Key Highlights

  • Net income was $18.9 million, up 97% from $9.6 million, and diluted EPS was $0.99 against $0.54.
  • Total revenue was $87.5 million, up 24%, the tenth consecutive quarter of growth.
  • Net interest margin was 3.34%, up 53 basis points from a year ago.
  • Loans rose $403 million in the quarter to $7.08 billion, and deposits rose $301 million to $7.36 billion.
  • Nonperforming assets fell to $57.8 million, or 0.68% of total assets, from $84.1 million a year ago.

Peapack-Gladstone Earnings: How Did Net Income Nearly Double in a Year?

Peapack-Gladstone (NASDAQ:PGC) reported third-quarter results on Tuesday, October 27, with net income of $18.9 million, or $0.99 per diluted share, against $9.6 million, or $0.54, a year earlier and $0.86 in the second quarter. The screen showed an estimate of $0.93 and a reported $1.01, which differs from the GAAP figure; the company reported no non-GAAP EPS.

Total revenue was $87.5 million, up 24% year over year and 1.6% from $86.1 million in the second quarter. Pre-provision net revenue was $32.3 million against $18.4 million a year ago. The New Jersey-based holding company provides commercial banking, private banking and wealth management services.

A discrete tax benefit of about $1.8 million from purchasing transferable production tax credits lowered the effective tax rate to 20.5% from 28.4% in the second quarter.

Net Interest Margin and Loan Growth: What Is Driving the Revenue Gain?

Net interest income was $67.5 million, up 6% from the second quarter and 33% from a year ago. The tax-equivalent net interest margin was 3.34%, up 2 basis points sequentially and 53 basis points year over year.

Total loans were $7.08 billion, up $403 million, or about 24% annualized, and up $1.05 billion from a year ago. Commercial and industrial loans and leases were $3.07 billion, or 43% of loans, and commercial mortgages rose to $1.14 billion from $0.98 billion. Loan closings were $930.7 million against $677.2 million in the second quarter.

Deposits were $7.36 billion, up $301 million, with money market balances at $1.67 billion against $1.45 billion. The loan-to-deposit ratio was 96%. Management credited team investments across New York City, Westchester and Long Island.

Wealth Fees, Efficiency and Credit: Did Asset Quality Keep Pace?

Wealth management fees were $17.3 million, about 20% of revenue, and assets under management and administration were $13.6 billion, up 6% year over year though down from $13.9 billion in the second quarter.

Operating expenses were $55.1 million, down 1% from the second quarter and up 5% from a year ago. The GAAP efficiency ratio improved to 63.03% from 64.69% and 73.98% a year ago.

Nonperforming assets fell to $57.8 million from $72.2 million in the second quarter, and classified loans declined to $89.5 million from $97.7 million. The provision was $8.5 million, with about $5.0 million tied to loan growth and $4.6 million to specific reserves. Net charge-offs were $4.7 million against $18.0 million a year ago, and the allowance was $73.0 million, or 1.03% of loans.

Capital Ratios and Preferred Issuance: What Should Be Watched in the Fourth Quarter?

The CET1 ratio was 10.06% and the total risk-based ratio was 11.81%, while tangible book value per share was $36.24, little changed from $36.26 in the second quarter. The tangible common equity ratio slipped to 7.60% from 8.10%. The company issued the remaining $20 million of a $50 million 6% convertible preferred commitment on July 24.

The company will reinstate a 3% discount on dividend reinvestment purchases from the November dividend. Management said fourth-quarter priorities are productivity, pricing and expense discipline, with credit and capital discipline central to execution. The call is scheduled for Wednesday, October 28.