Peapack-Gladstone Financial Corporation (PGC), the holding company for Peapack-Gladstone Bank, visited the NASDAQ MarketSite in Times Square on December 16, 2013. In honor of the occasion, Doug Kennedy, President and CEO rang The NASDAQ Stock Market Closing Bell.
Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $1.8 billion as of September 30, 2013. 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.
For the third quarter of 2013 total loan balances of $1.40 billion reached a record level for the Company. This level reflected an increase of 27 percent from the end of September 2012 and an increase of nearly 23 percent (or over 31 percent on an annualized basis) from year end 2012. The Company's net interest income of $13.37 million for the third quarter reflected improvement when compared to $12.85 million for the third quarter of last year. The market value of assets under administration at the Company's Trust & Investment Division was $2.58 billion at September 30, 2013, an increase of 20 percent from the end of September 2012.
In November the Company announced the commencement of a Rights Offering which, coupled with Standby Institutional Investor Participation, resulted in $42 million in capital raised, before expenses, on December 12. The Standby Investors, in the aggregate, had committed well in excess of the $42 million prior to commencement of the rights offering in November.
PEAPACK-GLADSTONE FINANCIAL CORPORATION REPORTS ANOTHER SOLID QUARTER AS IT CONTINUES TO EXECUTE ITS STRATEGIC PLAN
BEDMINSTER, N.J. – April 22, 2014 – Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market:PGC) (the “Corporation” or the “Company” recorded pretax income of $4.90 million, net income of $3.03 million and diluted earnings per share of $0.26 for the quarter ended March 31, 2014.
Doug Kennedy, President and CEO, said, “We had another solid quarter of accomplishment, as we continued to execute on our Strategic Plan – “Expanding Our Reach”. The plan focuses on the client experience and aggressively building and maintaining our private banking platform.”
- Total end of quarter loan balances reached another record level for the Company - $1.76 billion. This level reflected an increase when compared to $1.57 billion at December 31, 2013, and $1.16 billion one year ago at March 31, 2013.
- The Company’s net interest income for the March 2014 quarter reached another quarterly record level - $15.57 million. This level reflected improvement when compared to $14.53 million for the December 2013 quarter, and when compared to $12.43 million for the same quarter last year.
- As previously announced, John Babcock joined the Company, effective March 10, 2014, as the head of private wealth management. Mr. Babcock is a proven leader in the wealth management space and will be a tremendous asset to the Company as it executes its strategy.
- Also as previously announced, three seasoned wealth advisors have joined the Company from larger wealth management companies.
- At March 31, 2014, the market value of assets under administration at the Private Wealth Management Division of Peapack-Gladstone Bank (“The Bank”) was $2.75 billion, also another record for the Company.
- Fee income from the Private Wealth Management Division totaled $3.75 million for the March 2014 quarter reflecting growth when compared to $3.55 million for the December 2013 quarter, and $3.37 million for the March 2013 quarter.
- Total revenue (net interest income plus other income) of $20.57 million for the March 2014 quarter reflected improvement when compared to $19.50 million for the December 2013 quarter, and to $17.51 million (after removing the $522 thousand gain on sale of classified loans) for the March 2013 quarter.
- Asset quality metrics remained strong at March 31, 2014 when compared to prior periods. For example, nonperforming assets stood at just 0.42 percent of total assets as of March 31, 2014, compared to 0.44 percent of total assets of December 31, 2013, and 0.94 percent of total assets at March 31, 2013. Additionally, the Company’s nonperforming asset ratio compares very favorably to the weighted average for all Mid-Atlantic banks of 1.1 percent.
- The book value per share at March 31, 2014 of $15.08 reflected improvement when compared to $14.79 at December 31, 2013 and $14.05 at March 31, 2013.
- Capital ratios remain very strong as of March 31, 2014, even with significant asset growth for the quarter, as well as migration of lower risk weighted investment security cash flows into loans.
The following table summarizes earnings for the quarters ended:
(Dollars in millions, except EPS)
(1) The March 2014 earnings per share calculations include all of the 2.47 million shares issued in the December 12, 2013 capital raise.
(2) As previously reported, the December 2013 quarter included certain expenses related to two specific items totaling $806 thousand ($506 thousand net of tax), the largest of which was accelerated depreciation expense related to the Operations Center consolidation.
(3) The March 2013 quarter included a $522 thousand ($328 thousand net of tax) gain on sale of classified loans.
Net Interest Income/Net Interest Margin
Net interest income was $15.57 million for the first quarter of 2014, reflecting an increase of $1.04 million from the December 2013 quarter and an increase of $3.14 million from the same quarter last year. The net interest margin, on a fully tax-equivalent basis, was 3.18 percent for the March 2014 quarter compared to 3.26 percent for the December 2013 quarter and 3.28 percent for the March 2013 quarter.
Net interest income for the current 2014 quarter benefitted from significant loan growth during the first quarter of 2014 as well as the last half of 2013, principally multifamily and commercial mortgages.
Net interest margin for the March 2014 quarter declined slightly when compared to the December 2013 and March 2013 quarters due to the continued effect of low market yields and tighter market spreads.
The asset growth in the March 2014 quarter was funded by a diversified source of funding alternatives. During the quarter, $58.0 million of customer deposits, $60.0 million of brokered certificates of deposit (“CDs”), and $9.0 million of FHLB advances were added. And, investment securities cash flows of $20.4 million and capital growth of $5.2 million also funded the asset growth. Lastly, short term funding (which includes overnight wholesale borrowings plus short term brokered interest bearing demand deposit balances) provided $152.5 million of additional funding in the March 2014 quarter. Brokered interest bearing demand deposits have been utilized in place of wholesale overnight borrowings as a more cost effective alternative. The Company does ensure ample available collateralized liquidity as a backup to these short term brokered deposits.
Mr. Kennedy commented, “Our private bankers, commercial bankers, relationship bankers and our treasury management team have robust pipelines of client deposits. Given these pipelines, the Company utilized brokered CDs and borrowings with terms laddered in such a way to mature as we expect new client deposits to be added.” Mr. Kennedy went on to note, “A large portion of our short term funding at March 31, 2014 was or will be paid down in April 2014.”
Excess cash on hand held as of March 31, 2014 was used to pay down $50 million of overnight borrowings on April 1, 2014. $25 million of medium/longer term brokered CDs were added in mid-April with proceeds used to reduce overnight borrowings. Finally, the Company anticipates that the sale of the $51.2 million of one-to-four family residential mortgage loans held for sale as of March 31, 2014 will close in late April with the proceeds used to reduce short term funding.
Mr. Kennedy further commented, “We will continue to place intense focus on providing high touch client service and growing our core deposit base. Service is a key differentiator for us that will enable us to grow our business. In addition, we have a full array of treasury management products in place that will help support our core deposit growth and also our commercial lending opportunities.”
Total multifamily and commercial mortgage originations were $241 million for the March 2014 quarter, compared to $164 million for the December 2013 quarter, and $37 million for the March 2013 quarter. At March 31, 2014, loans totaled $1.76 billion as compared to $1.16 billion at March 31, 2013. The multifamily and commercial mortgage loan portfolio more than doubled when comparing the March 2014 balance to the March 2013 balance. The increase was attributable to the addition of seasoned banking professionals over the course of 2013; a more concerted focus on the client service aspect of the lending process; more of a focus on New Jersey markets; and a focus on New York City multifamily markets beginning in mid-2013. The increase was also due to demand from high quality borrowers looking to refinance multifamily and other commercial mortgages held by other institutions. Mr. Kennedy noted, “Our analysis showed that multifamily lending could be grown quickly without undue risk and that this lending provides solid risk-adjusted returns.” The multifamily and commercial mortgage pipeline stood at $340 million as of March 31, 2014.
The commercial loan portfolio increased $38 million when comparing the March 2014 balance to the March 2013 balance. Mr. Kennedy said “As part of our Strategic Plan, we introduced a comprehensive Commercial & Industrial (C&I) lending program. We closed $97 million of C&I loans in 2013 and an additional $16 million in the March 2014 quarter. And, our C&I pipeline stood at $110 million as of March 31, 2014. Given our pipeline and our strategic focus, we expect C&I loan volume to increase in future periods.”
Wealth Management Business
In the March 2014 quarter, Peapack-Gladstone Bank’s Wealth Management business generated $3.75 million in fee income compared to $3.55 million for the December 2013 quarter, and compared to $3.37 million for the March 2013 quarter. The market value of the assets under administration (AUA) of the wealth management division was $2.75 billion at March 31, 2014, up from $2.54 billion at March 31, 2013. The growth in fee income and AUA was due to a combination of new business and market value improvement.
John P. Babcock, President of Private Wealth Management, noted, “Our wealth management business differentiates us from our peer group competitors, adds significant value to our Company, and is a key component of our overall strategy to incorporate wealth in to every conversation we have with all of our clients, across all lines of business. Mr. Babcock went on to comment, “I am very excited to have joined the existing high-caliber team of wealth professionals here at PGB. The quality of this existing team and the level of advice and service it delivers to clients, combined with our forward vision, has enabled me to attract other proven, high-performing wealth advisors. I look forward to continuing to build-out and grow the size of our team as well as expanding the platform of products, services and advice we can deliver to our clients.”
Other Noninterest Income
In the March 2014 quarter, other noninterest income, exclusive of wealth management fees and securities gains, totaled $1.14 million, reflecting a decrease of $282 thousand when compared to the same quarter a year ago. The March 2014 quarter included $112 thousand of income from the sale of newly originated residential mortgage loans, down from $470 thousand in the same 2013 quarter.
Mr. Kennedy commented, “As noted in prior quarters, the rise in mortgage rates in the middle of 2013 caused a decrease in residential mortgage loan originations and resultant mortgage banking income. Reduced levels of mortgage banking income was expected and planned for, and reduced levels of mortgage banking income are expected to be ongoing. Fortunately, mortgage banking income is not a significant portion of revenue. Further, we have reduced our overhead expense associated with mortgage banking; we have improved our loan volume on the commercial front which has and will improve net interest income; and we have introduced treasury management services/products, which we expect will contribute to noninterest income in the future.”
Securities gains were $98 thousand for the March 2014 quarter compared to $289 thousand for the March 2013 quarter. Sales of securities have been generally employed to benefit interest rate risk, prepayment risk, and/or liquidity risk. Given the short duration of the securities portfolio, sales have been employed less often in recent periods.
The Company’s total operating expenses were $14.34 million for the quarter ended March 31, 2014 compared to $12.29 million in the same 2013 quarter, reflecting an increase of $2.05 million. Salary and benefits expense accounted for the bulk of the increase, due to strategic hiring in line with the Company’s Strategic Plan, including hires associated with implementation of Enterprise Risk Management, as well as normal salary increases and increased bonus/incentive accruals. Also, when comparing the March 2014 expense levels to those in March 2013, 2014 included increased occupancy costs associated with the new Princeton and Teaneck Private Banking offices, as well as various professional and other fees associated with various training and consulting, some of which was associated with the Strategic Plan.
Mr. Kennedy noted, “We expected higher operating expenses as we execute our Strategic Plan. We expect that the trend of higher operating expenses will continue in 2014 as we bring on high caliber revenue producers, and continue to invest in our infrastructure in line with our Strategic Plan. Further, we generally expect revenue and profitability related to new personnel to lag those expenses by several quarters. It is important to note, however, that we did see an improvement in quarterly revenue since we launched our Plan, particularly in the December 2013 and March 2014 quarters, as our Plan began to gain momentum late in 2013.”
When comparing the March 2014 expense levels to those of December 2013, operating expenses declined $307 thousand. However, the December 2013 quarter included certain expenses related to two specific items totaling $806 thousand, the largest of which was accelerated depreciation expense related to the Operations Center consolidation. Excluding these items, operating expenses would have increased $499 thousand, as contemplated in our Plan.
Provision for Loan Losses/Asset Quality
For the quarter ended March 2014, the Company’s provision for loan losses was $1.33 million, the same amount as the December 2013 provision, and up $475 thousand when compared to the $850 thousand provision for the March 2013 quarter. Charge-offs, net of recoveries, for the March 2014 quarter were only $111 thousand.
At March 31, 2014 the allowance for loan losses was 222 percent of nonperforming loans and 0.94 percent of total loans. Nonperforming assets totaled $9.5 million or just 0.42 percent of total assets at March 31, 2014 compared to $15.4 million or 0.94 percent of assets at March 31, 2013.
During the March 2014 quarter, the Company continued to employ the capital raised in December 2013 by continuing to grow loans. At March 31, 2014, the Company’s leverage ratio, tier 1 and total risk based capital ratios were 8.5 percent, 13.1 percent and 14.3 percent, respectively. The Company’s ratios are all significantly above the levels required to be considered well capitalized under regulatory guidelines applicable to banks.
On April 17, 2014, the Board of Directors declared a regular cash dividend of $0.05 per share payable on May 15, 2014 to shareholders of record on May 1, 2014.
ABOUT THE COMPANY
Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $2.25 billion as of March 31, 2014. 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.
Jeffery J. Carfora
Peapack-Gladstone Financial Corporation
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;
- inability to manage our growth;
- 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 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 cyber attacks against our IT infrastructure and that of our IT providers;
- higher than expected FDIC insurance premiums;
- 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, 2013. 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.
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