BEDMINSTER, NJ - (NewMediaWire) - October 27, 2022 - Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market: PGC) (the “Company”) announces its third quarter 2022 results.
This earnings release should be read in conjunction with the Company’s Q3 2022 Investor Update, a copy of which is available on our website at www.pgbank.com and via a current report on Form 8-K on the website of the Securities and Exchange Commission at www.sec.gov.
The Company recorded total revenue of $61.91 million, net income of $20.13 million and diluted earnings per share (“EPS”) of $1.09 for the quarter ended September 30, 2022, compared to revenue of $52.99 million, net income of $14.17 million and diluted EPS of $0.74 for the three months ended September 30, 2021.
The Company’s return on average assets, return on average equity, and return on average tangible equity totaled 1.30%, 15.21% and 16.73%, respectively, for the September 2022 quarter.
The September 2022 quarter results were driven by continued improvement in net interest income and net interest margin, which improved $10.3 million and 56 basis points, when compared to the September 2021 quarter (and $2.6 million and 15 basis points when compared to the June 2022 quarter). This benefit was partially offset by a decline in noninterest income, principally wealth management fee income and capital markets activity fee income, due to volatility in the markets.
The September 2022 quarter included a $571,000 fair value adjustment on an equity security held for CRA investment purposes. This adjustment reduced total revenue by $571,000; net income by $414,000; and EPS by $0.03, for the September 2022 quarter.
Douglas L. Kennedy, President and CEO said, “Our third quarter 2022 results continued to reflect the asset sensitivity of our loan portfolio, as loans continued to reprice upward in the rising rate environment.”
Mr. Kennedy also noted, “As previously announced, the Company has entered the Life Insurance Premium Finance business. Life insurance premium finance is a safe and profitable business, and we believe it is the next logical step in our growth plan. While Q4 of 2022 will include some level of loan originations, the business is expected to be fully operational at the beginning of 2023."
The following are select highlights:
Peapack Private Wealth Management:
· AUM/AUA in our Peapack Private Wealth Management Division totaled $9.3 billion at September 30, 2022.
· Gross new business inflows for Q3 2022 totaled $219 million (and for the first nine months of 2022 totaled $775 million).
· Wealth Management fee income of $12.9 million for Q3 2022 comprised 21% of total revenue for the quarter.
· Successfully opened our new Summit Wealth Management office, which has consolidated the teams of several previously acquired firms with legacy Peapack Private team members.
Commercial Banking and Balance Sheet Management:
· The net interest margin ("NIM") improved by 15 basis points in Q3 2022 compared to Q2 2022 and improved 56 basis points when compared to Q3 2021.
· During the third quarter of 2022, the Company successfully migrated $287 million of interest-bearing checking into noninterest-bearing demand deposits.
· Noninterest-bearing demand deposits comprised 25% of total deposits as of September 30, 2022.
· Core deposits (which includes noninterest-bearing demand and interest-bearing demand, savings and money market accounts) totaled 91% of total deposits at September 30, 2022.
· Commercial & industrial lending (“C&I”) loan/lease balances comprised 40% of the total loan portfolio at September 30, 2022.
· Total loans grew 7% (9% annualized) to $5.19 billion at September 30, 2022 compared to $4.84 billion at December 31, 2021.
· Fee income on unused commercial lines of credit totaled $818,000 for Q3 2022.
Capital Management:
· Repurchased 290,399 shares of Company stock for a total cost of $9.9 million during Q3 2022. (790,277 shares of Company stock for a total cost of $27.5 million were repurchased during the first nine months of 2022.)
· At September 30, 2022, Regulatory Tier 1 Leverage Ratio stood at 10.8% for Peapack-Gladstone Bank (the "Bank") and 8.7% for the Company; and Regulatory Common Equity Tier 1 Ratio (to Risk-Weighted Assets) stood at 13.5% for the Bank and 10.9% for the Company. These ratios have increased from June 30, 2022 levels (and from December 31, 2021 levels) and are significantly above well capitalized standards, as capital has benefitted from strong net income generation.
SUMMARY INCOME STATEMENT DETAILS:
The following tables summarize specified financial details for the periods shown.
September 2022 Year Compared to Prior Year
Nine Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | Increase/ | |||||||||||||||
(Dollars in millions, except per share data) | 2022 | 2021 | (Decrease) | ||||||||||||||
Net interest income | $ | 128.04 | $ | 100.85 | $ | 27.19 | 27 | % | |||||||||
Wealth management fee income (A) | 41.67 | 39.03 | 2.64 | 7 | |||||||||||||
Capital markets activity (B) | 8.30 | 7.10 | 1.20 | 17 | |||||||||||||
Other income (C) | (0.36 | ) | 7.15 | (7.51 | ) | (105 | ) | ||||||||||
Total other income | 49.61 | 53.28 | (3.67 | ) | (7 | ) | |||||||||||
Operating expenses (A) (D) | 100.39 | 94.46 | 5.93 | 6 | |||||||||||||
Pretax income before provision for credit losses | 77.26 | 59.67 | 17.59 | 29 | |||||||||||||
Provision for credit losses | 4.42 | 2.73 | 1.69 | 62 | |||||||||||||
Pretax income | 72.84 | 56.94 | 15.90 | 28 | |||||||||||||
Income tax expense/(benefit) | 19.17 | 15.17 | 4.00 | 26 | |||||||||||||
Net income | $ | 53.67 | $ | 41.77 | $ | 11.90 | 28 | % | |||||||||
Diluted EPS | $ | 2.88 | $ | 2.15 | $ | 0.73 | 34 | % | |||||||||
Total Revenue (E) | $ | 177.65 | $ | 154.13 | $ | 23.52 | 15 | % | |||||||||
Return on average assets annualized | 1.16 | % | 0.94 | % | 0.22 | ||||||||||||
Return on average equity annualized | 13.46 | % | 10.43 | % | 3.03 |
(A) The nine months ended September 30, 2022 included nine months of wealth management fee income and expense related to the July 2021 acquisition of Princeton Portfolio Strategies Group, while the nine months ended September 30, 2021 included three months.
(B) Capital markets activity includes fee income from loan level back-to-back swaps, the Small Business Association ("SBA") lending and sale program, corporate advisory and mortgage banking activities.
(C) Other income for the nine months ended September 30, 2022 included a $6.6 million loss on sale of securities associated with a balance sheet repositioning executed in the first quarter of 2022, and a $1.7 million fair value adjustment on a CRA equity security. The September 2021 nine months included a cost of $842,000 related to the termination of interest rate swaps; a $1.4 million gain on loans; $722,000 of fee income related to the referral of Paycheck Protection Program ("PPP") loans to a third party; $455,000 of additional Bank Owned Life Insurance ("BOLI") income related to the receipt of life insurance proceeds; and a $293,000 fair value adjustment on a CRA equity security.
(D) The nine months ended September 2022 and 2021 each included $1.5 million of severance expense related to certain staff reorganizations within several areas of the Bank. The nine months ended September 2021 also included $648,000 of expense related to the redemption of subordinated debt; and $1.4 million related to a swap valuation allowance.
(E) Total revenue equals the sum of net interest income plus total other income.
September 2022 Quarter Compared to Prior Year Quarter
| Three Months Ended |
|
|
| Three Months Ended |
|
|
|
|
|
|
| |||||
|
| September 30, |
|
|
| September 30, |
|
| Increase/ |
| |||||||
(Dollars in millions, except per share data) |
| 2022 |
|
|
| 2021 |
|
| (Decrease) |
| |||||||
Net interest income |
| $ | 45.53 |
|
|
| $ | 35.21 |
|
| $ | 10.32 |
|
|
| 29 | % |
Wealth management fee income |
|
| 12.94 |
|
|
|
| 13.86 |
|
|
| (0.92 | ) |
|
| (7 | ) |
Capital markets activity (A) |
|
| 0.78 |
|
|
|
| 2.06 |
|
|
| (1.28 | ) |
|
| (62 | ) |
Other income (B) |
|
| 2.66 |
|
|
|
| 1.86 |
|
|
| 0.80 |
|
|
| 43 |
|
Total other income |
|
| 16.38 |
|
|
|
| 17.78 |
|
|
| (1.40 | ) |
|
| (8 | ) |
Operating expenses (C) |
|
| 33.56 |
|
|
|
| 32.18 |
|
|
| 1.38 |
|
|
| 4 |
|
Pretax income before provision for credit losses |
|
| 28.35 |
|
|
|
| 20.81 |
|
|
| 7.54 |
|
|
| 36 |
|
Provision for credit losses |
|
| 0.60 |
|
|
|
| 1.60 |
|
|
| (1.00 | ) |
|
| (63 | ) |
Pretax income |
|
| 27.75 |
|
|
|
| 19.21 |
|
|
| 8.54 |
|
|
| 44 |
|
Income tax expense |
|
| 7.62 |
|
|
|
| 5.04 |
|
|
| 2.58 |
|
|
| 51 |
|
Net income |
| $ | 20.13 |
|
|
| $ | 14.17 |
|
| $ | 5.96 |
|
|
| 42 | % |
Diluted EPS |
| $ | 1.09 |
|
|
| $ | 0.74 |
|
| $ | 0.35 |
|
|
| 48 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total Revenue (D) |
| $ | 61.91 |
|
|
| $ | 52.99 |
|
| $ | 8.92 |
|
|
| 17 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Return on average assets annualized |
|
| 1.30 | % |
|
|
| 0.95 | % |
|
| 0.35 |
|
|
|
| |
Return on average equity annualized |
|
| 15.21 | % |
|
|
| 10.40 | % |
|
| 4.81 |
|
|
(A) Capital markets activity includes fee income from loan level back-to-back swaps, the SBA lending and sale program, corporate advisory and mortgage banking activities.
(B) Other income for the September 2022 and 2021 quarters included a fair value adjustment on a CRA equity security of $571,000 and $70,000, respectively
(C) The September 2021 quarter included $1.4 million of expense related to a swap valuation allowance.
(D) Total revenue equals the sum of net interest income plus total other income.
|
| Three Months Ended |
|
| Three Months Ended |
|
|
|
|
|
|
|
| ||||
|
| September 30, |
|
| June 30, |
|
|
| Increase/ |
| |||||||
(Dollars in millions, except per share data) |
| 2022 |
|
| 2022 |
|
|
| (Decrease) |
| |||||||
Net interest income |
| $ | 45.53 |
|
| $ | 42.89 |
|
|
| $ | 2.64 |
|
|
| 6 | % |
Wealth management fee income |
|
| 12.94 |
|
|
| 13.89 |
|
|
|
| (0.95 | ) |
|
| (7 | ) |
Capital markets activity (A) |
|
| 0.78 |
|
|
| 2.86 |
|
|
|
| (2.08 | ) |
|
| (73 | ) |
Other income (B) |
|
| 2.66 |
|
|
| 1.76 |
|
|
|
| 0.90 |
|
|
| 51 |
|
Total other income |
|
| 16.38 |
|
|
| 18.51 |
|
|
|
| (2.13 | ) |
|
| (12 | ) |
Operating expenses |
|
| 33.56 |
|
|
| 32.66 |
|
|
|
| 0.90 |
|
|
| 3 |
|
Pretax income before provision for credit losses |
|
| 28.35 |
|
|
| 28.74 |
|
|
|
| (0.39 | ) |
|
| (1 | ) |
Provision for credit losses |
|
| 0.60 |
|
|
| 1.45 |
|
|
|
| (0.85 | ) |
|
| (59 | ) |
Pretax income |
|
| 27.75 |
|
|
| 27.29 |
|
|
|
| 0.46 |
|
|
| 2 |
|
Income tax expense |
|
| 7.62 |
|
|
| 7.19 |
|
|
|
| 0.43 |
|
|
| 6 |
|
Net income |
| $ | 20.13 |
|
| $ | 20.10 |
|
|
| $ | 0.03 |
|
|
| 0 | % |
Diluted EPS |
| $ | 1.09 |
|
| $ | 1.08 |
|
|
| $ | 0.01 |
|
|
| 1 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total Revenue (C) |
| $ | 61.91 |
|
| $ | 61.40 |
|
|
| $ | 0.51 |
|
|
| 1 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Return on average assets annualized |
|
| 1.30 | % |
|
| 1.30 | % |
|
|
| 0.00 |
|
|
|
| |
Return on average equity annualized |
|
| 15.21 | % |
|
| 15.43 | % |
|
|
| (0.22 | ) |
|
|
program, corporate advisory and mortgage banking activities.
(B) Other income for the September 2022 and June 2022 quarters included a fair value adjustment on a CRA equity security of $571,000 and $475,000, respectively.
(C) Total revenue equals the sum of net interest income plus total other income.
SUPPLEMENTAL QUARTERLY DETAILS:
Peapack Private Wealth Management
In the September 2022 quarter, the Bank’s wealth management business, Peapack Private Wealth Management ("PPWM"), generated $12.94 million in fee income, compared to $13.89 million for the June 30, 2022 quarter and $13.86 million for the September 2021 quarter. Continued market declines in 2022 further impacted the results in the September 2022 quarter, as the S&P decreased another 5% in Q3 2022 (and YTD down 25%).
John Babcock, President of Peapack Private Wealth Management, noted, “Notwithstanding broad market forces that have negatively impacted both the equities and bond markets, and with economic challenges ahead, our business is sound and continues to attract new clients as well as additional funds from existing relationships. In Q3 2022, total new accounts and client additions totaled $219 million which brings our nine-month 2022 total to $775 million, an annualized pace consistent with the last several years. As we enter Q4 2022, our new business pipeline is healthy, and we remain focused on delivering excellent service and advice to our clients during these turbulent times. Our highly skilled professionals, our fiduciary powers and expertise, our financial planning capabilities and our high-touch client service model distinguishes PPWM in our market and are the drivers behind our growth and success.”
Loans / Commercial Banking
Total loans grew 7% (9% annualized) to $5.19 billion at September 30, 2022 compared to $4.84 billion at December 31, 2021.
Total C&I loans and leases at September 30, 2022 were $2.10 billion or 40% of the total loan portfolio.
Mr. Kennedy noted, “Our loan growth has historically been strong however, given economic uncertainty and rising interest rates, we believe loan demand will subside somewhat. Further, we have tightened our initial underwriting in anticipation of a potential economic downturn and higher rate environment. Given that, we believe we will achieve modest growth for the remainder of 2022, resulting in mid to high single digit growth for all of 2022.”
Mr. Kennedy also noted, “We are proud to have built a leading middle market commercial banking franchise, as evidenced by our C&I Portfolio, Treasury Management services, and Corporate Advisory and SBA businesses. Additionally, we are encouraged by the expansion into the Life Insurance Premium Finance business and believe it will prove to be a safe and profitable business line that aligns with the Company's strategy.”
Net Interest Income (NII)/Net Interest Margin (NIM)
| Nine Months Ended |
| Nine Months Ended |
|
|
|
|
| |||||||||
| September 30, 2022 |
| September 30, 2021 |
|
|
|
|
| |||||||||
| NII |
|
| NIM |
| NII |
|
| NIM |
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
NII/NIM excluding the below | $ | 126,643 |
|
| 2.84% |
| $ | 97,655 |
|
| 2.53% |
|
|
|
|
| |
Prepayment premiums received on loan paydowns |
| 912 |
|
| 0.02% |
|
| 1,530 |
|
| 0.03% |
|
|
|
|
| |
Effect of maintaining excess interest earning cash |
| 485 |
|
| -0.03% |
|
| (365 | ) |
| -0.17% |
|
|
|
|
| |
Effect of PPP loans |
| — |
|
| 0.00% |
|
| 2,029 |
|
| -0.04% |
|
|
|
|
| |
NII/NIM as reported | $ | 128,040 |
|
| 2.83% |
| $ | 100,849 |
|
| 2.35% |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
| Three Months Ended |
| Three Months Ended |
| Three Months Ended | ||||||||||||
| September 30, 2022 |
| June 30, 2022 |
| September 30, 2021 | ||||||||||||
| NII |
|
| NIM |
| NII |
|
| NIM |
| NII |
|
| NIM | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
NII/NIM excluding the below | $ | 44,728 |
|
| 2.99% |
| $ | 42,526 |
|
| 2.83% |
| $ | 34,635 |
|
| 2.56% |
Prepayment premiums received on loan paydowns |
| 305 |
|
| 0.02% |
|
| 255 |
|
| 0.02% |
|
| 325 |
|
| 0.02% |
Effect of maintaining excess interest earning cash |
| 492 |
|
| -0.03% |
|
| 112 |
|
| -0.02% |
|
| (46 | ) |
| -0.14% |
Effect of PPP loans |
| — |
|
| 0.00% |
|
| — |
|
| 0.00% |
|
| 297 |
|
| -0.02% |
NII/NIM as reported | $ | 45,525 |
|
| 2.98% |
| $ | 42,893 |
|
| 2.83% |
| $ | 35,211 |
|
| 2.42% |
The Company’s reported NII and NIM for Q3 2022 increased $2.6 million and 15 basis points, respectively, compared to the linked quarter (Q2 2022) and $10.3 million and 56 basis points compared to the prior year quarter (Q3 2021). When comparing to the prior year quarter the Bank grew its loan portfolio at rates/spreads beneficial to NIM, while reducing lower-yielding liquidity. Additionally, the Bank benefitted from the increases in LIBOR and the Prime rate during 2022.
Mr. Kennedy stated, “As noted above, we benefitted from the increases in LIBOR and Prime during 2022 and our loan portfolio is positioned to continue to benefit from a rise in interest rates. 23% of our loan portfolio reprices within one-month; 36% within three-months and 46% ($2.4 billion) within one year. Our current modeling, with an average deposit beta assumption of 45% on a go-forward basis, indicates net interest income will improve approximately 2.2% in year one and 5.8% in year two, after a 150-basis point rate shock.”
Funding / Liquidity / Interest Rate Risk Management
The Company actively manages its deposit base to reduce reliance on wholesale funding, volatility, and/or operational risk. Total deposits increased $33 million to $5.30 billion at September 30, 2022 from $5.27 billion at December 31, 2021 and decreased $105 million from $5.40 billion at June 30, 2022. The deposit outflows for the quarter included large relationships strategically utilizing their funds, including investing into our Wealth Management business, acquisitions, further investing in their business, and purchasing real estate and other investments. As noted previously, during the third quarter of 2022, the Company successfully migrated $287 million of interest-bearing checking into noninterest-bearing demand deposits.
Mr. Kennedy noted, “91% of our deposits are demand, savings, or money market accounts, and our noninterest bearing deposits comprise 25% of our total deposits; both metrics reflect the core nature of our deposit base.”
At September 30, 2022, the Company’s balance sheet liquidity (investments available for sale, interest-earning deposits and cash) totaled $634.1 million (or 10% of assets).
The Company maintains backup liquidity of approximately $1.8 billion of secured available funding with the Federal Home Loan Bank and $1.7 billion of secured funding from the Federal Reserve Discount Window. The available funding from the Federal Home Loan Bank and the Federal Reserve are secured by the Company’s loan and investment portfolios.
Income from Capital Markets Activities
Noninterest income from Capital Markets activities (detailed below) totaled $784,000 for the September 2022 quarter compared to $2.86 million for the June 2022 quarter and $2.06 million for the September 2021 quarter. The June 2022 quarter results were driven by $2.68 million in gains on sales of SBA loans. The September 2021 quarter reflected $1.57 million in gains on the sale of SBA loans and increased mortgage banking activity due to greater refinance activity in the low-rate environment.
Nine Months Ended |
|
| Nine Months Ended |
|
|
|
| |||||
|
| September 30, |
|
| September 30, |
|
|
|
| |||
(Dollars in thousands, except per share data) |
| 2022 |
|
| 2021 |
|
|
|
| |||
Gain on loans held for sale at fair value (Mortgage banking) |
| $ | 458 |
|
| $ | 1,842 |
|
|
|
| |
Fee income related to loan level, back-to-back swaps |
|
| — |
|
|
| — |
|
|
|
| |
Gain on sale of SBA loans |
|
| 6,141 |
|
|
| 3,950 |
|
|
|
| |
Corporate advisory fee income |
|
| 1,696 |
|
|
| 1,303 |
|
|
|
| |
Total capital markets activity |
| $ | 8,295 |
|
| $ | 7,095 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
| |||
|
| Three Months Ended |
|
| Three Months Ended |
|
| Three Months Ended |
| |||
|
| September 30, |
|
| June 30, |
|
| September 30, |
| |||
(Dollars in thousands, except per share data) |
| 2022 |
|
| 2022 |
|
| 2021 |
| |||
Gain on loans held for sale at fair value (Mortgage banking) |
| $ | 60 |
|
| $ | 151 |
|
| $ | 408 |
|
Fee income related to loan level, back-to-back swaps |
|
| — |
|
|
| — |
|
|
| — |
|
Gain on sale of SBA loans |
|
| 622 |
|
|
| 2,675 |
|
|
| 1,569 |
|
Corporate advisory fee income |
|
| 102 |
|
|
| 33 |
|
|
| 84 |
|
Total capital markets activity |
| $ | 784 |
|
| $ | 2,859 |
|
| $ | 2,061 |
Other Noninterest Income (other than Wealth Management fee income and Income from Capital Markets Activities)
Other noninterest income was $2.66 million for Q3 2022 compared to $1.76 million for Q2 2022 and $1.86 million for Q3 2021. Q3 2022 included $818,000 of unused line fees compared to $529,000 for Q2 2022 and $163,000 for Q3 2021. Additionally, Q3 2022 included $547,000 of income recorded by the Equipment Finance Division related to equipment transfers to lessees.
Operating Expenses
The Company’s total operating expenses were $33.56 million for the quarter ended September 30, 2022, compared to $32.66 million for the June 2022 quarter and $32.19 million for the September 2021 quarter. The 2022 quarters included increased costs related to health insurance and corporate insurance, as well as normal annual merit increases and year-end bonuses. The September 2021 quarter included $1.4 million related to a swap valuation allowance.
Mr. Kennedy noted, “While we continue to manage expenses closely and prudently, we have and will continue to invest in our existing people as the market demands in order to retain the talent we have acquired. We will also grow and expand our core wealth management and commercial banking businesses, including strategic hires and lift-outs, and invest in digital enhancements to further enhance the client experience.”
Income Taxes
The effective tax rate for the three months ended September 30, 2022 was 27.47%, as compared to 26.35% for the June 2022 quarter and 26.22% for the quarter ended September 30, 2021, reflecting higher pre-tax income.
Asset Quality / Provision for Credit Losses
Nonperforming assets (which does not include troubled debt restructured loans that are performing in accordance with their terms) were $15.8 million, or 0.26% of total assets at September 30, 2022. Loans past due 30 to 89 days and still accruing were $7.2 million, which included a $5.1 million outstanding loan to a US governmental unit.
Criticized and classified loans totaled $109.6 million at September 30, 2022, reflecting declines from both December 31, 2021 and June 30, 2022 levels.
The Company currently has no loans or leases on deferral and accruing. (During the COVID-19 pandemic, $914 million was on deferral status at June 30, 2020).
On January 1, 2022, the Company implemented Current Expected Credit Losses (“CECL”) methodology for calculating the Company’s Allowance for Credit Losses (“ACL”). The day one CECL adjustment totaled $5.5 million (a reduction to December 31, 2021 ACL, and benefit to Capital, net of tax effect).
For the quarter ended September 30, 2022, the Company’s provision for credit losses was $599,000 compared to $1.4 million for the June 2022 quarter and $1.6 million for the September 2021 quarter. The provision for credit losses in the September 2022 was lower, when compared to the June 2022 and September 2021 quarters, principally driven by modest loan growth when compared to prior periods.
At September 30, 2022, the ACL was $59.68 million (1.15% of total loans), compared to $59.02 million (1.14% of loans) at June 30, 2022. The ALLL at December 31, 2021 (before adoption of CECL) was $61.70 million (1.27% of loans).
Capital
The Company’s capital position during the September 2022 quarter was benefitted by net income of $20.13 million which was partially offset by the repurchase of 290,399 shares through the Company’s stock repurchase program at a total cost of $9.9 million and the quarterly dividend of $909,000. U.S. Generally Accepted Accounting Principles (“GAAP”) Capital at September 30, 2022 was also impacted by a $23.6 million increase in the unrealized loss on available-for-sale securities in the third quarter of 2022 due to the significant rise in medium-term Treasury yields.
Mr. Kennedy noted, “Despite capital spent on stock repurchases, and capital being affected by the increased unrealized loss on AFS securities, our tangible book value per share improved slightly during Q3 2022 to $26.10 at September 30, 2022.”
The Company’s and Bank’s regulatory capital ratios as of September 30, 2022 remain strong, and reflect increases from June 30, 2022 and December 31, 2021 levels. Where applicable, such ratios remain well above regulatory well capitalized standards.
The Company employs quarterly capital stress testing – adverse case and severely adverse case. In the most recent completed stress test (as of June 30, 2022), under the severely adverse case, and no growth scenario, the Bank remains well capitalized over a two-year stress period. With an additional stress overlay (impacting the industries most affected by the Pandemic more severely), the Bank still remains well capitalized over the two-year stress period.
On October 27, 2022, the Company declared a cash dividend of $0.05 per share payable on November 28, 2022, to shareholders of record on November 10, 2022.
ABOUT THE COMPANY
Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $6.1 billion and assets under management/administration of $9.3 billion as of September 30, 2022. Founded in 1921, Peapack-Gladstone Bank is a commercial bank that provides innovative wealth management, commercial and retail solutions, including residential lending and online platforms, to businesses and consumers. Peapack Private, the bank’s wealth management division, offers comprehensive financial, tax, fiduciary and investment advice and solutions to individuals, families, privately-held businesses, family offices and not-for-profit organizations, which help them to establish, maintain and expand their legacy. Together, Peapack-Gladstone Bank and Peapack Private offer an unparalleled commitment to client service. Visit www.pgbank.com and www.peapackprivate.com for more information.
The foregoing may contain 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:
· our ability to successfully grow our business and implement our strategic plan, including our ability to generate revenues to offset the increased personnel and other costs related to the strategic plan;
· the impact of anticipated higher operating expenses in 2022 and beyond;
· our ability to successfully integrate wealth management firm acquisitions;
· our ability to manage our growth;
· our ability 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;
· impact from a pandemic event on our business, operations, customers, allowance for credit losses and capital levels;
· the continuing impact of the COVID-19 pandemic on our business and results of operation;
· higher than expected increases in our allowance for credit losses;
· higher than expected increases in loan and lease losses or in the level of delinquent, nonperforming, classified and criticized loans;
· inflation and changes in interest rates, which may adversely impact or margins and yields, reduce the fair value of our financial instruments, reduce our loan originations and lead to higher operating costs;
· 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 and third-party providers;
· higher than expected FDIC insurance premiums;
· adverse weather conditions;
· the current or anticipated impact of military conflict, terrorism or other geopolitical events;
· our inability to successfully generate new business in new geographic markets;
· a 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;
· our inability to retain key employees;
· demands for loans and deposits in our market areas;
· adverse changes in securities markets;
· changes in accounting policies and practices; 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, 2021. 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.
Contact:
Jeffrey J. Carfora, SEVP and CFO
Peapack-Gladstone Financial Corporation
T: 908-719-4308
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, 2022 2022 2022 2021 2021Income Statement Data: Interest income $55,013 $48,520 $44,140 $42,075 $40,067Interest expense 9,488 5,627 4,518 4,863 4,856Net interest income 45,525 42,893 39,622 37,212 35,211Wealth management fee income 12,943 13,891 14,834 13,962 13,860Service charges and fees 1,060 1,063 952 996 959Bank owned life insurance 299 310 313 308 311Gain on loans held for sale at fair value
(Mortgage banking) (A) 60 151 247 352 408Gain/(loss) on loans held for sale at lower of cost or
fair value — — — (265) —Fee income related to loan level, back-to-back
swaps (A) — — — — —Gain on sale of SBA loans (A) 622 2,675 2,844 989 1,569Corporate advisory fee income (A) 102 33 1,561 2,180 84Other income 1,868 860 1,254 581 660Loss on securities sale, net (B) — — (6,609) — —Fair value adjustment for CRA equity security (571) (475) (682) (139) (70)Total other income 16,383 18,508 14,714 18,964 17,781Salaries and employee benefits (C) 22,656 21,882 22,449 20,105 19,859Premises and equipment 4,534 4,640 4,647 4,519 4,459FDIC insurance expense 510 503 471 402 555Swap valuation allowance — — 673 893 1,350Other expenses 5,860 5,634 5,929 5,785 5,962Total operating expenses 33,560 32,659 34,169 31,704 32,185Pretax income before provision for credit losses 28,348 28,742 20,167 24,472 20,807Provision for credit losses (D) 599 1,449 2,375 3,750 1,600Income before income taxes 27,749 27,293 17,792 20,722 19,207Income tax expense 7,623 7,193 4,351 5,867 5,036Net income $20,126 $20,100 $13,441 $14,855 $14,171 Total revenue (E) $61,908 $61,401 $54,336 $56,176 $52,992Per Common Share Data: Earnings per share (basic) $1.11 $1.10 $0.73 $0.80 $0.76Earnings per share (diluted) 1.09 1.08 0.71 0.78 0.74Weighted average number of common
shares outstanding: Basic 18,072,385 18,325,605 18,339,013 18,483,268 18,763,316Diluted 18,420,661 18,637,340 18,946,683 19,070,594 19,273,831Performance Ratios: Return on average assets annualized (ROAA) 1.30% 1.30% 0.87% 0.96% 0.95%Return on average equity annualized (ROAE) 15.21% 15.43% 9.88% 10.94% 10.40%Return on average tangible common equity (ROATCE) (F) 16.73% 17.00% 10.85% 12.03% 11.43%Net interest margin (tax-equivalent basis) 2.98% 2.83% 2.69% 2.46% 2.42%GAAP efficiency ratio (G) 54.21% 53.19% 62.88% 56.44% 60.74%Operating expenses / average assets annualized 2.17% 2.11% 2.22% 2.05% 2.16%
(A) Gain on loans held for sale at fair value (mortgage banking), fee income related to loan level, back-to-back swaps, gain on sale of SBA loans and corporate advisory fee income are all included in “capital markets activity” as referred to within the earnings release.
(B) Loss on sale of securities was a result of a balance sheet repositioning employed in the March 2022 quarter.
(C) The March 2022 quarter included $1.5 million of severance expense related to corporate restructuring.
(D) Commencing on January 1, 2022, the allowance calculation is based on the CECL methodology. Prior to January 1, 2022, the calculation was based on the incurred loss methodology.
(E) Total revenue equals the sum of net interest income plus total other income.
(F) Return on average tangible common equity is calculated by dividing tangible common equity by annualized net income. See Non-GAAP financial measures reconciliation included in these tables.
(G) Calculated as total operating expenses as a percentage of total revenue. For Non-GAAP efficiency ratio, see the Non-GAAP financial measures reconciliation included in these tables.
PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in Thousands, except share data)
(Unaudited)
For the Nine Months Ended Sept 30, Change 2022 2021 $ %Income Statement Data: Interest income $147,673 $117,992 $29,681 25%Interest expense 19,633 17,143 2,490 15%Net interest income 128,040 100,849 27,191 27%Wealth management fee income 41,668 39,025 2,643 7%Service charges and fees 3,075 2,701 374 14%Bank owned life insurance 922 1,388 (466) -34%Gain on loans held for sale at fair value (Mortgage banking) (A) 458 1,842 (1,384) -75%Gain on loans held for sale at lower of cost or fair value (B) — 1,407 (1,407) -100%Fee income related to loan level, back-to-back swaps (A) — — — N/AGain on sale of SBA loans (A) 6,141 3,950 2,191 55%Corporate advisory fee income (A) 1,696 1,303 393 30%Loss on swap termination — (842) 842 -100%Other income (C) 3,982 2,798 1,184 42%Loss on securities sale, net (D) (6,609) — (6,609) N/AFair value adjustment for CRA equity security (1,728) (293) (1,435) 490%Total other income 49,605 53,279 (3,674) -7%Salaries and employee benefits (E) 66,987 61,759 5,228 8%Premises and equipment 13,821 12,646 1,175 9%FDIC insurance expense 1,484 1,669 (185) -11%Swap valuation allowance 673 1,350 (677) -50%Other expenses 17,423 17,039 384 2%Total operating expenses 100,388 94,463 5,925 6%Pretax income before provision for credit losses 77,257 59,665 17,592 29%Provision for credit losses (F) 4,423 2,725 1,698 62%Income before income taxes 72,834 56,940 15,894 28%Income tax expense 19,167 15,173 3,994 26%Net income $53,667 $41,767 $11,900 28% Total revenue (G) $177,645 $154,128 $23,517 15%Per Common Share Data: Earnings per share (basic) $2.94 $2.21 $0.73 33%Earnings per share (diluted) 2.88 2.15 0.73 34%Weighted average number of common shares outstanding: Basic 18,244,691 18,891,601 (646,910) -3%Diluted 18,652,042 19,390,522 (738,480) -4%Performance Ratios: Return on average assets annualized (ROAA) 1.16% 0.94% 0.22% 23%Return on average equity annualized (ROAE) 13.46% 10.43% 3.03% 29%Return on average tangible common equity (ROATCE) (H) 14.81% 11.40% 3.41% 30%Net interest margin (tax-equivalent basis) 2.83% 2.35% 0.48% 21%GAAP efficiency ratio (I) 56.51% 61.29% (4.78)% -8%Operating expenses / average assets annualized 2.17% 2.12% 0.05% 2%
(A) Gain on loans held for sale at fair value (mortgage banking), fee income related to loan level, back-to-back swaps, gain on sale of SBA loans and corporate advisory fee income are all included in “capital markets activity” as referred to within the earnings release.
(B) Includes gain on sale of $57 million of PPP loans completed in the nine months ended September 30, 2021.
(C) Includes income of $722,000 from the referral of PPP loans to a third-party firm during the nine months ended September 30, 2021.
(D) Loss on sale of securities was a result of a balance sheet repositioning employed in the March 2022 quarter.
(E) The September 2022 and 2021 nine months ended each included $1.5 million of severance expense related to corporate restructuring.
(F) Commencing on January 1, 2022, the allowance calculation is based on the CECL methodology. Prior to January 1, 2022, the calculation was based on the incurred loss methodology.
(G) Total revenue equals the sum of net interest income plus total other income.
(H) Return on average tangible common equity is calculated by dividing tangible common equity by annualized net income. See Non-GAAP financial measures reconciliation included in these tables.
(I) Calculated as total operating expenses as a percentage of total revenue. For Non-GAAP efficiency ratio, see the Non-GAAP financial measures reconciliation included in these tables.
PEAPACK-GLADSTONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in Thousands)
(Unaudited)
As of Sept 30, June 30, March 31, Dec 31, Sept 30, 2022 2022 2022 2021 2021ASSETS Cash and due from banks $5,066 $6,203 $8,849 $5,929 $9,299Federal funds sold — — — — —Interest-earning deposits 103,214 147,222 105,111 140,875 606,913Total cash and cash equivalents 108,280 153,425 113,960 146,804 616,212Securities available for sale 497,880 556,791 601,163 796,753 843,779Securities held to maturity 103,551 105,048 106,816 108,680 —CRA equity security, at fair value 12,957 13,528 14,003 14,685 14,824FHLB and FRB stock, at cost (A) 14,986 13,710 18,570 12,950 12,950 Residential mortgage 519,088 512,341 513,289 501,340 510,878Multifamily mortgage 1,856,675 1,876,783 1,850,097 1,595,866 1,497,683Commercial mortgage 638,903 657,812 669,899 662,626 680,107Commercial and industrial loans 2,099,917 2,048,474 2,041,720 2,009,252 1,833,532Consumer loans 37,412 37,675 35,322 33,687 30,689Home equity lines of credit 36,375 36,023 38,604 40,803 42,512Other loans 259 236 226 238 245Total loans 5,188,629 5,169,344 5,149,157 4,843,812 4,595,646Less: Allowances for credit losses (B) 59,683 59,022 58,386 61,697 65,133Net loans 5,128,946 5,110,322 5,090,771 4,782,115 4,530,513 Premises and equipment 23,781 22,804 22,960 23,044 23,123Other real estate owned 116 116 — — —Accrued interest receivable 17,816 23,468 22,890 21,589 22,790Bank owned life insurance 47,072 46,944 46,805 46,663 46,510Goodwill and other intangible assets 47,698 48,082 48,471 48,902 49,333Finance lease right-of-use assets 3,021 3,209 3,395 3,582 3,769Operating lease right-of-use assets 13,404 14,192 14,725 9,775 10,307Due from brokers (C) — — 120,245 — —Other assets (D) 67,753 39,528 30,890 62,451 66,175TOTAL ASSETS $6,087,261 $6,151,167 $6,255,664 $6,077,993 $6,240,285 LIABILITIES Deposits: Noninterest-bearing demand deposits $1,317,954 $1,043,225 $1,023,208 $956,482 $986,765Interest-bearing demand deposits 2,149,629 2,456,988 2,362,987 2,287,894 2,355,892Savings 166,821 168,441 162,116 154,914 168,831Money market accounts 1,178,112 1,217,516 1,304,017 1,307,051 1,287,686Certificates of deposit – Retail 345,047 375,387 384,909 409,608 426,981Certificates of deposit – Listing Service 30,647 31,348 31,348 31,382 31,382Subtotal “customer” deposits 5,188,210 5,292,905 5,268,585 5,147,331 5,257,537IB Demand – Brokered 85,000 85,000 85,000 85,000 85,000Certificates of deposit – Brokered 25,974 25,963 33,831 33,818 33,804Total deposits 5,299,184 5,403,868 5,387,416 5,266,149 5,376,341Short-term borrowings 32,369 — 122,085 — —Paycheck Protection Program Liquidity Facility (E) — — — — 48,496Finance lease liability 5,003 5,305 5,573 5,820 6,063Operating lease liability 14,101 14,756 15,155 10,111 10,644Subordinated debt, net 132,916 132,844 132,772 132,701 132,629Other liabilities (D) 88,174 74,070 69,237 116,824 123,098TOTAL LIABILITIES 5,571,747 5,630,843 5,732,238 5,531,605 5,697,271Shareholders’ equity 515,514 520,324 523,426 546,388 543,014TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $6,087,261 $6,151,167 $6,255,664 $6,077,993 $6,240,285Assets under management and / or administration at
Peapack-Gladstone Bank’s Private Wealth Management
Division (market value, not included above-dollars in billions) $9.3 $9.5 $10.7 $11.1 $10.3
(A) FHLB means "Federal Home Loan Bank" and FRB means "Federal Reserve Bank."
(B) Commencing on January 1, 2022, the allowance calculation is based on the CECL methodology. Prior to January 1, 2022, the calculation was based on the incurred loss methodology.
(C) Includes $120 million due from FHLB related to securities sales at March 31, 2022. The $120 million received on April 1, 2022, was used to reduce short term borrowings.
(D) The change in other assets and other liabilities was primarily due to the change in the fair value of our back-to-back swap program.
(E) Represents funding provided by the Federal Reserve for pledged PPP loans.
PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED BALANCE SHEET DATA
(Dollars in Thousands)
(Unaudited)
As of Sept 30, June 30, March 31, Dec 31, Sept 30, 2022 2022 2022 2021 2021Asset Quality: Loans past due over 90 days and still accruing $— $— $— $— $—Nonaccrual loans 15,724 15,078 15,884 15,573 25,925Other real estate owned 116 116 — — —Total nonperforming assets $15,840 $15,194 $15,884 $15,573 $25,925 Nonperforming loans to total loans 0.30% 0.29% 0.31% 0.32% 0.56%Nonperforming assets to total assets 0.26% 0.25% 0.25% 0.26% 0.42% Performing TDRs (A)(B) $2,761 $2,272 $2,375 $2,479 $416 Loans past due 30 through 89 days and still accruing (C) $7,248 $3,126 $606 $8,606 $1,193 Loans subject to special mention $82,107 $98,787 $110,252 $116,490 $115,935 Classified loans $27,507 $27,167 $47,386 $50,702 $51,937 Impaired loans $13,047 $13,227 $16,147 $18,052 $26,341 Allowance for credit losses ("ACL"): Beginning of quarter $59,022 $58,386 $61,697 $65,133 $63,505Day one CECL adjustment — — (5,536) — —Provision for credit losses (D) 665 646 2,489 3,750 1,600(Charge-offs)/recoveries, net (4) (10) (264) (7,186) 28End of quarter $59,683 $59,022 $58,386 $61,697 $65,133 ACL to nonperforming loans 379.57% 391.44% 367.58% 396.18% 251.24%ACL to total loans 1.15% 1.14% 1.13% 1.27% 1.42%General ACL to total loans (E) 1.10% 1.09% 1.09% 1.19% 1.26%
(A) Amounts reflect troubled debt restructurings (“TDRs”) that are paying according to restructured terms.
(B) Excludes TDRs included in nonaccrual loans in the following amounts: $12.9 million at September 30, 2022; $13.5 million at June 30, 2022; $13.6 million at March 31, 2022; $1.1 million at December 31, 2021 and $4.0 million at September 30, 2021.
(C) Includes $5.1 million outstanding to a U.S. governmental unit at September 30, 2022; and $6.9 million for one equipment lease principally due to administrative issues with the servicer and the lessee/borrower at December 31, 2021.
(D) Commencing on January 1, 2022, the allowance calculation is based on the CECL methodology. Prior to January 1, 2022, the calculation was based on the incurred loss methodology. Provision to roll forward the ACL excludes a credit of $66,000 at September 30, 2022, a provision of $803,000 at June 30, 2022 and a credit of $114,000 at March 31, 2022 related to off-balance sheet commitments.
(E) Total ACL less specific reserves equals general ACL.
PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED BALANCE SHEET DATA
(Dollars in Thousands)
(Unaudited)
September 30, December 31, September 30, 2022 2021 2021Capital Adequacy Equity to total assets (A) 8.47% 8.99% 8.70%Tangible equity to tangible assets (B) 7.75% 8.25% 7.97%Book value per share (C) $28.77 $29.70 $29.15Tangible book value per share (D) $26.10 $27.05 $26.50 Tangible equity to tangible assets excluding other comprehensive loss* 8.88% 8.44% 8.11%Tangible book value per share excluding other comprehensive loss* $30.29 $27.72 $26.99
*Excludes other comprehensive loss of $75.0 million for the quarter ended September 30, 2022, $12.4 million for the quarter ended December 31, 2021, and $9.0 million for the quarter ended September 30, 2021.
As of September 30, December 31, September 30, 2022 2021 2021Regulatory Capital – Holding Company Tier I leverage $540,464 8.70% $508,231 8.29% $501,188 8.56%Tier I capital to risk-weighted assets 540,464 10.86 508,231 10.62 501,188 10.97Common equity tier I capital ratio
to risk-weighted assets 540,440 10.86 508,207 10.62 501,159 10.97Tier I & II capital to risk-weighted assets 733,988 14.74 700,790 14.64 691,044 15.12 Regulatory Capital – Bank Tier I leverage (E) $670,717 10.79% $612,762 9.99% $594,610 10.15%Tier I capital to risk-weighted assets (F) 670,717 13.48 612,762 12.80 594,610 13.01Common equity tier I capital ratio
to risk-weighted assets (G) 670,693 13.48 612,738 12.80 594,581 13.01Tier I & II capital to risk-weighted assets (H) 731,325 14.69 672,614 14.05 651,841 14.26
(A) Equity to total assets is calculated as total shareholders’ equity as a percentage of total assets at quarter 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 quarter end is calculated by dividing tangible equity by tangible assets at quarter end. See Non-GAAP financial measures reconciliation included in these tables.
(C) Book value per common share is calculated by dividing shareholders’ equity by quarter end common shares outstanding.
(D) Tangible book value per share excludes intangible assets. Tangible book value per share is calculated by dividing tangible equity by quarter end common shares outstanding. See Non-GAAP financial measures reconciliation tables.
(E) Regulatory well capitalized standard = 5.00% ($311 million)
(F) Regulatory well capitalized standard = 8.00% ($398 million)
(G) Regulatory well capitalized standard = 6.50% ($324 million)
(H) Regulatory well capitalized standard = 10.00% ($498 million)
PEAPACK-GLADSTONE FINANCIAL CORPORATION
LOANS CLOSED
(Dollars in Thousands)
(Unaudited)
For the Quarters Ended Sept 30, June 30, March 31, Dec 31, Sept 30, 2022 2022 2022 2021 2021Residential loans retained $17,885 $35,172 $41,547 $22,953 $36,845Residential loans sold 4,898 9,886 15,669 20,694 24,041Total residential loans 22,783 45,058 57,216 43,647 60,886Commercial real estate 7,320 13,960 25,575 16,134 14,944Multifamily 4,000 74,564 265,650 162,740 120,716Commercial (C&I) loans/leases (A) (B) 251,249 332,801 143,029 341,886 143,121SBA 5,682 10,534 26,093 27,630 11,570Wealth lines of credit (A) 4,450 12,575 9,400 7,500 10,020Total commercial loans 272,701 444,434 469,747 555,890 300,371Installment loans 1,253 100 131 94 178Home equity lines of credit (A) 5,614 3,897 1,341 5,359 2,535Total loans closed $302,351 $493,489 $528,435 $604,990 $363,970
For the Nine Months Ended Sept 30, Sept 30, 2022 2021Residential loans retained $94,604 $89,742Residential loans sold 30,453 95,346Total residential loans 125,057 185,088Commercial real estate 46,855 65,550Multifamily 344,214 461,545Commercial (C&I) loans (A) (B) 727,079 413,547SBA (C) 42,309 86,276Wealth lines of credit (A) 26,425 15,695Total commercial loans 1,186,882 1,042,613Installment loans 1,484 266Home equity lines of credit (A) 10,852 8,574Total loans closed $1,324,275 $1,236,541
(A) Includes loans and lines of credit that closed in the period but not necessarily funded.
(B) Includes equipment finance.
(C) Includes PPP loans of $56 million for the nine months ended September 30, 2021.
PEAPACK-GLADSTONE FINANCIAL CORPORATION
AVERAGE BALANCE SHEET
(Tax-Equivalent Basis, Dollars in Thousands)
(Unaudited)
For the Three Months Ended September 30, 2022 September 30, 2021 Average Income/ Average Income/ Balance Expense Yield Balance Expense YieldASSETS: Interest-earning assets: Investments: Taxable (A) $754,180 $2,853 1.51% $820,574 $2,824 1.38%Tax-exempt (A) (B) 3,226 30 3.72 6,035 64 4.24 Loans (B) (C): Mortgages 513,864 3,861 3.01 503,621 3,779 3.00Commercial mortgages 2,510,616 23,121 3.68 2,133,259 16,114 3.02Commercial 2,016,590 23,362 4.63 1,826,368 16,553 3.63Commercial construction 12,073 143 4.74 24,596 198 3.22Installment 38,338 399 4.16 32,219 245 3.04Home equity 36,706 451 4.91 43,182 357 3.31Other 263 7 10.65 252 5 7.94Total loans 5,128,450 51,344 4.00 4,563,497 37,251 3.27Federal funds sold — — — — — —Interest-earning deposits 232,158 1,162 2.00 413,623 142 0.14Total interest-earning assets 6,118,014 55,389 3.62% 5,803,729 40,281 2.78%Noninterest-earning assets: Cash and due from banks 8,296 8,592 Allowance for credit losses (59,464) (64,100) Premises and equipment 23,580 23,311 Other assets 97,583 201,287 Total noninterest-earning assets 69,995 169,090 Total assets $6,188,009 $5,972,819 LIABILITIES: Interest-bearing deposits: Checking $2,408,206 $5,127 0.85% $2,098,827 $1,177 0.22%Money markets 1,237,975 1,557 0.50 1,257,760 683 0.22Savings 168,281 5 0.01 152,759 20 0.05Certificates of deposit – retail 391,340 791 0.81 461,917 836 0.72Subtotal interest-bearing deposits 4,205,802 7,480 0.71 3,971,263 2,716 0.27Interest-bearing demand – brokered 85,000 345 1.62 85,000 385 1.81Certificates of deposit – brokered 25,968 210 3.23 33,796 266 3.15Total interest-bearing deposits 4,316,770 8,035 0.74 4,090,059 3,367 0.33Borrowings 3,810 29 3.04 64,332 57 0.35Capital lease obligation 5,106 61 4.78 6,147 74 4.82Subordinated debt 132,874 1,363 4.10 132,588 1,358 4.10Total interest-bearing liabilities 4,458,560 9,488 0.85% 4,293,126 4,856 0.45%Noninterest-bearing liabilities: Demand deposits 1,116,843 997,450 Accrued expenses and other liabilities 83,446 137,387 Total noninterest-bearing liabilities 1,200,289 1,134,837 Shareholders’ equity 529,160 544,856 Total liabilities and shareholders’ equity $6,188,009 $5,972,819 Net interest income $45,901 $35,425 Net interest spread 2.77% 2.33%Net interest margin (D) 2.98% 2.42%
(A) Average balances for available for sale securities are based on amortized cost.
(B) Interest income is presented on a tax-equivalent basis using a 21% federal tax rate.
(C) Loans are stated net of unearned income and include nonaccrual loans.
(D) Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.
PEAPACK-GLADSTONE FINANCIAL CORPORATION
AVERAGE BALANCE SHEET
(Tax-Equivalent Basis, Dollars in Thousands)
(Unaudited)
For the Three Months Ended September 30, 2022 June 30, 2022 Average Income/ Average Income/ Balance Expense Yield Balance Expense YieldASSETS: Interest-earning assets: Investments: Taxable (A) $754,180 $2,853 1.51% $774,145 $3,535 1.83%Tax-exempt (A) (B) 3,226 30 3.72 4,193 40 3.82 Loans (B) (C): Mortgages 513,864 3,861 3.01 513,666 3,630 2.83Commercial mortgages 2,510,616 23,121 3.68 2,552,128 21,185 3.32Commercial 2,016,590 23,362 4.63 2,024,457 19,348 3.82Commercial construction 12,073 143 4.74 16,186 162 4.00Installment 38,338 399 4.16 37,235 297 3.19Home equity 36,706 451 4.91 38,061 331 3.48Other 263 7 10.65 258 6 9.30Total loans 5,128,450 51,344 4.00 5,181,991 44,959 3.47Federal funds sold — — — — — —Interest-earning deposits 232,158 1,162 2.00 164,066 314 0.77Total interest-earning assets 6,118,014 55,389 3.62% 6,124,395 48,848 3.19%Noninterest-earning assets: Cash and due from banks 8,296 9,715 Allowance for credit losses (59,464) (59,629) Premises and equipment 23,580 22,952 Other assets 97,583 96,232 Total noninterest-earning assets 69,995 69,270 Total assets $6,188,009 $6,193,665 LIABILITIES: Interest-bearing deposits: Checking $2,408,206 $5,127 0.85% $2,493,668 $2,330 0.37%Money markets 1,237,975 1,557 0.50 1,234,564 579 0.19Savings 168,281 5 0.01 163,062 5 0.01Certificates of deposit – retail 391,340 791 0.81 411,202 651 0.63Subtotal interest-bearing deposits 4,205,802 7,480 0.71 4,302,496 3,565 0.33Interest-bearing demand – brokered 85,000 345 1.62 85,000 364 1.71Certificates of deposit – brokered 25,968 210 3.23 33,470 261 3.12Total interest-bearing deposits 4,316,770 8,035 0.74 4,420,966 4,190 0.38Borrowings 3,810 29 3.04 3,873 10 1.03Capital lease obligation 5,106 61 4.78 5,406 64 4.74Subordinated debt 132,874 1,363 4.10 132,803 1,363 4.11Total interest-bearing liabilities 4,458,560 9,488 0.85% 4,563,048 5,627 0.49%Noninterest-bearing liabilities: Demand deposits 1,116,843 1,029,538 Accrued expenses and other liabilities 83,446 79,882 Total noninterest-bearing liabilities 1,200,289 1,109,420 Shareholders’ equity 529,160 521,197 Total liabilities and shareholders’ equity $6,188,009 $6,193,665 Net interest income $45,901 $43,221 Net interest spread 2.77% 2.70%Net interest margin (D) 2.98% 2.83%
(A) Average balances for available for sale securities are based on amortized cost.
(B) Interest income is presented on a tax-equivalent basis using a 21% federal tax rate.
(C) Loans are stated net of unearned income and include nonaccrual loans.
(D) Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.
PEAPACK-GLADSTONE FINANCIAL CORPORATION
AVERAGE BALANCE SHEET
(Tax-Equivalent Basis, Dollars in Thousands)
(Unaudited)
For the Nine Months Ended September 30, 2022 September 30, 2021 Average Income/ Average Income/ Balance Expense Yield Balance Expense YieldASSETS: Interest-earning assets: Investments: Taxable (A) $818,411 $9,995 1.63% $822,262 $8,473 1.37%Tax-exempt (A) (B) 4,035 117 3.87 6,961 243 4.65 Loans (B) (C): Mortgages 511,999 11,148 2.90 501,276 11,559 3.07Commercial mortgages 2,472,503 62,481 3.37 1,972,723 45,590 3.08Commercial 2,016,533 60,911 4.03 1,900,231 49,992 3.51Commercial construction 15,427 465 4.02 20,418 516 3.37Installment 36,697 951 3.46 34,724 777 2.98Home equity 38,324 1,106 3.85 45,672 1,133 3.31Other 268 18 8.96 239 15 8.37Total loans 5,091,751 137,080 3.59 4,475,283 109,582 3.26Federal funds sold — — — 64 — 0.13Interest-earning deposits 174,833 1,505 1.15 465,287 367 0.11Total interest-earning assets 6,089,030 148,697 3.26% 5,769,857 118,665 2.74%Noninterest-earning assets: Cash and due from banks 8,491 10,018 Allowance for credit losses (60,026) (67,592) Premises and equipment 23,187 23,087 Other assets 119,908 203,344 Total noninterest-earning assets 91,560 168,857 Total assets $6,180,590 $5,938,714 LIABILITIES: Interest-bearing deposits: Checking $2,411,023 $8,695 0.48% $1,996,663 $3,099 0.21%Money markets 1,255,341 2,675 0.28 1,250,933 2,204 0.23Savings 162,675 15 0.01 140,066 55 0.05Certificates of deposit – retail 409,442 2,048 0.67 494,255 3,333 0.90Subtotal interest-bearing deposits 4,238,481 13,433 0.42 3,881,917 8,691 0.30Interest-bearing demand – brokered 85,000 1,082 1.70 100,110 1,334 1.78Certificates of deposit – brokered 31,058 732 3.14 33,783 791 3.12Total interest-bearing deposits 4,354,539 15,247 0.47 4,015,810 10,816 0.36Borrowings 20,876 103 0.66 138,448 448 0.43Capital lease obligation 5,389 193 4.78 6,376 229 4.79Subordinated debt 132,803 4,090 4.11 165,053 5,650 4.56Total interest-bearing liabilities 4,513,607 19,633 0.58% 4,325,687 17,143 0.53%Noninterest-bearing liabilities: Demand deposits 1,042,064 932,088 Accrued expenses and other liabilities 93,462 143,045 Total noninterest-bearing liabilities 1,135,526 1,075,133 Shareholders’ equity 531,457 533,894 Total liabilities and shareholders’ equity $6,180,590 $5,934,714 Net interest income $129,064 $101,522 Net interest spread 2.68% 2.21%Net interest margin (D) 2.83% 2.35%
(A) Average balances for available for sale securities are based on amortized cost.
(B) Interest income is presented on a tax-equivalent basis using a 21% federal tax rate.
(C) Loans are stated net of unearned income and include nonaccrual loans.
(D) Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.
PEAPACK-GLADSTONE FINANCIAL CORPORATION
NON-GAAP FINANCIAL MEASURES RECONCILIATION
Tangible book value per share and tangible equity as a percentage of tangible assets at period end are non-GAAP financial measures derived from GAAP-based amounts. We calculate tangible equity and tangible assets by excluding the balance of intangible assets from shareholders’ equity and total assets, respectively. We calculate tangible book value per share by dividing tangible equity by period end common shares outstanding, as compared to book value per common share, which we calculate by dividing shareholders’ equity by period end common shares outstanding. We calculate tangible equity as a percentage of tangible assets at period end by dividing tangible equity by tangible assets at period end. We believe that this is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of risk-based capital ratios.
The efficiency ratio is a non-GAAP measure of expense control relative to recurring revenue. We calculate the efficiency ratio by dividing total noninterest expenses, excluding other real estate owned 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 a reasonable measure of core expenses relative to core revenue.
We believe these non-GAAP financial measures provide information that is important to investors and useful in understanding our financial position, results and ratios because 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.
(Dollars in thousands, except share data)
Three Months Ended Sept 30, June 30, March 31, Dec 31, Sept 30,Tangible Book Value Per Share 2022 2022 2022 2021 2021Shareholders’ equity $515,514 $520,324 $523,426 $546,388 $543,014Less: Intangible assets, net 47,698 48,082 48,471 48,902 49,333Tangible equity $467,816 $472,242 $474,955 $497,486 $493,681Less: other comprehensive loss (74,983) (58,727) (40,938) (12,374) (9,035)Tangible equity excluding other comprehensive loss $542,799 $530,969 $515,893 $509,860 $502,716 Period end shares outstanding 17,920,571 18,190,009 18,370,312 18,393,888 18,627,910Tangible book value per share $26.10 $25.96 $25.85 $27.05 $26.50Tangible book value per share excluding other comprehensive loss $30.29 $29.19 $28.08 $27.72 $26.99Book value per share 28.77 28.60 28.49 29.70 29.15 Tangible Equity to Tangible Assets Total assets $6,087,261 $6,151,167 $6,255,664 $6,077,993 $6,240,285Less: Intangible assets, net 47,698 48,082 48,471 48,902 49,333Tangible assets $6,039,563 $6,103,085 $6,207,193 $6,029,091 $6,190,952Less: other comprehensive loss (74,983) (58,727) (40,938) (12,374) (9,035)Tangible assets excluding other comprehensive loss $6,114,546 $6,161,812 $6,248,131 $6,041,465 $6,199,987 Tangible equity to tangible assets 7.75% 7.74% 7.65% 8.25% 7.97%Tangible equity to tangible assets excluding other comprehensive loss 8.88% 8.62% 8.26% 8.44% 8.11%Equity to assets 8.47% 8.46% 8.37% 8.99% 8.70%
Three Months Ended Sept 30, June 30, March 31, Dec 31, Sept 30,Return on Average Tangible Equity 2022 2022 2022 2021 2021Net income $20,126 $20,100 $13,441 $14,855 $14,171 Average shareholders’ equity $529,160 $521,197 $544,179 $543,035 $544,856Less: Average intangible assets, net 47,922 48,291 48,717 49,151 48,757Average tangible equity $481,238 $472,906 $495,462 $493,884 $496,099 Return on average tangible common equity 16.73% 17.00% 10.85% 12.03% 11.43%
For the Nine Months Ended Sept 30, Sept 30,Return on Average Tangible Equity 2022 2021Net income $53,667 $41,767 Average shareholders’ equity $531,457 $533,894Less: Average intangible assets, net 48,307 45,306Average tangible equity 483,150 488,588 Return on average tangible common equity 14.81% 11.40%
Three Months Ended Sept 30, June 30, March 31, Dec 31, Sept 30,Efficiency Ratio 2022 2022 2022 2021 2021Net interest income $45,525 $42,893 $39,622 $37,212 $35,211Total other income 16,383 18,508 14,714 18,964 17,781Add: Fair value adjustment for CRA equity security 571 475 682 139 70Less: Loss/(gain) on loans held for sale at lower of cost or fair value — — — 265 — Loss on securities sale, net — — 6,609 — —Total recurring revenue 62,479 61,876 61,627 56,580 53,062 Operating expenses 33,560 32,659 34,169 31,704 32,185Less: Swap valuation allowance — — 673 893 1,350 Severance expense — — 1,476 — —Total operating expense 33,560 32,659 32,020 30,811 30,835 Efficiency ratio 53.71% 52.78% 51.96% 54.46% 58.11%
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