Three Months Ended

Three Months Ended

March 31,

March 31,

Increase/

(Dollars in millions, except per share data)

2019 (1)

2018

(Decrease)

Net interest income

$

30.01

$

28.39

$

1.62

6

%

Provision for loan and lease losses

0.10

1.25

(1.15

)

(92

)

Net interest income after provision

29.91

27.14

2.77

10

Wealth management fee income

9.17

8.37

0.80

10

Other income

2.56

1.85

0.71

38

Total other income

11.73

10.22

1.51

15

Operating expenses

25.72

23.34

2.38

10

Pretax income

15.92

14.02

1.90

14

Income tax expense (2)

4.49

3.21

1.28

40

Net income

$

11.43

$

10.81

$

0.62

6

%

Diluted EPS

$

0.58

$

0.57

$

0.01

2

%

Return on average assets annualized

0.98

%

1.01

%

(0.03

)

Return on average equity annualized

9.65

%

10.54

%

(0.89

)

(1)

The March 2019 quarter included a full quarter of wealth management fee income and expense related to Lassus Wherley, which was acquired effective September 1, 2018.

(2)

The effective tax rate for the March 2019 quarter was 28.2% compared to 22.9% for the March 2018 quarter. The March 2019 quarter included higher NJ State Income Tax due to changes signed into law July 1, 2018. The 2018 quarter included a tax benefit resulting from the vesting of restricted stock under ASU 2016-09.

Three Months Ended

Three Months Ended

March 31,

December 31,

Increase/

(Dollars in millions, except per share data)

2019

2018 (1)

(Decrease)

Net interest income

$

30.01

$

29.39

$

0.62

2

%

Provision for loan and lease losses

0.10

1.50

(1.40

)

(93

)

Net interest income after provision

29.91

27.89

2.02

7

Wealth management fee income

9.17

8.55

0.62

7

Other income

2.56

2.70

(0.14

)

(5

)

Total other income

11.73

11.25

0.48

4

Operating expenses

25.72

25.52

0.20

1

Pretax income

15.92

13.62

2.30

17

Income tax expense (2)

4.49

2.89

1.60

55

Net income

$

11.43

$

10.73

$

0.70

7

%

Diluted EPS

$

0.58

$

0.55

$

0.03

5

%

Return on average assets annualized

0.98

%

0.96

%

0.02

Return on average equity annualized

9.65

%

9.32

%

0.33

(1)

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

(2)

The effective tax rate for the March 2019 quarter was 28.2% compared to 21.2% for the December 2018 quarter. The March 2019 quarter included higher NJ State Income Tax. The December 2018 quarter was benefitted by $3 million of life insurance proceeds that were not taxable.

•

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

o

The March 2019 quarter included results from Lassus Wherley, which was acquired on September 1, 2018.  Lassus Wherley, a registered investment advisor, headquartered in New Providence, NJ, added approximately $550 million of assets under management and/or administration (“AUM/AUA”).

o

At March 31, 2019, the market value of AUM/AUA at the Peapack Private Wealth Management Division of Peapack-Gladstone Bank (the “Bank”) was $6.3 billion reflecting an increase of $697 million from $5.6 billion at March 31, 2018, reflecting growth of 13%. While new business and the Lassus Wherley acquisition accounted for significant growth, negative market action (particularly in the fourth quarter of 2018) partially offset some of that growth.

o

Wealth management fee income totaled $9.17 million for the quarter ended March 31, 2019, reflecting an increase of $622,000 or 7% from the December 2018 quarter, and an increase of $807,000, or 10%, from the March 2018 quarter.  

o

Wealth management fee income, which comprised approximately 22% of the Company’s total revenue for the quarter ended March 31, 2019, continues to contribute significantly to the Company’s diversified revenue sources.

o

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

•

The loan portfolio continues to shift from lower yielding multifamily to higher yielding commercial and industrial (C&I) lending (including equipment finance):

o

Total C&I loans (including equipment finance leases and loans of $429 million) at March 31, 2019 were $1.41 billion.  This reflected net growth of $413 million (41%) when compared to $997 million at March 31, 2018.

o

As of March 31, 2019, total C&I loans (including equipment finance) comprised 36% of the total loan portfolio, as compared to 27% a year earlier.  As of March 31, 2019, total multifamily loans comprised 28% of the total loan portfolio, as compared to 37% a year earlier.

o

The Bank’s concentration in commercial real estate loans declined to 379% of risk-based capital at March 31, 2019 from 446% at March 31, 2018.

•

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

o

Deposits totaled $3.92 billion at March 31, 2019.  This reflected net growth of $367 million (10%) when compared to $3.55 billion at March 31, 2018.

o

The Company’s loan-to-deposit ratio improved to 99.5% at March 31, 2019, from 101.0% at December 31, 2018, and 104.5% a March 31, 2018.    

o

The Company continues to have access to $1.3 billion of available secured funding at the Federal Home Loan Bank.

o

The Company has actively managed its balance sheet to remain generally balanced (not materially asset sensitive or materially liability sensitive), despite rising deposit betas and costs throughout all of 2018. At March 31, 2019, the Company’s interest rate sensitivity models indicate the Company is slightly asset sensitive, and that net interest income would improve slightly in a rising rate environment.  

•

Capital and asset quality continue to be strong.

o

The Company’s and Bank’s capital ratios at March 31, 2019 generally increased compared to both the December 31, 2018 and the March 31, 2018 levels. And, such ratios remain well above regulatory well capitalized standards.

o

Asset quality metrics continued to be strong as of March 31, 2019 and were improved from December 31, 2018 and March 31, 2018 levels. Nonperforming assets at March 31, 2019 were $24.9 million, or 0.53% of total assets.  Total loans past due 30 through 89 days and still accruing were $2.5 million, or 0.06% of total loans at March 31, 2019.

Three Months Ended

Three Months Ended

Three Months Ended

March 31, 2019

December 31, 2018

March 31, 2018

NII

NIM

NII

NIM

NII

NIM

NII/NIM excluding the below

$

29,575

2.72%

$

28,890

2.68%

$

27,960

2.72%

Prepayment premiums received on multifamily loan paydowns

432

0.04%

495

0.04%

433

0.04%

Effect of maintaining excess interest earning cash during Q1 2019

143

-0.06%

0

0.00%

0

0.00%

NII/NIM as reported

$

30,150

2.70%

$

29,385

2.72%

$

28,393

2.76%

•

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 2019 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;

•

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 ability to retain key employees;

•

demands for loans and deposits in our market areas;

•

adverse changes in securities markets;

•

changes in accounting policies and practices;

•

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

•

other unexpected material adverse changes in our operations or earnings.

For the Three Months Ended

March 31,

Dec 31,

Sept 30,

June 30,

March 31,

2019

2018

2018

2018

2018

Income Statement Data:

Interest income

$

44,563

$

42,781

$

40,163

$

39,674

$

37,068

Interest expense

14,556

13,396

12,021

10,431

8,675

Net interest income

30,007

29,385

28,142

29,243

28,393

Provision for loan and lease losses

100

1,500

500

300

1,250

Net interest income after provision for loan and

   lease losses

29,907

27,885

27,642

28,943

27,143

Wealth management fee income

9,174

8,552

8,200

8,126

8,367

Service charges and fees

816

938

860

873

831

Bank owned life insurance

338

351

349

345

336

Gain on loans held for sale at fair value

   (Mortgage banking)

47

74

87

79

94

Gain on loans held for sale at lower of cost or

   fair value

—

(4,392

)

—

—

—

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

   swaps

270

1,838

854

900

252

Gain on sale of SBA loans

419

277

514

814

31

Other income (A)

606

3,571

444

639

382

Securities losses, net

59

46

(325

)

(36

)

(78

)

Total other income

11,729

11,255

10,983

11,740

10,215

Salaries and employee benefits

17,156

16,372

16,025

15,826

14,579

Premises and equipment

3,388

3,422

3,399

3,406

3,270

FDIC insurance expense

277

645

593

625

580

Other expenses

4,894

5,085

4,267

5,084

4,908

Total operating expenses

25,715

25,524

24,284

24,941

23,337

Income before income taxes

15,921

13,616

14,341

15,742

14,021

Income tax expense

4,496

2,887

3,617

3,832

3,214

Net income

$

11,425

$

10,729

$

10,724

$

11,910

$

10,807

Total revenue (B)

$

41,736

$

40,640

$

39,125

$

40,983

$

38,608

Per Common Share Data:

Earnings per share (basic)

$

0.59

$

0.56

$

0.56

$

0.63

$

0.58

Earnings per share (diluted)

0.58

0.55

0.56

0.62

0.57

Weighted average number of common

   shares outstanding:

Basic

19,350,452

19,260,033

19,053,849

18,930,893

18,608,309

Diluted

19,658,006

19,424,906

19,240,098

19,098,838

18,908,692

Performance Ratios:

Return on average assets annualized (ROAA)

0.98

%

0.96

%

0.99

%

1.11

%

1.01

%

Return on average equity annualized (ROAE)

9.65

%

9.32

%

9.68

%

11.11

%

10.54

%

Net interest margin (tax- equivalent basis)

2.70

%

2.72

%

2.69

%

2.82

%

2.76

%

GAAP efficiency ratio (C)

61.61

%

62.81

%

62.07

%

60.86

%

60.45

%

Operating expenses / average assets annualized

2.21

%

2.28

%

2.24

%

2.32

%

2.19

%

(B)

Total revenue includes net interest income plus total other income.

(C)

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

As of

March 31,

Dec 31,

Sept 30,

June 30,

March 31,

2019

2018

2018

2018

2018

ASSETS

Cash and due from banks

$

4,726

$

5,914

$

4,792

$

4,458

$

4,223

Federal funds sold

101

101

101

101

101

Interest-earning deposits

235,487

154,758

118,111

62,231

149,192

Total cash and cash equivalents

240,314

160,773

123,004

66,790

153,516

Securities available for sale

384,400

377,936

368,554

346,790

342,553

Equity security

4,778

4,719

4,673

4,710

4,746

FHLB and FRB stock, at cost

18,460

18,533

21,561

21,533

23,703

Residential mortgage

569,304

573,146

562,930

567,459

567,885

Multifamily mortgage

1,104,406

1,138,190

1,289,458

1,320,251

1,366,712

Commercial mortgage

705,221

702,165

644,900

637,705

643,761

Commercial loans

1,410,146

1,398,214

1,180,774

1,069,526

996,788

Consumer loans

54,276

58,678

64,478

76,509

71,580

Home equity lines of credit

57,639

62,191

59,930

55,020

64,570

Other loans

355

465

432

431

420

Total loans

3,901,347

3,933,049

3,802,902

3,726,901

3,711,716

Less: Allowances for loan and lease losses

38,653

38,504

37,293

38,066

37,696

Net loans

3,862,694

3,894,545

3,765,609

3,688,835

3,674,020

Premises and equipment

21,201

27,408

27,874

28,404

28,923

Other real estate owned

—

—

96

1,608

2,090

Accrued interest receivable

11,688

10,814

10,849

7,202

7,306

Bank owned life insurance

45,554

45,353

45,181

44,980

44,779

Goodwill and other intangible assets (A)

32,170

32,399

34,297

23,477

23,656

Finance lease right-of-use assets (B)

5,639

—

—

—

—

Operating lease right-of-use assets (B)

7,541

—

—

—

—

Other assets

27,867

45,378

34,011

30,845

31,202

TOTAL ASSETS

$

4,662,306

$

4,617,858

$

4,435,709

$

4,265,174

$

4,336,494

LIABILITIES

Deposits:

Noninterest-bearing demand deposits

$

476,013

$

463,926

$

503,388

$

527,453

$

536,054

Interest-bearing demand deposits

1,268,823

1,247,305

1,148,660

1,053,004

1,089,980

Savings

114,865

114,674

116,391

120,986

126,026

Money market accounts

1,209,835

1,243,369

1,097,630

1,051,893

1,006,540

Certificates of deposit – Retail

545,450

510,724

466,791

431,679

408,621

Certificates of deposit – Listing Service

68,055

79,195

85,241

96,644

132,321

Subtotal “customer” deposits

3,683,041

3,659,193

3,418,101

3,281,659

3,299,542

IB Demand – Brokered

180,000

180,000

180,000

180,000

180,000

Certificates of deposit – Brokered

56,165

56,147

61,193

61,254

72,614

Total deposits

3,919,206

3,895,340

3,659,294

3,522,913

3,552,156

Overnight borrowings

—

—

95,190

127,350

216,000

Federal home loan bank advances

105,000

108,000

84,000

52,898

22,898

Finance lease liability (B)

8,175

8,362

8,548

8,728

8,900

Operating lease liability (B)

7,683

—

—

—

—

Subordinated debt, net

83,249

83,193

83,138

83,133

83,079

Other liabilities

57,521

53,950

51,106

33,133

31,055

TOTAL LIABILITIES

4,180,834

4,148,845

3,981,276

3,828,155

3,914,088

Shareholders’ equity

481,472

469,013

454,433

437,019

422,406

TOTAL LIABILITIES AND

SHAREHOLDERS’ EQUITY

$

4,662,306

$

4,617,858

$

4,435,709

$

4,265,174

$

4,336,494

Assets under management and / or administration at

   Peapack-Gladstone Bank’s Private Wealth Management

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

$

6.3

$

5.8

$

6.4

$

5.7

$

5.6

(A)

Includes goodwill and intangibles from the Murphy Capital Management, Quadrant Capital Management and Lassus Wherley and Associates acquisitions completed in August 2017, November 2017 and September 2018, respectively.

(B)

Resulted from the adoption of ASU No. 2016-02, “Leases (Topic 842)”.

As of

March 31,

Dec 31,

Sept 30,

June 30,

March 31,

2019

2018

2018

2018

2018

Asset Quality:

Loans past due over 90 days and still accruing

$

—

$

—

$

—

$

—

$

—

Nonaccrual loans (A)

24,892

25,715

10,722

12,025

13,314

Other real estate owned

—

—

96

1,608

2,090

Total nonperforming assets

$

24,892

$

25,715

$

10,818

$

13,633

$

15,404

Nonperforming loans to total loans

0.64

%

0.65

%

0.28

%

0.32

%

0.36

%

Nonperforming assets to total assets

0.53

%

0.56

%

0.24

%

0.32

%

0.36

%

Performing TDRs (B)(C)

$

4,274

$

4,303

$

19,334

$

18,665

$

7,888

Loans past due 30 through 89 days and still accruing

$

2,492

$

3,484

$

2,528

$

3,539

$

674

Classified loans

$

51,306

$

58,265

$

51,783

$

51,216

$

55,945

Impaired loans

$

29,185

$

31,300

$

31,345

$

30,711

$

21,223

Allowance for loan and lease losses:

Beginning of period

$

38,504

$

37,293

$

38,066

$

37,696

$

36,440

Provision for loan and lease losses

100

1,500

500

300

1,250

Charge-offs, net

49

(289

)

(1,273

)

70

6

End of period

$

38,653

$

38,504

$

37,293

$

38,066

$

37,696

ALLL to nonperforming loans

155.28

%

149.73

%

347.82

%

316.56

%

283.13

%

ALLL to total loans

0.991

%

0.979

%

0.981

%

1.021

%

1.016

%

General ALLL to total loans (D)

0.984

%

0.972

%

0.961

%

0.978

%

1.006

%

(B)

Amounts reflect TDRs that are paying according to restructured terms.

(C)

Amount does not include $20.0 million at March 31, 2019, $20.5 million at December 31, 2018, $5.5 million at September 30, 2018, $6.9 million at June 30, 2018 and $8.0 million at March 31, 2018 of TDRs included in nonaccrual loans.

March 31,

December 31,

March 31,

2019

2018

2018

Capital Adequacy

Equity to total assets (A)

10.33

%

10.16

%

9.74

%

Tangible Equity to tangible assets (B)

9.70

%

9.52

%

9.25

%

Book value per share (C)

$

24.76

$

24.25

$

22.32

Tangible Book Value per share (D)

$

23.11

$

22.58

$

21.07

2019

2018

2018

Regulatory Capital – Holding Company

Tier I leverage

$

450,244

9.76%

$

438,240

9.82%

$

401,498

9.46%

Tier I capital to risk weighted assets

450,244

12.19

438,240

11.76

401,498

11.77

Common equity tier I capital ratio

   to risk-weighted assets

450,242

12.19

438,238

11.76

401,496

11.77

Tier I & II capital to risk-weighted assets

572,146

15.49

559,937

15.03

522,273

15.32