SOURCE: Peapack-Gladstone Financial Corporation

Peapack-Gladstone Financial Corporation

July 28, 2017 09:00 ET

Peapack-Gladstone Financial Corporation Reports a Strong Second Quarter and Declares Its Quarterly Cash Dividend

BEDMINSTER, NJ--(Marketwired - Jul 28, 2017) - Peapack-Gladstone Financial Corporation (NASDAQ: PGC) (the "Company") reported record net income of $15.92 million and diluted earnings per share of $0.91 for the six months ended June 30, 2017, compared to $12.05 million and $0.74, respectively, for the same six month period last year, reflecting increases of $3.87 million, or 32 percent, and $0.17 per share, or 23 percent, respectively.

For the quarter ended June 30, 2017, the Company recorded net income of $7.94 million and diluted earnings per share of $0.45, compared to $6.56 million and $0.40 for the same three month period last year, reflecting increases of $1.38 million, or 21 percent, and $0.05 per share, or 13 percent, respectively.

The first quarter of 2017 included a $662 thousand benefit to income tax expense related to the adoption of ASU 2016-09, Compensation - Stock Compensation, improvements to employee share-based payment accounting. This increased net income by $662 thousand and earnings per share by 4 cents. 

The second quarter of 2017, when compared to the second quarter of 2016, reflected increases in net interest income, wealth management fee income, and other non-interest income. Expenses in the 2017 second quarter, when compared to the same 2016 quarter, included increased compensation and benefits expense, partially offset by decreased FDIC insurance expense.

The following table summarizes specified financial measures for the second quarters of 2017 and 2016, respectively.

                   
(Dollars in millions, except EPS)   June 30,     June 30,     Increase/  
  2017     2016     (Decrease)  
Net interest income   $ 26.97     $ 24.18     $ 2.79     12 %
Provision for loan losses   $ 2.20     $ 2.20     $ -     0 %
Pretax income   $ 12.85     $ 10.65     $ 2.20     21 %
Net income   $ 7.94     $ 6.56     $ 1.38     21 %
Diluted EPS   $ 0.45     $ 0.40     $ 0.05     13 %
Total revenue   $ 35.14     $ 31.62     $ 3.52     11 %
                               
Return on average assets     0.79 %     0.73 %     0.06        
Return on average equity     9.06 %     9.06 %     -        
Efficiency ratio (A)     57.18 %     60.36 %     (3.18 )      
Book value per share   $ 20.00     $ 17.74     $ 2.26     13 %
Tangible book value per share (A)     19.82       17.55       2.27     13 %
(A) See Non-GAAP financial measures reconciliation tables beginning on page 24.

Douglas L. Kennedy, President and CEO, said, "We had a very strong start to 2017, and that continued right through the second quarter of 2017."

Select highlights follow:

  • Growth in diluted EPS for Q2 2017 when compared to Q2 2016 was $0.05 per share, or 13 percent.
  • At June 30, 2017, the market value of assets under administration (AUA) at the Private Wealth Management Division of Peapack-Gladstone Bank (the "Bank") increased to $3.9 billion from $3.4 billion one year ago, reflecting growth of 15 percent.
  • Fee income from the Private Wealth Management Division totaled $5.1 million for the second quarter of 2017, compared to $4.9 million for the same quarter in 2016, reflecting growth of 4 percent. Wealth management fee income, comprising nearly 15 percent of the Company's total revenue, contributes significantly to the Company's diversified revenue sources.
  • Loans at June 30, 2017 totaled $3.67 billion. This reflected net growth of $227 million compared to the prior quarter (7 percent compared to the prior quarter or 26 percent on an annualized basis); and $453 million (14 percent) when compared to $3.21 billion of loans at June 30, 2016.
  • Commercial & Industrial (C&I) loans at June 30, 2017 totaled $801 million. This reflected net growth of $113 million compared to the prior quarter (16 percent compared to the prior quarter or 66 percent on an annualized basis), and net growth of $225 million (39 percent) when compared to $576 million in C&I loans at June 30, 2016.
  • Total "customer" deposit balances (defined as deposits excluding brokered CDs and brokered "overnight" interest-bearing demand deposits) totaled $3.31 billion at June 30, 2017. This reflected net growth of $156 million compared to the prior quarter (5 percent compared to the prior quarter or 20 percent on an annualized basis), and reflected growth of $497 million (18 percent) when compared to $2.82 billion of total "customer" deposit balances at June 30, 2016.
  • Asset quality metrics continued to be strong at June 30, 2017. Nonperforming assets at June 30, 2017, while up somewhat from the March 31, 2017 level, were just $16.0 million, or 0.38 percent of total assets. Total loans past due 30 through 89 days and still accruing were $1.2 million, or 0.03 percent of total loans at June 30, 2017.
  • The Company's book value per share at June 30, 2017 of $20.00 reflected improvement when compared to $17.74 at June 30, 2016. Year over year growth in book value per share totaled $2.26 or 13 percent. 

Net Interest Income / Net Interest Margin

Net interest income and net interest margin were $26.97 million and 2.76 percent for the second quarter of 2017, compared to $25.59 million and 2.71 percent for the first quarter of 2017, reflecting growth of $1.38 million or 5 percent and compared to $24.18 million and 2.79 percent for the same quarter last year, reflecting growth in net interest income of $2.79 million or 12 percent when compared to the same prior year period. Net interest income for the second quarter of 2017 benefitted from loan growth during 2016 and into 2017, as well as benefitting slightly from the recent Federal Reserve rate hikes. The June 2017 quarter included approximately $780 thousand of prepayment premiums received on the prepayment of certain loans, reflecting an increase from $515 thousand for the March 2017 quarter and $452 thousand for the June 2016 quarter.

Net interest margin for the second quarter of 2017 increased when compared to the first quarter of 2017, but decreased when compared to the same quarter of 2016. The increase was due to a reduction in our interest earning cash balances during the second quarter of 2017, as well as the effect of the increased market rates on our adjustable rate assets. The decrease when comparing the June 2017 quarter to the June 2016 quarter was due to the issuance of the $50 million in subordinated debt in June 2016, as well as the maintenance of higher liquidity in the 2017 second quarter when compared to the 2016 second quarter, the effect of which was partially offset by increased market rates on our adjustable rate assets.

As noted above, 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 $1.1 billion of secured funding available from the Federal Home Loan Bank, of which we only have $146 million drawn as of June 30, 2017."

The Company's interest rate sensitivity models indicate that the Company's net interest income and margin would continue to improve slightly in a rising interest rate environment, but such income and margin would also be impacted by competitive pressures in attracting new loans and deposits.

Wealth Management Business

In the June 2017 quarter, the Bank's wealth management business generated $5.09 million in fee income compared to $4.82 million for the March 2017 quarter, and $4.90 million for the June 2016 quarter. 

While, total fee income for the June 2017 quarter increased by $187 thousand, or approximately 4 percent, from the June 2016 quarter, "recurring type" fee income (tied to asset management fees and custody fees) grew 8 percent. Growth in recurring fee income was due to strong net inflows from new business, a healthy equity market which resulted in positive market action in client portfolios as well as additions to accounts from existing clients, all partially offset by normal levels of disbursements and outflows.

The market value of the AUA of the wealth management division was $3.9 billion at June 30, 2017, an increase of $94 million, or 3 percent (11 percent on an annualized basis), from March 31, 2017 and an increase of $433 million, or 15 percent, from $3.4 billion at June 30, 2016.

John P. Babcock, President of PGB Private Wealth Management, said, "We had a solid second quarter and first six months of the year. Our pipeline continues to be robust and we expect continued growth driven by organic new business, the expansion of existing relationships and potential strategic acquisitions of wealth management firms. On May 26, 2017, we announced our agreement to acquire Gladstone, NJ based Murphy Capital Management, Inc. ('MCM'). MCM will add approximately $850 million of assets under administration to our current $3.9 billion." 

Mr. Babcock also commented, "Our differentiator is our personalized, pro-active advice led approach, and the quality of our people. We combine investment, tax, financial, fiduciary, banking and lending capabilities into one integrated plan that helps our clients achieve their goals and objectives."

Loan Originations / Loans

At June 30, 2017, loans totaled $3.67 billion compared to $3.44 billion at March 31, 2017 and compared to $3.21 billion at June 30, 2016, representing net increases of $227 million compared to the March 2017 quarter (7 percent or 26 percent on an annualized basis), and $453 million (14 percent) compared to a year ago at June 30, 2016. 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 June 30, 2017, residential mortgage loans grew $40 million to $611 million at June 30, 2017 when compared to the March 2017 quarter. For the twelve months from June 30, 2016 to June 30, 2017, residential mortgage loans grew $127 million, or 26 percent.

For the June 2017 quarter, commercial real estate mortgage loans (not including multifamily loans) grew $36 million to $609 million when compared to the March 2017 quarter (6 percent or 25 percent on an annualized basis). For the twelve months from June 30, 2016 to June 30, 2017 commercial real estate mortgage loans grew $150 million, or 33 percent.

At June 30, 2017, the multifamily loan portfolio totaled $1.50 billion (or 41 percent of total loans), basically flat to $1.47 billion (or 43 percent of total loans) three months ago at March 31, 2017 and $1.56 billion (or 49 percent of total loans) at June 30, 2016. 

Mr. Kennedy said, "As I explained previously, we have been managing 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, throughout 2016, and into 2017, but particularly this past quarter. Of course, this balance sheet management will not be linear each quarter, but rather will be apparent over periods of time."

For the quarter ended June 30, 2017, commercial loans grew $113 million to $801 million when compared to the March 2017 quarter. For the twelve months from June 30, 2016 to June 30, 2017 commercial loans grew $225 million, or 39 percent. At June 30, 2017 the commercial loan portfolio comprised 21.8 percent of the overall loan portfolio up from 20.0 percent at March 31, 2017, and up from 17.9 percent one year ago at June 30, 2016.

Mr. Kennedy said, "We have seen, and believe we will continue to see, our C&I client base and corresponding loan portfolio grow. Additionally, as announced on April 25, 2017, we were recently successful in bringing on a team of very experienced bankers to focus on equipment financing, and $24 million of volume, in that loan category, was funded in June 2017. While this team has begun producing faster than previously assumed, we still generally expect that revenue and profitability related to this new group will lag related expenses by several quarters."

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, "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 previously, 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 until maturity in June 2026 or earlier redemption.

During the June 2017 quarter, the increase in loans of $227 million was primarily funded by customer deposit growth of $156 million, net (principally interest-bearing checking), increased capital of $16 million, decreased cash/cash equivalents of $25 million, and increased other borrowings of $52 million.

Brokered interest-bearing demand ("overnight") deposits totaled $180 million at June 30, 2017, flat to the March 31, 2017 balance and down $20 million from $200 million at June 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 June 30, 2017, 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 personal and commercial core deposit base. We expect that our full array of treasury management capabilities, including our new Treasury Management platform and our soon-to-be added escrow management product software, as well as added treasury management sales professionals and private bankers, will help us grow commercial deposits."

Other Noninterest Income

The Company's total noninterest income for the June 2017 quarter totaled $8.17 million, or 23 percent of total revenue.

The June 2017 quarter included $91 thousand of income from the sale of newly originated residential mortgage loans (mortgage banking), compared to $47 thousand for the March 2017 quarter, and $309 thousand for the June 2016 quarter. Originations of residential mortgage loans for sale were lower in the June 2017 quarter, compared to the prior year period.

The Company did not sell any multifamily loans during the June or March 2017 quarters, as such sales were not necessary for effective balance sheet management. The gain on sales of multifamily loans held for sale during the June 2016 quarter was $500 thousand. The Company may employ loan sale strategies later in 2017, and beyond, if and as needed for efficient balance sheet management.

The second quarter of 2017 included $142 thousand of income related to the Company's SBA lending and sale program, compared to $155 thousand generated in the March 2017 quarter, and $212 thousand in the June 2016 quarter. The SBA program was fully implemented in the March 2016 quarter and is part of the Company's normal ongoing operations.

The June 2017 quarter included $1.3 million of loan level, back-to-back swap income compared to $456 thousand in the March 2017 quarter and none in the June 2016 quarter. This program, which helps manage the Company's interest rate risk while contributing to income, remains part of the Company's normal ongoing operations. 

Other income for the June 2017 quarter totaled $396 thousand, compared to $450 thousand for the March 2017 quarter and to $347 thousand for the June 2016 quarter. Letter of credit fees and unused line of credit fees make up a large portion of this line item. 

Operating Expenses

The Company's total operating expenses were $20.10 million for the quarter ended June 30, 2017, compared to $19.30 million for the March 2017 quarter and $18.78 million for the June 2016 quarter.

While the second quarter 2017 FDIC premium was relatively flat to the first quarter of 2017, it was down significantly from the June 2016 quarter. 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 the utilization of a financial ratios method to determine assessment rates. The changes reduced the Company's assessment rate by nearly 50 percent, when compared to the second quarter 2016 assessment rate.

Compensation and employee benefits expense for the June 2017 quarter was $12.75 million compared to $11.91 million for the March 2017 quarter, and $11.10 million for the June 2016 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 increases from the June 2016 and March 2017 quarters. In addition, the six person Equipment Finance Team joined the Company the end of April 2017, further increasing compensation expense.

Premises and equipment expense for the June 2017 quarter was $3.03 million compared to $2.82 million for the March 2017 quarter and $2.74 million for the June 2016 quarter. The current quarter included approximately $150 thousand of accelerated depreciation related to upgrades at the Corporate Headquarters.

Income Taxes

For the June 2017 quarter, the effective income tax rate was 38.2 percent compared to 31.8 percent for the March 2017 quarter and 38.4 percent for the June 2016 quarter. In the March 2017 quarter, the Company adopted ASU 2016-9, "Compensation - Stock Compensation, Improvements to Employee Share-Based Payment Accounting". As a result of this adoption, the Company recorded an income tax benefit of $662 thousand in the first quarter of 2017. 

Provision for Loan Losses / Asset Quality

For the quarter ended June 30, 2017, the Company's provision for loan losses was $2.20 million, which was higher than the March 2017 quarter provision of $1.60 million and in line with the June 2016 provision of $2.20 million. The Company had $59 thousand of net charge-offs in the June 2017 quarter, compared to $198 thousand of net charge-offs in the March 2017 quarter and $302 thousand of net charge-offs in the June 2016 quarter. 

At June 30, 2017, the allowance for loan losses was $35.75 million, which was 229 percent of nonperforming loans and 0.98 percent of total loans, compared to $33.61 million at March 31, 2017, which was 292 percent of nonperforming loans and 0.98 percent of total loans, and $29.22 million at June 30, 2016, which was 363 percent of nonperforming loans and 0.93 percent of total loans.

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 June 30, 2017 (which does not include troubled debt restructured loans that are performing in accordance with their terms) were $16.0 million, or 0.38 percent of total assets, compared to $12.2 million, or 0.31 percent of total assets, at March 31, 2017 and $8.8 million, or 0.24 percent of total assets, at June 30, 2016. Total loans past due 30 through 89 days and still accruing were $1.2 million at June 30, 2017, compared to $622 thousand at March 31, 2017 and $6.6 million at June 30, 2016.

Capital / Dividends

The Company's capital position in the June 2017 quarter was benefitted by net income of $7.94 million and $7.63 million of voluntary share purchases under the Dividend Reinvestment Plan, which continues to be a source of capital for the Company.

At June 30, 2017, the Company's GAAP capital as a percent of total assets was 8.57 percent. The Company's regulatory leverage, common equity tier 1, tier 1 and total risk based capital ratios were 8.82 percent, 10.69 percent, 10.69 percent and 13.24 percent, respectively. The Bank's regulatory leverage, common equity tier 1, tier 1 and total risk based capital ratios were 9.76 percent, 11.83 percent, 11.83 percent and 12.91 percent, respectively. The Bank's regulatory capital ratios are all above the ratios to be considered well capitalized under regulatory guidance.

On July 26, 2017, the Company's Board of Directors declared a regular cash dividend of $0.05 per share payable on August 23, 2017 to shareholders of record on August 9, 2017.

ABOUT THE COMPANY

Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $4.17 billion as of June 30, 2017. 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 2017 and beyond;
  • inability to manage our growth;
  • inability to successfully integrate our expanded employee base;
  • 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;
  • 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, 2016. We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.

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

 
(Tables to follow)
 
PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in Thousands, except share data)
(Unaudited)
 
    For the Three Months Ended
    June 30,   March 31,   Dec 31,   Sept 30,   June 30,
    2017   2017   2016   2016 (A)   2016
Income Statement Data:                    
Interest income   $ 33,412   $ 31,385   $ 30,271   $ 29,844   $ 29,035
Interest Expense     6,440     5,794     5,691     5,575     4,859
  Net interest income     26,972     25,591     24,580     24,269     24,176
Provision for loan losses     2,200     1,600     1,500     2,100     2,200
  Net interest income after provision for loan losses     24,772     23,991     23,080     22,169     21,976
Wealth management fee income     5,086     4,818     4,610     4,436     4,899
Service charges and fees     815     771     815     812     818
Bank owned life insurance     350     322     380     340     345
Gain on loans held for sale at fair value (Mortgage banking)     91     47     197     383     309
Gain on loans held for sale at lower of cost or fair value     -     -     353     256     500
Fee income related to loan level, back-to-back swaps     1,291     456     874     670     -
Gain on sale of SBA loans     142     155     121     243     212
Other income     396     450     322     395     347
Securities gains, net     -     -     -     -     18
  Total other income     8,171     7,019     7,672     7,535     7,448
Compensation and employee benefits     12,751     11,913     11,480     11,515     11,100
Premises and equipment     3,033     2,816     2,903     2,736     2,742
FDIC insurance expense (A)     602     686     804     814     1,581
Other expenses     3,709     3,889     3,778     3,101     3,352
  Total operating expenses     20,095     19,304     18,965     18,166     18,775
Income before income taxes     12,848     11,706     11,787     11,538     10,649
Income tax expense     4,908     3,724     4,479     4,422     4,085
Net income   $ 7,940   $ 7,982   $ 7,308   $ 7,116   $ 6,564
                               
Total revenue (B)   $ 35,143   $ 32,610   $ 32,252   $ 31,804   $ 31,624
Per Common Share Data:                              
Earnings per share (basic)   $ 0.45   $ 0.47   $ 0.44   $ 0.43   $ 0.41
Earnings per share (diluted)     0.45     0.46     0.43     0.43     0.40
Weighted average number of common shares outstanding:                              
Basic     17,505,638     17,121,631     16,770,725     16,467,654     16,172,223
Diluted     17,756,390     17,438,907     17,070,473     16,673,596     16,341,975
Performance Ratios:                              
Return on average assets annualized (ROAA)     0.79%     0.82%     0.75%     0.77%     0.73%
Return on average equity annualized (ROAE)     9.06%     9.62%     9.27%     9.44%     9.06%
Net interest margin (taxable equivalent basis)     2.76%     2.71%     2.63%     2.74%     2.79%
Efficiency ratio (C)     57.18%     59.20%     59.45%     57.58%     60.36%
Operating expenses / average assets annualized     2.00%     1.97%     1.96%     1.98%     2.08%
(A) The quarter ended September 30, 2016 (and forward) included a reduction in FDIC premium. 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) Total revenue includes net interest income plus total other income.
(C) 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 beginning on page 24.
   
 
PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in Thousands, except share data)
(Unaudited)
 
    For the        
    Six Months Ended        
    June 30,   Change
    2017   2016   $   %
Income Statement Data:                
Interest income   $ 64,797   $ 56,933   $ 7,864   14%
Interest Expense     12,234     9,347     2,887   31%
  Net interest income     52,563     47,586     4,977   10%
Provision for loan losses     3,800     3,900     (100)   -3%
  Net interest income after provision for loan losses     48,763     43,686     5,077   12%
Wealth management fee income     9,904     9,194     710   8%
Service charges and fees     1,586     1,625     (39)   -2%
Bank owned life insurance     672     687     (15)   -2%
Gain on loans held for sale at fair value (Mortgage banking)     138     430     (292)   -68%
Gain on loans held for sale at lower of cost or fair value     -     624     (624)   -100%
Fee income related to loan level, back-to-back swaps     1,747     94     1,653   1759%
Gain on sale of SBA loans     297     259     38   15%
Other income     846     679     167   25%
Securities gains, net     -     119     (119)   -100%
  Total other income     15,190     13,711     1,479   11%
Compensation and employee benefits     24,664     22,008     2,656   12%
Premises and equipment     5,849     5,606     243   4%
FDIC insurance expense (A)     1,288     3,140     (1,852)   -59%
Other expenses     7,598     7,227     371   5%
  Total operating expenses     39,399     37,981     1,418   4%
Income before income taxes     24,554     19,416     5,138   26%
Income tax expense     8,632     7,363     1,269   17%
Net income   $ 15,922   $ 12,053   $ 3,869   32%
                       
Total revenue (B)   $ 67,753   $ 61,297   $ 6,456   11%
Per Common Share Data:                      
Earnings per share (basic)   $ 0.92   $ 0.75   $ 0.17   23%
Earnings per share (diluted)     0.91     0.74     0.17   23%
Weighted average number of common shares outstanding:                      
Basic     17,314,695     16,015,251     1,299,444   8%
Diluted     17,588,816     16,179,700     1,409,116   9%
Performance Ratios:                      
Return on average assets annualized (ROAA)     0.80%     0.68%     0.12%   18%
Return on average equity annualized (ROAE)     9.33%     8.45%     0.88%   10%
Net interest margin (taxable equivalent basis)     2.73%     2.80%     -0.07%   -3%
Efficiency ratio (C)     58.15%     62.72%     -4.57%   -7%
Operating expenses / average assets annualized     1.99%     2.15%     -0.16%   -7%
(A) Beginning July 1, 2016, the FDIC assessment system was revised resulting in a reduction of the Company's assessment rate. The revision 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) Total revenue includes net interest income plus total other income.
(C) 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 beginning on page 24.
   
 
PEAPACK-GLADSTONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in Thousands)
(Unaudited)
 
    As of
    June 30,   March 31,   Dec 31,   Sept 30,   June 30,
    2017   2017   2016   2016   2016
ASSETS                    
Cash and due from banks   $ 4,119   $ 4,910   $ 24,580   $ 17,861   $ 18,261
Federal funds sold     101     101     101     101     101
Interest-earning deposits     89,600     113,953     138,010     141,593     62,968
  Total cash and cash equivalents     93,820     118,964     162,691     159,555     81,330
                               
Securities available for sale     315,224     300,232     305,388     249,616     206,216
FHLB and FRB stock, at cost     18,487     15,436     13,813     14,093     14,623
                               
Residential mortgage (A)     611,316     571,496     528,570     499,748     483,972
Multifamily mortgage     1,504,581     1,468,890     1,459,594     1,537,834     1,562,206
Commercial mortgage     609,444     573,253     551,233     497,267     459,744
Commercial loans (A)     800,927     687,805     637,102     598,078     576,169
Construction loans     -     -     1,405     430     -
Consumer loans     72,943     69,802     69,654     69,222     67,614
Home equity lines of credit     67,051     68,055     65,682     62,872     63,188
Other loans     458     477     492     449     430
  Total loans (A)     3,666,720     3,439,778     3,313,732     3,265,900     3,213,323
  Less: Allowance for loan losses     35,751     33,610     32,208     30,616     29,219
  Net loans     3,630,969     3,406,168     3,281,524     3,235,284     3,184,104
                               
Premises and equipment     29,806     30,113     30,371     30,223     29,199
Other real estate owned     373     671     534     534     767
Accrued interest receivable     6,776     6,823     8,153     6,383     7,733
Bank owned life insurance     44,172     43,992     43,806     43,541     43,325
Deferred tax assets, net     16,912     15,325     15,320     14,765     18,190
Other assets     9,140     9,838     17,033     20,389     19,216
  TOTAL ASSETS   $ 4,165,679   $ 3,947,562   $ 3,878,633   $ 3,774,383   $ 3,604,703
                               
LIABILITIES                              
Deposits:                              
  Noninterest-bearing demand deposits   $ 548,427   $ 528,554   $ 489,485   $ 494,204   $ 469,809
  Interest-bearing demand deposits     1,085,805     1,015,178     1,023,081     928,941     897,210
  Savings     121,480     122,262     120,056     119,650     120,617
  Money market accounts     1,081,366     1,049,909     1,048,494     997,572     861,664
  Certificates of deposit - Retail     475,395     440,991     457,000     466,003     466,079
Subtotal "customer" deposits     3,312,473     3,156,894     3,138,116     3,006,370     2,815,379
  IB Demand - Brokered     180,000     180,000     180,000     200,000     200,000
  Certificates of deposit - Brokered     88,780     93,750     93,721     93,690     93,660
Total deposits     3,581,253     3,430,644     3,411,837     3,300,060     3,109,039
                               
Overnight borrowings     87,000     34,550     -     -     29,450
Federal home loan bank advances     58,795     58,795     61,795     71,795     83,692
Capital lease obligation     9,407     9,556     9,693     9,828     9,961
Subordinated debt, net     48,829     48,796     48,764     48,731     48,698
Other liabilities     23,548     24,293     22,334     27,934     28,330
Due to brokers, securities settlements     -     -     -     7,003     -
  TOTAL LIABILITIES     3,808,832     3,606,634     3,554,423     3,465,351     3,309,170
Shareholders' equity     356,847     340,928     324,210     309,032     295,533
  TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 4,165,679   $ 3,947,562   $ 3,878,633   $ 3,774,383   $ 3,604,703
                               
                               
Assets under administration at Peapack-Gladstone Bank's Wealth Management Division (market value, not included above) (in billions)   $ 3.9   $ 3.8   $ 3.7   $ 3.5   $ 3.4
                               
(A) Includes loans held for sale.                              
                               
 
PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED BALANCE SHEET DATA
(Dollars in Thousands)
(Unaudited)
 
    As of
    June 30,   Mar 31,   Dec 31,   Sept 30,   June 30,
    2017   2017   2016   2016   2016
Asset Quality:                    
Loans past due over 90 days and still accruing   $ -   $ -   $ -   $ -   $ -
Nonaccrual loans (A)     15,643     11,494     11,264     10,840     8,049
Other real estate owned     373     671     534     534     767
  Total nonperforming assets   $ 16,016   $ 12,165   $ 11,798   $ 11,374   $ 8,816
                               
Nonperforming loans to total loans     0.43%     0.33%     0.34%     0.34%     0.26%
Nonperforming assets to total assets     0.38%     0.31%     0.30%     0.30%     0.24%
                               
Performing TDRs (B)(C)   $ 9,725   $ 15,030   $ 17,784   $ 18,078   $ 18,570
                               
Loans past due 30 through 89 days and still accruing (D)   $ 1,232   $ 622   $ 1,356   $ 8,238   $ 6,576
                               
Classified loans   $ 43,608   $ 43,002   $ 45,798   $ 49,627   $ 51,084
                               
Impaired loans   $ 25,294   $ 26,546   $ 29,071   $ 28,951   $ 26,643
                               
Allowance for loan losses:                              
  Beginning of period   $ 33,610   $ 32,208   $ 30,616   $ 29,219   $ 27,321
  Provision for loan losses     2,200     1,600     1,500     2,100     2,200
  Charge-offs, net     (59)     (198)     92     (703)     (302)
  End of period   $ 35,751   $ 33,610   $ 32,208   $ 30,616   $ 29,219
                               
                               
ALLL to nonperforming loans     228.54%     292.41%     285.94%     282.44%     363.01%
ALLL to total loans     0.98%     0.98%     0.97%     0.95%     0.93%
(A) June 30, 2017 includes one legacy commercial mortgage totaling $4.9 million. The loan was past maturity at June 30, 2017, however interest payments continued to be made. The loan is secured by real estate valued at $7.2 million as of September 2016.
(B) Amounts reflect TDR's that are paying according to restructured terms.
(C) Amount does not include $9.6 million at June 30, 2017, $4.6 million at March 31, 2017, $4.5 million at December 31, 2016, $4.4 million at September 30, 2016 and $4.2 million at June 30, 2016 of TDRs included in nonaccrual loans.
(D) 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, except share data)
(Unaudited)
 
    June 30,     Dec 31,     June 30,  
    2017     2016     2016  
Capital Adequacy                                
                                 
Equity to total assets (A)             8.57 %           8.36 %           8.20 %
                                             
Tangible equity to tangible assets (B)             8.50 %           8.28 %           8.12 %
                                             
Book value per share (C)           $ 20.00           $ 18.79           $ 17.74  
                                             
Tangible book value per share (D)           $ 19.82           $ 18.60           $ 17.55  
                                             
    June 30,     Dec 31,     June 30,  
    2017     2016     2016  
Regulatory Capital - Holding Company                                            
                                             
Tier I leverage   $ 354,462       8.82 %   $ 323,045     8.35 %   $ 295,443     8.19 %
                                             
Tier I capital to risk weighted assets     354,462       10.69       323,045     10.60       295,443     10.28  
                                             
Common equity tier I capital ratio to risk-weighted assets     354,459       10.69       323,042     10.60       295,440     10.28  
                                             
Tier I & II capital to risk-weighted assets     439,042       13.24       404,017     13.25       373,360     12.99  
                                             
Regulatory Capital - Bank                                            
                                             
Tier I leverage   $ 392,243       9.76 %   $ 360,097     9.31 %   $ 332,115     9.21 %
                                             
Tier I capital to risk weighted assets     392,243       11.83       360,097     11.82       332,115     11.56  
                                             
Common equity tier I capital ratio to risk-weighted assets     392,240       11.83       360,094     11.82       332,112     11.56  
                                             
Tier I & II capital to risk-weighted assets     427,994       12.91       392,305     12.87       361,334     12.58  
(A) Equity to total assets is calculated as total shareholders' equity as a percentage of total assets at period end.
(B) Tangible equity and tangible assets are calculated by excluding the balance of intangible assets from shareholders' equity and total assets, respectively. Tangible equity as a percentage of tangible assets at period end is calculated by dividing tangible equity by tangible assets at period end. See Non-GAAP financial measures reconciliation included in these tables beginning on page 24.
(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 beginning on page 24.
 
 
PEAPACK-GLADSTONE FINANCIAL CORPORATION
 
LOANS CLOSED
(Dollars in Thousands)
(Unaudited)
 
     
    For the Quarters Ended
    June 30,   March 31,   Dec 31,   Sept 30,   June 30,
    2017   2017   2016   2016   2016
Residential loans retained   $ 54,833   $ 64,831   $ 53,324   $ 43,284   $ 32,513
Residential loans sold     6,491     3,115     11,429     25,128     20,221
Total residential loans     61,324     67,946     64,753     68,412     52,734
                               
Commercial real estate     46,931     33,216     56,793     56,799     36,554
Multifamily     78,824     47,125     26,300     74,450     150,709
Commercial (C & I) loans     158,476     128,130     78,038     59,698     61,309
SBA     3,900     1,700     2,050     3,025     2,285
Wealth lines of credit (A)     14,905     7,200     2,400     1,200     785
Total commercial loans     303,036     217,371     165,581     195,172     251,642
                               
Installment loans     2,075     2,146     1,826     1,591     1,077
                               
Home equity lines of credit (A)     5,444     6,973     5,878     7,064     14,435
                               
Total loans closed   $ 371,879   $ 294,436   $ 238,038   $ 272,239   $ 319,888
     
    For the Six Months Ended
    June 30,   June 30,
    2017   2016
Residential loans retained   $ 119,664   $ 50,260
Residential loans sold     9,606     28,283
Total residential loans     129,270     78,543
             
Commercial real estate     80,147     45,893
Multifamily     125,949     258,744
Commercial (C & I) loans     286,606     128,797
SBA     5,600     3,340
Wealth lines of credit (A)     22,105     2,585
Total commercial loans     520,407     439,359
             
Installment loans     4,221     1,563
             
Home equity lines of credit (A)     12,417     18,039
             
Total loans closed   $ 666,315   $ 537,504
             
             
(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)
 
    June 30, 2017     June 30, 2016  
    Average     Income/         Average     Income/      
    Balance     Expense   Yield     Balance     Expense   Yield  
ASSETS:                                
Interest-earning assets:                                
  Investments:                                
    Taxable (1)   $ 293,990     $ 1,477   2.01 %   $ 200,804     $ 914   1.82 %
    Tax-exempt (1) (2)     25,109       190   3.03       27,127       211   3.11  
                                         
  Loans (2) (3):                                        
    Mortgages     589,848       4,739   3.21       473,293       3,927   3.32  
    Commercial mortgages     2,085,623       18,653   3.58       2,047,112       17,830   3.48  
    Commercial     713,120       7,267   4.08       552,955       5,392   3.90  
    Commercial construction     0       0   -       1,305       13   3.98  
    Installment     71,364       554   3.11       63,158       420   2.66  
    Home equity     67,611       613   3.63       58,146       475   3.27  
    Other     481       11   9.15       462       11   9.52  
    Total loans     3,528,047       31,837   3.61       3,196,431       28,068   3.51  
  Federal funds sold     101       -   0.25       101       -   0.25  
  Interest-earning deposits     96,350       176   0.73       79,264       76   0.39  
    Total interest-earning assets     3,943,597       33,680   3.42       3,503,727       29,269   3.34  
Noninterest-Earning Assets:                                        
  Cash and due from banks     4,727                   16,122              
  Allowance for loan losses     (34,466 )                 (28,056 )            
  Premises and equipment     30,144                   29,452              
  Other assets     76,747                   88,907              
    Total noninterest-earning assets     77,152                   106,425              
Total assets   $ 4,020,749                 $ 3,610,152              
                                         
LIABILITIES:                                        
Interest-bearing deposits:                                        
  Checking   $ 1,075,832     $ 1,100   0.41 %   $ 906,611     $ 607   0.27 %
  Money markets     1,051,095       1,204   0.46       818,453       602   0.29  
  Savings     121,299       16   0.05       120,094       17   0.06  
  Certificates of deposit - retail     457,528       1,650   1.44       450,675       1,545   1.37  
    Subtotal interest-bearing deposits     2,705,754       3,970   0.59       2,295,833       2,771   0.48  
  Interest-bearing demand - brokered     180,000       726   1.61       200,000       760   1.52  
  Certificates of deposit - brokered     92,719       493   2.13       93,642       496   2.12  
    Total interest-bearing deposits     2,978,473       5,189   0.70       2,589,475       4,027   0.62  
  Borrowings     77,457       354   1.83       222,667       573   1.03  
  Capital lease obligation     9,463       114   4.82       10,007       120   4.80  
  Subordinated debt     48,808       783   6.42       8,777       139   6.33  
  Total interest-bearing liabilities     3,114,201       6,440   0.83       2,830,926       4,859   0.69  
Noninterest-bearing liabilities:                                        
  Demand deposits     534,339                   464,074              
  Accrued expenses and other liabilities     21,787                   25,247              
  Total noninterest-bearing liabilities     556,126                   489,321              
Shareholders' equity     350,422                   289,905              
  Total liabilities and Shareholders' equity   $ 4,020,749                 $ 3,610,152              
  Net interest income           $ 27,240                 $ 24,410      
                                         
    Net interest spread                 2.59 %                 2.65 %
    Net interest margin (4)                 2.76 %                 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
THREE MONTHS ENDED
 (Tax-Equivalent Basis, Dollars in Thousands)
 
    June 30, 2017     March 31, 2017  
    Average     Income/         Average     Income/      
    Balance     Expense   Yield     Balance     Expense   Yield  
ASSETS:                                
Interest-earning assets:                                
  Investments:                                
    Taxable (1)   $ 293,990     $ 1,477   2.01 %   $ 289,237     $ 1,504   2.08 %
    Tax-exempt (1) (2)     25,109       190   3.03       27,152       199   2.93  
                                         
  Loans (2) (3):                                        
    Mortgages     589,848       4,739   3.21       544,854       4,473   3.28  
    Commercial mortgages     2,085,623       18,653   3.58       2,035,304       17,732   3.48  
    Commercial     713,120       7,267   4.08       648,266       6,380   3.94  
    Commercial construction     0       0   -       390       4   4.10  
    Installment     71,364       554   3.11       69,415       501   2.89  
    Home equity     67,611       613   3.63       66,311       557   3.36  
    Other     481       11   9.15       514       11   8.56  
    Total loans     3,528,047       31,837   3.61       3,365,054       29,658   3.53  
  Federal funds sold     101       -   0.25       101       -   0.25  
  Interest-earning deposits     96,350       176   0.73       137,589       264   0.77  
    Total interest-earning assets     3,943,597       33,680   3.42       3,819,133       31,625   3.31  
Noninterest-Earning Assets:                                        
  Cash and due from banks     4,727                   21,615              
  Allowance for loan losses     (34,466 )                 (32,913 )            
  Premises and equipment     30,144                   30,279              
  Other assets     76,747                   73,467              
    Total noninterest-earning assets     77,152                   92,448              
Total assets   $ 4,020,749                 $ 3,911,581              
                                         
LIABILITIES:                                        
Interest-bearing deposits:                                        
  Checking   $ 1,075,832     $ 1,100   0.41 %   $ 1,029,012     $ 862   0.34 %
  Money markets     1,051,095       1,204   0.46       1,068,552       934   0.35  
  Savings     121,299       16   0.05       120,623       16   0.05  
  Certificates of deposit - retail     457,528       1,650   1.44       448,844       1,570   1.40  
    Subtotal interest-bearing deposits     2,705,754       3,970   0.59       2,667,031       3,382   0.51  
  Interest-bearing demand - brokered     180,000       726   1.61       180,000       720   1.60  
  Certificates of deposit - brokered     92,719       493   2.13       93,733       491   2.10  
    Total interest-bearing deposits     2,978,473       5,189   0.70       2,940,764       4,593   0.62  
  Borrowings     77,457       354   1.83       60,123       303   2.02  
  Capital lease obligation     9,463       114   4.82       9,605       115   4.79  
  Subordinated debt     48,808       783   6.42       48,775       783   6.42  
  Total interest-bearing liabilities     3,114,201       6,440   0.83       3,059,267       5,794   0.76  
Noninterest-bearing liabilities:                                        
  Demand deposits     534,339                   501,183              
  Accrued expenses and other liabilities     21,787                   19,151              
  Total noninterest-bearing liabilities     556,126                   520,334              
Shareholders' equity     350,422                   331,980              
  Total liabilities and Shareholders' equity   $ 4,020,749                 $ 3,911,581              
  Net interest income           $ 27,240                 $ 25,831      
                                         
    Net interest spread                 2.59 %                 2.55 %
    Net interest margin (4)                 2.76 %                 2.71 %
(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
SIX MONTHS ENDED
 (Tax-Equivalent Basis, Dollars in Thousands)
 
    June 30, 2017     June 30, 2016  
    Average     Income/         Average     Income/      
    Balance     Expense   Yield     Balance     Expense   Yield  
ASSETS:                                
Interest-earning assets:                                
  Investments:                                
    Taxable (1)   $ 291,627     $ 2,981   2.04 %   $ 200,192     $ 1,840   1.84 %
    Tax-exempt (1) (2)     26,125       389   2.98       25,586       411   3.21  
                                         
  Loans (2) (3):                                        
    Mortgages     567,475       9,212   3.25       469,895       7,745   3.30  
    Commercial mortgages     2,060,602       36,386   3.53       2,003,619       35,000   3.49  
    Commercial     680,872       13,646   4.01       539,426       10,492   3.89  
    Commercial construction     194       4   4.12       1,350       27   4.00  
    Installment     70,395       1,055   3.00       54,032       755   2.79  
    Home equity     66,965       1,169   3.49       55,601       915   3.29  
    Other     498       23   9.24       474       23   9.70  
    Total loans     3,447,001       61,495   3.57       3,124,397       54,957   3.52  
  Federal funds sold     101       -   0.25       101       -   0.24  
  Interest-earning deposits     116,856       440   0.75       78,583       163   0.42  
    Total interest-earning assets     3,881,710       65,305   3.36       3,428,859       57,371   3.35  
Noninterest-Earning Assets:                                        
  Cash and due from banks     13,125                   15,862              
  Allowance for loan losses     (33,694 )                 (27,319 )            
  Premises and equipment     30,211                   29,726              
  Other assets     75,099                   86,070              
    Total noninterest-earning assets     84,741                   104,339              
Total assets   $ 3,966,451                 $ 3,533,198              
                                         
LIABILITIES:                                        
Interest-bearing deposits:                                        
  Checking   $ 1,052,551     $ 1,961   0.37 %   $ 894,554     $ 1,178   0.26 %
  Money markets     1,059,775       2,138   0.40       819,135       1,175   0.29  
  Savings     120,963       33   0.05       118,327       33   0.06  
  Certificates of deposit - retail     453,210       3,220   1.42       446,619       3,034   1.36  
    Subtotal interest-bearing deposits     2,686,499       7,352   0.55       2,278,635       5,420   0.48  
  Interest-bearing demand - brokered     180,000       1,446   1.61       200,000       1,501   1.50  
  Certificates of deposit - brokered     93,223       984   2.11       93,658       993   2.12  
    Total interest-bearing deposits     2,959,722       9,782   0.66       2,572,293       7,914   0.62  
  Borrowings     68,838       657   1.91       188,971       1,052   1.11  
  Capital lease obligation     9,534       229   4.80       10,074       242   4.80  
  Subordinated debt     48,792       1,566   6.42       4,388       139   6.34  
  Total interest-bearing liabilities     3,086,886       12,234   0.79       2,775,726       9,347   0.67  
Noninterest-bearing liabilities:                                        
  Demand deposits     517,853                   449,922              
  Accrued expenses and other liabilities     20,460                   22,373              
  Total noninterest-bearing liabilities     538,313                   472,295              
Shareholders' equity     341,252                   285,177              
  Total liabilities and Shareholders' equity   $ 3,966,451                 $ 3,533,198              
  Net interest income           $ 53,071                 $ 48,024      
                                         
    Net interest spread                 2.57 %                 2.68 %
    Net interest margin (4)                 2.73 %                 2.80 %
(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, 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
 
Tangible Book Value Per Share
  June 30,   March 31,   Dec 31,   Sept 30,   June 30,
  2017   2017   2016   2016   2016
Shareholders' equity   $ 356,847   $ 340,928   $ 324,210   $ 309,032   $ 295,533
Less: Intangible assets     3,095     3,126     3,157     3,188     3,277
  Tangible equity     353,752     337,802     321,053     305,844     292,256
                               
Period end shares outstanding     17,846,404     17,579,274     17,257,995     16,944,738     16,657,403
Tangible book value per share   $ 19.82   $ 19.22   $ 18.60   $ 18.05   $ 17.55
Book value per share     20.00     19.39     18.79     18.24     17.74
                               
Tangible Equity to Tangible Assets                              
Total Assets   $ 4,165,679   $ 3,947,562   $ 3,878,633   $ 3,774,383   $ 3,604,703
Less: Intangible assets     3,095     3,126     3,157     3,188     3,277
  Tangible assets     4,162,584     3,944,436     3,875,476     3,771,195     3,601,426
Tangible equity to tangible assets     8.50%     8.56%     8.28%     8.11%     8.12%
Equity to assets     8.57%     8.64%     8.36%     8.19%     8.20%
    Three Months Ended  
    June 30,     March 31,     Dec 31,     Sept 30,     June 30,  
Efficiency Ratio   2017     2017     2016     2016     2016  
                               
Net interest income   $ 26,972     $ 25,591     $ 24,580     $ 24,269     $ 24,176  
Total other income     8,171       7,019       7,672       7,535       7,448  
Less: Gain on loans held for sale at lower of cost or fair value     -       -       353       256       500  
Less: Securities gains, net     -       -       -       -       18  
Total recurring revenue     35,143       32,610       31,899       31,548       31,106  
                                         
Operating expenses     20,095       19,304       18,965       18,166       18,775  
Total operating expense     20,095       19,304       18,965       18,166       18,775  
                                         
Efficiency ratio     57.18 %     59.20 %     59.45 %     57.58 %     60.36 %
                                         
         
    Six Months Ended                    
    June 30,     June 30,                    
Efficiency Ratio   2017     2016                    
                                         
Net interest income   $ 52,563     $ 47,586                          
Total other income     15,190       13,711                          
Less: Gain on loans held for sale at lower of cost or fair value     -       624                          
Less: Securities gains, net     -       119                          
Total recurring revenue     67,753       60,554                          
                                         
Operating expenses     39,399       37,981                          
Total operating expense     39,399       37,981                          
                                         
Efficiency ratio     58.15 %     62.72 %                        
                                         

Contact Information

  • Contact:
    Jeffrey J. Carfora
    SEVP and CFO
    Peapack-Gladstone Financial Corporation
    T: 908-719-4308