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 September 30, 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 October 29, 2021: 18,634,618

PEAPACK-GLADSTONE FINANCIAL CORPORATION

PART I FINANCIAL INFORMATION

Item 1	Financial Statements	3
	Consolidated Statements of Condition at September 30, 2021 and December 31, 2020	3
	Consolidated Statements of Income for the three and nine months ended September 30, 2021 and 2020	4
	Consolidated Statements of Comprehensive Income/(Loss) for the three and nine months ended September 30, 2021 and 2020	5
	Consolidated Statement of Changes in Shareholders’ Equity for the three and nine months ended September 30, 2021 and 2020	6
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020	8
	Notes to Consolidated Financial Statements	9
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44
Item 3	Quantitative and Qualitative Disclosures About Market Risk	65
Item 4	Controls and Procedures	67

PART II OTHER INFORMATION

Item 1	Legal Proceedings	68
Item 1A	Risk Factors	68
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 3	Defaults Upon Senior Securities	68
Item 4	Mine Safety Disclosures	68
Item 5	Other Information	68
Item 6	Exhibits	69

2

Item 1. Financial Statements

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CONDITION

(Dollars in thousands, except per share data)

	(unaudited)			(audited)
	September 30,			December 31,
	2021			2020
ASSETS
Cash and due from banks	$	9,299		$	10,629
Federal funds sold		—			102
Interest-earning deposits		606,913			642,591
Total cash and cash equivalents		616,212			653,322
Securities available for sale		843,779			622,689
Equity security, at fair value		14,824			15,117
FHLB and FRB stock, at cost		12,950			13,709
Loans held for sale, at fair value		3,013			13,588
Loans held for sale, at lower of cost or fair value		17,235			18,520
Loans		4,575,398			4,372,437
Less: Allowance for loan and lease losses		65,133			67,309
Net loans		4,510,265			4,305,128
Premises and equipment		23,123			21,609
Other real estate owned		—			50
Accrued interest receivable		22,790			22,495
Bank owned life insurance		46,510			46,809
Goodwill		36,212			33,103
Other intangible assets		13,121			10,788
Finance lease right-of-use assets		3,769			4,330
Operating lease right-of-use assets		10,307			9,421
Other assets		66,175			99,764
TOTAL ASSETS	$	6,240,285		$	5,890,442
LIABILITIES
Deposits:
Noninterest-bearing demand deposits	$	986,765		$	833,500
Interest-bearing deposits:
Checking		2,355,892			1,849,254
Savings		168,831			130,731
Money market accounts		1,287,686			1,298,885
Certificates of deposit - retail		426,981			530,222
Certificates of deposit - listing service		31,382			32,128
Subtotal deposits		5,257,537			4,674,720
Interest-bearing demand - brokered		85,000			110,000
Certificates of deposit - brokered		33,804			33,764
Total deposits		5,376,341			4,818,484
Short-term borrowings		—			15,000
Paycheck Protection Program Liquidity Facility		48,496			177,086
Finance lease liabilities		6,063			6,753
Operating lease liabilities		10,644			9,737
Subordinated debt, net		132,629			181,794
Deferred tax liabilities, net		27,575			32,978
Accrued expenses and other liabilities		95,523			121,488
TOTAL LIABILITIES		5,697,271			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, 20,615,903 at September 30, 2021 and 20,342,881 at December 31, 2020; outstanding    shares, 18,627,910 at September 30, 2021 and 18,974,703 at December 31, 2020		17,185			16,958
Surplus		330,392			326,592
Treasury stock at cost, 1,987,993 shares at September 30, 2021 and 1,368,178 shares    at December 31, 2020		(55,893	)		(36,477	)
Retained earnings		260,365			221,441
Accumulated other comprehensive loss, net of income tax		(9,035	)		(1,392	)
TOTAL SHAREHOLDERS’ EQUITY		543,014			527,122
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY	$	6,240,285		$	5,890,442

See accompanying notes to consolidated financial statements

3

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

(Unaudited)

See accompanying notes to consolidated financial statements

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2021			2020		2021			2020
INTEREST INCOME
Interest and fees on loans	$	37,040		$	37,704	$	108,921		$	119,330
Interest on investments:
Taxable		2,824			2,182		8,473			6,749
Tax-exempt		28			51		107			166
Interest on loans held for sale		33			78		124			153
Interest on interest-earning deposits		142			159		367			820
Total interest income		40,067			40,174		117,992			127,218
INTEREST EXPENSE
Interest on savings and interest-bearing deposit accounts		1,880			2,066		5,358			11,640
Interest on certificates of deposit		836			2,529		3,333			9,370
Interest on borrowed funds		57			1,221		448			3,360
Interest on finance lease liability		74			84		229			261
Interest on subordinated debt		1,358			1,222		5,650			3,667
Subtotal - interest expense		4,205			7,122		15,018			28,298
Interest on interest-bearing demand - brokered		385			636		1,334			2,259
Interest on certificates of deposits - brokered		266			267		791			794
Total interest expense		4,856			8,025		17,143			31,351
NET INTEREST INCOME BEFORE PROVISION FOR LOAN AND    LEASE LOSSES		35,211			32,149		100,849			95,867
Provision for loan and lease losses		1,600			5,150		2,725			30,050
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND    LEASE LOSSES		33,611			26,999		98,124			65,817
OTHER INCOME
Wealth management fee income		13,860			10,119		39,025			30,070
Service charges and fees		959			785		2,701			2,296
Bank owned life insurance		311			314		1,388			960
Gain on loans held for sale at fair value (mortgage banking)		408			954		1,842			1,796
Gain on loans held for sale at lower of cost or fair value		—			7,429		1,407			7,426
Fee income related to loan level, back-to-back swaps		—			—		—			1,620
Gain on sale of SBA loans		1,569			79		3,950			1,391
Corporate advisory fee income		84			75		1,303			215
Loss on swap termination		—			—		(842	)		—
Other income		660			456		2,798			1,257
Securities gains/(losses), net		(70	)		—		(293	)		323
Total other income		17,781			20,211		53,279			47,354
OPERATING EXPENSES
Compensation and employee benefits		19,859			19,202		61,759			57,614
Premises and equipment		4,459			4,109		12,646			12,188
FDIC insurance expense		555			605		1,669			1,310
Swap valuation allowance		1,350			—		1,350			—
Other operating expense		5,962			4,545		17,039			14,598
Total operating expenses		32,185			28,461		94,463			85,710
INCOME BEFORE INCOME TAX EXPENSE		19,207			18,749		56,940			27,461
Income tax expense		5,036			5,202		15,173			4,299
NET INCOME	$	14,171		$	13,547	$	41,767		$	23,162