BEDMINSTER, NJ - (NewMediaWire) - October 28, 2016 - Peapack-Gladstone Financial Corporation (NASDAQ: PGC) (the "Corporation" or the "Company") recorded record net income of $19.17 million and diluted earnings per share of $1.17 for the nine months ended September 30, 2016, compared to $15.63 million and $1.02, respectively, for the same nine month period last year, reflecting increases of $3.54 million or 23 percent, and $0.15 per share, or 15 percent, respectively. 

For the quarter ended September 30, 2016, the Corporation recorded net income of $7.12 million and diluted earnings per share of $0.43, compared to $5.38 million and $0.35 for the same three month period last year, reflecting increases of $1.73 million, or 32 percent, and $0.08 per share, or 23 percent, respectively. 

The 2016 nine month and three month periods, when compared to the same periods in 2015, reflected improved net interest income and improved non-interest income, partially offset by increased expenses. The increased expenses were principally due to increased FDIC premiums, increased investment in risk management related analytics and practices, and increased salary and benefits associated with strategic hiring which was in line with the Company's Strategic Plan. 

While the third quarter 2016 FDIC premium reflected an increase of $398 thousand relative to the same quarter in 2015, the third quarter of 2016 premium declined $767 thousand from the second quarter of 2016. Beginning July 1, 2016 the FDIC assessment system was revised. Revisions for "small institutions" (under $10 billion in assets) resulted in, among other things, the elimination of risk categories and utilization of a financial ratios method to determine assessment rates. The changes reduced the Company's assessment rate by nearly 50% in the third quarter of 2016, when compared to the second quarter 2016 assessment rate. 

The following table summarizes specified financial measures for the third quarters of 2016 and 2015, respectively:

Mr. Kennedy said, "We had a very strong third quarter of 2016, as we continued to successfully execute our Plan. We again posted record net income and near record earnings per share, despite the additional expense base in the 2016 period." 

Additional Q3 2016 highlights follow:

• Growth in diluted EPS for Q3 2016 when compared to Q3 2015 was $0.08 per share, or 23 percent.
• At September 30, 2016, the market value of assets under administration (AUA) at the Private Wealth Management Division of Peapack-Gladstone Bank (the "Bank") increased to $3.50 billion. 
• Fee income from the Private Wealth Management Division totaled $4.4 million for the third quarter of 2016, compared to $4.2 million for the same quarter in 2015. Wealth management fee income, comprising approximately 14 percent of the Company's total revenue, contributed significantly to the Company's diversified revenue sources. 
• Loans at September 30, 2016, including multifamily loans held for sale, totaled $3.26 billion. This reflected net growth of $54 million compared to the prior quarter (2 percent compared to the prior quarter or 7 percent on an annualized basis), and $381 million (13 percent) when compared to the $2.88 billion at September 30, 2015.
• Commercial & Industrial (C&I) loans at September 30, 2016 totaled $598 million. This reflected net growth of $22 million compared to the prior quarter (4 percent compared to the prior quarter or 15 percent on an annualized basis), and net growth of $141 million (31 percent) when compared to the $457 million at September 30, 2015.
• Multifamily whole loans sold totaled $44 million in the third quarter of 2016, which resulted in a net gain on sale of $256 thousand. 
• Total "customer" deposit balances (defined as deposits excluding brokered CDs and brokered "overnight" interest-bearing demand deposits) totaled $3.01 billion at September 30, 2016. This reflected net growth of $191 million compared to the prior quarter (7 percent compared to the prior quarter or 27 percent on an annualized basis), and $456 million (18 percent) when compared to the $2.55 billion at September 30, 2015.
•  Asset quality metrics continued to be strong at September 30, 2016. Nonperforming assets at September 30, 2016 were just $11.4 million, or 0.30 percent of total assets. Total loans past due 30 through 89 days and still accruing were $8.2 million or 0.25 percent of total loans at September 30, 2016.
• The Company's net interest income for the third quarter of 2016 was $24.3 million, reflecting growth of $93 thousand (less than 1 percent for the quarter or 1 percent on an annualized basis) when compared to $24.2 million for the June 2016 quarter, but reflected growth of $2.56 million (12 percent) when compared to the $21.71 million for the quarter ended September 30, 2015.
• The Company's book value per share at September 30, 2016 of $18.57 reflected improvement when compared to $17.33 at September 30, 2015. Year over year growth in book value per share totaled 7 percent.

Mr. Kennedy noted, "We continue to be pleased with our progress since launching our Strategic Plan -- Expanding our Reach -- in early 2013, and we are particularly pleased with our progress thus far in 2016. Despite the headwinds we noted going into 2016, we have delivered solid results thus far this year."

Net Interest Income / Net Interest Margin 

Net interest income and net interest margin was $24.27 million and 2.74 percent for the third quarter of 2016, compared to $24.18 million and 2.79 percent for the second quarter of 2016, and compared to $21.71 million and 2.75 percent for the same quarter last year, reflecting growth in net interest income of $2.56 million or 12 percent when compared to the same prior year period. Net interest income for the third quarter of 2016 benefitted from loan growth during 2015 and the first nine months of 2016. Additionally, the September 2016 quarter included approximately $507 thousand of prepayment premiums received on the prepayment of certain multifamily loans, compared to $453 thousand for the June 2016 quarter, and compared to $76 thousand for the September 2015 quarter. The $507 thousand in premiums benefitted the net interest margin for the September 2016 quarter by 6 basis points. 

Net interest income and net interest margin for the third quarter of 2016 was also impacted by the effect of the $50 million subordinated debt issued in June 2016. Interest on subordinated debt totaled $799 thousand for the third quarter, which reduced the net interest margin by approximately 9 basis points.

Net interest income for the third quarter of 2016 improved considerably compared to the same quarter in 2015, and net interest margin remained relatively flat at 2.74 percent for the 2016 quarter compared to 2.75 percent for the 2015 quarter. The net interest margin continues to be negatively impacted by the effect of the low interest rate environment throughout 2015 and 2016, as well as competitive pressures in attracting new loans and deposits. 

The net interest margin is also affected by the maintenance of liquid assets on the Company's balance sheet. Mr. Kennedy said, "In addition to $409 million of cash, cash equivalents and investment securities on our balance sheet, we also have over $1 billion of secured funding available from the Federal Home Loan Bank, of which we only have $72 million drawn as of September 30, 2016."

The Company's interest rate sensitivity models indicate that the Company's net interest income and margin would improve in a rising rate environment. 

Wealth Management Business 

In the September 2016 quarter, Peapack-Gladstone Bank's wealth management business generated $4.44 million in fee income compared to $4.90 million for the June 2016 quarter, and $4.17 million for the September 2015 quarter. Fee income for the September 2016 quarter was $463 thousand lower than the June 2016 quarter. The June quarter of each year historically reflects a high level of tax preparation income related to the Bank's wealth management clients. 

Fee income for the September 2016 quarter increased by $267 thousand, or approximately 6 percent greater than the September 2015 quarter. Growth in fee income was due to several factors including continued healthy new business results and a positive market environment, partially offset by normal levels of disbursements and outflows. This net positive contribution to revenue from our wealth management business was partially offset by the broader market declines in the latter part of 2015, as well as the first quarter of 2016, which negatively impacted assets under administration ("AUA") and the correlated investment fee revenue at the outset of 2016. 

The market value of the AUA of the wealth management division was $3.50 billion at September 30, 2016, increasing by $77 million, or 2 percent (9 percent on an annualized basis), from June 30, 2016 and increasing $244 million, (8 percent), from $3.25 billion at September 30, 2015.

John P. Babcock, President of PGB Private Wealth Management, said, "We continue to execute on our advice-led strategy, incorporating a wealth management conversation into every relationship we have with clients, across all business lines. We will continue to grow our professional team as well as expand the products, services, and the advice we deliver to our clients. Our continued growth will be driven by our continued successful new business generation, strategic new hires, and the possible acquisition of wealth management firms in the Tri-State area. Over the past two quarters we have added talented, proven and experienced new team members in wealth advisory, portfolio management and fiduciary roles". Mr. Babcock went on to note, "While the broader market declines in the latter part of 2015 and the beginning of 2016 impacted fee revenue at the start of the year, we have been able to generate fee income in the September 2016 quarter greater than the September quarter of 2015 due to new business and positive net flows. We are cautiously optimistic about the market in the medium-to-longer term and have a solid new business pipeline. Notwithstanding market fluctuations, our business continues to grow and will be a significant driver of enhanced shareholder value as we move ahead."

Loan Originations / Loans 

At September 30, 2016, loans, including multifamily loans held for sale, totaled $3.26 billion compared to $3.21 billion three months ago at June 30, 2016 and compared to $2.88 billion one year ago at September 30, 2015, representing net increases of $54 million compared to the prior quarter (2 percent compared to the prior quarter or 7 percent on an annualized basis), and $381 million (13 percent) compared to the prior year September 30 period. Mr. Kennedy noted, "We continue to believe we have a very high quality loan portfolio, as evidenced by very strong asset quality metrics."

For the quarter ended September 30, 2016, residential mortgage originations totaled $68 million. When comparing September 30, 2016 to September 30, 2015, residential mortgage loans grew $27 million, or 6 percent, to $497 million at September 30, 2016 from $470 million one year ago at September 30, 2015. We believe that residential mortgage volumes and the portfolio will increase through the remainder of 2016, and into 2017.

For the September 2016 quarter, commercial real estate originations (not including multifamily loans) totaled $57 million. When comparing September 30, 2016 to September 30, 2015, commercial real estate mortgage loans (not including multifamily loans) grew $98 million, or 24 percent, to $497 million at September 30, 2016 from $399 million one year ago at September 30, 2015.

The September 2016 quarter included $74 million of multifamily loan originations, down significantly from the previous quarters. At September 30, 2016, the multifamily loan portfolio, including multifamily loans held for sale, totaled $1.54 billion (or 47.1 percent of total loans) compared to $1.56 billion (or 48.7 percent of total loans) three months ago at June 30, 2016 and compared to $1.50 billion (or 50.0 percent of total loans) at December 31, 2015. The increases were net of whole loans sold and participations, including $44 million of whole loans sold in the September 2016 quarter, bringing the total whole loans sold or participated for 2016 to $182 million. These loan sales and participations were part of the Company's balance sheet management strategy and will likely continue in 2016, and beyond.

Mr. Kennedy said, "As I explained previously, we anticipated multifamily loan originations and growth would be less than prior years, as we manage our balance sheet such that multifamily loans decline as a percentage of the overall loan portfolio and C&I loans become a larger percentage of the overall loan portfolio. We made progress on this front late in 2015, and we are pleased this has continued into 2016." Mr. Kennedy further noted that, "This balance sheet management will likely not be linear each quarter, but will rather be apparent over periods of time."

For the quarter ended September 30, 2016 the Company closed $60 million of commercial loans. When comparing September 30, 2016 to September 30, 2015, commercial loans grew $141 million, or 31 percent, to $598 million at September 30, 2016 from $457 million one year ago at September 30, 2015. At September 30, 2016 the commercial loan portfolio comprised 18 percent of the overall loan portfolio unchanged from the 18 percent at June 30, 2016, and up from 16 percent one year ago at September 30, 2015. 

Mr. Kennedy said, "As a result of our continued investment in and commitment to C&I banking, we have seen, and believe we will continue to see, our C&I client base and corresponding loan portfolio grow."

Mr. Kennedy went on to say, "Our private banking business model of addressing the sophisticated needs and expectations of successful business owners and entrepreneurs is being well received. The ability to engage in high level strategic debt, capital and valuation analysis coupled with succession, estate and wealth planning strategies, enables us to provide a unique boutique level of service to business owners and middle market clients." 

Eric H. Waser, Head of Commercial Banking, noted, "Three of the 15 largest manufacturers in New Jersey (as enumerated in a reputable NJ business publication) have moved business to Peapack-Gladstone Bank over the past 12 months." Mr. Waser further noted, "We are extremely pleased with how our 'Advice Led' approach is capturing the attention of the business community."

Deposits / Funding / Balance Sheet Management 

As noted last quarter, in June 2016, the Company issued $50 million of subordinated debt ($48.7 million net of underwriting fees and expenses) bearing interest at an annual rate of 6 percent for the first five years, and thereafter at an adjustable rate and until maturity in June 2026 or earlier redemption.  

During the September 2016 quarter, customer deposit growth of $191 million (principally noninterest-bearing, interest-bearing and money market) and increased capital of $13 million, basically funded a $29 million reduction in overnight borrowings, a $12 million reduction of FHLB Advances, an increase in loans of $54 million, an increase in investment securities of $43 million, and an increase in interest earning deposits (cash) of $79 million. 

Brokered interest-bearing demand ("overnight") deposits continued to be managed flat at $200 million at September 30, 2016. The interest rate paid on these deposits allowed the Bank to fund at attractive rates and engage in interest rate swaps as part of its asset-liability interest rate risk management. As of September 30, 2016, the Company had transacted pay fixed, receive floating interest rate swaps totaling $180 million notional amount. The Company ensures ample available collateralized liquidity as a backup to these short term brokered deposits.

Mr. Kennedy noted, "The Company will continue to place an intense focus on providing high touch client service and growing its core deposit base. Our full array of treasury management solutions will help support both core deposit growth and commercial lending opportunities."

Other Noninterest Income 

The Company's total noninterest income for the September 2016 quarter totaled $7.54 million or nearly 24 percent of total revenue. 

Service charges and fees for the September 2016 quarter were $812 thousand, compared to $818 thousand for the June 2016 quarter and $832 thousand for the September 2015 quarter. Several categories have reflected improvement, including income from debit card usage as well as account analysis fees, however, overdraft/NSF fees have declined considerably. 

The September 2016 quarter included $383 thousand of income from the sale of newly originated residential mortgage loans (mortgage banking), compared to $309 thousand for the June 2016 quarter, and $102 thousand for the September 2015 quarter. Originations of residential mortgage loans for sale were higher in the September 2016 quarter, compared to the other noted periods. 

There were no securities gains for the September 2016 quarter compared to $18 thousand for the June 2016 quarter, and $83 thousand for the September 2015 quarter. Sales of securities have been generally employed to benefit interest rate risk, prepayment risk, and/or liquidity risk. Given the shorter duration of our investment portfolio and the interest rate environment, as well as the future outlook, we anticipate such sales will continue to be a very small component of the Company's operations. 

Gain on sale of multifamily loans held for sale at the lower of cost or fair value was $256 thousand for the September 2016 quarter, compared to $500 thousand for the June 2016 quarter. There were no such gains in the September 2015 quarter. During the first quarter of 2016 the Company began selling whole multifamily loans, in addition to participations. The Company anticipates that it will continue to employ both of these strategies throughout 2016, and beyond. 

The third quarter of 2016 included $243 thousand of income related to the Company's SBA lending and sale program, compared to $212 thousand generated in the June 2016 quarter. The SBA program was fully implemented in the March 2016 quarter, and the Company anticipates it will be a part of its normal ongoing operations. 

The September 2016 quarter included $670 thousand of loan level, back-to-back swap income. This program is also a part of the Company's normal ongoing operations. Due to the nature of this program, it is difficult to predict timing and amount of future income. 

Improvements in other income in the September 2016 quarter included greater loan servicing fees due principally to continued multifamily loan participations, and higher unused line of credit fees associated with the C&I lending business.  

Operating Expenses 

The Company's total operating expenses were $18.17 million for the quarter ended September 30, 2016, compared to $18.76 million for the June 2016 quarter and $16.90 million for the same quarter in 2015. 

As noted previously, the third quarter 2016 FDIC premium reflected a $398 thousand increase relative to the same quarter in 2015, however the third quarter of 2016 premium declined $767 thousand from the second quarter of 2016. Beginning July 1, 2016 the FDIC assessment system was revised. Revisions for "small institutions" (under $10 billion in assets) resulted in, among other things, the elimination of risk categories and utilization of a financial ratios method to determine assessment rates. The changes reduced the Company's assessment rate by nearly 50%, when compared to the second quarter 2016 assessment rate. 

Salary and benefits expenses for the September 2016 quarter were $11.52 million compared to $11.10 million for the June 2016 quarter, and $10.32 million for the September 2015 quarter. Strategic hiring that was in line with the Company's Plan, normal salary increases and increased bonus/incentive accruals associated with the Company's growth, all contributed to the increase from the September 2015 quarter to the September 2016 quarter.

Mr. Kennedy noted, "Total expenses for our third quarter of 2016 came in under budget, as we worked to manage our expenses closely."  

Provision for Loan Losses / Asset Quality 

For the quarter ended September 30, 2016, the Company's provision for loan losses was $2.10 million, which was generally in line with the June 2016 quarter, and greater than the September 2015 quarter. Charge-offs, net of recoveries, for the third quarter of 2016 was $703 thousand. The provision in the September 2016 quarter was reflective of loan growth, as well as greater qualitative factor allocations of the allowance, principally to C&I.

At September 30, 2016 the allowance for loan losses was $30.62 million, which was 282 percent of nonperforming loans and 0.95 percent of total loans, compared to $29.22 million, which was 363 percent of nonperforming loans and 0.93 percent of total loans at June 30, 2016, and $24.37 million, which was 320 percent of nonperforming loans and 0.85 percent of total loans one year prior, at September 30, 2015.

The Company's provision for loan losses and its allowance for loan losses continue to track consistently with the Company's net loan growth and asset quality metrics.

Nonperforming assets at September 30, 2016 (which does not include troubled debt restructured loans that are performing in accordance with their terms) were just $11.4 million or 0.30 percent of total assets, compared to $8.8 million or 0.24 percent of total assets at June 30, 2016 and $7.9 million or 0.24 percent of total assets at September 30, 2015. Total loans past due 30 through 89 days and still accruing were $8.2 million at September 30, 2016, compared to $6.6 million at June 30, 2016 and $2.7 million at September 30, 2015. There were no multifamily loans past due at quarter end. The increase in past due loans in the September 2016 quarter was due to one commercial loan secured by real estate totaling $5 million that was 30 days past due at September 30, 2016 but brought current on October 4, 2016. In addition to being brought current in early October, the Company believes there is adequate collateral coverage on the loan. 

Capital / Dividends 

The Company's capital position in the September 2016 quarter was benefitted by net income of $7.1 million and also by $5.4 million of voluntary share purchases under the Dividend Reinvestment Plan, which continues to be a source of capital for the Company. 

At September 30, 2016, the Company's GAAP capital as a percent of total assets was 8.19 percent. The Company's regulatory leverage, common equity tier 1, tier 1 and total risk based capital ratios were 8.39 percent, 10.47 percent, 10.47 percent and 13.17 percent, respectively. The Bank's regulatory leverage, common equity tier 1, tier 1 and total risk based capital ratios were 9.41 percent, 11.74 percent, 11.74 percent and 12.78 percent, respectively. The Bank's regulatory capital ratios are all above the ratios to be considered well capitalized under regulatory guidance.

On October 27, 2016, the Company's Board of Directors declared a regular cash dividend of $0.05 per share payable on November 25, 2016 to shareholders of record on November 10, 2016. 

Mr. Kennedy said, "We continue to believe we have sufficient common equity to support our planned growth and expansion for the immediate future." 

ABOUT THE COMPANY 

Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $3.77 billion as of September 30, 2016. Founded in 1921, Peapack-Gladstone Bank is a commercial bank that provides innovative private banking services to businesses, non-profits and consumers, which help them to establish, maintain and expand their legacy. Through its private banking locations in Bedminster, Morristown, Princeton and Teaneck, its wealth management division, and its branch network and online platforms, Peapack-Gladstone Bank offers an unparalleled commitment to client service.

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

• inability to successfully grow our business and implement our strategic plan, including an inability to generate revenues to offset the increased personnel and other costs related to the strategic plan;
• the impact of anticipated higher operating expenses in 2016 and beyond;
• inability to manage our growth;
• inability to successfully integrate our expanded employee base;
• a continued or 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 low interest rate environment and highly competitive market;
• declines in value in our investment portfolio
• higher than expected increases in our allowance for loan losses;
• higher than expected increases in loan losses or in the level of nonperforming loans;
• unexpected changes in interest rates;
• a continued or unexpected 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) subject us to additional regulatory oversight which may result in increased compliance costs;
• successful cyberattacks against our IT infrastructure and that of our IT providers;
• higher than expected FDIC insurance premiums;
• adverse weather conditions;
• inability to successfully generate new business in new geographic markets;
• inability to execute upon new business initiatives;
• lack of liquidity to fund our various cash obligations;
• reduction in our lower-cost funding sources;
• our inability to adapt to technological changes;
• claims and litigation pertaining to fiduciary responsibility, environmental laws and other matters; and
• other unexpected material adverse changes in our operations or earnings.

A discussion of these and other factors that could affect our results is included in our SEC filings, including our Annual Report on Form 10-K for the year ended December 31, 2015. We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in the Corporation's expectations.

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

(Tables to follow)

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 less restricted shares not yet vested, as compared to book value per common share, which we calculate by dividing shareholders' equity by period end common shares outstanding less restricted shares not yet vested. 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 ORE 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 one reasonable measure of core expenses relative to core revenue.

We believe that these non-GAAP financial measures provide information that is important to investors and that is useful in understanding our financial position, results and ratios. 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. 

Non-GAAP Financial Reconciliation 

(Dollars in thousands, except share data)