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Peapack-Gladstone Financial Corporation Reports Strong Fourth Quarter Results, as Net Interest Margin Continues to Expand

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Bedminster, NJ – (NewMediaWire) – January 26, 2023 – Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market: PGC) (the “Company”) announces its fourth quarter 2022 results. 

This earnings release should be read in conjunction with the Company’s Q4 2022 Investor Update, a copy of which is available on our website at www.pgbank.com and via a current report on Form 8-K on the website of the Securities and Exchange Commission at www.sec.gov.  

The Company recorded total revenue of $64.85 million, net income of $20.58 million and diluted earnings per share (“EPS”) of $1.12 for the quarter ended December 31, 2022, compared to revenue of $56.17 million, net income of $14.86 million and diluted EPS of $0.78 for the three months ended December 31, 2021. 

The Company’s return on average assets, return on average equity, and return on average tangible equity totaled 1.33%, 15.73% and 17.30%, respectively, for the December 2022 quarter, reflecting significant increases from the December 2021 quarterly levels.  

The December 2022 quarter results were driven by continued improvement in net interest income and net interest margin, which improved $10.8 million and 66 basis points, when compared to the December 2021 quarter (and $2.5 million and 14 basis points when compared to the September 2022 quarter). This increase was partially offset by a decline in noninterest income, principally wealth management fee income and capital markets activity fee income, due to volatility in the markets.

Douglas L. Kennedy, President and CEO said, “Our fourth quarter results represent a fitting end to a tremendous year for our Company. The consistent improvement of net interest income throughout the year reflects the asset sensitivity of our loan portfolio, as loans continued to reprice upward in the rising rate environment. For the 2022 fiscal year, net income grew 31% and earnings per share improved by 37%. I am extremely pleased with our financial performance and look forward to the year ahead as every member of our team continues to focus on delivering the highest levels of client service and enhancing our differentiated model.”

The December 2022 quarter included the following items: 1) $28,000 positive fair value adjustment on an equity security held for CRA investment purposes; 2) $275,000 gain on sale of a property; 3) $25,000 income from life insurance proceeds; 4) $200,000 expense related to accelerated restricted stock vesting related to one employee; and 5) $563,000 income tax expense (net of Federal benefit) related to the first nine months of 2022 brought about by a recent New York City nexus determination change. These items increased total revenue by $328,000, reduced net income by $469,000 and EPS by $0.03, for the December 2022 quarter.

The following are select highlights:

Peapack Private Wealth Management:

  • AUM/AUA in our Peapack Private Wealth Management Division totaled $10 billion at December 31, 2022. 
  • Gross new business inflows for Q4 2022 totaled $295 million ($236 million managed).
  • For the year ended December 31, 2022 gross new business inflows totaled $1 billion ($741 million managed). 
  • Wealth Management fee income of $13.0 million for Q4 2022 comprised 20% of total revenue for the quarter. 

Commercial Banking and Balance Sheet Management: 

  • The net interest margin (“NIM”) improved by 14 basis points in Q4 2022 compared to Q3 2022 and improved 66 basis points when compared to Q4 2021.
  • Noninterest-bearing demand deposits comprised 24% of total deposits as of December 31, 2022.
  • Core deposits (which includes noninterest-bearing demand and interest-bearing demand, savings and money market accounts) totaled 92% of total deposits at December 31, 2022.
  • Total loans were $5.30 billion at December 31, 2022 reflecting growth of $112 million (2.2% linked quarter or 8.7% annualized) when compared to $5.19 billion at September 30, 2022, and growth of $457 million (9.4%) when compared to $4.84 billion at December 31, 2021.
  • Commercial & industrial lending (“C&I”) loan/lease balances comprised 42% of the total loan portfolio at December 31, 2022.
  • Fee income on unused commercial lines of credit totaled $732,000 for Q4 2022.

Capital Management:

  • Repurchased 140,700 shares of Company stock for a total cost of $5.2 million during Q4 2022. (930,977 shares of Company stock for a total cost of $32.7 million were repurchased during 2022). 
  • At December 31, 2022, Regulatory Tier 1 Leverage Ratio stood at 10.9% for Peapack-Gladstone Bank (the “Bank”) and 8.9% for the Company; and Regulatory Common Equity Tier 1 Ratio (to Risk-Weighted Assets) stood at 13.5% for the Bank and 11.0% for the Company. These ratios are significantly above well capitalized standards, as capital has benefitted from strong net income generation. 

SUMMARY INCOME STATEMENT DETAILS:

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

December 2022 Year Compared to Prior Year

    Year Ended     Year Ended                
    December 31,     December 31,       Increase/  
(Dollars in millions, except per share data)   2022     2021       (Decrease)  
Net interest income   $ 176.08     $ 138.06       $ 38.02       28 %
Wealth management fee income (A)     54.65       52.99         1.66       3  
Capital markets activity (B)     9.25       10.62         (1.37 )     (13 )
Other income (C)     2.52       8.64         (6.12 )     (71 )
Total other income     66.42       72.25         (5.83 )     (8 )
Operating expenses (A) (D)     133.80       126.17         7.63       6  
Pretax income before provision for credit losses     108.70       84.14         24.56       29  
Provision for credit losses     6.35       6.48         (0.13 )     (2 )
Pretax income     102.35       77.66         24.69       32  
Income tax expense/(benefit) (E)     28.10       21.04         7.06       34  
Net income   $ 74.25     $ 56.62       $ 17.63       31 %
Diluted EPS   $ 4.00     $ 2.93       $ 1.07       37 %
                           
Total Revenue (F)   $ 242.50     $ 210.31       $ 32.19       15 %
                           
Return on average assets     1.20 %     0.94 %       0.26        
Return on average equity     14.02 %     10.56 %       3.46        

(A) The twelve months ended December 31, 2022 included twelve months of wealth management fee income and expense related to the July 2021 acquisition of Princeton Portfolio Strategies Group, while the twelve months ended December 31, 2021 included six months.

(B) Capital markets activity includes fee income from loan level back-to-back swaps, the Small Business Association (“SBA”) lending and sale program, corporate advisory and mortgage banking activities. 

(C) Other income for the twelve months ended December 31, 2022 included a $6.6 million loss on sale of securities associated with a balance sheet repositioning executed in the first quarter of 2022, gain on sale of property of $275,000, income from life insurance proceeds of $25,000 and a $1.7 million negative fair value adjustment on a CRA equity security.  The December 2021 twelve months included a cost of $842,000 related to the termination of interest rate swaps; a $1.1 million gain on sale of Paycheck Protection Program (“PPP”) loans; $722,000 of fee income related to the referral of PPP loans to a third party; $455,000 of additional Bank Owned Life Insurance (“BOLI”) income related to the receipt of life insurance proceeds; and a $432,000 negative fair value adjustment on a CRA equity security.

(D) The years ended December 2022 and 2021 each included $1.5 million of severance expense related to certain staff reorganizations within several areas of the Bank.  The year ended December 31, 2021 also included $648,000 of expense related to the redemption of subordinated debt; and $2.2 million related to a swap valuation allowance.

(E) The year ended December 31, 2022 included $750,000 of income tax expense (net of Federal benefit) related to recent approval of legislation that changed the nexus standard for New York City business tax.

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

December 2022 Quarter Compared to Prior Year Quarter

    Three Months Ended       Three Months Ended              
    December 31,       December 31,     Increase/  
(Dollars in millions, except per share data)   2022       2021     (Decrease)  
Net interest income   $ 48.04       $ 37.21     $ 10.83       29 %
Wealth management fee income     12.98         13.96       (0.98 )     (7 )
Capital markets activity (A)     0.95         3.52       (2.57 )     (73 )
Other income (B)     2.88         1.48       1.40       95  
Total other income     16.81         18.96       (2.15 )     (11 )
Operating expenses (C)     33.41         31.70       1.71       5  
Pretax income before provision for credit losses     31.44         24.47       6.97       28  
Provision for credit losses     1.93         3.75       (1.82 )     (49 )
Pretax income     29.51         20.72       8.79       42  
Income tax expense (D)     8.93         5.86       3.07       52  
Net income   $ 20.58       $ 14.86     $ 5.72       38 %
Diluted EPS   $ 1.12       $ 0.78     $ 0.34       44 %
                           
Total Revenue (E)   $ 64.85       $ 56.17     $ 8.68       15 %
                           
Return on average assets annualized     1.33 %       0.96 %     0.37        
Return on average equity annualized     15.73 %       10.94 %     4.79        

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

(B)  Other income for the December 2022 quarter included a gain on sale of property of $275,000 and income from life insurance proceeds of $25,000. Other income for the December 2022 and 2021 quarters included a fair value adjustment on a CRA equity security of positive $28,000 and negative $139,000, respectively.

(C) The December 2022 quarter included $200,000 of expense related to accelerated vesting of restricted stock related to one employee. The December 2021 quarter included $893,000 of expense related to a swap valuation allowance.

(D) The three months ended December 31, 2022 included $750,000 of income tax expense (net of Federal benefit) related to the recent approval of legislation that changed the nexus standard for New York City business tax.   ($563,000 of that amount related to the first nine months of 2022).

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

December 2022 Quarter Compared to Linked Quarter

    Three Months Ended     Three Months Ended                
    December 31,     September 30,       Increase/  
(Dollars in millions, except per share data)   2022     2022       (Decrease)  
Net interest income   $ 48.04     $ 45.53       $ 2.51       6 %
Wealth management fee income     12.98       12.94         0.04       0  
Capital markets activity (A)     0.95       0.78         0.17       22  
Other income (B)     2.88       2.66         0.22       8  
Total other income     16.81       16.38         0.43       3  
Operating expenses (C)     33.41       33.56         (0.15 )     (0 )
Pretax income before provision for credit losses     31.44       28.35         3.09       11  
Provision for credit losses     1.93       0.60         1.33       222  
Pretax income     29.51       27.75         1.76       6  
Income tax expense (D)     8.93       7.62         1.31       17  
Net income   $ 20.58     $ 20.13       $ 0.45       2 %
Diluted EPS   $ 1.12     $ 1.09       $ 0.03       3 %
                           
Total Revenue (E)   $ 64.85     $ 61.91       $ 2.94       5 %
                           
Return on average assets annualized     1.33 %     1.30 %       0.03        
Return on average equity annualized     15.73 %     15.21 %       0.52      

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

(B) Other income for the December 2022 quarter included gain on sale of property of $275,000 and income from life insurance proceeds of $25,000. Other income for the December 2022 and September 2022 quarters included a fair value adjustment on a CRA equity security of positive $28,000 and negative $571,000, respectively.

(C) The December 2022 quarter included $200,000 of expense related to accelerated vesting of restricted stock related to one employee.

(D) The three months ended December 31, 2022 included $750,000 of income tax expense (net of Federal benefit) related to the recent approval of legislation that changed the nexus standard for New York City business tax.   ($563,000 of that amount related to the first nine months of 2022).

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

SUPPLEMENTAL QUARTERLY DETAILS:

Peapack Private Wealth Management 

AUM/AUA in the Bank’s Peapack Private Wealth Management (“PPWM”) Division totaled $10 billion at December 31, 2022.  For the December 2022 quarter, PPWM generated $12.98 million in fee income, compared to $12.94 million for the September 30, 2022 quarter and $13.96 million for the December 2021 quarter. The equity market generally improved during Q4 2022, while on a full year basis for 2022, the equity market declined nearly 20%.

John Babcock, President of Peapack Private Wealth Management noted, “Notwithstanding broad market forces that have negatively impacted both the equity and bond markets in 2022, and with economic challenges ahead, our business remains sound and we continue to attract new clients as well as additional funds from existing relationships.  In Q4 2022, total new accounts and client additions totaled $295 million ($236 million managed), which brings our 2022 total to $1 billion ($741 million managed).  As we enter 2023, our new business pipeline is healthy and we remain focused on delivering excellent service and advice to our clients as well as continuing to integrate and advance our internal operating and technology infrastructure. Our highly skilled professionals, our fiduciary powers and expertise, our financial planning capabilities and our high-touch client service model distinguishes PPWM in our market and are the drivers behind our continued growth and success.”  

Loans / Commercial Banking 

Total loans were $5.30 billion at December 31, 2022, reflecting growth of $112 million (2.2% linked quarter or 8.7% annualized) when compared to $5.19 billion at September 30, 2022, and growth of $457 million (9.4%) when compared to $4.84 billion at December 31, 2021.

Total C&I loans and leases at December 31, 2022 were $2.21 billion or 42% of the total loan portfolio. 

Mr. Kennedy noted, “Our loan growth has historically been strong, however, given economic uncertainty and rising interest rates, we believe loan demand will subside somewhat as we look ahead to 2023. Further, we have tightened our initial underwriting given the higher rate environment and in anticipation of a potential economic downturn. Given that, we believe we will achieve modest loan growth in 2023, resulting in mid-single digit loan growth for the coming year.”

Mr. Kennedy also noted, “We are proud to have built a leading middle market commercial banking franchise, as evidenced by our C&I Portfolio, Treasury Management services, and Corporate Advisory and SBA businesses.  Additionally, we are encouraged by the expansion into the Life Insurance Premium Finance business and believe it will prove to be a safe and profitable business line that aligns with the Company’s strategy.” 

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

 

The Company’s NII of $48.0 million and NIM of 3.12% for Q4 2022 increased $2.5 million and 14 basis points from NII of $45.5 million and NIM of 2.98%, for the linked quarter (Q3 2022) and increased $10.8 million and 66 basis points from NII of $37.2 million and NIM of 2.46% for the prior year quarter (Q4 2021). When comparing Q4 2022 to Q4 2021, the Bank benefitted from the increases in LIBOR and the Prime rate during 2022. Additionally, the Bank grew its loan portfolio at rates/spreads beneficial to NIM, while reducing lower-yielding liquidity.

Funding / Liquidity / Interest Rate Risk Management

The Company actively manages its deposit base to reduce reliance on wholesale funding, volatility, and/or operational risk.  Total deposits decreased $61 million to $5.21 billion at December 31, 2022 from $5.27 billion at December 31, 2021. The deposit outflows for the quarter and year included large relationships strategically utilizing their funds, including investing into our Wealth Management business, acquisitions, further investing in their business, and purchasing real estate and other investments. As noted previously, during the third quarter of 2022, the Company successfully migrated $287 million of interest-bearing checking into noninterest-bearing demand deposits.  

Mr. Kennedy noted, “92% of our deposits are demand, savings, or money market accounts, and our noninterest bearing deposits comprise 24% of our total deposits; both metrics reflect the core nature of our deposit base.”

At December 31, 2022, the Company’s balance sheet liquidity (investments available for sale, interest-earning deposits and cash) totaled $788.4 million (or 12% of assets). 

The Company maintains backup liquidity of approximately $1.5 billion of secured available funding with the Federal Home Loan Bank and $1.8 billion of secured funding from the Federal Reserve Discount Window.  The available funding from the Federal Home Loan Bank and the Federal Reserve are secured by the Company’s loan and investment portfolios.

Income from Capital Markets Activities 

Noninterest income from Capital Markets activities (detailed below) totaled $950,000 for the December 2022 quarter compared to $784,000 for the September 2022 quarter and $3.52 million for the December 2021 quarter. The December 2021 quarter results were driven by $2.18 million in Corporate Advisory income.

    Year Ended     Year Ended        
    December 31,     December 31,        
(Dollars in thousands, except per share data)   2022     2021        
Gain on loans held for sale at fair value (Mortgage banking)   $ 483     $ 2,194        
Fee income related to loan level, back-to-back swaps     293              
Gain on sale of SBA loans     6,765       4,939        
Corporate advisory fee income     1,704       3,483        
Total capital markets activity   $ 9,245     $ 10,616        
                   
    Three Months Ended     Three Months Ended     Three Months Ended  
    December 31,     September 30,     December 31,  
(Dollars in thousands, except per share data)   2022     2022     2021  
Gain on loans held for sale at fair value (Mortgage banking)   $ 25     $ 60     $ 352  
Fee income related to loan level, back-to-back swaps     293              
Gain on sale of SBA loans     624       622       989  
Corporate advisory fee income     8       102       2,180  
Total capital markets activity   $ 950     $ 784     $ 3,521  

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

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

Other noninterest income was $2.88 million for Q4 2022 compared to $2.66 million for Q3 2022 and $1.48 million for Q4 2021. Q4 2022 included $732,000 of unused line fees compared to $818,000 for Q3 2022 and $179,000 for Q4 2021. Q4 2022 included a gain on sale of property of $275,000. Additionally, Q4 2022 included $294,000 of income recorded by the Equipment Finance Division related to equipment transfers to lessees while Q3 2022 included $547,000 of such income.

Operating Expenses

The Company’s total operating expenses were $33.41 million for the quarter ended December 31, 2022, compared to $33.56 million for the September 2022 quarter and $31.70 million for the December 2021 quarter. The 2022 quarters included increased costs related to employee health insurance and corporate insurance, as well as normal annual merit increases and year-end bonuses. The December 2021 quarter included $893,000 related to a swap valuation allowance. 

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

Income Taxes

The effective tax rate for the three months ended December 31, 2022 was 30.26%, as compared to 27.47% for the September 2022 quarter and 28.31% for the quarter ended December 31, 2021.  The three months ended December 31, 2022 includes $750,000 of income tax expense (net of Federal benefit) related to the recent approval of legislation that changed the nexus standard for New York City business tax.  ($563,000 of that amount related to the first nine months of 2022).

Asset Quality / Provision for Credit Losses

Nonperforming assets (which does not include troubled debt restructured loans that are performing in accordance with their terms) were $19.1 million, or 0.30% of total assets at December 31, 2022.  Loans past due 30 to 89 days and still accruing were $7.6 million, which included a $4.5 million outstanding loan to US governmental entities.  

Criticized and classified loans totaled $107.8 million at December 31, 2022, reflecting declines from both December 31, 2021 and September 30, 2022 levels. The Company currently has no loans or leases on deferral and accruing.  

On January 1, 2022, the Company implemented Current Expected Credit Losses (“CECL”) methodology for calculating the Company’s Allowance for Credit Losses (“ACL”). The day one CECL adjustment totaled $5.5 million which resulted in a reduction to the December 31, 2021 ACL, and benefit to Capital, net of tax effect. 

For the quarter ended December 31, 2022, the Company’s provision for credit losses was $1.9 million compared to $599,000 for the September 2022 quarter and $3.8 million for the December 2021 quarter. The provision for credit losses in the December 2022 quarter was driven principally by loan growth.  

At December 31, 2022, the ACL was $60.83 million (1.15% of total loans), compared to $59.68 million (1.15% of loans) at September 30, 2022. The ALLL at December 31, 2021 (before adoption of CECL) was $61.70 million (1.27% of loans).  

Capital 

The Company’s capital position during the December 2022 quarter was benefitted by net income of $20.58 million which was partially offset by the repurchase of 140,700 shares through the Company’s stock repurchase program at a total cost of $5.2 million and the quarterly dividend of $896,000. 

Mr. Kennedy noted, “Our tangible book value per share improved during Q4 2022 to $27.26 at December 31, 2022 from $26.10 at September 30, 2022.” 

The Company’s and Bank’s regulatory capital ratios as of December 31, 2022 remain strong, and generally reflect increases from September 30, 2022 and December 31, 2021 levels. Where applicable, such ratios remain well above regulatory well capitalized standards.

The Company employs quarterly capital stress testing – adverse case and severely adverse case. In the most recent completed stress test (as of September 30, 2022), under the severely adverse case, and no growth scenario, the Bank remains well capitalized over a two-year stress period. With an additional stress overlay (impacting the industries most affected by the Pandemic more severely), the Bank still remains well capitalized over the two-year stress period. 

On January 26, 2023, the Company declared a cash dividend of $0.05 per share payable on February 23, 2023 to shareholders of record on February 9, 2023.

ABOUT THE COMPANY

Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $6.4 billion and assets under management/administration of $10 billion as of December 31, 2022.  Founded in 1921, Peapack-Gladstone Bank is a commercial bank that provides innovative wealth management, commercial and retail solutions, including residential lending and online platforms, to businesses and consumers.  Peapack Private, the bank’s wealth management division, offers comprehensive financial, tax, fiduciary and investment advice and solutions to individuals, families, privately-held businesses, family offices and not-for-profit organizations, which help them to establish, maintain and expand their legacy.  Together, Peapack-Gladstone Bank and Peapack Private offer an unparalleled commitment to client service.  Visit www.pgbank.com and www.peapackprivate.com for more information.

The foregoing may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements are not historical facts and include expressions about management’s confidence and strategies and management’s expectations about new and existing programs and products, investments, relationships, opportunities and market conditions.  These statements may be identified by such forward-looking terminology as “expect,” “look,” “believe,” “anticipate,” “may” or similar statements or variations of such terms.  Actual results may differ materially from such forward-looking statements.  Factors that may cause results to differ materially from such forward-looking statements include, but are not limited to:

  • our ability to successfully grow our business and implement our strategic plan, including our ability to generate revenues to offset the increased personnel and other costs related to the strategic plan;
  • the impact of anticipated higher operating expenses in 2023 and beyond;
  • our ability to successfully integrate wealth management firm acquisitions;
  • our ability to manage our growth;
  • our ability to successfully integrate our expanded employee base;
  • an unexpected decline in the economy, in particular in our New Jersey and New York market areas, including potential recessionary conditions;
  • declines in our net interest margin caused by the interest rate environment and/or our highly competitive market;
  • declines in the value in our investment portfolio;
  • impact from a pandemic event on our business, operations, customers, allowance for credit losses and capital levels;
  • the continuing impact of the COVID-19 pandemic on our business and results of operation;
  • higher than expected increases in our allowance for credit losses;
  • higher than expected increases in loan and lease losses or in the level of delinquent, nonperforming, classified and criticized loans;
  • inflation and changes in interest rates, which may adversely impact or margins and yields, reduce the fair value of our financial instruments, reduce our loan originations and lead to higher operating costs;
  • decline in real estate values within our market areas;
  • legislative and regulatory actions (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Basel III and related regulations) that may result in increased compliance costs;
  • successful cyberattacks against our IT infrastructure and that of our IT and third-party providers;
  • higher than expected FDIC insurance premiums;
  • adverse weather conditions;
  • the current or anticipated impact of military conflict, terrorism or other geopolitical events;
  • our inability to successfully generate new business in new geographic markets;
  • a reduction in our lower-cost funding sources;
  • our inability to adapt to technological changes; 
  • claims and litigation pertaining to fiduciary responsibility, environmental laws and other matters;
  • our inability to retain key employees;
  • demands for loans and deposits in our market areas;
  • adverse changes in securities markets;
  • changes in governmental regulation, including, but not limited to, any increase in FDIC insurance premiums and changes in the monetary policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System;
  • changes in accounting policies and practices; 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, 2021.  We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

 (Tables to follow)

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

    For the Three Months Ended  
    Dec 31,     Sept 30,     June 30,     March 31,     Dec 31,  
    2022     2022     2022     2022     2021  
Income Statement Data:                              
Interest income   $ 64,202     $ 55,013     $ 48,520     $ 44,140     $ 42,075  
Interest expense     16,162       9,488       5,627       4,518       4,863  
Net interest income     48,040       45,525       42,893       39,622       37,212  
Wealth management fee income     12,983       12,943       13,891       14,834       13,962  
Service charges and fees     1,150       1,060       1,063       952       996  
Bank owned life insurance     321       299       310       313       308  
Gain on loans held for sale at fair value
   (Mortgage banking) (A)
    25       60       151       247       352  
Gain/(loss) on loans held for sale at lower of cost or
   fair value
                            (265 )
Fee income related to loan level, back-to-back
   swaps (A)
    293                          
Gain on sale of SBA loans (A)     624       622       2,675       2,844       989  
Corporate advisory fee income (A)     8       102       33       1,561       2,180  
Other income     1,380       1,868       860       1,254       581  
Loss on securities sale, net (B)                       (6,609 )      
Fair value adjustment for CRA equity security     28       (571 )     (475 )     (682 )     (139 )
Total other income     16,812       16,383       18,508       14,714       18,964  
Salaries and employee benefits (C)     22,489       22,656       21,882       22,449       20,105  
Premises and equipment     4,898       4,534       4,640       4,647       4,519  
FDIC insurance expense     455       510       503       471       402  
Swap valuation allowance                       673       893  
Other expenses     5,570       5,860       5,634       5,929       5,785  
Total operating expenses     33,412       33,560       32,659       34,169       31,704  
Pretax income before provision for credit losses     31,440       28,348       28,742       20,167       24,472  
Provision for credit losses (D)     1,930       599       1,449       2,375       3,750  
Income before income taxes     29,510       27,749       27,293       17,792       20,722  
Income tax expense (E)     8,931       7,623       7,193       4,351       5,867  
Net income   $ 20,579     $ 20,126     $ 20,100     $ 13,441     $ 14,855  
                               
Total revenue (F)   $ 64,852     $ 61,908     $ 61,401     $ 54,336     $ 56,176  
Per Common Share Data:                              
Earnings per share (basic)   $ 1.15     $ 1.11     $ 1.10     $ 0.73     $ 0.80  
Earnings per share (diluted)     1.12       1.09       1.08       0.71       0.78  
Weighted average number of common
   shares outstanding:
                             
Basic     17,915,058       18,072,385       18,325,605       18,339,013       18,483,268  
Diluted     18,382,193       18,420,661       18,637,340       18,946,683       19,070,594  
Performance Ratios:                              
Return on average assets annualized (ROAA)     1.33 %     1.30 %     1.30 %     0.87 %     0.96 %
Return on average equity annualized (ROAE)     15.73 %     15.21 %     15.43 %     9.88 %     10.94 %
Return on average tangible common equity annualized (ROATCE) (G)     17.30 %     16.73 %     17.00 %     10.85 %     12.03 %
Net interest margin (tax-equivalent basis)     3.12 %     2.98 %     2.83 %     2.69 %     2.46 %
GAAP efficiency ratio (H)     51.52 %     54.21 %     53.19 %     62.88 %     56.44 %
Operating expenses / average assets annualized     2.15 %     2.17 %     2.11 %     2.22 %     2.05 %

(A) Gain on loans held for sale at fair value (mortgage banking), fee income related to loan level, back-to-back swaps, gain on sale of SBA loans and corporate advisory fee income are all included in “capital markets activity” as referred to within the earnings release.

(B) Loss on sale of securities was a result of a balance sheet repositioning employed in the March 2022 quarter.

(C) The March 2022 quarter included $1.5 million of severance expense related to corporate restructuring.

(D) Commencing on January 1, 2022, the allowance calculation is based on the CECL methodology.  Prior to January 1, 2022, the calculation was based on the incurred loss methodology.

(E) The three months ended December 31, 2022 included $750,000 income tax expense (net federal benefit) related to the twelve months of 2022 brought about by a recent New York City nexus determination change which included $563,000 from prior quarters.

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

(G) Return on average tangible common equity is calculated by dividing tangible common equity by annualized net income.  See Non-GAAP financial measures reconciliation included in these tables.

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

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

    For the Twelve Months Ended              
    December 31,     Change  
    2022     2021     $     %  
Income Statement Data:                        
Interest income   $ 211,875     $ 160,067     $ 51,808       32 %
Interest expense     35,795       22,006       13,789       63 %
Net interest income     176,080       138,061       38,019       28 %
Wealth management fee income     54,651       52,987       1,664       3 %
Service charges and fees     4,225       3,697       528       14 %
Bank owned life insurance     1,243       1,696       (453 )     -27 %
Gain on loans held for sale at fair value (Mortgage banking) (A)     483       2,194       (1,711 )     -78 %
Gain on loans held for sale at lower of cost or fair value (B)           1,142       (1,142 )     -100 %
Fee income related to loan level, back-to-back swaps (A)     293             293     N/A  
Gain on sale of SBA loans (A)     6,765       4,939       1,826       37 %
Corporate advisory fee income (A)     1,704       3,483       (1,779 )     -51 %
Loss on swap termination           (842 )     842       -100 %
Other income     5,362       3,379       1,983       59 %
Loss on securities sale, net (C)     (6,609 )           (6,609 )   N/A  
Fair value adjustment for CRA equity security     (1,700 )     (432 )     (1,268 )     294 %
Total other income     66,417       72,243       (5,826 )     -8 %
Salaries and employee benefits (D)     89,476       81,864       7,612       9 %
Premises and equipment     18,719       17,165       1,554       9 %
FDIC insurance expense     1,939       2,071       (132 )     -6 %
Swap valuation allowance     673       2,243       (1,570 )     -70 %
Other expenses     22,993       22,824       169       1 %
Total operating expenses     133,800       126,167       7,633       6 %
Pretax income before provision for credit losses     108,697       84,137       24,560       29 %
Provision for credit losses (E)     6,353       6,475       (122 )     -2 %
Income before income taxes     102,344       77,662       24,682       32 %
Income tax expense (F)     28,098       21,040       7,058       34 %
Net income   $ 74,246     $ 56,622     $ 17,624       31 %
                         
Total revenue (G)   $ 242,497     $ 210,304     $ 32,193       15 %
Per Common Share Data:                        
Earnings per share (basic)   $ 4.09     $ 3.01     $ 1.08       36 %
Earnings per share (diluted)     4.00       2.93       1.07       37 %
Weighted average number of common shares outstanding:                        
Basic     18,161,605       18,788,679       (627,074 )     -3 %
Diluted     18,568,098       19,292,602       (724,504 )     -4 %
Performance Ratios:                        
Return on average assets (ROAA)     1.20 %     0.94 %     0.26 %     28 %
Return on average equity (ROAE)     14.02 %     10.56 %     3.46 %     33 %
Return on average tangible common equity (ROATCE) (H)     15.43 %     11.56 %     3.87 %     33 %
Net interest margin (tax-equivalent basis)     2.91 %     2.38 %     0.53 %     22 %
GAAP efficiency ratio (I)     55.18 %     59.99 %     (4.81 )%     -8 %
Operating expenses / average assets     2.16 %     2.10 %     0.06 %     3 %

(A) Gain on loans held for sale at fair value (mortgage banking), fee income related to loan level, back-to-back swaps, gain on sale of SBA loans and corporate advisory fee income are all included in “capital markets activity” as referred to within the earnings release.

(B) Includes gain on sale of $57 million of PPP loans completed in the twelve months ended December 31, 2021.

(C) Loss on sale of securities was a result of a balance sheet repositioning employed in the March 2022 quarter.

(D) The twelve months ended December 31, 2022 and 2021 each included $1.5 million of severance expense related to corporate restructuring.

(E) Commencing on January 1, 2022, the allowance calculation is based on the CECL methodology.  Prior to January 1, 2022, the calculation was based on the incurred loss methodology.

(F)The twelve months ended December 31, 2022 included $750,000 income tax expense (net federal benefit) brought about by a recent New York City nexus determination.

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

(H) Return on average tangible common equity is calculated by dividing tangible common equity by annualized net income.  See Non-GAAP financial measures reconciliation included in these tables.

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

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


    As of  
    Dec 31,     Sept 30,     June 30,     March 31,     Dec 31,  
    2022     2022     2022     2022     2021  
ASSETS                              
Cash and due from banks   $ 5,937     $ 5,066     $ 6,203     $ 8,849     $ 5,929  
Federal funds sold                              
Interest-earning deposits     184,138       103,214       147,222       105,111       140,875  
Total cash and cash equivalents     190,075       108,280       153,425       113,960       146,804  
Securities available for sale     554,648       497,880       556,791       601,163       796,753  
Securities held to maturity     102,291       103,551       105,048       106,816       108,680  
CRA equity security, at fair value     12,985       12,957       13,528       14,003       14,685  
FHLB and FRB stock, at cost (A)     30,672       14,986       13,710       18,570       12,950  
                               
Residential mortgage     525,756       519,088       512,341       513,289       501,340  
Multifamily mortgage     1,863,915       1,856,675       1,876,783       1,850,097       1,595,866  
Commercial mortgage     624,625       638,903       657,812       669,899       662,626  
Commercial and industrial loans     2,213,762       2,099,917       2,048,474       2,041,720       2,009,252  
Consumer loans     38,014       37,412       37,675       35,322       33,687  
Home equity lines of credit     34,496       36,375       36,023       38,604       40,803  
Other loans     304       259       236       226       238  
Total loans     5,300,872       5,188,629       5,169,344       5,149,157       4,843,812  
Less: Allowances for credit losses (B)     60,829       59,683       59,022       58,386       61,697  
Net loans     5,240,043       5,128,946       5,110,322       5,090,771       4,782,115  
                               
Premises and equipment     23,831       23,781       22,804       22,960       23,044  
Other real estate owned     116       116       116              
Accrued interest receivable     25,157       17,816       23,468       22,890       21,589  
Bank owned life insurance     47,147       47,072       46,944       46,805       46,663  
Goodwill and other intangible assets     47,333       47,698       48,082       48,471       48,902  
Finance lease right-of-use assets     2,835       3,021       3,209       3,395       3,582  
Operating lease right-of-use assets     12,873       13,404       14,192       14,725       9,775  
Due from brokers (C)                       120,245        
Other assets (D)     63,587       67,753       39,528       30,890       62,451  
TOTAL ASSETS   $ 6,353,593     $ 6,087,261     $ 6,151,167     $ 6,255,664     $ 6,077,993  
                               
LIABILITIES                              
Deposits:                              
Noninterest-bearing demand deposits   $ 1,246,066     $ 1,317,954     $ 1,043,225     $ 1,023,208     $ 956,482  
Interest-bearing demand deposits     2,143,611       2,149,629       2,456,988       2,362,987       2,287,894  
Savings     157,338       166,821       168,441       162,116       154,914  
Money market accounts     1,228,234       1,178,112       1,217,516       1,304,017       1,307,051  
Certificates of deposit – Retail     318,573       345,047       375,387       384,909       409,608  
Certificates of deposit – Listing Service     25,358       30,647       31,348       31,348       31,382  
Subtotal “customer” deposits     5,119,180       5,188,210       5,292,905       5,268,585       5,147,331  
IB Demand – Brokered     60,000       85,000       85,000       85,000       85,000  
Certificates of deposit – Brokered     25,984       25,974       25,963       33,831       33,818  
Total deposits     5,205,164       5,299,184       5,403,868       5,387,416       5,266,149  
Short-term borrowings     379,530       32,369             122,085        
Finance lease liability     4,696       5,003       5,305       5,573       5,820  
Operating lease liability     13,704       14,101       14,756       15,155       10,111  
Subordinated debt, net     132,987       132,916       132,844       132,772       132,701  
Other liabilities (D)     84,532       88,174       74,070       69,237       116,824  
TOTAL LIABILITIES     5,820,613       5,571,747       5,630,843       5,732,238       5,531,605  
Shareholders’ equity     532,980       515,514       520,324       523,426       546,388  
TOTAL LIABILITIES AND                              
SHAREHOLDERS’ EQUITY   $ 6,353,593     $ 6,087,261     $ 6,151,167     $ 6,255,664     $ 6,077,993  
Assets under management and / or administration at
   Peapack-Gladstone Bank’s Private Wealth Management
   Division (market value, not included above-dollars in billions)
  $ 9.9     $ 9.3     $ 9.5     $ 10.7

(A) FHLB means “Federal Home Loan Bank” and FRB means “Federal Reserve Bank.”

(B) Commencing on January 1, 2022, the allowance calculation is based on the CECL methodology.  Prior to January 1, 2022, the calculation was based on the incurred loss methodology.

(C) Includes $120 million due from FHLB related to securities sales at March 31, 2022.  The $120 million received on April 1, 2022, was used to reduce short term borrowings.

(D) The change in other assets and other liabilities was primarily due to the change in the fair value of our back-to-back swap program.

  

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

    As of  
    Dec 31,     Sept 30,     June 30,     March 31,     Dec 31,  
    2022     2022     2022     2022     2021  
Asset Quality:                              
Loans past due over 90 days and still accruing   $     $     $     $     $  
Nonaccrual loans     18,974       15,724       15,078       15,884       15,573  
Other real estate owned     116       116       116              
Total nonperforming assets   $ 19,090     $ 15,840     $ 15,194     $ 15,884     $ 15,573  
                               
Nonperforming loans to total loans     0.36 %     0.30 %     0.29 %     0.31 %     0.32 %
Nonperforming assets to total assets     0.30 %     0.26 %     0.25 %     0.25 %     0.26 %
                               
Performing TDRs (A)(B)   $ 965     $ 2,761     $ 2,272     $ 2,375     $ 2,479  
                               
Loans past due 30 through 89 days and still accruing (C)   $ 7,592     $ 7,248     $ 3,126     $ 606     $ 8,606  
                               
Loans subject to special mention   $ 64,842     $ 82,107     $ 98,787     $ 110,252     $ 116,490  
                               
Classified loans   $ 42,985     $ 27,507     $ 27,167     $ 47,386     $ 50,702  
                               
Impaired loans   $ 16,486     $ 13,047     $ 13,227     $ 16,147     $ 18,052  
                               
Allowance for credit losses (“ACL”):                              
Beginning of quarter   $ 59,683     $ 59,022     $ 58,386     $ 61,697     $ 65,133  
Day one CECL adjustment                       (5,536 )      
Provision for credit losses (D)     2,103       665       646       2,489       3,750  
(Charge-offs)/recoveries, net (E)     (957 )     (4 )     (10 )     (264 )     (7,186 )
End of quarter   $ 60,829     $ 59,683     $ 59,022     $ 58,386     $ 61,697  
                               
ACL to nonperforming loans     320.59 %     379.57 %     391.44 %     367.58 %     396.18 %
ACL to total loans     1.15 %     1.15 %     1.14 %     1.13 %     1.27 %
General ACL to total loans (F)     1.12 %     1.10 %     1.09 %     1.09 %     1.19 %

(A) Amounts reflect troubled debt restructurings (“TDRs”) that are paying according to restructured terms.

(B) Excludes TDRs included in nonaccrual loans in the following amounts:  $13.4 million at December 31, 2022; $12.9 million at September 30, 2022; $13.5 million at June 30, 2022; $13.6 million at March 31, 2022; and $1.1 million at December 31, 2021. 

(C) Includes $4.5 million outstanding to U.S. governmental entities at December 31, 2022.

(D) Commencing on January 1, 2022, the allowance calculation is based on the CECL methodology.  Prior to January 1, 2022, the calculation was based on the incurred loss methodology. Provision to roll forward the ACL excludes a credit of $173,000 at December 31, 2022, a credit of $66,000 at September 30, 2022, a provision of $803,000 at June 30, 2022 and a credit of $114,000 at March 31, 2022 related to off-balance sheet commitments.

(E) Net charge-offs for the quarter ended December 31, 2022 included a charge-off of $1.2 million of a previously established specific reserve on one commercial real estate loan.

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

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

    As of  
    December 31,     September 30,     December 31,  
    2022     2022     2021  
Capital Adequacy                              
Equity to total assets (A)         8.39 %         8.47 %         8.99 %
Tangible equity to tangible assets (B)         7.70 %         7.75 %         8.25 %
Book value per share (C)       $ 29.92         $ 28.77         $ 29.70  
Tangible book value per share (D)       $ 27.26         $ 26.10         $ 27.05  
                               
Tangible equity to tangible assets excluding other comprehensive loss*         8.77 %         8.88 %         8.44 %
Tangible book value per share excluding other comprehensive loss*       $ 31.43         $ 30.29         $ 27.72  

*Excludes other comprehensive loss of $74.2 million for the quarter ended December 31, 2022, $75.0 million for the quarter ended September 30, 2022, and $12.4 million for the quarter ended December 31, 2021.  See Non-GAAP financial measures reconciliation included in these tables.

    As of
    December 31,     September 30,   December 31,
    2022     2022   2021
Regulatory Capital – Holding Company                                
Tier I leverage   $ 557,627     8.90%     $ 540,464     8.70%   $ 508,231     8.29%
Tier I capital to risk-weighted assets     557,627     11.02       540,464     10.86     508,231     10.62
Common equity tier I capital ratio
   to risk-weighted assets
    557,609     11.02       540,440     10.86     508,207     10.62
Tier I & II capital to risk-weighted assets     745,197     14.73       733,988     14.74     700,790     14.64
                                 
Regulatory Capital – Bank                                
Tier I leverage (E)   $ 680,138     10.85%     $ 670,717     10.79%   $ 612,762     9.99%
Tier I capital to risk-weighted assets (F)     680,137     13.45       670,717     13.48     612,762     12.80
Common equity tier I capital ratio
   to risk-weighted assets (G)
    680,119     13.45       670,693     13.48     612,738     12.80
Tier I & II capital to risk-weighted assets (H)     741,719     14.67       731,325     14.69     672,614     14.05
                                                 

(A) Equity to total assets is calculated as total shareholders’ equity as a percentage of total assets at quarter 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 quarter end is calculated by dividing tangible equity by tangible assets at quarter end.  See Non-GAAP financial measures reconciliation included in these tables.
(C) Book value per common share is calculated by dividing shareholders’ equity by quarter end common shares outstanding.
(D) Tangible book value per share excludes intangible assets.  Tangible book value per share is calculated by dividing tangible equity by quarter end common shares outstanding.  See Non-GAAP financial measures reconciliation tables.
(E) Regulatory well capitalized standard (including capital conservation buffer) = 4.00% ($251 million)
(F) Regulatory well capitalized standard (including capital conservation buffer) = 8.50% ($430 million)
(G) Regulatory well capitalized standard (including capital conservation buffer) = 7.00% ($354 million)
(H) Regulatory well capitalized standard (including capital conservation buffer) = 10.50% ($531 million)

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

    For the Quarters Ended  
    Dec 31,     Sept 30,     June 30,     March 31,     Dec 31,  
    2022     2022     2022     2022     2021  
Residential loans retained   $ 28,051     $ 17,885     $ 35,172     $ 41,547     $ 22,953  
Residential loans sold     1,840       4,898       9,886       15,669       20,694  
Total residential loans     29,891       22,783       45,058       57,216       43,647  
Commercial real estate     6,747       7,320       13,960       25,575       16,134  
Multifamily     37,500       4,000       74,564       265,650       162,740  
Commercial (C&I) loans/leases (A) (B)     238,568       251,249       332,801       143,029       341,886  
SBA     17,431       5,682       10,534       26,093       27,630  
Wealth lines of credit (A)     7,700       4,450       12,575       9,400       7,500  
Total commercial loans     307,946       272,701       444,434       469,747       555,890  
Installment loans     1,845       1,253       100       131       94  
Home equity lines of credit (A)     3,815       5,614       3,897       1,341       5,359  
Total loans closed   $ 343,497     $ 302,351     $ 493,489     $ 528,435     $ 604,990  
    For the Twelve Months Ended  
    Dec 31,     Dec 31,  
    2022     2021  
Residential loans retained   $ 122,655     $ 112,695  
Residential loans sold     32,293       116,040  
Total residential loans     154,948       228,735  
Commercial real estate     53,602       81,684  
Multifamily     381,714       624,285  
Commercial (C&I) loans (A) (B)     965,647       755,433  
SBA (C)     59,740       113,906  
Wealth lines of credit (A)     34,125       23,195  
Total commercial loans     1,494,828       1,598,503  
Installment loans     3,329       360  
Home equity lines of credit (A)     14,667       13,933  
Total loans closed   $ 1,667,772     $ 1,841,531  

(A) Includes loans and lines of credit that closed in the period but not necessarily funded.
(B) Includes equipment finance.
(C) Includes PPP loans of $56 million for the twelve months ended December 31, 2021.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
AVERAGE BALANCE SHEET
(Tax-Equivalent Basis, Dollars in Thousands)
(Unaudited)

    For the Three Months Ended  
    December 31, 2022     December 31, 2021  
    Average     Income/           Average     Income/        
    Balance     Expense     Yield     Balance     Expense     Yield  
ASSETS:                                    
Interest-earning assets:                                    
Investments:                                    
Taxable (A)   $ 761,164     $ 3,859       2.03 %   $ 885,390     $ 3,104       1.40 %
Tax-exempt (A) (B)     1,999       20       4.00       5,443       54       3.97  
                                     
Loans (B) (C):                                    
Mortgages     516,721       4,017       3.11       510,562       3,799       2.98  
Commercial mortgages     2,497,847       25,007       4.00       2,209,160       17,708       3.21  
Commercial     2,136,355       29,314       5.49       1,826,640       16,660       3.65  
Commercial construction     4,213       68       6.46       20,426       176       3.45  
Installment     36,648       496       5.41       33,400       253       3.03  
Home equity     36,067       550       6.10       41,955       346       3.30  
Other     292       8       10.96       270       6       8.89  
Total loans     5,228,143       59,460       4.55       4,642,413       38,948       3.36  
Federal funds sold                                    
Interest-earning deposits     161,573       1,258       3.11       513,650       178       0.14  
Total interest-earning assets     6,152,879       64,597       4.20 %     6,046,896       42,284       2.80 %
Noninterest-earning assets:                                    
Cash and due from banks     6,723                   11,517              
Allowance for credit losses     (60,070 )                 (65,542 )            
Premises and equipment     23,682                   23,117              
Other assets     83,641                   182,154              
Total noninterest-earning assets     53,976                   151,246              
Total assets   $ 6,206,855                 $ 6,198,142              
                                     
LIABILITIES:                                    
Interest-bearing deposits:                                    
Checking   $ 2,222,130     $ 9,165       1.65 %   $ 2,321,970     $ 1,327       0.23 %
Money markets     1,246,179       3,438       1.10       1,290,334       678       0.21  
Savings     161,569       12       0.03       152,570       20       0.05  
Certificates of deposit – retail     360,589       922       1.02       453,127       725       0.64  
Subtotal interest-bearing deposits     3,990,467       13,537       1.36       4,218,001       2,750       0.26  
Interest-bearing demand – brokered     81,739       497       2.43       85,000       387       1.82  
Certificates of deposit – brokered     25,979       210       3.23       33,810       267       3.16  
Total interest-bearing deposits     4,098,185       14,244       1.39       4,336,811       3,404       0.31  
Borrowings     43,710       497       4.55       25,890       25       0.39  
Capital lease obligation     4,803       58       4.83       5,913       71       4.80  
Subordinated debt     132,947       1,363       4.10       132,659       1,363       4.11  
Total interest-bearing liabilities     4,279,645       16,162       1.51 %     4,501,273       4,863       0.43 %
Noninterest-bearing liabilities:                                    
Demand deposits     1,303,432                   1,042,477              
Accrued expenses and other liabilities     100,372                   111,357              
Total noninterest-bearing liabilities     1,403,804                   1,153,834              
Shareholders’ equity     523,406                   543,035              
Total liabilities and shareholders’ equity   $ 6,206,855                 $ 6,198,142              
Net interest income         $ 48,435                 $ 37,421        
Net interest spread                 2.69 %                 2.37 %
Net interest margin (D)                 3.12 %                 2.46 %

(A) Average balances for available for sale securities are based on amortized cost.
(B) Interest income is presented on a tax-equivalent basis using a 21% federal tax rate.
(C) Loans are stated net of unearned income and include nonaccrual loans.
(D) Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
AVERAGE BALANCE SHEET
(Tax-Equivalent Basis, Dollars in Thousands)
(Unaudited)

    For the Three Months Ended  
    December 31, 2022     September 30, 2022  
    Average     Income/           Average     Income/        
    Balance     Expense     Yield     Balance     Expense     Yield  
ASSETS:                                    
Interest-earning assets:                                    
Investments:                                    
Taxable (A)   $ 761,164     $ 3,859       2.03 %   $ 754,180     $ 2,853       1.51 %
Tax-exempt (A) (B)     1,999       20       4.00       3,226       30       3.72  
                                     
Loans (B) (C):                                    
Mortgages     516,721       4,017       3.11       513,864       3,861       3.01  
Commercial mortgages     2,497,847       25,007       4.00       2,510,616       23,121       3.68  
Commercial     2,136,355       29,314       5.49       2,016,590       23,362       4.63  
Commercial construction     4,213       68       6.46       12,073       143       4.74  
Installment     36,648       496       5.41       38,338       399       4.16  
Home equity     36,067       550       6.10       36,706       451       4.91  
Other     292       8       10.96       263       7       10.65  
Total loans     5,228,143       59,460       4.55       5,128,450       51,344       4.00  
Federal funds sold                                    
Interest-earning deposits     161,573       1,258       3.11       232,158       1,162       2.00  
Total interest-earning assets     6,152,879       64,597       4.20 %     6,118,014       55,389       3.62 %
Noninterest-earning assets:                                    
Cash and due from banks     6,723                   8,296              
Allowance for credit losses     (60,070 )                 (59,464 )            
Premises and equipment     23,682                   23,580              
Other assets     83,641                   97,583              
Total noninterest-earning assets     53,976                   69,995              
Total assets   $ 6,206,855                 $ 6,188,009              
                                     
LIABILITIES:                                    
Interest-bearing deposits:                                    
Checking   $ 2,222,130     $ 9,165       1.65 %   $ 2,408,206     $ 5,127       0.85 %
Money markets     1,246,179       3,438       1.10       1,237,975       1,557       0.50  
Savings     161,569       12       0.03       168,281       5       0.01  
Certificates of deposit – retail     360,589       922       1.02       391,340       791       0.81  
Subtotal interest-bearing deposits     3,990,467       13,537       1.36       4,205,802       7,480       0.71  
Interest-bearing demand – brokered     81,739       497       2.43       85,000       345       1.62  
Certificates of deposit – brokered     25,979       210       3.23       25,968       210       3.23  
Total interest-bearing deposits     4,098,185       14,244       1.39       4,316,770       8,035       0.74  
Borrowings     43,710       497       4.55       3,810       29       3.04  
Capital lease obligation     4,803       58       4.83       5,106       61       4.78  
Subordinated debt     132,947       1,363       4.10       132,874       1,363       4.10  
Total interest-bearing liabilities     4,279,645       16,162       1.51 %     4,458,560       9,488       0.85 %
Noninterest-bearing liabilities:                                    
Demand deposits     1,303,432                   1,116,843              
Accrued expenses and other liabilities     100,372                   83,446              
Total noninterest-bearing liabilities     1,403,804                   1,200,289              
Shareholders’ equity     523,406                   529,160              
Total liabilities and shareholders’ equity   $ 6,206,855                 $ 6,188,009              
Net interest income         $ 48,435                 $ 45,901        
Net interest spread                 2.69 %                 2.77 %
Net interest margin (D)                 3.12 %                 2.98 %

(A) Average balances for available for sale securities are based on amortized cost.
(B) Interest income is presented on a tax-equivalent basis using a 21% federal tax rate.
(C) Loans are stated net of unearned income and include nonaccrual loans.
(D) Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
AVERAGE BALANCE SHEET
(Tax-Equivalent Basis, Dollars in Thousands)
(Unaudited)

    For the Twelve Months Ended  
    December 31, 2022     December 31, 2021  
    Average     Income/           Average     Income/        
    Balance     Expense     Yield     Balance     Expense     Yield  
ASSETS:                                    
Interest-earning assets:                                    
Investments:                                    
Taxable (A)   $ 803,982     $ 13,854       1.72 %   $ 838,174     $ 11,577       1.38 %
Tax-exempt (A) (B)     3,521       137       3.89       6,579       296       4.50  
                                     
Loans (B) (C):                                    
Mortgages     513,189       15,165       2.96       503,616       15,359       3.05  
Commercial mortgages     2,478,891       87,488       3.53       2,032,318       63,298       3.11  
Commercial     2,046,735       90,225       4.41       1,881,683       66,652       3.54  
Commercial construction     12,600       533       4.23       20,420       692       3.39  
Installment     36,685       1,447       3.94       34,390       1,030       3.00  
Home equity     37,755       1,656       4.39       44,735       1,479       3.31  
Other     274       26       9.49       247       21       8.50  
Total loans     5,126,129       196,540       3.83       4,517,409       148,531       3.29  
Federal funds sold                       48             0.13  
Interest-earning deposits     171,491       2,763       1.61       477,477       545       0.11  
Total interest-earning assets     6,105,123       213,294       3.49 %     5,839,687       160,949       2.76 %
Noninterest-earning assets:                                    
Cash and due from banks     8,046                   10,396              
Allowance for credit losses     (60,037 )                 (67,075 )            
Premises and equipment     23,312                   23,094              
Other assets     111,893                   197,893              
Total noninterest-earning assets     83,214                   164,308              
Total assets   $ 6,188,337                 $ 6,003,995              
                                     
LIABILITIES:                                    
Interest-bearing deposits:                                    
Checking   $ 2,363,412     $ 17,861       0.76 %   $ 2,078,658     $ 4,426       0.21 %
Money markets     1,253,032       6,113       0.49       1,260,865       2,882       0.23  
Savings     162,396       26       0.02       146,210       75       0.05  
Certificates of deposit – retail     397,128       2,971       0.75       483,889       4,058       0.84  
Subtotal interest-bearing deposits     4,175,968       26,971       0.65       3,969,622       11,441       0.29  
Interest-bearing demand – brokered     84,178       1,579       1.88       96,301       1,721       1.79  
Certificates of deposit – brokered     29,778       942       3.16       33,790       1,058       3.13  
Total interest-bearing deposits     4,289,924       29,492       0.69       4,099,713       14,220       0.35  
Borrowings     26,631       600       2.25       110,077       473       0.43  
Capital lease obligation     5,241       250       4.77       6,260       300       4.79  
Subordinated debt     132,839       5,453       4.10       156,888       7,013       4.47  
Total interest-bearing liabilities     4,454,635       35,795       0.80 %     4,372,938       22,006       0.50 %
Noninterest-bearing liabilities:                                    
Demand deposits     1,107,943                   959,912              
Accrued expenses and other liabilities     96,331                   134,948              
Total noninterest-bearing liabilities     1,204,274                   1,094,860              
Shareholders’ equity     529,428                   536,197              
Total liabilities and shareholders’ equity   $ 6,188,337                 $ 6,003,995              
Net interest income         $ 177,499                 $ 138,943        
Net interest spread                 2.69 %                 2.26 %
Net interest margin (D)                 2.91 %                 2.38 %

(A) Average balances for available for sale securities are based on amortized cost.

(B) Interest income is presented on a tax-equivalent basis using a 21% federal tax rate. 

(C) Loans are stated net of unearned income and include nonaccrual loans.

(D) Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.

PEAPACK-GLADSTONE FINANCIAL CORPORATION

NON-GAAP FINANCIAL MEASURES RECONCILIATION

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

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

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

(Dollars in thousands, except share data)

    Three Months Ended  
    Dec 31,     Sept 30,     June 30,     March  31,     Dec 31,  
Tangible Book Value Per Share   2022     2022     2022     2022     2021  
Shareholders’ equity   $ 532,980     $ 515,514     $ 520,324     $ 523,426     $ 546,388  
Less:  Intangible assets, net     47,333       47,698       48,082       48,471       48,902  
Tangible equity   $ 485,647     $ 467,816     $ 472,242     $ 474,955     $ 497,486  
Less: other comprehensive loss     (74,211 )     (74,983 )     (58,727 )     (40,938 )     (12,374 )
Tangible equity excluding other comprehensive loss   $ 559,858     $ 542,799     $ 530,969     $ 515,893     $ 509,860  
                               
Period end shares outstanding     17,813,451       17,920,571       18,190,009       18,370,312       18,393,888  
Tangible book value per share   $ 27.26     $ 26.10     $ 25.96     $ 25.85     $ 27.05  
Tangible book value per share excluding other comprehensive loss   $ 31.43     $ 30.29     $ 29.19     $ 28.08     $ 27.72  
Book value per share     29.92       28.77       28.60       28.49       29.70  
                               
Tangible Equity to Tangible Assets                              
Total assets   $ 6,353,593     $ 6,087,261     $ 6,151,167     $ 6,255,664     $ 6,077,993  
Less: Intangible assets, net     47,333       47,698       48,082       48,471       48,902  
Tangible assets   $ 6,306,260     $ 6,039,563     $ 6,103,085     $ 6,207,193     $ 6,029,091  
Less: other comprehensive loss     (74,211 )     (74,983 )     (58,727 )     (40,938 )     (12,374 )
Tangible assets excluding other comprehensive loss   $ 6,380,471     $ 6,114,546     $ 6,161,812     $ 6,248,131     $ 6,041,465  
                               
Tangible equity to tangible assets     7.70 %     7.75 %     7.74 %     7.65 %     8.25 %
Tangible equity to tangible assets excluding other comprehensive loss     8.77 %     8.88 %     8.62 %     8.26 %     8.44 %
Equity to assets     8.39 %     8.47 %     8.46 %     8.37 %     8.99 %
    Three Months Ended  
    Dec 31,     Sept 30,     June 30,     March 31,     Dec 31,  
Return on Average Tangible Equity   2022     2022     2022     2022     2021  
Net income   $ 20,579     $ 20,126     $ 20,100     $ 13,441     $ 14,855  
                               
Average shareholders’ equity   $ 523,406     $ 529,160     $ 521,197     $ 544,179     $ 543,035  
Less:  Average intangible assets, net     47,531       47,922       48,291       48,717       49,151  
Average tangible equity   $ 475,875     $ 481,238     $ 472,906     $ 495,462     $ 493,884  
                               
Return on average tangible common equity     17.30 %     16.73 %     17.00 %     10.85 %     12.03 %
    For the Twelve Months Ended  
    Dec 31,     Dec 31,  
Return on Average Tangible Equity   2022     2021  
Net income   $ 74,246     $ 56,622  
             
Average shareholders’ equity   $ 529,428     $ 536,197  
Less:  Average intangible assets, net     48,111       46,275  
Average tangible equity     481,317       489,922  
             
Return on average tangible common equity     15.43 %     11.56 %
    Three Months Ended  
    Dec 31,     Sept 30,     June 30,     March 31,     Dec 31,  
Efficiency Ratio   2022     2022     2022     2022     2021  
Net interest income   $ 48,040     $ 45,525     $ 42,893     $ 39,622     $ 37,212  
Total other income     16,812       16,383       18,508       14,714       18,964  
Add:                              
Fair value adjustment for CRA equity security     (28 )     571       475       682       139  
Less:                              
Loss/(gain) on loans held for sale                              
at lower of cost or fair value                             265  
Loss on securities sale, net                       6,609        
Gain on sale of property     (275 )                        
Income from life insurance proceeds     (25 )                        
Total recurring revenue     64,524       62,479       61,876       61,627       56,580  
                               
Operating expenses     33,412       33,560       32,659       34,169       31,704  
Less:                              
Swap valuation allowance                       673       893  
Severance expense                       1,476        
Total operating expense     33,412       33,560       32,659       32,020       30,811  
                               
Efficiency ratio     51.78 %     53.71 %     52.78 %     51.96 %     54.46 %
    For the Twelve Months Ended  
    Dec 31,     Dec 31,  
Efficiency Ratio   2022     2021  
Net interest income   $ 176,080     $ 138,061  
Total other income     66,417       72,243  
Add:            
Fair value adjustment for CRA equity security     1,700       432  
Less:            
Loss on swap termination           842  
Income from life insurance proceeds           (455 )
Loss/(gain) on loans held for sale            
at lower of cost or fair value           (1,142 )
Loss on securities sale, net     6,609        
Gain on sale of property     (275 )      
Income from life insurance proceeds     (25 )      
Total recurring revenue     250,506       209,981  
             
Operating expenses     133,800       126,167  
Less:            
Write-off of subordinated debt costs           648  
Swap valuation allowance     673       2,243  
Severance expense     1,476       1,532  
Total operating expense     131,651       121,744  
             
Efficiency ratio     52.55 %     57.98 %

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