016 quarter, commercial real estate originations (not including multifamily loans) totaled $57 million. When comparing September 30, 2016 to September 30, 2015, commercial real estate mortgage loans (not including multifamily loans) grew $98 million, or 24 percent, to $497 million at September 30, 2016 from $399 million one year ago at September 30, 2015.

The September 2016 quarter included $74 million of multifamily loan originations, down significantly from the previous quarters. At September 30, 2016, the multifamily loan portfolio, including multifamily loans held for sale, totaled $1.54 billion (or 47.1 percent of total loans) compared to $1.56 billion (or 48.7 percent of total loans) three months ago at June 30, 2016 and compared to $1.50 billion (or 50.0 percent of total loans) at December 31, 2015. The increases were net of whole loans sold and participations, including $44 million of whole loans sold in the September 2016 quarter, bringing the total whole loans sold or participated for 2016 to $182 million. These loan sales and participations were part of the Company’s balance sheet management strategy and will likely continue in 2016, and beyond.

Mr. Kennedy said, “As I explained previously, we anticipated multifamily loan originations and growth would be less than prior years, as we manage our balance sheet such that multifamily loans decline as a percentage of the overall loan portfolio and C&I loans become a larger percentage of the overall loan portfolio. We made progress on this front late in 2015, and we are pleased this has continued into 2016.” Mr. Kennedy further noted that, “This balance sheet management will likely not be linear each quarter, but will rather be apparent over periods of time.”

For the quarter ended September 30, 2016 the Company closed $60 million of commercial loans. When comparing September 30, 2016 to September 30, 2015, commercial loans grew $141 million, or 31 percent, to $598 million at September 30, 2016 from $457 million one year ago at September 30, 2015. At September 30, 2016 the commercial loan portfolio comprised 18 percent of the overall loan portfolio unchanged from the 18 percent at June 30, 2016, and up from 16 percent one year ago at September 30, 2015.

Mr. Kennedy said, “As a result of our continued investment in and commitment to C&I banking, we have seen, and believe we will continue to see, our C&I client base and corresponding loan portfolio grow.”

Mr. Kennedy went on to say, “Our private banking business model of addressing the sophisticated needs and expectations of successful business owners and entrepreneurs is being well received. The ability to engage in high level strategic debt, capital and valuation analysis coupled with succession, estate and wealth planning strategies, enables us to provide a unique boutique level of service to business owners and middle market clients.”

Eric H. Waser, Head of Commercial Banking noted, “Three of the 15 largest manufacturers in New Jersey (as enumerated in a reputable NJ business publication), have moved business to Peapack - Gladstone Bank over the past 12 months.” Mr. Waser further noted, “We are extremely pleased with how our “Advice Led” approach is capturing the attention of the business community”.

Deposits / Funding / Balance Sheet Management

As noted last quarter, in June 2016, the Company issued $50 million of subordinated debt ($48.7 million net of underwriting fees and expenses) bearing interest at an annual rate of 6 percent for the first five years, and thereafter at an adjustable rate and until maturity in June 2026 or earlier redemption.

During the September 2016 quarter, customer deposit growth of $191 million (principally noninterest-bearing, interest-bearing and money market) and increased capital of $13 million, basically funded a $29 million reduction in overnight borrowings, a $12 million reduction of FHLB Advances, an increase in loans of $54 million, an increase in investment securities of $43 million, and an increase in interest earning deposits (cash) of $79 million.

Brokered interest-bearing demand (“overnight”) deposits continued to be managed flat at $200 million at September 30, 2016. The interest rate paid on these deposits allowed the Bank to fund at attractive rates and engage in interest rate swaps as part of its asset-liability interest rate risk management. As of September 30, 2016, the Company had transacted pay fixed, receive floating interest rate swaps totaling $180 million notional amount. The Company ensures ample available collateralized liquidity as a backup to these short term brokered deposits.

Mr. Kennedy noted, “The Company will continue to place an intense focus on providing high touch client service and growing its core deposit base. Our full array of treasury management solutions will help support both core deposit growth and commercial lending opportunities.”

Other Noninterest Income

The Company’s total noninterest income for the September 2016 quarter totaled $7.54 million or nearly 24 percent of total revenue.

Service charges and fees for the September 2016 quarter were $812 thousand, compared to $818 thousand for the June 2016 quarter and $832 thousand for the September 2015 quarter. Several categories have reflected improvement, including income from debit card usage as well as account analysis fees, however, overdraft/NSF fees have declined considerably.

The September 2016 quarter included $383 thousand of income from the sale of newly originated residential mortgage loans (mortgage banking), compared to $309 thousand for the June 2016 quarter, and $102 thousand for the September 2015 quarter. Originations of residential mortgage loans for sale were higher in the September 2016 quarter, compared to the other noted periods.

There were no securities gains for the September 2016 quarter compared to $18 thousand for the June 2016 quarter, and $83 thousand for the September 2015 quarter. Sales of securities have been generally employed to benefit interest rate risk, prepayment risk, and/or liquidity risk. Given the shorter duration of our investment portfolio and the interest rate environment, as well as the future outlook, we anticipate such sales will continue to be a very small component of the Company’s operations.

Gain on sale of multifamily loans held for sale at the lower of cost or fair value was $256 thousand for the September 2016 quarter, compared to $500 thousand for the June 2016 quarter. There were no such gains in the September 2015 quarter. During the first quarter of 2016 the Company began selling whole multifamily loans, in addition to participations. The Company anticipates that it will continue to employ both of these strategies throughout 2016, and beyond.

The third quarter of 2016 included $243 thousand of income related to the Company’s SBA lending and sale program, compared to $212 thousand generated in the June 2016 quarter. The SBA program was fully implemented in the March 2016 quarter, and the Company anticipates it will be a part of its normal ongoing operations.

The September 2016 quarter included $670 thousand of loan level, back-to-back swap income. This program is also a part of the Company’s normal ongoing operations. Due to the nature of this program, it is difficult to predict timing and amount of future income.

Improvements in other income in the September 2016 quarter included greater loan servicing fees due principally to continued multifamily loan participations, and higher unused line of credit fees associated with the C&I lending business.

Operating Expenses

The Company’s total operating expenses were $18.17 million for the quarter ended September 30, 2016, compared to $18.76 million for the June 2016 quarter and $16.90 million for the same quarter in 2015.

As noted previously, the third quarter 2016 FDIC premium reflected a $398 thousand increase relative to the same quarter in 2015, however the third quarter of 2016 premium declined $767 thousand from the second quarter of 2016. Beginning July 1, 2016 the FDIC assessment system was revised. Revisions for “small institutions” (under $10 billion in assets) resulted in, among other things, the elimination of risk categories and utilization of a financial ratios method to determine assessment rates. The changes reduced the Company’s assessment rate by nearly 50%, when compared to the second quarter 2016 assessment rate.

Salary and benefits expenses for the September 2016 quarter were $11.52 million compared to $11.10 million for the June 2016 quarter, and $10.32 million for the September 2015 quarter. Strategic hiring that was in line with the Company’s Plan, normal salary increases and increased bonus/incentive accruals associated with the Company’s growth, all contributed to the increase from the September 2015 quarter to the September 2016 quarter.

Mr. Kennedy noted, “Total expenses for our third quarter of 2016 came in under budget, as we worked to manage our expenses closely.”

Provision for Loan Losses / Asset Quality

For the quarter ended September 30, 2016, the Company’s provision for loan losses was $2.10 million, which was generally in line with the June 2016 quarter, and greater than the September 2015 quarter. Charge-offs, net of recoveries, for the third quarter of 2016 was $703 thousand. The provision in the September 2016 quarter was reflective of loan growth, as well as greater qualitative factor allocations of the allowance, principally to C&I.

At September 30, 2016 the allowance for loan losses was $30.62 million, which was 282 percent of nonperforming loans and 0.95 percent of total loans, compared to $29.22 million, which was 363 percent of nonperforming loans and 0.93 percent of total loans at June 30, 2016, and $24.37 million, which was 320 percent of nonperforming loans and 0.85 percent of total loans one year prior, at September 30, 2015.

The Company’s provision for loan losses and its allowance for loan losses continue to track consistently with the Company’s net loan growth and asset quality metrics.

Nonperforming assets at September 30, 2016 (which does not include troubled debt restructured loans that are performing in accordance with their terms) were just $11.4 million or 0.30 percent of total assets, compared to $8.8 million or 0.24 percent of total assets at June 30, 2016 and $7.9 million or 0.24 percent of total assets at September 30, 2015. Total loans past due 30 through 89 days and still accruing were $8.2 million at September 30, 2016, compared to $6.6 million at June 30, 2016 and $2.7 million at September 30, 2015. There were no multifamily loans past due at quarter end. The increase in past due loans in the September 2016 quarter was due to one commercial loan secured by real estate totaling $5 million that was 30 days past due at September 30, 2016 but brought current on October 4, 2016. In addition to being brought current in early October, the Company believes there is adequate collateral coverage on the loan.

Capital / Dividends

The Company’s capital position in the September 2016 quarter was benefitted by net income of $7.1 million and also by $5.4 million of voluntary share purchases under the Dividend Reinvestment Plan, which continues to be a source of capital for the Company.

At September 30, 2016, the Company’s GAAP capital as a percent of total assets was 8.19 percent. The Company’s regulatory leverage, common equity tier 1, tier 1 and total risk based capital ratios were 8.39 percent, 10.47 percent, 10.47 percent and 13.17 percent, respectively. The Bank’s regulatory leverage, common equity tier 1, tier 1 and total risk based capital ratios were 9.41 percent, 11.74 percent, 11.74 percent and 12.78 percent, respectively. The Bank’s regulatory capital ratios are all above the ratios to be considered well capitalized under regulatory guidance.

On October 27, 2016, the Company’s Board of Directors declared a regular cash dividend of $0.05 per share payable on November 25, 2016 to shareholders of record on November 10, 2016.

Mr. Kennedy said, “We continue to believe we have sufficient common equity to support our planned growth and expansion for the immediate future.”

ABOUT THE COMPANY

Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $3.77 billion as of September 30, 2016. 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 wealth management division, and its branch network and online platforms, Peapack-Gladstone Bank offers an unparalleled commitment to client service.

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

 

·

inability to successfully grow our business and implement our strategic plan, including an inability to generate revenues to offset the increased personnel and other costs related to the strategic plan;

·

the impact of anticipated higher operating expenses in 2016 and beyond;

·

inability to manage our growth;

·

inability to successfully integrate our expanded employee base;

·

a continued or 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 low interest rate environment and highly competitive market;

·

declines in value in our investment portfolio

·

higher than expected increases in our allowance for loan losses;

·

higher than expected increases in loan losses or in the level of nonperforming loans;

·

unexpected changes in interest rates;

·

a continued or unexpected decline in real estate values within our market areas;

·

legislative and regulatory actions (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Basel III and related regulations) subject us to additional regulatory oversight which may result in increased compliance costs;

·

successful cyberattacks against our IT infrastructure and that of our IT providers;

·

higher than expected FDIC insurance premiums;

·

adverse weather conditions;

·

inability to successfully generate new business in new geographic markets;

·

inability to execute upon new business initiatives;

·

lack of liquidity to fund our various cash obligations;

·

reduction in our lower-cost funding sources;

·

our inability to adapt to technological changes;

·

claims and litigation pertaining to fiduciary responsibility, environmental laws and other matters; and

·

other unexpected material adverse changes in our operations or earnings.

 

 

A discussion of these and other factors that could affect our results is included in our SEC filings, including our Annual Report on Form 10-K for the year ended December 31, 2015. We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in the Corporation’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,
		2016(A)				2016				2016				2015(B)				2015
Income Statement Data:
Interest income		$	29,844			$	29,035			$	27,898			$	27,123			$	25,806
Interest expense			5,575				4,859				4,488				4,304				4,100
Net interest income			24,269				24,176				23,410				22,819				21,706
Provision for loan losses			2,100				2,200				1,700				1,950				1,600
Net interest income after
provision for loan losses			22,169				21,976				21,710				20,869				20,106
Wealth management fee income			4,436				4,899				4,295				4,307				4,169
Service charges and fees			812				818				807				849				832
Bank owned life insurance			340				345				342				252				260
Gain on loans held for sale at fair
value (Mortgage banking)			383				309				121				117				102
Gain on loans held for sale at
lower of cost or fair value			256				500				124				—				—
Fee income related to loan level,
back-to-back swaps			670				—				94				—				—
Gain on sale of SBA loans			243				212				47				7				—
Other income			395				347				332				191				164
Securities gains, net			—				18				101				—				83
Total other income			7,535				7,448				6,263				5,723				5,610
Salaries and employee benefits			11,515				11,100				10,908				10,659				10,322
Premises and equipment			2,736				2,742				2,864				3,390				2,785
FDIC insurance expense			814				1,581				1,559				825				416
Other expenses			3,101				3,352				3,875				5,119				3,376
Total operating expenses			18,166				18,775				19,206				19,993				16,899
Income before income taxes			11,538				10,649				8,767				6,599				8,817
Income tax expense			4,422				4,085				3,278				2,256				3,434
Net income		$	7,116			$	6,564			$	5,489			$	4,343			$	5,383
Total revenue  (C)		$	31,804			$	31,624			$	29,673			$	28,542			$	27,316
Per Common Share Data:
Earnings per share (basic)		$	0.43			$	0.41			$	0.35			$	0.28			$	0.35
Earnings per share (diluted)			0.43				0.40				0.34				0.28				0.35
Weighted average number of
common shares outstanding:
Basic			16,467,654				16,172,223				15,858,278				15,498,119				15,253,009
Diluted			16,673,596				16,341,975				16,016,972				15,721,876				15,435,939
Performance Ratios:
Return on average assets
Annualized (ROAA)			0.77	%			0.73	%			0.64	%			0.51	%			0.66	%
Return on average
equity annualized (ROAE)			9.44	%			9.06	%			7.83	%			6.37	%			8.19	%
Net interest margin
(taxable equivalent basis)			2.74	%			2.79	%			2.82	%			2.79	%			2.75	%
Efficiency ratio (D)			57.58	%			60.36	%			65.22	%			70.05	%			61.14	%
Operating expenses / average
assets annualized			1.98	%			2.08	%			2.22	%			2.36	%			2.07	%

 

(A)

The quarter ended September 30, 2016 included a reduction in FDIC premium of approximately $750 thousand. The reduction was a result of an amendment to small institution pricing for deposit insurance by the FDIC effective the quarter after the FDIC reserve ratio reaches 1.15%. The reserve ratio reached 1.15% effective as of the quarter ended June 30, 2016.

(B)

The quarter ended December 31, 2015 included $2.5 million of charges related to the closure of two branch offices. These charges reduced pretax income by $2.5 million, net income by $1.6 million, earnings per share by $0.10 per share, ROAA by 0.05%, and ROAE by 0.60%, and increased the efficiency ratio by 2.09%.

(C)

Total revenue includes gain from sale of loans held for sale at lower of cost or fair value.

(D)

Calculated as (total operating expenses, excluding provision for losses on REO) as a percentage of (net interest income plus noninterest income less gain on securities and gain on loans held for sale at lower of cost or fair value). 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
Income Statement Data:		2016				2015				$				%
Interest income		$	86,777			$	72,019			$	14,758				20	%
Interest expense			14,922				10,386				4,536				44	%
Net interest income			71,855				61,633				10,222				17	%
Provision for loan losses			6,000				5,150				850				17	%
Net interest income after
provision for loan losses			65,855				56,483				9,372				17	%
Wealth management fee income			13,630				12,732				898				7	%
Service charges and fees			2,437				2,474				(37	)			-1	%
Bank owned life insurance			1,027				1,045				(18	)			-2	%
Gain on loans held for sale at fair
Value (Mortgage banking)			813				411				402				98	%
Gains on loans held for sale at
lower of cost or fair value			880				—				880				N/A
Fee income related to loan level,
back-to-back swaps			764				373				391				105	%
Gain on sale of SBA loans			502				—				502				N/A
Other income			1,074				429				645				150	%
Securities gains, net			119				527				(408	)			-77	%
Total other income			21,246				17,991				3,255				18	%
Salaries and employee benefits			33,523				29,619				3,904				13	%
Premises and equipment			8,342				8,179				163				2	%
FDIC insurance expense			3,954				1,329				2,375				179	%
Other expenses			10,328				9,806				772				8	%
Total operating expenses			56,147				48,933				7,214				15	%
Income before income taxes			30,954				25,541				5,413				21	%
Income tax expense			11,785				9,912				1,873				19	%
Net income		$	19,169			$	15,629			$	3,540				23	%
Total revenue   (A)		$	93,101			$	79,624			$	13,477				17	%
Per Common Share Data:
Earnings per share (basic)		$	1.19			$	1.04			$	0.15				14	%
Earnings per share (diluted)			1.17				1.02				0.15				15	%
Weighted average number of
common shares outstanding:
Basic			16,167,153				15,083,006				1,084,144				7	%
Diluted			16,347,255				15,293,747				1,054,228				7	%
Performance Ratios:
Return on average assets annualized			0.71	%			0.69	%			0.02				3	%
Return on average common equity annualized			8.79	%			8.19	%			0.60				7	%
Net interest margin (taxable equivalent basis)			2.78	%			2.81	%			(0.03	)			-1	%
Efficiency ratio (B)			60.96	%			61.55	%			(0.59	)			-1	%
Operating expenses / average			2.09	%			2.15	%			(0.06	)			-3	%
assets annualized

(A)

Total revenue includes an $880 thousand gain (for 2016) from sale of loans held for sale at lower of cost or fair value.

(B)

Calculated as (total operating expenses, excluding provision for losses on REO) as a percentage of (net interest income plus noninterest income less gain on securities and loss or gain on loans held for sale at lower of cost or fair value). 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,
		2016				2016				2016				2015				2015
ASSETS
Cash and due from banks		$	17,861			$	18,261			$	15,872			$	11,550			$	10,695
Federal funds sold			101				101				101				101				101
Interest-earning deposits			141,593				62,968				61,946				58,509				65,402
Total cash and cash equivalents			159,555				81,330				77,919				70,160				76,198
Securities available for sale			249,616				206,216				214,050				195,630				220,930
FHLB and FRB stock, at cost			14,093				14,623				13,254				13,984				11,737
Loans held for sale			3,013				4,133				3,537				1,558				501
Multifamily loans held for sale, at lower of
cost or fair value			30,000				60,291				38,066				82,200				27,023
Residential mortgage			496,735				479,839				469,084				470,869				469,865
Multifamily mortgage			1,507,834				1,501,915				1,489,708				1,416,775				1,444,334
Commercial mortgage			497,267				459,744				414,677				413,118				399,592
Commercial loans			598,078				576,169				554,871				512,886				456,611
Construction loans			430				—				1,392				1,401				1,409
Consumer loans			69,222				67,614				44,198				45,044				32,563
Home equity lines of credit			62,872				63,188				53,328				52,649				50,370
Other loans			449				430				443				500				483
Total loans			3,232,887				3,148,899				3,027,701				2,913,242				2,855,227
Less: Allowances for loan losses			30,616				29,219				27,321				25,856				24,374
Net loans			3,202,271				3,119,680				3,000,380				2,887,386				2,830,853
Premises and equipment			30,223				29,199				29,609				30,246				31,310
Other real estate owned			534				767				861				563				330
Accrued interest receivable			6,383				7,733				7,497				6,820				6,839
Bank owned life insurance			43,541				43,325				43,101				42,885				32,727
Deferred tax assets, net			14,765				18,190				17,952				15,582				14,613
Other assets			20,389				19,216				19,771				17,645				15,902
TOTAL ASSETS		$	3,774,383			$	3,604,703			$	3,465,997			$	3,364,659			$	3,268,963
LIABILITIES
Deposits:
Noninterest-bearing demand deposits		$	494,204			$	469,809			$	457,730			$	419,887			$	399,200
Interest-bearing demand deposits			928,941				897,210				905,479				861,697				829,970
Savings			119,650				120,617				119,149				115,007				117,665
Money market accounts			997,572				861,664				820,757				810,709				792,685
Certificates of deposit - Retail			466,003				466,079				446,833				434,450				411,335
Subtotal “customer” deposits			3,006,370				2,815,379				2,749,948				2,641,750				2,550,855
IB Demand - Brokered			200,000				200,000				200,000				200,000				243,000
Certificates of deposit - Brokered			93,690				93,660				93,630				93,720				93,690
Total deposits			3,300,060				3,109,039				3,043,578				2,935,470				2,887,545
Overnight borrowings			—				29,450				21,100				40,700				—
Federal home loan bank advances			71,795				83,692				83,692				83,692				83,692
Capital lease obligation			9,828				9,961				10,092				10,222				10,350
Subordinated debt, net			48,731				48,698				—				—				—
Other liabilities			34,937				28,330				24,030				18,899				19,448
Due to brokers, securities settlements			—				—				—				—				1,528
TOTAL LIABILITIES			3,465,351				3,309,170				3,182,492				3,088,983				3,002,563
Shareholders’ equity			309,032				295,533				283,505				275,676				266,400
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY		$	3,774,383			$	3,604,703			$	3,465,997			$	3,364,659			$	3,268,963
Assets under administration at
Peapack-Gladstone Bank’s
Wealth Management Division
(market value, not included above)		$	3,495,206			$	3,418,566			$	3,307,799			$	3,321,624			$	3,250,835

 

PEAPACK-GLADSTONE FINANCIAL CORPORATION

SELECTED BALANCE SHEET DATA

(Dollars in Thousands)

(Unaudited)

 

		As of
		Sept 30,				June 30,				March 31,				Dec 31,				Sept 30,
		2016				2016				2016				2015				2015
Asset Quality:
Loans past due over 90 days
and still accruing		$	—			$	—			$	—			$	—			$	—
Nonaccrual loans			10,840				8,049				7,278				6,747				7,615
Other real estate owned			534				767				861				563				330
Total nonperforming assets		$	11,374			$	8,816			$	8,139			$	7,310			$	7,945
Nonperforming loans to
total loans			0.34	%			0.26	%			0.24	%			0.23	%			0.27	%
Nonperforming assets to
total assets			0.30	%			0.24	%			0.23	%			0.22	%			0.24	%
Performing TDRs (A)(B)		$	18,078			$	18,570			$	16,033			$	16,231			$	14,609
Loans past due 30 through 89
days and still accruing (C)		$	8,238			$	6,576			$	1,393			$	2,143			$	2,748
Classified loans		$	49,627			$	51,084			$	48,817			$	42,777			$	41,985
Impaired loans		$	28,951			$	26,643			$	23,335			$	23,107			$	22,224
Allowance for loan losses:
Beginning of period		$	29,219			$	27,321			$	25,856			$	24,374			$	22,969
Provision for loan losses			2,100				2,200				1,700				1,950				1,600
Charge-offs, net			(703	)			(302	)			(235	)			(468	)			(195	)
End of period		$	30,616			$	29,219			$	27,321			$	25,856			$	24,374
ALLL to nonperforming loans			282.44	%			363.01	%			375.39	%			383.22	%			320.08	%
ALLL to total loans			0.95	%			0.93	%			0.90	%			0.89	%			0.85	%

 

(A)

Amounts reflect TDR’s that are paying according to restructured terms.

 

(B)

Amount does not include $4.4 million at September 30, 2016, $4.2 million at June 30, 2016, $3.4 million at March 31, 2016, $2.6

million at December 31, 2015, and $2.8 million at September 30, 2015 of TDRs included in nonaccrual loans.

 

(C)

September 30, 2016 includes one commercial loan secured by real estate totaling $5.0 million that was 30 days past due at September 30, 2016 but brought current on October 4, 2016.

 

 

PEAPACK-GLADSTONE FINANCIAL CORPORATION

SELECTED BALANCE SHEET DATA

(Dollars in Thousands)

(Unaudited)

 

		Sept 30,				Dec 31,				Sept 30,
		2016				2015				2015
Capital Adequacy
Equity to total assets (A)			8.19	%			8.19	%			8.15	%
Tangible Equity to tangible assets (B)			8.11	%			8.10	%			8.06	%
Book value per share (C)		$	18.57			$	17.61			$	17.33
Tangible Book Value per share (D)		$	18.38			$	17.40			$	17.12

 

		Sept 30,								Dec 31,								Sept 30,
		2016								2015								2015
Regulatory Capital – Holding Company
Tier I leverage		$	308,250				8.39	%		$	273,738				8.10	%		$	264,570				8.10	%
Tier I capital to risk weighted assets			308,250				10.47				273,738				10.42				264,570				10.35
Common equity tier I capital ratio
to risk-weighted assets			308,247				10.47				273,738				10.42				264,570				10.35
Tier I & II capital to
risk-weighted assets			387,597				13.17				299,593				11.40				288,944				11.30
Regulatory Capital – Bank
Tier I leverage		$	345,604				9.41	%		$	271,641				8.04	%		$	262,196				8.02	%
Tier I capital to risk weighted assets			345,604				11.74				271,641				10.34				262,196				10.26
Common equity tier I capital ratio
to risk-weighted assets			345,601				11.74				271,641				10.34				262,196				10.26
Tier I & II capital to
risk-weighted assets			376,220				12.78				297,497				11.32				286,570				11.21

 

(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 less restricted shares not yet vested.
(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 less restricted shares not yet vested.  See Non-GAAP financial measures reconciliation included in these tables.

 

PEAPACK-GLADSTONE FINANCIAL CORPORATION

LOANS CLOSED

(Dollars in Thousands)

(Unaudited)

 

		For the Quarters Ended
		Sept 30,				June 30,				March 31,				Dec 31,				Sept 30,
		2016				2016				2016				2015				2015
Residential loans retained		$	43,284			$	32,513			$	17,747			$	18,847			$	20,623
Residential loans sold			25,128				20,221				8,062				7,183				6,078
Total residential loans			68,412				52,734				25,809				26,030				26,701
CRE (includes
Community banking)			56,799				36,554				9,339				41,015				47,450
Multifamily (includes
Community banking)			74,450				150,709				108,035				107,605				149,763
Commercial loans (includes
Community banking) (A)			59,698				61,309				67,488				74,749				37,361
SBA			3,025				2,285				1,055				—				—
Wealth lines of credit (A)			1,200				785				1,800				35,550				24,000
Total commercial loans			195,172				251,642				187,717				258,919				258,574
Installment loans			1,591				1,077				486				1,052				933
Home equity lines of credit (A)			7,064				14,435				3,604				5,902				3,775
Total loans closed		$	272,239			$	319,888			$	217,616			$	291,903			$	289,983

 

 

		For the Nine Months Ended
		Sept 30,				Sept 30,
		2016				2015
Residential loans retained		$	93,543			$	60,726
Residential loans sold			53,412				25,994
Total residential loans			146,955				86,720
CRE (includes
Community banking)			102,692				134,798
Multifamily (includes
Community banking)			333,194				565,600
Commercial loans (includes
Community banking) (A)			188,495				214,540
SBA			6,365				—
Wealth lines of credit (A)			3,785				40,410
Total commercial loans			634,531				955,348
Installment loans			3,154				2,405
Home equity lines of credit (A)			25,103				10,377
Total loans closed		$	809,743			$	1,054,850

 

(A)

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

 

PEAPACK-GLADSTONE FINANCIAL CORPORATION

AVERAGE BALANCE SHEET

UNAUDITED

THREE MONTHS ENDED

(Tax-Equivalent Basis, Dollars in Thousands)

 

		Sept 30, 2016												Sept 30, 2015
		Average				Income/								Average				Income/
		Balance				Expense				Yield				Balance				Expense				Yield
ASSETS:
Interest-earning assets:
Investments:
Taxable (1)		$	193,902			$	976				2.01	%		$	214,967			$	959				1.78	%
Tax-exempt (1) (2)			27,516				212				3.08				30,682				211				2.76
Loans (2) (3):
Mortgages			486,909				3,983				3.27				466,384				3,806				3.26
Commercial mortgages			2,048,877				17,977				3.51				1,839,606				16,119				3.50
Commercial			573,211				5,826				4.07				454,239				4,132				3.64
Commercial construction			454				5				4.41				1,742				18				4.13
Installment			67,175				443				2.64				31,361				268				3.42
Home equity			62,560				519				3.32				51,012				415				3.25
Other			465				13				11.18				510				12				9.41
Total loans			3,239,651				28,766				3.55				2,844,854				24,770				3.48
Federal funds sold			101				—				0.25				101				—				0.10
Interest-earning deposits			111,204				131				0.47				96,308				46				0.19
Total interest-earning assets			3,572,374				30,085				3.37	%			3,186,912				25,986				3.26	%
Noninterest-Earning Assets:
Cash and due from banks			17,292												7,434
Allowance for loan losses			(30,022	)											(23,726	)
Premises and equipment			29,460												31,574
Other assets			88,721												68,067
Total noninterest-earning assets			105,451												83,349
Total assets		$	3,677,825											$	3,270,261
LIABILITIES:
Interest-bearing deposits:
Checking		$	924,970			$	645				0.28	%		$	810,106			$	356				0.18	%
Money markets			915,139				737				0.32				757,135				546				0.29
Savings			119,986				17				0.06				118,329				17				0.06
Certificates of deposit – retail			466,967				1,615				1.38				403,593				1,296				1.28
Subtotal interest-bearing deposits			2,427,062				3,014				0.50				2,089,163				2,215				0.42
Interest-bearing demand - brokered			200,000				762				1.52				292,456				857				1.17
Certificates of deposit – brokered			93,674				501				2.14				93,907				504				2.15
Total interest-bearing deposits			2,720,736				4,277				0.63				2,475,526				3,576				0.58
Borrowings			87,258				380				1.74				107,770				399				1.48
Capital lease obligation			9,874				119				4.82				10,394				125				4.81
Subordinated debt			48,711				799				6.56				—				—				N/A
Total interest-bearing liabilities			2,866,579				5,575				0.78				2,593,690				4,100				0.63
Noninterest-bearing liabilities:
Demand deposits			479,659												398,181
Accrued expenses and
other liabilities			30,070												15,619
Total noninterest-bearing liabilities			509,729												413,800
Shareholders’ equity			301,517												262,771
Total liabilities and
shareholders’ equity		$	3,677,825											$	3,270,261
Net interest income						$	24,510											$	21,886
Net interest spread											2.59	%											2.63	%
Net interest margin (4)											2.74	%											2.75	%

 

	(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 35 percent 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)

 

		Sept 30, 2016												June 30, 2016
		Average				Income/								Average				Income/
		Balance				Expense				Yield				Balance				Expense				Yield
ASSETS:
Interest-earning assets:
Investments:
Taxable (1)		$	193,902			$	976				2.01	%		$	200,804			$	914				1.82	%
Tax-exempt (1) (2)			27,516				212				3.08				27,127				211				3.11
Loans (2) (3):
Mortgages			486,909				3,983				3.27				473,293				3,927				3.32
Commercial mortgages			2,048,877				17,977				3.51				2,047,112				17,830				3.48
Commercial			573,211				5,826				4.07				552,955				5,392				3.90
Commercial construction			454				5				4.41				1,305				13				3.98
Installment			67,175				443				2.64				63,158				420				2.66
Home equity			62,560				519				3.32				58,146				475				3.27
Other			465				13				11.18				462				11				9.52
Total loans			3,239,651				28,766				3.55				3,196,431				28,068				3.51
Federal funds sold			101				—				0.25				101				—				0.25
Interest-earning deposits			111,204				131				0.47				79,264				76				0.39
Total interest-earning assets			3,572,374				30,085				3.37	%			3,503,727				29,269				3.34	%
Noninterest-Earning Assets:
Cash and due from banks			17,292												16,122
Allowance for loan losses			(30,022	)											(28,056	)
Premises and equipment			29,460												29,452
Other assets			88,721												88,907
Total noninterest-earning assets			105,451												106,425
Total assets		$	3,677,825											$	3,610,152
LIABILITIES:
Interest-bearing deposits:
Checking		$	924,970			$	645				0.28	%		$	906,611			$	607				0.27	%
Money markets			915,139				737				0.32				818,453				602				0.29
Savings			119,986				17				0.06				120,094				17				0.06
Certificates of deposit – retail			466,967				1,615				1.38				450,675				1,545				1.37
Subtotal interest-bearing deposits			2,427,062				3,014				0.50				2,295,833				2,771				0.48
Interest-bearing demand - brokered			200,000				762				1.52				200,000				760				1.52
Certificates of deposit – brokered			93,674				501				2.14				93,642				496				2.12
Total interest-bearing deposits			2,720,736				4,277				0.63				2,589,475				4,027				0.62
Borrowings			87,258				380				1.74				222,667				573				1.03
Capital lease obligation			9,874				119				4.82				10,007				120				4.80
Subordinated debt			48,711				799				6.56				8,777				139				6.33
Total interest-bearing liabilities			2,866,579				5,575				0.78				2,830,926				4,859				0.69
Noninterest-bearing liabilities:
Demand deposits			479,659												464,074
Accrued expenses and
other liabilities			30,070												25,247
Total noninterest-bearing liabilities			509,729												489,321
Shareholders’ equity			301,517												289,905
Total liabilities and
shareholders’ equity		$	3,677,825											$	3,610,152
Net interest income						$	24,510											$	24,410
Net interest spread											2.59	%											2.65	%
Net interest margin (4)											2.74	%											2.79	%

 

	(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 35 percent 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)

 

		Sept 30, 2016												Sept 30, 2015
		Average				Income/								Average				Income/
		Balance				Expense				Yield				Balance				Expense				Yield
ASSETS:
Interest-earning assets:
Investments:
Taxable (1)		$	198,080			$	2,816				1.90	%		$	244,117			$	3,178				1.74	%
Tax-exempt (1) (2)			26,234				623				3.17				33,059				652				2.63
Loans (2) (3):
Mortgages			475,607				11,728				3.29				466,987				11,424				3.26
Commercial mortgages			2,018,820				52,977				3.50				1,655,600				44,475				3.58
Commercial			550,770				16,319				3.95				377,461				10,376				3.67
Commercial construction			1,045				32				4.08				4,446				141				4.23
Installment			58,445				1,198				2.73				29,454				776				3.51
Home equity			57,938				1,434				3.30				51,129				1,237				3.23
Other			471				35				9.91				522				37				9.45
Total loans			3,163,096				83,723				3.53				2,585,599				68,466				3.53
Federal funds sold			101				—				0.24				101				—				0.10
Interest-earning deposits			89,536				294				0.44				85,932				128				0.20
Total interest-earning assets			3,477,047				87,456				3.35	%			2,948,808				72,424				3.27	%
Noninterest-Earning Assets:
Cash and due from banks			16,342												6,877
Allowance for loan losses			(28,227	)											(21,772	)
Premises and equipment			29,637												31,935
Other assets			86,960												66,038
Total noninterest-earning assets			104,712												83,078
Total assets		$	3,581,759											$	3,031,886
LIABILITIES:
Interest-bearing deposits:
Checking		$	904,767			$	1,823				0.27	%		$	704,558			$	1,028				0.19	%
Money markets			851,370				1,912				0.30				723,824				1,470				0.27
Savings			118,884				50				0.06				116,410				48				0.05
Certificates of deposit – retail			453,451				4,649				1.37				332,315				3,010				1.21
Subtotal interest-bearing deposits			2,328,472				8,434				0.48				1,877,107				5,556				0.39
Interest-bearing demand - brokered			200,000				2,263				1.51				266,443				1,700				0.85
Certificates of deposit – brokered			93,663				1,494				2.13				106,048				1,532				1.93
Total interest-bearing deposits			2,622,135				12,191				0.62				2,249,598				8,788				0.52
Borrowings			154,819				1,432				1.23				121,277				1,219				1.34
Capital lease obligation			10,007				361				4.81				10,514				379				4.81
Subordinated debt			19,270				938				6.49				—				—				N/A
Total interest-bearing liabilities			2,806,231				14,922				0.71				2,381,389				10,386				0.58
Noninterest-bearing liabilities:
Demand deposits			459,907												383,161
Accrued expenses and
other liabilities			24,958												12,852
Total noninterest-bearing liabilities			484,865												396,013
Shareholders’ equity			290,663												254,484
Total liabilities and
shareholders’ equity		$	3,581,759											$	3,031,886
Net interest income						$	72,534											$	62,038
Net interest spread											2.64	%											2.69	%
Net interest margin (4)											2.78	%											2.81	%

 

	(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 35 percent federal tax rate.
	(3)	Loans are stated net of unearned income and include nonaccrual loans.
	(4)	Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.

 

PEAPACK-GLADSTONE FINANCIAL CORPORATION

NON-GAAP FINANCIAL MEASURES RECONCILIATION

 

Tangible book value per share and tangible equity as a percentage of tangible assets at period end are non-GAAP financial measures derived from GAAP-based amounts. We calculate tangible equity and tangible assets by excluding the balance of intangible assets from shareholders’ equity and total assets, respectively. We calculate tangible book value per share by dividing tangible equity by period end common shares outstanding less restricted shares not yet vested, as compared to book value per common share, which we calculate by dividing shareholders’ equity by period end common shares outstanding less restricted shares not yet vested. 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		2016				2016				2016				2015				2015
Shareholders’ equity		$	309,032			$	295,533			$	283,505			$	275,676			$	266,400
Less: Intangible assets			3,188				3,277				3,264				3,281				3,311
Tangible equity			305,844				292,256				280,241				272,395				263,089
Period end shares outstanding			16,944,738				16,657,403				16,326,840				16,068,119				15,805,815
Less: Restricted shares not yet vested			302,799				309,920				321,580				414,188				435,312
Total outstanding shares			16,641,939				16,347,483				16,005,260				15,653,931				15,370,503
Tangible book value per share			18.38				17.88				17.51				17.40				17.12
Book value per share			18.57				18.08				17.71				17.61				17.33
Tangible Equity to Tangible Assets
Total Assets			3,774,383				3,604,703				3,465,997				3,364,659				3,268,963
Less: Intangible assets			3,188				3,277				3,264				3,281				3,311
Tangible assets			3,771,195				3,601,426				3,462,733				3,361,378				3,265,652
Tangible equity to tangible assets			8.11	%			8.12	%			8.09	%			8.10	%			8.06	%
Equity to assets			8.19	%			8.20	%			8.18	%			8.19	%			8.15	%

 

 

		Three Months Ended
		Sept 30,				June 30,				March 31,				Dec 31,				Sept 30,
Efficiency Ratio		2016				2016				2016				2015				2015
Net interest income		$	24,269			$	24,176			$	23,410			$	22,819			$	21,706
Total other income			7,535				7,448				6,263				5,723				5,610
Less: Gain on loans
held for sale at lower of cost
or fair value			256				500				124				—				—
Less: Securities gains, net			—				18				101				—				83
Total recurring revenue			31,548				31,106				29,448				28,542				27,233
Operating expenses			18,166				18,775				19,206				19,993				16,899
Less: ORE provision			—				—				—				—				250
Total operating expenses			18,166				18,775				19,206				19,993				16,649
Efficiency ratio			57.58	%			60.36	%			65.22	%			70.05	%			61.14	%
Efficiency ratio, excluding $2.5
million of charges relating
to the closure of two
branch offices			—				—				—				61.30	%			—

 

		Nine Months Ended
		Sept 30,				Sept 30,
Efficiency Ratio		2016				2015
Net interest income		$	71,855			$	61,633
Total other income			21,246				17,991
Less: Gain on loans
held for sale at lower of cost
or fair value			880				—
Less: Securities gains, net			119				527
Total recurring revenue			92,102				79,097
Operating expenses			56,147				48,933
Less: ORE provision			—				250
Total operating expenses			56,147				48,683
Efficiency ratio			60.96	%			61.55	%