Six Months

Six Months

Ended

Ended

June 30,

June 30,

Increase/

(Dollars in millions, except per share data)

2018 (1)

2017

(Decrease)

Net interest income

$

57.64

$

52.56

$

5.08

10

%

Provision for loan and lease losses

1.55

3.80

(2.25

)

(59

)

Net interest income after provision

56.09

48.76

7.33

15

Wealth management fee income

16.49

9.90

6.59

67

Other income

5.47

5.29

0.18

3

Total other income

21.96

15.19

6.77

45

Operating expenses

48.28

39.40

8.88

23

Pretax income

29.77

24.55

5.22

21

Income tax expense

7.05

(2)

8.63

(1.58

)

(18

)

Net income

$

22.72

$

15.92

$

6.80

43

%

Diluted EPS

$

1.20

$

0.91

$

0.29

32

%

Return on average assets annualized

1.06

%

0.80

%

0.26

Return on average equity annualized

10.83

%

9.33

%

1.50

(1)

The June 2018 six months included results of operations of the Equipment Finance team hired in April 2017, Murphy Capital Management, acquired effective August 1, 2017, and Quadrant Capital Management, acquired effective November 1, 2017.

(2)

The June 2018 six months reflected the reduced Federal income tax rate due to the new tax law signed in December 2017.  The June 2018 six months included a $416 thousand reduction in income taxes, while the June six months 2017 included a $662 thousand reduction in income taxes, both associated with the vesting of restricted stock under ASU 2016-09.

Three Months Ended

Three Months Ended

June 30,

June 30,

Increase/

(Dollars in millions, except per share data)

2018 (1)

2017

(Decrease)

Net interest income

$

29.24

$

26.97

$

2.27

8

%

Provision for loan and lease losses

0.30

2.20

(1.90

)

(86

)

Net interest income after provision

28.94

24.77

4.17

17

Wealth management fee income

8.13

5.09

3.04

60

Other income

3.61

3.09

0.52

17

Total other income

11.74

8.18

3.56

44

Operating expenses

24.94

20.10

4.84

24

Pretax income

15.74

12.85

2.89

22

Income tax expense

3.83

(2)

4.91

(1.08

)

(22

)

Net income

$

11.91

$

7.94

$

3.97

50

%

Diluted EPS

$

0.62

$

0.45

$

0.17

38

%

Return on average assets annualized

1.11

%

0.79

%

0.32

Return on average equity annualized

11.11

%

9.06

%

2.05

(1)

The June 2018 quarter included results of operations of the Equipment Finance team hired in April 2017, Murphy Capital Management, acquired effective August 1, 2017, and Quadrant Capital Management, acquired effective November 1, 2017.

(2)

The June 2018 quarter reflected the reduced Federal income tax rate due to the new tax law signed in December 2017.

Three Months Ended

Three Months Ended

June 30,

March 31,

Increase/

(Dollars in millions, except per share data)

2018

2018

(Decrease)

Net interest income

$

29.24

$

28.39

$

0.85

3

%

Provision for loan and lease losses

0.30

1.25

(0.95

)

(76

)

Net interest income after provision

28.94

27.14

1.80

7

Wealth management fee income

8.13

8.37

(0.24

)

(3

)

Other income

3.61

1.85

1.76

95

Total other income

11.74

10.22

1.52

15

Operating expenses

24.94

23.34

1.60

7

Pretax income

15.74

14.02

1.72

12

Income tax expense

3.83

3.21

(1)

0.62

19

Net income

$

11.91

$

10.81

$

1.10

10

%

Diluted EPS

$

0.62

$

0.57

$

0.05

9

%

Return on average assets annualized

1.11

%

1.01

%

0.10

Return on average equity annualized

11.11

%

10.54

%

0.57

(1)

The March 2018 quarter included a $362 thousand reduction in income taxes associated with the vesting of restricted stock under ASU 2016-09.

•

Wealth Management remains integral to the strategy and tends to be a diversified, predictable, and stable source of revenue:

o

On June 29, 2018, the Company announced its agreement to acquire Lassus Wherley & Associates, P.C, a registered investment advisor, headquartered in New Providence, NJ, which is expected to add approximately $500 million of assets under management and/or administration (“AUM/AUA”) upon the closing in the third quarter of 2018.

o

At June 30, 2018, the market value of AUM/AUA at the Private Wealth Management Division of Peapack-Gladstone Bank (the “Bank”) increased $1.8 billion to $5.7 billion from $3.9 billion at June 30, 2017, reflecting growth of 46 percent.   Organic growth was $500 million of the $1.8 billion in growth, while the Murphy Capital Management and Quadrant Capital Management acquisitions accounted for $1.3 billion of the growth.

o

Fee income from the Private Wealth Management Division totaled $8.1 million for the quarter ended June 30, 2018, an increase of $3.0 million, or 60 percent, from $5.1 million for the quarter ended June 30, 2017.  

o

Wealth management fee income, which comprised approximately 20 percent of the Company’s total revenue for the quarter ended June 30, 2018, contributed significantly to the Company’s diversified revenue sources.

o

In addition to wealth income, also contributing to the Company’s diversified revenue sources is fee income related to loan level, back-to-back swaps, and gain on sale of SBA loans.

•

The loan portfolio continues to shift from lower yielding multifamily to higher yielding commercial and industrial lending (including Equipment Finance):

o

Total C&I loans at June 30, 2018 were $1.07 billion (average yield of 4.54% for the six months of 2018).  This reflected net growth of $269 million (34 percent) when compared to $801 million in C&I loans at June 30, 2017 (average yield of 4.01% for the six months of 2017).

o

The Company continued to manage its balance sheet such that lower yielding, primarily fixed rate multifamily loans decline as a percentage of the overall loan portfolio and higher yielding, primarily floating rate or short duration C&I loans become a larger percentage of the overall loan portfolio. As of June 30, 2018, total C&I loans comprised 29 percent of the total loan portfolio, as compared to 22 percent a year earlier.  As of June 30, 2018, total multifamily loans comprised 35 percent of the total loan portfolio, as compared to 41 percent a year earlier.

o

The Bank’s concentration in multifamily and investor commercial real estate loans declined to 425 percent of risk based capital at June 30, 2018 from 552 percent at June 30, 2017.

•

Deposits, funding, and interest rate risk continue to be actively managed, and reflect the current robust economic environment:

o

Deposits totaled $3.52 billion at June 30, 2018 compared to $3.58 billion at June 30, 2017.  Deposit balances reflected $117 million of net increases in the second half of 2017, but $175 million of net decreases the first half of 2018.  

o

The Bank is a significant provider of depository services to its wealth and commercial clients.  During 2018, many of those clients are reallocating funds into managed assets with the Bank’s Wealth Management Group and in outside investment opportunities, and to pay income taxes.  Most of these depositors remain clients of the Company.

o

Other decreases during the first half of 2018 were part of programs to reduce reliance on wholesale sourced deposits and/or reduce volatility or operational risk.  During the six-month period ended June 30, 2018, $113 million of listing service and brokered certificates of deposits matured. As the Company has noted previously, the Company has chosen to not participate in these programs at this time due to the higher current cost, and lack of a core customer. Additionally, the Company chose to exit certain large deposit relationships totaling approximately $90 million that it considered to be too volatile or that exposed the Company to increased operational risk.

o

Total municipal deposits declined $25 million during the six-month period ended June 30, 2018 as the prepaid 2018 real estate tax inflows at the end of 2017 normalized in 2018.  

o

The Company has managed its balance sheet to remain slightly asset sensitive as of June 30, 2018, despite rising deposit betas and costs, which had been noted by the Company over the last several quarters.

o

The Company continues to maintain over $1 billion of available secured funding at the Federal Home Loan Bank.

•

Capital and asset quality continue to be strong.

o

Asset quality metrics continued to be strong at June 30, 2018.  Nonperforming assets at June 30, 2018 were $13.6 million, or 0.32 percent of total assets.  Total loans past due 30 through 89 days and still accruing were $3.5 million, or 0.09 percent of total loans at June 30, 2018.

o

The Company’s and Bank’s capital ratios at June 30, 2018 all increased significantly compared to the December 31, 2017 and June 30, 2017 levels. These capital positions were benefitted by net income, as well as capital generated through optional cash purchases in the Company’s Dividend Reinvestment Plan.  

•

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 2018 and beyond;

•

inability to manage our growth;

•

inability to successfully integrate our expanded employee base;

•

an unexpected decline in the economy, in particular in our New Jersey and New York market areas;

•

declines in our net interest margin caused by the interest rate environment and/or our highly competitive market;

•

declines in the value in our investment portfolio;

•

higher than expected increases in our allowance for loan and lease losses;

•

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

•

changes in interest rates;

•

decline in real estate values within our market areas;

•

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

•

successful cyberattacks against our IT infrastructure and that of our IT 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.

For the Three Months Ended

June 30,

March 31,

Dec 31,

Sept 30,

June 30,

2018

2018

2017

2017

2017

Income Statement Data:

Interest income

$

39,674

$

37,068

$

36,439

$

37,491

$

33,412

Interest expense

10,431

8,675

7,853

7,499

6,440

Net interest income

29,243

28,393

28,586

29,992

26,972

Provision for loan and lease losses

300

1,250

1,650

400

2,200

Net interest income after provision for loan and

   lease losses

28,943

27,143

26,936

29,592

24,772

Wealth management fee income

8,126

8,367

7,489

5,790

5,086

Service charges and fees

873

831

837

816

815

Bank owned life insurance

345

336

341

343

350

Gain on loans held for sale at fair value

   (Mortgage banking)

79

94

122

141

91

Gain on loans held for sale at lower of cost or

   fair value

—

—

378

34

—

Fee income related to loan level, back-to-back

   swaps

900

252

179

888

1,291

Gain on sale of SBA loans

814

31

774

493

142

Other income

639

382

486

326

396

Securities losses, net

(36

)

(78

)

—

—

—

Total other income

11,740

10,215

10,606

8,831

8,171

Salaries and employee benefits

15,826

14,579

15,296

13,996

12,751

Premises and equipment

3,406

3,270

3,194

2,945

3,033

FDIC insurance expense

625

580

495

583

602

Other expenses

5,084

4,908

5,266

4,437

3,709

Total operating expenses

24,941

23,337

24,251

21,961

20,095

Income before income taxes

15,742

14,021

13,291

16,462

12,848

Income tax expense

3,832

3,214

2,922

6,256

4,908

Net income

$

11,910

$

10,807

$

10,369

$

10,206

$

7,940

Total revenue (A)

$

40,983

$

38,608

$

39,192

$

38,823

$

35,143

Per Common Share Data:

Earnings per share (basic)

$

0.63

$

0.58

$

0.57

$

0.57

$

0.45

Earnings per share (diluted)

0.62

0.57

0.56

0.56

0.45

Weighted average number of common

   shares outstanding:

Basic

18,930,893

18,608,309

18,197,708

17,800,153

17,505,638

Diluted

19,098,838

18,908,692

18,527,829

18,123,268

17,756,390

Performance Ratios:

Return on average assets annualized (ROAA)

1.11

%

1.01

%

0.98

%

0.97

%

0.79

%

Return on average equity annualized (ROAE)

11.11

%

10.54

%

10.61

%

11.09

%

9.06

%

Net interest margin (tax- equivalent basis)

2.82

%

2.76

%

2.78

%

2.95

%

2.76

%

GAAP efficiency ratio (B)

60.86

%

60.45

%

61.88

%

56.57

%

57.18

%

Operating expenses / average assets annualized

2.32

%

2.19

%

2.28

%

2.10

%

2.00

%

(A)

Total revenue includes net interest income plus total other income.

(B)

Calculated as total operating expenses as a percentage of total revenue.  For Non-GAAP efficiency ratio, see Non-GAAP financial measures reconciliation included in these tables beginning on page 18.

For the Six Months Ended

June 30,

Change

2018

2017

$

%

Income Statement Data:

Interest income

$

76,742

$

64,797

$

11,945

18

%

Interest expense

19,106

12,234

6,872

56

%

Net interest income

57,636

52,563

5,073

10

%

Provision for loan and lease losses

1,550

3,800

(2,250

)

-59

%

Net interest income after provision for loan and

   lease losses

56,086

48,763

7,323

15

%

Wealth management fee income

16,493

9,904

6,589

67

%

Service charges and fees

1,704

1,586

118

7

%

Bank owned life insurance

681

672

9

1

%

Gain on loans held for sale at fair value (Mortgage banking)

173

138

35

25

%

Gain on loans held for sale at lower of cost or fair value

—

—

—

N/A

Fee income related to loan level, back-to-back swaps

1,152

1,747

(595

)

-34

%

Gain on sale of SBA loans

845

297

548

185

%

Other income

1,021

846

175

21

%

Securities losses, net

(114

)

—

(114

)

N/A

Total other income

21,955

15,190

6,765

45

%

Salaries and employee benefits

30,405

24,664

5,741

23

%

Premises and equipment

6,676

5,849

827

14

%

FDIC insurance expense

1,205

1,288

(83

)

-6

%

Other expenses

9,992

7,598

2,394

32

%

Total operating expenses

48,278

39,399

8,879

23

%

Income before income taxes

29,763

24,554

5,209

21

%

Income tax expense

7,046

8,632

(1,586

)

-18

%

Net income

$

22,717

$

15,922

$

6,795

43

%

Total revenue (A)

$

79,591

$

67,753

$

11,838

17

%

Per Common Share Data:

Earnings per share (basic)

$

1.21

$

0.92

$

0.29

32

%

Earnings per share (diluted)

1.20

0.91

0.29

32

%

Weighted average number of common shares outstanding:

Basic

18,770,492

17,314,695

1,455,797

8

%

Diluted

18,996,979

17,588,816

1,408,163

8

%

Performance Ratios:

Return on average assets annualized (ROAA)

1.06

%

0.80

%

0.26

%

33

%

Return on average equity annualized (ROAE)

10.83

%

9.33

%

1.50

%

16

%

Net interest margin (tax- equivalent basis)

2.79

%

2.73

%

0.06

%

2

%

GAAP efficiency ratio (B)

60.66

%

58.15

%

2.51

%

4

%

Operating expenses / average assets annualized

2.25

%

1.99

%

0.26

%

13

%

(A)

Total revenue includes net interest income plus total other income.

(B)

Calculated as total operating expenses as a percentage of total revenue.  For Non-GAAP efficiency ratio, see Non-GAAP financial measures reconciliation included in these tables beginning on page 18.

As of

June 30,

March 31,

Dec 31,

Sept 30,

June 30,

2018

2018

2017

2017

2017

ASSETS

Cash and due from banks

$

4,458

$

4,223

$

4,415

$

4,446

$

4,119

Federal funds sold

101

101

101

101

101

Interest-earning deposits

62,231

149,192

108,931

88,793

89,600

Total cash and cash equivalents

66,790

153,516

113,447

93,340

93,820

Securities available for sale

346,790

342,553

327,633

315,112

315,224

Equity security (A)

4,710

4,746

—

—

—

FHLB and FRB stock, at cost

21,533

23,703

13,378

13,589

18,487

Residential mortgage (B)

567,459

567,885

577,340

605,015

611,316

Multifamily mortgage

1,320,251

1,366,712

1,388,958

1,441,851

1,504,581

Commercial mortgage

637,705

643,761

626,656

625,467

609,444

Commercial loans (B)

1,069,526

996,788

958,481

845,831

800,927

Consumer loans

76,509

71,580

86,277

81,671

72,943

Home equity lines of credit

55,020

64,570

67,497

68,787

67,051

Other loans

431

420

402

815

458

Total loans

3,726,901

3,711,716

3,705,611

3,669,437

3,666,720

Less: Allowances for loan and lease losses

38,066

37,696

36,440

35,915

35,751

Net loans

3,688,835

3,674,020

3,669,171

3,633,522

3,630,969

Premises and equipment

28,404

28,923

29,476

29,832

29,806

Other real estate owned

1,608

2,090

2,090

137

373

Accrued interest receivable

7,202

7,306

9,452

6,803

6,776

Bank owned life insurance

44,980

44,779

44,586

44,380

44,172

Goodwill and other intangible assets (C)

23,477

23,656

23,836

15,064

3,095

Other assets

30,845

31,202

27,478

24,553

22,957

TOTAL ASSETS

$

4,265,174

$

4,336,494

$

4,260,547

$

4,176,332

$

4,165,679

LIABILITIES

Deposits:

Noninterest-bearing demand deposits

$

527,453

$

536,054

$

539,304

$

557,117

$

548,427

Interest-bearing demand deposits

1,053,004

1,089,980

1,152,483

1,144,714

1,085,805

Savings

120,986

126,026

119,556

121,830

121,480

Money market accounts

1,051,893

1,006,540

1,091,385

1,046,997

1,081,366

Certificates of deposit – Retail

431,679

408,621

344,652

299,493

226,766

Certificates of deposit – Listing Service

96,644

132,321

198,383

228,758

248,629

Subtotal “customer” deposits

3,281,659

3,299,542

3,445,763

3,398,909

3,312,473

IB Demand – Brokered

180,000

180,000

180,000

180,000

180,000

Certificates of deposit – Brokered

61,254

72,614

72,591

83,788

88,780

Total deposits

3,522,913

3,552,156

3,698,354

3,662,697

3,581,253

Overnight borrowings

127,350

216,000

—

—

87,000

Federal home loan bank advances

52,898

22,898

37,898

49,898

58,795

Capital lease obligation

8,728

8,900

9,072

9,240

9,407

Subordinated debt, net

83,133

83,079

83,024

48,862

48,829

Other liabilities

33,133

31,055

28,521

25,699

23,548

TOTAL LIABILITIES

3,828,155

3,914,088

3,856,869

3,796,396

3,808,832

Shareholders’ equity

437,019

422,406

403,678

379,936

356,847

TOTAL LIABILITIES AND

SHAREHOLDERS’ EQUITY

$

4,265,174

$

4,336,494

$

4,260,547

$

4,176,332

$

4,165,679

Assets under management and / or administration at

   Peapack-Gladstone Bank’s Private Wealth Management

   Division (market value, not included above-dollars in billions)

$

5.7

$

5.6

$

5.5

$

4.8

$

3.9

(A)

Represents investment in CRA Investment Fund.  This investment was classified as an equity security, carried at market, in accordance with the adoption of Accounting Standard Update 2016-01, Financial Instruments on January 1, 2018.

(B)

Includes loans held for sale at fair value and/or lower cost or market.

(C)

Includes goodwill and intangibles from the Murphy Capital Management and the Quadrant Capital Management acquisitions completed in August and November 2017, respectively.

As of

June 30,

March 31,

Dec 31,

Sept 30,

June 30,

2018