UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended March 31, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to                 

Commission File No. 001-16197

PEAPACK-GLADSTONE FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

New Jersey	22-3537895
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

500 Hills Drive, Suite 300

Bedminster, New Jersey 07921-0700

(Address of principal executive offices, including zip code)

(908) 234-0700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	PGC	The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of Common Stock outstanding as of April 30, 2021: 19,035,870

PEAPACK-GLADSTONE FINANCIAL CORPORATION

PART I FINANCIAL INFORMATION

Item 1	Financial Statements	3
	Consolidated Statements of Condition at March 31, 2021 and December 31, 2020	3
	Consolidated Statements of Income for the three months ended March 31, 2021 and 2020	4
	Consolidated Statements of Comprehensive Income/(Loss) for the three months ended March 31, 2021 and 2020	5
	Consolidated Statement of Changes in Shareholders’ Equity for the three months ended March 31, 2021 and 2020	6
	Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020	8
	Notes to Consolidated Financial Statements	9
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3	Quantitative and Qualitative Disclosures about Market Risk	57
Item 4	Controls and Procedures	59

PART II OTHER INFORMATION

Item 1	Legal Proceedings	60
Item 1A	Risk Factors	60
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 3	Defaults Upon Senior Securities	60
Item 4	Mine Safety Disclosures	60
Item 5	Other Information	60
Item 6	Exhibits	61

2

Item 1. Financial Statements

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CONDITION

(Dollars in thousands, except share and per share data)

	(unaudited)			(audited)
	March 31,			December 31,
	2021			2020
ASSETS
Cash and due from banks	$	8,159		$	10,629
Federal funds sold		102			102
Interest-earning deposits		468,276			642,591
Total cash and cash equivalents		476,537			653,322
Securities available for sale		875,301			622,689
Equity security, at fair value		14,852			15,117
FHLB and FRB stock, at cost		13,699			13,709
Loans held for sale, at fair value		9,219			13,588
Loans held for sale, at lower of cost or fair value		53,185			18,520
Loans		4,377,931			4,372,437
Less: Allowance for loan and lease losses		67,536			67,309
Net loans		4,310,395			4,305,128
Premises and equipment		23,260			21,609
Other real estate owned		50			50
Accrued interest receivable		23,916			22,495
Bank owned life insurance		46,448			46,809
Goodwill		33,103			33,103
Other intangible assets		10,421			10,788
Finance lease right-of-use assets		4,143			4,330
Operating lease right-of-use assets		10,186			9,421
Other assets		64,912			99,764
TOTAL ASSETS	$	5,969,627		$	5,890,442
LIABILITIES
Deposits:
Noninterest-bearing demand deposits	$	908,922		$	833,500
Interest-bearing deposits:
Checking		1,987,567			1,849,254
Savings		141,743			130,731
Money market accounts		1,256,605			1,298,885
Certificates of deposit - retail		474,668			530,222
Certificates of deposit - listing service		31,631			32,128
Subtotal deposits		4,801,136			4,674,720
Interest-bearing demand - brokered		110,000			110,000
Certificates of deposit - brokered		33,777			33,764
Total deposits		4,944,913			4,818,484
Short-term borrowings		15,000			15,000
Paycheck Protection Program Liquidity Facility		168,180			177,086
Finance lease liabilities		6,528			6,753
Operating lease liabilities		10,509			9,737
Subordinated debt, net		181,837			181,794
Deferred tax liabilities, net		28,341			32,978
Accrued expenses and other liabilities		91,878			121,488
TOTAL LIABILITIES		5,447,186			5,363,320
SHAREHOLDERS’ EQUITY
Preferred stock (no par value; authorized 500,000 shares; liquidation preference of $1,000 per share)		—			—
Common stock (no par value; stated value $0.83 per share; authorized 42,000,000 shares; issued    shares, 20,561,081 at March 31, 2021 and 20,342,881 at December 31, 2020; outstanding    shares, 19,034,870 at March 31, 2021 and 18,974,703 at December 31, 2020		17,140			16,958
Surplus		326,251			326,592
Treasury stock at cost, 1,526,211 shares at March 31, 2021 and 1,368,178 shares    at December 31, 2020		(40,856	)		(36,477	)
Retained earnings		233,670			221,441
Accumulated other comprehensive loss, net of income tax		(13,764	)		(1,392	)
TOTAL SHAREHOLDERS’ EQUITY		522,441			527,122
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY	$	5,969,627		$	5,890,442

See accompanying notes to consolidated financial statements

3

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except share data)

(Unaudited)

	Three Months Ended
	March 31,
	2021			2020
INTEREST INCOME
Interest and fees on loans	$	35,384		$	42,305
Interest on investments:
Taxable		2,629			2,459
Tax-exempt		43			58
Interest on loans held for sale		55			21
Interest on interest-earning deposits		128			552
Total interest income		38,239			45,395
INTEREST EXPENSE
Interest on savings and interest-bearing deposit accounts		1,789			6,443
Interest on certificates of deposit		1,470			3,694
Interest on borrowed funds		209			1,012
Interest on finance lease liability		79			90
Interest on subordinated debt		2,145			1,223
Subtotal - interest expense		5,692			12,462
Interest on interest-bearing demand - brokered		493			923
Interest on certificates of deposits - brokered		261			263
Total interest expense		6,446			13,648
NET INTEREST INCOME BEFORE PROVISION FOR LOAN AND    LEASE LOSSES		31,793			31,747
Provision for loan and lease losses		225			20,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND    LEASE LOSSES		31,568			11,747
OTHER INCOME
Wealth management fee income		12,131			9,955
Service charges and fees		846			816
Bank owned life insurance		611			328
Gains on loans held for sale at fair value (mortgage banking)		1,025			292
Gain/(loss) on loans held for sale at lower of cost or fair value		282			(3	)
Fee income related to loan level, back-to-back swaps		—			1,418
Gain on sale of SBA loans		1,449			1,054
Corporate advisory fee income		1,098			75
Other income		643			384
Securities (losses)/gains, net		(265	)		198
Total other income		17,820			14,517
OPERATING EXPENSES
Compensation and employee benefits		21,990			19,226
Premises and equipment		4,113			4,043
FDIC insurance expense		585			250
Other operating expense		4,906			4,716
Total operating expenses		31,594			28,235
INCOME/(LOSS) BEFORE INCOME TAX EXPENSE/(BENEFIT)		17,794			(1,971	)
Income tax expense/(benefit)		4,616			(3,344	)
NET INCOME	$	13,178		$	1,373
EARNINGS PER SHARE
Basic	$	0.70		$	0.07
Diluted	$	0.67		$	0.07
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic		18,950,305			18,858,343
Diluted		19,531,689			19,079,575

See accompanying notes to consolidated financial statements

4

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(Dollars in thousands)

(Unaudited)

	Three Months Ended
	March 31,
	2021			2020
Net income	$	13,178		$	1,373
Comprehensive income:
Unrealized (losses)/gains on available for sale securities:
Unrealized holding (losses)/gains arising during the period		(17,618	)		5,799
		(17,618	)		5,799
Tax effect		4,203			(1,412	)
Net of tax		(13,415	)		4,387
Unrealized gains/(losses) on cash flow hedges:
Unrealized holding gains/(losses) arising during the period		1,450			(8,878	)
Reclassification adjustment for amounts included in net    income		—			(71	)
		1,450			(8,949	)
Tax effect		(407	)		2,398
Net of tax		1,043			(6,551	)
Total other comprehensive loss		(12,372	)		(2,164	)
Total comprehensive income/(loss)	$	806		$	(791	)

See accompanying notes to consolidated financial statements

5

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Dollars in thousands)

(Unaudited)

Three Months Ended March 31, 2021 and March 31, 2020

															Accumulated
															Other			Total
(In thousands, except share and	Preferred		Common						Treasury			Retained			Comprehensive			Shareholders'
per share data)	Stock		Stock			Surplus			Stock			Earnings			Loss			Equity
Balance at December 31, 2020 18,974,703    common shares outstanding	$	—	$	16,958		$	326,592		$	(36,477	)	$	221,441		$	(1,392	)	$	527,122
Net income		—		—			—			—			13,178			—			13,178
Other comprehensive loss		—		—			—			—			—			(12,372	)		(12,372	)
Restricted stock units issued 267,148		—		223			(223	)		—			—			—			—
Restricted stock units/awards repurchased on    vesting to pay taxes, (64,653) shares		—		(54	)		(1,948	)		—			—			-			(2,002	)
Amortization of restricted stock awards/units		—		—			1,615			—			—			—			1,615
Cash dividends declared on common stock    ($0.05 per share)		—		—			—			—			(949	)		—			(949	)
Share repurchase, (158,033) shares		—		—			—			(4,379	)