BEDMINSTER, NJ, July 25, 2023 (GLOBE NEWSWIRE) -- via NewMediaWire - Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market: PGC) (the “Company”) announces its second quarter 2023 results.
This earnings release should be read in conjunction with the Company’s Q2 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 $57.5 million, net income of $13.1 million and diluted earnings per share (“EPS”) of $0.73 for the quarter ended June 30, 2023, compared to revenue of $61.4 million, net income of $20.1 million and diluted EPS of $1.08 for the three months ended June 30, 2022.
The Company’s return on average assets was 0.82%, return on average equity was 9.43%, and return on average tangible equity was 10.30%, each for the quarter ended June 30, 2023. Loans grew by $70 million to $5.4 billion while deposits declined by $110 million to $5.2 billion during the second quarter. Deposits have declined minimally on a year-to-date basis by $7 million.
The Company’s liquidity position remains strong as balance sheet liquidity (investments available for sale, interest-earning deposits and cash) was $761 million as of June 30, 2023 which is 11.74% of total assets. The Company also has $2.8 billion of external borrowing capacity, when combined with balance sheet liquidity provides us with 283% coverage of our uninsured deposits. Approximately 76% of our deposits are presently covered by FDIC insurance or are fully collateralized.
Douglas L. Kennedy, President and CEO said, “Our second quarter results were disappointing, but reflect the challenging nature of the current interest rate environment and the persistent inversion of the treasury yield curve. These conditions have resulted in compression of our net interest margin for a second consecutive quarter and a reduction in net interest income. The margin compression was primarily driven by an increase in our cost of funds during the first six months of 2023, as wealth and commercial clients moved funds from noninterest-bearing accounts to higher-yielding deposit products and other alternative investments. During these difficult times we are fortunate to be able to rely on a stable stream of wealth-related and other noninterest income, which represented 32% of revenue during the second quarter."
The Company recently announced its plan to expand into New York City. An application has been filed with regulatory agencies to open a location in mid-town Manhattan. The Company has hired and continues to actively recruit from the tri-state area to build a team of experienced financial service professionals to gain entry into this lucrative market.
Mr. Kennedy noted, “With the recent changes to the New York City banking landscape and the void left by the failure of larger, niche financial institutions, we believe the current environment has created an unprecedented opportunity to introduce our brand of private banking to this market. We have the right client-centric culture to take advantage of this rare sequence of events and seize this opportunity. We recently announced that Jeanne Scungio has joined our team as the Market President of New York City. Jeanne has spent the past 20 years as a Senior Leader at First Republic Bank. Under her leadership we expect to build a formidable presence in Manhattan."
The following are select highlights for the period ended June 30, 2023:
Peapack Private Wealth Management:
- AUM/AUA in our Peapack Private Wealth Management Division totaled $10.7 billion at June 30, 2023, an increase of 4% (14% annualized) over March 31, 2023.
- Gross new business inflows for Q2 2023 totaled $274 million ($214 million managed). For the first six months of 2023, gross business inflows totaled $528 million ($451 million managed). Managed gross inflows are on a record annualized pace for our Company.
- Wealth Management fee income of $14.3 million for Q2 2023 comprised 25% of total revenue for the quarter.
Commercial Banking and Balance Sheet Management:
- The net interest margin ("NIM") was 2.49% in Q2 2023, a decline of 39 basis points compared to Q1 2023 and a decline of 34 basis points when compared to Q2 2022.
- Total deposits declined $7 million to $5.2 billion from December 31, 2022.
- Noninterest-bearing demand deposits have declined by $222 million since December 31, 2022, but still comprised 20% of total deposits as of June 30, 2023.
- Core deposits (which includes noninterest-bearing demand and interest-bearing demand, savings and money market accounts) totaled 91% of total deposits at June 30, 2023.
- Total loans were $5.4 billion at June 30, 2023 reflecting growth of $148 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 June 30, 2023.
- Fee income on unused commercial lines of credit totaled $809,000 for Q2 2023.
Capital Management:
- During the quarter, the Company repurchased 184,000 shares of Company stock for a total cost of $4.7 million. The Company repurchased 930,977 shares of stock for a total cost of $32.7 million during the year ended December 31, 2022.
- At June 30, 2023, the Regulatory Tier 1 Leverage Ratio stood at 10.80% for Peapack-Gladstone Bank (the "Bank") and 9.06% for the Company. The Regulatory Common Equity Tier 1 Ratio (to Risk-Weighted Assets) stood at 13.68% for the Bank and 11.47% for the Company. These ratios are significantly above well capitalized standards, as capital has benefitted from strong net income generation.
Non-Core Items:
The June 2023 quarter included the following items, which management believes are non-core items:
- $209,000 negative fair value adjustment on an equity security held for CRA investment.
- $1.7 million of expense associated with the recent retirement of certain employees.
- $318,000 of an income tax benefit for a tax reversal.
- These items decreased total revenue by $209,000, reduced net income by $1.5 million and EPS by $0.08 for the June 2023 quarter.
SUMMARY INCOME STATEMENT DETAILS:
The following tables summarize specified financial details for the periods shown.
June 2023 Year Compared to Prior Year
| Six Months Ended | Six Months Ended | ||||||||||||||||
| June 30, | June 30, | Increase/ | |||||||||||||||
| (Dollars in millions, except per share data) | 2023 | 2022 | (Decrease) | ||||||||||||||
| Net interest income | $ | 82.90 | $ | 82.51 | $ | 0.39 | 0 | % | |||||||||
| Wealth management fee income | 28.01 | 28.72 | (0.71 | ) | (2 | ) | |||||||||||
| Capital markets activity (A) | 1.83 | 7.51 | (5.68 | ) | (76 | ) | |||||||||||
| Other income (B) | 6.80 | (3.01 | ) | 9.81 | N/A | ||||||||||||
| Total other income | 36.64 | 33.22 | 3.42 | 10 | |||||||||||||
| Operating expenses (C) | 73.27 | 66.83 | 6.44 | 10 | |||||||||||||
| Pretax income before provision for credit losses | 46.27 | 48.90 | (2.63 | ) | (5 | ) | |||||||||||
| Provision for credit losses | 3.21 | 3.82 | (0.61 | ) | (16 | ) | |||||||||||
| Pretax income | 43.06 | 45.08 | (2.02 | ) | (4 | ) | |||||||||||
| Income tax expense (D) | 11.56 | 11.54 | 0.02 | 0 | |||||||||||||
| Net income | $ | 31.50 | $ | 33.54 | $ | (2.04 | ) | (6 | )% | ||||||||
| Diluted EPS | $ | 1.74 | $ | 1.79 | $ | (0.05 | ) | (3 | )% | ||||||||
| Total Revenue (E) | $ | 119.54 | $ | 115.73 | $ | 3.81 | 3 | % | |||||||||
| Return on average assets | 0.99 | % | 1.09 | % | (0.10 | ) | |||||||||||
| Return on average equity | 11.44 | % | 12.59 | % | (1.15 | ) | |||||||||||
(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 six months ended June 30, 2022 included a $6.6 million loss on sale of securities. and a fair value adjustment on a CRA equity security of negative $1.2 million.
(C) The six months ended June 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 six months ended June 30, 2022 included $1.5 million of severance expense related to certain staff reorganizations.
(D) Income tax expense for the six months ended June 30, 2023 included a $318,000 tax benefit for the reversal of the New Jersey surtax, which is set to expire on December 31, 2023.
(E) Total revenue equals the sum of net interest income plus total other income.
June 2023 Quarter Compared to Prior Year Quarter
| Three Months Ended | Three Months Ended | ||||||||||||||||
| June 30, | June 30, | Increase/ | |||||||||||||||
| (Dollars in millions, except per share data) | 2023 | 2022 | (Decrease) | ||||||||||||||
| Net interest income | $ | 38.92 | $ | 42.89 | $ | (3.97 | ) | (9 | )% | ||||||||
| Wealth management fee income | 14.25 | 13.89 | 0.36 | 3 | |||||||||||||
| Capital markets activity (A) | 0.87 | 2.86 | (1.99 | ) | (70 | ) | |||||||||||
| Other income (B) | 3.46 | 1.76 | 1.70 | 97 | |||||||||||||
| Total other income | 18.58 | 18.51 | 0.07 | 0 | |||||||||||||
| Operating expenses (C) | 37.69 | 32.66 | 5.03 | 15 | |||||||||||||
| Pretax income before provision for credit losses | 19.81 | 28.74 | (8.93 | ) | (31 | ) | |||||||||||
| Provision for credit losses | 1.70 | 1.45 | 0.25 | 17 | |||||||||||||
| Pretax income | 18.11 | 27.29 | (9.18 | ) | (34 | ) | |||||||||||
| Income tax expense (D) | 4.96 | 7.19 | (2.23 | ) | (31 | ) | |||||||||||
| Net income | $ | 13.15 | $ | 20.10 | $ | (6.95 | ) | (35 | )% | ||||||||
| Diluted EPS | $ | 0.73 | $ | 1.08 | $ | (0.35 | ) | (32 | )% | ||||||||
| Total Revenue (E) | $ | 57.50 | $ | 61.40 | $ | (3.90 | ) | (6 | )% | ||||||||
| Return on average assets annualized | 0.82 | % | 1.30 | % | (0.48 | ) | |||||||||||
| Return on average equity annualized | 9.43 | % | 15.43 | % | (6.00 | ) | |||||||||||
(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 June 2023 and 2022 quarters included a fair value adjustment on a CRA equity security of negative $209,000 and negative $475,000, respectively.
(C) The June 2023 quarter included one-time charges of $1.7 million associated with the recent retirement of certain employees.
(D) Income tax expense for quarter ended June 30, 2023 included a $318,000 tax benefit for the reversal of the New Jersey surtax, which is set to expire on December 31, 2023.
(E) Total revenue equals the sum of net interest income plus total other income.
June 2023 Quarter Compared to Linked Quarter
| Three Months Ended | Three Months Ended | ||||||||||||||||
| June 30, | March 31, | Increase/ | |||||||||||||||
| (Dollars in millions, except per share data) | 2023 | 2023 | (Decrease) | ||||||||||||||
| Net interest income | $ | 38.92 | $ | 43.98 | $ | (5.06 | ) | (12 | )% | ||||||||
| Wealth management fee income | 14.25 | 13.76 | 0.49 | 4 | |||||||||||||
| Capital markets activity (A) | 0.87 | 0.97 | (0.10 | ) | (10 | ) | |||||||||||
| Other income | 3.46 | 3.33 | 0.13 | 4 | |||||||||||||
| Total other income | 18.58 | 18.06 | 0.52 | 3 | |||||||||||||
| Operating expenses (B) | 37.69 | 35.57 | 2.12 | 6 | |||||||||||||
| Pretax income before provision for credit losses | 19.81 | 26.47 | (6.66 | ) | (25 | ) | |||||||||||
| Provision for credit losses | 1.70 | 1.51 | 0.19 | 13 | |||||||||||||
| Pretax income | 18.11 | 24.96 | (6.85 | ) | (27 | ) | |||||||||||
| Income tax expense (C) | 4.96 | 6.60 | (1.64 | ) | (25 | ) | |||||||||||
| Net income | $ | 13.15 | $ | 18.36 | $ | (5.21 | ) | (28 | )% | ||||||||
| Diluted EPS | $ | 0.73 | $ | 1.01 | $ | (0.28 | ) | (28 | )% | ||||||||
| Total Revenue (D) | $ | 57.50 | $ | 62.04 | $ | (4.54 | ) | (7 | )% | ||||||||
| Return on average assets annualized | 0.82 | % | 1.16 | % | (0.34 | ) | |||||||||||
