Peapack-Gladstone Financial Corporation

01/28/2022 | Press release | Distributed by Public on 01/28/2022 08:07

Peapack-Gladstone Financial Corporation Reports Strong Fourth Quarter Results and Announces Another 5% Stock Repurchase Program

Bedminster, NJ, Jan. 28, 2022 (GLOBE NEWSWIRE) -- via NewMediaWire -- Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market: PGC) (the "Company") announces its fourth quarter 2021 results.

This earnings release should be read in conjunction with the Company's Q4 2021 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.

For the quarter ended December 31, 2021, the Company recorded total revenue of $56.17 million, net income of $14.86 million and diluted earnings per share ("EPS") of $0.78, compared to revenue of $46.14 million, net income of $3.03 million and diluted EPS of $0.16, respectively, for the three-month period ended December 31, 2020.

For the year ended December 31, 2021, the Company recorded total revenue of $210.31 million, net income of $56.62 million and diluted earnings per share ("EPS") of $2.93 compared to revenue of $189.36 million, net income of $26.19 million and diluted EPS of $1.37, respectively, for the year ended December 31, 2020.

Improvement in the 2021 periods was principally driven by the Company's wealth management and commercial banking businesses. 2021 included increased wealth management income, corporate advisory fees and SBA income, as well as increased net interest income resulting from asset growth, coupled with margin improvement. The earnings for the full year of 2021 also benefitted from a significantly lower provision for loan losses.

The Q4 2021 period included a $893,000 swap valuation allowance recorded in operating expenses related to a loan placed on nonaccrual in Q3 2021. Q4 2021 also included a higher provision for loan losses due to the loan growth during the quarter.

Douglas L. Kennedy, President and CEO, said, "Our fourth quarter and full year results reflected continued solid growth in our wealth management business and commercial banking, including both corporate advisory and SBA activities. Increases in these areas year-over-year more than made up for the $7.4 million of PPP gains that the Company had recorded in 2020. As we look into the new year our pipelines for wealth management and commercial banking continue to be robust and we remain quite constructive toward 2022."

During the fourth quarter of 2021 the Company repurchased 274,929 shares under its stock repurchase program at an average price of $33.50 for a total cost of $9.21 million. For the full year of 2021, the Company repurchased 894,744 shares at an average price of $31.99 for a total cost of $28.63 million.

On January 27, 2022, the Company authorized a new 5% stock repurchase program of up to 920,000 shares. Purchases will be conducted in accordance with the limitations set forth in the SEC's Rule 10b-18.

Mr. Kennedy noted, "We believe that repurchasing our stock continues to be a great opportunity to take advantage of the Company's discounted valuation relative to peers."

EXECUTIVE SUMMARY:

The following tables summarize specified financial measures for the periods shown.

2021 Year Compared to Prior Year

Year Ended Year Ended
December31, December31, Increase/
(Dollars in millions, except per share data) 2021 2020 (Decrease)
Net interest income $ 138.06 $ 127.60 $ 10.46 8 %
Wealth management fee income (A) 52.99 40.86 12.13 30
Capital markets activity (B) 10.62 6.65 3.97 60
Other income (C) 8.64 14.25 (5.61 ) (39 )
Total other income 72.25 61.76 10.49 17
Operating expenses (A) (D) 126.17 124.96 1.21 1
Pretax income before provision for loan losses 84.14 64.40 19.74 31
Provision for loan and lease losses (E) 6.48 32.40 (25.92 ) (80 )
Pretax income 77.66 32.00 45.66 143
Income tax expense (F) 21.04 5.81 15.23 262
Net income $ 56.62 $ 26.19 $ 30.43 116 %
Diluted EPS $ 2.93 $ 1.37 $ 1.56 114 %
Total Revenue (G) $ 210.31 $ 189.36 $ 20.95 11 %
Return on average assets 0.94 % 0.45 % 0.49
Return on average equity 10.56 % 5.11 % 5.45

(A) The 2021 results included twelve months of wealth management fee income and expense related to the December 2020 hires of the teams from Lucas Capital Management ("Lucas") and Noyes Capital Management ("Noyes") and six months of wealth management fee income and expense related to the July 2021 acquisition of Princeton Portfolio Strategies Group.

(B) Capital markets activity included fee income from loan level back-to-back swaps, the SBA lending and sale program, corporate advisory activities and mortgage banking activities. The 2021 results included $3.5 million of corporate advisory fee income. There were no fees related to loan level back-to-back swap activities in the twelve months ended December 31, 2021, compared to $1.6 million for 2020.

(C) The 2021 results included a cost of $842,000 related to the termination of interest rate swaps; a $1.1 million gain on loans held at lower of cost or fair value; $722,000 of fee income related to the referral of PPP loans to a third party; and $455,000 of additional BOLI income related to receipt of life insurance proceeds. The 2020 results included a $7.4 million gain on the sale of PPP loans.

(D) The 2021 results included $1.5 million of severance expense related to certain corporate restructurings within several areas of the Bank; $648,000 of expense related to the redemption of subordinated debt; and $2.2 million related to a swap valuation allowance. The 2020 results included $4.8 million for the prepayment of FHLB advances, $4.4 million for the valuation allowance for a loan held for sale, $210,000 for the consolidation of two private banking locations, and $278,000 for the closure of a retail branch.

(E) The 2020 results included a provision for loan and lease losses of $32.4 million, primarily due to the COVID-19 pandemic.

(F) The 2020 results included a $3.2 million tax benefit related to the carryback of tax NOLs.

(G) Total revenue equals the sum of net interest income plus total other income.

December 2021 Quarter Compared to Prior Year Quarter

Three Months Ended Three Months Ended
December31, December31, Increase/
(Dollars in millions, except per share data) 2021 2020 (Decrease)
Net interest income $ 37.21 $ 31.74 $ 5.47 17 %
Wealth management fee income (A) 13.96 10.79 3.17 29
Capital markets activity (B) 3.52 1.89 1.63 86
Other income (C) 1.48 1.72 (0.24 ) (14 )
Total other income 18.96 14.40 4.56 32
Operating expenses (A) (D) 31.70 39.25 (7.55 ) (19 )
Pretax income before provision for loan losses 24.47 6.89 17.58 255
Provision for loan and lease losses 3.75 2.35 1.40 60
Pretax income 20.72 4.54 16.18 356
Income tax expense 5.86 1.51 4.35 288
Net income $ 14.86 $ 3.03 $ 11.83 390 %
Diluted EPS $ 0.78 $ 0.16 $ 0.62 387 %
Total Revenue (E) $ 56.17 $ 46.14 $ 10.03 22 %
Return on average assets annualized 0.96 % 0.21 % 0.75
Return on average equity annualized 10.94 % 2.32 % 8.62

(A) The December 2021 quarter included a full quarter of wealth management fee income and expense related to the December 2020 hires of the teams from Lucas and Noyes and the July 2021 acquisition of PPSG.

(B) Capital markets activity included fee income from loan level back-to-back swaps, the SBA lending and sale program, corporate advisory activities, and mortgage banking activities. The December 2021 quarter included $2.2 million of corporate advisory fee income, the majority of which related to a large investment banking advisory event.

(C) The December 31, 2021 quarter included a $265,000 loss on the sale of loans.

(D) The December 2021 quarter included $893,000 related to a swap valuation allowance. The December 2020 quarter included $4.8 million for the prepayment of FHLB advances, $4.4 million for the valuation allowance for a loan held for sale, and $210,000 for the consolidation of two private banking locations

(E) Total revenue equals the sum of net interest income plus total other income.

December 2021 Quarter Compared to Linked Quarter

Three Months Ended Three Months Ended
December31, September30, Increase/
(Dollars in millions, except per share data) 2021 2021 (Decrease)
Net interest income $ 37.21 $ 35.21 $ 2.00 6 %
Wealth management fee income 13.96 13.86 0.10 1
Capital markets activity (A) 3.52 2.06 1.46 71
Other income (B) 1.48 1.86 (0.38 ) (20 )
Total other income 18.96 17.78 1.18 7
Operating expenses (C) 31.70 32.18 (0.48 ) (1 )
Pretax income before provision for loan losses 24.47 20.81 3.66 18
Provision for loan and lease losses 3.75 1.60 2.15 134
Pretax income 20.72 19.21 1.51 8
Income tax expense 5.86 5.04 0.82 16
Net income $ 14.86 $ 14.17 $ 0.69 5 %
Diluted EPS $ 0.78 $ 0.74 $ 0.04 5 %
Total Revenue (D) $ 56.17 $ 52.99 $ 3.18 6 %
Return on average assets annualized 0.96 % 0.95 % 0.01
Return on average equity annualized 10.94 % 10.40 % 0.54

(A) Capital markets activity included fee income from loan level back-to-back swaps, the SBA lending and sale program, corporate advisory and mortgage banking activities.

(B) The December 31, 2021 quarter included a $265,000 loss on sale of loans.

(C) The December 2021 quarter included $893,000 related to a swap valuation allowance. The September 2021 quarter included $1.4 million related to a swap valuation allowance.

(D) Total revenue equals the sum of net interest income plus total other income.

Select highlights:

Peapack Private Wealth Management:

  • AUM/AUA in our Peapack Private Wealth Management Division grew 8% (31% annualized) to $11.1 billion at December 31, 2021 from $10.3 billion at September 30, 2021, and 26% over the $8.8 billion at December 31, 2020.
  • Gross new business inflows for 2021 totaled $840 million.
  • Wealth Management fee income increased 30% to $14.0 million for Q4 2021 compared to $10.8 million for Q4 2020.
  • On July 1, 2021, we closed on the acquisition of Princeton Portfolio Strategies Group ("PPSG").

Commercial Banking and Balance Sheet Management:

  • At December 31, 2021, total loans (excluding $14 million of PPP loans) grew 15% to $4.83 billion compared to $4.21 billion (excluding $196 million of PPP loans) at December 31, 2020.
  • C&I loan/lease balances (excluding PPP loans) grew $216 million or 12% over 2020, with a large portion of that net growth occurring in Q4 2021.
  • SBA Income ($4.9 million) and Corporate Advisory fees ($3.5 million) totaled $8.4 million in 2021.
  • Core deposits (which includes noninterest-bearing demand and interest-bearing demand, savings and money market) totaled 89% of total deposits at December 31, 2021, with an average cost of 0.17%.
  • The net interest margin improved by 4 basis points in Q4 2021 compared to Q3 2021 and improved 21 basis points when compared to Q4 2020.

Capital Management:

  • Continued to execute on the previously approved stock repurchase program - during Q4 repurchased 274,929 shares at an average price of $33.50 for a total cost of $9.2 million. (For the year ended December 31, 2021, the Company repurchased 894,744 shares).
  • Tangible book value per share increased 6.2% to $27.05 at December 31, 2021 from $25.47 at December 31, 2020, despite recent stock repurchase activity and a wealth acquisition. See the Non-GAAP financial measures reconciliation included in this release.

SUPPLEMENTAL QUARTERLY DETAILS:

Wealth Management

In the December 2021 quarter, the Bank's wealth management business generated a record $13.96 million in fee income, compared to $13.86 million for the September 30, 2021 quarter and $10.79 million for the December 2020 quarter.

The market value of the Company's AUM/AUA increased 26% to $11.1 billion at December 31, 2021 from $8.8 billion at December 31, 2020, due to organic new business, the PPSG acquisition, and favorable market conditions.

John P. Babcock, President of the Peapack Private Wealth Management division, said, "2021 showed continued strong business from new clients as well as additional business from existing clients. Positive net flows, combined with solid client retention and favorable market conditions, all contributed to our strong quarterly and full year results." Mr. Babcock went on to note, "While we will continue to look at supplementing our organic growth with selective acquisitions, M&A activity in the RIA space is hyper-competitive with purchase price multiples reaching all-time highs - making it challenging for us to obtain acceptable returns on invested capital. Internally, we are focused on completing our One Team consolidation of the businesses and people we have acquired over the last several years under a single operating and technology framework, completing our migration to a single trading platform and re-organizing our wealth business under a new, streamlined organizational structure to ensure the highest level of client experience, maximum efficiency, and growth."

Loans / Commercial Banking

At December 31, 2021, loans totaled $4.83 billion (excluding $14 million of PPP loans), compared to $4.21 billion (excluding $196 million of PPP loans) at December 31, 2020, reflecting growth of 15%. This growth was achieved despite over $900 million of net paydown/payoff activity over the twelve-month period.

Total C&I loans and leases (including the $14 million of PPP loans) at December 31, 2021 were $2.01 billion or 41% of the total loan portfolio.

Mr. Kennedy noted, "Our commercial loan pipelines continue to be strong going into the new year, standing at approximately $350 million with the likelihood of a first quarter closing. Notwithstanding significant payoff activity, we believe that we will achieve high single digit loan growth for 2022."

Mr. Kennedy also noted, "We are proud to have built a leading middle market commercial banking franchise, as evidenced by over $200 million of net growth in our C&I Portfolio, continued growth in Treasury Management income, and our over $3 million of corporate advisory fees by our investment banking group - this team had record earnings in 2021 and continues to have a robust pipeline of new business opportunities."

Funding / Liquidity / Interest Rate Risk Management

The Company actively manages its deposit base to reduce reliance on wholesale sourced deposits, volatility, and/or operational risk. Total deposits at December 31, 2021 increased $448 million to $5.27 billion from $4.82 billion at December 31, 2020. Along with the deposit growth, the change in mix was favorable, as noninterest bearing demand deposits increased $123 million, interest-bearing demand increased $439 million, while higher costing CDs declined $121 million and brokered deposits declined $25 million, when comparing December 31, 2021 to December 31, 2020.

Mr. Kennedy noted, "89% of our deposits are demand, savings, or money market accounts, and our noninterest bearing deposits comprise 18% of our total deposits; both metrics reflect the relationship aspect of our deposit base."

At December 31, 2021, the Company's balance sheet liquidity (investments available for sale, interest-earning deposits and cash) totaled $971.2 million (or 16% of assets). This level is lower than the level at September 30, 2021 due to an increase in loan activity during Q4 2021 and more in line with historical levels.

The Company maintains backup liquidity of approximately $1.8 billion of secured funding with the Federal Home Loan Bank and $1.2 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.

Mr. Kennedy noted, "We are well positioned for a rise in interest rates given that 40% of our loan portfolio reprices within three months and 52% within one year. Our current modeling, with what we believe include conservative deposit beta assumptions, indicates net interest income will improve approximately 3% in year one and 5% in year two after a 100 basis point rate shock."

Net Interest Income (NII)/Net Interest Margin (NIM)

Twelve Months Ended Twelve Months Ended
December 31, 2021 December 31, 2020
NII NIM NII NIM
NII/NIM excluding the below $ 134,206 2.50% $ 123,099 2.58%
Prepayment premiums received on loan paydowns 2,085 0.04% 1,452 0.02%
Effect of maintaining excess interest earning cash (420 ) -0.17% (1,320 ) -0.21%
Effect of PPP loans 2,190 0.01% 4,371 -0.08%
NII/NIM as reported $ 138,061 2.38% $ 127,602 2.31%
Three Months Ended Three Months Ended Three Months Ended
December 31, 2021 September 30, 2021 December 31, 2020
NII NIM NII NIM NII NIM
NII/NIM excluding the below $ 36,564 2.60% $ 34,635 2.56% $ 30,897 2.51%
Prepayment premiums received on loan paydowns 555 0.04% 325 0.02% 413 0.02%
Effect of maintaining excess interest earning cash (68 ) -0.18% (46 ) -0.14% (206 ) -0.24%
Effect of PPP loans 161 0.00% 297 -0.02% 631 -0.04%
NII/NIM as reported $ 37,212 2.46% $ 35,211 2.42% $ 31,735 2.25%

As shown above, the Company's reported NII increased $2.0 million and NIM increased 4 basis points compared to the linked quarter. The Bank further lowered its cost of funds strategically and grew its average loan portfolio at rates/spreads beneficial to NIM.

Future net interest income and net interest margin should benefit from the following:

  • Robust loan pipelines to generate loan growth.
  • Continued downward repricing of maturing CDs.
  • An increase in target Fed funds (should that occur).

Income from Capital Markets Activities

Noninterest income from Capital Markets activities (detailed below) totaled $3.52 million for the December 2021 quarter compared to $2.06 million for the September 2021 quarter and $1.90 million for the December 2020 quarter. The December 2021 quarterly results were driven by $2.18 million in Corporate Advisory income. The September 2021 quarter results were driven by $1.57 million in gains on sale of SBA loans. The December 2020 quarter reflected increased mortgage banking activity due to greater refinance activity in the low-rate environment. The December 2021, September 2021 and December 2020 quarters included no income from loan level, back-to-back swap activities, as there has been, and will continue to be, minimal activity for such in the current environment.

Three Months Ended Three Months Ended Three Months Ended
December31, September30, December31,
(Dollars in thousands, except per share data) 2021 2021 2020
Gain on loans held for sale at fair value (Mortgage banking) $ 352 $ 408 $ 1,470
Fee income related to loan level, back-to-back swaps - - -
Gain on sale of SBA loans 989 1,569 375
Corporate advisory fee income 2,180 84 50
Total capital markets activity $ 3,521 $ 2,061 $ 1,895

Other Noninterest Income (other than Wealth Management fee income and Income from Capital Markets Activities)

Other noninterest income (as defined above) totaled $1.48 million, $1.86 million, and $1.72 million, for the December 2021, September 2021, and December 2020 quarters, respectively. The December 2021 quarter included $265,000 net loss on loans held for sale.

Operating Expenses

The Company's total operating expenses were $31.70 million for the quarter ended December 31, 2021, compared to $32.18 million for the September 2021 quarter and $39.25 million for the December 2020 quarter. The December 2021 and September 2021 quarters included $893,000 and $1.35 million related to a swap valuation allowance, respectively. The December and September 2021 quarters also included a full quarter's worth of expense related to the teams hired from Lucas and Noyes and the acquisition of PPSG. The December 2020 quarter included $4.8 million for the prepayment of FHLB advances, $4.4 million for a valuation allowance on a loan held for sale and $210,000 related to the consolidation of two private banking offices.

Mr. Kennedy noted, "While we continue to manage expenses closely and prudently, we will invest in our existing people as the market demands in order to retain the talent we have acquired, grow and expand our core wealth management and commercial banking businesses, including lift-outs, strategic hires, and wealth M&A, and invest in digital enhancements to further enhance the client experience."

Income Taxes

The effective tax rate for the three months ended December 31, 2021 was 28.31%, as compared to 26.22% for the September 2021 quarter and 33.29% for the quarter ended December 31, 2020. A tax return to book adjustment recorded in the December 2020 quarter coupled with reduced pretax income in the quarter, increased the December 2020 effective tax rate by approximately 5%.

The effective annual tax rate for 2021 was 27.09% compared to 18.16% for 2020. During the first quarter of 2020, the Company recorded a $3.34 million tax benefit, principally due to a $3.2 million federal income tax benefit that resulted from a tax NOL carryback. The Company had a $23 million operating loss for tax purposes in 2018 (when the federal tax rate was 21%) resulting from accelerated tax depreciation. Under the CARES Act, the Company was allowed to carry this NOL back to a period when the federal tax rate was 35%, generating a permanent tax benefit.

Asset Quality / Provision for Loan and Lease Losses

Nonperforming assets (which does not include troubled debt restructured loans that are performing in accordance with their terms) at December 31, 2021 were $15.6 million, or 0.26% of total assets, compared to $25.9 million, or 0.42% of total assets, at September 30, 2021. The $10.3 million decline was largely due to a $2 million C&I loan moved back to accrual status, and a $7 million charge-off of the specific reserve on the commercial real estate loan with a large retail component located in Manhattan, and on deferral, that was placed on nonaccrual status in the third quarter of 2021.

For the quarter ended December 31, 2021, the Company's provision for loan and lease losses was $3.8 million compared to $1.6 million for the September 2021 quarter and $2.4 million for the December 2020 quarter. The increased provision for loan and lease losses in the December 2021 quarter, when compared to the linked quarter and the 2020 quarter, was due principally to significant loan growth during the December 2021 quarter and additional specific reserves of $4.2 million on the commercial real estate loan noted above, offset by reduced qualitative loss factors related to the unemployment rate and amount of loan deferrals and other economic qualitative factors due to the COVID-19 pandemic.

Loans on deferral, and accruing, entered into during the COVID-19 pandemic have come down significantly from $914 million at June 30, 2020 to $13 million at December 31, 2021. The Company's provision for loan and lease losses, and its allowance for loan and lease losses (ALLL) also reflect, among other things, the Company's assessment of asset quality metrics, net charge-offs/recoveries, and the composition of the loan portfolio.

At December 31, 2021, the allowance for loan and lease losses was $61.70 million (1.27% of total loans), compared to $65.13 million at September 30, 2021 (1.42% of loans) and $67.31 million at December 31, 2020 (1.53% of total loans).

The Company will adopt CECL during the first quarter of 2022 and does not expect a material adjustment upon adoption.

Capital

The Company's capital position during the December 2021 quarter was benefitted by net income of $14.86 million, which was offset by the purchase of shares through the Company's stock repurchase program and the quarterly dividend. During the fourth quarter of 2021, the Company repurchased 274,929 shares at an average price of $33.50 for a total cost of $9.2 million. GAAP Capital at December 31, 2021 was also impacted by an increase in the unrealized loss on available-for-sale securities in the fourth quarter of 2021, due to a rise in medium-term Treasury yields.

The Company's and Bank's capital ratios at December 31, 2021 all remain strong. Such ratios remain well above regulatory well capitalized standards.

As previously announced, in the fourth quarter of 2020, the Company successfully completed a private placement of $100 million in fixed-to floating rate subordinated notes due 2030 at a rate of 3.5%. Such funds benefitted the Company's Regulatory Tier 2 Capital. At the time, the Company noted the proceeds raised would be used for general corporate purposes, which could include stock repurchases, the redemption of the Company's then existing 6% subordinated debt and acquisitions of wealth management firms. Throughout the twelve months of 2021, the Company repurchased $29 million of stock. On June 30, 2021, the Company redeemed its 6% subordinated debt. On July 1, 2021, the Company closed on the acquisition of PPSG.

The Company employs quarterly capital stress testing - adverse case and severely adverse case. In the most recent completed stress test on September 30, 2021, under severely adverse case, and no growth scenarios, the Bank remains well capitalized over a two-year stress period. With a Pandemic stress overlay, the Bank still remains well capitalized over the two-year stress period.

On January 27, 2022, the Company declared a cash dividend of $0.05 per share payable on February 25, 2022, to shareholders of record on February 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 $11.1 billion as of December 31, 2021. 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 loan losses and capital levels;
  • 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 delinquent, nonperforming, classified and criticized 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 and third-party providers;
  • higher than expected FDIC insurance premiums;
  • adverse weather conditions;
  • 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.

Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 pandemic on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

  • demand for our products and services may decline, making it difficult to grow assets and income;
  • if the economy worsens, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;
  • collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;
  • our allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect our net income;
  • the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;
  • a material decrease in net income or a net loss over several quarters could result in an elimination or a decrease in the rate of our quarterly cash dividend;
  • our wealth management revenues may decline with continuing market turmoil;
  • a worsening of business and economic conditions or in the financial markets could result in an impairment of certain intangible assets, such as goodwill;
  • the unanticipated loss or unavailability of key employees due to the outbreak, which could harm our ability to operate our business or execute our business strategy, especially as we may not be successful in finding and integrating suitable successors;
  • we may face litigation, regulatory enforcement and reputation risk as a result of our participation in the PPP and the risk that the SBA may not fund some or all PPP loan guaranties;
  • our cyber security risks are increased as the result of an increase in the number of employees working remotely; and
  • FDIC premiums may increase if the agency experience additional resolution costs.

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, 2020. 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

(Tables to follow)


PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in Thousands, except share data)
(Unaudited)

For the Three Months Ended
Dec 31, Sept 30, June 30, March 31, Dec 31,
2021 2021 2021 2021 2020
Income Statement Data:
Interest income $ 42,075 $ 40,067 $ 39,686 $ 38,239 $ 38,532
Interest expense 4,863 4,856 5,841 6,446 6,797
Net interest income 37,212 35,211 33,845 31,793 31,735
Wealth management fee income 13,962 13,860 13,034 12,131 10,791
Service charges and fees 996 959 896 846 859
Bank owned life insurance 308 311 466 611 313
Gain on loans held for sale at fair value
(Mortgage banking) (A) 		352 408 409 1,025 1,470
(Loss)/Gain on loans held for sale at lower of
cost or fair value (B) 		(265 ) - 1,125 282 -
Fee income related to loan level, back-to-back
swaps (A) 		- - - - -
Gain on sale of SBA loans (A) 989 1,569 932 1,449 375
Corporate advisory fee income (A) 2,180 84 121 1,098 50
Loss on swap termination - - (842 ) - -
Other income (C) 581 660 1,495 643 590
Securities (losses)/gains, net (139 ) (70 ) 42 (265 ) (42 )
Total other income 18,964 17,781 17,678 17,820 14,406
Salaries and employee benefits (D) 20,105 19,859 19,910 21,990 19,902
Premises and equipment 4,519 4,459 4,074 4,113 4,189
FDIC insurance expense 402 555 529 585 665
FHLB prepayment penalty - - - - 4,784
Valuation allowance loans held for sale - - - - 4,425
Swap valuation allowance 893 1,350 - - -
Other expenses 5,785 5,962 6,171 4,906 5,284
Total operating expenses 31,704 32,185 30,684 31,594 39,249
Pretax income before provision for loan losses 24,472 20,807 20,839 18,019 6,892
Provision for loan and lease losses 3,750 1,600 900 225 2,350
Income before income taxes 20,722 19,207 19,939 17,794 4,542
Income tax expense 5,867 5,036 5,521 4,616 1,512
Net income $ 14,855 $ 14,171 $ 14,418 $ 13,178 $ 3,030
Total revenue (E) $ 56,176 $ 52,992 $ 51,523 $ 49,613 $ 46,141
Per Common Share Data:
Earnings per share (basic) $ 0.80 $ 0.76 $ 0.76 $ 0.70 $ 0.16
Earnings per share (diluted) 0.78 0.74 0.74 0.67 0.16
Weighted average number of common
shares outstanding:
Basic 18,483,268 18,763,316 18,963,237 18,950,305 18,947,864
Diluted 19,070,594 19,273,831 19,439,439 19,531,689 19,334,569
Performance Ratios:
Return on average assets annualized (ROAA) 0.96 % 0.95 % 0.97 % 0.89 % 0.21 %
Return on average equity annualized (ROAE) 10.94 % 10.40 % 10.86 % 10.03 % 2.32 %
Return on average tangible common equity (ROATCE) (F) 12.03 % 11.43 % 11.83 % 10.94 % 2.51 %
Net interest margin (tax-equivalent basis) 2.46 % 2.42 % 2.38 % 2.28 % 2.25 %
GAAP efficiency ratio (G) 56.44 % 60.74 % 59.55 % 63.68 % 85.06 %
Operating expenses / average assets annualized 2.05 % 2.16 % 2.06 % 2.14 % 2.66 %

(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 a $1.1 million gain on sale of $57 million of PPP loans completed in the June 2021 quarter.

(C) Includes income of $722,000 from the referral of PPP loans to a third-party firm during the June 2021 quarter.

(D) The March 2021 quarter included $1.5 million of severance expense related to corporate restructuring.

(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 Twelve Months Ended
December 31, Change
2021 2020 $ %
Income Statement Data:
Interest income $ 160,067 $ 165,750 $ (5,683 ) -3 %
Interest expense 22,006 38,148 (16,142 ) -42 %
Net interest income 138,061 127,602 10,459 8 %
Wealth management fee income 52,987 40,861 12,126 30 %
Service charges and fees 3,697 3,155 542 17 %
Bank owned life insurance 1,696 1,273 423 33 %
Gain on loans held for sale at fair value (Mortgage banking) (A) 2,194 3,266 (1,072 ) -33 %
Gain on loans held for sale at lower of cost or fair value (B) 1,142 7,426 (6,284 ) -85 %
Fee income related to loan level, back-to-back swaps (A) - 1,620 (1,620 ) -100 %
Gain on sale of SBA loans (A) 4,939 1,766 3,173 180 %
Corporate advisory fee income (A) 3,483 265 3,218 1214 %
Loss on swap termination (842 ) - (842 ) N/A
Other income (C) 3,379 1,847 1,532 83 %
Securities (losses)/gains, net (432 ) 281 (713 ) -254 %
Total other income 72,243 61,760 10,483 17 %
Salaries and employee benefits (D) 81,864 77,516 4,348 6 %
Premises and equipment 17,165 16,377 788 5 %
FDIC insurance expense 2,071 1,975 96 5 %
FHLB prepayment penalty - 4,784 (4,784 ) -100 %
Valuation allowance loans held for sale - 4,425 (4,425 ) -100 %
Swap valuation allowance 2,243 - 2,243 N/A
Other expenses 22,824 19,882 2,942 15 %
Total operating expenses 126,167 124,959 1,208 1 %
Pretax income before provision for loan losses 84,137 64,403 19,734 31 %
Provision for loan and lease losses (E) 6,475 32,400 (25,925 ) -80 %
Income before income taxes 77,662 32,003 45,659 143 %
Income tax expense (F) 21,040 5,811 15,229 262 %
Net income $ 56,622 $ 26,192 $ 30,430 116 %
Total revenue (G) $ 210,304 $ 189,362 $ 20,942 11 %
Per Common Share Data:
Earnings per share (basic) $ 3.01 $ 1.39 $ 1.62 117 %
Earnings per share (diluted) 2.93 1.37 1.56 114 %
Weighted average number of common shares outstanding:
Basic 18,788,679 18,896,825 (108,146 ) -1 %
Diluted 19,292,602 19,081,187 211,415 1 %
Performance Ratios:
Return on average assets (ROAA) 0.94 % 0.45 % 0.49 % 110 %
Return on average equity (ROAE) 10.56 % 5.11 % 5.45 % 107 %
Return on average tangible common equity (ROATCE) (H) 11.56 % 5.55 % 6.01 % 108 %
Net interest margin (tax-equivalent basis) 2.38 % 2.31 % 0.07 % 3 %
GAAP efficiency ratio (I) 59.99 % 65.99 % (6.00 )% -9 %
Operating expenses / average assets 2.10 % 2.16 % (0.06 )% -3 %

(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 $1.1 million (2021) and $7.4 million (2020) of gains on sale of PPP loans of $57 million and $355 million completed in the twelve months ended December 31, 2021 and 2020, respectively.

(C) Includes income of $722,000 from the referral of PPP loans to a third-party firm during the twelve months ended December 31, 2021.

(D) 2021 included $1.5 million of severance expense related to corporate restructuring.

(E) 2020 included a higher provision for loan and lease losses primarily due to the COVID-19 pandemic.

(F) 2020 included a $3.2 million tax benefit related to the carryback of tax NOLs to prior years when the federal tax rate was 14% higher.

(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 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
Dec 31, Sept 30, June 30, March 31, Dec 31,
2021 2021 2021 2021 2020
ASSETS
Cash and due from banks $ 5,929 $ 9,299 $ 12,684 $ 8,159 $ 10,629
Federal funds sold - - - 102 102
Interest-earning deposits 140,875 606,913 190,778 468,276 642,591
Total cash and cash equivalents 146,804 616,212 203,462 476,537 653,322
Securities held to maturity 108,680 - - - -
Securities available for sale 796,753 843,779 823,820 875,301 622,689
Equity security 14,685 14,824 14,894 14,852 15,117
FHLB and FRB stock, at cost 12,950 12,950 12,901 13,699 13,709
Residential mortgage 501,340 510,878 504,181 498,884 520,188
Multifamily mortgage 1,595,866 1,497,683 1,420,043 1,178,940 1,127,198
Commercial mortgage 662,626 680,107 702,777 697,599 694,034
Commercial loans (A) 2,009,252 1,833,532 1,880,830 1,982,570 1,975,337
Consumer loans 33,687 30,689 31,889 36,519 37,016
Home equity lines of credit 40,803 42,512 44,062 45,624 50,547
Other loans 238 245 204 199 225
Total loans 4,843,812 4,595,646 4,583,986 4,440,335 4,404,545
Less: Allowances for loan and lease losses 61,697 65,133 63,505 67,536 67,309
Net loans 4,782,115 4,530,513 4,520,481 4,372,799 4,337,236
Premises and equipment 23,044 23,123 23,261 23,260 21,609
Other real estate owned - - - 50 50
Accrued interest receivable 21,589 22,790 23,117 23,916 22,495
Bank owned life insurance 46,663 46,510 46,605 46,448 46,809
Goodwill and other intangible assets 48,902 49,333 43,156 43,524 43,891
Finance lease right-of-use assets 3,582 3,769 3,956 4,143 4,330
Operating lease right-of-use assets 9,775 10,307 9,569 10,186 9,421
Other assets (B) 62,451 66,175 66,466 64,912 99,764
TOTAL ASSETS $ 6,077,993 $ 6,240,285 $ 5,791,688 $ 5,969,627 $ 5,890,442
LIABILITIES
Deposits:
Noninterest-bearing demand deposits $ 956,482 $ 986,765 $ 959,494 $ 908,922 $ 833,500
Interest-bearing demand deposits 2,287,894 2,355,892 1,978,497 1,987,567 1,849,254
Savings 154,914 168,831 147,227 141,743 130,731
Money market accounts 1,307,051 1,287,686 1,213,992 1,256,605 1,298,885
Certificates of deposit - Retail 409,608 426,981 446,143 474,668 530,222
Certificates of deposit - Listing Service 31,382 31,382 31,631 31,631 32,128
Subtotal "customer" deposits 5,147,331 5,257,537 4,776,984 4,801,136 4,674,720
IB Demand - Brokered 85,000 85,000 85,000 110,000 110,000
Certificates of deposit - Brokered 33,818 33,804 33,791 33,777 33,764
Total deposits 5,266,149 5,376,341 4,895,775 4,944,913 4,818,484
Short-term borrowings - - - 15,000 15,000
FHLB advances - - - - -
Paycheck Protection Program Liquidity Facility (C) - 48,496 83,586 168,180 177,086
Finance lease liability 5,820 6,063 6,299 6,528 6,753
Operating lease liability 10,111 10,644 9,902 10,509 9,737
Subordinated debt, net (D) 132,701 132,629 132,557 181,837 181,794
Other liabilities (B) 116,824 123,098 125,110 120,219 154,466
TOTAL LIABILITIES 5,531,605 5,697,271 5,253,229 5,447,186 5,363,320
Shareholders' equity 546,388 543,014 538,459 522,441 527,122
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 6,077,993 $ 6,240,285 $ 5,791,688 $ 5,969,627 $ 5,890,442
Assets under management and / or administration at
Peapack-Gladstone Bank's Private Wealth Management
Division (market value, not included above-dollars in billions) 		$ 11.1 $ 10.3 $ 9.8 $ 9.4 $ 8.8

(A) Includes PPP loans of $14 million at December 31, 2021; $49 million at September 30, 2021; $84 million at June 30, 2021; $233 million at March 31, 2021; and $196 million at December 31, 2020.

(B) 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.

(C) Represents funding provided by the Federal Reserve for pledged PPP loans.

(D) The decrease was due to the redemption of a $50 million subordinated debt on June 30, 2021.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED BALANCE SHEET DATA
(Dollars in Thousands)
(Unaudited)

As of
Dec 31, Sept 30, June 30, March 31, Dec 31,
2021 2021 2021 2021 2020
Asset Quality:
Loans past due over 90 days and still accruing $ - $ - $ - $ - $ -
Nonaccrual loans (A) 15,573 25,925 5,962 11,767 11,410
Other real estate owned - - - 50 50
Total nonperforming assets $ 15,573 $ 25,925 $ 5,962 $ 11,817 $ 11,460
Nonperforming loans to total loans 0.32 % 0.56 % 0.13 % 0.27 % 0.26 %
Nonperforming assets to total assets 0.26 % 0.42 % 0.10 % 0.20 % 0.19 %
Performing TDRs (B)(C) $ 2,479 $ 416 $ 190 $ 197 $ 201
Loans past due 30 through 89 days and still accruing (D)(E) $ 8,606 $ 1,193 $ 1,678 $ 1,622 $ 5,053
Loans subject to special mention $ 116,490 $ 115,935 $ 148,601 $ 166,013 $ 162,103
Classified loans $ 50,702 $ 51,937 $ 11,178 $ 25,714 $ 37,771
Impaired loans $ 18,052 $ 26,341 $ 6,498 $ 11,964 $ 16,204
Allowance for loan and lease losses:
Beginning of period $ 65,133 $ 63,505 $ 67,536 $ 67,309 $ 66,145
Provision for loan and lease losses 3,750 1,600 900 225 2,350
(Charge-offs)/recoveries, net (7,186 ) 28 (4,931 ) 2 (1,186 )
End of period $ 61,697 $ 65,133 $ 63,505 $ 67,536 $ 67,309
ALLL to nonperforming loans 396.18 % 251.24 % 1065.16 % 573.94 % 589.91 %
ALLL to total loans 1.27 % 1.42 % 1.39 % 1.52 % 1.53 %
General ALLL to total loans (F) 1.19 % 1.26 % 1.38 % 1.45 % 1.47 %

(A) Increase at September 30, 2021 due to one large CRE loan with a retail component, located in Manhattan.

(B) Amounts reflect TDRs that are paying according to restructured terms.

(C) Amount excludes $1.1 million at December 31, 2021, $4.0 million at September 30, 2021, $3.9 million at June 30, 2021, $3.9 million at March 31, 2021 and $4.0 million at December 31, 2020 of TDRs included in nonaccrual loans.

(D) Includes $6.9 million for one equipment lease principally due to administrative issues with the servicer and at the lessee/borrower at December 31, 2021. Payment was received in January.

(E) December 31, 2020 includes $1.3 million of residential loans that are classified as delinquent due to an escrow payment shortage due to a recent change in escrow payment requirement.

(F) Total ALLL less specific reserves equals general ALLL.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED BALANCE SHEET DATA
(Dollars in Thousands)
(Unaudited)

December31, September 30, December31,
2021 2021 2020
Capital Adequacy
Equity to total assets (A) 8.99 % 8.70 % 8.95 %
Tangible Equity to tangible assets (B) 8.25 % 7.97 % 8.27 %
Book value per share (C) $ 29.70 $ 29.15 $ 27.78
Tangible Book Value per share (D) $ 27.05 $ 26.50 $ 25.47
December31, September 30, December31,
2021 2021 2020
Regulatory Capital - Holding Company
Tier I leverage $ 508,231 8.29% $ 501,188 8.56% $ 483,535 8.53%
Tier I capital to risk-weighted assets 508,231 10.62 501,188 10.97 483,535 11.93
Common equity tier I capital ratio
to risk-weighted assets 		508,207 10.62 501,159 10.97 483,500 11.93
Tier I & II capital to risk-weighted assets 700,790 14.64 691,044 15.12 716,210 17.67
Regulatory Capital - Bank
Tier I leverage (E) $ 612,762 9.99% $ 594,610 10.15% $ 549,575 9.71%
Tier I capital to risk-weighted assets (F) 612,762 12.80 594,610 13.01 549,575

13.55
Common equity tier I capital ratio
to risk-weighted assets (G) 		612,738 12.80 594,581 13.01 549,540
13.55
Tier I & II capital to risk-weighted assets (H) 672,614 14.05 651,841 14.26 600,478 14.81

(A) Equity to total assets is calculated as total shareholders' equity as a percentage of total assets at period end.

(B) Tangible equity and tangible assets are calculated by excluding the balance of intangible assets from shareholders' equity and total assets, respectively. Tangible equity as a percentage of tangible assets at period end is calculated by dividing tangible equity by tangible assets at period end. See Non-GAAP financial measures reconciliation included in these tables.

(C) Book value per common share is calculated by dividing shareholders' equity by period 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 period end common shares outstanding. See Non-GAAP financial measures reconciliation tables.

(E) Regulatory well capitalized standard = 5.00% ($307 million)

(F) Regulatory well capitalized standard = 8.00% ($383 million)

(G) Regulatory well capitalized standard = 6.50% ($311 million)

(H) Regulatory well capitalized standard = 10.00% ($479 million)

PEAPACK-GLADSTONE FINANCIAL CORPORATION
LOANS CLOSED
(Dollars in Thousands)
(Unaudited)

For the Quarters Ended
Dec 31, Sept 30, June 30, March 31, Dec 31,
2021 2021 2021 2021 2020
Residential loans retained $ 22,953 $ 36,845 $ 37,083 $ 15,814 $ 22,316
Residential loans sold 20,694 24,041 25,432 45,873 64,630
Total residential loans 43,647 60,886 62,515 61,687 86,946
Commercial real estate 16,134 14,944 12,243 38,363 -
Multifamily 162,740 120,716 255,820 85,009 1,184
Commercial (C&I) loans (A) (B) 341,886 143,121 141,285 129,141 218,235
SBA (C) 27,630 11,570 15,976 58,730 8,355
Wealth lines of credit (A) 7,500 10,020 3,200 2,475 3,925
Total commercial loans 555,890 300,371 428,524 313,718 231,699
Installment loans 94 178 25 63 690
Home equity lines of credit (A) 5,359 2,535 4,140 1,899 2,330
Total loans closed $ 604,990 $ 363,970 $ 495,204 $ 377,367 $ 321,665
For the Twelve Months Ended
Dec 31, Dec 31,
2021 2020
Residential loans retained $ 112,695 $ 88,373
Residential loans sold 116,040 175,603
Total residential loans 228,735 263,976
Commercial real estate 81,684 11,219
Multifamily 624,285 76,642
Commercial (C&I) loans (A) (B) 755,433 478,485
SBA (C) 113,906 622,798
Wealth lines of credit (A) 23,195 9,675
Total commercial loans 1,598,503 1,198,819
Installment loans 360 2,149
Home equity lines of credit (A) 13,933 15,001
Total loans closed $ 1,841,531 $ 1,479,945

(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 $9 million for the quarter ended June 30, 2021, $47 million for the quarter ended March 31, 2021 and $596 million for the twelve months ended December 31, 2020.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
AVERAGE BALANCE SHEET
UNAUDITED
THREE MONTHS ENDED
(Tax-Equivalent Basis, Dollars in Thousands)

December31, 2021 December31, 2020
Average Income/ Average Income/
Balance Expense Yield Balance Expense Yield
ASSETS:
Interest-earning assets:
Investments:
Taxable (A) $ 885,390 $ 3,104 1.40 % $ 636,417 $ 2,033 1.28 %
Tax-exempt (A) (B) 5,443 54 3.97 8,137 101 4.96
Loans (B) (C):
Mortgages 510,562 3,799 2.98 520,123 4,372 3.36
Commercial mortgages 2,209,160 17,708 3.21 1,865,953 14,796 3.17
Commercial 1,826,640 16,660 3.65 1,943,855 16,587 3.41
Commercial construction 20,426 176 3.45 10,376 108 4.16
Installment 33,400 253 3.03 44,581 320 2.87
Home equity 41,955 346 3.30 51,545 429 3.33
Other 270 6 8.89 281 6 8.54
Total loans 4,642,413 38,948 3.36 4,436,714 36,618 3.30
Federal funds sold - - - 102 - 0.25
Interest-earning deposits 513,650 178 0.14 614,024 148 0.10
Total interest-earning assets 6,046,896 42,284 2.80 % 5,695,394 38,900 2.73 %
Noninterest-earning assets:
Cash and due from banks 11,517 9,632
Allowance for loan and lease losses (65,542 ) (68,862 )
Premises and equipment 23,117 21,698
Other assets 182,154 238,856
Total noninterest-earning assets 151,246 201,324
Total assets $ 6,198,142 $ 5,896,718
LIABILITIES:
Interest-bearing deposits:
Checking $ 2,321,970 $ 1,327 0.23 % $ 1,850,917 $ 1,059 0.23 %
Money markets 1,290,334 678 0.21 1,273,681 811 0.25
Savings 152,570 20 0.05 128,195 17 0.05
Certificates of deposit - retail 453,127 725 0.64 602,068 2,106 1.40
Subtotal interest-bearing deposits 4,218,001 2,750 0.26 3,854,861 3,993 0.41
Interest-bearing demand - brokered 85,000 387 1.82 113,696 514 1.81
Certificates of deposit - brokered 33,810 267 3.16 33,756 267 3.16
Total interest-bearing deposits 4,336,811 3,404 0.31 4,002,313 4,774 0.48
Borrowings 25,890 25 0.39 244,753 616 1.01
Capital lease obligation 5,913 71 4.80 6,832 82 4.80
Subordinated debt 132,659 1,363 4.11 94,437 1,325 5.61
Total interest-bearing liabilities 4,501,273 4,863 0.43 % 4,348,335 6,797 0.63 %
Noninterest-bearing liabilities:
Demand deposits 1,042,477 858,004
Accrued expenses and other liabilities 111,357 166,933
Total noninterest-bearing liabilities 1,153,834 1,024,937
Shareholders' equity 543,035 523,446
Total liabilities and shareholders' equity $ 6,198,142 $ 5,896,718
Net interest income $ 37,421 $ 32,103
Net interest spread 2.37 % 2.10 %
Net interest margin (D) 2.46 % 2.25 %

(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
UNAUDITED
THREE MONTHS ENDED
(Tax-Equivalent Basis, Dollars in Thousands)

December31, 2021 September 30, 2021
Average Income/ Average Income/
Balance Expense Yield Balance Expense Yield
ASSETS:
Interest-earning assets:
Investments:
Taxable (A) $ 885,390 $ 3,104 1.40 % $ 820,574 $ 2,824 1.38 %
Tax-exempt (A) (B) 5,443 54 3.97 6,035 64 4.24
Loans (B) (C):
Mortgages 510,562 3,799 2.98 503,621 3,779 3.00
Commercial mortgages 2,209,160 17,708 3.21 2,133,259 16,114 3.02
Commercial 1,826,640 16,660 3.65 1,826,368 16,553 3.63
Commercial construction 20,426 176 3.45 24,596 198 3.22
Installment 33,400 253 3.03 32,219 245 3.04
Home equity 41,955 346 3.30 43,182 357 3.31
Other 270 6 8.89 252 5 7.94
Total loans 4,642,413 38,948 3.36 4,563,497 37,251 3.27
Federal funds sold - - - - - -
Interest-earning deposits 513,650 178 0.14 413,623 142 0.14
Total interest-earning assets 6,046,896 42,284 2.80 % 5,803,729 40,281 2.78 %
Noninterest-earning assets:
Cash and due from banks 11,517 8,592
Allowance for loan and lease losses (65,542 ) (64,100 )
Premises and equipment 23,117 23,311
Other assets 182,154 201,287
Total noninterest-earning assets 151,246 169,090
Total assets $ 6,198,142 $ 5,972,819
LIABILITIES:
Interest-bearing deposits:
Checking $ 2,321,970 $ 1,327 0.23 % $ 2,098,827 $ 1,177 0.22 %
Money markets 1,290,334 678 0.21 1,257,760 683 0.22
Savings 152,570 20 0.05 152,759 20 0.05
Certificates of deposit - retail 453,127 725 0.64 461,917 836 0.72
Subtotal interest-bearing deposits 4,218,001 2,750 0.26 3,971,263 2,716 0.27
Interest-bearing demand - brokered 85,000 387 1.82 85,000 385 1.81
Certificates of deposit - brokered 33,810 267 3.16 33,796 266 3.15
Total interest-bearing deposits 4,336,811 3,404 0.31 4,090,059 3,367 0.33
Borrowings 25,890 25 0.39 64,332 57 0.35
Capital lease obligation 5,913 71 4.80 6,147 74 4.82
Subordinated debt 132,659 1,363 4.11 132,588 1,358 4.10
Total interest-bearing liabilities 4,501,273 4,863 0.43 % 4,293,126 4,856 0.45 %
Noninterest-bearing liabilities:
Demand deposits 1,042,477 997,450
Accrued expenses and other liabilities 111,357 137,387
Total noninterest-bearing liabilities 1,153,834 1,134,837
Shareholders' equity 543,035 544,856
Total liabilities and shareholders' equity $ 6,198,142 $ 5,972,819
Net interest income $ 37,421 $ 35,425
Net interest spread 2.37 % 2.33 %
Net interest margin (D) 2.46 % 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
UNAUDITED
TWELVE MONTHS ENDED
(Tax-Equivalent Basis, Dollars in Thousands)

December31, 2021 December 31, 2020
Average Income/ Average Income/
Balance Expense Yield Balance Expense Yield
ASSETS:
Interest-earning assets:
Investments:
Taxable (A) $ 838,174 $ 11,577 1.38 % $ 510,245 $ 8,782 1.72 %
Tax-exempt (A) (B) 6,579 296 4.50 9,479 477 5.03
Loans (B) (C):
Mortgages 503,616 15,359 3.05 528,687 17,882 3.38
Commercial mortgages 2,032,318 63,298 3.11 1,958,262 64,541 3.30
Commercial 1,881,683 66,652 3.54 1,969,115 71,037 3.61
Commercial construction 20,420 692 3.39 5,932 295 4.97
Installment 34,390 1,030 3.00 51,007 1,532 3.00
Home equity 44,735 1,479 3.31 53,853 1,940 3.60
Other 247 21 8.50 311 29 9.32
Total loans 4,517,409 148,531 3.29 4,567,167 157,256 3.44
Federal funds sold 48 - 0.13 102 - 0.25
Interest-earning deposits 477,477 545 0.11 504,753 968 0.19
Total interest-earning assets 5,839,687 160,949 2.76 % 5,591,746 167,483 3.00 %
Noninterest-earning assets:
Cash and due from banks 10,396 7,025
Allowance for loan and lease losses (67,075 ) (61,401 )
Premises and equipment 23,094 21,455
Other assets 197,893 219,287
Total noninterest-earning assets 164,308 186,366
Total assets $ 6,003,995 $ 5,778,112
LIABILITIES:
Interest-bearing deposits:
Checking $ 2,078,658 $ 4,426 0.21 % $ 1,742,846 $ 7,279 0.42 %
Money markets 1,260,865 2,882 0.23 1,227,295 6,185 0.50
Savings 146,210 75 0.05 120,780 63 0.05
Certificates of deposit - retail 483,889 4,058 0.84 654,652 11,476 1.75
Subtotal interest-bearing deposits 3,969,622 11,441 0.29 3,745,573 25,003 0.67
Interest-bearing demand - brokered 96,301 1,721 1.79 143,388 2,773 1.93
Certificates of deposit - brokered 33,790 1,058 3.13 33,735 1,061 3.15
Total interest-bearing deposits 4,099,713 14,220 0.35 3,922,696 28,837 0.74
Borrowings 110,077 473 0.43 308,814 3,976 1.29
Capital lease obligation 6,260 300 4.79 7,157 343 4.79
Subordinated debt 156,888 7,013 4.47 86,246 4,992 5.79
Total interest-bearing liabilities 4,372,938 22,006 0.50 % 4,324,913 38,148 0.88 %
Noninterest-bearing liabilities:
Demand deposits 959,912 787,191
Accrued expenses and other liabilities 134,948 153,648
Total noninterest-bearing liabilities 1,094,860 940,839
Shareholders' equity 536,197 512,360
Total liabilities and shareholders' equity $ 6,003,995 $ 5,778,112
Net interest income $ 138,943 $ 129,335
Net interest spread 2.26 % 2.12 %
Net interest margin (D) 2.38 % 2.31 %

(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
Dec 31, Sept 30, June 30, March 31, Dec 31,
Tangible Book Value Per Share 2021 2021 2021 2021 2020
Shareholders' equity $ 546,388 $ 543,014 $ 538,459 $ 522,441 $ 527,122
Less: Intangible assets, net 48,902 49,333 43,156 43,524 43,891
Tangible equity $ 497,486 $ 493,681 $ 495,303 $ 478,917 $ 483,231
Period end shares outstanding 18,393,888 18,627,910 18,829,877 19,034,870 18,974,703
Tangible book value per share $ 27.05 $ 26.50 $ 26.30 $ 25.16 $ 25.47
Book value per share 29.70 29.15 28.60 27.45 27.78
Tangible Equity to Tangible Assets
Total assets $ 6,077,993 $ 6,240,285 $ 5,791,688 $ 5,969,627 $ 5,890,442
Less: Intangible assets, net 48,902 49,333 43,156 43,524 43,891
Tangible assets $ 6,029,091 $ 6,190,952 $ 5,748,532 $ 5,926,103 $ 5,846,551
Tangible equity to tangible assets 8.25 % 7.97 % 8.62 % 8.08 % 8.27 %
Equity to assets 8.99 % 8.70 % 9.30 % 8.75 % 8.95 %
Three Months Ended
Dec 31, Sept 30, June 30, March 31, Dec 31,
Return on Average Tangible Equity 2021 2021 2021 2021 2020
Net income $ 14,855 $ 14,171 $ 14,418 $ 13,178 $ 3,030
Average shareholders' equity $ 543,035 $ 544,856 $ 530,971 $ 525,643 $ 523,446
Less: Average intangible assets, net 49,151 48,757 43,366 43,742 40,336
Average tangible equity $ 493,884 $ 496,099 $ 487,605 $ 481,901 $ 483,110
Return on average tangible common equity 12.03 % 11.43 % 11.83 % 10.94 % 2.51 %
For the Twelve Months Ended
Dec 31, Dec 31,
Return on Average Tangible Equity 2021 2020
Net income $ 56,622 $ 26,192
Average shareholders' equity $ 536,197 $ 512,360
Less: Average intangible assets, net 46,275 40,186
Average tangible equity $ 489,922 $ 472,174
Return on average tangible common equity 11.56 % 5.55 %
Three Months Ended
Dec 31, Sept 30, June 30, March 31, Dec 31,
Efficiency Ratio 2021 2021 2021 2021 2020
Net interest income $ 37,212 $ 35,211 $ 33,845 $ 31,793 $ 31,735
Total other income 18,964 17,781 17,678 17,820 14,406
Add:
Securities losses/(gains), net 139 70 (42 ) 265 42
Less:
Loss/(gain) on loans held for sale
at lower of cost or fair value 265 - (1,125 ) (282 ) -
Income from life insurance proceeds - - (153 ) (302 ) -
Loss on swap termination - - 842 - -
Total recurring revenue $ 56,580 $ 53,062 $ 51,045 $ 49,294 $ 46,183
Operating expenses $ 31,704 $ 32,185 $ 30,684 $ 31,594 $ 39,249
Less:
FHLB prepayment penalty - - - - 4,784
Valuation allowance loans held for sale - - - - 4,425
Write-off of subordinated debt costs - - 648 - -
Swap valuation allowance 893 1,350 - - -
Severance expense - - - 1,532 -
Total operating expenses $ 30,811 $ 30,835 $ 30,036 $ 30,062 $ 30,040
Efficiency ratio 54.46 % 58.11 % 58.84 % 60.99 % 65.05 %
For the Twelve Months Ended
Dec 31, Dec 31,
Efficiency Ratio 2021 2020
Net interest income $ 138,061 $ 127,602
Total other income 72,243 61,760
Add:
Securities losses/(gains), net 432 (281 )
Less:
Loss/ on swap termination 842 -
Income from life insurance proceeds (455 ) -
(Gain) on loans held for sale
at lower of cost or fair value (1,142 ) (7,426 )
Total recurring revenue $ 209,981 $ 181,655
Operating expenses $ 126,167 $ 124,959
Less:
FHLB prepayment penalty - 4,784
Valuation allowance loans held for sale - 4,425
Write-off of subordinated debt costs 648 -
Swap valuation allowance 2,243 -
Severance expense 1,532 -
Total operating expenses $ 121,744 $ 115,750
Efficiency ratio 57.98 % 63.72 %
Source: Peapack-Gladstone Financial Corporation