BEDMINSTER, NJ, Oct. 24, 2023 (GLOBE NEWSWIRE) -- via NewMediaWire – Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market: PGC) (the “Company”) announces its third quarter 2023 financial results.
This earnings release should be read in conjunction with the Company’s Q3 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 $55.9 million, net income of $8.8 million and diluted earnings per share (“EPS”) of $0.49 for the quarter ended September 30, 2023, compared to revenue of $61.9 million, net income of $20.1 million and diluted EPS of $1.09 for the quarter ended September 30, 2022.
The net interest margin declined to 2.28% for the quarter ended September 30, 2023, compared to 2.49% for the quarter ended June 30, 2023 and 2.98% for the quarter ended September 30, 2022.
The Company’s return on average assets was 0.54%, return on average equity was 6.20%, and return on average tangible equity was 6.75% for the quarter ended September 30, 2023. Loans grew by $44 million to $5.5 billion funded by deposit growth of $61 million to $5.3 billion during the third quarter.
The Company’s liquidity position remains strong as balance sheet liquidity was $756 million as of September 30, 2023, which was 11.59% of total assets. The Company also had $2.8 billion of external borrowing capacity available, when combined with balance sheet liquidity provides us with 294% coverage of our uninsured deposits. Approximately 77% of our deposits are presently covered by FDIC insurance or are fully collateralized.
Douglas L. Kennedy, President and CEO, said, “Our third quarter results were impacted by the continuing compression of our net interest margin primarily driven by the rapid rise in our cost of funds. We were however encouraged to see signs of stabilization in the margin during the quarter as we look at our results on a monthly basis. In addition, our business continues to generated a sizable and consistent stream of noninterest income led by the revenue generated by our Wealth Management business. Noninterest income represented 35% of total revenue during the third quarter."
Mr. Kennedy also noted, “The third quarter results also reflect an elevated provision for credit losses driven by two credit relationships that were transferred to non-performing status during the quarter. Both of these relationships are in the freight industry which is currently facing a massive downturn due to supply and demand imbalances. As we move forward through this challenging economic environment consisting of persistent inflation and rapidly rising interest rates, we continue to 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."
As previously announced, the Company has been approved by its regulators to open a location in mid-town Manhattan in 2024 and has hired a team of experienced professionals to gain entry into this lucrative market. The team, who predominantly started during the third quarter, is performing above expectations and is building robust pipelines.
Mr. Kennedy said, "From a strategic standpoint, the Company is adopting new technology and processes to improve the client experience, which includes empowering all employees to provide innovative solutions and a white glove experience in every interaction."
The following are select highlights for the period ended September 30, 2023:
Wealth Management:
- Gross new business inflows for Q3 2023 totaled $160 million ($96 million managed). For the first nine months of 2023, gross business inflows totaled $688 million ($547 million managed).
- AUM/AUA in our Wealth Management Division totaled $10.4 billion at September 30, 2023 compared to $9.3 billion at September 30, 2022, which is an increase of 12% year over year.
- Wealth Management fee income of $14.0 million for Q3 2023 comprised 25% of total revenue for the quarter.
Commercial Banking and Balance Sheet Management:
- Total loans were $5.5 billion at September 30, 2023 reflecting growth of $193 million when compared to $5.3 billion at December 31, 2022.
- Commercial & industrial lending (“C&I”) loan/lease balances comprised 42% of the total loan portfolio at September 30, 2023.
- Fee income on unused commercial lines of credit totaled $794,000 for Q3 2023.
- Fee income recorded by the Equipment Finance division related to equipment transfers to lessees totaled $2.3 million for Q3 2023.
- The net interest margin ("NIM") was 2.28% in Q3 2023, a decline of 21 basis points compared to Q2 2023 and a decline of 70 basis points when compared to Q3 2022.
- Total deposits increased $54 million to $5.3 billion from December 31, 2022.
- Noninterest-bearing demand deposits have declined by $299 million since December 31, 2022.
- Noninterest-bearing demand deposits represented 18% of total deposits as of September 30, 2023.
- Core deposits (which includes noninterest-bearing demand and interest-bearing demand, savings and money market accounts) totaled 89% of total deposits at September 30, 2023.
Capital Management:
- During the quarter, the Company repurchased 100,000 shares of Company stock for a cost of $2.8 million. On a year to date basis 367,014 shares have been repurchased during 2023. The Company repurchased 930,977 shares of stock for a cost of $32.7 million during the year ended December 31, 2022.
- At September 30, 2023, the Regulatory Tier 1 Leverage Ratio stood at 10.75% for Peapack-Gladstone Bank (the "Bank") and 9.05% for the Company. The Regulatory Common Equity Tier 1 Ratio (to Risk-Weighted Assets) stood at 13.22% for the Bank and 11.13% for the Company at September 30, 2023. These ratios are significantly above well capitalized standards, as capital has benefited from net income generation.
Non-Core Items:
The September 2023 quarter included a:
- $404,000 negative fair value adjustment on an equity security held for CRA investment, which decreased total revenue by $404,000, reduced net income by $293,000 and EPS by $0.01 for the September 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.
September 2023 Year Compared to Prior Year
| Nine Months Ended | Nine Months Ended | ||||||||||||||||
| September 30, | September 30, | Increase/ | |||||||||||||||
| (Dollars in millions, except per share data) | 2023 | 2022 | (Decrease) | ||||||||||||||
| Net interest income | $ | 119.41 | $ | 128.04 | $ | (8.63 | ) | (7 | )% | ||||||||
| Wealth management fee income | 41.99 | 41.67 | 0.32 | 1 | |||||||||||||
| Capital markets activity | 2.45 | 8.30 | (5.85 | ) | (70 | ) | |||||||||||
| Other income (A) | 11.55 | (0.36 | ) | 11.91 | N/A | ||||||||||||
| Total other income | 55.99 | 49.61 | 6.38 | 13 | |||||||||||||
| Total Revenue | 175.40 | 177.65 | (2.25 | ) | (1 | )% | |||||||||||
| Operating expenses (B) | 110.68 | 100.39 | 10.29 | 10 | |||||||||||||
| Pretax income before provision for credit losses | 64.72 | 77.26 | (12.54 | ) | (16 | ) | |||||||||||
| Provision for credit losses | 9.06 | 4.42 | 4.64 | 105 | |||||||||||||
| Pretax income | 55.66 | 72.84 | (17.18 | ) | (24 | ) | |||||||||||
| Income tax expense | 15.40 | 19.17 | (3.77 | ) | (20 | ) | |||||||||||
| Net income | $ | 40.26 | $ | 53.67 | $ | (13.41 | ) | (25 | )% | ||||||||
| Diluted EPS | $ | 2.23 | $ | 2.88 | $ | (0.65 | ) | (23 | )% | ||||||||
| Return on average assets | 0.84 | % | 1.16 | % | (0.32 | ) | |||||||||||
| Return on average equity | 9.66 | % | 13.46 | % | (3.80 | ) | |||||||||||
(A) Other income for the nine months ended September 30, 2023 included fee income from equipment finance activity of $2.7 million and a fair value adjustment on a CRA equity security of negative $404,000. Other income for the nine months ended September 30, 2022 included a $6.6 million loss on sale of securities and a fair value adjustment on a CRA equity security of negative $1.7 million.
(B) The nine months ended September 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 nine months ended September 30, 2022 included $1.5 million of severance expense related to certain staff reorganizations.
September 2023 Quarter Compared to Prior Year Quarter
| Three Months Ended | Three Months Ended | ||||||||||||||||
| September 30, | September 30, | Increase/ | |||||||||||||||
| (Dollars in millions, except per share data) | 2023 | 2022 | (Decrease) | ||||||||||||||
| Net interest income | $ | 36.52 | $ | 45.53 | $ | (9.01 | ) | (20 | )% | ||||||||
| Wealth management fee income | 13.98 | 12.94 | 1.04 | 8 | |||||||||||||
| Capital markets activity | 0.61 | 0.78 | (0.17 | ) | (22 | ) | |||||||||||
| Other income (A) | 4.76 | 2.66 | 2.10 | 79 | |||||||||||||
| Total other income | 19.35 | 16.38 | 2.97 | 18 | |||||||||||||
| Total Revenue | 55.87 | 61.91 | (6.04 | ) | (10 | )% | |||||||||||
| Operating expenses | 37.41 | 33.56 | 3.85 | 11 | |||||||||||||
| Pretax income before provision for credit losses | 18.46 | 28.35 | (9.89 | ) | (35 | ) | |||||||||||
| Provision for credit losses | 5.86 | 0.60 | 5.26 | 877 | |||||||||||||
| Pretax income | 12.60 | 27.75 | (15.15 | ) | (55 | ) | |||||||||||
| Income tax expense | 3.84 | 7.62 | (3.78 | ) | (50 | ) | |||||||||||
| Net income | $ | 8.76 | $ | 20.13 | $ | (11.37 | ) | (56 | )% | ||||||||
| Diluted EPS | $ | 0.49 | $ | 1.09 | $ | (0.60 | ) | (55 | )% | ||||||||
| Return on average assets annualized | 0.54 | % | 1.30 | % | (0.76 | ) | |||||||||||
| Return on average equity annualized | 6.20 | % | 15.21 | % | (9.01 | ) | |||||||||||
(A) Other income for the September 2023 quarter included fee income from equipment finance activity of $2.3 million and a fair value adjustment on a CRA equity security of negative $404,000. Other income for the September 2022 quarter included a fair value adjustment on a CRA equity security of negative $571,000.
September 2023 Quarter Compared to Linked Quarter
| Three Months Ended | Three Months Ended | ||||||||||||||||
| September 30, | June 30, | Increase/ | |||||||||||||||
| (Dollars in millions, except per share data) | 2023 | 2023 | (Decrease) | ||||||||||||||
| Net interest income | $ | 36.52 | $ | 38.92 | $ | (2.40 | ) | (6 | )% | ||||||||
| Wealth management fee income | 13.98 | 14.25 | (0.27 | ) | (2 | ) | |||||||||||
| Capital markets activity | 0.61 | 0.87 | (0.26 | ) | (30 | ) | |||||||||||
| Other income (A) | 4.76 | 3.46 | 1.30 | 38 | |||||||||||||
| Total other income | 19.35 | 18.58 | 0.77 | 4 | |||||||||||||
| Total Revenue | 55.87 | 57.50 | (1.63 | ) | (3 | )% | |||||||||||
| Operating expenses (B) | 37.41 | 37.69 | (0.28 | ) | (1 | ) | |||||||||||
| Pretax income before provision for credit losses | 18.46 | 19.81 | (1.35 | ) | (7 | ) | |||||||||||
| Provision for credit losses | 5.86 | 1.70 | 4.16 | 245 | |||||||||||||
| Pretax income | 12.60 | 18.11 | (5.51 | ) | (30 | ) | |||||||||||
| Income tax expense (C) | 3.84 | 4.96 | (1.12 | ) | (23 | ) | |||||||||||
| Net income | |||||||||||||||||
