PEAPACK GLADSTONE FINANCIAL CORP (PGC)

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.

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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.

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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.

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EXECUTIVE SUMMARY: The following table presents certain key aspects of our performance for the three months ended March 31, 2026 and 2025.

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 opera

[Excerpt truncated for page length; source filing is linked above.]

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING STATEMENTS: This Annual Report on Form 10-K 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, strategies and expectations about new and existing programs and products, investments, relationships, financial results and operations, 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 actual results to differ materially from those contemplated by such forward-looking statements include, but are not limited to:

•
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;

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•
a decline in the economy, in particular in our New Jersey and New York market areas, including potential recessionary conditions;

•
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/or capital levels;

•
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;

•
increased 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 and brand recognition 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, 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 operations or earnings.

Except as may be required by applicable law or regulation, the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes 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 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 results of operations. This critical policy and its application are periodically reviewed with the Audit Committee and the Board of Directors.

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The allowance for credit losses is a valuation allowance, which represents 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 economic 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 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 the allowance for credit losses may be necessary due to economic, operating, regulatory and other conditions beyond the Company’s control.

The Company’s quantitative component of its allowance for credit losses for collectively evaluated loans is calculated with an economic forecast sourced from Moody’s. Management performed a hypothetical sensitivity analysis to understand the impact of changes in the economic forecast as a key input in our calculation of the allowance for credit losses for collectively evaluated loans. Within the various economic scenarios considered for this hypothetical sensitivity analysis, as of December 31, 2025, the quantitative estimate of the allowance for credit loss for collectively evaluated loans would increase by approximately $23 million under sole consideration of an adverse Moody’s economic forecast, which when stressed, resulted in the national unemployment rate increasing to 8.3 percent and negative growth for national GDP of approximately 2.6 percent. The hypothetical sensitivity calculation reflects the sensitivity of the modeled allowance estimate to macroeconomic forecast data but lacks other qualitative overlays and other qualitative adjustments that are part of the quarterly allowance calculation process. As such, this does not necessarily reflect the nature and extent of future changes in the allowance for reasons including increases or decreases in qualitative adjustments, changes in the risk profile, size and composition of the loan portfolio, changes in the severity of the macroeconomic scenario and the range of scenarios under management consideration.

OVERVIEW: The following discussion and analysis is intended to provide information about the financial condition and results of operations of the Company and its subsidiaries on a consolidated basis and should be read in conjunction with the consolidated financial statements and the related notes and supplemental financial information appearing elsewhere in this report.

For the year ended December 31, 2025, the Company recorded net income of $37.3 million, and diluted earnings per share of $2.10, compared to $33.0 million and $1.85, respectively, for 2024, reflecting increases of $4.3 million, or 13 percent, and $0.25 per share, or 14 percent, respectively. During 2025, the Company continued to focus on its expansion into the metro New York region. During 2025, the Company added six new production teams in Long Island. The Company's metro New York initiative has resulted in approximately $1.9 billion in new core relationship deposits, 31 percent of which is in noninterest-bearing accounts. The Company also grew the wealth management team through the addition of experienced advisers to help serve the expanded geography throughout the metro NY market.

The following are selected highlights from 2025:

•
At December 31, 2025, the market value of assets under management in our Wealth Management Division grew by $1.2 billion to $13.1 billion, reflecting an increase of 10 percent from $11.9 billion at December 31, 2024.

•
Wealth Management fee income was $63.2 million in 2025, which comprised 22 percent of the Company's total revenue for the year.

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•
Total loans increased by $741 million, or 13 percent, to $6.3 billion at December 31, 2025 compared to $5.5 billion at December 31, 2024.

•
At December 31, 2025, total C&I loans (including equipment finance loans) comprised 44 percent of the total loan portfolio.

•
Total deposits increased by $460 million, or 8 percent, to $6.6 billion at December 31, 2025 compared to $6.1 billion at December 31, 2024.

•
Noninterest-bearing demand deposits increased by $316 million, or 28 percent, to $1.4 billion as of December 31, 2025.

•
Core deposits (which includes noninterest-bearing demand and interest-bearing demand, savings and money market accounts) represent 94 percent of total deposits at December 31, 2025.

•
Book value per share increased 9 percent to $37.49 at December 31, 2025 from $34.45 at December 31, 2024.

•
The Company and the Bank’s capital ratios at December 31, 2025 remain well above regulatory well capitalized standards.

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EARNINGS SUMMARY: The following table presents certain key aspects of our performance for the years ended December 31, 2025, 2024 and 2023.

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(A) Dividend payout ratio is calculated by dividing cash dividends by net income.

(B) Net interest income on a fully tax equivalent basis, using a 21 percent federal income tax rate, as a percentage of total average interest-earning assets.

2025 compared to 2024

The Company recorded net income of $37.3 million and diluted earnings per share of $2.10 for the year ended December 31, 2025, compared to net income of $33.0 million and diluted earnings per share of $1.85 for the year ended December 31, 2024. These results produced a return on average assets of 0.52 percent and 0.50 percent for 2025 and 2024, respectively, and a return on average shareholders’ equity of 5.95 percent and 5.61 percent for 2025 and 2024, respectively.

The increase in net income for 2025 was principally driven by increased net interest income partially offset by increased provision for credit losses and increased operating expenses, which was principally attributable to the expansion of our private banking model that offers a single point of contact for all banking services into the metro New York City market. This strategy and 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 2025, deposits grew $460.0 million, which included $316.0 million in noninterest-bearing demand deposits.

NET INTEREST INCOME AND NET INTEREST MARGIN

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 interest paid on interest-bearing liabilities. Interest-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 the difference between the average yields earned on interest-earning assets and the average cost of interest-bearing liabilities (“net interest spread”) and the relative amounts of interest-earning assets and interest-bearing liabilities. Net interest margin ("NIM") is calculated as net interest income as a percent of total interest-earning assets. 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 levels of nonperforming assets.

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The following table compares the average balance sheets, interest rate spreads and net interest margins for the years ended December 31, 2025, 2024 and 2023 (on a fully tax-equivalent basis "FTE"):

(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 income tax rate.

(C)
Loans are stated net of unearned income and include nonaccrual loans.

(D)
Net interest income on an FTE basis as a percentage of total average interest-earning assets.

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(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 income tax rate.

(C)
Loans are stated net of unearned income and include nonaccrual loans.

(D)
Net interest income on an FTE basis as a percentage of total average interest-earning assets.

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(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 income tax rate.

(C)
Loans are stated net of unearned income and include nonaccrual loans.

(D)
Net interest income on an FTE basis as a percentage of total average interest-earning assets.

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The effect of volume and rate changes on net interest income (on an FTE basis) for the periods indicated are shown below:

2025 compared to 2024

Net interest income, on a fully tax-equivalent basis, increased $51.8 million, or 35 percent, in 2025 to $201.9 million compared to $150.1 million in 2024. The net interest margin ("NIM") was 2.84 percent and 2.32 percent for the years ended December 31, 2025 and 2024, respectively, an increase of 52 basis points year over year. Net interest income, on a fully tax-equivalent basis, and NIM improved primarily due to continued growth in lower-costing client deposit relationships, which were used to fund loan production and investment purchases and allowed less reliance on higher-costing deposit balances and borrowed funds. 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 by $625.4 million to $7.11 billion at December 31, 2025 compared to $6.48 billion at 2024. The increase was predominately driven by growth in the average balance of loans of $512.1 million, and investments of $147.8 million, partially offset by a decline in the average balance of interest earnings deposits of $34.5 million.

The increase in average balance of loans was primarily driven by an increase in commercial loans, residential and commercial mortgages, and installment loans, offset slightly by a decline in commercial construction. The average balance of commercial loans increased by $342.9 million to $2.56 billion in 2025 compared to $2.22 billion in 2024. The average balances of residential mortgages grew $56.8 million to $638.9 million for the year ended December 31, 2025 from $582.0 million in 2024. The average balances of commercial mortgages grew $41.4 million to $2.45 billion in 2025 compared to $2.41 billion in 2024. Additionally, the average balance of installment loans increased by $75.7 million to $146.6 million in 2025 as compared to $70.9 million in 2024. The increase in the average balance of loans was primarily a result of increasing loan demand from customers due to a lower interest rate environment, our expansion into the metro New York region and improving economic conditions.

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 during the year ended December 31, 2025 was $263.0 million with an average yield of 3.68 percent as compared to $297.4 million and an average yield of 4.59 percent for 2024. The decrease reflected cash used to fund loan originations and investment purchases. The decrease in the rate reflected the lower interest rate environment.

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The average yields earned on interest-earning assets for 2025 remained stable when comparing to 2024. The yield on interest-earning assets increased four basis points to 5.11 percent for the year ended December 31, 2025, when compared to 2024.

The increase in the average yield on total investments for the year ended December 31, 2025 compared to 2024 reflected purchases of higher-yielding securities in 2024 and 2025. The average yield on investments increased by 41 basis points to 3.16 percent for the year ended December 31, 2025 as compared to 2.75 percent for 2024.

The average yield on total loans for 2025 remained stable up four basis points to 5.51 percent for 2025 when compared to 5.47 percent for 2024. The average yield on residential mortgages increased 53 basis points to 4.48 percent for the year ended December 31, 2025, when compared to 3.95 percent for 2024. The average yield on commercial mortgages increased nine basis points to 4.56 percent for the year ended December 31, 2025, when compared to 2024. Mortgage-related yields rose in 2025 despite Federal Funds rate cuts, as rates remained elevated at the longer end of the yield curve, along with more seasoned lower-coupon mortgages being replaced with higher-yielding originations. The yield on commercial loans for the year ended December 31, 2025 decreased 28 basis points to 6.56 percent from 6.84 percent for the year ended December 31, 2024. The average yield on commercial loans decreased for 2025 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 December 31, 2025, 30 percent of all loans will reprice within one month, 35 percent within three months and 51 percent within one year.

The average balance of interest-bearing liabilities totaled $5.24 billion for 2025 representing an increase of $368.1 million, or 8 percent, from $4.87 billion in 2024. The increase in interest-bearing liabilities was primarily due to an increase in the average balance of interest-bearing deposits of $449.9 million to $5.12 billion in 2025 from $4.67 billion in 2024. This increase was partially offset by a decrease in overnight borrowings of $53.2 million to $12.1 million in 2025 from $65.3 million in 2024 and a decrease in subordinated debt of $27.6 million to $105.8 million in 2025 from $133.4 million in 2024.

The increase in the average balance of interest-bearing deposits was primarily due to an increase in the average balance of interest-bearing checking accounts of $424.2 million to $3.57 billion and money markets of $157.3 million to $999.9 million, partially offset by a decrease in the average balance of certificates of deposit of $67.2 million in 2025. The increase in interest-bearing checking deposits was principally attributable to our continued expansion into the metro New York region and client demand for FDIC insured products, which we can offer through a reciprocal deposit program. Our expansion into the metro New York market has allowed us to grow lower-cost, relationship deposits, while reducing the Company's reliance on overnight borrowings, brokered deposits and other high-cost funding sources.

The decrease in the average balance of borrowings from $65.3 million to $12.1 million for 2025 was driven by the growth in client deposits led by the Company's expansion into New York City, which were used to pay down borrowings.

For the years ended December 31, 2025 and 2024, the cost of interest-bearing liabilities was 3.09 percent and 3.67 percent, respectively, reflecting a decrease of 58 basis points. The decrease was driven by a decrease in the average cost of interest-bearing deposits of 54 basis points to 3.06 percent for 2025 and a decrease in the average cost of certificates of deposit of 74 basis points to 3.45 percent for 2025. The Company also benefited from lower short-term borrowing costs for the year ended December 31, 2025, which decreased by 139 basis points to 4.50 percent when compared to 5.89 percent for the same period in 2024. 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 classified as held to maturity are those securities that the Company has both the ability and intent to hold to maturity. These securities are carried at amortized cost. Investment securities classified as 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. Equity securities are carried at fair value with unrealized gains and losses recorded in non-interest income as incurred.

At December 31, 2025, the Company had investment securities held to maturity with an amortized cost of $95.9 million and an estimated fair value of $87.5 million compared with an amortized cost of $101.6 million and an estimated fair value of $88.7 million at December 31, 2024.

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At December 31, 2025, the Company had investment securities available for sale with an estimated fair value of $774.2 million compared with $784.5 million at December 31, 2024. A net unrealized loss (net of income tax) of $49.3 million and $72.1 million related to these securities were included in shareholders’ equity at December 31, 2025 and 2024, respectively.

The Company had one equity security (a CRA investment security) with a fair value of $13.5 million and $13.0 million at December 31, 2025 and 2024, respectively, with changes in fair value recognized in the Consolidated Statements of Income. The Company recorded an unrealized gain of $418,000 for the year ended December 31, 2025, as compared to a $125,000 unrealized loss for the year ended December 31, 2024. Additionally, the Company sold its Visa B shares, which resulted in a positive fair value adjustment to equity securities of $953,000 recognized in the Consolidated Statements of Income during the year ended December 31, 2024.

The amortized cost and fair value of investment securities held to maturity and available for sale at December 31, 2025, 2024 and 2023 are shown below:

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The following table presents the contractual maturities and yields of debt securities held to maturity and available for sale as of December 31, 2025. The weighted average yield is a computation of income within each maturity range based on the amortized cost of securities:

(A)
Shown using stated final maturity

LOANS: The loan portfolio represents the largest portion of the Company’s interest-earning assets and is the primary source of interest income. Loans are primarily originated in New Jersey and the boroughs of New York City and, to a lesser extent, Pennsylvania. The Company also offers equipment financing loan and leases that are originated nationally. As of December 31, 2025, 44 percent of the total loan portfolio consisted of C&I loans (including equipment financing), 30 percent of multifamily loans, 12 percent of commercial mortgages and 10 percent of residential mortgages.

Total loans were $6.3 billion and $5.5 billion at December 31, 2025 and 2024, respectively, an increase of $741.4 million, over the previous year. Residential loans increased $32.9 million to $647.8 million at December 31, 2025 from $614.8 million at December 31, 2024. Multifamily mortgage loans were $1.9 billion at December 31, 2025, an increase of $62.8 million, or 3 percent, when compared to $1.8 billion at December 31, 2024. During 2025, commercial mortgages increased $186.3 million to $774.4 million when compared to $588.1 million at December 31, 2024. The increase in commercial mortgages was bolstered by our focus on attracting clients that bring a full relationship to the Bank coupled with improved lender liquidity. Commercial loans, which includes equipment financing, totaled $2.7 billion at December 31, 2025. This was an increase of $332.3 million, or 14 percent, when compared to December 31, 2024. Commercial loan growth was driven by business expansion and capital investment.

The Company originates loans that are partially guaranteed by the SBA, to provide working capital and/or, finance the purchase of equipment, inventory or commercial real estate and that could be used for start-up and smaller 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, with the non-guaranteed portion held in the loan portfolio. During 2025, the Bank sold $19.2 million of the guaranteed portion of SBA loans into the secondary market. As of December 31, 2025, the balance of the non-guaranteed portion of SBA loans held on our balance sheet totaled $36.7 million, which, and was included in commercial loans.

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The following table presents the contractual repayments of the loan portfolio, by loan type, at December 31, 2025:

The following table presents the loans, by loan type, that have a fixed interest rate and an adjustable interest rate due after one year:

The Company has not made nor invested in subprime loans or “Alt-A” type mortgages.

The geographic breakdown of the multifamily portfolio, net of participated multifamily loans, at December 31, 2025 was as follows:

A further breakdown of the multifamily portfolio by county within each respective State was as follows:

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Principal types of owner occupied commercial real estate properties (by Call Report code), included in commercial mortgage loans on the balance sheet, at December 31, 2025 were:

Principal types of non-owner occupied commercial real estate properties (by Call Report code), at December 31, 2025 were as follows. These loans are included in commercial mortgage loans and commercial loans on the Company’s balance sheet.

At December 31, 2025 and 2024, the Bank had a concentration in commercial real estate loans as defined by applicable regulatory guidance. The following table presents such concentration levels at December 31, 2025 and 2024:

The 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.

GOODWILL: At both December 31, 2025 and 2024, goodwill was $36.2 million, primarily as a result of the acquisition of registered investment advisors related to the Company's Wealth Management Division. The Bank currently intends to continue to grow its wealth management business through growth in existing relationships, attraction of new clients and acquisitions. Future acquisitions could result in additional goodwill.

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DEPOSITS: The following table sets forth the details of total deposits as of December 31:

At December 31, 2025 and 2024, the Company reported total deposits of $6.6 billion and $6.1 billion, an increase of $460.0 million, or 8 percent. The Company’s strategy is to fund a majority of its loan growth with core deposits, which is an important factor in the generation of net interest income. The increase in deposits was primarily due to increases of $316.0 million in noninterest-bearing demand deposits, $114.2 million in interest-bearing checking and $120.0 million in money market deposits. The growth in new client relationships was due to our continued expansion into the metro New York City market; client demand for FDIC insured products offered through our reciprocal deposit program; a focus on providing high-touch client service; and a full array of treasury management products that support core deposit growth. The Company has also successfully focused on:

•
Growth in deposits associated with its private banking relationships and

•
Business and personal core deposit generation, particularly noninterest-bearing checking accounts.

The Company is a participant in the Reich & Tang demand Deposit Marketplace ("DDM") program and the Promontory Program. The Company uses these deposit sweep services to place customer funds into interest-bearing demand (checking) accounts at other participating banks. Customer funds are placed at one or more participating banks to ensure that each deposit customer is eligible for the full amount of FDIC insurance. As a participant, the Company receives an equal amount of reciprocal deposits from other participating banks. Such average reciprocal deposit balances were $1.92 billion and $1.31 billion for 2025 and 2024, respectively.

At December 31, 2025, uninsured/unprotected deposits were approximately $1.90 billion, or 29 percent of total deposits. This amount was adjusted to exclude $317 million of public fund deposit balances, which are fully-collateralized by securities and an FHLBNY letter of credit. The Company continues to leverage interest rate swaps to extend the duration to the matched deposits. At December 31, 2025, the Company had transacted pay fixed, receive floating interest rate swaps totaling $305.0 million in notional amount.

The following table sets forth information concerning the composition of the Company’s average balance of deposits and average interest rates paid for the following years:

At December 31, 2025, the Company carried $ 1.90 billion in deposits that exceed the FDIC insurance limit of $250,000. At December 31, 2025, we had no deposits that were uninsured for any reason other than being in excess of the maximum amount for federal deposit insurance.

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The following table shows the maturity for certificates of deposit of $250,000 or more as of December 31, 2025 (in thousands):

FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS: As part of our overall funding and liquidity management program, from time to time we borrow from the Federal Home Loan Bank (the "FHLB").

The Company had $73.3 million of overnight borrowings at the FHLB at a rate of 3.96 percent at December 31, 2025. At December 31, 2024, the Company had no overnight borrowings. The Company had $403.8 million of overnight borrowings at the FHLB at a rate of 5.62 percent at December 31, 2023.

At December 31, 2025, unused short-term or overnight borrowing commitments totaled $1.70 billion from the FHLB, $15.0 million from correspondent banks and $2.47 billion from the Federal Reserve Bank.

SUBORDINATED DEBT: In December 2017, the Company issued $35.0 million in aggregate principal amount of fixed-to-floating subordinated notes (the “2017 Notes”) to certain institutional investors. The 2017 Notes had a stated maturity of December 15, 2027, and an interest rate reset quarterly to a level equal to the then current three-month LIBOR rate plus 254 basis points, payable quarterly in arrears (which was 7.75 percent at December 31, 2024). The Company fully redeemed these notes plus $627,000 in unpaid interest on March 15, 2025. The remaining net issuance costs of $259,000 were written-off during the quarter ended March 31, 2025.

In December 2020, the Company issued $100.0 million in aggregate principal amount of fixed to floating subordinated notes (the “2020 Notes”) to certain institutional investors. The 2020 Notes are non-callable for five years, have a stated maturity of December 22, 2030, and had a fixed rate of 3.50 percent per year until December 22, 2025. From December 23, 2025 to the maturity date or early redemption date, the interest rate will reset quarterly to a level equal to the then current three-month SOFR plus 326 basis points, payable quarterly in arrears (which was 6.93 percent at December 31, 2025). Debt issuance costs incurred totaled $1.9 million and are being amortized to maturity. The Company fully redeemed these notes, plus any accrued and unpaid interest on March 2, 2026.

Subordinated debt is presented net of issuance cost on the Consolidated Statements of Condition. The subordinated debt issuances are included in the Company’s regulatory total capital amount and ratio.

ALLOWANCE FOR CREDIT LOSSES AND RELATED PROVISION: The allowance for credit losses ("ACL") was $71.0 million at December 31, 2025 compared to $73.0 million at December 31, 2024. The decrease in the ACL was primarily due to charge-offs of $26.9 million and changes in the application of the methodology used to calculate the ACL, partially offset by a provision for credit losses of $23.6 million during 2025.

Charge-offs consisted of $13.9 million related to several C&I loans and $13.0 million related to five multifamily property credits that were resolved during 2025. A significant portion of the charge-offs were tied to previously established specific reserves. As those reserves were utilized, both the related loan balances and the previously allocated specific reserves declined, limiting their incremental impact on the overall ACL. The resolutions of these credits reduced portfolio uncertainty and concentration risk. The provision for credit losses of $23.6 million was driven by loan growth of $741.4 million and the establishment of $25.5 million in specific reserves on certain relationships.

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At December 31, 2025, the ACL as a percentage of total loans outstanding was 1.14 percent compared to 1.32 percent at December 31, 2024. The decline in the ratio was driven by (i) the use of previously established specific reserves associated with the charge-offs noted above, (ii) strong loan growth during the year, which increased total loans outstanding, and (iii) the Company’s annual CECL model recalibration. The recalibration incorporated lower historical loss rates and reflected the current risk portfolio characteristics, resulting in a lower required general reserve.

Although charge-offs were higher in 2025, they were largely related to credits that had been previously identified and reserved and therefore did not represent a broad decline in overall portfolio credit quality. Credit metrics and risk rating trends across the remainder of the portfolio remained stable, and management's forward-looking economic assumptions at December 31, 2025 reflected a stable economic outlook.

Despite the lower ACL ratio, management believes the allowance for credit losses of $71.0 million, or 1.14 percent of total loans, appropriately reflects the current credit quality, portfolio composition, loan growth, and forward-looking economic conditions, and remains adequate to absorb expected credit losses as of December 31, 2025.

The provision for credit losses was $23.5 million for 2025, $7.5 million for 2024 and $14.1 million for 2023. Net charge-offs were significantly higher at $25.6 million, as compared to $392,000 for 2024, as the Company aggressively worked to reduce nonperforming asset balances in 2025. Net charge-offs for the year ended December 31, 2024 included $5.4 million in recoveries recorded on commercial loans in 2024.

In determining an appropriate amount for the allowance, the Bank segments and aggregates the loan portfolio based on common characteristics. The following segments have been identified:

a)
Primary Residential Mortgages. The Bank originates one- to four-family residential mortgage loans in the Tri-State area (New York, New Jersey and Connecticut), Pennsylvania and Florida. On a case-by-case basis, the Bank will lend in additional states. When reviewing residential mortgage loan applications, detailed verifiable information is gathered on income, assets, employment and a tri-merged credit report obtained from a credit repository that will determine total monthly debt obligations. Utilizing an independent appraisal from an approved appraisal management company, the Bank makes residential mortgage loans up to 80 percent of the appraised value. Maximum loan-to-value (“LTV”) is determined based on property type and loan amount. On primary residences and second home properties, LTVs range from a maximum of 80 percent for loan amounts to $2 million to 60 percent for loan amounts to $7.5 million. Loans greater than $7.5 million will also be considered based on the strength of the overall credit profile of the borrower. For investment properties, LTVs range from a maximum of 80 percent for loan amounts to $2 million to 65 percent for loan amounts to $5 million. Underwriting guidelines include (i) minimum credit report scores of 680 and (ii) a maximum debt to income ratio of 45 percent. The Bank may consider an exception to any guideline if there are strong compensating factors that mitigate any risk. Generally, the Bank retains in its portfolio residential mortgage loans with fixed-rate maturities of no greater than ten years, which then convert to annually adjusted floating rates. Community Development loans granted under the Affordable Housing Program are offered with 30-year maturities. Loans with longer maturities or lower credit scores are sold to secondary market investors. The Bank does not originate, purchase or carry any sub-prime mortgage loans.

Risk characteristics associated with primary residential mortgage loans typically involve major living or lifestyle changes to the borrower, including: unemployment or other loss of income; unexpected significant expenses, such as for catastrophic events; and divorce or death. In addition, residential mortgage loans that have adjustable rates could expose the borrower to higher debt service requirements in a rising interest rate environment. Further, real estate values could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential exposure for the Bank.

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b)
Junior Lien Loan on Residence (which include home equity lines of credit). The Bank provides junior lien loans (“JLL”) and revolving home equity lines of credit against one-to four-family properties in the Tri-State area. Junior lien loans are a revolving home equity line of credit. These loans are subordinate to a first mortgage which may be from another lending institution. The Bank requires that the mortgage securing the JLL be no lower than a second lien position. When reviewing the JLL application, the Bank collects detailed verifiable information regarding income, assets, employment and a credit report that determines total monthly debt obligations. The Bank uses an independent appraisal of the subject property on all applications. LTVs and combined LTVs are capped at 75 percent for home equity lines of credit if the property type is a primary residence. All applications for JLLs adhere to applicable underwriting standards and guidelines. Exceptions can be made to these guidelines with compensating factors that mitigate the risk associated with the exception. Primary risk characteristics associated with JLLs typically involve major living or lifestyle changes to the borrower are the same as noted above for Primary Residential Mortgages.

c)
Multifamily Loans. Multifamily loans are commercial mortgages on residential apartment buildings. Multifamily loans are expected to be repaid from the cash flows of the underlying property so the collective amount of rents must be sufficient to cover all operating expenses, maintenance, taxes and debt service. Increases in vacancy rates, interest rates or other changes in general economic and political conditions can have an impact on the borrower and their ability to repay the loan. Certain markets, such as the Boroughs of New York City, are rent regulated, and as such, feature rents that are below market rates. Historically, rent regulated properties have been characterized by relatively stable occupancy levels and longer-term tenants. It is noted, however, New York City rent regulated buildings have had an increased level of non-paying tenants with a very protracted eviction process, which has negatively impacted rent collections. As a loan asset class for many banks, multifamily loans historically have experienced much lower historical loss rates compared to other types of commercial lending, however, given the stress on the New York rent regulated buildings, it is not clear if this will continue.

The Bank’s loan policy allows loan to appraised value ratios of up to 75 percent and the overall portfolio average loan to value ratio was approximately 60 percent at December 31, 2025 based on appraisals at the time of origination or at renewal or if any update is required per regulations. The majority of all new originations have a ten-year maturity with a repricing of the interest rate after five years.

Multifamily loan terms include prepayment penalties and generally require that the Bank escrow for real estate taxes. Multifamily loans will typically have a minimum debt service coverage ratio that provides for an adequate cushion for unexpected or uncertain events and changes in market conditions. In the loan underwriting process, the Bank requires an independent appraisal and review, appropriate environmental due diligence and an assessment of the property’s condition.

Multifamily properties generally present a lower level of risk as compared to investment commercial real estate projects given that there are a larger number of tenants in the property. The repayment of loans secured by multifamily real estate is typically dependent upon the successful operation of the related real estate property. If the cash flows from the property are reduced (for example, if tenants stop paying rent, leases are not obtained or renewed, or a bankruptcy court modifies a lease term), the borrower’s ability to repay the loan may be impaired.

d) Owner-Occupied Commercial Real Estate Loans. The Bank provides mortgage loans for owner-occupied commercial real estate properties in the Tri-State area and Pennsylvania.

The terms and conditions of all commercial mortgage loans are tailored to the specific attributes of the borrower and any guarantors as well as the nature of the property and loan purpose.

With an owner-occupied property, a detailed credit assessment is made of the operating business since its ongoing success and profitability will be the primary source of repayment. While owner-occupied properties include the real estate as collateral, the risk assessment of the operating business is more similar to the underwriting of commercial and industrial loans (described below). The Bank evaluates factors such as, but not limited to, the expected sustainability of profits and cash flows, the depth and experience of management and ownership, the nature of competition, and the impact of forces like regulatory change and evolving technology.

Commercial mortgage loans are generally made with an initial fixed rate with periodic rate resets at five years over an underlying market index. Resets may not be automatic and are subject to re-approval. Commercial mortgage loan terms include prepayment penalties and generally require that the Bank escrow for real estate taxes. The Bank

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requires an independent appraisal, an assessment of the property’s condition, and appropriate environmental due diligence. With all commercial real estate loans, the Bank’s standard practice is to require a depository relationship.

e)
Investment Commercial Real Estate Loans. The Bank provides mortgage loans for properties managed as an investment property (non-owner-occupied) in the Tri-State area and Pennsylvania.

The terms and conditions of all commercial mortgage loans are tailored to the specific attributes of the borrower and any guarantors as well as the nature of the property and loan purpose. In the case of investment commercial real estate properties, the Bank reviews, among other things, the composition and mix of the underlying tenants, terms and conditions of the underlying tenant lease agreements, the resources and experience of the sponsor, and the condition and location of the subject property.

Commercial real estate loans are generally considered to have a higher degree of credit risk than multifamily loans as they may be dependent on the ongoing success and operating viability of a fewer number of tenants who are occupying the property and who may have a greater degree of exposure to various industry or economic conditions. To mitigate this risk, the Bank generally requires an assignment of leases, direct recourse to the owners, and a risk appropriate interest rate and loan structure. In underwriting an investment commercial real estate loan, the Bank evaluates the property’s historical operating income as well as its projected sustainable cash flows and generally requires a minimum debt service coverage ratio that provides for an adequate cushion for unexpected or uncertain events and changes in market conditions.

Commercial mortgage loans are generally made with an initial fixed rate with periodic rate resets at five years over an underlying market index. Resets may not be automatic and subject to re-approval. Commercial mortgage loan terms include prepayment penalties and generally require that the Bank escrow for real estate taxes. The Bank requires an independent appraisal, an assessment of the property’s condition, and appropriate environmental due diligence. With all commercial real estate loans, the Bank’s standard practice is to require a depository relationship.

f)
Commercial and Industrial Loans. The Bank provides lines of credit and term loans to operating companies for business purposes. The loans are generally secured by business assets such as accounts receivable, inventory, business vehicles and equipment as well as the stock of the company, if privately held. In addition, these loans may include commercial real estate as collateral to strengthen the Bank’s position and further mitigate risk. When underwriting business loans, among other things, the Bank evaluates the historical profitability and debt servicing capacity of the borrowing entity and the financial resources and character of the principal owners and guarantors.

Commercial and industrial loans are typically repaid by the cash flows generated by the borrower’s business. The primary risk characteristics are specific to the underlying business and its ability to generate sustainable profitability and resulting positive cash flows. Factors that may influence a business’ profitability include, but are not limited to, demand for its products or services, quality and depth of management, degree of competition, regulatory changes, and general economic conditions. Commercial and industrial loans are generally secured by business assets; however, the ability of the Bank to foreclose and realize sufficient value from the assets is often highly uncertain. To mitigate the risk characteristics of commercial and industrial loans, the Bank often requires more frequent reporting requirements from the borrower in order to better monitor its business performance.

g)
Leasing and Equipment Finance. Peapack Capital Corporation (“PCC”), a subsidiary of the Bank, offers a range of finance solutions nationally. PCC provides term loans and leases secured by assets financed for small, mid-size and large companies based in the U.S. Facilities tend to be fully drawn under fixed-rate terms. PCC serves a broad range of industries including transportation, manufacturing, heavy construction and utilities.

Asset risk in PCC’s portfolio is generally recognized through changes to loan income, or through changes to lease- related income streams due to fluctuations in lease rates. Changes to lease income can occur when the existing lease contract expires, the asset comes off lease, or the business seeks to enter a new lease agreement. Asset risk may also change depreciation, resulting from changes in the residual value of the operating lease asset or through impairment of the asset carrying value, which can occur at any time during the life of the asset.

Credit risk in PCC’s portfolio generally results from the potential default of borrowers or lessees, which may be driven by customer specific or broader industry-related conditions. Credit losses can impact multiple parts of the income statement including an increase in the provision for credit losses, loss of interest/lease/rental income and/or via higher costs and expenses related to the repossession, refurbishment, re-marketing and or re-leasing of assets.

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h) Construction. The Bank selectively provides commercial construction loans for properties located in the Tri-state area. Risks common to commercial construction loans are cost overruns, inaccurate estimates of the time to complete construction, changes in market demand for property, inadequate long-term financing arrangements and declines in real estate values. Changes in market demand for property could lead to longer marketing times resulting in higher carrying costs, declining values, and higher interest rates.

i) Consumer and Other. These are loans to individuals for household, family and other personal expenditures as well as obligations of states and political subdivisions in the U.S. This also represents all other loans that cannot be categorized in any of the previous mentioned loan segments. Consumer loans generally have higher interest rates and shorter terms than residential loans but tend to have higher credit risk due to the depreciating nature of the collateral securing the loan or in some cases the absence of collateral.

Management believes that the underwriting guidelines previously described adequately address the primary risk characteristics. Further, the Bank has dedicated staff and resources to monitor and collect on any potentially problematic loans.

The following table presents the credit loss experience, by loan type, during the years ended December 31: