Investing in Our Future

On behalf of the entire Peapack-Gladstone Bank team, I am proud to report that 2022 was once again a record year. Our wealth and commercial banking centered business model has provided our Company with a significant competitive advantage compared to like-sized institutions.

We reported net income of $74.2 million, an increase of 31% over the previous year. Diluted earnings per share grew $1.07 or 37%. Return on assets increased from 0.94% to 1.20% and return on average equity reached 14.02%. For Q4 2022, our ROA was 1.33% and return on equity was 15.73%. For the year, PGC shares increased $1.82 or 5% compared to a 24% decline in the KBW NASDAQ Bank index and a 19% decline in the broader S&P index. After a decade of challenging work, the strategy we embarked on ten years ago was validated, as the investment community now considers us a top quartile high-performing commercial bank.

Our Peapack Private Wealth Management business attracted a record $1 billion in gross new business inflows. Wealth-related revenues increased $1.7 million or 3% for the year despite general weakness in the market. Sadly, we suddenly lost one of our senior colleagues, Dan Leary, who led our Fiduciary practice. Dan was a true gentleman and ultimate professional, whose contributions leave a profound impact on our organization, community, and clients. We are thankful for his leadership that contributed greatly to our Company’s culture and success.

Our SBA team had another strong year as fee revenue grew by $1.8 million or 37%. SBA fees combined with commercial banking related service charges and unused line of credit fees contributed $11.6 million in revenue. In addition to expanded margin and higher levels of fee-related revenue, loans grew $457 million or 9% during the year.

While deposit balances remained flat for the year, our deposit mix experienced a positive shift to higher levels of core funding, which is less volatile and less expensive. For the year, non-interest-bearing deposits grew $290 million or 30%, and accounted for 24% of total deposits.

Peapack Private Wealth Management

As previously mentioned, in 2022 we attracted over $1 billion in new business flows to the Bank of which $741 million are actively managed client assets. Peapack Private Wealth Management completed its work to build a unified singular brand, integrating each of the registered investment advisory firms we acquired between 2015 and 2021. In 2022, our combined investment organization began operating on one trading and reporting platform; we realigned our investment, financial planning, middle office, and wealth advisory teams into a singular reporting structure; we consolidated two teams into a new office in Summit, NJ; and we combined two Princeton-based wealth and banking teams during the year into one Princeton, NJ office.

Our Summit and Princeton locations now house teams representing our wealth, commercial, and personal banking business lines, which is consistent with our Bedminster, Morristown, Red Bank, and Teaneck offices. We believe that our “one team, one bank” alignment is critical as we embark on the next phase of our journey.

Commercial Banking

Our Commercial Banking Team had a very strong year with loan growth of $435 million or 10%. In early 2022, as inflation was accelerating, we took steps to mitigate emerging credit risk by shifting our focus from non-owner occupied commercial real estate to multifamily loans. We believed that the uptick in economic activity and inflation would positively impact rent prices. Our focus on multifamily lending continues to provide a stable and predictable revenue stream with historically low credit costs. This thinking enabled us to deploy approximately $270 million in excess liquidity at an attractive risk adjusted rate.

In addition to multifamily, our Commercial & Industrial Lending division continued to grow by $205 million, or 10%, as we established over 120 new commercial relationships with middle market businesses.

Commercial Banking also generated strong fee related income during the year. Our SBA lending team had a record year while continuing to support small businesses and their recovery from the pandemic. Many small businesses rely on funding from the SBA to support their growth. For the year, we originated $59.7 million in SBA related loans. Fee income for the SBA Team was up $1.8 million or 37% year over year. I am proud of the work our team has done assisting small businesses in their growth and recovery.

Also, during 2022, we hired a team to spearhead our entry into the life insurance premium finance business. This business is a powerful addition to our wealth strategy and will have a positive impact on our Company in the years to come. Premium finance loans offer high-net-worth clients the ability to finance insurance premiums as part of their overall wealth and tax strategy.

Personal Banking

Throughout 2022, our Personal Banking Team continued to operate at exceptional levels. We realigned and simplified our core deposit products to allow our team to better serve our clients with consolidated personal banking solutions. Our Platinum Service Team, which originated in our commercial banking area, was expanded to include a retail arm that is comprised of hospitality-focused bankers who are dedicated to providing a world-class experience and an extra special personal touch during every client interaction. As we look for more efficient ways of doing business, we continue to review our branch network and improve our digital capabilities to ensure our clients can bank wherever and whenever they want.

Investment in Technology Resulted in Efficiencies in 2022

In 2020, as the country faced the pandemic, our team immediately stepped up to support our clients. They worked countless hours to assist our clients through the Paycheck Protection Program, with deferrals on loan payments, and providing general advice. Out of necessity, we quickly adopted technology to serve our clients in a time of need. This experience taught us to further embrace technology so that we can deliver elevated client experiences. We plan to continue our digital transformation over the next few years. Our goal is to provide great user experiences with intuitive and easy to use technology.

Our efficiency ratio (the cost to generate revenue) improved from 66% in 2020 to 55% in 2022. Ultimately, driving efficiency and a best-in-class client experience will enable us to provide solid future shareholder returns.

Our Team is Our Top Priority

Our team is comprised of highly-skilled and experienced thought leaders in the areas of wealth management, commercial banking, and depository solutions for individuals, privately owned businesses, not-for-profits, and governmental agencies.

As our team migrated back to the office in 2021-2022, we made it a priority to “reconnect” with our employees. Our people are our greatest asset. Over the past decade, we have cultivated a unique culture, which embraces our Core Principles—Professionalism, Clients First, Competing to Win, Investing in Community, and One Team.

In 2022, for the fifth consecutive year, the Bank was named one of the “Best Banks to Work For” by American Banker. Our Company’s employee engagement rate was 94%, which is well above national standards. Having a highly-engaged team leads to satisfied clients and satisfied shareholders.

Throughout the year, we launched employee programs in professional development and leadership training. Our Cultural Ambassador Committee, led by a diverse group of employees, focused on promoting and sustaining our culture through ongoing events centered on celebrating diversity, wellness, fun, volunteerism, and the environment.

As we embark on the new year, we are embracing our long-standing reputation of providing excellent client service and are training employees to push themselves even further to provide memorable experiences—white-glove experiences—that go above and beyond expectations. Offering white-glove service, through empathy and intelligence, will set us apart from our competition.

Our Company Continues to Mature Even After 101 Years

When I joined the Bank over ten years ago, PGB was primarily focused on residential lending with a small focus on commercial real estate lending and small business lending. As we have grown and matured, we have had to adapt to an ever-changing environment. Changes in interest rates, technology, and the regulatory environment have forced us to examine virtually everything we do. As is the case with every industry, failure to act is not an option.

As we move forward, we will continue to make investments in technology and in our people to ensure we can continue to operate efficiently and serve our clients with the professional and high-level service that they deserve and expect.

In Conclusion

On the heels of the 2020-2021 health crisis, 2022 was a transformational year for our Company. Our business model and culture are well suited for the challenges before us. We have assembled a team of highly-skilled and motivated professionals that contribute significantly to the communities we serve. We remain committed to providing an exceptional client experience and will continue to evolve to succeed in our ever-changing world—financial markets, technology innovation, and regulatory changes.

I would be remiss if I did not acknowledge the contributions of two or our former Directors, Edward A. Merton, who passed away in early 2022 and Pamela A. Hill, who passed away last August. Both Ed and Pam were dedicated to their service on our Board, with Ed having served since 1981 and Pam, the granddaughter of Bank co-founder, G.F. Hill, and daughter of former Chairman, T. Leonard Hill, serving since 1991. Their commitment to our Company and ensuring its success will never be forgotten.