Peapack-Gladstone Financial Corporation Reports Fourth Quarter Results

Published

BEDMINSTER, NJ, Jan. 25, 2024 (GLOBE NEWSWIRE) -- via NewMediaWire Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market: PGC) (the “Company”) announces its fourth quarter 2023 financial results.

This earnings release should be read in conjunction with the Company’s Q4 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 $54.3 million, net income of $8.6 million and diluted earnings per share (“EPS”) of $0.48 for the quarter ended December 31, 2023, compared to revenue of $64.9 million, net income of $20.6 million and diluted EPS of $1.12 for the quarter ended December 31, 2022.

The net interest margin stabilized at 2.29% for the quarter ended December 31, 2023, compared to 2.28% for the quarter ended September 30, 2023 and 3.12% for the quarter ended December 31, 2022.

The Company’s return on average assets was 0.53%, return on average equity was 6.13%, and return on average tangible equity was 6.68% for the quarter ended December 31, 2023. Year over year deposits increased by $69.0 million to $5.3 billion and loans grew $135.2 million to $5.4 billion as of December 31, 2023.

The Company’s liquidity position remains stable as balance sheet liquidity (consisting of cash and cash equivalents and securities available for sale) increased to $782.4 million as of December 31, 2023, which was 12.08% of total assets.  The Company also had $2.7 billion of external borrowing capacity available, which, when combined with balance sheet liquidity provides us with 297% coverage of our uninsured deposits. Approximately 78% of our deposits are presently covered by FDIC insurance or are fully collateralized.

Douglas L. Kennedy, President and CEO said, “The fourth quarter brings an end to an incredibly challenging year for the financial services industry. A year that began with questions regarding liquidity and uninsured deposit balances combined with several interest rate increases by the Federal Reserve Bank in an effort to control inflation, which resulted in a turbulent ride from beginning to end.  Our net interest margin stabilized during the fourth quarter which provides an encouraging sign as we turn the calendar to 2024.  We continue to generate a consistent stream of noninterest income led by our Wealth Management Team.  Noninterest income represented 32% of total revenue during 2023."

Mr. Kennedy also noted, “Similar to the third quarter, fourth quarter results included an elevated provision for credit losses primarily driven by reserves required for two credits within the freight industry, which is currently facing a massive downturn due to supply and demand imbalances. We successfully liquidated one of these credits during the fourth quarter and continue to work through steps to quickly resolve the other. As we move forward through this challenging economic environment, we continue to thoroughly analyze our loan portfolio for areas of concern. We believe the diversity of our portfolio and strength of our underwriting standards will protect us in the long term. Unfortunately, we have been forced to deal with a handful of credit issues that have arisen as a result of current economic conditions."

The following are select highlights for the period ended December 31, 2023:

Wealth Management:

  • Gross new business inflows for Q4 2023 totaled $260 million ($156 million managed). Full year 2023, gross business inflows totaled $948 million ($703 million managed).
  • AUM/AUA in our Wealth Management Division totaled $10.9 billion at December 31, 2023 when compared to $9.9 billion at December 31, 2022, which is an increase of 10% year over year. 
  • Wealth Management fee income of $13.8 million for Q4 2023 comprised 25% of total revenue for the quarter.

Commercial Banking and Balance Sheet Management:

  • Total loans were $5.4 billion at December 31, 2023 reflecting growth of $135.2 million when compared to $5.3 billion at December 31, 2022.
  • Commercial & industrial lending (“C&I”) loan/lease balances remained at 42% of the total loan portfolio at December 31, 2023.
  • Fee income on unused commercial lines of credit totaled $750,000 for Q4 2023.
  • Fee income recorded by the Equipment Finance division related to equipment transfers to lessees totaled $309,000 for Q4 2023.
  • The net interest margin ("NIM") was 2.29% in Q4 2023, an increase of 1 basis point compared to Q3 2023 and a decline of 83 basis points when compared to Q4 2022.
  • Total deposits increased $69.0 million to $5.3 billion from December 31, 2022.
  • Noninterest-bearing demand deposits represented 18% of total deposits as of December 31, 2023.
  • Core deposits (which includes noninterest-bearing demand and interest-bearing demand, savings and money market accounts) totaled 89% of total deposits at December 31, 2023.

Capital Management:

  • Tangible book value per share increased 5% on a linked quarter basis or $1.54 per share, in Q4 2023 to $30.31.
  • During the quarter, the Company repurchased 88,327 shares of Company stock for a cost of $2.1 million. For 2023, the Company repurchased 455,341 shares for a cost of $12.5 million. The Company repurchased 930,977 shares of stock for a cost of $32.7 million during the year ended December 31, 2022.
  • At December 31, 2023, the Tier 1 Leverage Ratio stood at 10.83% for Peapack-Gladstone Bank (the "Bank") and 9.19% for the Company. The Common Equity Tier 1 Ratio (to Risk-Weighted Assets) stood at 13.47% for the Bank and 11.43% for the Company at December 31, 2023. These ratios are significantly above well capitalized standards, as capital has benefited from net income generation.

Non-Core Items:

The December 2023 quarter included a:

  • $585,000 positive fair value adjustment on an equity security held for CRA investment, which increased total revenue by $585,000, increased net income by $418,000 and EPS by $0.02 for the December 2023 quarter. Management believes this to be a non-core item.

SUMMARY INCOME STATEMENT DETAILS:

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

December 2023 Year Compared to Prior Year

    Year Ended     Year Ended                
    December 31,     December 31,       Increase/  
(Dollars in millions, except per share data)   2023     2022       (Decrease)  
Net interest income   $ 156.09     $ 176.08       $ (19.99 )     (11 )%
Wealth management fee income     55.75       54.65         1.10       2  
Capital markets activity (A)     2.74       9.25         (6.51 )     (70 )
Other income (B)     15.09       2.52         12.57       499  
Total other income     73.58       66.42         7.16       11  
                           
Total Revenue     229.67       242.50         (12.83 )     (5 )%
                           
Operating expenses (C)     148.30       133.80         14.50       11  
Pretax income before provision for credit losses     81.37       108.70         (27.33 )     (25 )
Provision for credit losses     14.09       6.35         7.74       122  
Pretax income     67.28       102.35         (35.07 )     (34 )
Income tax expense     18.43       28.10         (9.67 )     (34 )
Net income   $ 48.85     $ 74.25       $ (25.40 )     (34 )%
Diluted EPS   $ 2.71     $ 4.00       $ (1.29 )     (32 )%
                           
Return on average assets     0.76 %     1.20 %       (0.44 )      
Return on average equity     8.77 %     14.02 %       (5.25 )      

(A)  The twelve months ended December 31, 2023 was negatively impacted by both market volatility and the higher interest rate environment resulting in lower SBA sale premiums and origination volumes.  The twelve months ended December 31, 2023 had a decline in gain on sale of SBA loans of $4.3 million to $2.4 million when compared to the same period in 2022.(B)  Other income for the year ended December 31, 2023 included fee income from equipment finance activity of $3.0 million and a positive fair value adjustment on a CRA equity security of $181,000. Other income for the year ended December 31, 2022 included a $6.6 million loss on sale of securities, gain on sale of property of $275,000 income from life insurance proceeds of $25,000 and a negative fair value adjustment on a CRA equity security of $1.7 million.(C)  The year ended December 31, 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 year ended December 31, 2022 included $1.5 million of severance expense related to certain staff reorganizations and $673,000 of expense related to the swap valuation allowance.

December 2023 Quarter Compared to Prior Year Quarter

    Three Months Ended       Three Months Ended              
    December 31,       December 31,     Increase/  
(Dollars in millions, except per share data)   2023       2022     (Decrease)  
Net interest income   $ 36.68       $ 48.04     $ (11.36 )     (24 )%
Wealth management fee income     13.76         12.98       0.78       6  
Capital markets activity     0.30         0.95       (0.65 )     (68 )
Other income (A)     3.53         2.88       0.65       23  
Total other income     17.59         16.81       0.78       5  
                           
Total Revenue     54.27         64.85       (10.58 )     (16 )%
                           
Operating expenses     37.62         33.41       4.21       13  
Pretax income before provision for credit losses     16.65         31.44       (14.79 )     (47 )
Provision for credit losses     5.03         1.93       3.10       161  
Pretax income     11.62         29.51       (17.89 )     (61 )
Income tax expense (B)     3.02         8.93       (5.91 )     (66 )
Net income   $ 8.60       $ 20.58     $ (11.98 )     (58 )%
Diluted EPS   $ 0.48       $ 1.12     $ (0.64 )     (57 )%
                           
Return on average assets annualized     0.53 %       1.33 %     (0.80 )      
Return on average equity annualized     6.13 %       15.73 %     (9.60 )      

(A)  Other income for the December 2023 quarter included a positive fair value adjustment on a CRA equity security of $585,000.  Other income for the December 2022 quarter included a gain on sale of property of $275,000, income from life insurance proceeds of $25,000 and a positive fair value adjustment on a CRA equity security of $28,000.  (B) The three months ended December 31, 2022 included $750,000 of income tax expense (net of Federal benefit) related to 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).

December 2023 Quarter Compared to Linked Quarter

    Three Months Ended     Three Months Ended                
    December 31,     September       Increase/  
(Dollars in millions, except per share data)   2023     2023       (Decrease)  
Net interest income   $ 36.68     $ 36.52       $ 0.16       0 %
Wealth management fee income     13.76       13.98         (0.22 )     (2 )
Capital markets activity     0.30       0.61         (0.31 )     (51 )
Other income (A)     3.53       4.76         (1.23 )     (26 )
Total other income     17.59       19.35         (1.76 )     (9 )
                           
Total Revenue     54.27       55.87         (1.60 )     (3 )%
                           
Operating expenses     37.62       37.41         0.21       1  
Pretax income before provision for credit losses     16.65       18.46         (1.81 )     (10 )
Provision for credit losses     5.03       5.86         (0.83 )     (14 )
Pretax income     11.62       12.60         (0.98 )     (8 )
Income tax expense     3.02       3.84         (0.82 )     (21 )
Net income   $ 8.60     $ 8.76       $ (0.16 )     (2 )%
Diluted EPS   $ 0.48     $ 0.49       $ (0.01 )     (2 )%
                           
Return on average assets annualized     0.53 %     0.54 %       (0.01 )      
Return on average equity annualized     6.13 %     6.20 %       (0.07 )      

(A) Other income for the December 2023 quarter included a positive fair value adjustment on a CRA equity security of $585,000.  Other income for the September 2023 quarter included fee income from equipment finance activity of $2.3 million and a negative fair value adjustment on a CRA equity security of $404,000

SUPPLEMENTAL QUARTERLY DETAILS:

Wealth Management

AUM/AUA in the Bank’s Wealth Management Division were $10.9 billion at December 31, 2023.  For the December 2023 quarter, the Wealth Management Team generated $13.8 million in fee income, compared to $14.0 million for the September 30, 2023 quarter and $13.0 million for the December 2022 quarter. The equity market increased during Q4 2023, contributing to the increase in AUM/AUA from $10.4 billion at September 30, 2023.

John Babcock, President of the Bank's Wealth Management Division, noted, “2023 included total new accounts and client additions of $948 million ($703 million managed). As we prepare for 2024, 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 us in our market and continues to drive our growth and success.” 

Loans / Commercial Banking

Total loans grew $135.2 million, or 3% to $5.4 billion at December 31, 2023 when compared to $5.3 billion at December 31, 2022.

Total C&I loans and leases at December 31, 2023 were $2.3 billion or 42% of the total loan portfolio.

Mr. Kennedy noted, “As previously mentioned, we have tightened our underwriting guidelines due to economic uncertainty. As a result, we achieved modest loan growth in 2023 compared to prior years. We are proud to have built a leading middle market commercial banking franchise, as evidenced by our C&I Portfolio, Treasury Management services, Corporate Advisory and SBA businesses. We believe these business lines fit perfectly with our private banking business model.”

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

The Company’s NII of $36.7 million and NIM of 2.29% for Q4 2023 increased $160,000 and 1 basis point from NII of $36.5 million and NIM of 2.28% for the linked quarter (Q3 2023), respectively, and decreased $11.4 million and 83 basis points from NII of $48.0 million and NIM of 3.12% for the prior year (Q4 2022), respectively.  When comparing Q4 2023 to the prior year quarter, the Company has seen a sharp increase in interest expense mostly driven by higher deposit rates during 2023. Cycle to date betas are approximately 48%.  Clients continue to migrate out of noninterest bearing checking products and into higher costing alternatives, which leads to intense competition for deposit balances from other banks and alternative investment opportunities due to the significant rise in interest rates.

Funding / Liquidity / Interest Rate Risk Management

Total deposits increased $69.0 million to $5.3 billion at December 31, 2023 from $5.2 billion at December 31, 2022.  The Company saw limited deposit increases in 2023 as the ongoing acquisition of new relationships driven by our private banking strategy was offset by larger deposit relationships using funds for purposes such as deployment of excess liquidity into higher-yielding treasuries or the equity market, tax payments, or asset acquisitions or investments.  The Company has also seen clients transition money from noninterest bearing deposit accounts to higher yielding deposit accounts as a result of increases in the Fed Funds rate.

At December 31, 2023, the Company’s balance sheet liquidity (investments available for sale, interest-earning deposits and cash) totaled $782.4 million, or 12% of assets.

The Company maintains additional liquidity resources of approximately $2.7 billion through secured available funding with the Federal Home Loan Bank and 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 $3.5 billion, which is 297% of the total uninsured/uncollateralized deposits on the Company's balance sheet.

Income from Capital Markets Activities

Noninterest income from Capital Markets activities (detailed below) totaled $296,000 for the December 2023 quarter compared to $613,000 for the September 2023 quarter and $950,000 for the December 2022 quarter. The gain on sale of SBA loans was lower in Q4 2023 due to less activity in the higher interest rate environment and tighter margins.

    Three Months Ended     Three Months Ended     Three Months Ended  
    December 31,     September 30,     December 31,  
(Dollars in thousands, except per share data)   2023     2023     2022  
Gain on loans held for sale at fair value (Mortgage banking)   $ 18     $ 37     $ 25  
Fee income related to loan level, back-to-back swaps                 293  
Gain on sale of SBA loans     239       491       624  
Corporate advisory fee income     39       85       8  
Total capital markets activity   $ 296     $ 613     $ 950  

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

Other noninterest income was $3.5 million for Q4 2023 compared to $4.8 million for Q3 2023 and $2.9 million for Q4 2022. Q4 2023 included $309,000 of income recorded by the Equipment Finance Division related to equipment transfers to lessees upon the termination of leases while Q3 2023 included $2.3 million and Q4 2022 included $294,000 respectively. Additionally, Q4 2023 included $750,000 of unused line fees compared to $794,000 for Q3 2023 and $732,000 for Q4 2022.

Operating Expenses

The Company’s total operating expenses were $37.6 million for the fourth quarter of 2023, compared to $37.4 million for the September 2023 quarter and $33.4 million for the December 2022 quarter. The December 2023 and September 2023 quarters included expenses associated with the expansion of the Company into New York City.

Mr. Kennedy noted, “While we have made a strategic decision to expand into a new market which results in additional costs, we are pleased with our ability to manage expenses across the Company. We will continue to look for opportunities to create efficiencies while investing in digital and other software tools to further enhance the client experience.”

Income Taxes

The effective tax rate for the three months ended December 31, 2023 was 26.0%, as compared to 30.5% for the September 2023 quarter and 30.3% for the quarter ended December 31, 2022.  The higher tax rate for the September 2023 quarter was primarily due to the impact of certain non-deductible expenses related to compensation and benefits and the higher tax rate for the December 2022 quarter included income tax expense related to legislation that changed the nexus standard for New York City business tax.

Asset Quality / Provision for Credit Losses

Nonperforming assets (which does not include modified loans that are performing in accordance with their terms) were $61.3 million, or 0.95% of total assets at December 31, 2023, as compared to $70.8 million, or 1.09% of total assets at September 30, 2023. The third quarter was impacted by two freight related clients totaling $33.4 million that were transferred to nonaccrual status during the third quarter. One credit, totaling $9.9 million, was successfully liquidated during the fourth quarter and management is working diligently to resolve the remaining matter as quickly and efficiently as possible. Loans past due 30 to 89 days and still accruing were $34.6 million, or 0.64% of total loans at December 31, 2023 compared to $9.8 million, or 0.18% of total loans at September 30, 2023. The Q4 2023 loans past due 30 to 89 days and still accruing included $16.5 million to US governmental entities and $11.8 million to one multifamily sponsor.

Criticized and classified loans totaled $155.8 million at December 31, 2023, reflecting an increase from September 30, 2023 and December 31, 2022 levels. The Company currently has no loans or leases on deferral and accruing.  

For the quarter ended December 31, 2023, the Company’s provision for credit losses was $5.1 million compared to $5.9 million for the September 2023 quarter and $2.1 million for the December 2022 quarter. The elevated level of provision for credit losses in both the December and September 2023 quarters was primarily driven by specific provisions related to the two freight credits that were transferred to nonaccrual status during the third quarter of 2023 as described above.  Net charge-offs for the quarter ended December 31, 2023 included charge-offs of $2.2 million of a previously established reserve to loans individually evaluated on one multifamily loan and $5.6 million on one equipment finance relationship. 

At December 31, 2023, the allowance for credit losses was $65.9 million (1.21% of total loans), compared to $68.6 million (1.25% of loans) at September 30, 2023, and $60.8 million (1.15% of loans) at December 31, 2022.

Capital

The Company’s capital position benefited by net income of $8.6 million during the December 2023 quarter, which was partially offset by the repurchase of 88,327 shares through the Company's stock repurchase program at a total cost of $2.1 million and the quarterly dividend of $891,000. Additionally, during the fourth quarter of 2023, the Company recorded a net gain in accumulated other comprehensive loss of $16.8 million, net of tax. This amount was driven by a $21.2 million increase in the value of the available for sale securities portfolio partially offset by a $4.4 million loss on cash flow hedges. The total accumulated other comprehensive loss declined to $64.9 million as of December 31, 2023, ($69.8 million loss related to the available for sale securities portfolio partially offset by a $4.9 million gain on the cash flow hedges)

Tangible book value per share increased during Q4 2023 to $30.31 at December 31, 2023 from $28.77 at September 30, 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 December 31, 2023 remain strong, and generally reflect increases from December 31, 2022 levels. Where applicable, such ratios remain well above regulatory well capitalized standards.

The Company employs quarterly capital stress testing modeling of an adverse case and severely adverse case. In the most recently completed stress test (as of September 30, 2023), under the severely adverse case, and no growth scenario, the Bank remains well capitalized over a two-year stress period.

On December 19, 2023, the Company declared a cash dividend of $0.05 per share payable on February 23, 2024 to shareholders of record on February 8, 2024.

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 $10.9 billion as of December 31, 2023.  Founded in 1921, Peapack-Gladstone Bank is a commercial bank that provides Private Banking customized solutions through its 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.

FORWARD-LOOKING STATEMENTS

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 2024 and beyond;
  • our ability to successfully integrate wealth management firm acquisitions;
  • 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;
  • a potential government shutdown;
  • 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/or
  • 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 CORPORATIONSELECTED CONSOLIDATED FINANCIAL DATA(Dollars in Thousands, except per share data) (Unaudited)

    For the Three Months Ended  
    Dec 31,     Sept 30,     June 30,     March 31,     Dec 31,  
    2023     2023     2023     2023     2022  
Income Statement Data:                              
Interest income   $ 80,178     $ 78,489     $ 74,852     $ 70,491     $ 64,202  
Interest expense     43,503       41,974       35,931       26,513       16,162  
Net interest income     36,675       36,515       38,921       43,978       48,040  
Wealth management fee income     13,758       13,975       14,252       13,762       12,983  
Service charges and fees     1,255       1,319       1,320       1,258       1,150  
Bank owned life insurance     357       310       305       297       321  
Gain on loans held for sale at fair value    (Mortgage banking)     18       37       15       21       25  
Fee income related to loan level, back-to-back    swaps                             293  
Gain on sale of SBA loans     239       491       838       865       624  
Corporate advisory fee income     39       85       15       80       8  
Other income (A)     1,339       3,541       2,039       1,567       1,380  
Fair value adjustment for CRA equity security     585       (404 )     (209 )     209       28  
Total other income     17,590       19,354       18,575       18,059       16,812  
                               
Total revenue     54,265       55,869       57,496       62,037       64,852  
                               
Salaries and employee benefits (B)     24,320       25,264       26,354       24,586       22,489  
Premises and equipment     5,416       5,214       4,729       4,374       4,898  
FDIC insurance expense     765       741       729       711       455  
Other expenses     7,115       6,194       5,880       5,903       5,570  
Total operating expenses     37,616       37,413       37,692       35,574       33,412  
Pretax income before provision for credit losses     16,649       18,456       19,804       26,463       31,440  
Provision for credit losses     5,026       5,856       1,696       1,513       1,930  
Income before income taxes     11,623       12,600       18,108       24,950       29,510  
Income tax expense (C)     3,024       3,845       4,963       6,595       8,931  
Net income   $ 8,599     $ 8,755     $ 13,145     $ 18,355     $ 20,579  
                               
Per Common Share Data:                              
Earnings per share (basic)   $ 0.48     $ 0.49     $ 0.73     $ 1.03     $ 1.15  
Earnings per share (diluted)     0.48       0.49       0.73       1.01       1.12  
Weighted average number of common    shares outstanding:                              
Basic     17,770,158       17,856,961       17,930,611       17,841,203       17,915,058  
Diluted     17,961,400       18,010,127       18,078,848       18,263,310       18,382,193  
Performance Ratios:                              
Return on average assets annualized (ROAA)     0.53 %     0.54 %     0.82 %     1.16 %     1.33 %
Return on average equity annualized (ROAE)     6.13 %     6.20 %     9.43 %     13.50 %     15.73 %
Return on average tangible equity annualized (ROATCE) (D)     6.68 %     6.75 %     10.30 %     14.78 %     17.30 %
Net interest margin (tax-equivalent basis)     2.29 %     2.28 %     2.49 %     2.88 %     3.12 %
GAAP efficiency ratio (E)     69.32 %     66.97 %     65.56 %     57.34 %     51.52 %
Operating expenses / average assets annualized     2.33 %     2.31 %     2.36 %     2.26 %     2.15 %

(A) The September 2023 quarter included $2.3 million of fee income from equipment finance activity.(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 of income tax expense (net federal benefit) related to a recent New York City nexus determination change which included $563,000 from prior quarters.(D) Return on average tangible equity is calculated by dividing tangible equity by annualized net income.  See Non-GAAP financial measures reconciliation included in these tables.(E) 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 CORPORATIONSELECTED CONSOLIDATED FINANCIAL DATA(Dollars in Thousands, except share data)(Unaudited)

    For the Twelve Months Ended              
    December 31,     Change  
    2023     2022     $     %  
Income Statement Data:                        
Interest income   $ 304,010     $ 211,875     $ 92,135       43 %
Interest expense     147,921       35,795       112,126       313 %
Net interest income     156,089       176,080       (19,991 )     -11 %
Wealth management fee income     55,747       54,651       1,096       2 %
Service charges and fees     5,152       4,225       927       22 %
Bank owned life insurance     1,269       1,243       26       2 %
Gain on loans held for sale at fair value (Mortgage banking)     91       483       (392 )     -81 %
Fee income related to loan level, back-to-back swaps           293       (293 )     -100 %
Gain on sale of SBA loans     2,433       6,765       (4,332 )     -64 %
Corporate advisory fee income     219       1,704       (1,485 )     -87 %
Other income (A)     8,486       5,362       3,124       58 %
Loss on securities sale, net (B)           (6,609 )     6,609       -100 %
Fair value adjustment for CRA equity security     181       (1,700 )     1,881       -111 %
Total other income     73,578       66,417       7,161       11 %
                         
Total revenue     229,667       242,497       (12,830 )     -5 %
                         
Salaries and employee benefits (C)     100,524       89,476       11,048       12 %
Premises and equipment     19,733       18,719       1,014       5 %
FDIC insurance expense     2,946       1,939       1,007       52 %
Swap valuation allowance           673       (673 )     -100 %
Other expenses     25,092       22,993       2,099       9 %
Total operating expenses     148,295       133,800       14,495       11 %
Pretax income before provision for credit losses     81,372       108,697       (27,325 )     -25 %
Provision for credit losses     14,091       6,353       7,738       122 %
Income before income taxes     67,281       102,344       (35,063 )     -34 %
Income tax expense     18,427       28,098       (9,671 )     -34 %
Net income   $ 48,854     $ 74,246     $ (25,392 )     -34 %
                         
                         
Per Common Share Data:                        
Earnings per share (basic)   $ 2.74     $ 4.09     $ (1.35 )     -33 %
Earnings per share (diluted)     2.71       4.00       (1.29 )     -32 %
Weighted average number of common shares outstanding:                        
Basic     17,849,558       18,161,605       (312,047 )     -2 %
Diluted     18,049,052       18,568,098       (519,046 )     -3 %
Performance Ratios:                        
Return on average assets (ROAA)     0.76 %     1.20 %     (0.44 )%     -36 %
Return on average equity (ROAE)     8.77 %     14.02 %     (5.25 )%     -37 %
Return on average tangible equity (ROATCE) (D)     9.57 %     15.43 %     (5.86 )%     -38 %
Net interest margin (tax-equivalent basis)     2.48 %     2.91 %     (0.43 )%     -15 %
GAAP efficiency ratio (E)     64.57 %     55.18 %     9.39 %     17 %
Operating expenses / average assets     2.32 %     2.16 %     0.16 %     7 %

(A) The twelve months ended December 2023 included $3.0 million of fee income from equipment finance activity.(B) Loss on sale of securities was a result of a balance sheet repositioning employed in the March 2022 quarter.(C) The twelve months ended December 31, 2023 included $2.0 million of expense associated with the recent retirement of certain employees, increased corporate and health insurance costs and expenses associated with the previously announced expansion into New York City. The twelve months ended December 31, 2022 quarter included $1.5 million of severance expense related to corporate restructuring.(D) Return on average tangible equity is calculated by dividing tangible equity by annualized net income.  See Non-GAAP financial measures reconciliation included in these tables.(E) 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 CORPORATIONCONSOLIDATED STATEMENTS OF CONDITION(Dollars in Thousands)(Unaudited)

    As of  
    Dec 31,     Sept 30,     June 30,     March 31,     Dec 31,  
    2023     2023     2023     2023     2022  
ASSETS                              
Cash and due from banks   $ 5,887     $ 7,400     $ 4,859     $ 6,514     $ 5,937  
Federal funds sold                              
Interest-earning deposits     181,784       180,469       166,769       244,779       184,138  
Total cash and cash equivalents     187,671       187,869       171,628       251,293       190,075  
Securities available for sale     550,617       521,005       540,519       556,266       554,648  
Securities held to maturity     107,755       108,940       110,438       111,609       102,291  
CRA equity security, at fair value     13,166       12,581       12,985       13,194       12,985  
FHLB and FRB stock, at cost (A)     31,044       34,158       35,402       30,338       30,672  
                               
Residential mortgage     578,427       585,295       575,238       544,655       525,756  
Multifamily mortgage     1,836,390       1,871,853       1,884,369       1,871,387       1,863,915  
Commercial mortgage     637,625       622,469       624,710       613,911       624,625  
Commercial and industrial loans     2,284,940       2,321,917       2,278,133       2,266,837       2,213,762  
Consumer loans     62,036       57,227       52,098       49,002       38,014  
Home equity lines of credit     36,464       34,411       34,397       33,294       34,496  
Other loans     238       265       269       443       304  
Total loans     5,436,120       5,493,437       5,449,214       5,379,529       5,300,872  
Less: Allowance for credit losses     65,888       68,592       62,704       62,250       60,829  
Net loans     5,370,232       5,424,845       5,386,510       5,317,279       5,240,043  
                               
Premises and equipment     24,166       23,969       23,814       23,782       23,831  
Other real estate owned                       116       116  
Accrued interest receivable     30,676       22,889       20,865       19,143       25,157  
Bank owned life insurance     47,581       47,509       47,382       47,261       47,147  
Goodwill and other intangible assets     46,014       46,286       46,624       46,979       47,333  
Finance lease right-of-use assets     2,087       2,274       2,461       2,648       2,835  
Operating lease right-of-use assets     12,096       12,800       13,500       12,262       12,873  
Other assets     53,752       76,456       67,572       47,848       63,587  
TOTAL ASSETS   $ 6,476,857     $ 6,521,581     $ 6,479,700     $ 6,480,018     $ 6,353,593  
                               
LIABILITIES                              
Deposits:                              
Noninterest-bearing demand deposits   $ 957,687     $ 947,405     $ 1,024,105     $ 1,096,549     $ 1,246,066  
Interest-bearing demand deposits     2,882,193       2,871,359       2,816,913       2,797,493       2,143,611  
Savings     111,573       117,905       120,082       132,523       157,338  
Money market accounts     740,559       761,833       763,026       873,329       1,228,234  
Certificates of deposit – Retail     443,791       422,291       384,106       357,131       318,573  
Certificates of deposit – Listing Service     7,804       9,103       10,822       15,922       25,358  
Subtotal “customer” deposits     5,143,607       5,129,896       5,119,054       5,272,947       5,119,180  
IB Demand – Brokered     10,000       10,000       10,000       10,000       60,000  
Certificates of deposit – Brokered     120,507       119,463       69,443       25,895       25,984  
Total deposits     5,274,114       5,259,359       5,198,497       5,308,842       5,205,164  
Short-term borrowings     403,814       470,576       485,360       378,800       379,530  
Finance lease liability     3,430       3,752       4,071       4,385       4,696  
Operating lease liability     12,876       13,595       14,308       13,082       13,704  
Subordinated debt, net     133,274       133,203       133,131       133,059       132,987  
Due to brokers                       8,308        
Other liabilities     65,668       82,140       79,264       78,584       84,532  
TOTAL LIABILITIES     5,893,176       5,962,625       5,914,631       5,925,060       5,820,613  
Shareholders’ equity     583,681       558,956       565,069       554,958       532,980  
TOTAL LIABILITIES AND                              
SHAREHOLDERS’ EQUITY   $ 6,476,857     $ 6,521,581     $ 6,479,700     $ 6,480,018     $ 6,353,593  
Assets under management and / or administration at    Peapack-Gladstone Bank’s Private Wealth Management    Division (market value, not included above-dollars in billions)   $ 10.9     $ 10.4     $ 10.7     $ 10.4     $ 9.9  

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

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

    As of  
    Dec 31,     Sept 30,     June 30,     March 31,     Dec 31,  
    2023     2023     2023     2023     2022  
Asset Quality:                              
Loans past due over 90 days and still accruing   $     $     $     $     $  
Nonaccrual loans (A)     61,324       70,809       34,505       28,659       18,974  
Other real estate owned                       116       116  
Total nonperforming assets   $ 61,324     $ 70,809     $ 34,505     $ 28,775     $ 19,090  
                               
Nonperforming loans to total loans     1.13 %     1.29 %     0.63 %     0.53 %     0.36 %
Nonperforming assets to total assets     0.95 %     1.09 %     0.53 %     0.44 %     0.30 %
                               
Performing modifications (B)(C)   $ 248     $ 248     $ 248     $ 248     $  
                               
Performing TDRs (D)(E)   $     $     $     $     $ 965  
                               
Loans past due 30 through 89 days and still accruing (F)   $ 34,589     $ 9,780     $ 14,524     $ 2,762     $ 7,592  
                               
Loans subject to special mention   $ 71,397     $ 53,328     $ 53,606     $ 46,566     $ 64,842  
                               
Classified loans   $ 84,372     $ 94,866     $ 58,655     $ 58,010     $ 42,985  
                               
Individually evaluated loans   $ 60,710     $ 70,184     $ 33,867     $ 27,736     $ 16,732  
                               
Allowance for credit losses ("ACL"):                              
Beginning of quarter   $ 68,592     $ 62,704     $ 62,250     $ 60,829     $ 59,683  
Provision for credit losses (G)     5,082       5,944       1,666       1,464       2,103  
(Charge-offs)/recoveries, net (H)     (7,786 )     (56 )     (1,212 )     (43 )     (957 )
End of quarter   $ 65,888     $ 68,592     $ 62,704     $ 62,250     $ 60,829  
                               
ACL to nonperforming loans     107.44 %     96.87 %     181.72 %     217.21 %     320.59 %
ACL to total loans     1.21 %     1.25 %     1.15 %     1.16 %     1.15 %
Collectively evaluated ACL to total loans (I)     1.13 %     1.10 %     1.11 %     1.11 %     1.12 %

(A) Includes one freight credit totaling $23.5 million at December 31, 2023 and two freight credits totaling $33.4 million at September 30, 2023. Excludes $1.6 million in held for sale at September 30, 2023. (B) Amounts reflect modifications that are paying according to modified terms.(C) Excludes modifications included in nonaccrual loans of $3.0 million at December 31, 2023, $3.1 million at September 30, 2023 and $777,000 at June 30, 2023.(D) Amounts reflect troubled debt restructurings (“TDRs”) that are paying according to restructured terms.(E) Excludes TDRs included in nonaccrual loans of $13.4 million at December 31, 2022. On January 1, 2023, the Company adopted Accounting Standards Update 2022-02, which replaced the accounting and recognition of TDRs.(F) Includes $16.5 million outstanding to U.S. governmental entities at December 31, 2023 and $8.2 million of outstanding multifamily loans to one sponsor. December 31, 2022 includes $4.5 million outstanding to U.S. governmental entities.(G) Provision to roll forward the ACL excludes a credit of $55,000 at December 31, 2023, a credit of $88,000 at September 30, 2023, a provision of $30,000 at June 30, 2023, a provision of $49,000 at March 31, 2023 and a credit of $173,000 at December 31, 2022 related to off-balance sheet commitments.(H) Net charge-offs for the quarter ended December 31, 2023 included charge-offs of $2.2 million of a previously established reserve to loans individually evaluated on one multifamily loan and $5.6 million on one equipment finance relationship. 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.(I) Total ACL less reserves to loans individually evaluated equals collectively evaluated ACL.

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

    As of  
    December 31,     September 30,     December 31,  
    2023     2023     2022  
Capital Adequacy                              
Equity to total assets (A)         9.01 %         8.57 %         8.39 %
Tangible equity to tangible assets (B)         8.36 %         7.92 %         7.70 %
Book value per share (C)       $ 32.90         $ 31.37         $ 29.92  
Tangible book value per share (D)       $ 30.31         $ 28.77         $ 27.26  
                               
Tangible equity to tangible assets excluding other comprehensive loss*         9.28 %         9.06 %         8.77 %
Tangible book value per share excluding other comprehensive loss*       $ 33.97         $ 33.36         $ 31.43  

*Excludes other comprehensive loss of $64.9 million for the quarter ended December 31, 2023, $81.7 million for the quarter ended September 30, 2023, and $74.2 million for the quarter ended December 31, 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
    December 31,   September 30,   December 31,
    2023   2023   2022
Regulatory Capital – Holding Company                              
Tier I leverage   $ 600,444     9.19%   $ 592,061     9.05%   $ 557,627     8.90%
Tier I capital to risk-weighted assets     600,444     11.43     592,061     11.13     557,627     11.02
Common equity tier I capital ratio    to risk-weighted assets     600,432     11.43     592,043     11.13     557,609     11.02
Tier I & II capital to risk-weighted assets     785,413     14.95     784,777     14.76     745,197     14.73
                               
Regulatory Capital – Bank                              
Tier I leverage (E)   $ 707,446     10.83%   $ 702,517     10.75%   $ 680,137     10.85%
Tier I capital to risk-weighted assets (F)     707,446     13.48     702,517     13.22     680,137     13.45
Common equity tier I capital ratio    to risk-weighted assets (G)     707,434     13.47     702,499     13.22     680,119     13.45
Tier I & II capital to risk-weighted assets (H)     773,083     14.73     768,979     14.47     741,719     14.67

(E) Regulatory well capitalized standard (including capital conservation buffer) = 4.00% ($261 million)(F) Regulatory well capitalized standard (including capital conservation buffer) = 8.50% ($446 million)(G) Regulatory well capitalized standard (including capital conservation buffer) = 7.00% ($368 million)(H) Regulatory well capitalized standard (including capital conservation buffer) = 10.50% ($551 million)

PEAPACK-GLADSTONE FINANCIAL CORPORATIONLOANS CLOSED(Dollars in Thousands)(Unaudited)

    For the Quarters Ended  
    Dec 31,     Sept 30,     June 30,     March 31,     Dec 31,  
    2023     2023     2023     2023     2022  
Residential loans retained   $ 5,895     $ 21,310     $ 39,358     $ 30,303     $ 28,051  
Residential loans sold     1,449       2,503       1,072       1,477       1,840  
Total residential loans     7,344       23,813       40,430       31,780       29,891  
Commercial real estate     21,375       3,900       43,235       18,990       6,747  
Multifamily     5,725       3,000       26,662       30,150       37,500  
Commercial (C&I) loans/leases (A) (B)     145,397       176,845       158,972       207,814       238,568  
SBA     7,326       300       13,713       9,950       17,431  
Wealth lines of credit (A)     350       6,875       3,950       23,225       7,700  
Total commercial loans     180,173       190,920       246,532       290,129       307,946  
Installment loans     2,946       6,999       4,587       12,086       1,845  
Home equity lines of credit (A)     4,174       6,275       6,107       2,921       3,815  
Total loans closed   $ 194,637     $ 228,007     $ 297,656     $ 336,916     $ 343,497  

    For the Twelve Months Ended  
    Dec 31,     Dec 31,  
    2023     2022  
Residential loans retained   $ 96,866     $ 122,655  
Residential loans sold     6,501       32,293  
Total residential loans     103,367       154,948  
Commercial real estate     87,500       53,602  
Multifamily     65,537       381,714  
Commercial (C&I) loans (A) (B)     689,028       965,647  
SBA     31,289       59,740  
Wealth lines of credit (A)     34,400       34,125  
Total commercial loans     907,754       1,494,828  
Installment loans     26,618       3,329  
Home equity lines of credit (A)     19,477       14,667  
Total loans closed   $ 1,057,216     $ 1,667,772  

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

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

    For the Three Months Ended  
    December 31, 2023     December 31, 2022  
    Average     Income/     Annualized     Average     Income/     Annualized  
    Balance     Expense     Yield     Balance     Expense     Yield  
ASSETS:                                    
Interest-earning assets:                                    
Investments:                                    
Taxable (A)   $ 798,661     $ 5,202       2.61 %   $ 761,164     $ 3,859       2.03 %
Tax-exempt (A) (B)     106                   1,999       20       4.00  
                                     
Loans (B) (C):                                    
Mortgages     581,088       5,300       3.65       516,721       4,017       3.11  
Commercial mortgages     2,492,204       28,318       4.55       2,497,847       25,007       4.00  
Commercial     2,274,841       37,958       6.67       2,136,355       29,314       5.49  
Commercial construction     16,680       382       9.16       4,213       68       6.46  
Installment     59,988       1,037       6.91       36,648       496       5.41  
Home equity     35,570       721       8.11       36,067       550       6.10  
Other     246       8       13.01       292       8       10.96  
Total loans     5,460,617       73,724       5.40       5,228,143       59,460       4.55  
Federal funds sold                                    
Interest-earning deposits     146,699       1,623       4.43       161,573       1,258       3.11  
Total interest-earning assets     6,406,083       80,549       5.03 %     6,152,879       64,597       4.20 %
Noninterest-earning assets:                                    
Cash and due from banks     10,709                   6,723              
Allowance for credit losses     (68,289 )                 (60,070 )            
Premises and equipment     24,387                   23,682              
Other assets     85,720                   83,641              
Total noninterest-earning assets     52,527                   53,976              
Total assets   $ 6,458,610                 $ 6,206,855              
                                     
LIABILITIES:                                    
Interest-bearing deposits:                                    
Checking   $ 2,890,964     $ 25,811       3.57 %   $ 2,222,130     $ 9,165       1.65 %
Money markets     771,051       5,247       2.72       1,246,179       3,438       1.10  
Savings     112,969       81       0.29       161,569       12       0.03  
Certificates of deposit – retail     440,712       4,086       3.71       360,589       922       1.02  
Subtotal interest-bearing deposits     4,215,696       35,225       3.34       3,990,467       13,537       1.36  
Interest-bearing demand – brokered     10,000       142       5.68       81,739       497       2.43  
Certificates of deposit – brokered     115,722       1,454       5.03       25,979       210       3.23  
Total interest-bearing deposits     4,341,418       36,821       3.39       4,098,185       14,244       1.39  
Borrowings     357,384       4,955       5.55       43,710       497       4.55  
Capital lease obligation     3,539       42       4.75       4,803       58       4.83  
Subordinated debt     133,234       1,685       5.06       132,947       1,363       4.10  
Total interest-bearing liabilities     4,835,575       43,503       3.60 %     4,279,645       16,162       1.51 %
Noninterest-bearing liabilities:                                    
Demand deposits     963,968                   1,303,432              
Accrued expenses and other liabilities     98,012                   100,372              
Total noninterest-bearing liabilities     1,061,980                   1,403,804              
Shareholders’ equity     561,055                   523,406              
Total liabilities and shareholders’ equity   $ 6,458,610                 $ 6,206,855              
Net interest income         $ 37,046                 $ 48,435        
Net interest spread                 1.43 %                 2.69 %
Net interest margin (D)                 2.29 %                 3.12 %

(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 CORPORATIONAVERAGE BALANCE SHEET(Tax-Equivalent Basis, Dollars in Thousands)(Unaudited)

    For the Three Months Ended  
    December 31, 2023     September 30, 2023  
    Average     Income/     Annualized     Average     Income/     Annualized  
    Balance     Expense     Yield     Balance     Expense     Yield  
ASSETS:                                    
Interest-earning assets:                                    
Investments:                                    
Taxable (A)   $ 798,661     $ 5,202       2.61 %   $ 806,861     $ 5,170       2.56 %
Tax-exempt (A) (B)     106                   1,198       11       3.67  
                                     
Loans (B) (C):                                    
Mortgages     581,088       5,300       3.65       580,951       5,208       3.59  
Commercial mortgages     2,492,204       28,318       4.55       2,502,351       27,746       4.44  
Commercial     2,274,841       37,958       6.67       2,298,723       37,357       6.50  
Commercial construction     16,680       382       9.16       12,346       282       9.14  
Installment     59,988       1,037       6.91       56,248       967       6.88  
Home equity     35,570       721       8.11       34,250       680       7.94  
Other     246       8       13.01       234       7       11.97  
Total loans     5,460,617       73,724       5.40       5,485,103       72,247       5.27  
Federal funds sold                                    
Interest-earning deposits     146,699       1,623       4.43       136,315       1,463       4.29  
Total interest-earning assets     6,406,083       80,549       5.03 %     6,429,477       78,891       4.91 %
Noninterest-earning assets:                                    
Cash and due from banks     10,709                   6,954              
Allowance for credit losses     (68,289 )                 (63,625 )            
Premises and equipment     24,387                   23,880              
Other assets     85,720                   85,582              
Total noninterest-earning assets     52,527                   52,791              
Total assets   $ 6,458,610                 $ 6,482,268              
                                     
LIABILITIES:                                    
Interest-bearing deposits:                                    
Checking   $ 2,890,964     $ 25,811       3.57 %   $ 2,813,080     $ 24,318       3.46 %
Money markets     771,051       5,247       2.72       771,781       4,458       2.31  
Savings     112,969       81       0.29       118,718       75       0.25  
Certificates of deposit – retail     440,712       4,086       3.71       415,665       3,459       3.33  
Subtotal interest-bearing deposits     4,215,696       35,225       3.34       4,119,244       32,310       3.14  
Interest-bearing demand – brokered     10,000       142       5.68       10,000       136       5.44  
Certificates of deposit – brokered     115,722       1,454       5.03       102,777       1,183       4.60  
Total interest-bearing deposits     4,341,418       36,821       3.39       4,232,021       33,629       3.18  
Borrowings     357,384       4,955       5.55       470,616       6,569       5.58  
Capital lease obligation     3,539       42       4.75       3,863       46       4.76  
Subordinated debt     133,234       1,685       5.06       133,163       1,730       5.20  
Total interest-bearing liabilities     4,835,575       43,503       3.60 %     4,839,663       41,974       3.47 %
Noninterest-bearing liabilities:                                    
Demand deposits     963,968                   990,854              
Accrued expenses and other liabilities     98,012                   86,598              
Total noninterest-bearing liabilities     1,061,980                   1,077,452              
Shareholders’ equity     561,055                   565,153              
Total liabilities and shareholders’ equity   $ 6,458,610                 $ 6,482,268              
Net interest income         $ 37,046                 $ 36,917        
Net interest spread                 1.43 %                 1.44 %
Net interest margin (D)                 2.29 %                 2.28 %

(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 CORPORATIONAVERAGE BALANCE SHEET(Tax-Equivalent Basis, Dollars in Thousands)(Unaudited)

    For the Twelve Months Ended  
    December 31, 2023     December 31, 2022  
    Average     Income/           Average     Income/        
    Balance     Expense     Yield     Balance     Expense     Yield  
ASSETS:                                    
Interest-earning assets:                                    
Investments:                                    
Taxable (A)   $ 800,811     $ 19,743       2.47 %   $ 803,982     $ 13,854       1.72 %
Tax-exempt (A) (B)     1,251       50       4.00       3,521       137       3.89  
                                     
Loans (B) (C):                                    
Mortgages     562,488       19,733       3.51       513,189       15,165       2.96  
Commercial mortgages     2,494,427       108,819       4.36       2,478,891       87,488       3.53  
Commercial     2,254,617       144,141       6.39       2,046,735       90,225       4.41  
Commercial construction     10,115       918       9.08       12,600       533       4.23  
Installment     51,929       3,454       6.65       36,685       1,447       3.94  
Home equity     34,332       2,624       7.64       37,755       1,656       4.39  
Other     257       29       11.28       274       26       9.49  
Total loans     5,408,165       279,718       5.17       5,126,129       196,540       3.83  
Federal funds sold                                    
Interest-earning deposits     146,977       6,075       4.13       171,491       2,763       1.61  
Total interest-earning assets     6,357,204       305,586       4.81 %     6,105,123       213,294       3.49 %
Noninterest-earning assets:                                    
Cash and due from banks     8,973                   8,046              
Allowance for credit losses     (64,149 )                 (60,037 )            
Premises and equipment     23,986                   23,312              
Other assets     79,192                   111,893              
Total noninterest-earning assets     48,002                   83,214              
Total assets   $ 6,405,206                 $ 6,188,337              
                                     
LIABILITIES:                                    
Interest-bearing deposits:                                    
Checking   $ 2,777,390     $ 88,829       3.20 %   $ 2,363,412     $ 17,861       0.76 %
Money markets     862,686       18,432       2.14       1,253,032       6,113       0.49  
Savings     124,538       229       0.18       162,396       26       0.02  
Certificates of deposit – retail     400,155       11,736       2.93       397,128       2,971       0.75  
Subtotal interest-bearing deposits     4,164,769       119,226       2.86       4,175,968       26,971       0.65  
Interest-bearing demand – brokered     13,973       611       4.37       84,178       1,579       1.88  
Certificates of deposit – brokered     67,998       3,038       4.47       29,778       942       3.16  
Total interest-bearing deposits     4,246,740       122,875       2.89       4,289,924       29,492       0.69  
Borrowings     337,777       18,204       5.39       26,631       600       2.25  
Capital lease obligation     4,018       191       4.75       5,241       250       4.77  
Subordinated debt     133,127       6,651       5.00       132,839       5,453       4.10  
Total interest-bearing liabilities     4,721,662       147,921       3.13 %     4,454,635       35,795       0.80 %
Noninterest-bearing liabilities:                                    
Demand deposits     1,040,403                   1,107,943              
Accrued expenses and other liabilities     86,193                   96,331              
Total noninterest-bearing liabilities     1,126,596                   1,204,274              
Shareholders’ equity     556,948                   529,428              
Total liabilities and shareholders’ equity   $ 6,405,206                 $ 6,188,337              
Net interest income         $ 157,665                 $ 177,499        
Net interest spread                 1.68 %                 2.69 %
Net interest margin (D)                 2.48 %                 2.91 %

(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 CORPORATIONNON-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  
    Dec 31,     Sept 30,     June 30,     March 31,     Dec 31,  
Tangible Book Value Per Share   2023     2023     2023     2023     2022  
Shareholders’ equity   $ 583,681     $ 558,956     $ 565,069     $ 554,958     $ 532,980  
Less:  Intangible assets, net     46,014       46,286       46,624       46,979       47,333  
Tangible equity   $ 537,667     $ 512,670     $ 518,445     $ 507,979     $ 485,647  
Less: other comprehensive loss     (64,878 )     (81,653 )     (67,997 )     (67,445 )     (74,211 )
Tangible equity excluding other comprehensive loss   $ 602,545     $ 594,323     $ 586,442     $ 575,424     $ 559,858  
                               
Period end shares outstanding     17,739,677       17,816,922       17,887,895       18,014,757       17,813,451  
Tangible book value per share   $ 30.31     $ 28.77     $ 28.98     $ 28.20     $ 27.26  
Tangible book value per share excluding other comprehensive loss   $ 33.97     $ 33.36     $ 32.78     $ 31.94     $ 31.43  
Book value per share     32.90       31.37       31.59       30.81       29.92  
                               
Tangible Equity to Tangible Assets                              
Total assets   $ 6,476,857     $ 6,521,581     $ 6,479,700     $ 6,480,018     $ 6,353,593  
Less: Intangible assets, net     46,014       46,286       46,624       46,979       47,333  
Tangible assets   $ 6,430,843     $ 6,475,295     $ 6,433,076     $ 6,433,039     $ 6,306,260  
Less: other comprehensive loss     (64,878 )     (81,653 )     (67,997 )     (67,445 )     (74,211 )
Tangible assets excluding other comprehensive loss   $ 6,495,721     $ 6,556,948     $ 6,501,073     $ 6,500,484     $ 6,380,471  
                               
Tangible equity to tangible assets     8.36 %     7.92 %     8.06 %     7.90 %     7.70 %
Tangible equity to tangible assets excluding other comprehensive loss     9.28 %     9.06 %     9.02 %     8.85 %     8.77 %
Equity to assets     9.01 %     8.57 %     8.72 %     8.56 %     8.39 %

(Dollars in thousands, except per share data)

    Three Months Ended  
    Dec 31,     Sept 30,     June 30,     March 31,     Dec 31,  
Return on Average Tangible Equity   2023     2023     2023     2023     2022  
Net income   $ 8,599     $ 8,755     $ 13,145     $ 18,355     $ 20,579  
                               
Average shareholders’ equity   $ 561,055     $ 565,153     $ 557,428     $ 543,861     $ 523,406  
Less:  Average intangible assets, net     46,167       46,468       46,828       47,189       47,531  
Average tangible equity   $ 514,888     $ 518,685     $ 510,600     $ 496,672     $ 475,875  
                               
Return on average tangible common equity     6.68 %     6.75 %     10.30 %     14.78 %     17.30 %

    For the Twelve Months Ended  
    Dec 31,     Dec 31,  
Return on Average Tangible Equity   2023     2022  
Net income   $ 48,854     $ 74,246  
             
Average shareholders’ equity   $ 556,948     $ 529,428  
Less:  Average intangible assets, net     46,659       48,111  
Average tangible equity     510,289       481,317  
             
Return on average tangible common equity     9.57 %     15.43 %

(Dollars in thousands, except per share data)

    Three Months Ended  
    Dec 31,     Sept 30,     June 30,     March 31,     Dec 31,  
Efficiency Ratio   2023     2023     2023     2023     2022  
Net interest income   $ 36,675     $ 36,515     $ 38,921     $ 43,978     $ 48,040  
Total other income     17,590       19,354       18,575       18,059       16,812  
Add:                              
Fair value adjustment for CRA equity security     (585 )     404       209       (209 )     (28 )
Less:                              
Gain on sale of property                             (275 )
Income from life insurance proceeds                             (25 )
Total recurring revenue     53,680       56,273       57,705       61,828       64,524  
                               
Operating expenses     37,616       37,413       37,692       35,574       33,412  
Less:                              
Accelerated Expense for Retirement                 1,665       300        
Branch Closure Expense                       175        
Total operating expense     37,616       37,413       36,027       35,099       33,412  
                               
Efficiency ratio     70.07 %     66.48 %     62.43 %     56.77 %     51.78 %

    For the Twelve Months Ended  
    Dec 31,     Dec 31,  
Efficiency Ratio   2023     2022  
Net interest income   $ 156,089     $ 176,080  
Total other income     73,578       66,417  
Add:            
Fair value adjustment for CRA equity security     (181 )     1,700  
Less:            
Loss on securities sale, net           6,609  
Gain on sale of property           (275 )
Income from life insurance proceeds           (25 )
Total recurring revenue     229,486       250,506  
             
Operating expenses     148,295       133,800  
Less:            
Swap valuation allowance           673  
Accelerated Expense for Retirement     1,965        
Branch Closure Expense     175        
Severance expense           1,476  
Total operating expense     146,155       131,651  
             
Efficiency ratio