Year over Year Comparison

Year

Year

Increase/

(Dollars in millions, except per share data)

2018 (1)(2)

2017

(Decrease)

Net interest income

$

115.16

$

111.14

$

4.02

4

%

Provision for loan and lease losses

3.55

5.85

(2.30

)

(39

)

Net interest income after provision

111.61

105.29

6.32

6

Wealth management fee income

33.25

23.18

10.07

43

Other income

10.95

11.45

(0.50

)

(4

)

Total other income

44.20

34.63

9.57

28

Operating expenses

98.09

85.61

12.48

15

Pretax income

57.72

54.31

3.41

6

Income tax expense

13.55

(3)

17.81

(4.26

)

(24

)

Net income

$

44.17

$

36.50

$

7.67

21

%

Diluted EPS

$

2.31

$

2.03

$

0.28

14

%

Return on average assets

1.02

%

0.89

%

0.13

Return on average equity

10.13

%

10.12

%

0.01

(1)

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

(2)

The 2018 year includes $4.39 million loss on sale of multifamily loans; $3.00 million of life insurance proceeds related to the December 31, 2018 passing of the founder and managing principle of MCM; $319,000 of severance expense related to the elimination of select positions; $405,000 write-down of intangible assets related to MCM; and $340,000 of professional fees related to investment banking and other fees associated with the Lassus Wherley acquisition.  These five items reduced pretax income by $2.46 million; net income by $1.14 million; EPS by $0.06; ROAA by 0.03%; and ROAE by 0.26%.

(3)

The 2018 year reflected the reduced Federal income tax rate due to the new tax law signed in December 2017 but included a higher NJ state corporate income tax rate, as signed into law in July 2018, but effective back to January 1, 2018.

Three Months Ended

Three Months Ended

December 31,

December 31,

Increase/

(Dollars in millions, except per share data)

2018 (1)(2)

2017

(Decrease)

Net interest income

$

29.39

$

28.59

$

0.80

3

%

Provision for loan and lease losses

1.50

1.65

(0.15

)

(9

)

Net interest income after provision

27.89

26.94

0.95

4

Wealth management fee income

8.55

7.49

1.06

14

Other income

2.70

3.11

(0.41

)

(13

)

Total other income

11.25

10.60

0.65

6

Operating expenses

25.52

24.25

1.27

5

Pretax income

13.62

13.29

0.33

2

Income tax expense

2.89

(3)

2.92

(0.03

)

(1

)

Net income

$

10.73

$

10.37

$

0.36

3

%

Diluted EPS

$

0.55

$

0.56

$

(0.01

)

(2

)%

Return on average assets annualized

0.96

%

0.98

%

(0.02

)

Return on average equity annualized

9.32

%

10.61

%

(1.29

)

(1)

The December 2018 quarter included results of operations of Quadrant Capital Management, acquired effective November 1, 2017, and Lassus Wherley acquired effective September 1, 2018.

(2)

The December 2018 quarter included $4.39 million loss on sale of multifamily loans; $3.00 million of life insurance proceeds related to the December 31, 2018 passing of the founder and managing principle of MCM; and $405,000 write-down of intangible assets related to MCM. These three items reduced pretax income by $1.80 million; net income by $655,000; EPS by $0.04; ROAA by 0.06%; and ROAE by 0.57%.

(3)

The December 2018 quarter reflected the reduced federal income tax rate due to the new tax law signed in December 2017, but a higher NJ state corporate income tax rate, as signed into law in July 2018, but effective back to January 1, 2018.

Three Months Ended

Three Months Ended

December 31,

September 30,

Increase/

(Dollars in millions, except per share data)

2018 (1)(2)

2018(3)

(Decrease)

Net interest income

$

29.39

$

28.14

$

1.25

4

%

Provision for loan and lease losses

1.50

0.50

1.00

200

Net interest income after provision

27.89

27.64

0.25

1

Wealth management fee income

8.55

8.20

0.35

4

Other income

2.70

2.78

(0.08

)

(3

)

Total other income

11.25

10.98

0.27

2

Operating expenses

25.52

24.28

1.24

5

Pretax income

13.62

14.34

(0.72

)

(5

)

Income tax expense

2.89

3.62

(0.73

)

(20

)

Net income

$

10.73

$

10.72

$

0.01

0

%

Diluted EPS

$

0.55

$

0.56

$

(0.01

)

(2

)%

Return on average assets annualized

0.96

%

0.99

%

(0.03

)

Return on average equity annualized

9.32

%

9.68

%

(0.36

)

(1)

The December 2018 quarter included results of operations of Lassus Wherley acquired effective September 1, 2018.

(2)

The December 2018 quarter included $4.39 million loss on sale of multifamily loans; $3.00 million of life insurance proceeds related to the December 31, 2018 passing of the founder and managing principle of MCM; and $405,000 write-down of intangible assets related to MCM. These three items reduced pretax income by $1.80 million; net income by $655,000; EPS by $0.04; ROAA by 0.06%; and ROAE by 0.57%.

(3)

The September 2018 quarter included $319,000 of severance expense related to the elimination of select positions; $340,000 of professional fees related to investment banking and other fees associated with the Lassus Wherley acquisition; and $325,000 loss on sale of securities, principally related to a restructure of the investment portfolio, which will benefit future earnings. These three items reduced net income by $736,000 EPS by $0.04, ROAA by 0.07%, and ROAE by 0.66%, for the 2018 September quarter.

•

Wealth Management remains integral to the strategy and provides a diversified, predictable, and stable source of revenue over time:

o

As previously announced, effective September 1, 2018, the Company completed its acquisition of Lassus Wherley, a registered investment advisor, headquartered in New Providence, NJ, which added approximately $550 million of assets under management and/or administration (“AUM/AUA”).

o

At December 31, 2018, the market value of AUM/AUA at the Private Wealth Management Division of Peapack-Gladstone Bank (the “Bank”) increased $319 million to $5.8 billion from $5.5 billion at December 31, 2017, reflecting growth of 5%. While new business and the Lassus Wherley acquisition accounted for significant growth, negative market action (particularly in the fourth quarter of 2018) offset much of that growth.

o

Wealth management fee income totaled $8.55 million for the quarter ended December 31, 2018, an increase of $1.06 million, or 14%, from $7.49 million for the quarter ended December 31, 2017.  

o

Wealth management fee income, which comprised approximately 21% of the Company’s total revenue for the quarter ended December 31, 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 (C&I) lending (including equipment finance). Significant progress was made on this front in the fourth quarter of 2018:

o

During the fourth quarter of 2018, the Company sold $131 million of fixed rate multifamily loans with an average coupon of 3.28%. Such proceeds were reinvested in floating rate and short duration loans with an average coupon of 4.78%, principally C&I (including equipment finance) loans. This strategy will benefit future earnings. The Company believes the $4.39 million loss incurred on the sale of the multifamily loans will be fully offset by increased earnings from this strategy in approximately two years.  

o

Total C&I (including equipment finance) loans at December 31, 2018 were $1.40 billion.  This reflected net growth of $440 million (46%) when compared to $958 million at December 31, 2017.

o

As of December 31, 2018, total C&I loans (including equipment finance) comprised 36% of the total loan portfolio, as compared to 26% a year earlier.  As of December 31, 2018, total multifamily loans comprised 29% of the total loan portfolio, as compared to 37% a year earlier.

o

The Bank’s concentration in commercial real estate loans declined to 394% of risk-based capital at December 31, 2018 from 466% at December 31, 2017.

•

Deposits, funding, and interest rate risk continue to be actively managed:

o

Deposits totaled $3.90 billion at December 31, 2018.  This reflected net growth of $197 million (5%) when compared to $3.70 billion at December 31, 2017.

o

The Company’s loan-to-deposit ratio improved to 101% at December 31, 2018, from 104% at September 30, 2018.    

o

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

o

The Company has actively managed its balance sheet to remain balanced (not materially asset sensitive or materially liability sensitive), despite rising deposit betas and costs. At December 31, 2018, the Company’s interest rate sensitivity models indicate the Company is asset sensitive, and that net interest income would improve in a rising rate environment.  

•

Capital and asset quality continue to be strong.

o

The Company’s and Bank’s capital ratios at December 31, 2018 all increased significantly compared to the December 31, 2017 levels. And, such ratios remain well above regulatory well capitalized standards.

o

Asset quality metrics continued to be strong at December 31, 2018.  Nonperforming assets at December 31, 2018 were $25.7 million, or 0.56% of total assets.  Total loans past due 30 through 89 days and still accruing were $3.48 million, or 0.09% of total loans at December 31, 2018. The increase in nonperforming assets in the December 2018 quarter was due to one $15 million healthcare real estate secured loan which continues to pay as agreed, and which the Company believes to be well secured.

Twelve Months Ended

Twelve Months Ended

December 31, 2018

December 31, 2017

NII

NIM

NII

NIM

NII/NIM excluding the below

$

112,840

2.69%

$

106,393

2.68%

Prepayment premiums received on multifamily loan paydowns

2,002

0.05%

3,513

0.09%

Fees recognized on full paydowns of select C&I loans

321

0.01%

1,235

0.03%

NII/NIM as reported

$

115,163

2.75%

$

111,141

2.80%

Three Months Ended

Three Months Ended

Three Months Ended

December 31, 2018

September 30, 2018

December 31, 2017

NII

NIM

NII

NIM

NII

NIM

NII/NIM excluding the below

$

28,890

2.68%

$

27,804

2.66%

$

27,641

2.69%

Prepayment premiums received on multifamily loan paydowns

495

0.04%

338

0.03%

945

0.09%

Fees recognized on full paydowns of select C&I loans

0

0.00%

0

0.00%

0

0.00%

NII/NIM as reported

$

29,385

2.72%

$

28,142

2.69%

$

28,586

2.78%

•

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;

•

effects related to a prolonged shutdown of the federal government which could impact SBA and other government lending programs: and

•

other unexpected material adverse changes in our operations or earnings.

For the Three Months Ended

Dec 31,

Sept 30,

June 30,

March 31,

Dec 31,

2018

2018

2018

2018

2017

Income Statement Data:

Interest income

$

42,781

$

40,163

$

39,674

$

37,068

$

36,439

Interest expense

13,396

12,021

10,431

8,675

7,853

Net interest income

29,385

28,142

29,243

28,393

28,586

Provision for loan and lease losses

1,500

500

300

1,250

1,650

Net interest income after provision for loan and

   lease losses

27,885

27,642

28,943

27,143

26,936

Wealth management fee income

8,552

8,200

8,126

8,367

7,489

Service charges and fees

938

860

873

831

837

Bank owned life insurance

351

349

345

336

341

Gain on loans held for sale at fair value

   (Mortgage banking)

74

87

79

94

122

(Loss) / Gain on loans held for sale at lower of cost

   or fair value

(4,392

)

—

—

—

378

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

   swaps

1,838

854

900

252

179

Gain on sale of SBA loans

277

514

814

31

774

Other income (A)

3,571

444

639

382

486

Securities gains / (losses), net

46

(325

)

(36

)

(78

)

—

Total other income

11,255

10,983

11,740

10,215

10,606

Salaries and employee benefits

16,372

16,025

15,826

14,579

15,296

Premises and equipment

3,422

3,399

3,406

3,270

3,194

FDIC insurance expense

645

593

625

580

495

Other expenses

5,085

4,267

5,084

4,908

5,266

Total operating expenses

25,524

24,284

24,941

23,337

24,251

Income before income taxes

13,616

14,341

15,742

14,021

13,291

Income tax expense

2,887

3,617

3,832

3,214

2,922

Net income

$

10,729

$

10,724

$

11,910

$

10,807

$

10,369

Total revenue (B)

$

40,640

$

39,125

$

40,983

$

38,608

$

39,192

Per Common Share Data:

Earnings per share (basic)

$

0.56

$

0.56

$

0.63

$

0.58

$

0.57

Earnings per share (diluted)

0.55

0.56

0.62

0.57

0.56

Weighted average number of common

   shares outstanding:

Basic

19,260,033

19,053,849

18,930,893

18,608,309

18,197,708

Diluted

19,424,906

19,240,098

19,098,838

18,908,692

18,527,829

Performance Ratios:

Return on average assets annualized (ROAA)

0.96

%

0.99

%

1.11

%

1.01

%

0.98

%

Return on average equity annualized (ROAE)

9.32

%

9.68

%

11.11

%

10.54

%

10.61

%

Net interest margin (tax-equivalent basis)

2.72

%

2.69

%

2.82

%

2.76

%

2.78

%

GAAP efficiency ratio (C)

62.81

%

62.07

%

60.86

%

60.45

%

61.88

%

Operating expenses / average assets annualized

2.28

%

2.24

%

2.32

%

2.19

%

2.28

%

(B)

Total revenue includes net interest income plus total other income.

(C)

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.

For the Twelve Months Ended

Dec 31,

Change

2018

2017

$

%

Income Statement Data:

Interest income

$

159,686

$

138,727

$

20,959

15

%

Interest expense

44,523

27,586

16,937

61

%

Net interest income

115,163

111,141

4,022

4

%

Provision for loan and lease losses

3,550

5,850

(2,300

)

-39

%

Net interest income after provision for loan and

   lease losses

111,613

105,291

6,322

6

%

Wealth management fee income

33,245

23,183

10,062

43

%

Service charges and fees

3,502

3,239

263

8

%

Bank owned life insurance

1,381

1,356

25

2

%

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

334

401

(67

)

-17

%

(Loss) / Gain on loans held for sale at lower of cost

   or fair value

(4,392

)

412

(4,804

)

-1166

%

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

3,844

2,814

1,030

37

%

Gain on sale of SBA loans

1,636

1,564

72

5

%

Other income (A)

5,036

1,658

3,378

204

%

Securities (losses), net

(393

)

—

(393

)

N/A

Total other income

44,193

34,627

9,566

28

%

Salaries and employee benefits

62,802

53,956

8,846

16

%

Premises and equipment

13,497

11,988

1,509

13

%

FDIC insurance expense

2,443

2,366

77

3

%

Other expenses

19,344

17,301

2,043

12

%

Total operating expenses

98,086

85,611

12,475

15

%

Income before income taxes

57,720

54,307

3,413

6

%

Income tax expense

13,550

17,810

(4,260

)

-24

%

Net income

$

44,170

$

36,497

$

7,673

21

%

Total revenue (B)

$

159,356

$

145,768

$

13,588

9

%

Per Common Share Data:

Earnings per share (basic)

$

2.33

$

2.07

$

0.26

13

%

Earnings per share (diluted)

2.31

2.03

0.28

14

%

Weighted average number of common shares outstanding:

Basic

18,965,305

17,659,625

1,305,680

7

%

Diluted

19,148,645

17,943,685

1,204,960

7

%

Performance Ratios:

Return on average assets annualized (ROAA)

1.02

%

0.89

%

0.13

%

14

%

Return on average equity annualized (ROAE)

10.13

%

10.12

%

0.01

%

0

%

Net interest margin (tax-equivalent basis)

2.75

%

2.80

%

(0.05

)%

-2

%

GAAP efficiency ratio (C)

61.55

%

58.90

%

2.65

%

5

%

Operating expenses / average assets annualized

2.25

%

2.09

%

0.16

%

8

%

(B)

Total revenue includes net interest income plus total other income.

(C)

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.

As of

Dec 31,

Sept 30,

June 30,

March 31,

Dec 31,

2018

2018

2018

2018

2017

ASSETS

Cash and due from banks

$

5,914

$

4,792

$

4,458

$

4,223

$

4,415

Federal funds sold

101

101

101

101

101

Interest-earning deposits

154,758

118,111

62,231

149,192

108,931

Total cash and cash equivalents

160,773

123,004

66,790

153,516

113,447

Securities available for sale

377,936

368,554

346,790

342,553

327,633

Equity security (A)

4,719

4,673

4,710

4,746

—

FHLB and FRB stock, at cost

18,533

21,561

21,533

23,703

13,378

Residential mortgage (B)

573,146

562,930

567,459

567,885

577,340

Multifamily mortgage (B)

1,138,190

1,289,458

1,320,251

1,366,712

1,388,958

Commercial mortgage

702,165

644,900

637,705

643,761

626,656

Commercial loans (B)

1,398,214

1,180,774

1,069,526

996,788

958,481

Consumer loans

58,678

64,478

76,509

71,580

86,277

Home equity lines of credit

62,191

59,930

55,020

64,570

67,497

Other loans

465

432

431

420

402

Total loans

3,933,049

3,802,902

3,726,901

3,711,716

3,705,611

Less: Allowances for loan and lease losses

38,504

37,293

38,066

37,696

36,440

Net loans

3,894,545

3,765,609

3,688,835

3,674,020

3,669,171

Premises and equipment

27,408

27,874

28,404

28,923

29,476

Other real estate owned

—

96

1,608

2,090

2,090

Accrued interest receivable

10,814

10,849

7,202

7,306

9,452

Bank owned life insurance

45,353

45,181

44,980

44,779

44,586

Goodwill and other intangible assets (C)

32,399

34,297

23,477

23,656

23,836

Other assets

45,378

34,011

30,845

31,202

27,478

TOTAL ASSETS

$

4,617,858

$

4,435,709

$

4,265,174

$

4,336,494

$

4,260,547

LIABILITIES

Deposits:

Noninterest-bearing demand deposits

$

463,926

$

503,388

$

527,453

$

536,054

$

539,304

Interest-bearing demand deposits

1,247,305

1,148,660

1,053,004

1,089,980

1,152,483

Savings

114,674

116,391

120,986

126,026

119,556

Money market accounts

1,243,369

1,097,630

1,051,893

1,006,540

1,091,385

Certificates of deposit – Retail

510,724

466,791

431,679

408,621

344,652

Certificates of deposit – Listing Service

79,195

85,241

96,644

132,321

198,383

Subtotal “customer” deposits