BEDMINSTER, N.J., Jan. 25, 2019 (GLOBE NEWSWIRE) — Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market: PGC) (the “Company”) recorded net income of $44.17 million and diluted earnings per share of $2.31 for the year ended December 31, 2018, compared to $36.50 million and $2.03, respectively, for the year ended December 31, 2017, reflecting increases of $7.67 million, or 21%, and $0.28 per share, or 14%, respectively.

The Company’s total revenue increased $13.59 million when comparing the 2018 year to the 2017 year. Of the total revenue increase, $10.07 million (or 74%) was provided by increased wealth management fee income.  Douglas L. Kennedy, President and CEO, said “Our Strategy has driven continued growth in our wealth management business, both organically and through acquisition. Our wealth management focus provides a more stable and predictable revenue stream over time than other sources of income.”

For the quarter ended December 31, 2018, the Company recorded net income of $10.73 million and diluted earnings per share of $0.55, compared to $10.37 million and $0.56 for the same three-month period last year. The 2018 quarter included a $4.39 million loss on sale of multifamily loans and a $405,000 write down of intangible assets (non-taxable), partially offset by $3.00 million of life insurance proceeds related to the December 31, 2018 passing of the founder and managing principle of Murphy Capital Management (also non-taxable). These three items reduced net income by $655,000 and reduced earnings per share by $0.04 for the December 2018 quarter.

EXECUTIVE SUMMARY:

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

Year over Year Comparison
		Year						Year				Increase/
(Dollars in millions, except per share data)		2018 (1)(2)						2017				(Decrease)
Net interest income		$	115.16					$	111.14			$	4.02				4	%
Provision for loan and lease losses			3.55						5.85				(2.30	)			(39	)
Net interest income after provision			111.61						105.29				6.32				6
Wealth management fee income			33.25						23.18				10.07				43
Other income			10.95						11.45				(0.50	)			(4	)
Total other income			44.20						34.63				9.57				28
Operating expenses			98.09						85.61				12.48				15
Pretax income			57.72						54.31				3.41				6
Income tax expense			13.55		(3	)			17.81				(4.26	)			(24	)
Net income		$	44.17					$	36.50			$	7.67				21	%
Diluted EPS		$	2.31					$	2.03			$	0.28				14	%
Return on average assets			1.02	%					0.89	%			0.13
Return on average equity			10.13	%					10.12	%			0.01

(1)	The 2018 year included results of operations of the Equipment Finance team hired in April 2017, Murphy Capital Management, acquired effective August 1, 2017, Quadrant Capital Management, acquired effective November 1, 2017, and Lassus Wherley acquired effective September 1, 2018.
(2)	The 2018 year includes $4.39 million loss on sale of multifamily loans; $3.00 million of life insurance proceeds related to the December 31, 2018 passing of the founder and managing principle of MCM; $319,000 of severance expense related to the elimination of select positions; $405,000 write-down of intangible assets related to MCM; and $340,000 of professional fees related to investment banking and other fees associated with the Lassus Wherley acquisition.  These five items reduced pretax income by $2.46 million; net income by $1.14 million; EPS by $0.06; ROAA by 0.03%; and ROAE by 0.26%.
(3)	The 2018 year reflected the reduced Federal income tax rate due to the new tax law signed in December 2017 but included a higher NJ state corporate income tax rate, as signed into law in July 2018, but effective back to January 1, 2018.

 

December 2018 Quarter Compared to Prior Year Quarter

		Three Months Ended						Three Months Ended
		December 31,						December 31,				Increase/
(Dollars in millions, except per share data)		2018 (1)(2)						2017				(Decrease)
Net interest income		$	29.39					$	28.59			$	0.80				3	%
Provision for loan and lease losses			1.50						1.65				(0.15	)			(9	)
Net interest income after provision			27.89						26.94				0.95				4
Wealth management fee income			8.55						7.49				1.06				14
Other income			2.70						3.11				(0.41	)			(13	)
Total other income			11.25						10.60				0.65				6
Operating expenses			25.52						24.25				1.27				5
Pretax income			13.62						13.29				0.33				2
Income tax expense			2.89		(3	)			2.92				(0.03	)			(1	)
Net income		$	10.73					$	10.37			$	0.36				3	%
Diluted EPS		$	0.55					$	0.56			$	(0.01	)			(2	)%
Return on average assets annualized			0.96	%					0.98	%			(0.02	)
Return on average equity annualized			9.32	%					10.61	%			(1.29	)

(1)	The December 2018 quarter included results of operations of Quadrant Capital Management, acquired effective November 1, 2017, and Lassus Wherley acquired effective September 1, 2018.
(2)	The December 2018 quarter included $4.39 million loss on sale of multifamily loans; $3.00 million of life insurance proceeds related to the December 31, 2018 passing of the founder and managing principle of MCM; and $405,000 write-down of intangible assets related to MCM. These three items reduced pretax income by $1.80 million; net income by $655,000; EPS by $0.04; ROAA by 0.06%; and ROAE by 0.57%.
(3)	The December 2018 quarter reflected the reduced federal income tax rate due to the new tax law signed in December 2017, but a higher NJ state corporate income tax rate, as signed into law in July 2018, but effective back to January 1, 2018.

December 2018 Quarter Compared to Linked Quarter

		Three Months Ended				Three Months Ended
		December 31,				September 30,					Increase/
(Dollars in millions, except per share data)		2018 (1)(2)				2018(3)					(Decrease)
Net interest income		$	29.39			$	28.14				$	1.25				4	%
Provision for loan and lease losses			1.50				0.50					1.00				200
Net interest income after provision			27.89				27.64					0.25				1
Wealth management fee income			8.55				8.20					0.35				4
Other income			2.70				2.78					(0.08	)			(3	)
Total other income			11.25				10.98					0.27				2
Operating expenses			25.52				24.28					1.24				5
Pretax income			13.62				14.34					(0.72	)			(5	)
Income tax expense			2.89				3.62					(0.73	)			(20	)
Net income		$	10.73			$	10.72				$	0.01				0	%
Diluted EPS		$	0.55			$	0.56				$	(0.01	)			(2	)%
Return on average assets annualized			0.96	%			0.99	%				(0.03	)
Return on average equity annualized			9.32	%			9.68	%				(0.36	)

(1)	The December 2018 quarter included results of operations of Lassus Wherley acquired effective September 1, 2018.
(2)	The December 2018 quarter included $4.39 million loss on sale of multifamily loans; $3.00 million of life insurance proceeds related to the December 31, 2018 passing of the founder and managing principle of MCM; and $405,000 write-down of intangible assets related to MCM. These three items reduced pretax income by $1.80 million; net income by $655,000; EPS by $0.04; ROAA by 0.06%; and ROAE by 0.57%.
(3)	The September 2018 quarter included $319,000 of severance expense related to the elimination of select positions; $340,000 of professional fees related to investment banking and other fees associated with the Lassus Wherley acquisition; and $325,000 loss on sale of securities, principally related to a restructure of the investment portfolio, which will benefit future earnings. These three items reduced net income by $736,000 EPS by $0.04, ROAA by 0.07%, and ROAE by 0.66%, for the 2018 September quarter.

Douglas L. Kennedy, President and CEO, said, “I am pleased with our results, especially given this challenging environment. Our strategy and business model, which includes a focus on wealth management and fee income, provides a strong base for future performance.” Mr. Kennedy went on to say, “We believe that during these challenging times we will likely have opportunities to attract additional talent, given our client centric strategy and business model.”

Highlights for the quarter included:

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

• As previously announced, effective September 1, 2018, the Company completed its acquisition of Lassus Wherley, a registered investment advisor, headquartered in New Providence, NJ, which added approximately $550 million of assets under management and/or administration (“AUM/AUA”).
• At December 31, 2018, the market value of AUM/AUA at the Private Wealth Management Division of Peapack-Gladstone Bank (the “Bank”) increased $319 million to $5.8 billion from $5.5 billion at December 31, 2017, reflecting growth of 5%. While new business and the Lassus Wherley acquisition accounted for significant growth, negative market action (particularly in the fourth quarter of 2018) offset much of that growth.
• Wealth management fee income totaled $8.55 million for the quarter ended December 31, 2018, an increase of $1.06 million, or 14%, from $7.49 million for the quarter ended December 31, 2017. 
• Wealth management fee income, which comprised approximately 21% of the Company’s total revenue for the quarter ended December 31, 2018, contributed significantly to the Company’s diversified revenue sources.
• In addition to wealth income, also contributing to the Company’s diversified revenue sources is fee income related to loan level, back-to-back swaps, and gain on sale of SBA loans.

• The loan portfolio continues to shift from lower yielding multifamily to higher yielding commercial and industrial (C&I) lending (including equipment finance). Significant progress was made on this front in the fourth quarter of 2018:

• During the fourth quarter of 2018, the Company sold $131 million of fixed rate multifamily loans with an average coupon of 3.28%. Such proceeds were reinvested in floating rate and short duration loans with an average coupon of 4.78%, principally C&I (including equipment finance) loans. This strategy will benefit future earnings. The Company believes the $4.39 million loss incurred on the sale of the multifamily loans will be fully offset by increased earnings from this strategy in approximately two years. 
• Total C&I (including equipment finance) loans at December 31, 2018 were $1.40 billion.  This reflected net growth of $440 million (46%) when compared to $958 million at December 31, 2017.
• As of December 31, 2018, total C&I loans (including equipment finance) comprised 36% of the total loan portfolio, as compared to 26% a year earlier.  As of December 31, 2018, total multifamily loans comprised 29% of the total loan portfolio, as compared to 37% a year earlier.
• The Bank’s concentration in commercial real estate loans declined to 394% of risk-based capital at December 31, 2018 from 466% at December 31, 2017.

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

• Deposits totaled $3.90 billion at December 31, 2018.  This reflected net growth of $197 million (5%) when compared to $3.70 billion at December 31, 2017.
• The Company’s loan-to-deposit ratio improved to 101% at December 31, 2018, from 104% at September 30, 2018.   
• The Company continues to have access to over $1 billion of available secured funding at the Federal Home Loan Bank.
• The Company has actively managed its balance sheet to remain balanced (not materially asset sensitive or materially liability sensitive), despite rising deposit betas and costs. At December 31, 2018, the Company’s interest rate sensitivity models indicate the Company is asset sensitive, and that net interest income would improve in a rising rate environment.  

• Capital and asset quality continue to be strong.

• The Company’s and Bank’s capital ratios at December 31, 2018 all increased significantly compared to the December 31, 2017 levels. And, such ratios remain well above regulatory well capitalized standards.
• Asset quality metrics continued to be strong at December 31, 2018.  Nonperforming assets at December 31, 2018 were $25.7 million, or 0.56% of total assets.  Total loans past due 30 through 89 days and still accruing were $3.48 million, or 0.09% of total loans at December 31, 2018. The increase in nonperforming assets in the December 2018 quarter was due to one $15 million healthcare real estate secured loan which continues to pay as agreed, and which the Company believes to be well secured.

SUPPLEMENTAL QUARTERLY DETAILS:

Wealth Management Business

In the December 2018 quarter, the Bank’s wealth management business generated $8.55 million in fee income compared to $8.20 million for the September 2018 quarter, and $7.49 million for the December 2017 quarter. 

When compared to the December 2017 quarter, the December 2018 quarter included three months of income related to Quadrant Capital (compared to two months for the December 2017 quarter), which was acquired effective November 1, 2017, and three months of income related to Lassus Wherley (approximately $1 million), which was acquired effective September 1, 2018, as well as increased earnings from organic growth in assets under management. These positive effects on fee income, were partially offset by negative market action, particularly in the fourth quarter of 2018.  

John P. Babcock, President of the newly-branded “Peapack Private Wealth Management Division”, said “We continue to grow our wealth management business organically, and selectively seek to identify potential acquisitions that can add talent and expertise to our growing organization.”

Loans / Commercial Banking

For the quarter ended December 31, 2018, total net loan growth was $130 million (3% for the quarter, or 14% annualized). Total commercial and industrial loans (including Equipment Finance) grew $217 million (18% for the quarter, or 74% annualized) to $1.40 billion at the end of the fourth quarter, compared to $1.18 billion at the end of the third quarter of 2018. New loan growth was funded by managed reductions in lower yielding multifamily loans (net reduction of $151 million for the quarter) and deposit growth (net increase of $236 million for the quarter).

Mr. Kennedy said, “With the launch of our Corporate Advisory Team in January 2018, we now have the capability to engage in high level strategic debt, capital and valuation analysis coupled with succession, estate and wealth planning strategies, enabling us to provide a unique boutique level of service, giving us a competitive advantage over much of our competition.”

Mr. Kennedy also said, “The loan market continues to be extremely competitive from a structure/credit and a pricing perspective. As I have noted before, we will continue to be disciplined and not compromise our credit standards, but we will compete on price, as long as returns remain reasonable as measured by our proprietary loan pricing model.”

Funding / Liquidity / Interest Rate Risk Management

As noted in prior quarters, the Company has actively managed its deposit base to reduce reliance on wholesale sourced deposits and/or reduce volatility or operational risk.

For the quarter ended December 31, 2018, the Company utilized its increased capital, deposit growth, and reductions in its lower yielding multifamily loan portfolio to fund C&I loan growth (including Equipment Finance), eliminate its overnight borrowing position with the FHLB, and increase on balance sheet liquidity (interest earning deposits and investment securities). 

The Company also added $35 million of medium term FHLB advances during the December 2018 quarter as part of its interest rate risk management.

In addition to approximately $543 million of cash, cash equivalents and investment securities on its balance sheet, the Company also had approximately $1.4 billion of secured funding available from the Federal Home Loan Bank, of which only $108 million was drawn as of December 31, 2018.

Mr. Kennedy noted, “The northeast market continues to be extremely competitive for deposits. The Company is focused on providing high touch client service, a key element in growing its personal and commercial core deposit base.  The Company is focused on multiple retail channels, as well as commercial channels, including its enhanced Treasury Management and Escrow offerings. Further, all our Private Bankers remain keenly focused on deposit gathering, including our new Professional Services Group, led by a seasoned commercial banker who joined us recently.”

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

	Twelve Months Ended									Twelve Months Ended
	December 31, 2018									December 31, 2017
	NII				NIM					NII				NIM
NII/NIM excluding the below	$	112,840			2.69		%			$	106,393			2.68		%
Prepayment premiums received on multifamily loan paydowns		2,002			0.05		%				3,513			0.09		%
Fees recognized on full paydowns of select C&I loans		321			0.01		%				1,235			0.03		%
NII/NIM as reported	$	115,163			2.75		%			$	111,141			2.80		%
	Three Months Ended									Three Months Ended									Three Months Ended
	December 31, 2018									September 30, 2018									December 31, 2017
	NII				NIM					NII				NIM					NII				NIM
NII/NIM excluding the below	$	28,890			2.68		%			$	27,804			2.66		%			$	27,641			2.69		%
Prepayment premiums received on multifamily loan paydowns		495			0.04		%				338			0.03		%				945			0.09		%
Fees recognized on full paydowns of select C&I loans		0			0.00		%				0			0.00		%				0			0.00		%
NII/NIM as reported	$	29,385			2.72		%			$	28,142			2.69		%			$	28,586			2.78		%

Net interest income and net interest margin comparisons are shown above.

High deposit betas throughout 2018 negatively impacted net interest margin. The issuance of $35 million of subordinated debt in mid-December 2017 also negatively impacted margin in 2018. New loan originations during the fourth quarter of 2018 at an average coupon of 4.78% positively impacted margin for the three months ended December 31, 2018.

The Company’s interest rate sensitivity models indicate that the Company is asset sensitive, and that net interest income would improve in a rising interest rate environment. These models assume the Company’s higher deposit betas experienced during the last half of 2018 will continue. The Company believes that such betas could continue for some period of time, but then level off and decline. Accordingly, the Company believes its net interest margin may continue to remain fairly flat to current levels, but then begin to rise as betas decline, as the Company continues replacing its lower yielding multifamily portfolio with higher yielding, adjustable rate and short duration loans, and as the Company’s deposit gathering efforts noted previously have more of an effect on core deposit generation. The Company’s forecasting models indicate a net interest margin in the 3.00% range by the end of 2020, but that could certainly be adversely affected by further changes in deposit betas and/or by competitive forces and market interest rates and economic conditions. 

Other Noninterest Income

The fourth quarter of 2018 included $277,000 of income related to the Company’s SBA lending and sale program, compared to $514,000 generated in the September 2018 quarter, and $774,000 in the December 2017 quarter. Due to the Federal government shutdown, the Company has been unable to conduct SBA loan sales in 2019 and is uncertain as to when such sales would resume.  

The fourth quarter of 2018 also included $1.84 million of loan level, back-to-back swap income compared to $854,000 in the September 2018 quarter and $179,000 in the December 2017 quarter.  This program provides a borrower with a degree of interest rate protection on a variable rate loan, while still providing an adjustable rate to the Company, thus helping to manage the Company’s interest rate risk, while contributing to income. The Company noted that income from both of these programs are not linear each quarter, as some quarters will be higher than others. The December 2018 quarter reflected higher swap income due to the Company’s higher level of loan activity coupled with borrowers’ desire to protect themselves from rates rising beyond current levels. 

The December 2018 quarter included a $4.39 million loss on the sale of loans. As noted previously, $131 million of fixed rate, multifamily loans were sold as part of the Bank’s balance sheet management strategy.

Other income for the December 2018 quarter included $3.00 million of life insurance proceeds related to the December 31, 2018 passing of the founder and managing principle of Murphy Capital Management.   

Operating Expenses

The Company’s total operating expenses were $25.52 million for the quarter ended December 31, 2018, compared to $24.28 million for the September 2018 quarter and $24.25 million for the December 2017 quarter.

Compensation and employee benefits expense for the December 2018 quarter was $16.37 million compared to $15.30 million for the December 2017 quarter.  When compared to the 2017 quarter, the December 2018 quarter included: three months of expense (compared to two months in the 2017 quarter) related to Quadrant Capital (which closed in November 2017) and three months of expense related to Lassus Wherley (which closed in September 2018). Strategic hiring and normal salary increases also contributed to the increase for the December 2018 quarter as compared to the December 2017 quarter.

Premises and equipment and other operating expense for the December 2018 quarter, when compared to the September 2018 and December 2017 quarters, included increased expenses due to normal operating expenses of the wealth companies acquired as noted just above, as well as a $405,000 write-down of intangible assets related to Murphy Capital Management. 

Income Taxes

2018 included a reduced Federal income tax rate due to the new tax law signed in December 2017, but included a higher NJ state corporate income tax rate, as signed into law in July 2018, but effective back to January 1, 2018. The effective tax rate for the December 2018 quarter was 21.2%, compared to 25.2% for the September 2018 quarter, and 22.0% for the December 2017 quarter. The December 2018 effective tax rate was impacted by $3.00 million of life insurance proceeds related to the December 31, 2018 passing of the founder and managing principle of Murphy Capital Management that are not taxable.

Asset Quality / Provision for Loan and Lease Losses

Nonperforming assets at December 31, 2018 (which does not include troubled debt restructured loans that are performing in accordance with their terms) were $25.7 million, or 0.56% of total assets, compared to $10.8 million, or 0.24% of total assets, at September 30, 2018 and $15.6 million, or 0.37% of total assets, at December 31, 2017.  Total loans past due 30 through 89 days and still accruing were $3.5 million at December 31, 2018, compared to $2.5 million at September 30, 2018 and $246,000 at December 31, 2017. The increase in nonperforming assets in the December 2018 quarter was due to one $15 million healthcare real estate secured loan which continues to pay as agreed, and which the Company believes to be well secured.

For the quarter ended December 31, 2018, the Company’s provision for loan and lease losses was $1.50 million compared to $500,000 for the September 2018 quarter and $1.65 million for the December 2017 quarter. The Company’s provision for loan and lease losses (and its allowance for loan and lease losses) reflect, among other things, the Company’s asset quality metrics, net loan growth, net charge-offs, and the composition of the loan portfolio.

At December 31, 2018, the allowance for loan and lease losses of $38.50 million (150% of nonperforming loans and 0.98% of total loans), compared to $37.29 million at September 30, 2018 (348% of nonperforming loans and 0.98% of total loans), and $36.44 million (269% of nonperforming loans and 0.98% of total loans) at December 31, 2017. 

Capital / Dividends

The Company’s capital positions in the December 2018 quarter were benefitted by net income of $10.73 million and $2.02 million of voluntary share purchases under the Dividend Reinvestment Plan. Voluntary share purchases in the Dividend Reinvestment Plan can be filled from the Company’s authorized but unissued shares and/or in the open market, at the discretion of the Company – 75,000 of the shares purchased during the December 2018 quarter were from authorized but unissued shares, while 263,117 shares were purchased in the open market.

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

On January 24, 2019, the Company’s Board of Directors declared a cash dividend of $0.05 per share payable on February 22, 2019 to shareholders of record on February 7, 2019.

ABOUT THE COMPANY

Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $4.62 billion and wealth management assets under management and/or administration (AUM/AUA) of $5.8 billion as of December 31, 2018.  Founded in 1921, Peapack-Gladstone Bank is a commercial bank that provides innovative private banking services to businesses, non-profits and consumers, which help them to establish, maintain and expand their legacy.  Through its private banking locations in Bedminster, Morristown, Princeton and Teaneck, its Private Wealth Management Division, and its branch network and online platforms, Peapack-Gladstone Bank offers an unparalleled commitment to client service.

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:

• inability to successfully grow our business and implement our strategic plan, including an inability to generate revenues to offset the increased personnel and other costs related to the strategic plan;
• the impact of anticipated higher operating expenses in 2018 and beyond;
• inability to manage our growth;
• inability to successfully integrate our expanded employee base;
• an unexpected decline in the economy, in particular in our New Jersey and New York market areas;
• declines in our net interest margin caused by the interest rate environment and/or our highly competitive market;
• declines in the value in our investment portfolio;
• higher than expected increases in our allowance for loan and lease losses;
• higher than expected increases in loan and lease losses or in the level of nonperforming loans;
• changes in interest rates;
• decline in real estate values within our market areas;
• legislative and regulatory actions (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Basel III and related regulations) that may result in increased compliance costs;
• successful cyberattacks against our IT infrastructure and that of our IT providers;
• higher than expected FDIC insurance premiums;
• adverse weather conditions;
• inability to successfully generate new business in new geographic markets;
• inability to execute upon new business initiatives;
• lack of liquidity to fund our various cash obligations;
• reduction in our lower-cost funding sources;
• our inability to adapt to technological changes;
• claims and litigation pertaining to fiduciary responsibility, environmental laws and other matters;
• effects related to a prolonged shutdown of the federal government which could impact SBA and other government lending programs: and
• other unexpected material adverse changes in our operations or earnings.

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, 2017.  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.

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,
		2018				2018				2018				2018				2017
Income Statement Data:
Interest income		$	42,781			$	40,163			$	39,674			$	37,068			$	36,439
Interest expense			13,396				12,021				10,431				8,675				7,853
Net interest income			29,385				28,142				29,243				28,393				28,586
Provision for loan and lease losses			1,500				500				300				1,250				1,650
Net interest income after provision for loan and   lease losses			27,885				27,642				28,943				27,143				26,936
Wealth management fee income			8,552				8,200				8,126				8,367				7,489
Service charges and fees			938				860				873				831				837
Bank owned life insurance			351				349				345				336				341
Gain on loans held for sale at fair value   (Mortgage banking)			74				87				79				94				122
(Loss) / Gain on loans held for sale at lower of cost   or fair value			(4,392	)			—				—				—				378
Fee income related to loan level, back-to-back   swaps			1,838				854				900				252				179
Gain on sale of SBA loans			277				514				814				31				774
Other income (A)			3,571				444				639				382				486
Securities gains / (losses), net			46				(325	)			(36	)			(78	)			—
Total other income			11,255				10,983				11,740				10,215				10,606
Salaries and employee benefits			16,372				16,025				15,826				14,579				15,296
Premises and equipment			3,422				3,399				3,406				3,270				3,194
FDIC insurance expense			645				593				625				580				495
Other expenses			5,085				4,267				5,084				4,908				5,266
Total operating expenses			25,524				24,284				24,941				23,337				24,251
Income before income taxes			13,616				14,341				15,742				14,021				13,291
Income tax expense			2,887				3,617				3,832				3,214				2,922
Net income		$	10,729			$	10,724			$	11,910			$	10,807			$	10,369
Total revenue (B)		$	40,640			$	39,125			$	40,983			$	38,608			$	39,192
Per Common Share Data:
Earnings per share (basic)		$	0.56			$	0.56			$	0.63			$	0.58			$	0.57
Earnings per share (diluted)			0.55				0.56				0.62				0.57				0.56
Weighted average number of common   shares outstanding:
Basic			19,260,033				19,053,849				18,930,893				18,608,309				18,197,708
Diluted			19,424,906				19,240,098				19,098,838				18,908,692				18,527,829
Performance Ratios:
Return on average assets annualized (ROAA)			0.96	%			0.99	%			1.11	%			1.01	%			0.98	%
Return on average equity annualized (ROAE)			9.32	%			9.68	%			11.11	%			10.54	%			10.61	%
Net interest margin (tax-equivalent basis)			2.72	%			2.69	%			2.82	%			2.76	%			2.78	%
GAAP efficiency ratio (C)			62.81	%			62.07	%			60.86	%			60.45	%			61.88	%
Operating expenses / average assets annualized			2.28	%			2.24	%			2.32	%			2.19	%			2.28	%

(A)	Includes death benefit from life insurance policy of $3.0 million for the quarter ended December 31, 2018 related to the December 31, 2018 passing of the founder and managing principle of MCM.
(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.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in Thousands, except share data)
(Unaudited)
		For the Twelve Months Ended
		Dec 31,								Change
		2018				2017				$				%
Income Statement Data:
Interest income		$	159,686			$	138,727			$	20,959				15	%
Interest expense			44,523				27,586				16,937				61	%
Net interest income			115,163				111,141				4,022				4	%
Provision for loan and lease losses			3,550				5,850				(2,300	)			-39	%
Net interest income after provision for loan and   lease losses			111,613				105,291				6,322				6	%
Wealth management fee income			33,245				23,183				10,062				43	%
Service charges and fees			3,502				3,239				263				8	%
Bank owned life insurance			1,381				1,356				25				2	%
Gain on loans held for sale at fair value (Mortgage banking)			334				401				(67	)			-17	%
(Loss) / Gain on loans held for sale at lower of cost   or fair value			(4,392	)			412				(4,804	)			-1166	%
Fee income related to loan level, back-to-back swaps			3,844				2,814				1,030				37	%
Gain on sale of SBA loans			1,636				1,564				72				5	%
Other income (A)			5,036				1,658				3,378				204	%
Securities (losses), net			(393	)			—				(393	)		N/A
Total other income			44,193				34,627				9,566				28	%
Salaries and employee benefits			62,802				53,956				8,846				16	%
Premises and equipment			13,497				11,988				1,509				13	%
FDIC insurance expense			2,443				2,366				77				3	%
Other expenses			19,344				17,301				2,043				12	%
Total operating expenses			98,086				85,611				12,475				15	%
Income before income taxes			57,720				54,307				3,413				6	%
Income tax expense			13,550				17,810				(4,260	)			-24	%
Net income		$	44,170			$	36,497			$	7,673				21	%
Total revenue (B)		$	159,356			$	145,768			$	13,588				9	%
Per Common Share Data:
Earnings per share (basic)		$	2.33			$	2.07			$	0.26				13	%
Earnings per share (diluted)			2.31				2.03				0.28				14	%
Weighted average number of common shares outstanding:
Basic			18,965,305				17,659,625				1,305,680				7	%
Diluted			19,148,645				17,943,685				1,204,960				7	%
Performance Ratios:
Return on average assets annualized (ROAA)			1.02	%			0.89	%			0.13	%			14	%
Return on average equity annualized (ROAE)			10.13	%			10.12	%			0.01	%			0	%
Net interest margin (tax-equivalent basis)			2.75	%			2.80	%			(0.05	)%			-2	%
GAAP efficiency ratio (C)			61.55	%			58.90	%			2.65	%			5	%
Operating expenses / average assets annualized			2.25	%			2.09	%			0.16	%			8	%

(A)	Includes death benefit of $3.0 million from life insurance policy for the year ended December 31, 2018 related to the December 31, 2018 passing of the founder and managing principle of MCM.
(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.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in Thousands)
(Unaudited)
		As of
		Dec 31,				Sept 30,				June 30,				March 31,				Dec 31,
		2018				2018				2018				2018				2017
ASSETS
Cash and due from banks		$	5,914			$	4,792			$	4,458			$	4,223			$	4,415
Federal funds sold			101				101				101				101				101
Interest-earning deposits			154,758				118,111				62,231				149,192				108,931
Total cash and cash equivalents			160,773				123,004				66,790				153,516				113,447
Securities available for sale			377,936				368,554				346,790				342,553				327,633
Equity security (A)			4,719				4,673				4,710				4,746				—
FHLB and FRB stock, at cost			18,533				21,561				21,533				23,703				13,378
Residential mortgage (B)			573,146				562,930				567,459				567,885				577,340
Multifamily mortgage (B)			1,138,190				1,289,458				1,320,251				1,366,712				1,388,958
Commercial mortgage			702,165				644,900				637,705				643,761				626,656
Commercial loans (B)			1,398,214				1,180,774				1,069,526				996,788				958,481
Consumer loans			58,678				64,478				76,509				71,580				86,277
Home equity lines of credit			62,191				59,930				55,020				64,570				67,497
Other loans			465				432				431				420				402
Total loans			3,933,049				3,802,902				3,726,901				3,711,716				3,705,611
Less: Allowances for loan and lease losses			38,504				37,293				38,066				37,696				36,440
Net loans			3,894,545				3,765,609				3,688,835				3,674,020				3,669,171
Premises and equipment			27,408				27,874				28,404				28,923				29,476
Other real estate owned			—				96				1,608				2,090				2,090
Accrued interest receivable			10,814				10,849				7,202				7,306				9,452
Bank owned life insurance			45,353				45,181				44,980				44,779				44,586
Goodwill and other intangible assets (C)			32,399				34,297				23,477				23,656				23,836
Other assets			45,378				34,011				30,845				31,202				27,478
TOTAL ASSETS		$	4,617,858			$	4,435,709			$	4,265,174			$	4,336,494			$	4,260,547
LIABILITIES
Deposits:
Noninterest-bearing demand deposits		$	463,926			$	503,388			$	527,453			$	536,054			$	539,304
Interest-bearing demand deposits			1,247,305				1,148,660				1,053,004				1,089,980				1,152,483
Savings			114,674				116,391				120,986				126,026				119,556
Money market accounts			1,243,369				1,097,630				1,051,893				1,006,540				1,091,385
Certificates of deposit – Retail			510,724				466,791				431,679				408,621				344,652
Certificates of deposit – Listing Service			79,195				85,241				96,644				132,321				198,383
Subtotal “customer” deposits			3,659,193				3,418,101				3,281,659				3,299,542				3,445,763
IB Demand – Brokered			180,000				180,000				180,000				180,000				180,000
Certificates of deposit – Brokered			56,147				61,193				61,254				72,614				72,591
Total deposits			3,895,340				3,659,294				3,522,913				3,552,156				3,698,354
Overnight borrowings			—				95,190				127,350				216,000				—
Federal home loan bank advances			108,000				84,000				52,898				22,898				37,898
Capital lease obligation			8,362				8,548				8,728				8,900				9,072
Subordinated debt, net			83,193				83,138				83,133				83,079				83,024
Other liabilities			53,950				51,106				33,133				31,055				28,521
TOTAL LIABILITIES			4,148,845				3,981,276				3,828,155				3,914,088				3,856,869
Shareholders’ equity			469,013				454,433				437,019				422,406				403,678
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY		$	4,617,858			$	4,435,709			$	4,265,174			$	4,336,494			$	4,260,547
Assets under management and / or administration at   Peapack-Gladstone Bank’s Private Wealth Management   Division (market value, not included above-dollars in billions)		$	5.8			$	6.4			$	5.7			$	5.6			$	5.5

(A)	Represents investment in CRA Investment Fund.  This investment was classified as an equity security and carried at market, in accordance with the adoption of Accounting Standard Update 2016-01, Financial Instruments on January 1, 2018.
(B)	Includes loans held for sale at fair value and/or lower cost or market.
(C)	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.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED BALANCE SHEET DATA
(Dollars in Thousands)
(Unaudited)
		As of
		Dec 31,				Sept 30,				June 30,				March 31,				Dec 31,
		2018				2018				2018				2018				2017
Asset Quality:
Loans past due over 90 days and still accruing		$	—			$	—			$	—			$	—			$	—
Nonaccrual loans (A)			25,715				10,722				12,025				13,314				13,530
Other real estate owned			—				96				1,608				2,090				2,090
Total nonperforming assets		$	25,715			$	10,818			$	13,633			$	15,404			$	15,620
Nonperforming loans to total loans			0.65	%			0.28	%			0.32	%			0.36	%			0.37	%
Nonperforming assets to total assets			0.56	%			0.24	%			0.32	%			0.36	%			0.37	%
Performing TDRs (B)(C)		$	4,303			$	19,334			$	18,665			$	7,888			$	9,514
Loans past due 30 through 89 days and still accruing (D)		$	3,484			$	2,528			$	3,539			$	674			$	246
Classified loans		$	58,265			$	51,783			$	51,216			$	55,945			$	41,706
Impaired loans		$	31,300			$	31,345			$	30,711			$	21,223			$	23,065
Allowance for loan and lease losses:
Beginning of period		$	37,293			$	38,066			$	37,696			$	36,440			$	35,915
Provision for loan and lease losses			1,500				500				300				1,250				1,650
Charge-offs, net			(289	)			(1,273	)			70				6				(1,125	)
End of period		$	38,504			$	37,293			$	38,066			$	37,696			$	36,440
ALLL to nonperforming loans			149.73	%			347.82	%			316.56	%			283.13	%			269.33	%
ALLL to total loans			0.979	%			0.981	%			1.021	%			1.016	%			0.983	%
General ALLL to total loans (E)			0.972	%			0.961	%			0.978	%			1.006	%			0.969	%

(A)	Amount includes one commercial real estate loan with a loan balance of $15.2 million at December 31, 2018.
(B)	Amounts reflect TDRs that are paying according to restructured terms.
(C)	Amount does not include $20.5 million at December 31, 2018, $5.5 million at September 30, 2018, $6.9 million at June 30, 2018, $8.0 million at March 31, 2018 and $8.1 million at December 31, 2017 of TDRs included in nonaccrual loans.
(D)	Amount includes one loan held for sale of $2.4 million that was sold on January 2, 2019.
(E)	Total ALLL less specific reserves equals general ALLL.

 

PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED BALANCE SHEET DATA
(Dollars in Thousands)
(Unaudited)
		December 31,						September 30,						December 31,
		2018						2018						2017
Capital Adequacy
Equity to total assets (A)					10.16	%					10.24	%					9.47	%
Tangible Equity to tangible assets (B)					9.52	%					9.55	%					8.97	%
Book value per share (C)				$	24.25					$	23.66					$	21.68
Tangible Book Value per share (D)				$	22.58					$	21.88					$	20.40

		December 31,									September 30,									December 31,
		2018									2018									2017
Regulatory Capital – Holding Company
Tier I leverage		$	438,240			9.82		%			$	423,124			9.80		%			$	382,870			9.04		%
Tier I capital to risk weighted assets			438,240			11.76						423,124			11.79						382,870			11.31
Common equity tier I capital ratio   to risk-weighted assets			438,238			11.76						423,122			11.79						382,868			11.31
Tier I & II capital to risk-weighted assets			559,937			15.03						543,555			15.15						502,334			14.84
Regulatory Capital – Bank
Tier I leverage		$	504,504			11.32		%			$	489,308			11.34		%			$	448,812			10.61		%
Tier I capital to risk weighted assets			504,504			13.56						489,308			13.65						448,812			13.27
Common equity tier I capital ratio   to risk-weighted assets			504,502			13.56						489,306			13.65						448,810			13.27
Tier I & II capital to risk-weighted assets			543,008			14.59						526,601			14.69						485,252			14.34

(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 is different than book value per share because it 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.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
LOANS CLOSED
(Dollars in Thousands)
(Unaudited)
		For the Quarters Ended
		Dec 31,				Sept 30,				June 30,				March 31,				Dec 31,
		2018				2018				2018				2018				2017
Residential loans retained		$	24,937			$	14,412			$	22,217			$	11,642			$	20,791
Residential loans sold			4,686				6,717				6,488				7,672				8,282
Total residential loans			29,623				21,129				28,705				19,314				29,073
Commercial real estate			63,486				23,950				20,780				34,385				19,090
Multifamily			58,175				12,328				4,743				21,000				5,400
Commercial (C&I) loans (A) (B)			285,950				133,973				137,805				118,425				141,672
SBA			5,695				4,800				10,740				4,270				9,640
Wealth lines of credit (A)			5,850				6,100				11,560				19,238				14,800
Total commercial loans			419,156				181,151				185,628				197,318				190,602
Installment loans			649				1,634				1,036				1,350				802
Home equity lines of credit (A)			3,625				10,273				5,091				2,497				4,513
Total loans closed		$	453,053			$	214,187			$	220,460			$	220,479			$	224,990

		For the Twelve Months Ended
		Dec 31,				Dec 31,
		2018				2017
Residential loans retained		$	73,208			$	162,777
Residential loans sold			25,563				28,484
Total residential loans			98,771				191,261
Commercial real estate			142,601				124,107
Multifamily			96,246				216,837
Commercial (C&I) loans (A) (B)			676,153				559,599
SBA			25,505				19,800
Wealth lines of credit (A)			42,748				52,105
Total commercial loans			983,253				972,448
Installment loans			4,669				6,990
Home equity lines of credit (A)			21,486				23,809
Total loans closed		$	1,108,179			$	1,194,508

(A)	Includes loans and lines of credit that closed in the period, but not necessarily funded.
(B)	Includes equipment finance.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
AVERAGE BALANCE SHEET
UNAUDITED
THREE MONTHS ENDED
(Tax-Equivalent Basis, Dollars in Thousands)
		December 31, 2018												December 31, 2017
		Average				Income/								Average				Income/
		Balance				Expense				Yield				Balance				Expense				Yield
ASSETS:
Interest-earning assets:
Investments:
Taxable (1)		$	383,455			$	2,521				2.63	%		$	316,148			$	1,726				2.18	%
Tax-exempt (1) (2)			17,887				173				3.87				24,836				183				2.95
Loans (2) (3):
Mortgages			562,284				4,732				3.37				598,407				4,880				3.26
Commercial mortgages			1,947,674				18,825				3.87				2,053,221				19,039				3.71
Commercial			1,221,111				14,915				4.89				886,170				9,263				4.18
Installment			60,855				624				4.10				85,390				656				3.07
Home equity			61,423				759				4.94				68,485				667				3.90
Other			461				11				9.54				638				11				6.90
Total loans			3,853,808				39,866				4.14				3,692,311				34,516				3.74
Federal funds sold			101				—				0.25				101				—				0.25
Interest-earning deposits			122,813				636				2.07				125,495				305				0.97
Total interest-earning assets			4,378,064				43,196				3.95	%			4,158,891				36,730				3.53	%
Noninterest-earning assets:
Cash and due from banks			6,876												5,096
Allowance for loan and lease losses			(37,774	)											(37,000	)
Premises and equipment			27,749												29,670
Other assets			112,348												96,607
Total noninterest-earning assets			109,199												94,373
Total assets		$	4,487,263											$	4,253,264
LIABILITIES:
Interest-bearing deposits:
Checking			1,208,604				3,174				1.05	%			1,135,660				1,591				0.56	%
Money markets			1,124,780				3,684				1.31				1,101,862				1,781				0.65
Savings			115,316				16				0.06				120,768				17				0.06
Certificates of deposit – retail			569,151				2,914				2.05				537,685				2,034				1.51
Subtotal interest-bearing deposits			3,017,851				9,788				1.30				2,895,975				5,423				0.75
Interest-bearing demand – brokered			180,000				855				1.90				180,000				751				1.67
Certificates of deposit – brokered			59,061				386				2.61				74,529				445				2.39
Total interest-bearing deposits			3,256,912				11,029				1.35				3,150,504				6,619				0.84
Borrowings			143,348				1,043				2.91				51,265				267				2.08
Capital lease obligation			8,428				102				4.84				9,136				110				4.82
Subordinated debt			83,157				1,222				5.88				56,444				857				6.07
Total interest-bearing liabilities			3,491,845				13,396				1.53	%			3,267,349				7,853				0.96	%
Noninterest-bearing liabilities:
Demand deposits			496,238												567,041
Accrued expenses and other liabilities			38,498												28,138
Total noninterest-bearing liabilities			534,736												595,179
Shareholders’ equity			460,682												390,736
Total liabilities and shareholders’ equity		$	4,487,263											$	4,253,264
Net interest income						$	29,800											$	28,877
Net interest spread											2.42	%											2.57	%
Net interest margin (4)											2.72	%											2.78	%

(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 at December 31, 2018 and a 35% federal tax rate at December 31, 2017.
(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)
		December 31, 2018												September 30, 2018
		Average				Income/								Average				Income/
		Balance				Expense				Yield				Balance				Expense				Yield
ASSETS:
Interest-earning assets:
Investments:
Taxable (1)		$	383,455			$	2,521				2.63	%		$	367,955			$	2,385				2.59	%
Tax-exempt (1) (2)			17,887				173				3.87				19,201				179				3.73
Loans (2) (3):
Mortgages			562,284				4,732				3.37				563,066				4,671				3.32
Commercial mortgages			1,947,674				18,825				3.87				1,960,801				18,488				3.77
Commercial			1,221,111				14,915				4.89				1,109,492				13,055				4.71
Installment			60,855				624				4.10				72,246				674				3.73
Home equity			61,423				759				4.94				58,082				682				4.70
Other			461				11				9.54				439				11				10.02
Total loans			3,853,808				39,866				4.14				3,764,126				37,581				3.99
Federal funds sold			101				—				0.25				101				—				0.25
Interest-earning deposits			122,813				636				2.07				95,014				418				1.76
Total interest-earning assets			4,378,064				43,196				3.95	%			4,246,397				40,563				3.82	%
Noninterest-earning assets:
Cash and due from banks			6,876												5,141
Allowance for loan and lease losses			(37,774	)											(38,473	)
Premises and equipment			27,749												28,216
Other assets			112,348												103,422
Total noninterest-earning assets			109,199												98,306
Total assets		$	4,487,263											$	4,344,703
LIABILITIES:
Interest-bearing deposits:
Checking		$	1,208,604			$	3,174				1.05	%		$	1,148,921			$	2,644				0.92	%
Money markets			1,124,780				3,684				1.31				1,065,338				3,261				1.22
Savings			115,316				16				0.06				118,996				17				0.06
Certificates of deposit – retail			569,151				2,914				2.05				538,985				2,545				1.89
Subtotal interest-bearing deposits			3,017,851				9,788				1.30				2,872,240				8,467				1.18
Interest-bearing demand – brokered			180,000				855				1.90				180,000				796				1.77
Certificates of deposit – brokered			59,061				386				2.61				61,192				394				2.58
Total interest-bearing deposits			3,256,912				11,029				1.35				3,113,432				9,657				1.24
Borrowings			143,348				1,043				2.91				167,153				1,038				2.48
Capital lease obligation			8,428				102				4.84				8,614				103				4.78
Subordinated debt			83,157				1,222				5.88				83,115				1,223				5.89
Total interest-bearing liabilities			3,491,845				13,396				1.53	%			3,372,314				12,021				1.43	%
Noninterest-bearing liabilities:
Demand deposits			496,238												495,163
Accrued expenses and other liabilities			38,498												33,943
Total noninterest-bearing liabilities			534,736												529,106
Shareholders’ equity			460,682												443,283
Total liabilities and shareholders’ equity		$	4,487,263											$	4,344,703
Net interest income						$	29,800											$	28,542
Net interest spread											2.42	%											2.39	%
Net interest margin (4)											2.72	%											2.69	%

(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
TWELVE MONTHS ENDED
(Tax-Equivalent Basis, Dollars in Thousands)
		December 31, 2018												December 31, 2017
		Average				Income/								Average				Income/
		Balance				Expense				Yield				Balance				Expense				Yield
ASSETS:
Interest-earning assets:
Investments:
Taxable (1)		$	363,259			$	8,903				2.45	%		$	300,590			$	6,271				2.09	%
Tax-exempt (1) (2)			20,489				731				3.57				26,046				766				2.94
Loans (2) (3):
Mortgages			565,513				18,842				3.33				586,722				19,025				3.24
Commercial mortgages			1,976,712				74,693				3.78				2,073,804				75,304				3.63
Commercial			1,087,600				50,854				4.68				761,401				32,564				4.28
Commercial construction			—				—				—				96				4				4.17
Installment			71,643				2,603				3.63				75,995				2,322				3.06
Home equity			61,828				2,786				4.51				67,420				2,489				3.69
Other			451				45				9.98				550				45				8.18
Total loans			3,763,747				149,823				3.98				3,565,988				131,753				3.69
Federal funds sold			101				—				0.25				101				—				0.25
Interest-earning deposits			103,059				1,806				1.75				115,567				1,021				0.88
Total interest-earning assets			4,250,655				161,263				3.79	%			4,008,292				139,811				3.49	%
Noninterest-earning assets:
Cash and due from banks			5,346												8,986
Allowance for loan and lease losses			(37,904	)											(35,246	)
Premises and equipment			28,477												30,021
Other assets			103,761												83,060
Total noninterest-earning assets			99,680												86,821
Total assets		$	4,350,335											$	4,095,113
LIABILITIES:
Interest-bearing deposits:
Checking		$	1,143,640			$	9,543				0.83	%		$	1,092,545			$	5,039				0.46	%
Money markets			1,056,368				11,322				1.07				1,076,492				5,499				0.51
Savings			119,699				66				0.06				120,896				66				0.05
Certificates of deposit – retail			554,903				9,938				1.79				486,960				7,118				1.46
Subtotal interest-bearing deposits			2,874,610				30,869				1.07				2,776,893				17,722				0.64
Interest-bearing demand – brokered			180,000				3,135				1.74				180,000				2,934				1.63
Certificates of deposit – brokered			64,009				1,608				2.51				86,967				1,910				2.20
Total interest-bearing deposits			3,118,619				35,612				1.14				3,043,860				22,566				0.74
Borrowings			154,765				3,606				2.33				71,788				1,363				1.90
Capital lease obligation			8,698				418				4.81				9,375				451				4.81
Subordinated debt			83,104				4,887				5.88				50,733				3,206				6.32
Total interest-bearing liabilities			3,365,186				44,523				1.32	%			3,175,756				27,586				0.87	%
Noninterest-bearing liabilities:
Demand deposits			516,718												535,451
Accrued expenses and other liabilities			32,541												23,413
Total noninterest-bearing liabilities			549,259												558,864
Shareholders’ equity			435,890												360,493
Total liabilities and shareholders’ equity		$	4,350,335											$	4,095,113
Net interest income						$	116,740											$	112,225
Net interest spread											2.47	%											2.62	%
Net interest margin (4)											2.75	%											2.80	%

(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 at December 31, 2018 and a 35% federal tax rate at December 31, 2017.
(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
		Dec 31,				Sept 30,				June 30,				March 31,				Dec 31,
Tangible Book Value Per Share		2018				2018				2018				2018				2017
Shareholders’ equity		$	469,013			$	454,433			$	437,019			$	422,406			$	403,678
Less:  Intangible assets, net			32,399				34,297				23,477				23,656				23,836
Tangible equity			436,614				420,136				413,542				398,750				379,842
Period end shares outstanding			19,337,662				19,203,727				19,007,312				18,921,114				18,619,634
Tangible book value per share		$	22.58			$	21.88			$	21.76			$	21.07			$	20.40
Book value per share			24.25				23.66				22.99				22.32				21.68
Tangible Equity to Tangible Assets
Total assets		$	4,617,858			$	4,435,709			$	4,265,174			$	4,336,494			$	4,260,547
Less: Intangible assets, net			32,399				34,297				23,477				23,656				23,836
Tangible assets			4,585,459				4,401,412				4,241,697				4,312,838				4,236,711
Tangible equity to tangible assets			9.52	%			9.55	%			9.75	%			9.25	%			8.97	%
Equity to assets			10.16	%			10.24	%			10.25	%			9.74	%			9.47	%

		Three Months Ended
		Dec 31				Sept 30,				June 30,				March 31,				Dec 31,
Efficiency Ratio		2018				2018				2018				2018				2017
Net interest income		$	29,385			$	28,142			$	29,243			$	28,393			$	28,586
Total other income			11,255				10,983				11,740				10,215				10,606
Less:  Loss/(gain) on loans held for sale
at lower of cost or fair value			4,392				—				—				—				(378	)
Less:  Income from life insurance proceeds			(3,000	)
Add:  Securities (gains)/losses, net			(46	)			325				36				78				—
Total recurring revenue			41,986				39,450				41,019				38,686				38,814
Operating expenses			25,524				24,284				24,941				23,337				24,251
Less: ORE provision			—				28				204				—				—
Total operating expense			25,524				24,256				24,737				23,337				24,251
Efficiency ratio			60.79	%			61.49	%			60.31	%			60.32	%			62.48	%

		For the Twelve Months Ended
		Dec 31,				Dec 31,
Efficiency Ratio		2018				2017
Net interest income		$	115,163			$	111,141
Total other income			44,193				34,627
Less:  Loss/(gain) on loans held for sale
at lower of cost or fair value			4,392				412
Less:  Income from life insurance proceeds			(3,000	)			—
Add:  Securities losses, net			393				—
Total recurring revenue			161,141				145,356
Operating expenses			98,086				85,611
Total operating expense			98,086				85,611
Efficiency ratio			60.87	%			58.90	%

Contact:

Jeffrey J. Carfora, SEVP and CFO

Peapack-Gladstone Financial Corporation

T: 908-719-4308