Peapack-Gladstone Financial Corporation
05/08/2026 | Press release | Distributed by Public on 05/08/2026 10:15
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS: This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about Management's confidence and strategies and Management's expectations about operations, growth, financial results, asset quality, new and existing programs and products, investments, relationships, opportunities and market conditions. These statements may be identified by such forward-looking terminology as "expect", "look", "believe", "anticipate", "may", or similar statements or variations of such terms. Actual results may differ materially from such forward-looking statements. Factors that may cause results to differ materially from those contemplated by such forward-looking statements include, among others, those risk factors identified in the Company's Form 10-K for the year ended December 31, 2025, which include the following:
•
our ability to successfully grow our business and implement our strategic plan, including our ability to generate revenues to offset the increased personnel and other costs related to the strategic plan;
•
the impact of anticipated higher operating expenses in 2026 and beyond;
•
our ability to successfully integrate wealth management firm and team acquisitions;
•
our ability to successfully integrate our expanded employee base;
•
an unexpected decline in the economy, in particular in our New Jersey and New York market areas, including potential recessionary conditions, which could affect the demand for loans and deposits or have an adverse effect on the ability of consumers and businesses to pay debts;
•
declines in our net interest margin caused by the interest rate environment and/or our highly competitive market;
•
declines in the value in our investment portfolio;
•
impact from a pandemic event on our business, operations, customers, allowance for credit losses and capital levels;
•
higher than expected increases in our allowance for credit losses;
•
changes in the methodology and assumptions used to calculate the allowance for credit losses;
•
higher than expected increases in credit losses or in the level of delinquent, nonperforming, classified and criticized loans or charge-offs;
•
inflation and changes in interest rates, which may adversely impact our margins and yields, reduce the fair value of our financial instruments, reduce our loan originations and lead to higher operating costs;
•
decline in real estate values within our market areas;
•
legislative and regulatory actions (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Basel III and related regulations) that may result in increased compliance costs;
•
the imposition of tariffs or other domestic or international governmental policies and retaliatory responses;
•
the impact of any federal government shutdown;
•
the failure to maintain current technologies and/or to successfully implement future information technology enhancements;
•
successful cyberattacks against our IT infrastructure and that of our IT and third-party providers;
•
higher than expected FDIC insurance premiums;
•
adverse weather conditions;
•
the current or anticipated impact of military conflict, terrorism or other geopolitical events;
•
our inability to successfully generate new business in new geographic markets, including our expansion into New York City and Long Island;
•
a reduction in our lower-cost funding sources;
•
changes in liquidity, including the size and composition of our deposit portfolio, including the percentage of uninsured deposits in the portfolio;
•
our inability to adapt to technological changes;
•
claims and litigation pertaining to fiduciary responsibility, environmental laws and other matters;
•
our inability to retain key employees;
•
demand for loans and deposits in our market areas;
•
adverse changes in securities markets;
•
changes in New York City rent regulation law;
•
changes in governmental regulation, including, but not limited to, any increase in FDIC insurance premiums and changes in the monetary and fiscal policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System;
•
changes in accounting policies and practices; and/or
•
other unexpected material adverse changes in our financial condition, operations or earnings.
Except as may be required by applicable law or regulation, the Company undertakes no duty to update any forward-looking statements to conform the statement to actual results or change in the Company's expectations. Although we believe that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES: Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon the Company's consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Note 1 to the Company's Audited Consolidated Financial Statements for the year ended December 31, 2025 contains a summary of the Company's significant accounting policies.
The Company's determination of the allowance for credit losses involves a higher degree of complexity and requires Management to make difficult and subjective judgments, which often require assumptions or estimates about highly uncertain matters. Changes in the methodology for determining the allowance for credit losses or in these judgments, assumptions or estimates could materially impact our results of operations. This critical policy and its application are reviewed periodically with the Audit Committee and the Board of Directors.
The allowance for credit losses is a valuation allowance of Management's estimate of expected credit losses in the loan portfolio calculated in accordance with ASC 326, "Credit Losses". The process to determine expected credit losses utilizes analytic tools and Management judgment and is reviewed on a quarterly basis. When Management is reasonably certain that a loan balance is not fully collectable, an analysis is completed whereby a specific reserve may be established or a full or partial charge-off is recorded against the allowance. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance via a quantitative analysis, which considers available information from internal and external sources related to past loan loss and prepayment experience and current economic conditions, as well as the incorporation of reasonable and supportable forecasts. Management evaluates a variety of factors, including available published economic information, in arriving at its forecasts. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. Also included in the allowance for credit losses are qualitative reserves that are expected, but, in the Management's assessment, may not be adequately represented in the quantitative analysis or the forecasts described above. Factors may include, among others, changes in lending policies and procedures, size and composition of the portfolio, experience and depth of Management and the effect of external factors such as competition and legal and regulatory requirements. The allowance is available for any loan that, in Management's judgment, should be charged off.
Although Management uses the best information available, the level of the allowance for credit losses remains an estimate, which is subject to significant judgment and short-term change. Various regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance for credit losses. Such agencies may require the Company to make additional provisions for credit losses based upon information available to them at the time of their examination. Furthermore, the majority of the Company's loans are secured by real estate in New Jersey and the boroughs of New York City. Accordingly, the collectability of a substantial portion of the carrying value of the Company's loan portfolio is susceptible to changes in local market conditions, rent control regulations and any adverse economic conditions. Future adjustments to the provision for credit losses and allowance for credit losses may be necessary due to economic, operating, regulatory and other conditions beyond the Company's control.
EXECUTIVE SUMMARY: The following table presents certain key aspects of our performance for the three months ended March 31, 2026 and 2025.
|
For the Three Months Ended March 31, |
Change |
|||||||||||
|
(Dollars in thousands, except per share data) |
2026 |
2025 |
2026 vs 2025 |
|||||||||
|
Results of Operations: |
||||||||||||
|
Interest income |
$ |
95,049 |
$ |
86,345 |
$ |
8,704 |
||||||
|
Interest expense |
35,153 |
40,840 |
(5,687 |
) |
||||||||
|
Net interest income |
59,896 |
45,505 |
14,391 |
|||||||||
|
Wealth management fee income |
16,503 |
15,435 |
1,068 |
|||||||||
|
Other income |
6,094 |
3,419 |
2,675 |
|||||||||
|
Total other income |
22,597 |
18,854 |
3,743 |
|||||||||
|
Total revenue |
82,493 |
64,359 |
18,134 |
|||||||||
|
Operating expense |
55,440 |
49,440 |
6,000 |
|||||||||
|
Pretax income before provision for credit losses |
27,053 |
14,919 |
12,134 |
|||||||||
|
Provision for credit losses |
7,327 |
4,471 |
2,856 |
|||||||||
|
Pretax income |
19,726 |
10,448 |
9,278 |
|||||||||
|
Income tax expense |
5,573 |
2,853 |
2,720 |
|||||||||
|
Net income |
14,153 |
7,595 |
6,558 |
|||||||||
|
Dividends on preferred stock |
- |
- |
- |
|||||||||
|
Net income available to common shareholders |
$ |
14,153 |
$ |
7,595 |
$ |
6,558 |
||||||
|
Diluted average shares outstanding |
17,760,678 |
17,812,222 |
(51,544 |
) |
||||||||
|
Diluted earnings per share |
$ |
0.80 |
$ |
0.43 |
$ |
0.37 |
||||||
|
Return on average assets annualized ("ROAA") |
0.74 |
% |
0.43 |
% |
0.31 |
% |
||||||
|
Return on average equity annualized ("ROAE") |
8.51 |
4.98 |
3.53 |
|||||||||
|
March 31, |
December 31, |
Change |
||||||||||
|
2026 |
2025 |
2026 vs 2025 |
||||||||||
|
Selected Balance Sheet Ratios: |
||||||||||||
|
Total capital (Tier I + II) to risk-weighted assets |
12.08 |
% |
12.68 |
% |
(0.60 |
)% |
||||||
|
Tier I leverage ratio |
9.24 |
8.87 |
0.37 |
|||||||||
|
Loans to deposits |
94.25 |
94.91 |
(0.66 |
) |
||||||||
|
Allowance for credit losses to total loans |
1.04 |
1.14 |
(0.10 |
) |
||||||||
|
Allowance for credit losses to nonperforming loans |
112.99 |
104.10 |
8.89 |
|||||||||
|
Nonperforming loans to total loans |
0.92 |
1.09 |
(0.17 |
) |
||||||||
For the quarter ended March 31, 2026, the Company recorded total revenue of $82.5 million, pretax income of $19.7 million, net income of $14.2 million and diluted earnings per share of $0.80, compared to revenue of $64.4 million, pretax income of $10.4 million, net income of $7.6 million and diluted earnings per share of $0.43 for the same period last year.
The increase in total revenue for the first quarter of 2026 was primarily due to higher net interest income of $14.4 million offset by increases in operating expenses and provision for credit losses. The increase in operating expenses was principally attributable to the addition of new employees related to the Company's expansion into New York City and Long Island and the expansion of the equipment financing team, increased health insurance costs and annual merit increases. The implementation of the strategy, including our metro New York City expansion, continues to deliver lower-cost core deposit relationships resulting in consistent improvement in our cost of funds and net interest margin. During the first quarter of 2026, deposits grew $237.8 million, which included $115.8 million in noninterest-bearing demand deposits. Net interest margin improved to 3.26 percent for the first quarter of 2026 as compared to 2.68 percent for the same period in 2025. Wealth management fee income continues to be a consistent and steady revenue stream for the Company and represented 20 percent of total revenue for the first quarter of 2026.
OFF-BALANCE SHEET ARRANGEMENTS: For a discussion of our off-balance sheet arrangements, see the information set forth in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2025 under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations - Off-Balance Sheet Arrangements and Aggregate Contractual Obligations."
NET INTEREST INCOME ("NII") / NET INTEREST MARGIN ("NIM") / AVERAGE BALANCE SHEET:
The primary source of the Company's operating income is net interest income, which is the difference between interest and dividends earned on interest-earning assets and fees earned on loans, and interest paid on interest-bearing liabilities. Earning assets include loans, investment securities, interest-earning deposits and federal funds sold. Interest-bearing liabilities include interest-bearing checking, savings and time deposits, Federal Home Loan Bank advances, subordinated debt and other borrowings. Net interest income is determined by calculating the difference between the average yields earned on earning assets and the average cost of interest-bearing liabilities ("net interest spread") and the relative amounts of earning assets and interest-bearing liabilities. Net interest margin is net interest income as a percent of total interest-earning assets on an annualized basis. The Company's net interest income, spread and margin are affected by regulatory, economic and competitive factors that influence interest rates, loan demand and deposit flows and general levels of nonperforming assets.
Outstanding loan balances are the primary driver of the yields on interest-earning assets. The following table summarizes the loans that the Company closed during the periods indicated:
|
For the Three Months Ended |
||||||||
|
March 31, |
March 31, |
|||||||
|
(In thousands) |
2026 |
2025 |
||||||
|
Residential mortgage loans originated for portfolio |
$ |
29,376 |
$ |
25,157 |
||||
|
Residential mortgage loans originated for sale |
4,680 |
4,074 |
||||||
|
Total residential mortgage loans |
34,056 |
29,231 |
||||||
|
Commercial real estate loans |
138,570 |
47,280 |
||||||
|
Multifamily |
31,825 |
6,800 |
||||||
|
C&I loans (A) (B) |
274,269 |
257,282 |
||||||
|
Small business administration |
11,445 |
5,928 |
||||||
|
Wealth lines of credit (A) |
5,225 |
9,900 |
||||||
|
Total commercial loans |
461,334 |
327,190 |
||||||
|
Installment loans |
30,171 |
76,941 |
||||||
|
Home equity lines of credit (A) |
6,638 |
4,805 |
||||||
|
Total loans closed |
$ |
532,199 |
$ |
438,167 |
||||
(A) Includes loans and lines of credit that closed in the period but were not necessarily funded.
(B) Includes equipment finance leases and loans.
Residential mortgage, commercial real estate, multifamily, C&I, and SBA loan originations increased by $4.8 million, $91.3 million, $25.0 million, $17.0 million, and $5.5 million, respectively, for the three months ended March 31, 2026 as compared to the same period in 2025. Loan growth has been fueled by lower market interest rates, the hiring of a new head of commercial real estate and the Company's expansion into the New York City and Long Island markets.
At March 31, 2026, December 31, 2025 and March 31, 2025, the Bank had a concentration in commercial real estate ("CRE") loans as defined by applicable regulatory guidance as follows:
|
March 31, |
December 31, |
March 31, |
||||||||||
|
2026 |
2025 |
2025 |
||||||||||
|
Multifamily real estate loans as a percent of |
242 |
% |
231 |
% |
228 |
% |
||||||
|
Non-owner occupied commercial real estate |
161 |
136 |
127 |
|||||||||
|
Total CRE concentration |
403 |
% |
367 |
% |
355 |
% |
||||||
Total CRE concentration as a percentage of regulatory capital is monitored by Management. Management believes it satisfactorily addresses the key elements in the risk management framework laid out by its regulators for the effective management of CRE concentration risks.
The following table reflects the components of the average balance sheet and of net interest income for the periods indicated:
Average Balance Sheet
Unaudited
Three Months Ended
|
March 31, 2026 |
March 31, 2025 |
|||||||||||||||||||||||
|
Average |
Income/ |
Annualized |
Average |
Income/ |
Annualized |
|||||||||||||||||||
|
(Dollars in thousands) |
Balance |
Expense |
Yield |
Balance |
Expense |
Yield |
||||||||||||||||||
|
ASSETS: |
||||||||||||||||||||||||
|
Interest-earning assets: |
||||||||||||||||||||||||
|
Investments: |
||||||||||||||||||||||||
|
Taxable (A) |
$ |
934,080 |
$ |
7,126 |
3.05 |
% |
$ |
1,032,257 |
$ |
8,213 |
3.18 |
% |
||||||||||||
|
Loans (B) (C): |
||||||||||||||||||||||||
|
Residential mortgages |
656,719 |
7,958 |
4.85 |
617,185 |
6,670 |
4.32 |
||||||||||||||||||
|
Commercial mortgages |
2,678,193 |
31,551 |
4.71 |
2,384,542 |
26,179 |
4.39 |
||||||||||||||||||
|
Commercial |
2,773,733 |
43,359 |
6.25 |
2,432,862 |
40,104 |
6.59 |
||||||||||||||||||
|
Commercial construction |
576 |
9 |
6.25 |
- |
- |
- |
||||||||||||||||||
|
Installment |
199,070 |
2,994 |
6.02 |
107,506 |
1,793 |
6.67 |
||||||||||||||||||
|
Home equity |
55,816 |
936 |
6.71 |
45,949 |
845 |
7.36 |
||||||||||||||||||
|
Other |
627 |
5 |
3.19 |
304 |
5 |
6.81 |
||||||||||||||||||
|
Total loans |
6,364,734 |
86,812 |
5.46 |
5,588,348 |
75,596 |
5.41 |
||||||||||||||||||
|
Interest-earning deposits |
188,404 |
1,325 |
2.81 |
290,702 |
2,776 |
3.82 |
||||||||||||||||||
|
Total interest-earning assets |
7,487,218 |
95,263 |
5.09 |
% |
6,911,307 |
86,585 |
5.01 |
% |
||||||||||||||||
|
Noninterest-earning assets: |
||||||||||||||||||||||||
|
Cash and due from banks |
8,692 |
8,380 |
||||||||||||||||||||||
|
Allowance for credit losses |
(71,767 |
) |
(74,413 |
) |
||||||||||||||||||||
|
Premises and equipment |
39,336 |
29,954 |
||||||||||||||||||||||
|
Other assets |
139,139 |
128,754 |
||||||||||||||||||||||
|
Total noninterest-earning assets |
115,400 |
92,675 |
||||||||||||||||||||||
|
Total assets |
$ |
7,602,618 |
$ |
7,003,982 |
||||||||||||||||||||
|
LIABILITIES: |
||||||||||||||||||||||||
|
Interest-bearing deposits: |
||||||||||||||||||||||||
|
Checking |
$ |
3,713,856 |
$ |
23,842 |
2.57 |
% |
$ |
3,445,903 |
$ |
28,078 |
3.26 |
% |
||||||||||||
|
Money market accounts |
1,070,606 |
6,368 |
2.38 |
982,245 |
6,717 |
2.74 |
||||||||||||||||||
|
Savings |
111,872 |
193 |
0.69 |
106,073 |
118 |
0.44 |
||||||||||||||||||
|
Certificates of deposit - retail |
411,628 |
3,099 |
3.01 |
468,176 |
4,363 |
3.73 |
||||||||||||||||||
|
Subtotal interest-bearing deposits |
5,307,962 |
33,502 |
2.52 |
5,002,397 |
39,276 |
3.14 |
||||||||||||||||||
|
Interest-bearing demand - brokered |
- |
- |
- |
10,000 |
100 |
4.00 |
||||||||||||||||||
|
Total interest-bearing deposits |
5,307,962 |
33,502 |
2.52 |
5,012,397 |
39,376 |
3.14 |
||||||||||||||||||
|
FHLB advances and borrowings |
45,262 |
432 |
3.82 |
1,001 |
11 |
4.54 |
||||||||||||||||||
|
Finance lease liabilities |
1,159 |
12 |
4.14 |
1,322 |
14 |
4.20 |
||||||||||||||||||
|
Subordinated debt |
66,026 |
1,207 |
7.31 |
126,641 |
1,439 |
4.55 |
||||||||||||||||||
|
Total interest-bearing liabilities |
5,420,409 |
35,153 |
2.59 |
% |
5,141,361 |
40,840 |
3.18 |
% |
||||||||||||||||
|
Noninterest-bearing liabilities: |
||||||||||||||||||||||||
|
Demand deposits |
1,405,577 |
1,122,191 |
||||||||||||||||||||||
|
Accrued expenses and other liabilities |
111,095 |
129,857 |
||||||||||||||||||||||
|
Total noninterest-bearing liabilities |
1,516,672 |
1,252,048 |
||||||||||||||||||||||
|
Shareholders' equity |
665,537 |
610,573 |
||||||||||||||||||||||
|
Total liabilities and shareholders' equity |
$ |
7,602,618 |
$ |
7,003,982 |
||||||||||||||||||||
|
Net interest income (tax-equivalent basis) |
$ |
60,110 |
$ |
45,745 |
||||||||||||||||||||
|
Net interest spread |
2.50 |
% |
1.83 |
% |
||||||||||||||||||||
|
Net interest margin (D) |
3.26 |
% |
2.68 |
% |
||||||||||||||||||||
|
Tax equivalent adjustment |
$ |
(214 |
) |
$ |
(240 |
) |
||||||||||||||||||
|
Net interest income |
$ |
59,896 |
$ |
45,505 |
||||||||||||||||||||
(A)
Average balances for available for sale securities are based on amortized cost.
(B)
Interest income is presented on a tax-equivalent basis using a 21 percent federal tax rate.
(C)
Loans are stated net of unearned income and include nonaccrual loans.
(D)
Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.
The effect of volume and rate changes on net interest income (on a tax-equivalent basis) for the three month periods ended March 31, 2026 compared to March 31, 2025 are shown below:
|
For the Three Months Ended March 31, 2026 |
||||||||||||
|
Difference due to |
Change In |
|||||||||||
|
Change In: |
Income/ |
|||||||||||
|
(In Thousands): |
Volume |
Rate |
Expense |
|||||||||
|
ASSETS: |
||||||||||||
|
Investments |
$ |
(840 |
) |
$ |
(247 |
) |
$ |
(1,087 |
) |
|||
|
Loans |
10,771 |
445 |
11,216 |
|||||||||
|
Interest-earning deposits |
(829 |
) |
(622 |
) |
(1,451 |
) |
||||||
|
Total interest income |
$ |
9,102 |
$ |
(424 |
) |
$ |
8,678 |
|||||
|
LIABILITIES: |
||||||||||||
|
Interest-bearing checking |
$ |
3,222 |
$ |
(7,458 |
) |
$ |
(4,236 |
) |
||||
|
Money market |
783 |
(1,132 |
) |
(349 |
) |
|||||||
|
Savings |
7 |
68 |
75 |
|||||||||
|
Certificates of deposit - retail |
(492 |
) |
(772 |
) |
(1,264 |
) |
||||||
|
Interest bearing demand brokered |
(50 |
) |
(50 |
) |
(100 |
) |
||||||
|
Borrowed funds |
400 |
21 |
421 |
|||||||||
|
Capital lease obligation |
(2 |
) |
- |
(2 |
) |
|||||||
|
Subordinated debt |
(873 |
) |
641 |
(232 |
) |
|||||||
|
Total interest expense |
$ |
2,995 |
$ |
(8,682 |
) |
$ |
(5,687 |
) |
||||
|
Net interest income (tax-equivalent basis) |
$ |
6,107 |
$ |
8,258 |
$ |
14,365 |
||||||
Net interest income, on a fully tax-equivalent basis, increased $14.4 million, or 31 percent, for the first quarter of 2026 to $60.1 million from $45.7 million in the first quarter of 2025. The net interest margin ("NIM") was 3.26 percent and 2.68 percent for the three months ended March 31, 2026 and 2025, respectively, an increase of 58 basis points year over year. Net interest income, on a fully tax-equivalent basis, and NIM improved primarily due to continued growth in lower-cost client deposit relationships, which were used to fund consistent loan production. The Bank also benefited from the 175 basis-point reduction in the target federal funds rate by the Federal Reserve from the latter half of 2024 through 2025, which lowered deposit costs and supported margin expansion.
The average balance of interest-earning assets increased to $7.49 billion during the first quarter of 2026 from $6.91 billion in the first quarter of 2025, reflecting an increase of $575.9 million, or 8 percent. The increase in the average balance of interest-earning assets during the first quarter of 2026 when compared to the same quarter of 2025 was due to an increase in the average balance of loans of $776.4 million, which was partially offset by a decrease in the average balance of investments of $98.2 million and a decrease in interest-earning deposits of $102.3 million.
The increase in the average balance of outstanding loans for the three months ended March 31, 2026 was primarily driven by an increase in commercial loans, commercial mortgages, residential mortgages and installment loans. The average balance of commercial loans increased by $340.9 million, or 14 percent, to $2.77 billion for the quarter ended March 31, 2026 when compared to $2.43 billion for the quarter ended March 31, 2025. The average balance of commercial mortgages increased by $293.7 million, or 12 percent, to $2.68 billion for the quarter ended March 31, 2026 when compared to $2.38 billion during the quarter ended March 31, 2025. The increase in the average balance of loans for the three-month period was primarily a result of increasing loan demand from customers due to a lower interest rate environment and improving economic conditions. Growth was also driven by the addition of a new leader of the commercial real estate lending team, along with our continued expansion into New York City and Long Island.
Interest-earning deposits are an additional part of the Company's liquidity and interest rate risk management strategies. The combined average balance of these investments for the three months ended March 31, 2026 was $188.4 million with an average yield of 2.81 percent as compared to $290.7 million and an average yield of 3.82 percent for the same period in 2025. The decrease reflected cash used to fund loan originations. The decrease in the rate was a result of the lower interest rate environment.
For the quarters ended March 31, 2026 and 2025, the average yields earned on interest-earning assets were 5.09 percent and 5.01 percent, respectively, an increase of 8 basis points year over year.
The average balance of total investments declined by $98.2 million to $934.1 million for the three months ended March 31, 2026 as compared to $1.03 billion for the three months ended March 31, 2025. The yield on investments decreased by 13 basis points to
3.05 percent for the three months ended March 31, 2026, compared to 3.18 percent for the same period a year ago. The decreases in the average balance and average yield on total investments were a result of a security sale of $97.0 million of higher-yielding investments as part of a portfolio repositioning completed during the first quarter of 2026.
The average yield on total loans for the three months ended March 31, 2026 increased slightly to 5.46 percent when compared to 5.41 percent for the three months ended March 31, 2025. The yield on residential mortgages increased 53 basis points to 4.85 percent for the three months ended March 31, 2026, as compared to 4.32 percent for the same 2025 period. The increase in the average yield for residential mortgages for the three-month period was driven by the origination of higher-yielding loans. The average yield on commercial mortgages for the three months ended March 31, 2026, increased 32 basis points to 4.71 percent as compared to 4.39 percent for the same period in 2025. The increase in the average yield on commercial mortgages for the three months ended March 31, 2026, compared to March 31, 2025, was primarily attributable to changes in portfolio mix and loan repricing characteristics. During the period, higher-yielding new originations and the runoff of lower-yielding legacy loans, more than offset the impact of Federal Reserve rate reductions. The average yield on commercial loans for the three months ended March 31, 2026 decreased 34 basis points to 6.25 percent from 6.59 percent at March 31, 2025. The average yield on commercial loans decreased due to a decrease in the target Federal Funds rate of 175 basis points from the second half of 2024 through December 31, 2025, which had a greater impact on these loans, which are typically floating rates with short repricing periods. As of March 31, 2026, 29 percent of all loans will reprice within one month, 35 percent within three months and 51 percent within one year.
For the three months ended March 31, 2026, the average balance of interest-bearing liabilities totaled $5.42 billion representing an increase of $279.0 million from $5.14 billion for the three month period ended March 31, 2025 primarily due to an increase in interest-bearing deposits of $295.6 million to $5.31 billion for the three months ended March 31, 2026. This increase was partially offset by a decrease in average outstanding subordinated debt of $60.6 million to $66.0 million due to the redemption of $100.0 million of such debt in March 2026.
The increase in the average balance of interest-bearing deposits for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to an increase in the average balances of interest-bearing checking deposits of $268.0 million and money market accounts of $88.4 million, partially offset by a decline in the average balance of certificates of deposit of $56.5 million and interest-bearing brokered demand deposits of $10.0 million. The increase in interest-bearing checking deposits for the three months ended March 31, 2026 was due to our continued expansion into the New York City market and client demand for FDIC insured products, which we offer through a reciprocal deposit program. Our expansion into the New York City market has allowed us to grow lower cost, relationship-based deposits, while reducing the Company's reliance on overnight borrowings, brokered deposits and other high-cost funding sources.
The Company is a participant in the Reich & Tang Demand Deposit Marketplace program and the Promontory program. The Company uses these deposit sweep services to place customer funds into interest-bearing demand (checking) accounts issued by other participating banks. Customer funds are placed at one or more participating banks to increase the level of FDIC insurance available to deposit customers. As a participant, the Company receives reciprocal amounts of deposits from other participating banks. Average reciprocal deposit balances for the quarters ended March 31, 2026 and 2025 were $2.25 billion and $1.37 billion, respectively.
At March 31, 2026, uninsured/unprotected deposits were approximately $2.10 billion, or 31 percent of total deposits. This amount was adjusted to exclude $194 million of public fund deposit balances, which are fully-collateralized and protected with investment securities and an FHLBNY letter of credit.
For the quarters ended March 31, 2026 and 2025, the cost of interest-bearing liabilities was 2.59 percent and 3.18 percent, respectively, reflecting a decrease of 59 basis points. The decrease for the three month period ended March 31, 2026 was driven by a decrease in the average cost of interest-bearing deposits of 62 basis points to 2.52 percent during the first quarter of 2026. The Company also benefited from lower short-term borrowing costs for the three months ended March 31, 2026, which decreased by 72 basis points to 3.82 percent when compared to 4.54 percent for the same period in 2025. The decrease in deposit and borrowing rates was due to the Federal Reserve lowering the target Federal Funds rate by 175 basis points during the latter half of 2024 through the end of 2025, and a change in the composition of the deposit portfolio with a greater concentration of lower-cost, core relationship deposits.
INVESTMENT SECURITIES: Investment securities available for sale are purchased, sold and/or maintained as a part of the Company's overall balance sheet, liquidity and interest rate risk management strategies, and in response to changes in interest rates, liquidity needs, prepayment speeds and/or other factors. These securities are carried at estimated fair value, and unrealized changes in fair value are recognized as a separate component of shareholders' equity, net of income taxes. Realized gains and losses are recognized in income at the time the securities are sold. Investment securities held to maturity are securities that the Company has
both the ability and intent to hold to maturity. These securities are carried at amortized cost. Equity securities are carried at fair value with unrealized gains and losses recorded in noninterest income as incurred.
At March 31, 2026, the Company had investment securities available for sale with a fair value of $710.0 million compared with $774.2 million at December 31, 2025. A net unrealized loss (net of income tax) of $51.8 million and $49.3 million related to these securities were included in shareholders' equity at March 31, 2026 and December 31, 2025, respectively.
At March 31, 2026, the Company had investment securities held to maturity with a carrying cost of $79.5 million and an estimated fair value of $70.8 million compared with a carrying cost of $95.9 million and an estimated fair value of $87.5 million at December 31, 2025.
The Company had one equity security (a CRA investment security) with a fair value of $13.4 million at March 31, 2026 compared to $13.5 million at December 31, 2025, with changes in fair value recognized in the Consolidated Statements of Income. The Company recorded an unrealized loss of $84,000 for the three months ended March 31, 2026 compared to an unrealized gain of $195,000 for the three months ended March 31, 2025.
The carrying value of investment securities available for sale and held to maturity as of March 31, 2026 and December 31, 2025 are shown below:
|
March 31, 2026 |
December 31, 2025 |
|||||||||||||||
|
Estimated |
Estimated |
|||||||||||||||
|
Amortized |
Fair |
Amortized |
Fair |
|||||||||||||
|
(In thousands) |
Cost |
Value |
Cost |
Value |
||||||||||||
|
Investment securities available for sale: |
||||||||||||||||
|
U.S. government-sponsored agencies |
$ |
219,838 |
$ |
186,581 |
$ |
244,833 |
$ |
211,223 |
||||||||
|
Mortgage-backed securities-residential (principally |
526,784 |
491,768 |
561,794 |
530,365 |
||||||||||||
|
SBA pool securities |
18,640 |
16,420 |
19,345 |
17,212 |
||||||||||||
|
Corporate bond |
15,500 |
15,277 |
15,500 |
15,403 |
||||||||||||
|
Total investment securities available for sale |
$ |
780,762 |
$ |
710,046 |
$ |
841,472 |
$ |
774,203 |
||||||||
|
Investment securities held to maturity: |
||||||||||||||||
|
U.S. government-sponsored agencies |
25,000 |
23,896 |
40,000 |
38,875 |
||||||||||||
|
Mortgage-backed securities-residential (principally |
54,478 |
46,941 |
55,862 |
48,616 |
||||||||||||
|
Total investment securities held to maturity |
$ |
79,478 |
$ |
70,837 |
$ |
95,862 |
$ |
87,491 |
||||||||
|
Total |
$ |
860,240 |
$ |
780,883 |
$ |
937,334 |
$ |
861,694 |
||||||||
The following table presents the contractual maturities and yields of debt securities available for sale and held to maturity as of March 31, 2026. The weighted average yield is a computation of income within each maturity range based on the amortized cost of securities:
|
After 1 |
After 5 |
|||||||||||||||||||
|
But |
But |
After |
||||||||||||||||||
|
Within |
Within |
Within |
||||||||||||||||||
|
(Dollars in thousands) |
1 Year |
5 Years |
10 Years |
Years |
Total |
|||||||||||||||
|
Investment securities available for sale: |
||||||||||||||||||||
|
U.S. government-sponsored agencies |
$ |
- |
$ |
76,295 |
$ |
110,286 |
$ |
- |
$ |
186,581 |
||||||||||
|
- |
1.36 |
% |
1.83 |
% |
1.65 |
% |
||||||||||||||
|
Mortgage-backed securities-residential (A) |
50,264 |
8,511 |
10,261 |
422,732 |
491,768 |
|||||||||||||||
|
4.42 |
% |
2.29 |
% |
1.61 |
% |
3.69 |
% |
3.69 |
% |
|||||||||||
|
SBA pool securities |
- |
1,560 |
8,610 |
6,250 |
16,420 |
|||||||||||||||
|
- |
3.23 |
% |
1.91 |
% |
1.18 |
% |
1.72 |
% |
||||||||||||
|
Corporate bond |
- |
- |
15,277 |
- |
15,277 |
|||||||||||||||
|
- |
- |
6.32 |
% |
- |
6.32 |
% |
||||||||||||||
|
Total investments available for sale |
$ |
50,264 |
$ |
86,366 |
$ |
144,434 |
$ |
428,982 |
$ |
710,046 |
||||||||||
|
Weighted-average yield (A) |
4.42 |
% |
1.48 |
% |
2.23 |
% |
3.65 |
% |
3.12 |
% |
||||||||||
|
Investment securities held to maturity: |
||||||||||||||||||||
|
U.S. government-sponsored agencies |
- |
25,000 |
- |
- |
25,000 |
|||||||||||||||
|
1.64 |
% |
- |
- |
1.64 |
% |
|||||||||||||||
|
Mortgage-backed securities-residential (B) |
- |
- |
- |
54,478 |
54,478 |
|||||||||||||||
|
- |
- |
- |
2.13 |
% |
2.13 |
% |
||||||||||||||
|
Total investments held to maturity |
$ |
- |
$ |
25,000 |
$ |
- |
$ |
54,478 |
79,478 |
|||||||||||
|
1.64 |
% |
- |
2.13 |
% |
1.98 |
% |
||||||||||||||
|
Total |
$ |
50,264 |
$ |
111,366 |
$ |
144,434 |
$ |
483,460 |
$ |
789,524 |
||||||||||
|
Weighted-average yield (A) |
4.42 |
% |
1.51 |
% |
2.23 |
% |
3.48 |
% |
3.01 |
% |
||||||||||
(A)
Weighted-average yields are based on amortized cost with effective yields weighted for the contractual maturity of each security.
(B)
Shown using stated final maturity.
OTHER INCOME: The following table presents other income, excluding income from wealth management services, which is summarized and discussed subsequently:
|
For the Three Months Ended March 31, |
Change |
|||||||||||
|
(In thousands) |
2026 |
2025 |
2026 vs 2025 |
|||||||||
|
Service charges and fees |
$ |
1,359 |
$ |
1,112 |
$ |
247 |
||||||
|
Bank owned life insurance |
345 |
371 |
(26 |
) |
||||||||
|
Loan fee income |
3,844 |
989 |
2,855 |
|||||||||
|
Gain on sale of loans (mortgage banking) |
72 |
63 |
9 |
|||||||||
|
Gain on sale of SBA loans |
403 |
302 |
101 |
|||||||||
|
Corporate advisory fee income |
69 |
90 |
(21 |
) |
||||||||
|
Other income |
167 |
297 |
(130 |
) |
||||||||
|
Loss on securities sale |
(81 |
) |
- |
(81 |
) |
|||||||
|
Fair value adjustment for CRA equity security |
(84 |
) |
195 |
(279 |
) |
|||||||
|
Total other income (excluding wealth management income) |
$ |
6,094 |
$ |
3,419 |
$ |
2,675 |
||||||
The Company recorded total other income, excluding wealth management fee income, of $6.1 million for the first quarter of 2026 compared to $3.4 million for the same 2025 period, reflecting an increase of $2.7 million. The increase was primarily due to increases in loan fee income and service charges and fees.
Service charges and fee income increased $247,000 to $1.4 million during the quarter ended March 31, 2026 from $1.1 million for the same period in 2025 reflecting an increase in our commercial client base, which generated higher fee activity.
The Company provides loans that are partially guaranteed by the SBA to provide working capital and/or finance the purchase of equipment, inventory or commercial real estate that could be used for start-up businesses. All SBA loans are underwritten and
documented as prescribed by the SBA. The Company generally sells the guaranteed portion of the SBA loans in the secondary market and retains the non-guaranteed portion of SBA loans in the loan portfolio. The Company recorded a gain on the sale of SBA loans of $403,000 and $302,000 for the quarters ended March 31, 2026 and 2025, respectively. The Company continues to see pressure from market volatility resulting in lower sale premiums and origination volumes associated with SBA loans.
The Company recorded corporate advisory fee income for the first quarter of 2026 of $69,000 compared to $90,000 for the same period ended March 31, 2025. Income from the SBA programs, and corporate advisory fee income are dependent on volume, and may vary from quarter to quarter.
For the quarter ended March 31, 2026, income from the sale of newly originated residential mortgage loans was $72,000 compared to $63,000 for the same period in 2025. While the interest rate environment has improved following rate reductions by the Federal Reserve, residential mortgage activity continues to be constrained by limited housing inventory and affordability considerations, which have tempered both refinancing and home purchase volumes.
Loan fee income increased to $3.8 million for the first quarter of 2026 as compared to $989,000 for the quarter ended March 31, 2025. Loan fee income included a gain of $2.6 million and a loss of $415,000 recorded by the Equipment Finance Division related to equipment transfers to lessees upon the termination of leases for the first quarter of 2026 and 2025, respectively. The period-over-period change was primarily driven by differences in the volume and timing of lease terminations and the underlying fair value of the equipment at the end of the lease term, which can vary based on market conditions and asset-specific factors. Additionally, the Company recorded $758,000 of unused commercial line fees for the quarter ended March 31, 2026 compared to $932,000 for the same 2025 period. Letter of credit fees totaled $342,000 for the quarter ended March 31, 2026 as compared to $123,000 for the same period in 2025. Letter of credit fee income increased as a result of the Company's expansion into the metro New York area, which has driven higher utilization of trade finance products among a growing commercial client base.
The Company completed a security sale of $97.0 million resulting in a loss of $81,000 as part of a portfolio repositioning completed during the first three months of 2026.
The Company recorded an $84,000 negative fair value adjustment and a $195,000 positive fair value adjustment for CRA equity securities in the first quarters of 2026 and 2025, respectively. The negative fair value adjustment during the first quarter of 2026 was due to an increase in medium-term rates during the first quarter of 2026.
OPERATING EXPENSES: The following table presents the components of operating expenses for the periods indicated:
|
For the Three Months Ended March 31, |
Change |
|||||||||||
|
(In thousands) |
2026 |
2025 |
2026 vs 2025 |
|||||||||
|
Compensation and employee benefits |
$ |
39,365 |
$ |
35,879 |
$ |
3,486 |
||||||
|
Premises and equipment |
6,858 |
6,154 |
704 |
|||||||||
|
FDIC assessment |
1,388 |
855 |
533 |
|||||||||
|
Other Operating Expenses: |
||||||||||||
|
Professional and legal fees |
1,554 |
1,190 |
364 |
|||||||||
|
Trust department expense |
1,180 |
1,043 |
137 |
|||||||||
|
Telephone |
379 |
430 |
(51 |
) |
||||||||
|
Loan expense |
556 |
433 |
123 |
|||||||||
|
Amortization of intangible assets |
244 |
272 |
(28 |
) |
||||||||
|
Advertising |
267 |
154 |
113 |
|||||||||
|
Other |
3,649 |
3,030 |
619 |
|||||||||
|
Total operating expenses |
$ |
55,440 |
$ |
49,440 |
$ |
6,000 |
||||||
Operating expenses for the quarter ended March 31, 2026 and 2025 totaled $55.4 million and $49.4 million, respectively, reflecting an increase of $6.0 million, or 12 percent. Increased operating expenses for the three months ended March 31, 2026 were principally attributable to the Company's ongoing expansion into New York City and Long Island, in addition to annual merit increases. The addition of production teams in Long Island, including the opening of two new Long Island offices during the latter half of 2025, and the expansion of our equipment financing team, also contributed to the growth in premises and equipment and other operating expenses. FDIC assessment expense increased for the three months ended March 31, 2026 due primarily to higher assessment rates implemented by the FDIC and an increase in the Bank's average total assets subject to assessment. Our expansion into New York City and Long Island resulted in increased advertising fees for the three months March 31, 2026. The increase in professional and legal fees was partially due to expenses related to the subordinated debt redemption and the issuance of preferred stock during the
first quarter of 2026. The increase in loan expense for the three-month period ended March 31, 2026 was primarily related to the workout of several problem loans.
WEALTH MANAGEMENT DIVISION: This division includes: investment management services provided for individuals and institutions; personal trust services, including services as executor, trustee, administrator, custodian and guardian; and other financial planning, tax preparation and advisory services. Officers from the wealth management division are available to provide wealth management, trust and investment services at the Bank's headquarters in Bedminster, New Jersey, at private banking locations in Morristown, Princeton, Red Bank, Summit and Teaneck, New Jersey, in New York City and Long Island and at the Bank's subsidiary, PGB Trust & Investments of Delaware, in Greenville, Delaware.
The market value of the assets under management and/or administration ("AUM/AUA") was $13.1 billion at both March 31, 2026 and December 31, 2025, but grew by $1.3 billion, or 11 percent from $11.8 billion at March 31, 2025 due primarily to improved market conditions and new client inflows.
In the March 2026 quarter, the Wealth Management Division generated $16.5 million in fee income compared to $15.4 million for the March 2025 quarter, reflecting a 7 percent increase. The increase in fee income for the three months ended March 31, 2026 was due to strong client inflows driven by new accounts and client additions and solid equity market performance. New business inflows for the three months ended March 31, 2026 totaled $227 million, compared to $341 million for the three months ended March 31, 2025.
Operating expenses relative to the Wealth Management Division, for the three months ended March 31, 2026, was stable at $9.5 million as compared to $9.6 million for the first quarter of 2025. Expenses are in line with the Company's strategic plan.
The Wealth Management Division currently generates adequate revenue to support the salaries, benefits and other expenses of the wealth division and Management believes it will continue to do so as the Company grows organically and/or by acquisition. Management believes that the Bank generates adequate liquidity to support the expenses of the Wealth Management Division should it be necessary.
NONPERFORMING ASSETS: Loans past due in excess of 90 days and still accruing, nonaccrual loans, and other real estate owned are considered nonperforming assets.
The following table sets forth asset quality data as of the dates indicated:
|
As of |
||||||||||||||||||||
|
March 31, |
December 31, |
September 30, |
June 30, |
March 31, |
||||||||||||||||
|
(Dollars in thousands) |
2026 |
2025 |
2025 |
2025 |
2025 |
|||||||||||||||
|
Loans past due 90 days or more and still accruing |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
||||||||||
|
Nonaccrual loans |
59,321 |
68,243 |
84,142 |
114,958 |
97,170 |
|||||||||||||||
|
Other real estate owned |
- |
- |
- |
- |
- |
|||||||||||||||
|
Total nonperforming assets |
$ |
59,321 |
$ |
68,243 |
$ |
84,142 |
$ |
114,958 |
$ |
97,170 |
||||||||||
|
Performing modifications (A)(B) |
$ |
85,835 |
$ |
95,266 |
$ |
101,501 |
$ |
111,962 |
$ |
63,259 |
||||||||||
|
Loans past due 30 through 89 days and still accruing |
$ |
47,053 |
$ |
26,555 |
$ |
28,817 |
$ |
15,522 |
$ |
28,323 |
||||||||||
|
Loans subject to special mention |
$ |
75,935 |
$ |
51,027 |
$ |
56,534 |
$ |
86,907 |
$ |
75,248 |
||||||||||
|
Classified loans |
$ |
90,583 |
$ |
118,912 |
$ |
134,982 |
$ |
145,783 |
$ |
142,273 |
||||||||||
|
Individually evaluated loans |
$ |
59,321 |
$ |
68,243 |
$ |
84,142 |
$ |
114,958 |
$ |
97,170 |
||||||||||
|
Nonperforming loans as a % of total loans (C) |
0.92 |
% |
1.09 |
% |
1.40 |
% |
1.98 |
% |
1.69 |
% |
||||||||||
|
Nonperforming assets as a % of total assets (C) |
0.77 |
% |
0.91 |
% |
1.13 |
% |
1.60 |
% |
1.36 |
% |
||||||||||
|
Nonperforming assets as a % of total loans |
0.92 |
% |
1.09 |
% |
1.40 |
% |
1.98 |
% |
1.69 |
% |
||||||||||
(A)
Amounts reflect modifications that are paying according to modified terms.
(B)
Excludes modifications included in nonaccrual loans of $19.6 million at March 31, 2026, $36.0 million at December 31, 2025, $37.6 million at September 30, 2025, $38.1 million at June 30, 2025 and $3.9 million at March 31, 2025.
(C)
Nonperforming loans/assets do not include performing modifications.
Loans past due 30 through 89 days and still accruing increased to $47.1 million, or 0.73 percent of total loans at March 31, 2026 compared to $26.6 million, or 0.42 percent, at December 31, 2025. The increase in past due loans at March 31, 2026 was primarily due to one multifamily loan relationship with an aggregate outstanding balance of $36.2 million. The persistent nature of inflationary pressures have presented challenges for certain borrowers as operating expenses, including insurance, utilities and maintenance costs continue to rise. The decrease in nonperforming assets and individually evaluated loans during the first three months of 2026 was driven by the liquidation of one commercial loan with a balance of $9.6 million. Multifamily loans represented approximately 53 percent of nonperforming assets as of March 31, 2026. The decrease in performing modifications was primarily related to two multifamily loans of $12.8 million that are no longer classified as loan modifications. The increase in special mention loans was primarily due to the previously mentioned $36.2 million multifamily relationship. The increase was partially offset by multifamily loans of $12.8 million that are no longer classified as special mention. The decrease in classified loans was primarily due to one multifamily relationship of $16.7 million and the liquidation of the above mentioned commercial loan of $9.6 million that are no longer classified as substandard as of March 31, 2026.
PROVISION FOR CREDIT LOSSES: The provision for credit losses was $7.3 million and $4.5 million for the first quarters of 2026 and 2025, respectively. The allowance for credit losses ("ACL") was $67.0 million as of March 31, 2026, compared to $71.0 million at December 31, 2025. The provision for credit losses for the three months ended March 31, 2026 was attributable to loan growth of $184.1 million resulting in a required provision of $1.3 million. Additions to specific reserve balances required a provision of $6.0 million related to two loans. Net charge-offs totaled $11.3 million during the first quarter of 2026 compared to charge-offs of $2.3 million during the first quarter of 2025. Charge-offs consisted of $7.8 million related to the liquidation of one commercial and industrial relationship with an additional $3.5 million associated with the sale of a multifamily loan.
The ACL as a percentage of loans was 1.04 percent at March 31, 2026 compared to 1.14 percent at December 31, 2025. The decline in the ratio was primarily attributable to $11.3 million in net charge-offs recorded during the first quarter of 2026, of which $5.6 million of specific reserves were recorded in prior periods. In addition, the Company's ACL methodology incorporates forward-looking economic factors, and during the quarter the quantitative reserve reflected improved macroeconomic expectations further reducing the ACL. These reductions were partially offset by the aforementioned provision related to loan growth.
After considering charge-off activity, changes in portfolio risk characteristics, delinquency trends, economic conditions, and qualitative factors, Management believes the allowance remains adequate to absorb expected losses as of March 31, 2026. Management continues to closely monitor asset quality trends, including criticized and delinquent loan migration, and will adjust the ACL as conditions warrant. The ACL recorded on individually evaluated loans was $6.7 million at March 31, 2026 compared to $12.0 million as of December 31, 2025. Total individually evaluated loans were $59.3 million and $68.2 million as of March 31, 2026 and December 31, 2025, respectively. The general component of the allowance on loans collectively evaluated increased from $59.0 million at December 31, 2025 to $60.3 million at March 31, 2026.
A summary of the allowance for credit losses for the quarterly periods indicated follows:
|
March 31, |
December 31, |
September 30, |
June 30, |
March 31, |
||||||||||||||||
|
(Dollars in thousands) |
2026 |
2025 |
2025 |
2025 |
2025 |
|||||||||||||||
|
Allowance for credit losses: |
||||||||||||||||||||
|
Beginning of period |
$ |
71,039 |
$ |
68,642 |
$ |
81,770 |
$ |
75,150 |
$ |
72,992 |
||||||||||
|
Provision for credit losses (A) |
7,322 |
7,659 |
4,871 |
6,577 |
4,494 |
|||||||||||||||
|
(Charge-offs)/recoveries, net |
(11,335 |
) |
(5,262 |
) |
(17,999 |
) |
43 |
(2,336 |
) |
|||||||||||
|
End of period |
$ |
67,026 |
$ |
71,039 |
$ |
68,642 |
$ |
81,770 |
$ |
75,150 |
||||||||||
|
Allowance for credit losses as a % of |
1.04 |
% |
1.14 |
% |
1.14 |
% |
1.41 |
% |
1.31 |
% |
||||||||||
|
Collectively evaluated allowance for credit |
0.94 |
% |
0.94 |
% |
0.95 |
% |
1.06 |
% |
1.09 |
% |
||||||||||
|
Allowance for credit losses as a % of |
112.99 |
% |
104.10 |
% |
81.58 |
% |
71.13 |
% |
77.34 |
% |
||||||||||
(A)
Excludes provision of $5,000 at March 31, 2026, provision of $12,000 at December 31, 2025, a credit of $81,000 at September 30, 2025, provision of $9,000 at June 30, 2025, and a credit of $23,000 at March 31, 2025 related to off-balance sheet commitments.
The increase in the allowance for credit losses as a percentage of nonperforming loans was primarily due to a decrease in nonperforming loans of $8.9 million to $59.3 million at March 31, 2026, as compared to nonperforming loans of $68.2 million at December 31, 2025, partially offset by a decrease in the ACL of $4.0 million to $67.0 million at March 31, 2026. The decrease in nonperforming assets during the first quarter of 2026 was largely driven by the liquidation of one commercial loan with a balance of $9.6 million.
INCOME TAXES: Income tax expense for the quarter ended March 31, 2026 was $5.6 million as compared to $2.9 million for the same period in 2025. The increase in income tax expense reflected higher pretax income of $27.1 million for the quarter ended March 31, 2026 as compared to $14.9 million for the same period in 2025.
The effective tax rate for the three months ended March 31, 2026 was 28.3 percent compared to 27.3 percent for the same quarter in 2025.
CAPITAL RESOURCES: A solid capital base provides the Company with financial strength and the ability to support future growth and is essential to executing the Company's current strategic plan. The Company's capital strategy is intended to provide stability to expand its business, even in stressed environments. Quarterly stress testing is integral to the Company's capital management process.
The Company strives to maintain capital levels in excess of internal "triggers" and in excess of those considered to be well capitalized under regulatory guidelines applicable to banks and bank holding companies. Maintaining an adequate capital position supports the Company's goal of providing shareholders an attractive and stable long-term return on investment.
Capital increased as a result of net income of $14.2 million and the issuance of 30,000 shares of Series B Preferred Stock totaling $30.0 million for the three months ended March 31, 2026. These increases were partially offset by cash dividends of $879,000 and an increase in accumulated other comprehensive loss of $2.1 million during the first quarter of 2026. Total accumulated other comprehensive loss grew to $49.6 million as of March 31, 2026 ($51.8 million loss related to the available for sale securities portfolio partially offset by a $2.2 million gain on the cash flow hedges), as compared to $47.6 million at December 31, 2025.
The Company employs quarterly capital stress testing by modeling adverse case and severely adverse case scenarios. In the most recent completed stress test based on December 31, 2025 financial information, under the severely adverse case, and no growth scenarios, the Bank remains well capitalized over a two-year stress period.
Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios of Total, Common Equity Tier 1 and Tier 1 capital (each as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). At March 31, 2026 and December 31, 2025, all of the Bank's capital ratios remain above the levels required to be considered "well capitalized" and the Company's capital ratios remain above regulatory requirements. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based, common equity Tier I and Tier I leverage ratios as set forth in the table below.
The Bank's regulatory capital amounts and ratios are presented in the following table:
|
To Be Well |
For Capital |
|||||||||||||||||||||||||||||||||||||
|
Capitalized Under |
For Capital |
Adequacy Purposes |
||||||||||||||||||||||||||||||||||||
|
Prompt Corrective |
Adequacy |
Including Capital |
||||||||||||||||||||||||||||||||||||
|
Actual |
Action Provisions |
Purposes |
Conservation Buffer (A) |
|||||||||||||||||||||||||||||||||||
|
(Dollars in thousands) |
Amount |
Ratio |
Amount |
Ratio |
Amount |
Ratio |
Amount |
Ratio |
||||||||||||||||||||||||||||||
|
As of March 31, 2026: |
||||||||||||||||||||||||||||||||||||||
|
Total capital |
$ |
754,761 |
11.83 |
% |
$ |
637,792 |
10.00 |
% |
$ |
510,234 |
8.00 |
% |
$ |
669,682 |
10.50 |
% |
||||||||||||||||||||||
|
Tier I capital |
687,120 |
10.77 |
510,234 |
8.00 |
382,675 |
6.00 |
542,123 |
8.50 |
||||||||||||||||||||||||||||||
|
Common equity tier I |
687,061 |
10.77 |
414,565 |
6.50 |
287,006 |
4.50 |
446,455 |
7.00 |
||||||||||||||||||||||||||||||
|
Tier I capital |
687,120 |
9.02 |
380,711 |
5.00 |
304,569 |
4.00 |
304,569 |
4.00 |
||||||||||||||||||||||||||||||
|
As of December 31, 2025: |
||||||||||||||||||||||||||||||||||||||
|
Total capital |
$ |
807,580 |
12.64 |
% |
$ |
638,896 |
10.00 |
% |
$ |
511,117 |
8.00 |
% |
$ |
670,841 |
10.50 |
% |
||||||||||||||||||||||
|
Tier I capital |
735,931 |
11.52 |
511,117 |
8.00 |
383,338 |
6.00 |
543,062 |
8.50 |
||||||||||||||||||||||||||||||
|
Common equity tier I |
735,872 |
11.52 |
415,282 |
6.50 |
287,503 |
4.50 |
447,227 |
7.00 |
||||||||||||||||||||||||||||||
|
Tier I capital |
735,931 |
9.89 |
372,195 |
5.00 |
297,756 |
4.00 |
297,756 |
4.00 |
||||||||||||||||||||||||||||||
(A)
See footnote on following table.
The Company's regulatory capital amounts and ratios are presented in the following table:
|
To Be Well |
For Capital |
||||||||||||||||||||||||||||||
|
Capitalized Under |
For Capital |
Adequacy Purposes |
|||||||||||||||||||||||||||||
|
Prompt Corrective |
Adequacy |
Including Capital |
|||||||||||||||||||||||||||||
|
Actual |
Action Provisions |
Purposes |
Conservation Buffer (A) |
||||||||||||||||||||||||||||
|
(Dollars in thousands) |
Amount |
Ratio |
Amount |
Ratio |
Amount |
Ratio |
Amount |
Ratio |
|||||||||||||||||||||||
|
As of March 31, 2026: |
|||||||||||||||||||||||||||||||
|
Total capital |
$ |
771,704 |
12.08 |
% |
N/A |
N/A |
$ |
510,960 |
8.00 |
% |
$ |
670,634 |
10.50 |
% |
|||||||||||||||||
|
Tier I capital |
704,063 |
11.02 |
N/A |
N/A |
383,220 |
6.00 |
542,895 |
8.50 |
|||||||||||||||||||||||
|
Common equity tier I |
674,004 |
10.55 |
N/A |
N/A |
287,415 |
4.50 |
447,090 |
7.00 |
|||||||||||||||||||||||
|
Tier I capital |
704,063 |
9.24 |
N/A |
N/A |
304,891 |
4.00 |
304,891 |
4.00 |
|||||||||||||||||||||||
|
As of December 31, 2025: |
|||||||||||||||||||||||||||||||
|
Total capital |
$ |
811,375 |
12.68 |
% |
N/A |
N/A |
$ |
511,816 |
8.00 |
% |
$ |
671,759 |
10.50 |
% |
|||||||||||||||||
|
Tier I capital |
660,696 |
10.33 |
N/A |
N/A |
383,862 |
6.00 |
543,805 |
8.50 |
|||||||||||||||||||||||
|
Common equity tier I |
660,637 |
10.33 |
N/A |
N/A |
287,897 |
4.50 |
447,839 |
7.00 |
|||||||||||||||||||||||
|
Tier I capital |
660,696 |
8.87 |
N/A |
N/A |
298,086 |
4.00 |
298,086 |
4.00 |
|||||||||||||||||||||||
(A)
The Basel Rules require the Company and the Bank to maintain a 2.5% "capital conservation buffer" on top of the minimum risk-weighted asset ratios. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of (i) Common Equity Tier 1 to risk-weighted assets, (ii) Tier 1 capital to risk-weighted assets or (iii) total capital to risk-weighted assets above the respective minimum but below the capital conservation buffer face constraints on dividends, stock repurchases and discretionary bonus payments to executive officers based on the amount of the shortfall.
The Dividend Reinvestment Plan of Peapack-Gladstone Financial Corporation, or the "Reinvestment Plan," allows shareholders of the Company to purchase additional shares of common stock using cash dividends without payment of any brokerage commissions or other charges. Shareholders may also make voluntary cash payments of up to $200,000 per quarter to purchase additional shares of common stock. Voluntary share purchases in the Reinvestment Plan can be fulfilled through the Company's authorized but unissued shares and/or in the open market, at the discretion of the Company. All shares purchased during the quarter ended March 31, 2026 were purchased in the open market.
On March 26, 2026, the Board of Directors declared a regular cash dividend of $0.05 per share payable on May 21, 2026 to shareholders of record on May 7, 2026.
Management believes the Company's capital position and capital ratios were adequate at March 31, 2026. Further, Management believes the Company has sufficient equity to support its planned growth for the immediate future. The Company continually assesses other potential sources of capital to support future growth.
LIQUIDITY: Liquidity refers to an institution's ability to meet short-term requirements including funding of loans, deposit withdrawals and maturing obligations, as well as long-term obligations, including potential capital expenditures. The Company's liquidity risk management is intended to ensure the Company has adequate funding and liquidity to support its assets across a range of market environments and conditions, including stressed conditions. Principal sources of liquidity include cash, securities
available for sale, customer deposit inflows, loan repayments and secured borrowings. Other liquidity sources include loan and security sales and loan participations.
Management actively monitors and manages the Company's liquidity position and believes it is sufficient to meet future needs. Cash and cash equivalents, including interest-earning deposits, totaled $253.4 million at March 31, 2026. In addition, the Company had $710.0 million in securities designated as available for sale at March 31, 2026. These securities can be sold, or used as collateral for borrowings, in response to liquidity concerns. Available for sale and held to maturity securities with a carrying value of $477.6 million and $77.5 million as of March 31, 2026, respectively, were pledged to secure public funds and for other purposes required or permitted by law. However, only $45.7 million of pledged securities are encumbered. In addition, the Company generates significant liquidity from scheduled and unscheduled principal repayments of loans and mortgage-backed securities.
As of March 31, 2026, the Company had approximately $4.1 billion of external borrowing capacity available on a same day basis (subject to any practical constraints affecting the FHLB or FRB), which when combined with balance sheet liquidity provided the Company with 240 percent coverage of our uninsured/unprotected deposits.
The Company has a Board-approved Contingency Funding Plan. This plan provides a framework for managing adverse liquidity stress and contingent sources of liquidity. The Company conducts liquidity stress testing on a regular basis to ensure sufficient liquidity in a stressed environment. Management believes the Company's liquidity position and sources were adequate at March 31, 2026.
Peapack-Gladstone Financial Corporation published this content on May 08, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 08, 2026 at 16:15 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]