Exhibit 99.1

Contact:

Jeffrey J. Carfora, SEVP and CFO

Peapack-Gladstone Financial Corporation

T: 908-719-4308

PEAPACK-GLADSTONE FINANCIAL CORPORATION

REPORTS THIRD QUARTER RESULTS AND

DECLARES ITS QUARTERLY CASH DIVIDEND

Bedminster, N.J. – October 26, 2018 – Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market: PGC) (the “Company”) recorded net income of $33.44 million and diluted earnings per share of $1.75 for the nine months ended September 30, 2018, compared to $26.13 million and $1.47, respectively, for the nine months ended September 30, 2017, reflecting increases of $7.31 million, or 28%, and $0.28 per share, or 19%, respectively.

For the same nine-month periods, the Company’s total revenue increased $12.14 million when comparing the 2018 nine-month period to the 2017 nine-month period. Of the total revenue increase, $9.00 million (or 74%) was provided by increased wealth management fee income.  Douglas L. Kennedy, President and CEO, said “Increased wealth management business and income has been driven by our Strategy.  Such fee income provides a more stable and predictable revenue stream than other sources of income.”

For the quarter ended September 30, 2018, the Company recorded net income of $10.72 million and diluted earnings per share of $0.56, compared to $10.21 million and $0.56 for the same three-month period last year. The 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 & Associates, P.C, (“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 and reduced earnings per share by $0.04 for the 2018 quarter.

1


EXECUTIVE SUMMARY:

 

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

Year over Year Comparison

 

 

Nine Months

 

 

 

Nine Months

 

 

 

 

 

 

 

 

 

 

 

Ended

 

 

 

Ended

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

 

September 30,

 

 

Increase/

 

(Dollars in millions, except per share data)

 

2018 (1)

 

 

 

2017

 

 

(Decrease)

 

Net interest income

 

$

85.78

 

 

 

$

82.56

 

 

$

3.22

 

 

 

4

%

Provision for loan and lease losses

 

 

2.05

 

 

 

 

4.20

 

 

 

(2.15

)

 

 

(51

)

Net interest income after provision

 

 

83.73

 

 

 

 

78.36

 

 

 

5.37

 

 

 

7

 

Wealth management fee income

 

 

24.69

 

 

 

 

15.69

 

 

 

9.00

 

 

 

57

 

Other income

 

 

8.24

 

 

 

 

8.33

 

 

 

(0.09

)

 

 

(1

)

Total other income

 

 

32.93

 

 

 

 

24.02

 

 

 

8.91

 

 

 

37

 

Operating expenses

 

 

72.56

 

 

 

 

61.36

 

 

 

11.20

 

 

 

18

 

Pretax income

 

 

44.10

 

 

 

 

41.02

 

 

 

3.08

 

 

 

8

 

Income tax expense

 

 

10.66

 

(2)

 

 

14.89

 

 

 

(4.23

)

 

 

(28

)

Net income

 

$

33.44

 

 

 

$

26.13

 

 

$

7.31

 

 

 

28

%

Diluted EPS

 

$

1.75

 

 

 

$

1.47

 

 

$

0.28

 

 

 

19

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets annualized

 

 

1.04

%

 

 

 

0.86

%

 

 

0.18

 

 

 

 

 

Return on average equity annualized

 

 

10.43

%

 

 

 

9.94

%

 

 

0.49

 

 

 

 

 

 

 

(1)

The September 2018 nine months 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 September 2018 nine months reflected the reduced Federal income tax rate due to the new tax law signed in December 2017.  The September 2018 nine months included a $458,000 reduction in income taxes, while the September nine months 2017 included a $662,000 reduction in income taxes, both associated with the vesting of restricted stock under ASU 2016-09. Also, the nine months ended September 2018 included a higher NJ state corporate income tax rate, as signed into law in July 2018, but effective back to January 1, 2018.

 

2


September 2018 Quarter Compared to Prior Year Quarter

 

 

Three Months Ended

 

 

 

Three Months Ended

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

 

September 30,

 

 

Increase/

 

(Dollars in millions, except per share data)

 

2018 (1)(2)

 

 

 

2017

 

 

(Decrease)

 

Net interest income

 

$

28.14

 

 

 

$

29.99

 

 

$

(1.85

)

 

 

(6

)%

Provision for loan and lease losses

 

 

0.50

 

 

 

 

0.40

 

 

 

0.10

 

 

 

25

 

Net interest income after provision

 

 

27.64

 

 

 

 

29.59

 

 

 

(1.95

)

 

 

(7

)

Wealth management fee income

 

 

8.20

 

 

 

 

5.79

 

 

 

2.41

 

 

 

42

 

Other income

 

 

2.78

 

 

 

 

3.04

 

 

 

(0.26

)

 

 

(9

)

Total other income

 

 

10.98

 

 

 

 

8.83

 

 

 

2.15

 

 

 

24

 

Operating expenses

 

 

24.28

 

 

 

 

21.96

 

 

 

2.32

 

 

 

11

 

Pretax income

 

 

14.34

 

 

 

 

16.46

 

 

 

(2.12

)

 

 

(13

)

Income tax expense

 

 

3.62

 

(3)

 

 

6.25

 

 

 

(2.63

)

 

 

(42

)

Net income

 

$

10.72

 

 

 

$

10.21

 

 

$

0.51

 

 

 

5

%

Diluted EPS

 

$

0.56

 

 

 

$

0.56

 

 

$

-

 

 

 

0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets annualized

 

 

0.99

%

 

 

 

0.97

%

 

 

0.02

 

 

 

 

 

Return on average equity annualized

 

 

9.68

%

 

 

 

11.09

%

 

 

(1.41

)

 

 

 

 

 

 

(1)

The September 2018 quarter included results of operations of 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 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 quarter.

 

(3)

The September 2018 quarter reflected the reduced federal income tax rate due to the new tax law signed in December 2017. Also, the September 2018 quarter included a higher NJ state corporate income tax rate, as signed into law in July 2018, but effective back to January 1, 2018.

 

September 2018 Quarter Compared to Linked Quarter

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

June 30,

 

 

 

Increase/

 

(Dollars in millions, except per share data)

 

2018 (1)(2)

 

 

2018

 

 

 

(Decrease)

 

Net interest income

 

$

28.14

 

 

$

29.24

 

 

 

$

(1.10

)

 

 

(4

)%

Provision for loan and lease losses

 

 

0.50

 

 

 

0.30

 

 

 

 

0.20

 

 

 

67

 

Net interest income after provision

 

 

27.64

 

 

 

28.94

 

 

 

 

(1.30

)

 

 

(4

)

Wealth management fee income

 

 

8.20

 

 

 

8.13

 

 

 

 

0.07

 

 

 

1

 

Other income

 

 

2.78

 

 

 

3.61

 

 

 

 

(0.83

)

 

 

(23

)

Total other income

 

 

10.98

 

 

 

11.74

 

 

 

 

(0.76

)

 

 

(6

)

Operating expenses

 

 

24.28

 

 

 

24.94

 

 

 

 

(0.66

)

 

 

(3

)

Pretax income

 

 

14.34

 

 

 

15.74

 

 

 

 

(1.40

)

 

 

(9

)

Income tax expense

 

 

3.62

 

(3)

 

3.83

 

 

 

 

(0.21

)

 

 

(5

)

Net income

 

$

10.72

 

 

$

11.91

 

 

 

$

(1.19

)

 

 

(10

)%

Diluted EPS

 

$

0.56

 

 

$

0.62

 

 

 

$

(0.06

)

 

 

(10

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets annualized

 

 

0.99

%

 

 

1.11

%

 

 

 

(0.12

)

 

 

 

 

Return on average equity annualized

 

 

9.68

%

 

 

11.11

%

 

 

 

(1.43

)

 

 

 

 

 

 

(1)

The September 2018 quarter included results of operations of Lassus Wherley acquired effective September 1, 2018.

3


 

(2)

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.

 

(3)

The September 2018 quarter included a higher NJ state corporate income tax rate, as signed into law in July 2018, but effective back to January 1, 2018.

Douglas L. Kennedy, President and CEO, said, “I am pleased with our results 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 this challenging period we may have an opportunity to attract additional talent to the Company from larger bank competitors, 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:

 

o

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”).

 

o

At September 30, 2018, the market value of AUM/AUA at the Private Wealth Management Division of Peapack-Gladstone Bank (the “Bank”) increased $1.6 billion to $6.4 billion from $4.8 billion at September 30, 2017, reflecting growth of 33%.   The Quadrant Capital Management and Lassus Wherley acquisitions accounted for approximately $1.0 billion of the growth.

 

o

Fee income from the Private Wealth Management Division totaled $8.20 million for the quarter ended September 30, 2018, an increase of $2.41 million, or 42%, from $5.79 million for the quarter ended September 30, 2017.  

 

o

Wealth management fee income, which comprised approximately 21% of the Company’s total revenue for the quarter ended September 30, 2018, contributed significantly to the Company’s diversified revenue sources.

 

o

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 lending (including Equipment Finance):

 

o

Total commercial and industrial (“C&I”) loans at September 30, 2018 were $1.18 billion.  This reflected net growth of $335 million (40%) when compared to $846 million in C&I loans at September 30, 2017.

 

o

The Company continued to manage its balance sheet such that lower-yielding, primarily fixed rate multifamily loans decline as a percentage of the overall loan portfolio and higher-yielding, primarily floating rate or short duration C&I loans become a larger percentage of the overall loan portfolio. As of September 30, 2018, total C&I loans comprised 31% of the total loan portfolio, as compared to 23% a year earlier.  As of September 30, 2018, total multifamily loans comprised 34% of the total loan portfolio, as compared to 39% a year earlier.

 

o

The Bank’s concentration in multifamily and investor commercial real estate loans declined to 416% of risk-based capital at September 30, 2018 from 529% at September 30, 2017.

 

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

 

o

Deposits totaled $3.66 billion at both September 30, 2018 and September 30, 2017.  Deposit growth of $136 million in the third quarter of 2018 and $36 million in the fourth quarter of 2017, was principally offset by $175 million of net decreases the first half of 2018 (as described fully last quarter, and as summarized below).  

4


 

o

The Bank is a significant provider of depository services to its wealth and commercial clients.  During the first half of 2018, many of those clients reallocated funds to pay income taxes and to invest in other opportunities, both inside and outside of the Company.

 

o

Other decreases in the first half of 2018 were part of a program to manage the deposit base to achieve better economics. $125 million of listing service and brokered certificates of deposits matured during 2018. As the Company has noted previously, the Company has chosen to not participate in these programs at this time due to the higher current cost, and lack of a core customer. Additionally, the Company chose to exit certain large deposit relationships totaling approximately $90 million that it considered to be too volatile or that exposed the Company to increased operational risk.

 

o

The Company has actively managed its balance sheet to remain balanced (slightly asset sensitive to slightly liability sensitive), despite rising deposit betas and costs, which had been noted by the Company over the last several quarters, and as discussed later in this release.  

 

o

The Company continues to have access to over $1 billion of available secured funding at the Federal Home Loan Bank.

 

Capital and asset quality continue to be strong.

 

o

Asset quality metrics continued to be strong at September 30, 2018.  Nonperforming assets at September 30, 2018 were $10.8 million, or 0.24% of total assets.  Total loans past due 30 through 89 days and still accruing were $2.5 million, or 0.07% of total loans at September 30, 2018.

 

o

The Company’s and Bank’s capital ratios at September 30, 2018 all increased significantly compared to the December 31, 2017 and September 30, 2017 levels. These capital positions were benefitted by net income, as well as capital generated through optional cash purchases in the Company’s Dividend Reinvestment Plan.  

 

SUPPLEMENTAL QUARTERLY DETAILS:

 

Wealth Management Business

In the September 2018 quarter, the Bank’s wealth management business generated $8.20 million in fee income compared to $8.13 million for the June 2018 quarter, and $5.79 million for the September 2017 quarter. 

When compared to the September 2017 quarter, the September 2018 quarter included three months of income related to Murphy Capital (compared to two months for the September 2017 quarter), which was acquired effective August 1, 2017, three months of income related to Quadrant Capital, which was acquired effective November 1, 2017, and one month of income related to Lassus Wherley (approximately $300,000), which was acquired effective September 1, 2018, as well as increased earnings from organic growth in assets under management. The June 2018 quarter included seasonal tax preparation fees of approximately $400,000, with no such fees included in the September 2018 quarter.  

John P. Babcock, President of the newly branded “Peapack Private”, the Bank’s Private Wealth Management Division, said “We continue to grow our wealth management business organically, hire experienced new colleagues and continue to pursue businesses that can add talent and expertise to our growing business.”

Loans / Commercial Banking

For the quarter ended September 30, 2018, total net loan growth was $76 million (2% for the quarter, or 8% annualized). Total commercial and industrial loans grew $111 million (10% for the quarter, or 42% annualized) to $1.18 billion at the end of the third quarter, compared to $1.07 billion at the end of the second quarter of 2018. New loan growth was funded by managed reductions in lower yielding multifamily loans (net reduction of $31 million for the quarter) and deposit growth (net increase of $136 million for the quarter).

5


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.

Despite this competitive market, the Company has very strong loan pipelines heading into the fourth quarter of 2018. We expect such loans will be funded by a combination of reductions in lower yielding loans, growth in deposits, and additions of medium term FHLB advances as part of our interest rate risk management.”  

Funding / Liquidity / Interest Rate Risk Management

As noted previously, 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 September 30, 2018, the Company utilized its increased capital, deposit growth, and reductions in its lower yielding multifamily loan portfolio to fund C&I loan growth, reduce overnight borrowings, and increase on balance sheet liquidity (interest earning deposits and investment securities).  

During the quarter ended September 30, 2018 the company’s deposit repricing betas rose as would be expected at this point in the interest rate cycle. Accordingly, the Company added $40 million of medium term FHLB advances during the September 2018 quarter as part of its interest rate risk management.

In addition to approximately $496 million of cash, cash equivalents and investment securities on its balance sheet, the Company also had approximately $1.3 billion of secured funding available from the Federal Home Loan Bank, of which $179 million was drawn as of September 30, 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.”

6


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

 

Nine Months Ended

 

 

Nine Months Ended

 

 

 

 

 

 

 

 

 

 

September 30, 2018

 

 

September 30, 2017

 

 

 

 

 

 

 

 

 

 

NII

 

 

NIM

 

 

NII

 

 

NIM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NII/NIM excluding the below

$

83,949

 

 

2.70%

 

 

$

78,752

 

 

2.68%

 

 

 

 

 

 

 

 

 

Prepayment premiums received on multifamily loan paydowns

 

1,508

 

 

0.04%

 

 

 

2,568

 

 

0.09%

 

 

 

 

 

 

 

 

 

Fees recognized on full paydowns of select C&I loans

 

321

 

 

0.01%

 

 

 

1,235

 

 

0.04%

 

 

 

 

 

 

 

 

 

NII/NIM as reported

$

85,778

 

 

2.75%

 

 

$

82,555

 

 

2.81%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

Three Months Ended

 

 

September 30, 2018

 

 

June 30, 2018

 

 

September 30, 2017

 

 

NII

 

 

NIM

 

 

NII

 

 

NIM

 

 

NII

 

 

NIM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NII/NIM excluding the below

$

27,804

 

 

2.66%

 

 

$

28,186

 

 

2.72%

 

 

$

27,483

 

 

2.70%

 

Prepayment premiums received on multifamily loan paydowns

 

338

 

 

0.03%

 

 

 

736

 

 

0.07%

 

 

 

1,274

 

 

0.13%

 

Fees recognized on full paydowns of select C&I loans

 

0

 

 

0.00%

 

 

 

321

 

 

0.03%

 

 

 

1,235

 

 

0.12%

 

NII/NIM as reported

$

28,142

 

 

2.69%

 

 

$

29,243

 

 

2.82%

 

 

$

29,992

 

 

2.95%

 

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

Net interest margin, after excluding the benefits summarized above, for the third quarter of 2018 decreased when compared to comparable numbers for the second quarter of 2018, and the third quarter of 2017.  The decrease from the third quarter of 2017 and the linked quarter in 2018 was due to the increase in our cost of deposits partially offset by the effect of the increased market rates on our adjustable rate assets. The issuance of $35 million of subordinated debt in mid-December 2017 negatively impacted net interest margin slightly in the September and June 2018 quarters. Also, the margin for the September 2018 quarter was negatively impacted by the payoff of two higher yielding C&I loans totaling $35 million near the end of June. One loan was scheduled to mature later in the year but paid down early, and the other loan was a special mention loan that was managed to early repayment. In both cases, the Company received payment in full.  

The Company’s interest rate sensitivity models indicate that the Company’s sensitivity is relatively balanced, meaning that its net interest income remains relatively stable in a rising interest rate environment. These models contemplate the Company’s higher deposit betas experienced during the September quarter will continue. The Company believes that such betas will continue for some period of time, but then begin to level off and decline. Accordingly, the Company believes its net interest margin may continue to decline slightly over the next several quarters, but then begin to rise as betas decline, as the Company continues the reduction of its lower yielding multifamily portfolio replaced with higher yielding, adjustable rate and short duration loans, and as the Company’s deposit gathering efforts noted above 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 by competitive forces.  

Other Noninterest Income

The third quarter of 2018 included $514,000 of income related to the Company’s SBA lending and sale program, compared to $814,000 generated in the June 2018 quarter, and $493,000 in the September 2017 quarter.  

The third quarter of 2018 also included $854,000 of loan level, back-to-back swap income compared to $900,000 in the June 2018 quarter and $888,000 in the September 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

7


noted that income from both of these programs are not linear each quarter, as some quarters will be higher than others.

The September 2018 quarter included a $325,000 loss on sale of investment securities, principally related to a restructure of the investment portfolio, which will benefit future earnings.  The company replaced $20 million of lower yielding securities with higher yielding securities, without extending duration. The loss on sale will be fully offset by increased earnings in less than 12-months.  

Operating Expenses

The Company’s total operating expenses were $24.28 million for the quarter ended September 30, 2018, compared to $24.94 million for the June 2018 quarter and $21.96 million for the September 2017 quarter.

Compensation and employee benefits expense for the September 2018 quarter was $16.03 million compared to $15.83 million for the June 2018 quarter, and $14.00 million for the September 2017 quarter.  When compared to the 2017 quarter, the September 2018 quarter included: three months of expense (compared to two months in the 2017 quarter) related to Murphy Capital (which closed in August 2017); three months of expense related to Quadrant Capital (which closed in November 2017); and one month of expense related to Lassus Wherley (which closed in September 2018). Strategic hiring and normal salary increases also contributed to the increase for the September 2018 quarter as compared to the September 2017 quarter. When compared to the June 2018 quarter, the September quarter included $319,000 of severance expense related to the elimination of select positions, and one month of Lassus Wherley expense, partially offset by reduced compensation expense related to the position eliminations noted just above.

Premises and equipment and other operating expense for the September 2018 quarter, when compared to the September 2017 quarter, included increased expenses due to normal operating expenses of the wealth companies acquired as noted just above. When compared to the June 2018 quarter, the September 2018 quarter included $340,000 of professional fees related to investment banking and other fees associated with the Lassus Wherley acquisition, and the June 2018 quarter included a $200,000 provision on two REO properties subsequently sold. Further, when compared to the June 2018 quarter, the September 2018 quarter included somewhat reduced expenses related to third party services, as part of the Company’s focus on expense management.  

Income Taxes

The September and June 2018 quarters included a reduced Federal income tax rate due to the new tax law signed in December 2017. Also, the September 2018 quarter 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 September 2018 quarter was 25.2%, compared to 24.3% for the June 2018 quarter, and 38.0% for the September 2017 quarter.

Asset Quality / Provision for Loan and Lease Losses

Nonperforming assets at September 30, 2018 (which does not include troubled debt restructured loans that are performing in accordance with their terms) were $10.8 million, or 0.24% of total assets, compared to $13.6 million, or 0.32% of total assets, at June 30, 2018 and $15.5 million, or 0.37% of total assets, at September 30, 2017.  Total loans past due 30 through 89 days and still accruing were $2.5 million at September 30, 2018, compared to $3.5 million at June 30, 2018 and $589,000 at September 30, 2017.

For the quarter ended September 30, 2018, the Company’s provision for loan and lease losses was $500,000, compared to $300,000 for the June 2018 quarter and $400,000 for the September 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 September 30, 2018, the allowance for loan and lease losses of $37.29 million (348% of nonperforming loans and 0.98% of total loans), compared to $38.07 million at June 30, 2018 (317% of nonperforming loans and 1.02% of total loans), and $35.92 million (234% of nonperforming loans and 0.98% of total loans) at September 30, 2017.  

8


Capital / Dividends

The Company’s capital positions in the September 2018 quarter were benefitted by net income of $10.72 million and $2.39 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 September 2018 quarter were from authorized but unissued shares, while 246,941 shares were purchased in the open market.

The Bank’s regulatory capital ratios are all well above the ratios to be considered well capitalized under regulatory guidance.

On October 25, 2018, the Company’s Board of Directors declared a cash dividend of $0.05 per share payable on November 23, 2018 to shareholders of record on November 8, 2018.

ABOUT THE COMPANY

Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $4.44 billion and wealth management assets under management and/or administration (AUM/AUA) of $6.4 billion as of September 30, 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;

9


 

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; 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.

(Tables to follow)

10


PEAPACK-GLADSTONE FINANCIAL CORPORATION

SELECTED CONSOLIDATED FINANCIAL DATA

(Dollars in Thousands, except share data)

(Unaudited)

 

 

For the Three Months Ended

 

 

 

Sept 30,

 

 

June 30,

 

 

March 31,

 

 

Dec 31,

 

 

Sept 30,

 

 

 

2018

 

 

2018

 

 

2018

 

 

2017

 

 

2017

 

Income Statement Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

40,163

 

 

$

39,674

 

 

$

37,068

 

 

$

36,439

 

 

$

37,491

 

Interest expense

 

 

12,021

 

 

 

10,431

 

 

 

8,675

 

 

 

7,853

 

 

 

7,499

 

Net interest income

 

 

28,142

 

 

 

29,243

 

 

 

28,393

 

 

 

28,586

 

 

 

29,992

 

Provision for loan and lease losses

 

 

500

 

 

 

300

 

 

 

1,250

 

 

 

1,650

 

 

 

400

 

Net interest income after provision for loan and

   lease losses

 

 

27,642

 

 

 

28,943

 

 

 

27,143

 

 

 

26,936

 

 

 

29,592

 

Wealth management fee income

 

 

8,200

 

 

 

8,126

 

 

 

8,367

 

 

 

7,489

 

 

 

5,790

 

Service charges and fees

 

 

860

 

 

 

873

 

 

 

831

 

 

 

837

 

 

 

816

 

Bank owned life insurance

 

 

349

 

 

 

345

 

 

 

336

 

 

 

341

 

 

 

343

 

Gain on loans held for sale at fair value

   (Mortgage banking)

 

 

87

 

 

 

79

 

 

 

94

 

 

 

122

 

 

 

141

 

Gain on loans held for sale at lower of cost or

   fair value

 

 

 

 

 

 

 

 

 

 

 

378

 

 

 

34

 

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

   swaps

 

 

854

 

 

 

900

 

 

 

252

 

 

 

179

 

 

 

888

 

Gain on sale of SBA loans

 

 

514

 

 

 

814

 

 

 

31

 

 

 

774

 

 

 

493

 

Other income

 

 

444

 

 

 

639

 

 

 

382

 

 

 

486

 

 

 

326

 

Securities losses, net

 

 

(325

)

 

 

(36

)

 

 

(78

)

 

 

 

 

 

 

Total other income

 

 

10,983

 

 

 

11,740

 

 

 

10,215

 

 

 

10,606

 

 

 

8,831

 

Salaries and employee benefits

 

 

16,025

 

 

 

15,826

 

 

 

14,579

 

 

 

15,296

 

 

 

13,996

 

Premises and equipment

 

 

3,399

 

 

 

3,406

 

 

 

3,270

 

 

 

3,194

 

 

 

2,945

 

FDIC insurance expense

 

 

593

 

 

 

625

 

 

 

580

 

 

 

495

 

 

 

583

 

Other expenses

 

 

4,267

 

 

 

5,084

 

 

 

4,908

 

 

 

5,266

 

 

 

4,437

 

Total operating expenses

 

 

24,284

 

 

 

24,941

 

 

 

23,337

 

 

 

24,251

 

 

 

21,961

 

Income before income taxes

 

 

14,341

 

 

 

15,742

 

 

 

14,021

 

 

 

13,291

 

 

 

16,462

 

Income tax expense

 

 

3,617

 

 

 

3,832

 

 

 

3,214

 

 

 

2,922

 

 

 

6,256

 

Net income

 

$

10,724

 

 

$

11,910

 

 

$

10,807

 

 

$

10,369

 

 

$

10,206

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue (A)

 

$

39,125

 

 

$

40,983

 

 

$

38,608

 

 

$

39,192

 

 

$

38,823

 

Per Common Share Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share (basic)

 

$

0.56

 

 

$

0.63

 

 

$

0.58

 

 

$

0.57

 

 

$

0.57

 

Earnings per share (diluted)

 

 

0.56

 

 

 

0.62

 

 

 

0.57

 

 

 

0.56

 

 

 

0.56

 

Weighted average number of common

   shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

19,053,849

 

 

 

18,930,893

 

 

 

18,608,309

 

 

 

18,197,708

 

 

 

17,800,153

 

Diluted

 

 

19,240,098

 

 

 

19,098,838

 

 

 

18,908,692

 

 

 

18,527,829

 

 

 

18,123,268

 

Performance Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets annualized (ROAA)

 

 

0.99

%

 

 

1.11

%

 

 

1.01

%

 

 

0.98

%

 

 

0.97

%

Return on average equity annualized (ROAE)

 

 

9.68

%

 

 

11.11

%

 

 

10.54

%

 

 

10.61

%

 

 

11.09

%

Net interest margin (tax- equivalent basis)

 

 

2.69

%

 

 

2.82

%

 

 

2.76

%

 

 

2.78

%

 

 

2.95

%

GAAP efficiency ratio (B)

 

 

62.07

%

 

 

60.86

%

 

 

60.45

%

 

 

61.88

%

 

 

56.57

%

Operating expenses / average assets annualized

 

 

2.24

%

 

 

2.32

%

 

 

2.19

%

 

 

2.28

%

 

 

2.10

%

 

(A)

Total revenue includes net interest income plus total other income.

(B)

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 beginning on page 19.

11


PEAPACK-GLADSTONE FINANCIAL CORPORATION

SELECTED CONSOLIDATED FINANCIAL DATA

(Dollars in Thousands, except share data)

(Unaudited)

 

 

For the Nine Months Ended

 

 

 

 

 

 

 

 

 

 

 

Sept 30,

 

 

Change

 

 

 

2018

 

 

2017

 

 

$

 

 

%

 

Income Statement Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

116,905

 

 

$

102,288

 

 

$

14,617

 

 

 

14

%

Interest expense

 

 

31,127

 

 

 

19,733

 

 

 

11,394

 

 

 

58

%

Net interest income

 

 

85,778

 

 

 

82,555

 

 

 

3,223

 

 

 

4

%

Provision for loan and lease losses

 

 

2,050

 

 

 

4,200

 

 

 

(2,150

)

 

 

-51

%

Net interest income after provision for loan and

   lease losses

 

 

83,728

 

 

 

78,355

 

 

 

5,373

 

 

 

7

%

Wealth management fee income

 

 

24,693

 

 

 

15,694

 

 

 

8,999

 

 

 

57

%

Service charges and fees

 

 

2,564

 

 

 

2,402

 

 

 

162

 

 

 

7

%

Bank owned life insurance

 

 

1,030

 

 

 

1,015

 

 

 

15

 

 

 

1

%

Gain on loans held for sale at fair value (Mortgage banking)

 

 

260

 

 

 

279

 

 

 

(19

)

 

 

-7

%

Gain on loans held for sale at lower of cost or fair value

 

 

 

 

 

34

 

 

 

(34

)

 

 

-100

%

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

 

 

2,006

 

 

 

2,635

 

 

 

(629

)

 

 

-24

%

Gain on sale of SBA loans

 

 

1,359

 

 

 

790

 

 

 

569

 

 

 

72

%

Other income

 

 

1,465

 

 

 

1,172

 

 

 

293

 

 

 

25

%

Securities losses, net

 

 

(439

)

 

 

 

 

 

(439