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

Bedminster, NJ - (NewMediaWire) - July 29, 2022 - Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market: PGC) (the “Company”) announces its second quarter 2022 results. 

This earnings release should be read in conjunction with the Company’s Q2 2022 Investor Update, a copy of which is available on our website at www.pgbank.com and via a current report on Form 8-K on the website of the Securities and Exchange Commission at www.sec.gov.  

The Company recorded total revenue of $61.40 million, net income of $20.10 million and diluted earnings per share (“EPS”) of $1.08 for the quarter ended June 30, 2022, compared to revenue of $51.52 million, net income of $14.42 million and diluted EPS of $0.74 for the three months ended June 30, 2021. 

The Company’s return on average assets, return on average equity, and return on average tangible equity totaled 1.30%, 15.43% and 17.00%, respectively, for the June 2022 quarter. 

The June 2022 quarter results were driven by improvement in net interest income and net interest margin, which improved 45 basis points compared to the June 2021 quarter (and 14 basis points compared to the March 2022 quarter).

The June 2022 quarter also included increases in wealth management fee income and SBA fee income, when compared to the June 2021 quarter.    

Douglas L. Kennedy, President and CEO said, “Our second quarter 2022 results reflect the asset sensitivity of our balance sheet, as loans continued to reprice upward in the rising rate environment.”

The following are select highlights:

Peapack Private Wealth Management:

• AUM/AUA in our Peapack Private Wealth Management Division totaled $9.5 billion at June 30, 2022. 
• Gross new business inflows for the first six months of 2022 totaled $556 million. 
• Wealth Management fee income increased 7% to $13.9 million for Q2 2022 compared to $13.0 million for Q2 2021. 
• Finalizing the consolidation of three offices of previously acquired firms into existing private banking locations.

Commercial Banking and Balance Sheet Management: 

• The net interest margin ("NIM") improved by 14 basis points in Q2 2022 compared to Q1 2022 and improved 45 basis points when compared to Q2 2021. 
• Commercial & industrial lending (“C&I”) loan/lease balances comprised 40% of the total loan portfolio at June 30, 2022.
• Total loans grew 7% (13% annualized) to $5.17 billion at June 30, 2022 compared to $4.84 billion at December 31, 2021; and grew 13% from $4.58 billion at June 30, 2021.
• U.S. Small Business Association (“SBA”) Income continues to be a driver in fee income recording $2.7 million for the second quarter of 2022.
• Core deposits (which includes noninterest-bearing demand and interest-bearing demand, savings and money market accounts) totaled 90% of total deposits at June 30, 2022.    

Capital Management:

• Repurchased 499,878 shares of Company stock for a total cost of $17.6 million during the first six months of 2022. 
• Regulatory Tier 1 Leverage Ratio stood at 10.4% for the Bank and 8.5% for the Company, at June 30, 2022. Regulatory Common Equity Tier 1 Ratio (to Risk-Weighted Assets) stood at 13.1% for the Bank and 10.7% for the Company at June 30, 2022.  These ratios have increased from December 31, 2021 levels and are significantly above well capitalized standards. 

SUMMARY INCOME STATEMENT DETAILS:

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

June 2022 Year Compared to Prior Year

A. The six months ended June 30, 2022 included wealth management fee income and expense related to the July 2021 acquisition of Princeton Portfolio Strategies Group.
B. 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. 
C. Other income for the six months ended June 30, 2022 included a $6.6 million loss on sale of securities associated with a balance sheet repositioning executed in the first quarter.  The June 2021 six months included a cost of $842,000 related to the termination of interest rate swaps; a $1.4 million gain on loans; $722,000 of fee income related to the referral of Paycheck Protection Program ("PPP") loans to a third party; and $455,000 of additional Bank Owned Life Insurance ("BOLI") income related to the receipt of life insurance proceeds.
E. The six months ended June 2022 and 2021 each included $1.5 million of severance expense related to certain staff reorganizations within several areas of the Bank. The six months ended June 2021 also included $648,000 of expense related to the redemption of subordinated debt.
F. Total revenue equals the sum of net interest income plus total other income.

June 2022 Quarter Compared to Prior Year Quarter

A. The quarter ended June 30, 2022 included a full quarter of wealth management fee income and expense related to the July 2021 acquisition of Princeton Portfolio Strategies Group.
B. 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. 
C. Other income for the June 2021 quarter included a cost of $842,000 related to the termination of interest rate swaps; a $1.1 million gain on sale of PPP loans; $722,000 of fee income related to the referral of PPP loans to a third party; and $153,000 of additional BOLI income related to the receipt of life insurance proceeds.
D. The June 2021 quarter included $648,000 of expense related to the redemption of subordinated debt.
E. Total revenue equals the sum of net interest income plus total other income.

June 2022 Quarter Compared to Linked Quarter

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 quarter ended March 31, 2022 included a $6.6 million loss on the sale of securities associated with a balance sheet repositioning executed in the quarter. 
C. The March 2022 quarter included $1.5 million of severance expense related to certain staff reorganization within several areas of the Bank.
D. Total revenue equals the sum of net interest income plus total other income.

SUPPLEMENTAL QUARTERLY DETAILS:

Peapack Private Wealth Management 

In the June 2022 quarter, the Bank’s wealth management business, Peapack Private Wealth Management ("PPWM"), generated $13.89 million in fee income, compared to $14.83 million for the March 31, 2022 quarter and $13.03 million for the June 2021 quarter. Continued market declines in 2022 further impacted the results in the June 2022 quarter, as the S&P was down another 16% in Q2 2022 (and YTD down 21%).

John Babcock, President of Peapack Private Wealth Managed noted, “Our business is sound and continues to attract new clients as well as additions from existing relationships, despite overall market declines in the first half of the year.  In Q2 2022, total new accounts and client additions totaled $210 million which brings our six-month 2022 total to a record $556 million. As we enter Q3 2022, our new business pipeline is strong. Our highly skilled professionals, our fiduciary powers and expertise, our financial planning capabilities and our high-touch client service model distinguishes PPWM in our market and are the drivers behind our growth and success. Additionally, as noted last quarter, we are nearing the completion of our integration of our eight acquisitions made since 2015 into a singular organizational structure and operating platform.”  

Loans / Commercial Banking 

Total loans grew 7% (13% annualized) to $5.17 billion at June 30, 2022 compared to $4.84 billion at December 31, 2021, and grew 13% from $4.58 billion at June 30, 2021.

Total C&I loans and leases at June 30, 2022 were $2.05 billion or 40% of the total loan portfolio. 

Mr. Kennedy noted, “Our loan growth has been strong, however, given economic uncertainty and rising interest rates, we believe loan demand will subside somewhat. Further, we have tightened our initial underwriting in anticipation of a potential economic downturn and higher rate environment. Given that, we believe we will achieve modest growth for the remainder of 2022, resulting in mid to high single digit growth for all of 2022.”

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.” 

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

As shown above, the Company’s reported NII and NIM for Q2 2022 increased $3.3 million and 14 basis points, respectively, compared to the linked quarter (Q1 2022) and $9.0 million and 45 basis points compared to the prior year quarter (Q2 2021). When comparing to the prior year quarter the Bank further lowered its cost of funds strategically and grew its average loan portfolio at rates/spreads beneficial to NIM, while reducing lower-yielding liquidity. Additionally, the Bank benefitted from the increases in LIBOR and Prime during 2022. Mr. Kennedy stated, “As noted above, we benefitted from the increase in LIBOR and Prime during 2022 and we are positioned to continue to benefit from a rise in interest rates. 25% of our loan portfolio reprices within one month; 37% within three months and 47% within one year. Our current modeling, with what we believe include very conservative deposit beta assumptions (average of 45%), indicates net interest income will improve approximately 3% in year one and 8% in year two, after a 200-basis point rate shock.”

Funding / Liquidity / Interest Rate Risk Management

The Company actively manages its deposit base to reduce reliance on wholesale funding, volatility, and/or operational risk.  Total deposits at June 30, 2022 increased $138 million to $5.40 billion from $5.27 billion at December 31, 2021 and increased $508 million from $4.90 billion at June 30, 2021. Along with the deposit growth, the change in mix was favorable, as noninterest bearing demand deposits increased $84 million, interest-bearing demand accounts increased $478 million and savings and money market accounts increased $25 million, while higher costing CDs declined $71 million and brokered deposits declined $8 million, when comparing June 30, 2022 to June 30, 2021.  

Mr. Kennedy noted, “90% of our deposits are demand, savings, or money market accounts, and our noninterest bearing deposits comprise nearly 20% of our total deposits; both metrics reflect the relationship aspect of our deposit base.”

At June 30, 2022, the Company’s balance sheet liquidity (investments available for sale, interest-earning deposits and cash) totaled $737.5 million (or 12% of assets). 

The Company maintains backup liquidity of approximately $1.9 billion of secured available funding with the Federal Home Loan Bank and $1.6 billion of secured funding from the Federal Reserve Discount Window.  The available funding from the Federal Home Loan Bank and the Federal Reserve are secured by the Company’s loan and investment portfolios.

Income from Capital Markets Activities

Noninterest income from Capital Markets activities (detailed below) totaled $2.86 million for the June 2022 quarter compared to $4.65 million for the March 2022 quarter and $1.46 million for the June 2021 quarter. The June 2022 quarter results were driven by $2.68 million in gains on sales of SBA loans. The March 2022 quarter results were driven by $2.84 million in gains on sale of SBA loans and $1.56 million in corporate advisory fee income. The June 2021 quarter reflected $932,000 in gains on the sale of SBA loans and increased mortgage banking activity due to greater refinance activity in the low-rate environment. The June 2022, March 2022 and June 2021 quarters included no income from loan level, back-to-back swap activities, as there has been minimal activity for such. 

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

Other noninterest income was $1.76 million for Q2 2022 compared to a $(4.77) million loss for Q1 2022 and $3.18 million for Q2 2021. Q1 2022 included a $6.6 million loss on sale of securities associated with a balance sheet repositioning.  Q2 2021 included $153,000 of bank owned life insurance income due to the receipt of life insurance proceeds; a $1.13 million gain on sale of PPP loans; $722,000 of fee income related to referral of PPP loans to a third party; and a cost of $842,000 on the termination of interest rate swaps. 

Operating Expenses

The Company’s total operating expenses were $32.66 million for the quarter ended June 30, 2022, compared to $34.17 million for the March 2022 quarter and $30.68 million for the June 2021 quarter. The June 2022 and March 2022 quarters included a full quarter’s worth of expense related to the acquisition of Princeton Portfolio Strategies Group (“PPSG”), which closed on July 1, 2021. The first six months of 2022 included increased costs related to health insurance and corporate insurance, as well as the normal annual merit increases and year-end bonuses. The March 2022 quarter also included $1.5 million of severance expense related to certain staff reorganizations within several areas of the Bank.  The June 2021 quarter included $648,000 of expense related to the redemption of subordinated debt. 

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

Income Taxes

The effective tax rate for the three months ended June 30, 2022 was 26.35%, as compared to 24.45% for the March 2022 quarter and 27.69% for the quarter ended June 30, 2021. The March 31, 2022 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 troubled debt restructured loans that are performing in accordance with their terms) at June 30, 2022 were $15.2 million, or 0.25% of total assets. Loans past due 30 to 89 days and still accruing were $3.1 million. 

Criticized and classified loans declined by $41 million from December 31, 2021 to June 30, 2022. 

Loans on deferral and accruing, entered into during the COVID-19 pandemic, stand at just $13 million at June 30, 2022, down significantly from $914 million at June 30, 2020.  

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

For the quarter ended June 30, 2022, the Company’s provision for credit losses was $1.4 million compared to $2.4 million for the March 2022 quarter and $900,000 for the June 2021 quarter. The increased provision for credit losses in the June 2022 and March 2022 quarters, when compared to the June 2021 quarter was due principally to loan growth during the six-month period.

At June 30, 2022, the ACL was $59.02 million (1.14% of total loans), compared to $61.70 million at December 31, 2021 (1.27% of loans) and $63.51 million at June 30, 2021 (1.39% of total loans).  

Capital 

The Company’s capital position during the June 2022 quarter was benefitted by net income of $20.10 million which was offset by the purchase of approximately 200,000 shares through the Company’s stock repurchase program at a total cost of $6.4 million and the quarterly dividend of $919,000. U.S. Generally Accepted Accounting Principles (“GAAP”) Capital at June 30, 2022 was also impacted by an increase in the unrealized loss on available-for-sale securities in the second quarter of 2022 due to the significant rise in medium-term Treasury yields. 

Mr. Kennedy noted, “Despite capital spent on stock repurchases, and capital being affected by the increased unrealized loss on AFS securities, our tangible book value per share improved slightly during Q2 2022 to $25.96 at June 30, 2022.” 

The Company’s and Bank’s capital ratios at June 30, 2022 remain strong.  Such ratios remain well above regulatory well capitalized standards.

The Company employs quarterly capital stress testing – adverse case and severely adverse case. In the most recent completed stress test on March 31, 2022, under the severely adverse case, and no growth scenarios, the Bank remains well capitalized over a two-year stress period. With a Pandemic stress overlay, the Bank still remains well capitalized over the two-year stress period. 

On July 28, 2022, the Company declared a cash dividend of $0.05 per share payable on August 25, 2022, to shareholders of record on August 11, 2022.

ABOUT THE COMPANY

Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $6.2 billion and assets under management/administration of $9.5 billion as of June 30, 2022.  Founded in 1921, Peapack-Gladstone Bank is a commercial bank that provides innovative wealth management, commercial and retail solutions, including residential lending and online platforms, to businesses and consumers.  Peapack Private, the bank’s wealth management division, offers comprehensive financial, tax, fiduciary and investment advice and solutions to individuals, families, privately-held businesses, family offices and not-for-profit organizations, which help them to establish, maintain and expand their legacy.  Together, Peapack-Gladstone Bank and Peapack Private offer an unparalleled commitment to client service.  Visit www.pgbank.com and www.peapackprivate.com for more information.

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

• our ability to successfully grow our business and implement our strategic plan, including our ability to generate revenues to offset the increased personnel and other costs related to the strategic plan;
• the impact of anticipated higher operating expenses in 2022 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;
• 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;
• higher than expected increases in our allowance for credit losses;
• higher than expected increases in loan and lease losses or in the level of delinquent, nonperforming, classified and criticized loans;
• inflation and changes in interest rates, which may adversely impact or margins and yields, reduce the fair value of our financial instruments, reduce our loan originations and lead to higher operating costs;
• decline in real estate values within our market areas;
• legislative and regulatory actions (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Basel III and related regulations) that may result in increased compliance costs;
• successful cyberattacks against our IT infrastructure and that of our IT and third-party providers;
• higher than expected FDIC insurance premiums;
• adverse weather conditions;
• the current or anticipated impact of military conflict, terrorism or other geopolitical events;
• our inability to successfully generate new business in new geographic markets;
• a reduction in our lower-cost funding sources;
• our inability to adapt to technological changes; 
• claims and litigation pertaining to fiduciary responsibility, environmental laws and other matters;
• our inability to retain key employees;
• demands for loans and deposits in our market areas;
• adverse changes in securities markets;
• changes in accounting policies and practices; and
• other unexpected material adverse changes in our operations or earnings.

Further, given its ongoing and dynamic nature, it is difficult to predict the continued impact of the COVID-19 pandemic on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated.  As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: 

• demand for our products and services may decline, making it difficult to grow assets and income; 
• if the economy worsens, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; 
• collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; 
• our allowance for credit losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; 
• the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; 
• a material decrease in net income or a net loss over several quarters could result in an elimination or a decrease in the rate of our quarterly cash dividend; 
• our wealth management revenues may decline with continuing market turmoil; 
• a worsening of business and economic conditions or in the financial markets could result in an impairment of certain intangible assets, such as goodwill;
• the unanticipated loss or unavailability of key employees due to the outbreak, which could harm our ability to operate our business or execute our business strategy, especially as we may not be successful in finding and integrating suitable successors;
• our cyber security risks are increased as the result of an increase in the number of employees working remotely; and 
• FDIC premiums may increase if the agency experience additional resolution costs.

A discussion of these and other factors that could affect our results is included in our SEC filings, including our Annual Report on Form 10-K for the year ended December 31, 2021. We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

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

Contact:

Jeffrey J. Carfora, SEVP and CFO

Peapack-Gladstone Financial Corporation

T: 908-719-4308

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

A. Gain on loans held for sale at fair value (mortgage banking), fee income related to loan level, back-to-back swaps, gain on sale of SBA loans and corporate advisory fee income are all included in “capital markets activity” as referred to within the earnings release.
B. Includes a $1.1 million gain on sale of $57 million of PPP loans completed in the June 2021 quarter.
C. Includes income of $722,000 from the referral of PPP loans to a third-party firm during the June 2021 quarter.
D. Loss on sale of securities was a result of a balance sheet repositioning employed in the March 2022 quarter.
E. The March 2022 and 2021 quarters each included $1.5 million of severance expense related to corporate restructuring.
F. Commencing on January 1, 2022, the allowance calculation is based on the CECL methodology.  Prior to January 1, 2022, the calculation was based on the incurred loss methodology.
G. Total revenue equals the sum of net interest income plus total other income.
H. Return on average tangible common equity is calculated by dividing tangible common equity by annualized net income.  See Non-GAAP financial measures reconciliation included in these tables.
I. Calculated as total operating expenses as a percentage of total revenue.  For Non-GAAP efficiency ratio, see the Non-GAAP financial measures reconciliation included in these tables.

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

A. Gain on loans held for sale at fair value (mortgage banking), fee income related to loan level, back-to-back swaps, gain on sale of SBA loans and corporate advisory fee income are all included in “capital markets activity” as referred to within the earnings release.
B. Includes gain on sale of $57 million of PPP loans completed in the June 2021 quarter.
C. Includes income of $722,000 from the referral of PPP loans to a third-party firm during the June 2021 quarter.
D. Loss on sale of securities was a result of a balance sheet repositioning employed in the March 2022 quarter.
E. The June 2022 and 2021 six months ended each included $1.5 million of severance expense related to corporate restructuring.
F. Commencing on January 1, 2022, the allowance calculation is based on the CECL methodology.  Prior to January 1, 2022, the calculation was based on the incurred loss methodology.
G. Total revenue equals the sum of net interest income plus total other income.
H. Return on average tangible common equity is calculated by dividing tangible common equity by annualized net income.  See Non-GAAP financial measures reconciliation included in these tables.
I. Calculated as total operating expenses as a percentage of total revenue.  For Non-GAAP efficiency ratio, see the Non-GAAP financial measures reconciliation included in these tables.

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

A. Includes PPP loans of $10 million at June 30, 2022; $10 million at March 31, 2022; $14 million at December 31, 2021; $49 million at September 30, 2021; and $84 million at June 30, 2021.
B. Commencing on January 1, 2022, the allowance calculation is based on the CECL methodology.  Prior to January 1, 2022, the calculation was based on the incurred loss methodology.
C. Includes $120 million due from FHLB related to securities sales at March 31, 2022.  The $120 million received on April 1, 2022, was used to reduce short term borrowings.
D. The change in other assets and other liabilities was primarily due to the change in the fair value of our back-to-back swap program.
E. Represents funding provided by the Federal Reserve for pledged PPP loans.

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

A. Increase at September 30, 2021 due to one large CRE loan with a retail component, located in Manhattan. 
B. Amounts reflect troubled debt restructurings (“TDRs”) that are paying according to restructured terms.
C. Excludes TDRs included in nonaccrual loans in the following amounts: $13.5 million at June 30, 2022; $13.6 million at March 31, 2022; $1.1 million at December 31, 2021; $4.0 million at September 30, 2021; and $3.9 million at June 30, 2021. 
D. Includes $6.9 million for one equipment lease principally due to administrative issues with the servicer and the lessee/borrower at December 31, 2021. Payment was received in January 2022.
E. Commencing on January 1, 2022, the allowance calculation is based on the CECL methodology.  Prior to January 1, 2022, the calculation was based on the incurred loss methodology. Provision to roll forward the ACL excludes a provision of $803,000 at June 30, 2022 and a credit of $114,000 at March 31, 2022 related to off-balance sheet commitments.
F. Total ACL less specific reserves equals general ACL.

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

A. Equity to total assets is calculated as total shareholders’ equity as a percentage of total assets at period end.
B. Tangible equity and tangible assets are calculated by excluding the balance of intangible assets from shareholders’ equity and total assets, respectively. Tangible equity as a percentage of tangible assets at period end is calculated by dividing tangible equity by tangible assets at period end. See Non-GAAP financial measures reconciliation included in these tables.
C. Book value per common share is calculated by dividing shareholders’ equity by period end common shares outstanding.
D. Tangible book value per share excludes intangible assets. Tangible book value per share is calculated by dividing tangible equity by period end common shares outstanding. See Non-GAAP financial measures reconciliation tables.
E. Regulatory well capitalized standard = 5.00% ($310 million)
F. Regulatory well capitalized standard = 8.00% ($395 million)
G. Regulatory well capitalized standard = 6.50% ($321 million)
H. Regulatory well capitalized standard = 10.00% ($494 million)

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

A. Includes loans and lines of credit that closed in the period but not necessarily funded.
B. Includes equipment finance.
C. Includes PPP loans of $56 million for the six months ended June 30, 2021.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
AVERAGE BALANCE SHEET
UNAUDITED
THREE MONTHS ENDED
(Tax-Equivalent Basis, Dollars in Thousands)

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
UNAUDITED
THREE MONTHS ENDED
(Tax-Equivalent Basis, Dollars in Thousands)

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
UNAUDITED
SIX MONTHS ENDED
(Tax-Equivalent Basis, Dollars in Thousands)

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 period end common shares outstanding, as compared to book value per common share, which we calculate by dividing shareholders’ equity by period end common shares outstanding.  We calculate tangible equity as a percentage of tangible assets at period end by dividing tangible equity by tangible assets at period end.  We believe that this is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of risk-based capital ratios.

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

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

(Dollars in thousands, except share data)

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