• Peapack-Gladstone Financial Corporation Reports Strong First Quarter Results, Driven By Noninterest Income Totaling 36% Of Total Revenue

    Source: Nasdaq GlobeNewswire / 29 Apr 2021 08:00:03   America/Chicago

    Bedminster, NJ, April 29, 2021 (GLOBE NEWSWIRE) -- via NewMediaWire -- Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market: PGC) (the “Company”) announces its first quarter 2021 results.

    This earnings release should be read in conjunction with the Company’s Q1 2021 Investor Update (and Supplemental Financial Information), 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 $49.61 million, net income of $13.18 million and diluted earnings per share (“EPS”) of $0.67 for the quarter ended March 31, 2021, compared to $46.27 million, $1.37 million and $0.07, respectively, for the same three month period ended March 31, 2020.

    The 2021 quarter included increased noninterest income, principally wealth management income and income from capital markets activities (which includes mortgage banking income, loan level back-to-back swap income, SBA loan income, and corporate advisory fee income). The 2021 quarter also included a significantly reduced provision for loan losses when compared to the same quarter last year. The 2021 quarter included a $225,000 provision while the 2020 quarter included a $20.0 million provision, which was due to the environment at that time created by the COVID-19 pandemic, which led to increased qualitative loss factors when calculating the allowance for loan losses.

    The 2021 three-month period also included $1.5 million of severance expense related to certain staff reorganizations within several areas of the Bank.  The 2020 three-month period included a tax benefit of $3.2 million caused by the changes in the treatment of tax net operating losses (“NOL”) under the provisions of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.  

    As previously disclosed, on January 28, 2021, the Company authorized the repurchase of up to 948,735 shares, or approximately 5% of its outstanding shares. During the first quarter of 2021 the Company purchased 158,033 shares at an average price of $27.71 for a total cost of $4.4 million under this program.

    Douglas L. Kennedy, President and CEO, said, “Our capital is strong and we believe that purchasing the Company’s stock is an opportunity for us to effectively manage our excess capital, while taking advantage of the Company’s discounted valuation relative to peers.”

    Mr. Kennedy also said, “During the first quarter of 2021 the Company participated in the 2021 round of the Paycheck Protection Program (“PPP”) which created much needed funding to qualifying small businesses and organizations.  We are proud to say that during the quarter we assisted with over $142 million of PPP loans - $47 million processed, closed and funded by the Bank, and another $95 million referred directly to a third party for processing and funding.  The Company plans to sell the $46 million of loans in the second quarter to the same third party, who is extremely proficient in the servicing and forgiveness processes for PPP loans.”

    EXECUTIVE SUMMARY:

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

    March 2021 Quarter Compared to Prior Year Quarter

      Three Months Ended   Three Months Ended         
      March 31,   March 31,  Increase/ 
    (Dollars in millions, except per share data) 2021   2020  (Decrease) 
    Net interest income $31.79   $31.75  $0.04   0%
    Wealth management fee income (A)  12.13    9.96   2.17   22 
    Capital markets activity (B)  3.57    2.84   0.73   26 
    Other income  2.12    1.72   0.40   23 
    Total other income  17.82    14.52   3.30   23 
    Operating expenses (C)  31.59    28.24   3.35   12 
    Pretax income before provision for loan losses  18.02    18.03   (0.01)  (0)
    Provision for loan and lease losses (D)  0.23    20.00   (19.77)  (99)
    Pretax income  17.79    (1.97)  19.76  N/A 
    Income tax expense/(benefit) (E)  4.61    (3.34)  7.95  N/A 
    Net income (C) $13.18   $1.37  $11.81   862%
    Diluted EPS $0.6747   $0.0700  $0.6047   864%
                      
    Total Revenue (F) $49.61   $46.27  $3.34   7%
                      
    Return on average assets annualized  0.89%   0.11%  0.78     
    Return on average equity annualized  10.03%   1.08%  8.95     
    1. The March 2021 quarter included a full quarter of wealth management fee income and expense related to the December lift outs of teams from Lucas Capital Management (“Lucas”) and Noyes Capital Management (“Noyes”) - approximately $600,000 of wealth management fee income and approximately $400,000 of operating expenses were recorded in the 2021 quarter.
    2. Capital markets activity includes loan level back-to-back swap activities, the SBA lending and sale program, corporate advisory activities and mortgage banking activities. There were no fees related to loan level back-to-back swap activities in the quarter ended March 31, 2021, compared to $1.4 million in the March 2020 quarter.  
    3. The quarter ended March 31, 2021 included $1.5 million of severance expense related to certain staff reorganization within several areas of the Bank. This expense reduced pretax income before provision for loan losses and pretax income by $1.5 million each; and reduced net income by $1.1 million; diluted EPS by $0.06; ROA by 0.08%; and ROE by 0.86%, respectively.  
    4. The March 2020 quarter included a provision for loan and lease losses of $20.0 million, primarily due to the environment at that time created by the COVID-19 pandemic.
    5. The March 2020 quarter 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.
    6. Total revenue equals net interest income plus total other income.

    March 2021 Quarter Compared to Linked Quarter

      Three Months Ended  Three Months Ended          
      March 31,  December 31,   Increase/ 
    (Dollars in millions, except per share data) 2021  2020   (Decrease) 
    Net interest income $31.79  $31.74   $0.05   0%
    Wealth management fee income (A)  12.13   10.79    1.34   12 
    Capital markets activity (B)  3.57   1.90    1.67   88 
    Other income  2.12   1.71    0.41   24 
    Total other income  17.82   14.40    3.42   24 
    Operating expenses (C)  31.59   39.25    (7.66)  (20)
    Pretax income before provision for loan losses  18.02   6.89    11.13   162 
    Provision for loan and lease losses  0.23   2.35    (2.12)  (90)
    Pretax income  17.79   4.54    13.25   292 
    Income tax expense  4.61   1.51    3.10   205 
    Net income (C) $13.18  $3.03   $10.15   335%
    Diluted EPS $0.67  $0.16   $0.51   319%
                      
    Total Revenue (D) $49.61  $46.14   $3.47   8%
                      
    Return on average assets annualized  0.89%  0.21%   0.68     
    Return on average equity annualized  10.03%  2.32%   7.71     
    1. The March 2021 quarter included a full quarter of wealth management fee income and expense related to the lift outs of teams from Lucas and Noyes - approximately $600,000 of wealth management fee income and approximately $400,000 of operating expenses were recorded in the 2021 quarter.
    2. Capital markets activity includes loan level back-to-back swap activities, the SBA lending and sale program, corporate advisory and mortgage banking activities. 
    3. The quarter ended March 31, 2021 included $1.5 million of severance expense related to certain staff reorganization within several areas of the Bank. This expense reduced pretax income before provision for loan losses and pretax income by $1.5 million each; and reduced net income by $1.1 million; diluted EPS by $0.06; ROA by 0.08%; and ROE by 0.86%, respectively.   The December 31, 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.
    4. Total revenue equals net interest income plus total other income.

    The Company’s near-term priorities include:

    • Actively deploy/manage capital and liquidity by expanding our lending activities and executing on our recently announced stock repurchase program.
    • Continue to grow and expand our core Wealth Management, Commercial Banking and Capital Markets businesses through core operations, strategic hires, lift-outs, and acquisition of wealth management firms.
    • Expand our Net Interest Margin.
    • Investment in digital enhancements.
    • Continue to target fee income at 35% - 45% of total bank revenue.
    • Drive ROA to greater than 1% and return on average tangible common equity to greater than 14%.

    Other select highlights for the quarter included:

    • Total noninterest income totaled $17.8 million for the March 2021 quarter, accounting for 36% of total revenue (within our target of 35% to 45% of total revenue).
    • Wealth management fee income, which comprised approximately 24% of the Company’s total revenue for the three-months ended March 31, 2021, continues to contribute significantly to the Company’s diversified revenue sources.
    • The Company completed its first major corporate advisory/investment banking deal. 
    • As of March 31, 2021, total C&I loans (including PPP loans held in portfolio and held for sale) comprised 45% of the total loan portfolio. 
    • Deposits totaled $4.94 billion at March 31, 2021.  This reflected net growth of $504 million or 11% compared to $4.44 billion at March 31, 2020, despite managed reductions in higher cost CDs of $184 million. 
    • The Company’s net interest margin improved in the quarter when compared to the December 2020 quarter (see subsequent discussion of Net Interest Income / Net Interest Margin).
    • In addition to $1.4 billion (23% of total assets) of balance sheet liquidity (investments, interest-earning deposits and cash) as of March 31, 2021, the Company also has access to approximately $2.8 billion of available secured funding at the Federal Home Loan Bank and the Federal Reserve.
    • Nonperforming assets at March 31, 2021 were $11.8 million, or 0.20% of total assets. Loans past due 30 to 89 days totaled $1.6 million at March 31, 2021. Loans on deferral status as of March 31, 2021 were $43 million (less than 1% of total loans).
    • As previously announced, the Company opened a retail location in Boonton/Mountain Lakes, New Jersey. 

      

    SUPPLEMENTAL QUARTERLY DETAILS:

    Wealth Management Business

    In the March 2021 quarter, the Bank’s wealth management business generated $12.13 million in fee income, compared to $9.96 million for the March 2020 quarter, and $10.79 million for the December 2020 quarter.

    The market value of the Company’s AUM/AUA increased from $8.8 billion at December 31, 2020 to $9.4 billion at March 31, 2021.

    In the quarter ended March 31, 2021 the Company successfully integrated the previously announced teams from Lucas and Noyes which combined added approximately $400 million in AUM/AUA during the fourth quarter of 2020.

    John P. Babcock, President of the Peapack Private Wealth Management division, said, “2021 showed continued strong new business, new client acquisition and client retention. We ended 2020 with a very strong Q4 and this continued into Q1 2021 with gross inflows of over $250 million.” Babcock went on to note, “We continue to look to grow our wealth business organically and through selective acquisition.  At year-end 2020, we combined two of our acquired RIAs – Lassus Wherley Associates and Point View Wealth Management into the Peapack Private bank entity as well as on-boarded two lift outs in Morristown and Red Bank NJ.  We continue to make significant progress on our infrastructure consolidation including launching our new trading platform and a new CRM system, as well as adding more resources to our financial planning team.”

    Loans / Commercial Banking

    Total loans of $4.44 billion at March 31, 2021 (including PPP loans of $233 million, of which $46 million are held for sale) increased $36 million from $4.40 billion at December 31, 2020. Excluding net PPP loan growth during the March 2021 quarter, loan balances were relatively flat to year-end. Loan origination levels for the March 2021 quarter were approximately $330 million (excluding PPP loans), but paydown and payoff activity remains robust.

    Total C&I loans (including the PPP loans) at March 31, 2021 were $1.98 billion or 45% of the total loan portfolio. While C&I origination levels have been strong, as noted just above, paydown and payoff activity has also been robust, including paydowns of several large lines of credit, as well as the Company’s workout and asset recovery efforts, including the workout and recovery of several nonaccrual and/or classified credits in 2021.

    Mr. Kennedy noted, “Our commercial loan (C&I, Equipment Finance and CRE/Multifamily) pipelines are strong going into the second quarter, standing at approximately $350 million with likelihood of closing during the second quarter of 2021.”

    Mr. Kennedy also noted, “As I have mentioned in the past, our Corporate Advisory business, which gives us the capability to engage in high level strategic debt, capital and valuation analysis, enables us to provide a unique boutique level of service, giving us a competitive advantage over many of our peers. Our Corporate Advisory pipelines are also strong.”

    The Company maintains a well-diversified loan portfolio, as noted in the Q1 2021 Investor Update (and Supplemental Financial Information).

    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 March 31, 2021 were $4.94 billion reflecting an increase of $504 million when compared to $4.44 billion at March 31, 2020 and an increase of $126 million from $4.82 billion at December 31, 2020. Compared to the quarter ended March 31, 2020, noninterest bearing demand deposits increased $328 million and interest-bearing demand increased $307 million, while brokered deposits declined $70 million, and higher costing CDs declined $184 million.  Mr. Kennedy noted, “Our noninterest bearing deposits comprise 19% of our customer deposits, and only 17% of our total deposits are not covered by FDIC insurance; both statistics reinforce the ‘core’ nature of our deposit base.”

    For the quarter ended March 31, 2021, the Company’s balance sheet liquidity (investments, interest-earning deposits and cash) totaled $1.4 billion (or 23% of assets).  In addition to the $1.4 billion of balance sheet liquidity, the Company also had approximately $1.8 billion of secured funding available from the Federal Home Loan Bank. Additionally, the Company had $990 million of secured funding available from the Federal Reserve Discount Window.

    Mr. Kennedy noted, “As a commercial bank, a large portion of our loans reprice when the Fed changes rates. The 150-basis point reduction in target Fed Funds near the end of the first quarter of 2020 reduced the Company’s yield earned on assets. However, we were able to and we continue to strategically reprice our deposits over time to offset much of that decline. Further, when interest rates rise, we expect that our net interest income will improve. Our current modeling indicates that net interest income would improve 6.3% with an immediate 100 basis points rise in rates.”

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

     Three Months Ended  Three Months Ended  Three Months Ended 
     March 31, 2021  December 31, 2020  March 31, 2020 
     NII  NIM  NII  NIM  NII  NIM 
                            
    NII/NIM excluding the below$30,565  2.49%  $30,897  2.51%  $31,279  2.60% 
    Prepayment premiums received on loan paydowns 704  0.05%   413  0.02%   525  0.05% 
    Effect of maintaining excess interest earning cash (195) -0.21%   (206) -0.24%   (57) -0.08% 
    Effect of PPP loans 719  -0.05%   631  -0.04%   —  0.00% 
    NII/NIM as reported$31,793  2.28%  $31,735  2.25%  $31,747  2.57% 

     

    As shown above, the Company’s reported NIM increased 3 basis points compared to the linked quarter. The Bank strategically lowered its cost of deposits by 8 basis points and generated an additional $291,000 of prepayment premiums compared to the linked quarter. These positives were partially offset by a reduced yield on loans (decline of 4 basis points) and the full 90-day impact from the mid-December 2020 $100 million, 3.5% subordinated debt issuance. 

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

    • $415 million of CDs at an average rate of 0.76% mature within one year.
    • $67 million of term money market accounts at an average rate of 0.50% are set to reprice on July 1, 2021.
    • $50 million of subordinated debt at a coupon of 6% becomes callable on June 30, 2021.

    Income from Capital Markets Activities

    Noninterest income from Capital Markets activities (the SBA lending and sale program, mortgage banking activity, corporate advisory activity and loan level back-to-back swap activities) totaled $3.57 million for the March 2021 quarter compared to $1.90 million for the December 2020 quarter and $2.84 million for the March 2020 quarter.  The March 2021 quarter results were driven by a $1.45 million gain on sale of SBA loans, which was benefitted by certain changes to SBA lending requirements. The March 2021 and December 2020 quarters reflected increased mortgage banking activity due to greater refinance activity in the low rate environment. During March 2021, the Company also recorded $1.1 million of corporate advisory fee income.  This included the Company’s first major corporate advisory/investment banking event. These transactions tend to be larger and take longer to complete. As noted previously, the pipeline of such business is fairly robust.  The March 2021 quarter 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. The March 2020 quarter included $1.4 million of such income.

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

    The March 2021 quarter included approximately $300,000 of additional Bank Owned life Insurance income, compared to prior quarters, due to receipt of life insurance proceeds. Such proceeds were nontaxable. The 2021 quarter also included a $282,000 gain on sale of $8 million of loans that had some past payment issues and were classified as held for sale as of December 31, 2020. Partially offsetting these positives, the Company recorded a $265,000 securities loss related to the valuation of certain community investment equity securities. 

    Operating Expenses

    The Company’s total operating expenses were $31.59 million for the quarter ended March 31, 2021, compared to $39.25 million for the December 2020 quarter and $28.24 million for the March 2020 quarter. The March 2021 quarter included $1.5 million of severance expense related to certain staff reorganization within several areas of the Bank, as well as a full quarter’s worth of expense related to Lucas and Noyes (approximately $400,000). The December 2020 quarter included the prepayment of FHLB advances ($4.8 million), a valuation allowance on a loan held for sale ($4.4 million) and consolidation of two private banking offices ($210,000). 

    Mr. Kennedy noted, “While we continue to manage expenses closely and prudently, we will invest in digital enhancements to improve the client experience and grow and expand our core wealth management and commercial banking businesses, including lift-outs, strategic hires, and wealth M&A.”

    Income Taxes

    The effective tax rate for the three months ended March 31, 2021 was 25.94%, as compared to 33.29% for the December 2020 quarter and a tax benefit in the quarter ended March 31, 2020. The March 31, 2021 benefitted from life insurance proceeds that were not taxable and from the vesting of restricted stock at prices higher than grant prices. A tax return to book adjustment recorded in the December 2020 quarter, coupled with reduced pretax income in the that quarter, increased the December 2020 effective tax rate by approximately 5%.    

    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

    For further details, see the Q1 2021 Investor Update (and Supplemental Financial Information).

    Nonperforming assets at March 31, 2021 (which does not include troubled debt restructured loans that are performing in accordance with their terms) were $11.8 million, or 0.20% of total assets, up slightly from $11.5 million, or 0.19% of total assets, at December 31, 2020 and down significantly from $29.4 million, or 0.50% of total assets, at March 31, 2020.  Total loans past due 30 through 89 days and still accruing declined to $1.6 million at March 31, 2021, from $5.1 million at December 31, 2020 and $8.3 million at March 31, 2020.  During the latter half of 2020 and first quarter of 2021, the Company’s asset recovery and workout efforts reduced nonperforming and classified assets.   

    For the quarter ended March 31, 2021, the Company’s provision for loan and lease losses was $225,000 compared to $2.35 million for the December 2020 quarter and $20.00 million for the March 2020 quarter. The decreased provision for loan and lease losses in the 2021 quarter when compared to the 2020 quarters reflect the reduced qualitative loss factors when calculating the allowance for loan losses as loan deferrals entered into during the COVID-19 pandemic have come down significantly from prior year (declined from $914 million at June 30, 2020 to $43 million at March 31, 2021). The Company’s provision for loan and lease losses (and its allowance for loan and lease losses) 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 March 31, 2021, the allowance for loan and lease losses was $67.54 million (1.52% of total loans), compared to $67.31 million at December 31, 2020 (1.53% of total loans), and $63.78 million at March 31, 2020 (1.44% of total loans).  The Company has elected to take additional time to adopt CECL and will implement effective January 1, 2022.

    Capital

    The Company’s capital position during the March 2021 quarter was benefitted by net income of $13.18 million which was offset by the purchase of shares through the Company’s stock repurchase program.  The Company purchased 158,033 shares at an average price of $27.71 for a total cost of $4.4 million.  Capital was also impacted by an increase in the unrealized loss on our securities of $13.4 million during the March 2021 quarter, as medium-term market interest rates rose during the quarter impacting the market value of securities.

    The Company’s and Bank’s capital ratios at March 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. The proceeds raised will be used for general corporate purposes, which will include stock repurchases and could potentially include redemption of the Company’s existing 6% subordinated debt and acquisitions of wealth management firms.

    The Company employs quarterly capital stress testing run under multiple scenarios, including a no growth, severely adverse case. In such case as of December 31, 2020, the Bank remains well capitalized over a two-year stress period. With a Pandemic stress overlay on this case, the Bank still remains well capitalized over the two-year stress period. For further details, see the Q1 2021 Investor Update (and Supplemental Financial Information).

    As previously announced, on April 27, 2021, the Company declared a cash dividend of $0.05 per share payable on May 25, 2021 to shareholders of record on May 11, 2021.

    ABOUT THE COMPANY

    Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $6.0 billion and assets under management/administration of $9.4 billion as of March 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 inability to successfully grow our business and implement our strategic plan, including an inability to generate revenues to offset the increased personnel and other costs related to the strategic plan;
    • the impact of anticipated higher operating expenses in 2021 and beyond;
    • our inability to successfully integrate wealth management firm acquisitions;
    • our inability to manage our growth;
    • our inability to successfully integrate our expanded employee base;
    • an unexpected decline in the economy, in particular in our New Jersey and New York market areas;
    • declines in our net interest margin caused by the interest rate environment and/or our highly competitive market;
    • declines in value in our investment portfolio;
    • impact on our business 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 nonperforming loans;
    • changes in interest rates;
    • decline in real estate values within our market areas;
    • legislative and regulatory actions (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Basel III and related regulations) that may result in increased compliance costs;
    • successful cyberattacks against our IT infrastructure and that of our IT and third-party providers;
    • higher than expected FDIC insurance premiums;
    • adverse weather conditions;
    • our inability to successfully generate new business in new geographic markets;
    • our inability to execute upon new business initiatives;
    • our lack of liquidity to fund our various cash obligations;
    • reduction in our lower-cost funding sources;
    • our inability to adapt to technological changes;
    • claims and litigation pertaining to fiduciary responsibility, environmental laws and other matters;
    • 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 outbreak 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 and when and whether the gradual reopening of businesses will result in a meaningful increase in economic activity.  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 is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, 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 have to be increased 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 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.

     (Tables to follow)

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

      For the Three Months Ended 
      March 31,  Dec 31,  Sept 30,  June 30,  March 31, 
      2021  2020  2020  2020  2020 
    Income Statement Data:                    
    Interest income $38,239  $38,532  $40,174  $41,649  $45,395 
    Interest expense  6,446   6,797   8,025   9,678   13,648 
    Net interest income  31,793   31,735   32,149   31,971   31,747 
    Wealth management fee income  12,131   10,791   10,119   9,996   9,955 
    Service charges and fees  846   859   785   695   816 
    Bank owned life insurance  611   313   314   318   328 
    Gain on loans held for sale at fair value
       (Mortgage banking) (A)    		  1,025   1,470   954   550   292 
    Gain/(loss) on loans held for sale at lower of cost or
       fair value(B)    		  282   —   7,429   —   (3)
    Fee income related to loan level, back-to-back
       swaps (A)    		  —   —   —   202   1,418 
    Gain on sale of SBA loans (A)  1,449   375   79   258   1,054 
    Corporate advisory fee income (A)  1,098   50   75   65   75 
    Other income  643   590   456   417   384 
    Securities (losses)/gains, net  (265)  (42)  —   125   198 
    Total other income  17,820   14,406   20,211   12,626   14,517 
    Salaries and employee benefits (C)  21,990   19,902   19,202   19,186   19,226 
    Premises and equipment  4,113   4,189   4,109   4,036   4,043 
    FDIC insurance expense  585   665   605   455   250 
    FHLB prepayment penalty  —   4,784   —   —   — 
    Valuation allowance loans held for sale (D)  —   4,425   —   —   — 
    Other expenses  4,906   5,284   4,545   5,337   4,716 
    Total operating expenses  31,594   39,249   28,461   29,014   28,235 
    Pretax income before provision for loan losses  18,019   6,892   23,899   15,583   18,029 
    Provision for loan and lease losses (E)  225   2,350   5,150   4,900   20,000 
    Income/(loss) before income taxes  17,794   4,542   18,749   10,683   (1,971)
    Income tax expense/(benefit) (F)  4,616   1,512   5,202   2,441   (3,344)
    Net income $13,178  $3,030  $13,547  $8,242  $1,373 
                         
    Total revenue (G) $49,613  $46,141  $52,360  $44,597  $46,264 
    Per Common Share Data:                    
    Earnings per share (basic) $0.70  $0.16  $0.72  $0.44  $0.07 
    Earnings per share (diluted)  0.67   0.16   0.71   0.43   0.07 
    Weighted average number of common
       shares outstanding:    		                    
    Basic  18,950,305   18,947,864   18,908,337   18,872,070   18,858,343 
    Diluted  19,531,689   19,334,569   19,132,650   19,059,822   19,079,575 
    Performance Ratios:                    
    Return on average assets annualized (ROAA)  0.89%  0.21%  0.89%  0.56%  0.11%
    Return on average equity annualized (ROAE)  10.03%  2.32%  10.53%  6.56%  1.08%
    Return on average tangible common equity (ROATCE) (H)  10.94%  2.51%  11.41%  7.13%  1.17%
    Net interest margin (tax-equivalent basis)  2.28%  2.25%  2.20%  2.27%  2.57%
    GAAP efficiency ratio (I)  63.68%  85.06%  54.36%  65.06%  61.03%
    Operating expenses / average assets annualized  2.14%  2.66%  1.86%  1.97%  2.18%
    1. 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.
    2. Includes gain on sale of PPP loans of $355 million completed in the September quarter.
    3. The March 2021 quarter included $1.5 million of severance expense related to corporate restructuring.
    4. The December 2020 quarter reflects a $4.4 million write-down of a commercial real estate held for sale loan associated with an assisted living facility.
    5. The March 2020, June 2020 and September 2020 quarters included a higher provision for loan and lease losses primarily due to the environment created by the COVID-19 pandemic.
    6. The March 2020 quarter 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.
    7. Total revenue equals net interest income plus total other income.
    8. 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.
    9. Calculated as total operating expenses as a percentage of total revenue.  For Non-GAAP efficiency ratio, see Non-GAAP financial measures reconciliation included in these tables.

    PEAPACK-GLADSTONE FINANCIAL CORPORATION
    CONSOLIDATED STATEMENTS OF CONDITION
    (Dollars in Thousands)
    (Unaudited)

      As of 
      March 31,  Dec 31,  Sept 30,  June 30,  March 31, 
      2021  2020  2020  2020  2020 
    ASSETS                    
    Cash and due from banks $8,159  $10,629  $8,400  $5,608  $6,171 
    Federal funds sold  102   102   102   102   102 
    Interest-earning deposits  468,276   642,591   670,863   617,117   767,730 
    Total cash and cash equivalents  476,537   653,322   679,365   622,827   774,003 
    Securities available for sale  875,301   622,689   596,929   539,742   400,558 
    Equity security  14,852   15,117   15,159   15,159   14,034 
    FHLB and FRB stock, at cost  13,699   13,709   18,433   18,598   40,871 
    Residential mortgage  498,884   520,188   532,120   536,015   532,063 
    Multifamily mortgage  1,178,940   1,127,198   1,168,796   1,178,494   1,203,487 
    Commercial mortgage  697,599   694,034   722,678   761,910   760,648 
    Commercial loans (A)  1,982,570   1,975,337   1,930,984   2,316,125   1,810,214 
    Consumer loans  36,519   37,016   51,859   53,111   53,365 
    Home equity lines of credit  45,624   50,547   52,194   54,006   55,856 
    Other loans  199   225   260   272   347 
    Total loans  4,440,335   4,404,545   4,458,891   4,899,933   4,415,980 
    Less: Allowances for loan and lease losses  67,536   67,309   66,145   66,065   63,783 
    Net loans  4,372,799   4,337,236   4,392,746   4,833,868   4,352,197 
    Premises and equipment  23,260   21,609   21,668   21,449   21,243 
    Other real estate owned  50   50   50   50   50 
    Accrued interest receivable  23,916   22,495   22,192   15,956   11,816 
    Bank owned life insurance  46,448   46,809   46,645   46,479   46,309 
    Goodwill and other intangible assets  43,524   43,891   39,622   39,943   40,265 
    Finance lease right-of-use assets  4,143   4,330   4,517   4,704   4,891 
    Operating lease right-of-use assets  10,186   9,421   10,011   10,810   11,553 
    Other assets (B)  64,912   99,764   110,770   111,630   113,668 
    TOTAL ASSETS $5,969,627  $5,890,442  $5,958,107  $6,281,215  $5,831,458 
                         
    LIABILITIES                    
    Deposits:                    
    Noninterest-bearing demand deposits $908,922  $833,500  $838,307  $911,989  $581,085 
    Interest-bearing demand deposits  1,987,567   1,849,254   1,858,529   1,804,102   1,680,452 
    Savings  141,743   130,731   127,737   123,140   112,668 
    Money market accounts  1,256,605   1,298,885   1,251,349   1,183,603   1,163,410 
    Certificates of deposit – Retail  474,668   530,222   586,801   629,941   651,000 
    Certificates of deposit – Listing Service  31,631   32,128   32,677   35,327   38,895 
    Subtotal “customer” deposits  4,801,136   4,674,720   4,695,400   4,688,102   4,227,510 
    IB Demand – Brokered  110,000   110,000   130,000   130,000   180,000 
    Certificates of deposit – Brokered  33,777   33,764   33,750   33,736   33,723 
    Total deposits  4,944,913   4,818,484   4,859,150   4,851,838   4,441,233 
    Short-term borrowings  15,000   15,000   15,000   15,000   515,000 
    FHLB advances (C)  —   —   105,000   105,000   105,000 
    Paycheck Protection Program Liquidity Facility (D)  168,180   177,086   183,790   535,837   — 
    Finance lease liability  6,528   6,753   6,976   7,196   7,402 
    Operating lease liability  10,509   9,737   10,318   11,116   11,852 
    Subordinated debt, net (E)  181,837   181,794   83,585   83,529   83,473 
    Other liabilities (B)  120,219   154,466   156,472   163,719   160,173 
    Due to brokers  —   —   15,088   —   10,885 
    TOTAL LIABILITIES  5,447,186   5,363,320   5,435,379   5,773,235   5,335,018 
    Shareholders’ equity  522,441   527,122   522,728   507,980   496,440 
    TOTAL LIABILITIES AND                    
    SHAREHOLDERS’ EQUITY $5,969,627  $5,890,442  $5,958,107  $6,281,215  $5,831,458 
    Assets under management and / or administration at
       Peapack-Gladstone Bank’s Private Wealth Management
       Division (market value, not included above-dollars in billions)    		 $9.4  $8.8  $7.6  $7.2  $6.4 

     
    1. Includes PPP loans of $233 million at March 31, 2021, $196 million at December 31, 2020, $202 million at September 30, 2020 and $547 million at June 30, 2020.
    2. 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.
    3. The Company prepaid $105 million of FHLB advances with a weighted-average rate of 3.20% during the December 2020 quarter.
    4. Represents funding provided by the Federal Reserve for pledged PPP loans.
    5. The increase was due to the completion of a $100 million subordinated debt offering in December 22, 2020.

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

      As of 
      March 31,  Dec 31,  Sept 30,  June 30,  March 31, 
      2021  2020  2020  2020  2020 
    Asset Quality:                    
    Loans past due over 90 days and still accruing $—  $—  $—  $—  $— 
    Nonaccrual loans (A)  11,767   11,410   8,611   26,697   29,324 
    Other real estate owned  50   50   50   50   50 
    Total nonperforming assets $11,817  $11,460  $8,661  $26,747  $29,374 
                         
    Nonperforming loans to total loans  0.27%  0.26%  0.19%  0.54%  0.66%
    Nonperforming assets to total assets  0.20%  0.19%  0.15%  0.43%  0.50%
                         
    Performing TDRs (B)(C) $197  $201  $2,278  $2,376  $2,389 
                         
    Loans past due 30 through 89 days and still accruing (D)(E) $1,622  $5,053  $6,609  $3,785  $8,261 
                         
    Loans subject to special mention $166,013  $162,103  $129,700  $27,922  $13,222 
                         
    Classified loans $25,714  $37,771  $41,263  $63,562  $58,938 
                         
    Impaired loans $11,964  $16,204  $15,514  $33,708  $36,369 
                         
    Allowance for loan and lease losses:                    
    Beginning of period $67,309  $66,145  $66,065  $63,783  $43,676 
    Provision for loan and lease losses  225   2,350   5,150   4,900   20,000 
    (Charge-offs)/recoveries, net  2   (1,186)  (5,070)  (2,618)  107 
    End of period $67,536  $67,309  $66,145  $66,065  $63,783 
                         
    ALLL to nonperforming loans  573.94%  589.91%  768.15%  247.46%  217.51%
    ALLL to total loans  1.52%  1.53%  1.48%  1.35%  1.44%
    General ALLL to total loans (F)  1.45%  1.47%  1.48%  1.26%  1.30%
    1. Excludes one commercial loan held for sale of $5.6 million at March 31, 2021. Excludes residential and commercial loans held for sale of $8.5 million at December 31, 2020.  Excludes one commercial loan held for sale of $10.0 million at September 30, 2020.
    2. Amounts reflect TDRs that are paying according to restructured terms.
    3. Amount does not include $3.9 million at March 31, 2021, $4.0 million at December 31, 2020, $5.2 million at September 30, 2020, $23.2 million at June 30, 2020 and $25.9 million at March 31, 2020 of TDRs included in nonaccrual loans.
    4. Excludes a residential loan held for sale of $93,000 at December 31, 2020.
    5. 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.
    6. Total ALLL less specific reserves equals general ALLL.

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

      March 31,  December 31,  March 31, 
      2021  2020  2020 
    Capital Adequacy                  
    Equity to total assets (A)(J)    8.75%    8.95%    8.51%
    Tangible Equity to tangible assets (B)    8.08%    8.27%    7.88%
    Tangible Equity to tangible assets excluding
       PPP loans (C)    		    8.41%    8.55%    7.88%
    Book value per share (D)   $27.45    $27.78    $26.33 
    Tangible Book Value per share (E)   $25.16    $25.47    $24.20 


      March 31,  December 31,  March 31,
      2021  2020  2020
    Regulatory Capital – Holding Company                       
    Tier I leverage $491,384  8.66%  $483,535  8.53%  $458,640  8.93%
    Tier I capital to risk-weighted assets  491,384   12.00   483,535  11.93   458,640  10.71
    Common equity tier I capital ratio
       to risk-weighted assets    		  491,355   12.00   483,500  11.93   458,639  10.71
    Tier I & II capital to risk-weighted assets  724,599   17.70   716,210  17.67   595,770  13.91
                            
    Regulatory Capital – Bank                       
    Tier I leverage (F) $564,533  9.95%  $549,575  9.71%  $527,433  10.28%
    Tier I capital to risk-weighted assets (G)  564,533  13.79   549,575  13.55   527,433   12.33
    Common equity tier I capital ratio
       to risk-weighted assets (H)    		  564,504  13.78   549,540  13.55   527,432   12.33
    Tier I & II capital to risk-weighted assets (I)  615,925  15.04   600,478  14.81   581,025  13.58
    1. Equity to total assets is calculated as total shareholders’ equity as a percentage of total assets at period end.
    2. 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.
    3. Tangible equity and tangible assets excluding PPP loans are calculated by excluding the balance of intangible assets from shareholders’ equity and excluding the balance of intangible assets and PPP loans from total assets. Tangible equity as a percentage of tangible assets excluding PPP loans at period end is calculated by dividing tangible equity by tangible assets excluding PPP loans at period end.  See Non-GAAP financial measures reconciliation included in these tables.
    4. Book value per common share is calculated by dividing shareholders’ equity by period end common shares outstanding
    5. Tangible book value per 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.
    6. Regulatory well capitalized standard = 5.00% ($284 million)
    7. Regulatory well capitalized standard = 8.00% ($328 million)
    8. Regulatory well capitalized standard = 6.50% ($266 million)
    9. Regulatory well capitalized standard = 10.00% ($410 million)
    10. PPP loans with a balance of $233 million and $196 million increased total assets at March 31, 2021 and December 31, 2020, respectively.

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

      For the Quarters Ended
      March 31,  Dec 31,  Sept 30,  June 30,  March 31,
      2021  2020  2020  2020  2020
    Residential loans retained $15,814  $22,316  $32,599  $18,627  $14,831
    Residential loans sold  45,873   64,630   54,521   37,061   19,391
    Total residential loans  61,687   86,946   87,120   55,688   34,222
    Commercial real estate  38,363   —   1,613   748   8,858
    Multifamily  85,009   1,184   1,500   11,960   61,998
    Commercial (C&I) loans (A) (B)  129,141   218,235   118,048   99,294   42,908
    SBA (C)  58,730   8,355   4,962   595,651   13,830
    Wealth lines of credit (A)  2,475   3,925   2,000   500   3,250
    Total commercial loans  313,718   231,699   128,123   708,153   130,844
    Installment loans  63   690   253   950   256
    Home equity lines of credit (A)  1,899   2,330   4,759   4,280   3,632
    Total loans closed $377,367  $321,665  $220,255  $769,071  $168,954
    1. Includes loans and lines of credit that closed in the period but not necessarily funded.
    2. Includes equipment finance.
    3. Includes PPP loans of $47 million for the quarter ended March 31, 2021 and $596 million for the three months ended June 30, 2020.

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

      March 31, 2021  March 31, 2020 
      Average  Income/      Average  Income/     
      Balance  Expense  Yield  Balance  Expense  Yield 
    ASSETS:                        
    Interest-earning assets:                        
    Investments:                        
    Taxable (A) $761,187  $2,629   1.38% $411,806  $2,459   2.39%
    Tax-exempt (A) (B)  7,980   98   4.91   10,534   131   4.97 
                             
    Loans (B) (C):                        
    Mortgages  501,590   3,954   3.15   535,114   4,576   3.42 
    Commercial mortgages  1,840,363   14,420   3.13   1,955,808   18,483   3.78 
    Commercial  1,932,692   16,455   3.41   1,758,137   18,593   4.23 
    Commercial construction  15,606   139   3.56   5,629   88   6.25 
    Installment  37,695   276   2.93   53,983   464   3.44 
    Home equity  48,853   399   3.27   55,654   614   4.41 
    Other  246   5   8.13   364   9   9.89 
    Total loans  4,377,045   35,648   3.26   4,364,689   42,827   3.92 
    Federal funds sold  102   —   0.25   102   —   0.25 
    Interest-earning deposits  555,331   128   0.09   251,566   552   0.88 
    Total interest-earning assets  5,701,645   38,503   2.70%  5,038,697   45,969   3.65%
    Noninterest-earning assets:                        
    Cash and due from banks  11,129           5,517         
    Allowance for loan and lease losses  (71,160)          (44,368)        
    Premises and equipment  22,634           21,145         
    Other assets  228,134           161,452         
    Total noninterest-earning assets  190,737           143,746         
    Total assets $5,892,382          $5,182,443         
                             
    LIABILITIES:                        
    Interest-bearing deposits:                        
    Checking $1,908,380  $978   0.20% $1,540,798  $3,447   0.89%
    Money markets  1,259,597   794   0.25   1,192,049   2,981   1.00 
    Savings  135,202   17   0.05   110,905   15   0.05 
    Certificates of deposit – retail  533,488   1,470   1.10   698,019   3,694   2.12 
    Subtotal interest-bearing deposits  3,836,667   3,259   0.34   3,541,771   10,137   1.14 
    Interest-bearing demand – brokered  110,000   493   1.79   180,000   923   2.05 
    Certificates of deposit – brokered  33,769   261   3.09   33,715   263   3.12 
    Total interest-bearing deposits  3,980,436   4,013   0.40   3,755,486   11,323   1.21 
    Borrowings  186,006   209   0.45   183,398   1,012   2.21 
    Capital lease obligation  6,608   79   4.78   7,475   90   4.82 
    Subordinated debt  181,795   2,145   4.72   83,439   1,223   5.86 
    Total interest-bearing liabilities  4,354,845   6,446   0.59%  4,029,798   13,648   1.35%
    Noninterest-bearing liabilities:                        
    Demand deposits  848,325           542,557         
    Accrued expenses and other liabilities  163,569           101,662         
    Total noninterest-bearing liabilities  1,011,894           644,219         
    Shareholders’ equity  525,643           508,426         
    Total liabilities and shareholders’ equity $5,892,382          $5,182,443         
    Net interest income     $32,057          $32,321     
    Net interest spread          2.11%          2.30%
    Net interest margin (D)          2.28%          2.57%
    1. Average balances for available for sale securities are based on amortized cost.
    2. Interest income is presented on a tax-equivalent basis using a 21% federal tax rate.
    3. Loans are stated net of unearned income and include nonaccrual loans.
    4. Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.


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

      March 31, 2021  December 31, 2020 
      Average  Income/      Average  Income/     
      Balance  Expense  Yield  Balance  Expense  Yield 
    ASSETS:                        
    Interest-earning assets:                        
    Investments:                        
    Taxable (A) $761,187  $2,629   1.38% $636,417  $2,033   1.28%
    Tax-exempt (A) (B)  7,980   98   4.91   8,137   101   4.96 
                             
    Loans (B) (C):                        
    Mortgages  501,590   3,954   3.15   520,123   4,372   3.36 
    Commercial mortgages  1,840,363   14,420   3.13   1,865,953   14,796   3.17 
    Commercial  1,932,692   16,455   3.41   1,943,855   16,587   3.41 
    Commercial construction  15,606   139   3.56   10,376   108   4.16 
    Installment  37,695   276   2.93   44,581   320   2.87 
    Home equity  48,853   399   3.27   51,545   429   3.33 
    Other  246   5   8.13   281   6   8.54 
    Total loans  4,377,045   35,648   3.26   4,436,714   36,618   3.30 
    Federal funds sold  102   —   0.25   102   —   0.25 
    Interest-earning deposits  555,331   128   0.09   614,024   148   0.10 
    Total interest-earning assets  5,701,645   38,503   2.70%  5,695,394   38,900   2.73%
    Noninterest-earning assets:                        
    Cash and due from banks  11,129           9,632         
    Allowance for loan and lease losses  (71,160)          (68,862)        
    Premises and equipment  22,634           21,698         
    Other assets  228,134           238,856         
    Total noninterest-earning assets  190,737           201,324         
    Total assets $5,892,382          $5,896,718         
                             
    LIABILITIES:                        
    Interest-bearing deposits:                        
    Checking $1,908,380  $978   0.20% $1,850,917  $1,059   0.23%
    Money markets  1,259,597   794   0.25   1,273,681   811   0.25 
    Savings  135,202   17   0.05   128,195   17   0.05 
    Certificates of deposit – retail  533,488   1,470   1.10   602,068   2,106   1.40 
    Subtotal interest-bearing deposits  3,836,667   3,259   0.34   3,854,861   3,993   0.41 
    Interest-bearing demand – brokered  110,000   493   1.79   113,696   514   1.81 
    Certificates of deposit – brokered  33,769   261   3.09   33,756   267   3.16 
    Total interest-bearing deposits  3,980,436   4,013   0.40   4,002,313   4,774   0.48 
    Borrowings  186,006   209   0.45   244,753   616   1.01 
    Capital lease obligation  6,608   79   4.78   6,832   82   4.80 
    Subordinated debt  181,795   2,145   4.72   94,437   1,325   5.61 
    Total interest-bearing liabilities  4,354,845   6,446   0.59%  4,348,335   6,797   0.63%
    Noninterest-bearing liabilities:                        
    Demand deposits  848,325           858,004         
    Accrued expenses and other liabilities  163,569           166,933         
    Total noninterest-bearing liabilities  1,011,894           1,024,937         
    Shareholders’ equity  525,643           523,446         
    Total liabilities and shareholders’ equity $5,892,382          $5,896,718         
    Net interest income     $32,057          $32,103     
    Net interest spread          2.11%          2.10%
    Net interest margin (D)          2.28%          2.25%
    1. Average balances for available for sale securities are based on amortized cost.
    2. Interest income is presented on a tax-equivalent basis using a 21% federal tax rate.
    3. Loans are stated net of unearned income and include nonaccrual loans.
    4. Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.

    PEAPACK-GLADSTONE FINANCIAL CORPORATION
    NON-GAAP FINANCIAL MEASURES RECONCILIATION

    Tangible book value per share and tangible equity as a percentage of tangible assets at period end are non-GAAP financial measures derived from GAAP-based amounts.  We calculate tangible equity and tangible assets by excluding the balance of intangible assets from shareholders’ equity and total assets, respectively.  We calculate tangible book value per share by dividing tangible equity by period end common shares outstanding, as compared to book value per common share, which we calculate by dividing shareholders’ equity by period end common shares outstanding.  We calculate tangible equity as a percentage of tangible assets at period end by dividing tangible equity by tangible assets at period end.  We believe that this is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of risk-based capital ratios.

    The efficiency ratio is a non-GAAP measure of expense control relative to recurring revenue.  We calculate the efficiency ratio by dividing total noninterest expenses, excluding ORE provision, as determined under GAAP, by net interest income and total noninterest income as determined under GAAP, but excluding net gains/(losses) on loans held for sale at lower of cost or fair value and excluding net gains on securities from this calculation, which we refer to below as recurring revenue.  We believe that this provides one reasonable measure of core expenses relative to core revenue.

    We believe that these non-GAAP financial measures provide information that is important to investors and that is useful in understanding our financial position, results and ratios.  Our management internally assesses our performance based, in part, on these measures.  However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures.  As other companies may use different calculations for these measures, this presentation may not be comparable to other similarly titles measures reported by other companies.  A reconciliation of the non-GAAP measures of tangible common equity, tangible book value per share and efficiency ratio to the underlying GAAP numbers is set forth below.

    Non-GAAP Financial Reconciliation

    (Dollars in thousands, except share data)


      Three Months Ended 
      March 31,  Dec 31,  Sept 30,  June 30,  March 31, 
    Tangible Book Value Per Share 2021  2020  2020  2020  2020 
    Shareholders’ equity $522,441  $527,122  $522,728  $507,980  $496,440 
    Less:  Intangible assets, net  43,524   43,891   39,622   39,943   40,265 
    Tangible equity  478,917   483,231   483,106   468,037   456,175 
                         
    Period end shares outstanding  19,034,870   18,974,703   18,924,953   18,905,135   18,852,523 
    Tangible book value per share $25.16  $25.47  $25.53  $24.76  $24.20 
    Book value per share  27.45   27.78   27.62   26.87   26.33 
                         
    Tangible Equity to Tangible Assets                    
    Total assets $5,969,627  $5,890,442  $5,958,107  $6,281,215  $5,831,458 
    Less: Intangible assets, net  43,524   43,891   39,622   39,943   40,265 
    Tangible assets  5,926,103   5,846,551   5,918,485   6,241,272   5,791,193 
    Less: PPP Loans  232,721   195,574   201,991   547,004   — 
    Tangible Assets excluding PPP Loans  5,693,382   5,650,977   5,716,494   5,694,268   5,791,193 
    Tangible equity to tangible assets  8.08%  8.27%  8.16%  7.50%  7.88%
    Tangible equity to tangible assets excluding PPP loans  8.41%  8.55%  8.45%  8.22%  7.88%
    Equity to assets (A)  8.75%  8.95%  8.77%  8.09%  8.51%
    1. Equity to total assets would be 9.11% if PPP loans of $233 million were excluded from total assets of March 31, 2021. Equity to total assets would be 9.26% if PPP loans of $196 million were excluded from total assets as of December 31, 2020. Equity to total assets would be 9.08% if PPP loans of $202 million were excluded from total assets as of September 30, 2020. Equity to total assets would be 8.86% if PPP loans of $547 million were excluded from total assets as of June 30, 2020.


      Three Months Ended 
      March 31,  Dec 31,  Sept 30,  June 30,  March 31, 
    Return on Average Tangible Equity 2021  2020  2020  2020  2020 
    Net income $13,178  $3,030  $13,547  $8,242  $1,373 
                         
    Average shareholders’ equity $525,643  $523,446  $514,736  $502,683  $508,426 
    Less:  Average intangible assets, net  43,742   40,336   39,811   40,139   40,459 
    Average tangible equity  481,901   483,110   474,925   462,544   467,967 
                         
    Return on average tangible common equity  10.94%  2.51%  11.41%  7.13%  1.17%


      Three Months Ended 
      March 31,  Dec 31,  Sept 30,  June 30,  March 31, 
    Efficiency Ratio 2021  2020  2020  2020  2020 
    Net interest income $31,793  $31,735  $32,149  $31,971  $31,747 
    Total other income  17,820   14,406   20,211   12,626   14,517 
    Less:  Loss/(gain) on loans held for sale                    
    at lower of cost or fair value  (282)  —   (7,429)  —   3 
    Less:  Income from life insurance proceeds  (302)  —   —   —   — 
    Add:  Securities (gains)/losses, net  265   42   —   (125)  (198)
    Total recurring revenue  49,294   46,183   44,931   44,472   46,069 
                         
    Operating expenses  31,594   39,249   28,461   29,014   28,235 
    Less:                    
       FHLB prepayment penalty  —   4,784   —   —   — 
       Valuation allowance loans held for sale  —   4,425   —   —   — 
       Severance expense  1,532   —   —   —   — 
    Total operating expense  30,062   30,040   28,461   29,014   28,235 
                         
    Efficiency ratio  60.99%  65.05%  63.34%  65.24%  61.29%

    Contact:

    Jeffrey J. Carfora, SEVP and CFO

    Peapack-Gladstone Financial Corporation

    T: 908-719-4308




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