Peapack-Gladstone Financial Corporation Reports Second Quarter Results

Rhea-AI Summary

Peapack-Gladstone Financial Corporation (NASDAQ: PGC) announced its second quarter 2023 results. The company recorded total revenue of $57.5 million, net income of $13.1 million, and diluted EPS of $0.73 for the quarter. Loans grew by $70 million to $5.4 billion while deposits declined by $110 million to $5.2 billion during the second quarter. The company's return on average assets was 0.82%, return on average equity was 9.43%, and return on average tangible equity was 10.30% for the quarter. The company also announced plans to expand into New York City.

Positive

• Peapack-Gladstone Financial Corporation recorded total revenue of $57.5 million for Q2 2023.
• Loans grew by $70 million to $5.4 billion during the second quarter.
• The company's return on average assets was 0.82% for the quarter.
• The company plans to expand into New York City.

Negative

• Net income decreased from $20.1 million in Q2 2022 to $13.1 million in Q2 2023.
• Deposits declined by $110 million to $5.2 billion during the second quarter.
• The company's diluted EPS decreased from $1.08 in Q2 2022 to $0.73 in Q2 2023.

BEDMINSTER, NJ, July 25, 2023 (GLOBE NEWSWIRE) -- via NewMediaWire - Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market: PGC) (the “Company”) announces its second quarter 2023 results.

This earnings release should be read in conjunction with the Company’s Q2 2023 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 $57.5 million, net income of $13.1 million and diluted earnings per share (“EPS”) of $0.73 for the quarter ended June 30, 2023, compared to revenue of $61.4 million, net income of $20.1 million and diluted EPS of $1.08 for the three months ended June 30, 2022.

The Company’s return on average assets was 0.82%, return on average equity was 9.43%, and return on average tangible equity was 10.30%, each for the quarter ended June 30, 2023. Loans grew by $70 million to $5.4 billion while deposits declined by $110 million to $5.2 billion during the second quarter. Deposits have declined minimally on a year-to-date basis by $7 million.

The Company’s liquidity position remains strong as balance sheet liquidity (investments available for sale, interest-earning deposits and cash) was $761 million as of June 30, 2023 which is 11.74% of total assets. The Company also has $2.8 billion of external borrowing capacity, when combined with balance sheet liquidity provides us with 283% coverage of our uninsured deposits. Approximately 76% of our deposits are presently covered by FDIC insurance or are fully collateralized.

Douglas L. Kennedy, President and CEO said, “Our second quarter results were disappointing, but reflect the challenging nature of the current interest rate environment and the persistent inversion of the treasury yield curve. These conditions have resulted in compression of our net interest margin for a second consecutive quarter and a reduction in net interest income. The margin compression was primarily driven by an increase in our cost of funds during the first six months of 2023, as wealth and commercial clients moved funds from noninterest-bearing accounts to higher-yielding deposit products and other alternative investments. During these difficult times we are fortunate to be able to rely on a stable stream of wealth-related and other noninterest income, which represented 32% of revenue during the second quarter."

The Company recently announced its plan to expand into New York City. An application has been filed with regulatory agencies to open a location in mid-town Manhattan. The Company has hired and continues to actively recruit from the tri-state area to build a team of experienced financial service professionals to gain entry into this lucrative market.

Mr. Kennedy noted, “With the recent changes to the New York City banking landscape and the void left by the failure of larger, niche financial institutions, we believe the current environment has created an unprecedented opportunity to introduce our brand of private banking to this market. We have the right client-centric culture to take advantage of this rare sequence of events and seize this opportunity. We recently announced that Jeanne Scungio has joined our team as the Market President of New York City. Jeanne has spent the past 20 years as a Senior Leader at First Republic Bank. Under her leadership we expect to build a formidable presence in Manhattan."

The following are select highlights for the period ended June 30, 2023:

Peapack Private Wealth Management:

• AUM/AUA in our Peapack Private Wealth Management Division totaled $10.7 billion at June 30, 2023, an increase of 4% (14% annualized) over March 31, 2023.
• Gross new business inflows for Q2 2023 totaled $274 million ($214 million managed). For the first six months of 2023, gross business inflows totaled $528 million ($451 million managed). Managed gross inflows are on a record annualized pace for our Company.
• Wealth Management fee income of $14.3 million for Q2 2023 comprised 25% of total revenue for the quarter.
  
  

Commercial Banking and Balance Sheet Management:

• The net interest margin ("NIM") was 2.49% in Q2 2023, a decline of 39 basis points compared to Q1 2023 and a decline of 34 basis points when compared to Q2 2022.
• Total deposits declined $7 million to $5.2 billion from December 31, 2022.
• Noninterest-bearing demand deposits have declined by $222 million since December 31, 2022, but still comprised 20% of total deposits as of June 30, 2023.
• Core deposits (which includes noninterest-bearing demand and interest-bearing demand, savings and money market accounts) totaled 91% of total deposits at June 30, 2023.
• Total loans were $5.4 billion at June 30, 2023 reflecting growth of $148 million when compared to $5.3 billion at December 31, 2022.
• Commercial & industrial lending (“C&I”) loan/lease balances comprised 42% of the total loan portfolio at June 30, 2023.
• Fee income on unused commercial lines of credit totaled $809,000 for Q2 2023.
  
  

Capital Management:

• During the quarter, the Company repurchased 184,000 shares of Company stock for a total cost of $4.7 million. The Company repurchased 930,977 shares of stock for a total cost of $32.7 million during the year ended December 31, 2022.
• At June 30, 2023, the Regulatory Tier 1 Leverage Ratio stood at 10.80% for Peapack-Gladstone Bank (the "Bank") and 9.06% for the Company. The Regulatory Common Equity Tier 1 Ratio (to Risk-Weighted Assets) stood at 13.68% for the Bank and 11.47% for the Company. These ratios are significantly above well capitalized standards, as capital has benefitted from strong net income generation.

Non-Core Items:

The June 2023 quarter included the following items, which management believes are non-core items:

• $209,000 negative fair value adjustment on an equity security held for CRA investment.
• $1.7 million of expense associated with the recent retirement of certain employees.
• $318,000 of an income tax benefit for a tax reversal.
• These items decreased total revenue by $209,000, reduced net income by $1.5 million and EPS by $0.08 for the June 2023 quarter.

SUMMARY INCOME STATEMENT DETAILS:

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

June 2023 Year Compared to Prior Year

		Six Months Ended				Six Months Ended
		June 30,				June 30,					Increase/
(Dollars in millions, except per share data)		2023				2022					(Decrease)
Net interest income		$	82.90			$	82.51				$	0.39				0	%
Wealth management fee income			28.01				28.72					(0.71	)			(2	)
Capital markets activity (A)			1.83				7.51					(5.68	)			(76	)
Other income (B)			6.80				(3.01	)				9.81			N/A
Total other income			36.64				33.22					3.42				10
Operating expenses (C)			73.27				66.83					6.44				10
Pretax income before provision for credit losses			46.27				48.90					(2.63	)			(5	)
Provision for credit losses			3.21				3.82					(0.61	)			(16	)
Pretax income			43.06				45.08					(2.02	)			(4	)
Income tax expense (D)			11.56				11.54					0.02				0
Net income		$	31.50			$	33.54				$	(2.04	)			(6	)%
Diluted EPS		$	1.74			$	1.79				$	(0.05	)			(3	)%
Total Revenue (E)		$	119.54			$	115.73				$	3.81				3	%
Return on average assets			0.99	%			1.09	%				(0.10	)
Return on average equity			11.44	%			12.59	%				(1.15	)

(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 six months ended June 30, 2022 included a $6.6 million loss on sale of securities. and a fair value adjustment on a CRA equity security of negative $1.2 million.
(C) The six months ended June 2023 included one-time charges of $2.0 million related to the recent retirement of certain employees and $175,000 of expense associated with three retail branch closures. The six months ended June 30, 2022 included $1.5 million of severance expense related to certain staff reorganizations.
(D) Income tax expense for the six months ended June 30, 2023 included a $318,000 tax benefit for the reversal of the New Jersey surtax, which is set to expire on December 31, 2023.
(E) Total revenue equals the sum of net interest income plus total other income.

June 2023 Quarter Compared to Prior Year Quarter

		Three Months Ended					Three Months Ended
		June 30,					June 30,				Increase/
(Dollars in millions, except per share data)		2023					2022				(Decrease)
Net interest income		$	38.92				$	42.89			$	(3.97	)			(9	)%
Wealth management fee income			14.25					13.89				0.36				3
Capital markets activity (A)			0.87					2.86				(1.99	)			(70	)
Other income (B)			3.46					1.76				1.70				97
Total other income			18.58					18.51				0.07				0
Operating expenses (C)			37.69					32.66				5.03				15
Pretax income before provision for credit losses			19.81					28.74				(8.93	)			(31	)
Provision for credit losses			1.70					1.45				0.25				17
Pretax income			18.11					27.29				(9.18	)			(34	)
Income tax expense (D)			4.96					7.19				(2.23	)			(31	)
Net income		$	13.15				$	20.10			$	(6.95	)			(35	)%
Diluted EPS		$	0.73				$	1.08			$	(0.35	)			(32	)%
Total Revenue (E)		$	57.50				$	61.40			$	(3.90	)			(6	)%
Return on average assets annualized			0.82	%				1.30	%			(0.48	)
Return on average equity annualized			9.43	%				15.43	%			(6.00	)

(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 June 2023 and 2022 quarters included a fair value adjustment on a CRA equity security of negative $209,000 and negative $475,000, respectively.
(C) The June 2023 quarter included one-time charges of $1.7 million associated with the recent retirement of certain employees.
(D) Income tax expense for quarter ended June 30, 2023 included a $318,000 tax benefit for the reversal of the New Jersey surtax, which is set to expire on December 31, 2023.
(E) Total revenue equals the sum of net interest income plus total other income.

June 2023 Quarter Compared to Linked Quarter

		Three Months Ended				Three Months Ended
		June 30,				March 31,					Increase/
(Dollars in millions, except per share data)		2023				2023					(Decrease)
Net interest income		$	38.92			$	43.98				$	(5.06	)			(12	)%
Wealth management fee income			14.25				13.76					0.49				4
Capital markets activity (A)			0.87				0.97					(0.10	)			(10	)
Other income			3.46				3.33					0.13				4
Total other income			18.58				18.06					0.52				3
Operating expenses (B)			37.69				35.57					2.12				6
Pretax income before provision for credit losses			19.81				26.47					(6.66	)			(25	)
Provision for credit losses			1.70				1.51					0.19				13
Pretax income			18.11				24.96					(6.85	)			(27	)
Income tax expense (C)			4.96				6.60					(1.64	)			(25	)
Net income		$	13.15			$	18.36				$	(5.21	)			(28	)%
Diluted EPS		$	0.73			$	1.01				$	(0.28	)			(28	)%
Total Revenue (D)		$	57.50			$	62.04				$	(4.54	)			(7	)%
Return on average assets annualized			0.82	%			1.16	%				(0.34	)
Return on average equity annualized			9.43	%			13.50	%				(4.07	)

(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) The June 2023 quarter included one-time charges of $1.7 million associated with the recent retirement of certain employees while the March 2023 quarter included $300,000 of expense related to accelerated vesting of restricted stock related to one executive and $175,000 of expense associated with three retail branch closures.
(C) The three months ended June 30, 2023 included a $318,000 tax benefit for the reversal of the New Jersey surtax, which is set to expire on December 31, 2023.
(D) 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 increased to $10.7 billion at June 30, 2023. For the June 2023 quarter, PPWM generated $14.3 million in fee income, compared to $13.8 million for the March 31, 2023 quarter and $13.9 million for the June 2022 quarter. The equity market generally improved during Q2 2023, contributing to the growth in AUM/AUA.

John Babcock, President of Peapack Private Wealth Management noted, “In Q2 2023, total new accounts and client additions amounted to $274 million ($214 million managed), and net flows were positive. As we look ahead in 2023, our new business pipeline is healthy and we remain focused on delivering excellent service and advice to our clients. Our highly skilled wealth management professionals, our fiduciary powers and expertise, our financial planning capabilities and our high-touch client service model distinguishes PPWM in our market and continues to drive our growth and success.”

Loans / Commercial Banking

Total loans grew $148 million or 3% (6% annualized) to $5.4 billion at June 30, 2023 when compared to $5.3 billion at December 31, 2022.

Total C&I loans and leases at June 30, 2023 were $2.3 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 compared to recent prior years. We began tightening our underwriting in anticipation of a potential economic downturn in early 2022 and have continued this practice in 2023. Given the current environment, we believe we will achieve modest loan growth in 2023.”

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 overall strategy.”

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

The Company’s NII of $38.9 million and NIM of 2.49% for Q2 2023 decreased $5.1 million and 39 basis points from NII of $44.0 million and NIM of 2.88%, for the linked quarter (Q1 2023) and decreased $4.0 million and 34 basis points from NII of $42.9 million and NIM of 2.83% for the prior year quarter (Q2 2022). When comparing Q2 2023 to the linked and prior year quarter the Company has seen a rapid increase in interest expense mostly driven by higher deposit rates during 2023. Cycle to date betas are approximately 41%, which is consistent with results across the financial services industry. The intense competition for deposit balances was the primary driver for increased costs.

Funding / Liquidity / Interest Rate Risk Management

Total deposits decreased $6.7 million to $5.2 billion at June 30, 2023. The Company saw limited net deposit outflows during first half of 2023 with most outflow activity related to larger deposit relationships utilizing their funds for normal business purposes such as deployment of excess liquidity into the equity or treasury markets, asset acquisitions or further investments into their businesses, and tax payments. The Company has also seen clients transitioning money into interest-bearing deposit accounts from noninterest-bearing deposit accounts as a result of the rapid increases in the Fed Funds rate.

Mr. Kennedy noted, "Although we did see minimal outflows associated with clients concerned about deposit insurance, our team actively engaged with many of our deposit customers during the first half of 2023 to discuss any concerns and provide assurance regarding the safety and soundness of our institution. Additionally, we migrated $344 million of uninsured deposits this year into fully-insured FDIC products for those customers that desired that type of protection."

Mr. Kennedy also noted, “91% of our deposits are demand, savings, or money market accounts, and our noninterest bearing deposits comprise 20% of our total deposits. 85% of deposits are held by clients with relationships greater than three years old and 66% of deposits are held by clients with relationships greater than five years old. These metrics reflect the core nature of the majority of our deposit base.”

At June 30, 2023, the Company’s balance sheet liquidity (investments available for sale, interest-earning deposits and cash) totaled $761 million (or 12% of assets).

The Company maintains additional liquidity resources of approximately $2.8 billion through secured available funding with the Federal Home Loan Bank and 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. In addition, the Company also has access to the Bank Term Funding Program offered by the Federal Reserve Bank if needed.

The Company's total on and off-balance sheet liquidity totaled $3.6 billion, which is 283% of the total uninsured deposits on the Company's balance sheet.

Income from Capital Markets Activities

Noninterest income from Capital Markets activities (detailed below) totaled $868,000 for the June 2023 quarter compared to $966,000 for the March 2023 quarter and $2.9 million for the June 2022 quarter.

		Three Months Ended				Three Months Ended				Three Months Ended
		June 30,				March 31,				June 30,
(Dollars in thousands, except per share data)		2023				2023				2022
Gain on loans held for sale at fair value (Mortgage banking)		$	15			$	21			$	151
Fee income related to loan level, back-to-back swaps			—				—				—
Gain on sale of SBA loans			838				865				2,675
Corporate advisory fee income			15				80				33
Total capital markets activity		$	868			$	966			$	2,859

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

Other noninterest income was $3.5 million for Q2 2023 compared to $3.3 million for Q1 2023 and $1.8 million for Q2 2022. Q2 2023 included $809,000 of unused line fees compared to $852,000 for Q1 2023 and $529,000 for Q2 2022. Additionally, Q2 2023 included $221,000 of income recorded by the Equipment Finance Division related to equipment transfers to lessees while Q1 2023 included $145,000. The gain on sale of SBA loans for the first and second quarters of 2023 have been impacted by market volatility resulting in lower sale premiums and origination volumes.

Operating Expenses

The Company’s total operating expenses were $37.7 million for the second quarter of 2023, compared to $35.6 million for the March 2023 quarter and $32.7 million for the June 2022 quarter. The June 2023 quarter included $1.7 million of expense associated with the recent retirement of certain employees. The March 2023 quarter included $300,000 of restricted stock expense associated with an executive retiring and $175,000 of expense associated with the closure of three retail branch locations. The June 2023 quarter also included increases associated with compensation related to the addition of full-time equivalent employees, which grew to 520 at June 30, 2023 compared to 512 at March 31, 2023 and 472 at June 30, 2022, as well as normal annual merit increases.

Mr. Kennedy noted, “The Company is committed to be in a position of strength when industry headwinds recede as evident by the recent announcement of its intention to expand into New York City and the opening of a retail bank location in mid-town Manhattan. We will manage expenses closely and prudently, but will continue to invest to retain talent. We will also grow and expand our core wealth management and commercial banking businesses, including strategic hires and lift-outs if opportunities arise, and invest in digital and other enhancements to further enhance the client experience.”

Income Taxes

The effective tax rate for the three months ended June 30, 2023 was 27.4%, as compared to 26.4% for the March 2023 quarter and 26.4% for the quarter ended June 30, 2022. The June 30, 2023 quarter benefitted from a $318,000 reversal of a previously recorded New Jersey surtax. The March 31, 2023 quarter benefitted from the vesting of restricted stock at prices higher than grant prices.

Asset Quality / Provision for Credit Losses

Nonperforming assets (which does not include modified loans that are performing in accordance with their terms) were $34.5 million, or 0.53% of total assets at June 30, 2023, as compared to $28.8 million, or 0.44% of total assets at March 31, 2023. The increase during the second quarter was primarily due to one multifamily relationship totaling $7.6 million that transferred to a nonaccrual status during the quarter. Loans past due 30 to 89 days and still accruing were $14.5 million, or 0.27% of total loans.

Criticized and classified loans totaled $112.3 million at June 30, 2023, reflecting an increase from March 31, 2023 and a decline from June 30, 2022 levels. The Company currently has no loans or leases on deferral and accruing.

For the quarter ended June 30, 2023, the Company’s provision for credit losses was $1.7 million compared to $1.5 million for the March 2023 quarter and $646,000 for the June 2022 quarter. The provision for credit losses in the June 2023 quarter was driven by loan growth, in addition to Allowance for Credit Losses ("ACL") to individually evaluated loans related to one loan totaling $7.6 million that was transferred to nonaccrual status.

At June 30, 2023, the allowance for credit losses was $62.7 million (1.15% of total loans), compared to $62.3 million (1.16% of loans) at March 31, 2023, and $59.0 million (1.14% of loans) at June 30, 2022.

Capital

The Company’s capital position during the June 2023 quarter increased as a result of net income of $13.1 million, which was partially offset by the repurchase of 184,000 shares of common stock through the Company’s stock repurchase program at a total cost of $4.7 million and the quarterly cash dividend of $890,000. Additionally, during the second quarter of 2023 the Company recorded a net loss in accumulated other comprehensive income of $522,000 ($3.8 million loss related to the available for sale portfolio partially offset by a $3.2 million gain on cash flow hedges) increasing the total accumulated other comprehensive loss amount to $68.0 million as of June 30, 2023 ($76.0 million loss related to the available for sale portfolio partially offset by a $8.0 million gain on the cash flow hedges).

Tangible book value per share improved during Q2 2023 to $28.98 at June 30, 2023 from $28.20 at March 31, 2023. Tangible book value per share is a non-GAAP financial measure. See the reconciliation tables included in this release. The Company’s and Bank’s regulatory capital ratios as of June 30, 2023 remain strong, and generally reflect increases from March 31, 2023 and June 30, 2022 levels. Where applicable, such ratios remain well above regulatory well capitalized standards.

The Company employs quarterly capital stress testing modelling an adverse case and severely adverse case. In the most recently completed stress test (as of March 31, 2023), 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 June 22, 2023, the Company declared a cash dividend of $0.05 per share payable on August 24, 2023 to shareholders of record on August 10, 2023.

ABOUT THE COMPANY

Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $6.5 billion and assets under management/administration of $10.7 billion as of June 30, 2023. 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 credit losses or in the level of delinquent, nonperforming, classified and criticized loans;
• inflation and changes in interest rates, which may adversely impact our 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, including our expansion into New York City;
• a reduction in our lower-cost funding sources;
• changes in liquidity, including the size and composition of our deposit portfolio, including the percentage of uninsured deposits in the portfolio;
• 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, 2022. 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.

Contact:

Frank A. Cavallaro, SEVP and CFO

Peapack-Gladstone Financial Corporation

T: 908-306-8933

(Tables to follow)

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

		For the Three Months Ended
		June 30,				March 31,				Dec 31,				Sept 30,				June 30,
		2023				2023				2022				2022				2022
Income Statement Data:
Interest income		$	74,852			$	70,491			$	64,202			$	55,013			$	48,520
Interest expense			35,931				26,513				16,162				9,488				5,627
Net interest income			38,921				43,978				48,040				45,525				42,893
Wealth management fee income			14,252				13,762				12,983				12,943				13,891
Service charges and fees			1,320				1,258				1,150				1,060				1,063
Bank owned life insurance			305				297				321				299				310
Gain on loans held for sale at fair value (Mortgage banking) (A)			15				21				25				60				151
Gain/(loss) on loans held for sale at lower of cost or fair value			—				—				—				—				—
Fee income related to loan level, back-to-back swaps (A)			—				—				293				—				—
Gain on sale of SBA loans (A)			838				865				624				622				2,675
Corporate advisory fee income (A)			15				80				8				102				33
Other income			2,039				1,567				1,380				1,868				860
Fair value adjustment for CRA equity security			(209	)			209				28				(571	)			(475	)
Total other income			18,575				18,059				16,812				16,383				18,508
Salaries and employee benefits (B)			26,354				24,586				22,489				22,656				21,882
Premises and equipment			4,729				4,374				4,898				4,534				4,640
FDIC insurance expense			729				711				455				510				503
Other expenses			5,880				5,903				5,570				5,860				5,634
Total operating expenses			37,692				35,574				33,412				33,560				32,659
Pretax income before provision for credit losses			19,804				26,463				31,440				28,348				28,742
Provision for credit losses			1,696				1,513				1,930				599				1,449
Income before income taxes			18,108				24,950				29,510				27,749				27,293
Income tax expense (C)			4,963				6,595				8,931				7,623				7,193
Net income		$	13,145			$	18,355			$	20,579			$	20,126			$	20,100
Total revenue (D)		$	57,496			$	62,037			$	64,852			$	61,908			$	61,401
Per Common Share Data:
Earnings per share (basic)		$	0.73			$	1.03			$	1.15			$	1.11			$	1.10
Earnings per share (diluted)			0.73				1.01				1.12				1.09				1.08
Weighted average number of common shares outstanding:
Basic			17,930,611				17,841,203				17,915,058				18,072,385				18,325,605
Diluted			18,078,848				18,263,310				18,382,193				18,420,661				18,637,340
Performance Ratios:
Return on average assets annualized (ROAA)			0.82	%			1.16	%			1.33	%			1.30	%			1.30	%
Return on average equity annualized (ROAE)			9.43	%			13.50	%			15.73	%			15.21	%			15.43	%
Return on average tangible common equity annualized (ROATCE) (E)			10.30	%			14.78	%			17.30	%			16.73	%			17.00	%
Net interest margin (tax-equivalent basis)			2.49	%			2.88	%			3.12	%			2.98	%			2.83	%
GAAP efficiency ratio (F)			65.56	%			57.34	%			51.52	%			54.21	%			53.19	%
Operating expenses / average assets annualized			2.36	%			2.26	%			2.15	%			2.17	%			2.11	%

(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) The June 2023 quarter included $1.7 million of expense associated with the recent retirement of certain employees.
(C) The three months ended December 31, 2022 included $750,000 income tax expense (net federal benefit) related to a recent New York City nexus determination change which included $563,000 from prior quarters.
(D) Total revenue equals the sum of net interest income plus total other income.
(E) 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.
(F) 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 Six Months Ended
		June 30,								Change
		2023				2022				$				%
Income Statement Data:
Interest income		$	145,343			$	92,660			$	52,683				57	%
Interest expense			62,444				10,145				52,299				516	%
Net interest income			82,899				82,515				384				0	%
Wealth management fee income			28,014				28,725				(711	)			-2	%
Service charges and fees			2,578				2,015				563				28	%
Bank owned life insurance			602				623				(21	)			-3	%
Gain on loans held for sale at fair value (Mortgage banking) (A)			36				398				(362	)			-91	%
Gain on loans held for sale at lower of cost or fair value			—				—				—			N/A
Fee income related to loan level, back-to-back swaps (A)			—				—				—			N/A
Gain on sale of SBA loans (A)			1,703				5,519				(3,816	)			-69	%
Corporate advisory fee income (A)			95				1,594				(1,499	)			-94	%
Other income			3,606				2,114				1,492				71	%
Loss on securities sale, net (B)			—				(6,609	)			6,609				-100	%
Fair value adjustment for CRA equity security			—				(1,157	)			1,157				-100	%
Total other income			36,634				33,222				3,412				10	%
Salaries and employee benefits (C)			50,940				44,331				6,609				15	%
Premises and equipment			9,103				9,287				(184	)			-2	%
FDIC insurance expense			1,440				974				466				48	%
Swap valuation allowance			—				673				(673	)			-100	%
Other expenses			11,783				11,563				220				2	%
Total operating expenses			73,266				66,828				6,438				10	%
Pretax income before provision for credit losses			46,267				48,909				(2,642	)			-5	%
Provision for credit losses			3,209				3,824				(615	)			-16	%
Income before income taxes			43,058				45,085				(2,027	)			-4	%
Income tax expense			11,558				11,544				14				0	%
Net income		$	31,500			$	33,541			$	(2,041	)			-6	%
Total revenue (D)		$	119,533			$	115,737			$	3,796				3	%
Per Common Share Data:
Earnings per share (basic)		$	1.76			$	1.83			$	(0.07	)			-4	%
Earnings per share (diluted)			1.74				1.79				(0.05	)			-3	%
Weighted average number of common shares outstanding:
Basic			17,886,154				18,332,272				(446,118	)			-2	%
Diluted			18,153,267				18,782,559				(629,292	)			-3	%
Performance Ratios:
Return on average assets (ROAA)			0.99	%			1.09	%			(0.10	)%			-9	%
Return on average equity (ROAE)			11.44	%			12.59	%			(1.15	)%			-9	%
Return on average tangible common equity (ROATCE) (E)			12.51	%			13.86	%			(1.35	)%			-10	%
Net interest margin (tax-equivalent basis)			2.68	%			2.76	%			(0.08	)%			-3	%
GAAP efficiency ratio (F)			61.29	%			57.74	%			3.55	%			6	%
Operating expenses / average assets			2.31	%			2.16	%			0.15	%			7	%

(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 six months ended June 30, 2023 included $2.0 million of expense associated with the recent retirement of certain employees. The six months ended June 30, 2022 quarter included $1.5 million of severance expense related to corporate restructuring.
(D) Total revenue equals the sum of net interest income plus total other income.
(E) 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.
(F) 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
		June 30,				March 31,				Dec 31,				Sept 30,				June 30,
		2023				2023				2022				2022				2022
ASSETS
Cash and due from banks		$	4,859			$	6,514			$	5,937			$	5,066			$	6,203
Federal funds sold			—				—				—				—				—
Interest-earning deposits			166,769				244,779				184,138				103,214				147,222
Total cash and cash equivalents			171,628				251,293				190,075				108,280				153,425
Securities available for sale			540,519				556,266				554,648				497,880				556,791
Securities held to maturity			110,438				111,609				102,291				103,551				105,048
CRA equity security, at fair value			12,985				13,194				12,985				12,957				13,528
FHLB and FRB stock, at cost (A)			35,402				30,338				30,672				14,986				13,710
Residential mortgage			575,238				544,655				525,756				519,088				512,341
Multifamily mortgage			1,884,369				1,871,387				1,863,915				1,856,675				1,876,783
Commercial mortgage			624,710				613,911				624,625				638,903				657,812
Commercial and industrial loans			2,278,133				2,266,837				2,213,762				2,099,917				2,048,474
Consumer loans			52,098				49,002				38,014				37,412				37,675
Home equity lines of credit			34,397				33,294				34,496				36,375				36,023
Other loans			269				443				304				259				236
Total loans			5,449,214				5,379,529				5,300,872				5,188,629				5,169,344
Less: Allowance for credit losses			62,704				62,250				60,829				59,683				59,022
Net loans			5,386,510				5,317,279				5,240,043				5,128,946				5,110,322
Premises and equipment			23,814				23,782				23,831				23,781				22,804
Other real estate owned			—				116				116				116				116
Accrued interest receivable			20,865				19,143				25,157				17,816				23,468
Bank owned life insurance			47,382				47,261				47,147				47,072				46,944
Goodwill and other intangible assets			46,624				46,979				47,333				47,698				48,082
Finance lease right-of-use assets			2,461				2,648				2,835				3,021				3,209
Operating lease right-of-use assets			13,500				12,262				12,873				13,404				14,192
Other assets (B)			67,572				47,848				63,587				67,753				39,528
TOTAL ASSETS		$	6,479,700			$	6,480,018			$	6,353,593			$	6,087,261			$	6,151,167
LIABILITIES
Deposits:
Noninterest-bearing demand deposits		$	1,024,105			$	1,096,549			$	1,246,066			$	1,317,954			$	1,043,225
Interest-bearing demand deposits			2,816,913				2,797,493				2,143,611				2,149,629				2,456,988
Savings			120,082				132,523				157,338				166,821				168,441
Money market accounts			763,026				873,329				1,228,234				1,178,112				1,217,516
Certificates of deposit – Retail			384,106				357,131				318,573				345,047				375,387
Certificates of deposit – Listing Service			10,822				15,922				25,358				30,647				31,348
Subtotal “customer” deposits			5,119,054				5,272,947				5,119,180				5,188,210				5,292,905
IB Demand – Brokered			10,000				10,000				60,000				85,000				85,000
Certificates of deposit – Brokered			69,443				25,895				25,984				25,974				25,963
Total deposits			5,198,497				5,308,842				5,205,164				5,299,184				5,403,868
Short-term borrowings			485,360				378,800				379,530				32,369				—
Finance lease liability			4,071				4,385				4,696				5,003				5,305
Operating lease liability			14,308				13,082				13,704				14,101				14,756
Subordinated debt, net			133,131				133,059				132,987				132,916				132,844
Due to brokers			—				8,308				—				—				—
Other liabilities (B)			79,264				78,584				84,532				88,174				74,070
TOTAL LIABILITIES			5,914,631				5,925,060				5,820,613				5,571,747				5,630,843
Shareholders’ equity			565,069				554,958				532,980				515,514				520,324
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY		$	6,479,700			$	6,480,018			$	6,353,593			$	6,087,261			$	6,151,167
Assets under management and / or administration at Peapack-Gladstone Bank’s Private Wealth Management Division (market value, not included above-dollars in billions)		$	10.7			$	10.4			$	9.9			$	9.3			$	9.5

(A) FHLB means "Federal Home Loan Bank" and FRB means "Federal Reserve Bank."
(B) 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
		June 30,				March 31,				Dec 31,				Sept 30,				June 30,
		2023				2023				2022				2022				2022
Asset Quality:
Loans past due over 90 days and still accruing		$	—			$	—			$	—			$	—			$	—
Nonaccrual loans			34,505				28,659				18,974				15,724				15,078
Other real estate owned			—				116				116				116				116
Total nonperforming assets		$	34,505			$	28,775			$	19,090			$	15,840			$	15,194
Nonperforming loans to total loans			0.63	%			0.53	%			0.36	%			0.30	%			0.29	%
Nonperforming assets to total assets			0.53	%			0.44	%			0.30	%			0.26	%			0.25	%
Performing modifications (A)(B)		$	248			$	248			$	—			$	—			$	—
Performing TDRs (C)(D)		$	—			$	—			$	965			$	2,761			$	2,272
Loans past due 30 through 89 days and still accruing		$	14,524			$	2,762			$	7,592			$	7,248			$	3,126
Loans subject to special mention		$	53,606			$	46,566			$	64,842			$	82,107			$	98,787
Classified loans		$	58,655			$	58,010			$	42,985			$	27,507			$	27,167
Individually evaluated loans		$	33,867			$	27,736			$	16,732			$	13,047			$	13,227
Allowance for credit losses ("ACL"):
Beginning of quarter		$	62,250			$	60,829			$	59,683			$	59,022			$	58,386
Day one CECL adjustment			—				—				—				—				—
Provision for credit losses (E)			1,666				1,464				2,103				665				646
(Charge-offs)/recoveries, net (F)			(1,212	)			(43	)			(957	)			(4	)			(10	)
End of quarter		$	62,704			$	62,250			$	60,829			$	59,683			$	59,022
ACL to nonperforming loans			181.72	%			217.21	%			320.59	%			379.57	%			391.44	%
ACL to total loans			1.15	%			1.16	%			1.15	%			1.15	%			1.14	%
Collectively evaluated ACL to total loans (G)			1.11	%			1.11	%			1.12	%			1.10	%			1.09	%

(A) Amounts reflect modifications that are paying according to modified terms.
(B) Excludes modifications included in nonaccrual loans of $777,000 at June 30, 2023.
(C) Amounts reflect troubled debt restructurings (“TDRs”) that are paying according to restructured terms.
(D) Excludes TDRs included in nonaccrual loans in the following amounts: $13.4 million at December 31, 2022; $12.9 million at September 30, 2022 and $13.5 million at June 30, 2022. On January 1, 2023, the Company adopted Accounting Standards Update 2022-02, which replaced the accounting and recognition of TDRs.
(E) Provision to roll forward the ACL excludes a provision of $30,000 at June 30, 2023, $49,000 at March 31, 2023, a credit of $173,000 at December 31, 2022, a credit of $66,000 at September 30, 2022 and a provision of $803,000 at June 30, 2022 related to off-balance sheet commitments.
(F) Net charge-offs for the quarters ended June 30, 2023 and December 31, 2022 included a charge-off of $1.2 million of a previously established reserve to loans individually evaluated on one commercial real estate loan.
(G) Total ACL less reserves to loans individually evaluated equals collectively evaluated ACL.

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

		As of
		June 30,						December 31,						June 30,
		2023						2022						2022
Capital Adequacy
Equity to total assets (A)					8.72	%					8.39	%					8.46	%
Tangible equity to tangible assets (B)					8.06	%					7.70	%					7.74	%
Book value per share (C)				$	31.59					$	29.92					$	28.60
Tangible book value per share (D)				$	28.98					$	27.26					$	25.96
Tangible equity to tangible assets excluding other comprehensive loss*					9.02	%					8.77	%					8.62	%
Tangible book value per share excluding other comprehensive loss*				$	32.78					$	31.43					$	29.19

*Excludes other comprehensive loss of $68.0 million for the quarter ended June 30, 2023, $74.2 million for the quarter ended December 31, 2022, and $58.7 million for the quarter ended June 30, 2022. See Non-GAAP financial measures reconciliation included in these tables.

(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.

		As of
		June 30,							December 31,							June 30,
		2023							2022							2022
Regulatory Capital – Holding Company
Tier I leverage		$	584,140			9.06	%		$	557,627			8.90	%		$	528,646			8.51	%
Tier I capital to risk-weighted assets			584,140			11.47				557,627			11.02				528,646			10.70
Common equity tier I capital ratio to risk-weighted assets			584,122			11.47				557,609			11.02				528,622			10.70
Tier I & II capital to risk-weighted assets			773,808			15.20				745,197			14.73				721,503			14.60
Regulatory Capital – Bank
Tier I leverage (E)		$	696,399			10.80	%		$	680,137			10.85	%		$	646,884			10.42	%
Tier I capital to risk-weighted assets (F)			696,399			13.69				680,137			13.45				646,884			13.10
Common equity tier I capital ratio to risk-weighted assets (G)			696,381			13.68				680,119			13.45				646,860			13.10
Tier I & II capital to risk-weighted assets (H)			759,935			14.93				741,719			14.67				706,897			14.31

(E) Regulatory well capitalized standard (including capital conservation buffer) = 4.00% ($258 million)
(F) Regulatory well capitalized standard (including capital conservation buffer) = 8.50% ($433 million)
(G) Regulatory well capitalized standard (including capital conservation buffer) = 7.00% ($356 million)
(H) Regulatory well capitalized standard (including capital conservation buffer) = 10.50% ($534 million)

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

		For the Quarters Ended
		June 30,				March 31,				Dec 31,				Sept 30,				June 30,
		2023				2023				2022				2022				2022
Residential loans retained		$	39,358			$	30,303			$	28,051			$	17,885			$	35,172
Residential loans sold			1,072				1,477				1,840				4,898				9,886
Total residential loans			40,430				31,780				29,891				22,783				45,058
Commercial real estate			43,235				18,990				6,747				7,320				13,960
Multifamily			26,662				30,150				37,500				4,000				74,564
Commercial (C&I) loans/leases (A) (B)			158,972				207,814				238,568				251,249				332,801
SBA			13,713				9,950				17,431				5,682				10,534
Wealth lines of credit (A)			3,950				23,225				7,700				4,450				12,575
Total commercial loans			246,532				290,129				307,946				272,701				444,434
Installment loans			4,587				12,086				1,845				1,253				100
Home equity lines of credit (A)			6,107				2,921				3,815				5,614				3,897
Total loans closed		$	297,656			$	336,916			$	343,497			$	302,351			$	493,489

		For the Six Months Ended
		June 30,				June 30,
		2023				2022
Residential loans retained		$	69,661			$	76,719
Residential loans sold			2,549				25,555
Total residential loans			72,210				102,274
Commercial real estate			62,225				39,535
Multifamily			56,812				340,214
Commercial (C&I) loans (A) (B)			366,786				475,830
SBA			23,663				36,627
Wealth lines of credit (A)			27,175				21,975
Total commercial loans			536,661				914,181
Installment loans			16,673				231
Home equity lines of credit (A)			9,028				5,238
Total loans closed		$	634,572			$	1,021,924

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

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

		For the Three Months Ended
		June 30, 2023												June 30, 2022
		Average				Income/								Average				Income/
		Balance				Expense				Yield				Balance				Expense				Yield
ASSETS:
Interest-earning assets:
Investments:
Taxable (A)		$	806,447			$	4,900				2.43	%		$	774,145			$	3,535				1.83	%
Tax-exempt (A) (B)			1,858				20				4.31				4,193				40				3.82
Loans (B) (C):
Mortgages			557,575				4,942				3.55				513,666				3,630				2.83
Commercial mortgages			2,504,268				26,839				4.29				2,552,128				21,185				3.32
Commercial			2,241,817				35,457				6.33				2,024,457				19,348				3.82
Commercial construction			6,977				165				9.46				16,186				162				4.00
Installment			51,269				841				6.56				37,235				297				3.19
Home equity			33,650				633				7.52				38,061				331				3.48
Other			271				7				10.33				258				6				9.30
Total loans			5,395,827				68,884				5.11				5,181,991				44,959				3.47
Federal funds sold			—				—				—				—				—				—
Interest-earning deposits			141,968				1,451				4.09				164,066				314				0.77
Total interest-earning assets			6,346,100				75,255				4.74	%			6,124,395				48,848				3.19	%
Noninterest-earning assets:
Cash and due from banks			7,800												9,715
Allowance for credit losses			(63,045	)											(59,629	)
Premises and equipment			23,745												22,952
Other assets			85,969												96,232
Total noninterest-earning assets			54,469												69,270
Total assets		$	6,400,569											$	6,193,665
LIABILITIES:
Interest-bearing deposits:
Checking		$	2,834,140			$	22,219				3.14	%		$	2,493,668			$	2,330				0.37	%
Money markets			788,745				3,853				1.95				1,234,564				579				0.19
Savings			125,555				45				0.14				163,062				5				0.01
Certificates of deposit – retail			385,211				2,462				2.56				411,202				651				0.63
Subtotal interest-bearing deposits			4,133,651				28,579				2.77				4,302,496				3,565				0.33
Interest-bearing demand – brokered			10,000				125				5.00				85,000				364				1.71
Certificates of deposit – brokered			26,165				196				3.00				33,470				261				3.12
Total interest-bearing deposits			4,169,816				28,900				2.77				4,420,966				4,190				0.38
Borrowings			413,961				5,384				5.20				3,873				10				1.03
Capital lease obligation			4,187				50				4.78				5,406				64				4.74
Subordinated debt			133,090				1,597				4.80				132,803				1,363				4.11
Total interest-bearing liabilities			4,721,054				35,931				3.04	%			4,563,048				5,627				0.49	%
Noninterest-bearing liabilities:
Demand deposits			1,033,176												1,029,538
Accrued expenses and other liabilities			88,911												79,882
Total noninterest-bearing liabilities			1,122,087												1,109,420
Shareholders’ equity			557,428												521,197
Total liabilities and shareholders’ equity		$	6,400,569											$	6,193,665
Net interest income						$	39,324											$	43,221
Net interest spread											1.70	%											2.70	%
Net interest margin (D)											2.49	%											2.83	%

(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
		June 30, 2023												March 31, 2023
		Average				Income/								Average				Income/
		Balance				Expense				Yield				Balance				Expense				Yield
ASSETS:
Interest-earning assets:
Investments:
Taxable (A)		$	806,447			$	4,900				2.43	%		$	791,125			$	4,471				2.26	%
Tax-exempt (A) (B)			1,858				20				4.31				1,864				19				4.08
Loans (B) (C):
Mortgages			557,575				4,942				3.55				529,570				4,283				3.24
Commercial mortgages			2,504,268				26,839				4.29				2,478,645				25,917				4.18
Commercial			2,241,817				35,457				6.33				2,201,801				33,369				6.06
Commercial construction			6,977				165				9.46				4,296				88				8.19
Installment			51,269				841				6.56				39,945				609				6.10
Home equity			33,650				633				7.52				33,839				591				6.99
Other			271				7				10.33				276				7				10.14
Total loans			5,395,827				68,884				5.11				5,288,372				64,864				4.91
Federal funds sold			—				—				—				—				—				—
Interest-earning deposits			141,968				1,451				4.09				163,225				1,538				3.77
Total interest-earning assets			6,346,100				75,255				4.74	%			6,244,586				70,892				4.54	%
Noninterest-earning assets:
Cash and due from banks			7,800												10,449
Allowance for credit losses			(63,045	)											(61,567	)
Premises and equipment			23,745												23,927
Other assets			85,969												84,800
Total noninterest-earning assets			54,469												57,609
Total assets		$	6,400,569											$	6,302,195
LIABILITIES:
Interest-bearing deposits:
Checking		$	2,834,140			$	22,219				3.14	%		$	2,567,426			$	16,481				2.57	%
Money markets			788,745				3,853				1.95				1,124,047				4,874				1.73
Savings			125,555				45				0.14				141,285				28				0.08
Certificates of deposit – retail			385,211				2,462				2.56				357,953				1,729				1.93
Subtotal interest-bearing deposits			4,133,651				28,579				2.77				4,190,711				23,112				2.21
Interest-bearing demand – brokered			10,000				125				5.00				26,111				208				3.19
Certificates of deposit – brokered			26,165				196				3.00				25,961				205				3.16
Total interest-bearing deposits			4,169,816				28,900				2.77				4,242,783				23,525				2.22
Borrowings			413,961				5,384				5.20				104,915				1,296				4.94
Capital lease obligation			4,187				50				4.78				4,493				53				4.72
Subordinated debt			133,090				1,597				4.80				133,017				1,639				4.93
Total interest-bearing liabilities			4,721,054				35,931				3.04	%			4,485,208				26,513				2.36	%
Noninterest-bearing liabilities:
Demand deposits			1,033,176												1,176,495
Accrued expenses and other liabilities			88,911												96,631
Total noninterest-bearing liabilities			1,122,087												1,273,126
Shareholders’ equity			557,428												543,861
Total liabilities and shareholders’ equity		$	6,400,569											$	6,302,195
Net interest income						$	39,324											$	44,379
Net interest spread											1.70	%											2.18	%
Net interest margin (D)											2.49	%											2.88	%

(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 Six Months Ended
		June 30, 2023												June 30, 2022
		Average				Income/								Average				Income/
		Balance				Expense				Yield				Balance				Expense				Yield
ASSETS:
Interest-earning assets:
Investments:
Taxable (A)		$	798,828			$	9,371				2.35	%		$	851,059			$	7,142				1.68	%
Tax-exempt (A) (B)			1,861				38				4.08				4,446				88				3.96
Loans (B) (C):
Mortgages			543,650				9,225				3.39				511,051				7,286				2.85
Commercial mortgages			2,491,527				52,756				4.23				2,453,130				39,360				3.21
Commercial			2,221,921				68,827				6.20				2,016,504				37,550				3.72
Commercial construction			5,644				253				8.97				17,131				322				3.76
Installment			45,638				1,450				6.35				35,863				552				3.08
Home equity			33,744				1,223				7.25				39,147				655				3.35
Other			273				14				10.26				271				11				8.12
Total loans			5,342,397				133,748				5.01				5,073,097				85,736				3.38
Federal funds sold			—				—				—				0				—				-
Interest-earning deposits			152,538				2,989				3.92				145,696				343				0.47
Total interest-earning assets			6,295,624				146,146				4.64	%			6,074,298				93,309				3.07	%
Noninterest-earning assets:
Cash and due from banks			9,117												8,591
Allowance for credit losses			(62,310	)											(60,311	)
Premises and equipment			23,835												22,987
Other assets			86,288												132,266
Total noninterest-earning assets			56,930												103,533
Total assets		$	6,352,554											$	6,177,831
LIABILITIES:
Interest-bearing deposits:
Checking		$	2,701,519			$	38,700				2.87	%		$	2,412,456			$	3,568				0.30	%
Money markets			955,470				8,726				1.83				1,264,167				1,118				0.18
Savings			133,377				74				0.11				159,826				10				0.01
Certificates of deposit – retail			371,657				4,191				2.26				418,642				1,257				0.60
Subtotal interest-bearing deposits			4,162,023				51,691				2.48				4,255,091				5,953				0.28
Interest-bearing demand – brokered			18,011				333				3.70				85,000				737				1.73
Certificates of deposit – brokered			26,064				401				3.08				33,646				522				3.10
Total interest-bearing deposits			4,206,098				52,425				2.49				4,373,737				7,212				0.33
Borrowings			260,292				6,680				5.13				29,550				74				0.50
Capital lease obligation			4,339				103				4.75				5,533				132				4.77
Subordinated debt			133,053				3,236				4.86				132,767				2,727				4.11
Total interest-bearing liabilities			4,603,782				62,444				2.71	%			4,541,587				10,145				0.45	%
Noninterest-bearing liabilities:
Demand deposits			1,104,440												1,004,055
Accrued expenses and other liabilities			93,650												99,565
Total noninterest-bearing liabilities			1,198,090												1,103,620
Shareholders’ equity			550,682												532,624
Total liabilities and shareholders’ equity		$	6,352,554											$	6,177,831
Net interest income						$	83,702											$	83,164
Net interest spread											1.93	%											2.62	%
Net interest margin (D)											2.68	%											2.76	%

(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 per share data)

		Three Months Ended
		June 30,				March 31,				Dec 31,				Sept 30,				June 30,
Tangible Book Value Per Share		2023				2023				2022				2022				2022
Shareholders’ equity		$	565,069			$	554,958			$	532,980			$	515,514			$	520,324
Less: Intangible assets, net			46,624				46,979				47,333				47,698				48,082
Tangible equity		$	518,445			$	507,979			$	485,647			$	467,816			$	472,242
Less: other comprehensive loss			(67,997	)			(67,445	)			(74,211	)			(74,983	)			(58,727	)
Tangible equity excluding other comprehensive loss		$	586,442			$	575,424			$	559,858			$	542,799			$	530,969
Period end shares outstanding			17,887,895				18,014,757				17,813,451				17,920,571				18,190,009
Tangible book value per share		$	28.98			$	28.20			$	27.26			$	26.10			$	25.96
Tangible book value per share excluding other comprehensive loss		$	32.78			$	31.94			$	31.43			$	30.29			$	29.19
Book value per share			31.59				30.81				29.92				28.77				28.60
Tangible Equity to Tangible Assets
Total assets		$	6,479,700			$	6,480,018			$	6,353,593			$	6,087,261			$	6,151,167
Less: Intangible assets, net			46,624				46,979				47,333				47,698				48,082
Tangible assets		$	6,433,076			$	6,433,039			$	6,306,260			$	6,039,563			$	6,103,085
Less: other comprehensive loss			(67,997	)			(67,445	)			(74,211	)			(74,983	)			(58,727	)
Tangible assets excluding other comprehensive loss		$	6,501,073			$	6,500,484			$	6,380,471			$	6,114,546			$	6,161,812
Tangible equity to tangible assets			8.06	%			7.90	%			7.70	%			7.75	%			7.74	%
Tangible equity to tangible assets excluding other comprehensive loss			9.02	%			8.85	%			8.77	%			8.88	%			8.62	%
Equity to assets			8.72	%			8.56	%			8.39	%			8.47	%			8.46	%

(Dollars in thousands, except per share data)

		Three Months Ended
		June 30,				March 31,				Dec 31,				Sept 30,				June 30,
Return on Average Tangible Equity		2023				2023				2022				2022				2022
Net income		$	13,145			$	18,355			$	20,579			$	20,126			$	20,100
Average shareholders’ equity		$	557,428			$	543,861			$	523,406			$	529,160			$	521,197
Less: Average intangible assets, net			46,828				47,189				47,531				47,922				48,291
Average tangible equity		$	510,600			$	496,672			$	475,875			$	481,238			$	472,906
Return on average tangible common equity			10.30	%			14.78	%			17.30	%			16.73	%			17.00	%

		For the Six Months Ended
		June 30,				June 30,
Return on Average Tangible Equity		2023				2022
Net income		$	31,500			$	33,541
Average shareholders’ equity		$	550,682			$	532,624
Less: Average intangible assets, net			47,007				48,503
Average tangible equity			503,675				484,121
Return on average tangible common equity			12.51	%			13.86	%

(Dollars in thousands, except per share data)

		Three Months Ended
		June 30,				March 31,				Dec 31,				Sept 30,				June 30,
Efficiency Ratio		2023				2023				2022				2022				2022
Net interest income		$	38,921			$	43,978			$	48,040			$	45,525			$	42,893
Total other income			18,575				18,059				16,812				16,383				18,508
Add:
Fair value adjustment for CRA equity security			209				(209	)			(28	)			571				475
Less:
Gain on sale of property			—				—				(275	)			—				—
Income from life insurance proceeds			—				—				(25	)			—				—
Total recurring revenue			57,705				61,828				64,524				62,479				61,876
Operating expenses			37,692				35,574				33,412				33,560				32,659
Less:
Accelerated Expense for Retirement			1,665				300				—				—				—
Branch Closure Expense			—				175				—				—				—
Total operating expense			36,027				35,099				33,412				33,560				32,659
Efficiency ratio			62.43	%			56.77	%			51.78	%			53.71	%			52.78	%

		For the Six Months Ended
		June 30,				June 30,
Efficiency Ratio		2023				2022
Net interest income		$	82,899			$	82,515
Total other income			36,634				33,222
Add:
Fair value adjustment for CRA equity security			—				1,157
Less:
Loss on securities sale, net			—				6,609
Total recurring revenue			119,533				123,503
Operating expenses			73,266				66,828
Less:
Swap valuation allowance			—				673
Accelerated Expense for Retirement			1,965				—
Branch Closure Expense			175				—
Severance expense			—				1,476
Total operating expense			71,126				64,679
Efficiency ratio			59.50	%			52.37	%

FAQ

What were Peapack-Gladstone Financial Corporation's total revenue and net income for Q2 2023?

Peapack-Gladstone Financial Corporation recorded total revenue of $57.5 million and net income of $13.1 million for Q2 2023.

How much did loans grow by during the second quarter?

Loans grew by $70 million to $5.4 billion during the second quarter.

What was the company's return on average assets for the quarter?

The company's return on average assets was 0.82% for the quarter.

What are Peapack-Gladstone Financial Corporation's expansion plans?

The company plans to expand into New York City.