Attached files
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| 8-K - 8-K - PEAPACK GLADSTONE FINANCIAL CORP | form8k-18933_pgfc.htm |
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 27, 2017 – Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market:PGC) (the “Company”) reported record net income of $26.13 million and diluted earnings per share of $1.47 for the nine months ended September 30, 2017, compared to $19.17 million and $1.17, respectively, for the same nine month period last year, reflecting increases of $6.96 million, or 36 percent, and $0.30 per share, or 26 percent, respectively.
For the quarter ended September 30, 2017, the Company recorded net income of $10.21 million and diluted earnings per share of $0.56, compared to $7.12 million and $0.43 for the same three month period last year, reflecting increases of $3.09 million, or 43 percent, and $0.13 per share, or 30 percent, respectively.
The third quarter of 2017, when compared to the third quarter of 2016, reflected: increased net interest income (partially due to $1.2 million of recognition of deferred fees and prepayment income on two C&I credits); greater wealth management fee income (partially due to two months of fee income related to the recently acquired Murphy Capital Management (“MCM”)); and a reduced provision for loan and lease losses (due to low charge-off levels and $79 million of loan sales). These positive effects were partially offset by higher operating expenses in the 2017 third quarter (partially due to two months of expenses related to MCM, as well as a full quarter of expenses related to Peapack Capital, the Bank’s Equipment Finance subsidiary, which began operations in May 2017).
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The following table summarizes specified financial measures for the third quarters of 2017 and 2016, respectively.
| September | September | Increase/ | ||||||||||||||
| (Dollars in millions, except per share data) | 2017 | 2016 | (Decrease) | |||||||||||||
| Net interest income | $ | 29.99 | $ | 24.27 | $ | 5.72 | 24 | % | ||||||||
| Provision for loan and lease losses | $ | .40 | $ | 2.10 | $ | (1.70 | ) | -81 | % | |||||||
| Pretax income | $ | 16.46 | $ | 11.54 | $ | 4.92 | 43 | % | ||||||||
| Net income | $ | 10.21 | $ | 7.12 | $ | 3.09 | 43 | % | ||||||||
| Diluted EPS | $ | 0.56 | $ | 0.43 | $ | 0.13 | 30 | % | ||||||||
| Total revenue | $ | 38.82 | $ | 31.80 | $ | 7.02 | 22 | % | ||||||||
| Return on average assets | 0.97 | % | 0.77 | % | 0.20 | |||||||||||
| Return on average equity | 11.09 | % | 9.44 | % | 1.65 | |||||||||||
| Efficiency ratio (A) | 56.62 | % | 57.58 | % | (0.96 | ) | ||||||||||
| Book value per share | $ | 20.86 | $ | 18.24 | $ | 2.62 | 14 | % | ||||||||
| Tang book value per share (A) | $ | 20.03 | $ | 18.05 | $ | 1.98 | 11 | % | ||||||||
| (A) | See Non-GAAP financial measures reconciliation table 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 third quarter of 2017. We continue to successfully execute on our strategic plan – Expanding Our Reach.”
Select third quarter highlights follow:
| · | Growth in diluted EPS for Q3 2017 when compared to Q3 2016 was $0.13 per share, or 30 percent. |
| · | As previously announced, effective August 1, 2017, the Bank completed its acquisition of MCM, a registered investment advisory firm (“RIA”), based in Gladstone NJ. |
| · | At September 30, 2017, the market value of assets under administration (AUA) at the Private Wealth Management Division of Peapack-Gladstone Bank (the “Bank”) increased $1.3 billion to $4.8 billion from $3.5 billion at September 30, 2016, reflecting growth of 37 percent. The acquisition of MCM contributed approximately $900 million of AUA at September 30, 2017. |
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| · | Fee income from the Private Wealth Management Division totaled $5.8 million for the third quarter of 2017, compared to $4.4 million for the same quarter in 2016, reflecting growth of 31 percent. Wealth management fee income, comprising nearly 15 percent of the Company’s total revenue, contributes significantly to the Company’s diversified revenue sources. |
| · | As previously announced on September 14, 2017, the Company announced its agreement to acquire Quadrant Capital Management, a RIA, headquartered in Fairfield NJ which is expected to add approximately $400 million in AUA upon the closing expected in the fourth quarter of 2017. |
| · | During the third quarter of 2017, the Company employed loan sales as a balance sheet management strategy, while improving returns. The $79 million of lower-yielding multifamily and residential mortgage loan sales generally funded increases in commercial and other loans, resulting in planned minimal net loan growth during the quarter. |
| · | Loans at September 30, 2017 totaled $3.67 billion. This reflected net growth of $404 million (12 percent) when compared to $3.27 billion of loans at September 30, 2016. |
| · | Commercial & Industrial (C&I) loans at September 30, 2017 totaled $846 million. This reflected net growth of $45 million compared to the prior quarter (6 percent compared to the prior quarter or 22 percent on an annualized basis), and net growth of $248 million (41 percent) when compared to $598 million in C&I loans at September 30, 2016. |
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| · | Total “customer” deposit balances (defined as deposits excluding brokered CDs and brokered “overnight” interest-bearing demand deposits) totaled $3.40 billion at September 30, 2017. This reflected net growth of $86 million compared to the prior quarter (3 percent compared to the prior quarter or 10 percent on an annualized basis), and reflected growth of $393 million (13 percent) when compared to $3.01 billion of total “customer” deposit balances at September 30, 2016. |
| · | Asset quality metrics continued to be strong at September 30, 2017. Nonperforming assets at September 30, 2017, declining slightly from the June 30, 2017 level, were just $15.5 million, or 0.37 percent of total assets. Total loans past due 30 through 89 days and still accruing were $589 thousand, or 0.02 percent of total loans at September 30, 2017. |
| · | The Company’s book value per share at September 30, 2017 of $20.86 reflected improvement when compared to $18.24 at September 30, 2016. Year over year growth in book value per share totaled $2.62 or 14 percent. |
Net Interest Income / Net Interest Margin
Net interest income and net interest margin were $29.99 million and 2.95 percent for the third quarter of 2017, compared to $26.97 million and 2.76 percent for the second quarter of 2017, and compared to $24.27 million and 2.74 percent for the same quarter last year, reflecting growth in net interest income of $5.72 million or 24 percent when compared to the same prior year period. Net interest income for the third quarter of 2017 benefitted from $1.2 million of recognition of deferred fees and prepayment premiums on two C&I credits and from loan growth during 2016 and into 2017, as well as benefitting slightly from the recent Federal Reserve rate hikes. The September 2017 quarter also included approximately $1.2 million of prepayment premiums received on the prepayment of certain multifamily loans, reflecting an increase from $780 thousand for the June 2017 quarter and $507 thousand for the September 2016 quarter.
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Net interest margin for the third quarter of 2017 increased when compared to the second quarter of 2017, and the same quarter of 2016. The increase was due to the recognition of the deferred fees and increased prepayment premiums noted above, as well as the effect of the increased market rates on our adjustable rate assets, partially offset by the increased cost of deposits.
Net interest margin is also affected by the maintenance of liquid assets on the Company’s balance sheet. Mr. Kennedy said, “In addition to approximately $400 million of cash, cash equivalents and investment securities on our balance sheet, we also have over $1.2 billion of secured funding available from the Federal Home Loan Bank, of which we only have $50 million drawn as of September 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 may also be impacted by competitive pressures in attracting new loans and deposits.
Wealth Management Business
In the September 2017 quarter, the Bank’s wealth management business generated $5.79 million in fee income compared to $5.09 million for the June 2017 quarter, and $4.44 million for the September 2016 quarter.
The September 2017 quarter included approximately $900 thousand of income related to MCM, which was acquired effective August 1, 2017. The September 2017 quarter also included increased “recurring type” fee income (tied principally to asset management fees and custody fees), which was due to 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. Relative to the June 2017 quarter, the September 2017 quarter included reduced tax preparation fees, as such fees are seasonally high in the second quarter of each year.
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The market value of the AUA of the wealth management division was $4.8 billion at September 30, 2017 an increase of $1.3 billion, or 37 percent, from $3.5 billion at September 30, 2016. The acquisition of MCM contributed approximately $900 million of AUA at September 30, 2017.
John P. Babcock, President of the PGB Private Wealth Management Division, said, “We were pleased to consummate the acquisition of MCM, as well as announce the agreement to acquire Quadrant Capital Management, with a planned closing in the fourth quarter of 2017. Our new business pipeline continues to be robust and we expect continued growth in our client base, the expansion of existing relationships and further pursuit of potential strategic acquisitions of wealth management firms.”
Mr. Babcock went on to say, “Our differentiator continues to be 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
During the third quarter of 2017, the Company employed loan sales as a balance sheet management strategy, while improving returns. The $79 million of lower-yielding multifamily and residential mortgage loan sales generally funded increases in commercial and other loans, resulting in planned minimal net loan growth during the third quarter of 2017.
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At September 30, 2017, loans totaled $3.67 billion, compared to $3.31 billion at December 31, 2016 and compared to $3.27 billion at September 30, 2016, representing net increases of $356 million compared to the December 2016 year end (11 percent or 14 percent on an annualized basis), and $404 million (12 percent) compared to a year ago at September 30, 2016.
Mr. Kennedy noted, “We actively managed our loan portfolio during this past quarter by selling off lower yielding loans, to fund higher yielding production. And we utilized our deposit growth to pay down wholesale borrowings. 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, 2017, residential mortgage loans decreased $6 million to $605 million when compared to the June 2017 quarter. During the September 2017 quarter, approximately $13 million of residential mortgage portfolio loans were sold with servicing retained. From September 30, 2016 to September 30, 2017, residential mortgage loans grew $105 million, or 21 percent.
For the September 2017 quarter, commercial real estate mortgage loans (not including multifamily loans) grew $16 million to $625 million when compared to the June 2017 quarter (3 percent or 10 percent on an annualized basis). From September 30, 2016 to September 30, 2017 commercial real estate mortgage loans grew $128 million, or 26 percent.
At September 30, 2017, the multifamily mortgage loan portfolio totaled $1.44 billion (or 39 percent of total loans), decreasing from $1.50 billion (or 41 percent of total loans) at June 30, 2017 and $1.54 billion (or 47 percent of total loans) at September 30, 2016. During the September 2017 quarter the Company sold $66 million of multifamily mortgage loans on a servicing retained basis.
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Mr. Kennedy said, “As I note each quarter, we have been actively 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 have continued to make significant progress on this front.”
For the quarter ended September 30, 2017, commercial loans grew $45 million to $846 million when compared to the June 2017 quarter. From September 30, 2016 to September 30, 2017 commercial loans grew $248 million, or 41 percent. At September 30, 2017 the commercial loan portfolio comprised 23 percent of the overall loan portfolio up from 22 percent at June 30, 2017, and up from 18 percent one year ago at September 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 in April 2017, we were successful in bringing on a team of very experienced bankers to focus on equipment financing, and $56 million of volume has been funded since inception. While this team has been successfully integrated and has begun producing somewhat quicker than previously assumed, we still generally expect that revenue and profitability related to this 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.”
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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
During the September 2017 quarter, as noted previously, net loans were managed basically flat to the June 30, 2017 level, as $79 million of lower-yielding multifamily and residential mortgage loan sales generally funded increases in commercial and other loans, while customer deposit growth of $86 million, net (principally interest-bearing checking and retail certificates of deposit) and capital of $23 million funded the paydown of wholesale borrowings of $96 million, as well as funding the purchase price of MCM.
Brokered interest-bearing demand (“overnight”) deposits totaled $180 million at September 30, 2017, and June 30, 2017 down $20 million from $200 million at September 30, 2016. The interest rate paid on these deposits provided an attractive funding source and allowed the Bank to engage in interest rate swaps as part of its asset-liability interest rate risk management. As of September 30, 2017, the Company had transacted pay fixed, receive floating interest rate swaps totaling $180 million in 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 focus on providing high touch client service, a key element in growing its personal commercial core deposit base. We expect that our full array of treasury management capabilities, including our new Treasury Management platform and our new escrow management product software, as well as added treasury management sales professionals and private bankers, will help us grow commercial deposits.”
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Mr. Kennedy added, “Our overall balance sheet growth will be governed by our continued ability to generate economical core deposits. We will be intently focused on fully utilizing our enhanced in-house relationship-based loan profitability model to manage the origination of loans with competitive risk-adjusted returns.”
Other Noninterest Income
The Company’s total noninterest income for the September 2017 quarter totaled $8.83 million, or 23 percent of total revenue, compared to $8.17 million for the June 2017 quarter and to $7.54 million for the September 2016 quarter. Noninterest income, excluding wealth management fee income, totaled $3.04 million, $3.09 million, and $3.10 million for the September 2017, June 2017, and September 2016 quarters, respectively.
The September 2017 quarter included $141 thousand of income from the sale of newly originated residential mortgage loans (mortgage banking), compared to $91 thousand for the June 2017 quarter, and $383 thousand for the September 2016 quarter. Originations of residential mortgage loans for sale were lower in the 2017 quarterly periods, compared to the prior year periods.
Gain on loans held for sale at lower of cost or fair value was $34 thousand for the third quarter of 2017. The Company did not sell any loans during the June 2017 quarter. The gain on sales of loans held for sale at lower of cost or fair value during the September 2016 quarter was $256 thousand. The Company sold loans in the September 2017 quarter, however the sales focused on lower-yielding loans, and with servicing retained, thus the gain on sale was lower in the 2017 period.
The third quarter of 2017 included $493 thousand of income related to the Company’s SBA lending and sale program, compared to $142 thousand generated in the June 2017 quarter, and $243 thousand in the September 2016 quarter.
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The September 2017 quarter included $888 thousand of loan level, back-to-back swap income compared to $1.3 million in the June 2017 quarter and $670 thousand in the September 2016 quarter. This program provides a borrower with a fixed interest rate on a loan, while providing an adjustable rate to the Company, thus helping to manage the Company’s interest rate risk, while contributing to income.
Other income for the September 2017 quarter totaled $326 thousand, compared to $396 thousand for the June 2017 quarter and to $395 thousand for the September 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 $21.96 million for the quarter ended September 30, 2017, compared to $20.10 million for the June 2017 quarter and $18.17 million for the September 2016 quarter.
Compensation and employee benefits expense for the September 2017 quarter was $14.00 million compared to $12.75 million for the June 2017 quarter, and $11.52 million for the September 2016 quarter. The September 2017 quarter included a full quarter of expense related to the Equipment Finance team, and two months of expense related to MCM. Strategic hiring, normal salary increases and increased bonus/incentive accruals associated with the Company’s growth, all contributed to the increases from the September 2016 quarter.
Premises and equipment expense for the September 2017 quarter was $2.95 million compared to $3.03 million for the June 2017 quarter and $2.74 million for the September 2016 quarter. The previous quarter included approximately $150 thousand of fixed asset write-offs related to upgrades at the corporate headquarters.
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Other expenses for the September 2017 quarter were $4.44 million compared to $3.71 million for the June 2017 quarter and $3.10 million for the September 2016 quarter. The September 2017 quarter included approximately $500 thousand of professional fees related to the MCM acquisition, a full quarter of other expenses related to the Equipment Finance business, and two months of other operating expense related to MCM. Further, when compared to the September 2016 quarter, the September 2017 quarter included increased advertising and marketing expenses relating to various target marketing campaigns.
Income Taxes
For the September 2017 quarter, the effective income tax rate was 38.0 percent, generally in line with the 38.2 percent for the June 2017 quarter and 38.3 percent for the September 2016 quarter.
Provision for Loan and Lease Losses / Asset Quality
For the quarter ended September 30, 2017, the Company’s provision for loan and lease losses was $400 thousand, compared to $2.20 million for the June 2017 quarter and $2.10 million for the September 2016 quarter. The Company’s provision for loan and lease losses (and its allowance for loan and lease losses) reflect the Company’s asset quality metrics and minimal net loan growth (in the September 2017 quarter due to the loan sales).
At September 30, 2017, the allowance for loan and lease losses of $35.92 million, held fairly steady at 234 percent of nonperforming loans and 0.98 percent of total loans, compared to $35.75 million at June 30, 2017, which was 229 percent of nonperforming loans and 0.98 percent of total loans, and compared to 282 percent of nonperforming loans and 0.95 percent of total loans at September 30, 2016.
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Nonperforming assets at September 30, 2017 (which does not include troubled debt restructured loans that are performing in accordance with their terms) were $15.5 million, or 0.37 percent of total assets, compared to $16.0 million, or 0.38 percent of total assets, at June 30, 2017 and $11.4 million, or 0.30 percent of total assets, at September 30, 2016. Total loans past due 30 through 89 days and still accruing were $589 thousand at September 30, 2017, compared to $1.2 million at June 30, 2017 and $8.2 million at September 30, 2016. September 30, 2016 includes one commercial loan secured by real estate totaling $5.0 million that was 30 days past due. This loan was brought current in October 2016.
Capital / Dividends
The Company’s capital position in the September 2017 quarter was benefitted by net income of $10.21 million and $9.60 million of voluntary share purchases under the Dividend Reinvestment Plan, which continues to be a source of capital for the Company.
At September 30, 2017, the Company’s GAAP capital as a percent of total assets was 9.10 percent. The Company’s regulatory leverage, common equity tier 1, tier 1 to risk weighted assets, and total risk based capital ratios were 8.75 percent, 10.78 percent, 10.78 percent and 13.28 percent, respectively. The Bank’s regulatory leverage, common equity tier 1, tier 1 and total risk based capital ratios were 9.63 percent, 11.86 percent, 11.86 percent and 12.92 percent, respectively. The Bank’s regulatory capital ratios are all above the ratios to be considered well capitalized under regulatory guidance.
On October 26, 2017, the Company’s Board of Directors declared a regular cash dividend of $0.05 per share payable on November 23, 2017 to shareholders of record on November 9, 2017.
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ABOUT THE COMPANY
Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $4.18 billion as of September 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 Private 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 and lease losses; |
| · | higher than expected increases in loan and lease losses or in the level of nonperforming loans; |
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| · | 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)
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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, | ||||||||||||||||
| 2017 | 2017 | 2017 | 2016 | 2016 | ||||||||||||||||
| Income Statement Data: | ||||||||||||||||||||
| Interest income | $ | 37,491 | $ | 33,412 | $ | 31,385 | $ | 30,271 | $ | 29,844 | ||||||||||
| Interest expense | 7,499 | 6,440 | 5,794 | 5,691 | 5,575 | |||||||||||||||
| Net interest income | 29,992 | 26,972 | 25,591 | 24,580 | 24,269 | |||||||||||||||
| Provision for loan and lease losses | 400 | 2,200 | 1,600 | 1,500 | 2,100 | |||||||||||||||
| Net interest income after | ||||||||||||||||||||
| provision for loan and lease losses | 29,592 | 24,772 | 23,991 | 23,080 | 22,169 | |||||||||||||||
| Wealth management fee income | 5,790 | 5,086 | 4,818 | 4,610 | 4,436 | |||||||||||||||
| Service charges and fees | 816 | 815 | 771 | 815 | 812 | |||||||||||||||
| Bank owned life insurance | 343 | 350 | 322 | 380 | 340 | |||||||||||||||
| Gain on loans held for sale at fair | ||||||||||||||||||||
| value (Mortgage banking) | 141 | 91 | 47 | 197 | 383 | |||||||||||||||
| Gain on loans held for sale at | ||||||||||||||||||||
| lower of cost or fair value | 34 | — | — | 353 | 256 | |||||||||||||||
| Fee income related to loan level, | ||||||||||||||||||||
| back-to-back swaps | 888 | 1,291 | 456 | 874 | 670 | |||||||||||||||
| Gain on sale of SBA loans | 493 | 142 | 155 | 121 | 243 | |||||||||||||||
| Other income | 326 | 396 | 450 | 322 | 395 | |||||||||||||||
| Securities gains, net | — | — | — | — | — | |||||||||||||||
| Total other income | 8,831 | 8,171 | 7,019 | 7,672 | 7,535 | |||||||||||||||
| Salaries and employee benefits | 13,996 | 12,751 | 11,913 | 11,480 | 11,515 | |||||||||||||||
| Premises and equipment | 2,945 | 3,033 | 2,816 | 2,903 | 2,736 | |||||||||||||||
| FDIC insurance expense | 583 | 602 | 686 | 804 | 814 | |||||||||||||||
| Other expenses | 4,437 | 3,709 | 3,889 | 3,778 | 3,101 | |||||||||||||||
| Total operating expenses | 21,961 | 20,095 | 19,304 | 18,965 | 18,166 | |||||||||||||||
| Income before income taxes | 16,462 | 12,848 | 11,706 | 11,787 | 11,538 | |||||||||||||||
| Income tax expense | 6,256 | 4,908 | 3,724 | 4,479 | 4,422 | |||||||||||||||
| Net income | $ | 10,206 | $ | 7,940 | $ | 7,982 | $ | 7,308 | $ | 7,116 | ||||||||||
| Total revenue (A) | $ | 38,823 | $ | 35,143 | $ | 32,610 | $ | 32,252 | $ | 31,804 | ||||||||||
| Per Common Share Data: | ||||||||||||||||||||
| Earnings per share (basic) | $ | 0.57 | $ | 0.45 | $ | 0.47 | $ | 0.44 | $ | 0.43 | ||||||||||
| Earnings per share (diluted) | 0.56 | 0.45 | 0.46 | 0.43 | 0.43 | |||||||||||||||
| Weighted average number of | ||||||||||||||||||||
| common shares outstanding: | ||||||||||||||||||||
| Basic | 17,800,153 | 17,505,638 | 17,121,631 | 16,770,725 | 16,467,654 | |||||||||||||||
| Diluted | 18,123,268 | 17,756,390 | 17,438,907 | 17,070,473 | 16,673,596 | |||||||||||||||
| Performance Ratios: | ||||||||||||||||||||
| Return on average assets annualized (ROAA) | 0.97 | % | 0.79 | % | 0.82 | % | 0.75 | % | 0.77 | % | ||||||||||
| Return on average equity annualized (ROAE) | 11.09 | % | 9.06 | % | 9.62 | % | 9.27 | % | 9.44 | % | ||||||||||
| Net interest margin (taxable equivalent basis) | 2.95 | % | 2.76 | % | 2.71 | % | 2.63 | % | 2.74 | % | ||||||||||
| Efficiency ratio (B) | 56.62 | % | 57.18 | % | 59.20 | % | 59.45 | % | 57.58 | % | ||||||||||
| Operating expenses / average | ||||||||||||||||||||
| assets annualized | 2.10 | % | 2.00 | % | 1.97 | % | 1.96 | % | 1.98 | % | ||||||||||
| (A) | Total revenue includes net interest income plus total other income. |
| (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 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. |
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PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in Thousands, except share data)
(Unaudited)
| For the | ||||||||||||||||
| Nine Months Ended | ||||||||||||||||
| September 30, | Change | |||||||||||||||
| 2017 | 2016 | $ | % | |||||||||||||
| Income Statement Data: | ||||||||||||||||
| Interest income | $ | 102,288 | $ | 86,777 | $ | 15,511 | 18 | % | ||||||||
| Interest expense | 19,733 | 14,922 | 4,811 | 32 | % | |||||||||||
| Net interest income | 82,555 | 71.855 | 10,700 | 15 | % | |||||||||||
| Provision for loan and lease losses | 4,200 | 6,000 | (1,800 | ) | -30 | % | ||||||||||
| Net interest income after | ||||||||||||||||
| provision for loan and lease losses | 78,355 | 65,855 | 12,500 | 19 | % | |||||||||||
| Wealth management fee income | 15,694 | 13,630 | 2,064 | 15 | % | |||||||||||
| Service charges and fees | 2,402 | 2.437 | (35 | ) | -1 | % | ||||||||||
| Bank owned life insurance | 1,015 | 1,027 | (12 | ) | -1 | % | ||||||||||
| Gain on loans held for sale at fair | ||||||||||||||||
| value (Mortgage banking) | 279 | 813 | (534 | ) | -66 | % | ||||||||||
| Gain on loans held for sale at | ||||||||||||||||
| lower of cost or fair value | 34 | 880 | (846 | ) | -96 | % | ||||||||||
| Fee income related to loan level, | ||||||||||||||||
| back-to-back swaps | 2,635 | 764 | 1,871 | 245 | % | |||||||||||
| Gain on sale of SBA loans | 790 | 502 | 288 | 57 | % | |||||||||||
| Other income | 1,172 | 1,074 | 98 | 9 | % | |||||||||||
| Securities gains, net | — | 119 | (119 | ) | -100 | % | ||||||||||
| Total other income | 24,021 | 21,246 | 2,775 | 13 | % | |||||||||||
| Compensation and employee benefits | 38,660 | 33,523 | 5,137 | 15 | % | |||||||||||
| Premises and equipment | 8,794 | 8,342 | 452 | 5 | % | |||||||||||
| FDIC insurance expense (A) | 1,871 | 3,954 | (2,083 | ) | -53 | % | ||||||||||
| Other expenses | 12,035 | 10,328 | 1,707 | 17 | % | |||||||||||
| Total operating expenses | 61,360 | 56,147 | 5,213 | 9 | % | |||||||||||
| Income before income taxes | 41,016 | 30,954 | 10,062 | 33 | % | |||||||||||
| Income tax expense | 14,888 | 11,785 | 3,103 | 26 | % | |||||||||||
| Net income | $ | 26,128 | $ | 19,169 | $ | 6,959 | 36 | % | ||||||||
| Total revenue (B) | $ | 106,576 | $ | 93,101 | $ | 13,475 | 14 | % | ||||||||
| Per Common Share Data: | ||||||||||||||||
| Earnings per share (basic) | $ | 1.49 | $ | 1.19 | $ | 0.30 | 25 | % | ||||||||
| Earnings per share (diluted) | 1.47 | 1.17 | 0.30 | 26 | % | |||||||||||
| Weighted average number of | ||||||||||||||||
| common shares outstanding: | ||||||||||||||||
| Basic | 17,478,293 | 16,167,153 | 1,311,140 | 8 | % | |||||||||||
| Diluted | 17,753,731 | 16,347,255 | 1,406,476 | 9 | % | |||||||||||
| Performance Ratios: | ||||||||||||||||
| Return on average assets annualized (ROAA) | 0.86 | % | 0.71 | % | 0.15 | % | 21 | % | ||||||||
| Return on average equity annualized (ROAE) | 9.94 | % | 8.79 | % | 1.15 | % | 13 | % | ||||||||
| Net interest margin (taxable equivalent basis) | 2.81 | % | 2.78 | % | 0.03 | % | 1 | % | ||||||||
| Efficiency ratio (C) | 57.59 | % | 60.96 | % | -3.37 | % | -6 | % | ||||||||
| Operating expenses / average | ||||||||||||||||
| assets annualized | 2.02 | % | 2.09 | % | -0.07 | % | -3 | % | ||||||||
| (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. |
20
PEAPACK-GLADSTONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in Thousands)
(Unaudited)
| As of | ||||||||||||||||||||
| Sept 30, | June 30, | March 31, | Dec 31, | Sept 30, | ||||||||||||||||
| 2017 | 2017 | 2017 | 2016 | 2016 | ||||||||||||||||
| ASSETS | ||||||||||||||||||||
| Cash and due from banks | $ | 4,446 | $ | 4,119 | $ | 4,910 | $ | 24,580 | $ | 17,861 | ||||||||||
| Federal funds sold | 101 | 101 | 101 | 101 | 101 | |||||||||||||||
| Interest-earning deposits | 88,793 | 89,600 | 113,953 | 138,010 | 141,593 | |||||||||||||||
| Total cash and cash equivalents | 93,340 | 93,820 | 118,964 | 162,691 | 159,555 | |||||||||||||||
| Securities available for sale | 315,112 | 315,224 | 300,232 | 305,388 | 249,616 | |||||||||||||||
| FHLB and FRB stock, at cost | 13,589 | 18,487 | 15,436 | 13,813 | 14,093 | |||||||||||||||
| Residential mortgage (A) | 605,015 | 611,316 | 571,496 | 528,570 | 499,748 | |||||||||||||||
| Multifamily mortgage | 1,441,851 | 1,504,581 | 1,468,890 | 1,459,594 | 1,537,834 | |||||||||||||||
| Commercial mortgage | 625,467 | 609,444 | 573,253 | 551,233 | 497,267 | |||||||||||||||
| Commercial loans (A) | 845,831 | 800,927 | 687,805 | 637,102 | 598,078 | |||||||||||||||
| Construction loans | — | — | — | 1,405 | 430 | |||||||||||||||
| Consumer loans | 81,671 | 72,943 | 69,802 | 69,654 | 69,222 | |||||||||||||||
| Home equity lines of credit | 68,787 | 67,051 | 68,055 | 65,682 | 62,872 | |||||||||||||||
| Other loans | 815 | 458 | 477 | 492 | 449 | |||||||||||||||
| Total loans | 3,669,437 | 3,666,720 | 3,439,778 | 3,313,732 | 3,265,900 | |||||||||||||||
| Less: Allowances for loan and lease losses | 35,915 | 35,751 | 33,610 | 32,208 | 30,616 | |||||||||||||||
| Net loans | 3,633,522 | 3,630,969 | 3,406,168 | 3,281,524 | 3,235,284 | |||||||||||||||
| Premises and equipment | 29,832 | 29,806 | 30,113 | 30,371 | 30,223 | |||||||||||||||
| Other real estate owned | 137 | 373 | 671 | 534 | 534 | |||||||||||||||
| Accrued interest receivable | 6,803 | 6,776 | 6,823 | 8,153 | 6,383 | |||||||||||||||
| Bank owned life insurance | 44,380 | 44,172 | 43,992 | 43,806 | 43,541 | |||||||||||||||
| Deferred tax assets, net | 16,636 | 16,912 | 15,325 | 15,320 | 14,765 | |||||||||||||||
| Goodwill and other intangible assets (B) | 15,064 | 3,095 | 3,126 | 3,157 | 3,188 | |||||||||||||||
| Other assets | 7,917 | 6,045 | 6,712 | 13,876 | 17,201 | |||||||||||||||
| TOTAL ASSETS | $ | 4,176,332 | $ | 4,165,679 | $ | 3,947,562 | $ | 3,878,633 | $ | 3,774,383 | ||||||||||
| LIABILITIES | ||||||||||||||||||||
| Deposits: | ||||||||||||||||||||
| Noninterest-bearing demand deposits | $ | 557,117 | $ | 548,427 | $ | 528,554 | $ | 489,485 | $ | 494,204 | ||||||||||
| Interest-bearing demand deposits | 1,144,714 | 1,085,805 | 1,015,178 | 1,023,081 | 928,941 | |||||||||||||||
| Savings | 121,830 | 121,480 | 122,262 | 120,056 | 119,650 | |||||||||||||||
| Money market accounts | 1,046,997 | 1,081,366 | 1,049,909 | 1,048,494 | 997,572 | |||||||||||||||
| Certificates of deposit – Retail | 528,251 | 475,395 | 440,991 | 457,000 | 466,003 | |||||||||||||||
| Subtotal “customer” deposits | 3,398,909 | 3,312,473 | 3,156,894 | 3,138,116 | 3,006,370 | |||||||||||||||
| IB Demand – Brokered | 180,000 | 180,000 | 180,000 | 180,000 | 200,000 | |||||||||||||||
| Certificates of deposit – Brokered | 83,788 | 88,780 | 93,750 | 93,721 | 93,690 | |||||||||||||||
| Total deposits | 3,662,697 | 3,581,253 | 3,430,644 | 3,411,837 | 3,300,060 | |||||||||||||||
| Overnight borrowings | — | 87,000 | 34,550 | — | — | |||||||||||||||
| Federal home loan bank advances | 49,898 | 58,795 | 58,795 | 61,795 | 71,795 | |||||||||||||||
| Capital lease obligation | 9,240 | 9,407 | 9,556 | 9,693 | 9,828 | |||||||||||||||
| Subordinated debt, net | 48,862 | 48,829 | 48,796 | 48,764 | 48,731 | |||||||||||||||
| Other liabilities | 25,699 | 23,548 | 24,293 | 22,334 | 27,934 | |||||||||||||||
| Due to brokers, securities settlements | — | — | — | — | 7,003 | |||||||||||||||
| TOTAL LIABILITIES | 3,796,396 | 3,808,832 | 3,606,634 | 3,554,423 | 3,465,351 | |||||||||||||||
| Shareholders’ equity | 379,936 | 356,847 | 340,928 | 324,210 | 309,032 | |||||||||||||||
| TOTAL LIABILITIES AND | ||||||||||||||||||||
| SHAREHOLDERS’ EQUITY | $ | 4,176,332 | $ | 4,165,679 | $ | 3,947,562 | $ | 3,878,633 | $ | 3,774,383 | ||||||||||
| Assets under administration at | ||||||||||||||||||||
| Peapack-Gladstone Bank’s | ||||||||||||||||||||
| Private Wealth Management Division | ||||||||||||||||||||
| (market value, not included above) | $ | 4.8 | $ | 3.9 | $ | 3.8 | $ | 3.7 | $ | 3.5 | ||||||||||
| (A) | Includes loans held for sale at fair value and/or lower of cost or market. |
| (B) | Includes goodwill and intangibles from the MCM acquisition effective August 1, 2017. |
21
PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED BALANCE SHEET DATA
(Dollars in Thousands)
(Unaudited)
| As of | ||||||||||||||||||||
| Sept 30, | June 30, | March 31, | Dec 31, | Sept 30, | ||||||||||||||||
| 2017 | 2017 | 2017 | 2016 | 2016 | ||||||||||||||||
| Asset Quality: | ||||||||||||||||||||
| Loans past due over 90 days | ||||||||||||||||||||
| and still accruing | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
| Nonaccrual loans (A) | 15,367 | 15,643 | 11,494 | 11,264 | 10,840 | |||||||||||||||
| Other real estate owned | 137 | 373 | 671 | 534 | 534 | |||||||||||||||
| Total nonperforming assets | $ | 15,504 | $ | 16,016 | $ | 12,165 | $ | 11,798 | $ | 11,374 | ||||||||||
| Nonperforming loans to | ||||||||||||||||||||
| total loans | 0.42 | % | 0.43 | % | 0.33 | % | 0.34 | % | 0.34 | % | ||||||||||
| Nonperforming assets to | ||||||||||||||||||||
| total assets | 0.37 | % | 0.38 | % | 0.31 | % | 0.30 | % | 0.30 | % | ||||||||||
| Performing TDRs (B)(C) | $ | 9,658 | $ | 9,725 | $ | 15,030 | $ | 17,784 | $ | 18,078 | ||||||||||
| Loans past due 30 through 89 | ||||||||||||||||||||
| days and still accruing (D) | $ | 589 | $ | 1,232 | $ | 622 | $ | 1,356 | $ | 8,238 | ||||||||||
| Classified loans | $ | 44,170 | $ | 43,608 | $ | 43,002 | $ | 45,798 | $ | 49,627 | ||||||||||
| Impaired loans | $ | 25,046 | $ | 25,294 | $ | 26,546 | $ | 29,071 | $ | 28,951 | ||||||||||
| Allowance for loan and lease losses: | ||||||||||||||||||||
| Beginning of period | $ | 35,751 | $ | 33,610 | $ | 32,208 | $ | 30,616 | $ | 29,219 | ||||||||||
| Provision for loan and lease losses | 400 | 2,200 | 1,600 | 1,500 | 2,100 | |||||||||||||||
| Charge-offs, net | (236 | ) | (59 | ) | (198 | ) | 92 | (703 | ) | |||||||||||
| End of period | $ | 35,915 | $ | 35,751 | $ | 33,610 | $ | 32,208 | $ | 30,616 | ||||||||||
| ALLL to nonperforming loans | 233.72 | % | 228.54 | % | 292.41 | % | 285.94 | % | 282.44 | % | ||||||||||
| ALLL to total loans | 0.98 | % | 0.98 | % | 0.98 | % | 0.97 | % | 0.95 | % | ||||||||||
| (A) | September 30, 2017 and 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 TDRs that are paying according to restructured terms. |
| (C) | Amount does not include $9.1 million at September 30, 2017, $9.6 million at June 30, 2017, $4.6 million at March 31, 2017, $4.5 million at December 31, 2016 and $4.4 million at September 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. |
22
PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED BALANCE SHEET DATA
(Dollars in Thousands)
(Unaudited)
| Sept 30, | Dec 31, | Sept 30, | ||||||||||
| 2017 | 2016 | 2016 | ||||||||||
| Capital Adequacy | ||||||||||||
| Equity to total assets (A) | 9.10 | % | 8.36 | % | 8.19 | % | ||||||
| Tangible Equity to tangible assets (B) | 8.77 | % | 8.28 | % | 8.11 | % | ||||||
| Book value per share (C) | $ | 20.86 | $ | 18.79 | $ | 18.24 | ||||||
| Tangible Book Value per share (D) | $ | 20.03 | $ | 18.60 | $ | 18.05 | ||||||
| Sept 30, | Dec 31, | Sept 30, | ||||||||||||||||||||||
| 2017 | 2016 | 2016 | ||||||||||||||||||||||
| Regulatory Capital – Holding Company | ||||||||||||||||||||||||
| Tier I leverage | $ | 365,300 | 8.75 | % | $ | 323,045 | 8.35 | % | $ | 308,250 | 8.39 | % | ||||||||||||
| Tier I capital to risk weighted assets | 365,300 | 10.78 | 323,045 | 10.60 | 308,250 | 10.47 | ||||||||||||||||||
| Common equity tier I capital ratio | ||||||||||||||||||||||||
| to risk-weighted assets | 365,298 | 10.78 | 323,042 | 10.60 | 308,247 | 10.47 | ||||||||||||||||||
| Tier I & II capital to | ||||||||||||||||||||||||
| risk-weighted assets | 450,078 | 13.28 | 404,017 | 13.25 | 387,597 | 13.17 | ||||||||||||||||||
| Regulatory Capital – Bank | ||||||||||||||||||||||||
| Tier I leverage | $ | 401,988 | 9.63 | % | $ | 360,097 | 9.31 | % | $ | 345,604 | 9.41 | % | ||||||||||||
| Tier I capital to risk weighted assets | 401,988 | 11.86 | 360,097 | 11.82 | 345,604 | 11.74 | ||||||||||||||||||
| Common equity tier I capital ratio | ||||||||||||||||||||||||
| to risk-weighted assets | 401,986 | 11.86 | 360,094 | 11.82 | 345,601 | 11.74 | ||||||||||||||||||
| Tier I & II capital to | ||||||||||||||||||||||||
| risk-weighted assets | 437,904 | 12.92 | 392,305 | 12.87 | 376,220 | 12.78 | ||||||||||||||||||
| (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. |
23
PEAPACK-GLADSTONE FINANCIAL CORPORATION
LOANS CLOSED
(Dollars in Thousands)
(Unaudited)
| For the Quarters Ended | ||||||||||||||||||||
| Sept 30, | June 30, | March 31, | Dec 31, | Sept 30, | ||||||||||||||||
| 2017 | 2017 | 2017 | 2016 | 2016 | ||||||||||||||||
| Residential loans retained | $ | 22,322 | $ | 54,833 | $ | 64,831 | $ | 53,324 | $ | 43,284 | ||||||||||
| Residential loans sold | 10,596 | 6,491 | 3,115 | 11,429 | 25,128 | |||||||||||||||
| Total residential loans | 32,918 | 61,324 | 67,946 | 64,753 | 68,412 | |||||||||||||||
| Commercial real estate | 24,870 | 46,931 | 33,216 | 56,793 | 56,799 | |||||||||||||||
| Multifamily | 85,488 | 78,824 | 47,125 | 26,300 | 74,450 | |||||||||||||||
| Commercial (C&I) loans (A) (B) | 131,321 | 158,476 | 128,130 | 78,038 | 59,698 | |||||||||||||||
| SBA | 4,560 | 3,900 | 1,700 | 2,050 | 3,025 | |||||||||||||||
| Wealth lines of credit (A) | 15,200 | 14,905 | 7,200 | 2,400 | 1,200 | |||||||||||||||
| Total commercial loans | 261,439 | 303,036 | 217,371 | 165,581 | 195,172 | |||||||||||||||
| Installment loans | 1,967 | 2,075 | 2,146 | 1,826 | 1,591 | |||||||||||||||
| Home equity lines of credit (A) | 6,879 | 5,444 | 6,973 | 5,878 | 7,064 | |||||||||||||||
| Total loans closed | $ | 303,203 | $ | 371,879 | $ | 294,436 | $ | 238,038 | $ | 272,239 | ||||||||||
| For the Nine Months Ended | ||||||||
| Sept 30, | Sept 30, | |||||||
| 2017 | 2016 | |||||||
| Residential loans retained | $ | 141,986 | $ | 93,543 | ||||
| Residential loans sold | 20,202 | 53,412 | ||||||
| Total residential loans | 162,188 | 146,955 | ||||||
| Commercial real estate | 105,017 | 102,692 | ||||||
| Multifamily | 211,437 | 333,194 | ||||||
| Commercial (C&I) loans (A) (B) | 417,927 | 188,495 | ||||||
| SBA | 10,160 | 6,365 | ||||||
| Wealth lines of credit (A) | 37,305 | 3,785 | ||||||
| Total commercial loans | 781,846 | 634,531 | ||||||
| Installment loans | 6,188 | 3,154 | ||||||
| Home equity lines of credit (A) | 19,296 | 25,103 | ||||||
| Total loans closed | $ | 969,518 | $ | 809,743 | ||||
| (A) | Includes loans and lines of credit that closed in the period, but not necessarily funded. |
| (B) | Includes equipment lease finance. |
24
PEAPACK-GLADSTONE FINANCIAL CORPORATION
AVERAGE BALANCE SHEET
UNAUDITED
THREE MONTHS ENDED
(Tax-Equivalent Basis, Dollars in Thousands)
| Sept 30, 2017 | Sept 30, 2016 | |||||||||||||||||||||||
| Average | Income/ | Average | Income/ | |||||||||||||||||||||
| Balance | Expense | Yield | Balance | Expense | Yield | |||||||||||||||||||
| ASSETS: | ||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||
| Investments: | ||||||||||||||||||||||||
| Taxable (1) | $ | 302,669 | $ | 1,564 | 2.07 | % | $ | 193,902 | $ | 976 | 2.01 | % | ||||||||||||
| Tax-exempt (1) (2) | 27,099 | 194 | 2.86 | 27,516 | 212 | 3.08 | ||||||||||||||||||
| Loans (2) (3): | ||||||||||||||||||||||||
| Mortgages | 612,904 | 4,934 | 3.22 | 486,909 | 3,983 | 3.27 | ||||||||||||||||||
| Commercial mortgages | 2,120,360 | 19,879 | 3.75 | 2,048,877 | 17,977 | 3.51 | ||||||||||||||||||
| Commercial | 795,063 | 9,654 | 4.86 | 573,211 | 5,826 | 4.07 | ||||||||||||||||||
| Commercial construction | — | — | — | 454 | 5 | 4.41 | ||||||||||||||||||
| Installment | 77,616 | 611 | 3.15 | 67,175 | 443 | 2.64 | ||||||||||||||||||
| Home equity | 67,251 | 653 | 3.88 | 62,560 | 519 | 3.32 | ||||||||||||||||||
| Other | 563 | 11 | 7.82 | 465 | 13 | 11.18 | ||||||||||||||||||
| Total loans | 3,673,757 | 35,742 | 3.89 | 3,239,651 | 28,766 | 3.55 | ||||||||||||||||||
| Federal funds sold | 101 | — | 0.25 | 101 | — | 0.25 | ||||||||||||||||||
| Interest-earning deposits | 103,103 | 276 | 1.07 | 111,204 | 131 | 0.47 | ||||||||||||||||||
| Total interest-earning assets | 4,106,729 | 37,776 | 3.68 | % | 3,572,374 | 30,085 | 3.37 | % | ||||||||||||||||
| Noninterest-earning assets: | ||||||||||||||||||||||||
| Cash and due from banks | 4,732 | 17,292 | ||||||||||||||||||||||
| Allowance for loan and lease losses | (36,547 | ) | (30,022 | ) | ||||||||||||||||||||
| Premises and equipment | 29,996 | 29,460 | ||||||||||||||||||||||
| Other assets | 86,493 | 88,721 | ||||||||||||||||||||||
| Total noninterest-earning assets | 84,674 | 105,451 | ||||||||||||||||||||||
| Total assets | $ | 4,191,403 | $ | 3,677,825 | ||||||||||||||||||||
| LIABILITIES: | ||||||||||||||||||||||||
| Interest-bearing deposits: | ||||||||||||||||||||||||
| Checking | $ | 1,128,112 | $ | 1,487 | 0.53 | % | $ | 924,970 | $ | 645 | 0.28 | % | ||||||||||||
| Money markets | 1,084,009 | 1,580 | 0.58 | 915,139 | 737 | 0.32 | ||||||||||||||||||
| Savings | 120,893 | 16 | 0.05 | 119,986 | 17 | 0.06 | ||||||||||||||||||
| Certificates of deposit – retail | 502,637 | 1,864 | 1.48 | 466,967 | 1,615 | 1.38 | ||||||||||||||||||
| Subtotal interest-bearing deposits | 2,835,651 | 4,947 | 0.70 | 2,427,062 | 3,014 | 0.50 | ||||||||||||||||||
| Interest-bearing demand – brokered | 180,000 | 737 | 1.64 | 200,000 | 762 | 1.52 | ||||||||||||||||||
| Certificates of deposit – brokered | 87,095 | 481 | 2.21 | 93,674 | 501 | 2.14 | ||||||||||||||||||
| Total interest-bearing deposits | 3,102,746 | 6,165 | 0.79 | 2,720,736 | 4,277 | 0.63 | ||||||||||||||||||
| Borrowings | 98,114 | 439 | 1.79 | 87,258 | 380 | 1.74 | ||||||||||||||||||
| Capital lease obligation | 9,303 | 112 | 4.82 | 9,874 | 119 | 4.82 | ||||||||||||||||||
| Subordinated debt | 48,841 | 783 | 6.41 | 48,711 | 799 | 6.56 | ||||||||||||||||||
| Total interest-bearing liabilities | 3,259,004 | 7,499 | 0.92 | 2,866,579 | 5,575 | 0.78 | ||||||||||||||||||
| Noninterest-bearing liabilities: | ||||||||||||||||||||||||
| Demand deposits | 538,484 | 479,659 | ||||||||||||||||||||||
| Accrued expenses and | ||||||||||||||||||||||||
| other liabilities | 25,807 | 30,070 | ||||||||||||||||||||||
| Total noninterest-bearing liabilities | 564,291 | 509,729 | ||||||||||||||||||||||
| Shareholders’ equity | 368,108 | 301,517 | ||||||||||||||||||||||
| Total liabilities and | ||||||||||||||||||||||||
| shareholders’ equity | $ | 4,191,403 | $ | 3,677,825 | ||||||||||||||||||||
| Net interest income | $ | 30,277 | $ | 24,510 | ||||||||||||||||||||
| Net interest spread | 2.76 | % | 2.59 | % | ||||||||||||||||||||
| Net interest margin (4) | 2.95 | % | 2.74 | % | ||||||||||||||||||||
| (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. |
25
PEAPACK-GLADSTONE FINANCIAL CORPORATION
AVERAGE BALANCE SHEET
UNAUDITED
THREE MONTHS ENDED
(Tax-Equivalent Basis, Dollars in Thousands)
| Sept 30, 2017 | June 30, 2017 | |||||||||||||||||||||||
| Average | Income/ | Average | Income/ | |||||||||||||||||||||
| Balance | Expense | Yield | Balance | Expense | Yield | |||||||||||||||||||
| ASSETS: | ||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||
| Investments: | ||||||||||||||||||||||||
| Taxable (1) | $ | 302,669 | $ | 1,564 | 2.07 | % | $ | 293,990 | $ | 1,477 | 2.01 | % | ||||||||||||
| Tax-exempt (1) (2) | 27,099 | 194 | 2.86 | 25,109 | 190 | 3.03 | ||||||||||||||||||
| Loans (2) (3): | ||||||||||||||||||||||||
| Mortgages | 612,904 | 4,934 | 3.22 | 589,848 | 4,739 | 3.21 | ||||||||||||||||||
| Commercial mortgages | 2,120,360 | 19,879 | 3.75 | 2,085,623 | 18,653 | 3.58 | ||||||||||||||||||
| Commercial | 795,063 | 9,654 | 4.86 | 713,120 | 7,267 | 4.08 | ||||||||||||||||||
| Installment | 77,616 | 611 | 3.15 | 71,364 | 554 | 3.11 | ||||||||||||||||||
| Home equity | 67,251 | 653 | 3.88 | 67,611 | 613 | 3.63 | ||||||||||||||||||
| Other | 563 | 11 | 7.82 | 481 | 11 | 9.15 | ||||||||||||||||||
| Total loans | 3,673,757 | 35,742 | 3.89 | 3,528,047 | 31,837 | 3.61 | ||||||||||||||||||
| Federal funds sold | 101 | — | 0.25 | 101 | — | 0.25 | ||||||||||||||||||
| Interest-earning deposits | 103,103 | 276 | 1.07 | 96,350 | 176 | 0.73 | ||||||||||||||||||
| Total interest-earning assets | 4,106,729 | 37,776 | 3.68 | % | 3,943,597 | 33,680 | 3.42 | % | ||||||||||||||||
| Noninterest-earning assets: | ||||||||||||||||||||||||
| Cash and due from banks | 4,732 | 4,727 | ||||||||||||||||||||||
| Allowance for loan and lease losses | (36,547 | ) | (34,466 | ) | ||||||||||||||||||||
| Premises and equipment | 29,996 | 30,144 | ||||||||||||||||||||||
| Other assets | 86,493 | 76,747 | ||||||||||||||||||||||
| Total noninterest-earning assets | 84,674 | 77,152 | ||||||||||||||||||||||
| Total assets | $ | 4,191,403 | $ | 4,020,749 | ||||||||||||||||||||
| LIABILITIES: | ||||||||||||||||||||||||
| Interest-bearing deposits: | ||||||||||||||||||||||||
| Checking | $ | 1,128,112 | $ | 1,487 | 0.53 | % | $ | 1,075,832 | $ | 1,100 | 0.41 | % | ||||||||||||
| Money markets | 1,084,009 | 1,580 | 0.58 | 1,051,095 | 1,204 | 0.46 | ||||||||||||||||||
| Savings | 120,893 | 16 | 0.05 | 121,299 | 16 | 0.05 | ||||||||||||||||||
| Certificates of deposit – retail | 502,637 | 1,864 | 1.48 | 457,528 | 1,650 | 1.44 | ||||||||||||||||||
| Subtotal interest-bearing deposits | 2,835,651 | 4,947 | 0.70 | 2,705,754 | 3,970 | 0.59 | ||||||||||||||||||
| Interest-bearing demand – brokered | 180,000 | 737 | 1.64 | 180,000 | 726 | 1.61 | ||||||||||||||||||
| Certificates of deposit – brokered | 87,095 | 481 | 2.21 | 92,719 | 493 | 2.13 | ||||||||||||||||||
| Total interest-bearing deposits | 3,102,746 | 6,165 | 0.79 | 2,978,473 | 5,189 | 0.70 | ||||||||||||||||||
| Borrowings | 98,114 | 439 | 1.79 | 77,457 | 354 | 1.83 | ||||||||||||||||||
| Capital lease obligation | 9,303 | 112 | 4.82 | 9,463 | 114 | 4.82 | ||||||||||||||||||
| Subordinated debt | 48,841 | 783 | 6.41 | 48,808 | 783 | 6.42 | ||||||||||||||||||
| Total interest-bearing liabilities | 3,259,004 | 7,499 | 0.92 | 3,114,201 | 6,440 | 0.83 | ||||||||||||||||||
| Noninterest-bearing liabilities: | ||||||||||||||||||||||||
| Demand deposits | 538,484 | 534,339 | ||||||||||||||||||||||
| Accrued expenses and | ||||||||||||||||||||||||
| other liabilities | 25,807 | 21,787 | ||||||||||||||||||||||
| Total noninterest-bearing liabilities | 564,291 | 556,126 | ||||||||||||||||||||||
| Shareholders’ equity | 368,108 | 350,422 | ||||||||||||||||||||||
| Total liabilities and | ||||||||||||||||||||||||
| shareholders’ equity | $ | 4,191,403 | $ | 4,020,749 | ||||||||||||||||||||
| Net interest income | $ | 30,277 | $ | 27,240 | ||||||||||||||||||||
| Net interest spread | 2.76 | % | 2.59 | % | ||||||||||||||||||||
| Net interest margin (4) | 2.95 | % | 2.76 | % | ||||||||||||||||||||
| (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. |
26
PEAPACK-GLADSTONE FINANCIAL CORPORATION
AVERAGE BALANCE SHEET
UNAUDITED
NINE MONTHS ENDED
(Tax-Equivalent Basis, Dollars in Thousands)
| Sept 30, 2017 | Sept 30, 2016 | |||||||||||||||||||||||
| Average | Income/ | Average | Income/ | |||||||||||||||||||||
| Balance | Expense | Yield | Balance | Expense | Yield | |||||||||||||||||||
| ASSETS: | ||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||
| Investments: | ||||||||||||||||||||||||
| Taxable (1) | $ | 295,348 | $ | 4,545 | 2.05 | % | $ | 198,080 | $ | 2,816 | 1.90 | % | ||||||||||||
| Tax-exempt (1) (2) | 26,453 | 583 | 2.94 | 26,234 | 623 | 3.17 | ||||||||||||||||||
| Loans (2) (3): | ||||||||||||||||||||||||
| Mortgages | 582,785 | 14,145 | 3.24 | 475,607 | 11,728 | 3.29 | ||||||||||||||||||
| Commercial mortgages | 2,080,740 | 56,265 | 3.61 | 2,018,820 | 52,977 | 3.50 | ||||||||||||||||||
| Commercial | 719,354 | 23,301 | 4.32 | 550,770 | 16,319 | 3.95 | ||||||||||||||||||
| Commercial construction | 128 | 4 | 4.17 | 1,045 | 32 | 4.08 | ||||||||||||||||||
| Installment | 72,829 | 1,666 | 3.05 | 58,445 | 1,198 | 2.73 | ||||||||||||||||||
| Home equity | 67,061 | 1,822 | 3.62 | 57,938 | 1,434 | 3.30 | ||||||||||||||||||
| Other | 520 | 34 | 8.72 | 471 | 35 | 9.91 | ||||||||||||||||||
| Total loans | 3,523,417 | 97,237 | 3.68 | 3,163,096 | 83,723 | 3.53 | ||||||||||||||||||
| Federal funds sold | 101 | — | 0.25 | 101 | — | 0.24 | ||||||||||||||||||
| Interest-earning deposits | 112,221 | 716 | 0.85 | 89,536 | 294 | 0.44 | ||||||||||||||||||
| Total interest-earning assets | 3,957,540 | 103,081 | 3.47 | % | 3,477,047 | 87,456 | 3.35 | % | ||||||||||||||||
| Noninterest-earning assets: | ||||||||||||||||||||||||
| Cash and due from banks | 10,297 | 16,342 | ||||||||||||||||||||||
| Allowance for loan and lease losses | (34,655 | ) | (28,227 | ) | ||||||||||||||||||||
| Premises and equipment | 30,139 | 29,637 | ||||||||||||||||||||||
| Other assets | 78,938 | 86,960 | ||||||||||||||||||||||
| Total noninterest-earning assets | 84,719 | 104,712 | ||||||||||||||||||||||
| Total assets | $ | 4,042,259 | $ | 3,581,759 | ||||||||||||||||||||
| LIABILITIES: | ||||||||||||||||||||||||
| Interest-bearing deposits: | ||||||||||||||||||||||||
| Checking | $ | 1,078,015 | $ | 3,448 | 0.43 | % | $ | 904,767 | $ | 1,823 | 0.27 | % | ||||||||||||
| Money markets | 1,067,942 | 3,718 | 0.46 | 851,370 | 1,912 | 0.30 | ||||||||||||||||||
| Savings | 120,939 | 49 | 0.05 | 118,884 | 50 | 0.06 | ||||||||||||||||||
| Certificates of deposit – retail | 469,867 | 5,084 | 1.44 | 453,451 | 4,649 | 1.37 | ||||||||||||||||||
| Subtotal interest-bearing deposits | 2,736,763 | 12,299 | 0.60 | 2,328,472 | 8,434 | 0.48 | ||||||||||||||||||
| Interest-bearing demand – brokered | 180,000 | 2,183 | 1.62 | 200,000 | 2,263 | 1.51 | ||||||||||||||||||
| Certificates of deposit – brokered | 91,158 | 1,465 | 2.14 | 93,663 | 1,494 | 2.13 | ||||||||||||||||||
| Total interest-bearing deposits | 3,007,921 | 15,947 | 0.71 | 2,622,135 | 12,191 | 0.62 | ||||||||||||||||||
| Borrowings | 78,704 | 1,096 | 1.86 | 154,819 | 1,432 | 1.23 | ||||||||||||||||||
| Capital lease obligation | 9,456 | 341 | 4.81 | 10,007 | 361 | 4.81 | ||||||||||||||||||
| Subordinated debt | 48,809 | 2,349 | 6.42 | 19,270 | 938 | 6.49 | ||||||||||||||||||
| Total interest-bearing liabilities | 3,144,890 | 19,733 | 0.84 | 2,806,231 | 14,922 | 0.71 | ||||||||||||||||||
| Noninterest-bearing liabilities: | ||||||||||||||||||||||||
| Demand deposits | 524,805 | 459,907 | ||||||||||||||||||||||
| Accrued expenses and | ||||||||||||||||||||||||
| Other liabilities | 22,262 | 24,958 | ||||||||||||||||||||||
| Total noninterest-bearing liabilities | 547,067 | 484,865 | ||||||||||||||||||||||
| Shareholders’ equity | 350,302 | 290,663 | ||||||||||||||||||||||
| Total liabilities and | ||||||||||||||||||||||||
| Shareholders’ equity | $ | 4,042,259 | $ | 3,581,759 | ||||||||||||||||||||
| Net interest income | $ | 83,348 | $ | 72,534 | ||||||||||||||||||||
| Net interest spread | 2.63 | % | 2.64 | % | ||||||||||||||||||||
| Net interest margin (4) | 2.81 | % | 2.78 | % | ||||||||||||||||||||
| (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. |
27
PEAPACK-GLADSTONE FINANCIAL CORPORATION
NON-GAAP FINANCIAL MEASURES RECONCILIATION
Tangible book value per share and tangible equity as a percentage of tangible assets at period end are non-GAAP financial measures derived from GAAP-based amounts. We calculate tangible equity and tangible assets by excluding the balance of intangible assets from shareholders’ equity and total assets, respectively. We calculate tangible book value per share by dividing tangible equity by period end common shares outstanding, as compared to book value per common share, which we calculate by dividing shareholders’ equity by period end common shares outstanding. We calculate tangible equity as a percentage of tangible assets at period end by dividing tangible equity by tangible assets at period end. We believe that this is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of risk-based capital ratios.
The efficiency ratio is a non-GAAP measure of expense control relative to recurring revenue. We calculate the efficiency ratio by dividing total noninterest expenses, excluding ORE provision, as determined under GAAP, by net interest income and total noninterest income as determined under GAAP, but excluding net gains/(losses) on loans held for sale at lower of cost or fair value and excluding net gains on securities from this calculation, which we refer to below as recurring revenue. We believe that this provides one reasonable measure of core expenses relative to core revenue.
We believe that these non-GAAP financial measures provide information that is important to investors and that is useful in understanding our financial position, results and ratios. Our management internally assesses our performance based, in part, on these measures. However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures. As other companies may use different calculations for these measures, this presentation may not be comparable to other similarly titles measures reported by other companies. A reconciliation of the non-GAAP measures of tangible common equity, tangible book value per share and efficiency ratio to the underlying GAAP numbers is set forth below.
Non-GAAP Financial Reconciliation
(Dollars in thousands, except share data)
| Three Months Ended | ||||||||||||||||||||
| Sept 30, | June 30, | March 31, | Dec 31, | Sept 30, | ||||||||||||||||
| Tangible Book Value Per Share | 2017 | 2017 | 2017 | 2016 | 2016 | |||||||||||||||
| Shareholders’ equity | $ | 379,936 | $ | 356,847 | $ | 340,928 | $ | 324,210 | $ | 309,032 | ||||||||||
| Less: Intangible assets, net | 15,064 | 3,095 | 3,126 | 3,157 | 3,188 | |||||||||||||||
| Tangible equity | 364,872 | 353,752 | 337,802 | 321,053 | 305,844 | |||||||||||||||
| Period end shares outstanding | 18,214,759 | 17,846,404 | 17,579,274 | 17,257,995 | 16,944,738 | |||||||||||||||
| Tangible book value per share | $ | 20.03 | $ | 19.82 | $ | 19.22 | $ | 18.60 | $ | 18.05 | ||||||||||
| Book value per share | 20.86 | 20.00 | 19.39 | 18.79 | 18.24 | |||||||||||||||
| Tangible Equity to Tangible Assets | ||||||||||||||||||||
| Total assets | $ | 4,176,332 | $ | 4,165,679 | $ | 3,947,562 | $ | 3,878,633 | $ | 3,774,383 | ||||||||||
| Less: Intangible assets, net | 15,064 | 3,095 | 3,126 | 3,157 | 3,188 | |||||||||||||||
| Tangible assets | 4,161,268 | 4,162,584 | 3,944,436 | 3,875,476 | 3,771,195 | |||||||||||||||
| Tangible equity to tangible assets | 8.77 | % | 8.50 | % | 8.56 | % | 8.28 | % | 8.11 | % | ||||||||||
| Equity to assets | 9.10 | % | 8.57 | % | 8.64 | % | 8.36 | % | 8.19 | % | ||||||||||
28
| Three Months Ended | ||||||||||||||||||||
| Sept 30, | June 30, | March 31, | Dec 31, | Sept 30, | ||||||||||||||||
| Efficiency Ratio | 2017 | 2017 | 2017 | 2016 | 2016 | |||||||||||||||
| Net interest income | $ | 29,992 | $ | 26,972 | $ | 25,591 | $ | 24,580 | $ | 24,269 | ||||||||||
| Total other income | 8,831 | 8,171 | 7,019 | 7,672 | 7,535 | |||||||||||||||
| Less: Gain on loans held for sale | ||||||||||||||||||||
| at lower of cost or fair value | 34 | — | — | 353 | 256 | |||||||||||||||
| Less: Securities gains, net | — | — | — | — | — | |||||||||||||||
| Total recurring revenue | 38,789 | 35,143 | 32,610 | 31,899 | 31,548 | |||||||||||||||
| Operating expenses | 21,961 | 20,095 | 19,304 | 18,965 | 18,166 | |||||||||||||||
| Total operating expense | 21,961 | 20,095 | 19,304 | 18,965 | 18,166 | |||||||||||||||
| Efficiency ratio | 56.62 | % | 57.18 | % | 59.20 | % | 59.45 | % | 57.58 | % | ||||||||||
| Nine Months Ended | ||||||||
| Sept 30, | Sept 30, | |||||||
| Efficiency Ratio | 2017 | 2016 | ||||||
| Net interest income | $ | 82,555 | $ | 71,855 | ||||
| Total other income | 24,021 | 21,246 | ||||||
| Less: Gain on loans held for sale | ||||||||
| at lower of cost or fair value | 34 | 880 | ||||||
| Less: Securities gains, net | — | 119 | ||||||
| Total recurring revenue | 106,542 | 92,102 | ||||||
| Operating expenses | 61,360 | 56,147 | ||||||
| Total operating expense | 61,360 | 56,147 | ||||||
| Efficiency ratio | 57.59 | % | 60.96 | % | ||||
29