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Peakpack-Gladstone: A "Boutique Bank"

10/11/2018 5:00 am EST

Focus: FINANCIALS

Douglas Gerlach

President, ICLUBcentral, Inc.

Founded in 1921, Peapack-Gladstone Bank (PGC) 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, explains growth and income expert Doug Gerlach, editor of SmallCap Informer.

The bank is best described as a “boutique bank,” similar to Signature Bank (though much smaller in size). Its private banking clients include businesses, non-profits, and consumers; and wealth management clients comprise individuals, families, foundations, endowments, trusts, and estates.

Through its seven private banking locations in New Jersey and Delaware, its wealth management and commercial private banking divisions, and its retail private banking network and online platforms, Peapack-Gladstone Bank is positioned for substantial future growth.

Since 2010 (post-recession/financial crisis), Peapack-Gladstone has seen revenues (as we calculate them) grow at an annualized 11.6% while EPS grew 13.1% a year. Growth has been relatively stable, increasing in consistency since 2013. For the most recent quarter ended June 30, 2018, the company recorded EPS of $0.62, compared to $0.45 for the same threemonth period last year, a 38% gain.

Wealth Management remains integral to the bank’s strategy and tends to be a diversified, predictable, and stable source of revenue. Fee income in this business line grew 27% in 2017, while deposits grew 49% year-over-year.

The bank’s loan portfolio has been shifting from lower yielding multifamily units to higher yielding commercial and industrial lending (including equipment finance).

Pre-tax profit margins have expanded generously in the last decade, reaching an all-time high of 37.3% in 2017. Serving wealthy individuals can be profitable; return on equity has leveled off in the 10% range. We have set our projected high P/E at a conservative 14, well below the average high P/E and the 52-week high P/E.

If EPS reach $4.45 as we project, a high price of $62 would be indicated. On the downside, if the P/E dips to 10, a low price of $23 could be reached. This represents a 4.2-to-1 reward-to-risk ratio from the current price of $30.64, and a 16.3% potential total return.

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