Peapack-Gladstone Financial Corporation (PGC) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Shareholders of Peapack-Gladstone Financial Corporation. Please note that today's meeting is being recorded. [Operator Instructions] It is now my pleasure to turn today's meeting over to Duff Meyercord Chairman of the Board; Mr. Meyercord, the floor is yours.

Good morning. I'm Duff Meyercord, Chairman of the Board of Peapack-Gladstone Financial Corporation. We hope that all of you participating today and all of your families are doing well. On behalf of the directors and the officers of Peapack-Gladstone Financial Corporation and Peapack Private Bank & Trust, let me welcome you and express my appreciation to you for participating in this online meeting today. If you need access to our proxy statement and annual report, lengths of these documents are available online. Also, we intend to follow the rules of conduct for this meeting, a copy of which is located on the annual meeting portal. You may submit written questions at any point today by clicking the messages icon in the upper left portion of the meeting center screen. We will address the questions that relate to the matters conducted at this meeting during the meeting and allow for general questions towards the end of the meeting. The principal business of this annual meeting is to elect 14 directors, vote on the compensation of certain named executives on the Peapack-Gladstone Financial Corporation 2025 long-term incentive plan and to ratify the appointment of independent auditors for 2025. At this point, I'd like to introduce the Corporate Secretary of Peapack-Gladstone Financial Corporation, Ken Geiger. Mr. Geiger, has the notice of this meeting been sent to all shareholders entitled to vote at this meeting?

Yes, I have here an affidavit sworn to by myself and duly signed stating that notice has been mailed to each shareholder as required under the bylaws. In addition, resolutions were adopted by the Board of Directors of Peapack-Gladstone Financial Corporation providing for the meeting to be held at this time and by remote communication and directing that notice be given as provided in the bylaws. The Board also fixed March 5, 2025, as the record date for determining shareholders entitled to notice of and to vote at this annual meeting.

Thank you, Mr. Geiger. Please file a copy of the notice and the affidavit as to the mailing of notice with the minutes for this meeting. Alisa Zagare from Computershare, our transfer agent, will be serving as inspector of election. Ms. Zagare, will you please present your report of the attendance at this meeting so that we can determine whether a quorum is present.

There were 17,596,195 shares entitled to vote as of the March 5, 2025, record date. 87.7% of the shares of common stock of the company are represented at this meeting.

Thank you, Ms. Zagare. Based on the reports of the Corporate Secretary and the Inspector of Elections, I find that proper notice has been given and that a quorum is present. Accordingly, this meeting has been properly convened. I intend to present all of the matters to be voted on at this meeting separately and allow questions to be asked once all the matters have been presented. You may submit questions online by clicking the messages icon on the upper left portion of the meeting center screen. At the conclusion of the presentation of all items, I will allow time for shareholders to vote online before the voting is closed. Mr. Geiger, were there any shareholder nominations or proposals for business for this meeting properly filed with you as Corporate Secretary?

No.

Since no shareholder nominations or proposals were properly filed with the Corporate Secretary in advance of this meeting as provided by the bylaws, the business of this meeting is limited to the 4 matters stated in the agenda. The first proposal is the election of 14 directors, each of whom will serve for a 1-year term. All of the nominees are presently directors of the company and the bank. Additional information concerning the principal occupation of the nominees, their service with Peapack-Gladstone Financial Corporation and the bank and other matters that may be of interest are contained in the proxy statement. The second proposal is a nonbinding advisory vote to approve the compensation of the company's named executive officers as disclosed in the proxy statement. The third proposal is for consideration of the Peapack-Gladstone Financial Corporation 2025 long-term incentive plan. And the fourth proposal is a consideration at this meeting is the ratification of the appointment of Crowe LLP as the independent auditors for the year ending December 31, 2025. A representative of Crowe is available to answer any questions related to their engagement. Are there any questions with respect to the 3 proposals being considered today?

Mr. Chairman, there are no questions.

Will the shareholders who wish to vote at this time, please do so by clicking on the link provided online. If you have already voted, there is no need for you to recast your vote. However, if you have not yet voted and wish to change your vote, you may do so by clicking on the link provided online. [Voting] Online voting is now closed. Ms. Zagare, would you now present your report on the vote?

Each of the directors nominated by the Board have been duly elected. The nonbinding advisory vote on the compensation of the named executive officers have been approved. The Peapack-Gladstone Financial Corporation 2025 long-term incentive plan has been approved and the appointment of Crowe as the independent auditor for the year ending December 31, 2025, has been ratified.

The report of the Inspector of Elections as presented is accepted. Mr. Geiger, please safeguard the votes and the oath and certificate and report of the Inspector of Elections and maintain them among the records of the company. Now the Board would like to present our President and Chief Executive Officer, Doug Kennedy, who will make a brief presentation.

Thank you, Mr. Chairman. Good morning, everybody. It's my distinct pleasure to welcome you to Peapack-Gladstone Financial Corporation's 104th Annual Meeting. I'm proud to share with you today the incredible strides our team has made to expand and position our company for future shareholder returns. Your company has embarked on an exciting expansion strategy that is capitalizing on current market disruption and unfavorable interest rate environment. We've made numerous investments in people and technology that is enabling us to compete and win. At the conclusion of 2024, we took the bold move to rebrand our bank subsidiary to Peapack Private Bank & Trust or Peapack Private for short. As you'll see shortly, we've been quietly expanding our presence towards becoming Metro New York's boutique financial institution. On March 24, we opened our flagship New York City branch that anchors this strategy. Our new financial service center is located at 300 Park Avenue in the heart of Midtown Manhattan. We're directly across the street from the Waldorf Astoria on the corner of Park Avenue in 50th Street. The sweet spot of Midtown Manhattan. Our new facility is a showplace. It's very well appointed, and it conveys the level of style and sophistication that supports our private banking brand. In addition to the branch, we have 13 commercial teams located in the upper floors of the same location. Our success to date in executing our growth strategy is evident in the numbers. The teams we hired in 2024, combined with thoughtful and refresh rebranding have already begun to deliver results. In 2024, our deposits grew $1.2 billion or 30% during the year. We repaid $404 million of borrowed funds and $120 million of brokered deposits. At the end of 2024, our balance sheet liquidity increased to 17%, which is quite strong by any standard. During the year, we grew our net interest income by a healthy 14%, the vast majority coming in the fourth quarter. And you'll hear shortly from Frank Cavallaro, our CFO, that has continued into the first quarter. As many of you may recall, Metro New York is something that we've been focused on for some time. The market dislocation that we saw in 2023 opened the door for us to make a meaningful step towards expanding our presence. This heat map shows you where we currently have loans, deposits and wealth clients in the region. The key takeaway here is that our move to physically expand in New York City follows a significant preexisting legacy business that was built over the last 10 years. Two years ago, using Net Promoter Score, we began surveying our clients and repeated it again this last fall, we're very pleased to learn that New York City, we received a Net Promoter Score of 81 from new clients that we recently onboarded. A score of 81 is considered best-in-class. Our wealth clients gave us a score of 71, which is also considered very strong and best-in-class. And the bank overall received a score of 57, which is considered excellent and was up 14 points year-over-year. I should further note that nationally, the average for all U.S. commercial banks is 31. These scores point to a high level of service and care that we provide our clients, and our goal long term is to increase the client experience to 70 in the 80s universally across our banking franchise. As you can see on this slide, we rank quite well relative to the universe of banks of $500 billion to $200 billion in the U.S. in terms of their wealth management revenue. Wealth Management is a highly technical business that requires lots of experience and expertise, which is why so many banks are not in it. We've been in the business for over 50 years, and Wealth Management has significant barriers to entry and is integral to our strategy for driving long-term shareholder value. To date, New York City has delivered strong results that have exceeded our most optimistic expectations. In 2024, we onboarded over 550 new commercial relationships. We opened over 5,000 new accounts, 20% of the deposits that we brought in were noninterest-bearing checking and finally, we approved and funded $311 million in new outstanding loans during the year. Our core deposit growth in 2024 transformed our balance sheet. In 2024, we repaid $404 million in FHLB borrowings and $120 million in brokered deposits. Our total overall liquidity grew by nearly $1 billion during the year, and our total available liquidity of on and off balance sheet reached a record $4.4 billion. The bottom line is that our growth and core deposits during the year improved our funding base. And with greater liquidity, we have more capacity to purchase securities and make loans, which are significant drivers for profitability. The favorable improvement in liquidity driven by higher levels of core deposits, reduced borrowings and better organic growth is combining to grow net interest income, which ended the year up 14% year-over-year. As previously mentioned, the bulk of this increase came in Q4, which has continued nicely into Q1. Wealth Management is our crown jewel. This business had a solid year with new business flows of $710 million during the year. As you'll hear from Frank in a moment, this strength is carried into Q1 where $341 million in new business was booked. Strong flows continued in Q1 despite considerable market volatility. Revenues grew 10% during the year, which is fairly consistent for how we operate in this business. One of the other great attributes of our company is our commercial and industrial business. In 2024, we originated $950 million in new commercial and industrial loans. This capability provides diversification as an alternative to commercial real estate. With the influx of deposits in the back half of the year, lending became more attractive for us. In fact, the loan volume in Q4 was almost 50% of the production for the entire year. This robust pipeline continued into 2025. And in fact, during Q1, we grew loans at a 17% annualized rate. Finally, our Personal Banking division continues to perform despite a shift towards technology and increasing competition from bank and nonbank competitors. Over the past decade, we've proven that we can compete and win against big banks. Our performance to date in New York City along with a Net Promoter Score of 81 in this market bears the south. So at this point, I'd like to hand the presentation over to our CFO, Frank Cavallaro, who'll provide you with an overview of the Q1 results. And after that, we'll move towards opening up the line for questions. Frank?

Thanks, Doug. So the momentum that Doug described from 2024 clearly carried into the first quarter of 2025 as we reported in our earnings release last week. Core relationship deposits grew $177 million, driven by the continued success of our private banking strategy. We continue to remix our funding base by trading high-cost nonrelationship balances from lower cost or deposit counts. It was very evident as seen in the growth in noninterest-bearing demand balances, which grew by $72 million, representing almost half of our growth in Q1. Loan growth was also very strong in Q1. Outstanding loans grew by $236 million during the first quarter. In the first quarter, we included a slide in our investor presentation, showing the diversity of our loan originations led by the C&I team. We shared credit metrics supporting the originations, including data average FICO scores, loan-to-value ratios and debt service coverage numbers. The net interest margin was up 22 basis points in the first quarter to 2.68. But more importantly, we saw net interest income grow from a dollar perspective, demonstrated by the continued growth which was 32% compared to the first quarter of last year. Our liquidity profile remains strong, and we have no need for reliance on short-term outside borrowings of so many banks in our peer group depend on. And our wealth business consistently delivered strong results, as Doug mentioned in his remarks, wealth fees were north of $15 million in the first quarter, which contributed to total fee revenue that represents nearly 1/3 of our total revenue stream. Shareholders' equity grew by $16 million in the period. Similar to the fourth quarter, we did not repurchase any shares during the first quarter as we conservatively manage capital, thinking about our current growth trajectory. But capital levels do remain at more than sufficient levels as of March 31, which are well in excess of regulatory guidance. I'll end my comments there and turn it back to Doug.

Well, thank you, Frank. So we'd like to open up for questions. You can submit questions right now online by clicking on the messages icon on the upper left-hand portion of the meeting center screen. With that, I'll just send it over to you, Ken, for any questions that may have come in.

Mr. Kennedy, there are no questions.

The Board would like to acknowledge to our shareholders our appreciation of the commitment and dedication of our management and employees. We are fortunate as we move forward into this year and the future to have so many people who are committed to trying to make sure that we service our customers and our shareholders. I want to thank all of you for participating in today's meeting and for the interest you have shown in the affairs of your company. We hope that everyone remains well, and we look forward to holding this meeting in person next year. This meeting is adjourned.

This concludes the meeting. You may now disconnect.