Form 10-Q PEAPACK GLADSTONE FINANC For: Mar 31

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pgc-10q_20220331.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended March 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-16197

PEAPACK-GLADSTONE FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)


New Jersey	22-3537895
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

500 Hills Drive, Suite 300

Bedminster, New Jersey 07921-0700

(Address of principal executive offices, including zip code)

(908) 234-0700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, no par value

PGC

The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of Common Stock outstanding as of May 6, 2022: 18,370,312

PEAPACK-GLADSTONE FINANCIAL CORPORATION

PART I FINANCIAL INFORMATION

Item 1	Financial Statements (Unaudited)	3
	Consolidated Statements of Condition at March 31, 2022 and December 31, 2021	3
	Consolidated Statements of Income for the three months ended March 31, 2022 and 2021	4
	Consolidated Statements of Comprehensive Income/(Loss) for the three months ended March 31, 2022 and 2021	5
	Consolidated Statement of Changes in Shareholders’ Equity for the three months ended March 31, 2022 and 2021	6
	Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021	7
	Notes to Consolidated Financial Statements	8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44
Item 3	Quantitative and Qualitative Disclosures About Market Risk	60
Item 4	Controls and Procedures	62

PART II OTHER INFORMATION

Item 1	Legal Proceedings	63
Item 1A	Risk Factors	63
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	63
Item 3	Defaults Upon Senior Securities	63
Item 4	Mine Safety Disclosures	63
Item 5	Other Information	63
Item 6	Exhibits	64

Item 1. Financial Statements

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CONDITION

(Dollars in thousands, except per share data)

	(unaudited)			(audited)
	March 31,			December 31,
	2022			2021
ASSETS
Cash and due from banks	$	8,849		$	5,929
Federal funds sold		—			—
Interest-earning deposits		105,111			140,875
Total cash and cash equivalents		113,960			146,804
Securities available for sale		601,163			796,753
Securities held to maturity (fair value $100,314 at March 31, 2022 and $108,460 at December 31, 2021)		106,816			108,680
Equity security, at fair value		14,003			14,685
FHLB and FRB stock, at cost		18,570			12,950
Loans held for sale, at fair value		605			3,040
Loans held for sale, at lower of cost or fair value		26,350			34,051
Loans		5,122,202			4,806,721
Less: Allowance for credit losses (1)		58,386			61,697
Net loans		5,063,816			4,745,024
Premises and equipment		22,960			23,044
Other real estate owned		—			—
Accrued interest receivable		22,890			21,589
Bank owned life insurance		46,805			46,663
Goodwill		36,212			36,212
Other intangible assets		12,259			12,690
Finance lease right-of-use assets		3,395			3,582
Operating lease right-of-use assets		14,725			9,775
Due from brokers		120,245			—
Other assets		30,890			62,451
TOTAL ASSETS	$	6,255,664		$	6,077,993
LIABILITIES
Deposits:
Noninterest-bearing demand deposits	$	1,023,208		$	956,482
Interest-bearing deposits:
Checking		2,362,987			2,287,894
Savings		162,116			154,914
Money market accounts		1,304,017			1,307,051
Certificates of deposit - retail		384,909			409,608
Certificates of deposit - listing service		31,348			31,382
Subtotal deposits		5,268,585			5,147,331
Interest-bearing demand - brokered		85,000			85,000
Certificates of deposit - brokered		33,831			33,818
Total deposits		5,387,416			5,266,149
Short-term borrowings		122,085			—
Finance lease liabilities		5,573			5,820
Operating lease liabilities		15,155			10,111
Subordinated debt, net		132,772			132,701
Deferred tax liabilities, net		26,916			39,322
Accrued expenses and other liabilities		42,321			77,502
TOTAL LIABILITIES		5,732,238			5,531,605
SHAREHOLDERS’ EQUITY
Preferred stock (no par value; authorized 500,000 shares; liquidation preference of $1,000 per share)		—			—
Common stock (no par value; stated value $0.83 per share; authorized 42,000,000 shares; issued shares, 20,933,112 at March 31, 2022 and 20,656,810 at December 31, 2021; outstanding shares, 18,370,312 at March 31, 2022 and 18,393,888 at December 31, 2021		17,450			17,220
Surplus		332,474			332,358
Treasury stock at cost, 2,562,800 shares at March 31, 2022 and 2,262,922 shares at December 31, 2021		(76,278	)		(65,104	)
Retained earnings		290,718			274,288
Accumulated other comprehensive loss, net of income tax		(40,938	)		(12,374	)
TOTAL SHAREHOLDERS’ EQUITY		523,426			546,388
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY	$	6,255,664		$	6,077,993

(1)

Commencing on January 1, 2022, the allowance calculation is based on the current expected credit loss methodology. Prior to January 1, 2022, the calculation was based on the incurred loss methodology.

See accompanying notes to consolidated financial statements

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

(Unaudited)

	Three Months Ended
	March 31,
	2022			2021
INTEREST INCOME
Interest and fees on loans	$	40,472		$	35,384
Interest on investments:
Taxable		3,607			2,629
Tax-exempt		21			43
Interest on loans held for sale		11			55
Interest on interest-earning deposits		29			128
Total interest income		44,140			38,239
INTEREST EXPENSE
Interest on savings and interest-bearing deposit accounts		1,782			1,789
Interest on certificates of deposit		606			1,470
Interest on borrowed funds		64			209
Interest on finance lease liability		68			79
Interest on subordinated debt		1,364			2,145
Subtotal - interest expense		3,884			5,692
Interest on interest-bearing demand - brokered		373			493
Interest on certificates of deposits - brokered		261			261
Total interest expense		4,518			6,446
NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES		39,622			31,793
Provision for credit losses (1)		2,375			225
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		37,247			31,568
OTHER INCOME
Wealth management fee income		14,834			12,131
Service charges and fees		952			846
Bank owned life insurance		313			611
Gain on loans held for sale at fair value (mortgage banking)		247			1,025
Gain on loans held for sale at lower of cost or fair value		—			282
Fee income related to loan level, back-to-back swaps		—			—
Gain on sale of SBA loans		2,844			1,449
Corporate advisory fee income		1,561			1,098
Other income		1,254			643
Loss on securities sale, net		(6,609	)		—
Fair value adjustment for CRA equity security		(682	)		(265	)
Total other income		14,714			17,820
OPERATING EXPENSES
Compensation and employee benefits		22,449			21,990
Premises and equipment		4,647			4,113
FDIC insurance expense		471			585
Swap valuation allowance		673			—
Other operating expense		5,929			4,906
Total operating expenses		34,169			31,594
INCOME BEFORE INCOME TAX EXPENSE		17,792			17,794
Income tax expense		4,351			4,616
NET INCOME	$	13,441		$	13,178

EARNINGS PER SHARE
Basic	$	0.73		$	0.70
Diluted	$	0.71		$	0.67
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic		18,339,013			18,950,305
Diluted		18,946,683			19,531,689

(1)

See accompanying notes to consolidated financial statements

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(Dollars in thousands)

(Unaudited)

	Three Months Ended
	March 31,
	2022			2021
Net income	$	13,441		$	13,178
Comprehensive (loss)/income:
Unrealized (losses)/gains on available for sale securities:
Unrealized holding losses arising during the period		(46,799	)		(17,618	)
Reclassification adjustment for amounts included in net income		6,609			—

		(40,190	)		(17,618	)

Tax effect		9,616			4,203
Net of tax		(30,574	)		(13,415	)

Unrealized gains/(losses) on cash flow hedges:
Unrealized holding gains arising during the period		2,796			1,450
		2,796			1,450

Tax effect		(786	)		(407	)
Net of tax		2,010			1,043


Total other comprehensive loss		(28,564	)		(12,372	)

Total comprehensive (loss)/income	$	(15,123	)	$	806

See accompanying notes to consolidated financial statements

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Dollars in thousands, except per share amounts)

(Unaudited)

Three Months Ended March 31, 2022 and March 31, 2021

												Accumulated
												Other			Total
(In thousands, except share and	Preferred		Common				Treasury			Retained		Comprehensive			Shareholders'
per share data)	Stock		Stock		Surplus		Stock			Earnings		Loss			Equity
Balance at January 1, 2022 18,393,888 common shares outstanding	$	—	$	17,220	$	332,358	$	(65,104	)	$	274,288	$	(12,374	)	$	546,388
Cumulative effect adjustment for adoption of ASU 2016-13		—		—		—		—			3,909		—			3,909
Balance at January 1, 2022, adjusted	$	—	$	17,220	$	332,358	$	(65,104	)	$	278,197	$	(12,374	)