BEDMINSTER, NJ, United States, via ETELIGIS INC., 01/28/2015 – – Peapack-Gladstone Financial Corporation (NASDAQ: PGC) (the “Corporation” or the “Company”) recorded net income of $14.89 million and diluted earnings per share of $1.22 for the twelve months ended December 31, 2014, compared to $9.26 million and $1.01, respectively, for the same twelve month period last year, reflecting increases of 61 percent and 21 percent, respectively.
Doug Kennedy, President and CEO, said, “We continue to focus on executing our Strategic Plan – Expanding Our Reach. Our growth and overall results, which included achieving many record performance levels in 2014, reflect our continued success and indicates that our strategy is delivering positive operating leverage.”
2014 Highlights Follow:
– The Company successfully sold 2.776 million common shares ($50 million gross) in its at-the-market equity offering in the fourth quarter of 2014, just one year after selling 2.471 million common shares ($42 million gross) in its rights offering / sale to stand-by investors in the fourth quarter of 2013. The 2014 capital raise has positioned the Company for continued growth and expansion.
– Earnings and performance ratios for 2014 reflected improvement when compared to 2013’s results (as reflected just above). Year over year growth in diluted earnings per share was 21 percent.
– Loans at December 31, 2014 totaled $2.25 billion. This reflected growth of $676 million when compared to $1.57 billion at December 31, 2013. Year over year loan growth was 43 percent.
– Asset quality metrics continued to be strong at December 31, 2014. Nonperforming assets at December 31, 2014 were just $8.2 million or 0.30 percent of total assets, compared to $8.6 million or 0.44 percent at December 31, 2013. Total loans past due 30 through 89 days were only $1.76 million at year end 2014, compared to $2.95 million at year end 2013.
– During 2014, Commercial & Industrial (C&I) loan closings totaled $243 million. This compared to $97 million in 2013. Year over year growth in commercial loan closings was 150 percent.
– During 2014, four new seasoned bankers with a focus on C&I lending, joined the Company.
– Total “customer” deposit balances (defined as deposits excluding brokered CDs and brokered “overnight” interest-bearing demand deposits) grew to $1.98 billion at December 31, 2014 from $1.63 billion at December 31, 2013. Year over year customer deposit growth totaled 21 percent.
– The Company’s net interest income for 2014 was $ 67.89 million. This reflected improvement when compared to $52.78 million for 2013. Year over year growth in net interest income was 29 percent.
– At December 31, 2014, the market value of assets under administration at the Private Wealth Management Division of Peapack-Gladstone Bank (“the Bank”) was $2.99 billion.
– Fee income from the Private Wealth Management Division totaled $15.24 million for 2014, growing from $13.84 million for 2013. Year over year growth in wealth management fee income was 10 percent.
– During 2014, three new seasoned wealth advisors, a seasoned portfolio manager and a seasoned trust officer, all with a focus on new business generation and client advisory, joined the Company.
– The book value per share at December 31, 2014 of $16.36 reflected improvement when compared to $14.79 at December 31, 2013. Year-over-year growth in book value per share totaled 11 percent.
For the quarter ended December 31, 2014, the Corporation recorded net income of $4.21 million and diluted earnings per share of $0.32. This compared to $2.40 million and $0.25, respectively, for the same quarter last year.
Net Interest Income / Net Interest Margin:
Net interest income was $18.35 million for the fourth quarter of 2014, compared to $14.53 million for the same quarter last year, reflecting growth of $3.82 million or 26 percent when compared to the prior year period. Net interest income for the fourth quarter of 2014 benefitted from significant loan growth during 2014.
While net interest income for the fourth quarter of 2014 improved compared to prior periods, the net interest margin, on a fully tax-equivalent basis, was 2.89 percent for the December 2014 quarter compared to 3.26 percent for the December 2013 quarter. A portion of the decline in net interest margin for the December 2014 quarter was due to the maintenance of much larger average interest earning deposit/cash balances – $163.3 million average for the December 2014 quarter, compared to $38.4 million for the December 2013 quarter. Mr. Kennedy said, “As noted last quarter given our rapid growth, we had decided to maintain greater liquidity on our balance sheet. This excess liquidity proved useful late in the fourth quarter as loan volume reached record quarterly levels, while net customer deposit growth was below previous quarterly levels due to several larger clients utilizing funds for varying needs close to year end.”
In addition to the maintenance of larger interest bearing deposit/cash balances for much of the quarter, net interest margin also continued to be impacted by the effect of low market yields, as well as competitive pressures in attracting new loans and deposits. The Company expects continued high liquidity levels and also expects continued loan growth in this lower market rate and competitive environment.
Loan Originations / Loans:
Total loan originations were $1.07 billion for the year ended December 31, 2014. At December 31, 2014, loans totaled $2.25 billion as compared to $1.57 billion one year ago at December 31, 2013, representing an increase of $676 million or 43 percent. The multifamily and commercial mortgage loan portfolio grew $557 million or 67 percent when comparing the December 31, 2014 balance to the December 31, 2013 balance. The increase was attributable: to the addition of seasoned banking professionals over the course of 2014; continued attention to the client service aspect of the lending process; an expansion of New Jersey-based real estate marketing activities; and a focus on the Boroughs of New York City multifamily markets beginning in mid-2013. The increase was also due to demand from borrowers looking to refinance multifamily and other commercial mortgages held by other institutions.
Mr. Kennedy said, “As explained in prior quarters, analysis showed that multifamily lending could be grown quickly and had strong credit metrics and provided solid risk-adjusted returns. Loan originations in this asset class have been a major focus as we build our C&I (Commercial & Industrial) lending capabilities, as part of our Strategic Plan launched in March 2013. Going forward, multifamily lending will remain a focus of the Company, but with the C&I lending program becoming more seasoned, including the addition in 2014 of four seasoned bankers focused on C&I lending, we anticipate that C&I loan production will continue to grow at an increased trajectory as we move forward.”
The Company closed $243 million of commercial loans for the twelve months ended December 31, 2014, up from $97 million in 2013. At December 31, 2014, commercial loans totaled $309 million, more than double the $132 million one year ago at December 31, 2013.
Deposits / Funding / Balance Sheet Management:
Loan growth of $209 million and investment security growth of $63 million (principally shorter duration and very liquid securities) in the December 2014 quarter were funded by capital growth of $54 million, customer deposit growth of $46 million, and utilization of $90 million in interest earning deposit/cash balances, as well as the addition of broker deposits and wholesale borrowings.
Brokered interest-bearing demand deposits continue to be maintained as an additional source of liquidity. At a cost of less than 25 basis points, such deposits are generally a more cost effective alternative than other borrowings and do not require pledging of collateral, as wholesale borrowings do. These deposits increased to $188 million at December 31, 2014 from $138 million at September 30, 2014. The Company does ensure ample available collateralized liquidity as a backup to these short term brokered deposits.
Brokered certificates of deposit have also been utilized throughout 2014. The majority of these deposits have been longer term and have generally been transacted as part of the Company’s interest rate risk management. These certificates of deposit are also a more cost effective alternative than other borrowings and also do not require pledging of collateral. Also as part of its interest rate risk management, during the December 2014 quarter, the Company transacted a pay fixed, receive floating interest rate swap with a notional amount of $25 million.
Mr. Kennedy said, “As previously noted in this release, maintenance of excess balance sheet liquidity proved useful late in the fourth quarter of 2014 as loan volume reached record quarterly levels, while net customer deposit growth was somewhat below previous quarterly levels, due to several larger clients utilizing funds for varying needs close to year end. Such withdrawals were expected and were only a portion of each client’s relationship with us. We do expect some of the funds to make their way back into the Company in 2015.”
Mr. Kennedy went on to say, “As noted in prior quarters, the June 2014 quarter included the sales of longer-duration, lower coupon residential first mortgage loans, as well as multifamily loan participations. These sales were part of the Company’s overall balance sheet management strategy and will likely continue into 2015.”
Mr. Kennedy further 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 products will help support both core deposit growth and commercial lending opportunities. Our bankers have robust pipelines of client deposits.”
Wealth Management Business:
In the December 2014 quarter, Peapack-Gladstone Bank’s wealth management business generated $3.82 million in fee income compared to $3.55 million for the December 2013 quarter. For the 2014 year, wealth management fee income totaled $15.24 million reflecting a 10 percent increase over the $13.84 million for 2013. The market value of the assets under administration (AUA) of the wealth management division was $2.99 billion at December 31, 2014, up from $2.69 billion at December 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, “Incorporating wealth into every conversation we have with all of our clients, across all business lines, is integral to the bank’s strategy. As previously noted, over the course of 2014, three seasoned wealth advisors joined the Company from larger wealth management companies. Additionally a seasoned two person team – a Portfolio Manager and a Trust Officer – from a larger wealth management company joined us in the second quarter to complement our existing high-caliber team in our Princeton office. We will continue to build-out and grow our wealth management team and expand the products, services, and advice we deliver to our clients.”
Other Noninterest Income:
The December 2014 quarter included $128 thousand of income from the sale of newly originated residential mortgage loans, down from $171 thousand in the same 2013 quarter. As noted in prior quarters, the rise in mortgage rates caused a decrease in residential mortgage loan originations and resultant mortgage banking income. Mr. Kennedy noted, “Reduced levels of mortgage banking income was expected and planned for, and reduced levels of mortgage banking income are expected going forward. Fortunately, mortgage banking income is not a significant portion of our revenue.”
Securities gains were $44 thousand for the December 2014 quarter compared to $125 thousand for the December 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 much less often in recent periods.
Other income of $1.30 million for the December 2014 quarter was $166 thousand higher than the December 2013 quarter. Several categories reflected slight improvement in the quarter, including increased income associated with a new set of checking products put in place during the summer months.
The Company’s total operating expenses were $15.58 million for the quarter ended December 31, 2014 compared to $14.65 million in the same 2013 quarter, reflecting a net increase of $932 thousand.
Salary and benefits expense increased due to strategic hiring in line with the Company’s Strategic Plan: private bankers in all of our businesses – retail, commercial and wealth; risk management professionals and various support staff, including support staff associated with the commercial lending process. Additionally, normal salary increases and increased bonus/incentive accruals associated with the Company’s growth contributed to the increase.
Mr. Kennedy noted, “Expense increases that were contemplated with our strategy, Expanding Our Reach, are tracking consistent with projections. We expect that the trend of higher operating expenses will continue into 2015, 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 have seen an improvement in quarterly revenue since we launched our Plan, particularly throughout 2014 as our Plan gained momentum. This revenue growth has outpaced expense growth considerably, which has caused our Efficiency Ratio to decline to just below 67 percent for the current quarter.”
Provision for Loan Losses / Asset Quality:
For the year ended December 2014, the Company’s provision for loan losses was $4.88 million, compared to $3.43 million for 2013. Charge-offs, net of recoveries, for the 2014 year were only $768 thousand.
At December 31, 2014 the allowance for loan losses was 284 percent of nonperforming loans and 0.87 percent of total loans.
The Company’s provision for loan losses and net increase in its allowance for loan losses continue to track well with the Company’s net loan growth and asset quality metrics.
Nonperforming assets at December 31, 2014 were just $8.2 million or 0.30 percent of total assets, compared to $8.6 million or 0.44 percent at December 31, 2013. Total loans past due 30 through 89 days were only $1.76 million at year end 2014, compared to $2.95 million at year end 2013.
Capital / Dividends:
Capital in the December 2014 quarter was benefitted by the “at-the-market” equity offering discussed previously, as well as by net income and $1.5 million of voluntary share purchases in the Dividend Reinvestment Plan.
At December 31, 2014, the Company’s leverage ratio, tier 1 and total risk based capital ratios were 9.11 percent, 14.38 percent and 15.55 percent, respectively. The Company’s ratios are all above the levels required to be considered well capitalized under regulatory guidelines applicable to banks.
As previously announced, on January 22, 2015, the Board of Directors declared a regular cash dividend of $0.05 per share payable on February 13, 2015 to shareholders of record on February 2, 2014.
About The Company:
Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $2.70 billion as of December 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.
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;
– 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 cyber-attacks 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, 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.
(Tables to follow)
Peapack-Gladstone Financial Corporation Non-GAAP Financial Measures Reconciliation:
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 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 titled 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)
Jeffrey J. Carfora, SEVP and CFO
Peapack-Gladstone Financial Corporation
SOURCE: Peapack-Gladstone Financial Corporation