Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS O F 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;
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.
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.
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.
EARNINGS SUMMARY : The following table presents certain key aspects of our performance for the years ended December 31, 2025, 2024 and 2023.
At or for the Years Ended December 31,
Change
(Dollars in thousands, except share and per share data)
Results of Operations:
Interest income
Interest expense
Net interest income
Provision for credit losses
Net interest income after provision for
credit losses
Wealth management fee income
Other income
Total operating expense
Income before income tax expense
Income tax expense
Net income
Per Share Data:
Basic earnings per common share
Diluted earnings per common share
Cash dividends declared
Book value end-of-period
Average common shares outstanding
Common stock equivalents (dilutive)
Diluted average common shares outstanding
Average equity to average assets
Return on average assets
Return on average equity
Dividend payout ratio (A)
Net interest margin (B)
Noninterest expenses to average assets
Noninterest income to average assets
Balance sheet data (at period end):
Total assets
Securities held to maturity
Securities available to sale
Total loans
Allowance for credit losses
Total deposits
Total shareholders’ equity
Cash dividends:
Common
Assets under management and/or
administration (market value)
$ 13.1 billion
$ 11.9 billion
$ 10.9 billion
$ 1.2 billion
$ 1.0 billion
At or for the Years Ended December 31,
Change
Asset quality ratios (at period end):
Nonperforming loans to total loans
Nonperforming assets to total assets
Allowance for credit losses to nonperforming loans
Allowance for credit losses to total loans
Net charge-offs to average loans plus other real estate owned
Liquidity and capital ratios:
Average loans to average deposits
Total shareholders’ equity to total assets
Selected Balance Sheet Ratios of the
Company:
Regulatory total capital to risk-weighted assets
Regulatory leverage ratio
Noninterest-bearing deposits to total deposits
Time deposits to total deposits
(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.
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"):
Year Ended December 31, 2025
Average
Income/Expense
Yield
(Dollars in thousands)
Balance
(FTE)
(FTE)
Assets:
Interest-earnings assets:
Investments:
Taxable (A)
Tax-exempt (A)(B)
Loans (B)(C):
Mortgages
Commercial mortgages
Commercial
Commercial construction
Installment
Home Equity
Other
Total loans
Federal funds sold
Interest-earning deposits
Total interest-earning assets
Noninterest-earning assets:
Cash and due from banks
Allowance for loan losses
Premises and equipment
Other assets
Total noninterest-earning assets
Total assets
Liabilities and shareholders’ equity:
Interest-bearing deposits:
Checking
Money markets
Savings
Certificates of deposit - retail and listing service
Subtotal interest-bearing deposits
Interest-bearing demand - brokered
Certificates of deposit - brokered
Total interest-bearing deposits
Borrowed funds
Finance lease liability
Subordinated debt
Total interest-bearing liabilities
Noninterest-bearing liabilities:
Demand deposits
Accrued expenses and other liabilities
Total noninterest-bearing liabilities
Shareholders’ equity
Total liabilities and shareholders’ equity
Net interest income
Net interest spread
Net interest margin (D)
Average balances for available for sale securities are based on amortized cost.
Interest income is presented on a tax-equivalent basis using a 21 percent federal income tax rate.
Loans are stated net of unearned income and include nonaccrual loans.
Net interest income on an FTE basis as a percentage of total average interest-earning assets.
Year Ended December 31, 2024
Average
Income/Expense
Yield
(Dollars in thousands)
Balance
(FTE)
(FTE)
Assets:
Interest-earnings assets:
Investments:
Taxable (A)
Tax-exempt (A)(B)
Loans (B)(C):
Mortgages
Commercial mortgages
Commercial
Commercial construction
Installment
Home Equity
Other
Total loans
Federal funds sold
Interest-earning deposits
Total interest-earning assets
Noninterest-earning assets:
Cash and due from banks
Allowance for loan losses
Premises and equipment
Other assets
Total noninterest-earning assets
Total assets
Liabilities and shareholders’ equity:
Interest-bearing deposits:
Checking
Money markets
Savings
Certificates of deposit - retail and listing service
Subtotal interest-bearing deposits
Interest-bearing demand - brokered
Certificates of deposit - brokered
Total interest-bearing deposits
Borrowed funds
Finance lease liability
Subordinated debt
Total interest-bearing liabilities
Noninterest-bearing liabilities:
Demand deposits
Accrued expenses and other liabilities
Total noninterest-bearing liabilities
Shareholders’ equity
Total liabilities and shareholders’ equity
Net interest income
Net interest spread
Net interest margin (D)
Average balances for available for sale securities are based on amortized cost.
Interest income is presented on a tax-equivalent basis using a 21 percent federal income tax rate.
Loans are stated net of unearned income and include nonaccrual loans.
Net interest income on an FTE basis as a percentage of total average interest-earning assets.
Year Ended December 31, 2023
Average
Income/Expense
Yield
(Dollars in thousands)
Balance
(FTE)
(FTE)
Assets:
Interest-earnings assets:
Investments:
Taxable (A)
Tax-exempt (A)(B)
Loans (B)(C):
Mortgages
Commercial mortgages
Commercial
Commercial construction
Installment
Home Equity
Other
Total loans
Federal funds sold
Interest-earning deposits
Total interest-earning assets
Noninterest-earning assets:
Cash and due from banks
Allowance for loan losses
Premises and equipment
Other assets
Total noninterest-earning assets
Total assets
Liabilities and shareholders’ equity:
Interest-bearing deposits:
Checking
Money markets
Savings
Certificates of deposit - retail and listing service
Subtotal interest-bearing deposits
Interest-bearing demand – brokered
Certificates of deposit – brokered
Total interest-bearing deposits
Borrowed funds
Finance lease liability
Subordinated debt
Total interest-bearing liabilities
Noninterest-bearing liabilities:
Demand deposits
Accrued expenses and other liabilities
Total noninterest-bearing liabilities
Shareholders’ equity
Total liabilities and shareholders’ equity
Net interest income
Net interest spread
Net interest margin (D)
Average balances for available for sale securities are based on amortized cost.
Interest income is presented on a tax-equivalent basis using a 21 percent federal income tax rate.
Loans are stated net of unearned income and include nonaccrual loans.
Net interest income on an FTE basis as a percentage of total average interest-earning assets.
The effect of volume and rate changes on net interest income (on an FTE basis) for the periods indicated are shown below:
Year Ended 2025 Compared with 2024
Year Ended 2024 Compared with 2023
Net
Net
Difference due to
Change In
Change In
Change In
Change In:
Income/
Income/
Income/
(In Thousands):
Volume
Rate
Expense
Volume
Rate
Expense
ASSETS:
Investments
Loans
Federal funds sold
Interest-earning deposits
Total interest income
LIABILITIES:
Checking
Money market
Savings
Certificates of deposit - retail
Certificates of deposit - brokered
Interest bearing demand brokered
Borrowed funds
Finance lease liability
Subordinated debt
Total interest expense
Net interest income
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.
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.
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:
(In thousands)
Amortized Cost
Estimated Fair Value
Amortized Cost
Estimated Fair Value
Amortized Cost
Estimated Fair Value
Investment securities - held to maturity:
U.S. government-sponsored
agencies
Mortgage-backed securities-residential (principally
U.S. government-sponsored entities)
Total investment securities -
held to maturity
Investment securities - available for sale:
U.S. government-sponsored
agencies
Mortgage-backed securities-residential (principally
U.S. government-sponsored entities)
SBA pool securities
Corporate bond
Total investment securities -
available for sale
Total investment securities
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:
After 1
After 5
But
But
After
Within
Within
Within
(Dollars in thousands)
1 Year
5 Years
10 Years
Years
Total
Investment securities - held to maturity:
U.S. government-sponsored agencies
Mortgage-backed securities-
residential (A)
Total investment securities - held to maturity
Investment securities - available for sale:
U.S. government-sponsored agencies
Mortgage-backed securities-
residential (A)
SBA pool securities
Corporate bond
Total investment securities - available for sale
Total investment securities
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.
The following table presents the contractual repayments of the loan portfolio, by loan type, at December 31, 2025:
After 5 But
Within
After 1 But
Within
After
(In thousands)
One Year
Within 5 Years
15 Years
15 Years
Total
Residential mortgage
Commercial mortgage (including multifamily)
Commercial loans (including equipment financing)
Commercial construction
Home equity lines of credit
Consumer and other loans
Total loans
The following table presents the loans, by loan type, that have a fixed interest rate and an adjustable interest rate due after one year:
Fixed
Adjustable
(In thousands)
Interest Rate
Interest Rate
Residential mortgage
Commercial mortgage (including multifamily)
Commercial loans (including equipment financing)
Commercial construction
Home equity lines of credit
Consumer and other loans
Total loans
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:
(Dollars in thousands)
New York
New Jersey
Pennsylvania
Other
Total Multifamily
A further breakdown of the multifamily portfolio by county within each respective State was as follows:
New Jersey
New York
Pennsylvania
Essex County
Bronx County
Philadelphia County
Hudson County
Kings County
Lehigh County
Union County
New York County
York County
Bergen County
Westchester County
Lycoming County
Morris County
Queens County
Bucks County
Monmouth County
All other NY counties
All other PA counties
All other NJ counties
Total
Total
Total
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:
(Dollars in thousands)
Industrial (including Warehouse)
Office Buildings/Office Condominiums
Retail Buildings/Shopping Centers
Medical Offices
Other Owner Occupied CRE Properties
Total Owner Occupied CRE Loans
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.
(Dollars in thousands)
Retail Buildings/Shopping Centers
Healthcare
Office Buildings/Office Condominiums
Mixed Use (Commercial/Residential)
Hotels and Hospitality
Medical Offices
Industrial (including Warehouse)
Mixed Use (Retail/Office)
Other Non-Owner Occupied CRE Properties
Total Non-Owner Occupied CRE Loans
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:
As of December 31,
Multifamily mortgage loans as a percent of total regulatory capital of the Bank
Non-owner occupied commercial real estate loans as a percent of
total regulatory capital of the Bank
Total CRE concentration
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.
DEPOSITS: The following table sets forth the details of total deposits as of December 31:
(Dollars in thousands)
Noninterest-bearing demand deposits
Interest-bearing checking
Savings
Money market
Certificates of deposit - retail
Certificates of deposit - listing service
Subtotal deposits
Interest-bearing demand - Brokered
Total deposits
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:
(Dollars in thousands)
Noninterest-bearing demand
Checking
Savings
Money markets
Certificates of deposit - retail and listing
service
Interest-bearing demand - brokered
Certificates of deposit - brokered
Total deposits
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.
The following table shows the maturity for certificates of deposit of $250,000 or more as of December 31, 2025 (in thousands):
Three months or less
Over three months through six months
Over six months through year
Over year
Total
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").
As of December 31,
(Dollars in thousands)
Amount outstanding at end of the year
Weighted average interest rate end of the year
Average daily balance during the year
Weighted average interest rate during the year
Maximum month-end balance during the year
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.
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:
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.
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.
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
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.
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.
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.
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.
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:
(Dollars in thousands)
Average loans outstanding
Allowance for credit losses at beginning of year (A)
Day one CECL adjustment
Loans charged-off during the period:
Residential mortgage
Commercial mortgage
Commercial
Home equity lines of credit
Consumer and other
Total loans charged-off
Recoveries during the period:
Residential mortgage
Commercial mortgage
Commercial
Home equity lines of credit
Consumer and other
Total recoveries
Net charge-offs/(recoveries)
Provision charge to expense
Allowance for credit losses at end of year
Ratios:
Allowance for credit losses/total loans (B)
Allowance for loans collectively evaluated/total loans (B)
Nonaccrual loans/total loans (B)
Allowance for credit losses/
total nonperforming loans
Net charge offs/average loans:
Residential mortgage
Commercial mortgage
Commercial
Home equity lines of credit
Consumer and other
Total net charge offs/average loans
Commencing on January 1, 2022, the allowance calculation is based on the CECL methodology. Prior to January 1, 2022, the calculation was based on the incurred loss methodology. Provision to roll forward the ACL excludes a credit of $83,000, a provision of $4,000, a credit of $65,000 and a provision of $450,000 at December 31, 2025, 2024, 2023 and 2022, respectively, related to off-balance sheet commitments.
The December 31, 2024, 2023, 2022 and 2021 ACL coverage ratios include PPP loans of $297,000, $1.0 million, $1.7 million and $13.8 million, respectively.
The following table shows the allocation of the allowance for credit losses and the percentage of each loan category, by collateral type, to total loans as of December 31, of the years indicated:
Loan
Loan
Loan
Loan
Loan
Category
Category
Category
Category
Category
To Total
To Total
To Total
To Total
To Total
(Dollars in thousands)
Loans
Loans
Loans
Loans
Loans
Residential
Commercial and other
Consumer and other
Total
The portion of the allowance for credit losses allocated to loans collectively evaluated for impairment, commonly referred to as general reserves, was $59.0 million at December 31, 2025 and $60.3 million at December 31, 2024. General reserves at December 31, 2025 represented 0.94 percent of loans collectively evaluated for impairment compared to 1.09 percent at December 31, 2024. Though loan balances grew in 2025, the overall general reserve coverage declined primarily due to the annual CECL model recalibration, which incorporated lower historical loss rates resulting in a lower required general reserve. The specific reserves on individually evaluated loans were $12.0 million at December 31, 2025 compared to $12.7 million at December 31, 2024.
The allowance for credit losses as a percentage of nonperforming loans increased to 104 percent due to a decrease in nonperforming loans. Nonperforming loans decreased from $100.2 million to $68.2 million impacted by $20.3 million attributed to one commercial loan relationship and $22.3 million to five multifamily loans that were resolved in 2025. Nonperforming loans are specifically evaluated for impairment. Also, the Company commonly records partial charge-offs of the excess of the principal balance over the fair value, less estimated costs to sell, of collateral for collateral-dependent impaired loans. As a result, the allowance for credit losses does not always change proportionately with changes in nonperforming loans. The Company charged off $26.6 million on loans identified as collateral-dependent individually evaluated loans during 2025. The Company charged off $5.4 million on loans identified as collateral-dependent impaired loans during 2024.
ASSET QUALITY : The following table presents various asset quality data at the dates indicated. These tables do not include loans held for sale.
December 31,
(Dollars in thousands)
Loans past due 30-89 days (A)
Modifications
Troubled debt restructured loans (B)
Loans past due 90 days or more and
still accruing interest
Nonaccrual loans (C)
Total nonperforming loans
Other real estate owned
Total nonperforming assets
Ratios:
Total nonperforming loans/total loans
Total nonperforming loans/total assets
Total nonperforming assets/total assets
Included $14.2 million related to three multifamily loans and $4.2 million for one equipment lease at December 31, 2025. Included $16.5 million and $4.5 million outstanding to U.S. governmental entities at December 31, 2023 and December 31, 2022, respectively. Included $6.9 million for one equipment lease principally due to administrative issues with the servicer and at the lessee/borrower at December 31, 2021.
On January 1, 2023, the Company adopted Accounting Standards Update 2022-02, which replaced the accounting and recognition of TDRs.
The increase in nonaccrual loans in 2024 was largely due to nine multifamily credits totaling $51.5 million at December 31, 2024. The increase in nonaccrual loans in 2023 was due to one freight credit totaling $23.5 million and three multifamily credits totaling $16.6 million at December 31, 2023.
At December 31, 2025, there were no commitments to lend additional funds to borrowers whose loans were classified as nonperforming.
LOAN MODIFICATIONS :
The Company will provide modifications, which may include other than insignificant delays in payment of amounts due, extension of the terms of the notes or reduction in the interest rates on the notes. In certain instances, the Company may grant more than one type of modification.
The following table presents the modified loans, by collateral type, at December 31, 2025:
December 31,
Number of
(Dollars in thousands)
Relationships
Primary residential mortgage
Multifamily property
Commercial and industrial
Total
The following table presents the modified loans, by collateral type, at December 31, 2024:
December 31,
Number of
(Dollars in thousands)
Relationships
Primary residential mortgage
Investment commercial real estate
Commercial and industrial
Total
The increase in modified loans was primarily due to modifications related to multifamily property credits during 2025. The increase in multifamily property modifications was driven by various relationships which were impacted by the limitations imposed on rent increases along with higher costs to maintain and operate rental properties. There were $160,000 in specific reserves on the multifamily property loans and $5.6 million in specific reserves on the commercial and industrial loans modified in 2025. Each of these loans was performing according to its modified terms as of December 31, 2025.
At December 31, 2025, there were fourteen modified loans totaling $37.2 million included in nonaccrual loans. At December 31, 2024, there were four modified loans of $3.6 million included in nonaccrual loans. At December 31, 2025, fourteen modified loans totaling $37.2 million were included in individually evaluated loans and had specific reserves of $5.8 million. At December 31, 2024, four modified loans of $3.6 million were included in individually evaluated loans and had a specific reserve of $86,000.
Except as disclosed, the Company did not have any potential problem loans at December 31, 2025 or December 31, 2024 that caused Management to have serious doubts as to the ability of such borrowers to comply with the present loan repayment terms and which may result in disclosure of such loans.
The following table presents individually evaluated loans, by collateral type, at December 31, 2025 and 2024:
December 31,
Number of
December 31,
Number of
(Dollars in thousands)
Relationships
Relationships
Primary residential mortgage
Junior lien loan on residence
Multifamily property
Investment commercial real estate
Commercial and industrial
Lease financing
Total
Specific reserves, included in the allowance for loan losses
Loans individually evaluated totaled $68.2 million at December 31, 2025 as compared to $99.8 million at December 31, 2024, all of which were nonaccrual. The decrease was primarily due to the resolution of an equipment financing relationship with a loan balance of $20.3 million and six multifamily loans with balances totaling $25.9 million, partially offset by $17.3 million of commercial and industrial loans and $4.8 million of multifamily loans that migrated to nonperforming status during 2025. Individually evaluated loans included fourteen modified loans at December 31, 2025, totaling $37.2 million. Individually evaluated loans included four modified loans totaling $3.6 million at December 31, 2024.
CONTRACTUAL OBLIGATIONS : Leases represent obligations entered into by the Company for the use of land and premises. The leases generally have escalation terms based upon certain defined indexes. Common area maintenance charges may also apply and are adjusted annually based on the terms of the lease agreements. See Notes 1 and 15 in Notes in Consolidated Financial Statements for further discussion on leases.
Purchase obligations represent legally binding and enforceable agreements to purchase goods and services from third parties and consist of contractual obligations under data processing service agreements. The Company also enters into various routine rental and maintenance contracts for facilities and equipment. These contracts are generally for one year.
The Company is a limited partner in a Small Business Investment Company (“SBIC”). As of December 31, 2025, the Company had unfunded commitments of $6.7 million for its investment in SBIC qualified funds.
OFF-BALANCE SHEET ARRANGEMENTS : The following table shows the amounts and expected maturities of significant commitments, consisting primarily of letters of credit, as of December 31, 2025.
Less Than
More Than
(In thousands)
One Year
1-3 Years
3-5 Years
5 Years
Total
Financial letters of credit
Performance letters of credit
Interest rate lock commitments-residential mortgages
Total letters of credit
Commitments under standby letters of credit, both financial and performance, do not necessarily represent future cash requirements, in that these commitments often expire without being drawn upon.
OTHER INCOME : The following table presents the major components of other income (excluding income from our wealth management operations, which is discussed separately):
Years Ended December 31,
Change
(In thousands)
Service charges and fees
Bank owned life insurance
Loan fee income
Gains on loans held for sale at fair
value (mortgage banking)
Gain on securities sale, net
Fair value adjustment for equity securities
Fee income related to loan level,
back-to-back swaps
(Loss)/gains on loans held for sale at
lower of cost or fair value
Gain on sale of SBA loans
Corporate advisory fee income
Other income
Total other income
2025 compared to 2024
The Company recorded total other income, excluding wealth management fee income, of $18.8 million in 2025, compared to $17.7 million for 2024, reflecting an increase of $1.2 million.
Service charges and fee income decreased in 2025 reflecting our shift from a retail‑oriented deposit base to a more commercially focused client portfolio, which typically generates lower 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 and 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, with the non-guaranteed portion of SBA loans held in the loan portfolio. Gain on sale of SBA loans for 2025 increased by $370,000 to $1.6 million for 2025 compared to $1.2 million in 2024. The 2025 period was positively affected by the greater demand for capital as small business confidence improved, resulting in an increase in origination volumes.
The Company recorded corporate advisory fee income of $820,000 for 2025 compared to $1.0 million for 2024. The Company completed one corporate advisory/investment banking acquisition transaction in the third quarter of 2025, as well as one transaction in the first quarter of 2024.
The Company recorded $492,000 related to loan level, back-to-back swaps in 2025 compared to no fee income for back-to-back swaps recorded in 2024. The program provides a borrower with a degree of interest rate protection on a variable-rate loan, while still providing an adjustable rate to the Company, thus helping to manage the Company's interest rate risk, while contributing to income. The Company expects back-to-back swap activity will continue to be minimal in the current rate environment. Income from the back-to-back swap, corporate advisory fee income and SBA programs are dependent on volume, and may vary from period to period.
Income from the sale of newly originated residential mortgages loans for 2025 decreased to $132,000 from $163,000 for the year ended December 31, 2025. The Company continues to be impacted by the industry wide slowdown in refinancing and home purchase activity due to inventory constraints and elevated mortgage rates.
Loan fee income included $3.5 million of unused commercial credit line fees in 2025 compared to $3.3 million for 2024. Additionally, the Company recorded $821,000 of income generated by the Equipment Finance Division related to equipment transfers to lessees in 2025 compared to $2.6 million for the same 2024 period.
Included in other income was a gain of $875,000 related to the termination of a lease agreement for a branch location that was no longer in use in 2025. Other income also included $1.2 million of SBIC income for the year ended December 31, 2025.
During the year ended December 31, 2025, the Company recorded a $418,000 positive fair value adjustment for CRA equity securities compared to a negative adjustment of $125,000 for 2024. The positive fair value adjustment was due to a decline in medium-term rates during 2025. Additionally, the Company sold its Visa B shares which resulted in a positive fair value adjustment to equity securities of $953,000 during the year ended December 31, 2024.
OPERATING EXPENSES : The following table presents the major components of operating expenses:
Years Ended December 31,
Change
(In thousands)
Compensation and employee benefits
Premises and equipment
FDIC assessment
Other operating expenses:
Professional and legal fees
Trust department expense
Telephone
Loan expense
Amortization of intangible assets
Advertising
Other operating expenses
Total operating expense
2025 compared to 2024
Operating expenses totaled $207.2 million in 2025, compared to $175.7 million in 2024, reflecting an increase of $31.5 million, or 18 percent. Increased operating expenses in 2025 were principally attributable to the Company's ongoing expansion into the metro New York City market, increased health insurance costs, and annual merit increases. The addition of production teams in Long Island and the expansion of our equipment financing team, which included the opening of two new Long Island offices and related computer and software equipment investments, contributed to an increase in premises and equipment expense in 2025. The increase in loan expense during 2025 was largely due to expenses related to the workout of several equipment finance and multifamily problem loans. FDIC assessment in 2025 increased $1.3 million compared to 2024, due primarily to higher assessment rates implemented by the FDIC and an increase in the Bank's average total assets subject to assessment.
INCOME TAXES : Income tax expense for the year ended December 31, 2025 was $15.0 million as compared to $12.0 million for 2024. The effective tax rate for the year ended December 31, 2025 was 28.6 percent as compared to 26.6 percent for the year ended December 31, 2024. The year ended December 2024 included the impact of discrete, favorable federal return to provision adjustments primarily related to the Company's state tax apportionment rate.
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 Strategic Plan. The Company’s capital strategy is intended to provide stability to expand its businesses, even in stressed environments. The Company employs quarterly capital stress testing - adverse case and severely adverse case. In the most recent stress test was completed using September 30, 2025 data, under severely adverse case, no growth scenarios, the Bank remains well capitalized over the two-year stress period.
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.
The Company’s capital position during 2025 was enhanced by net income of $37.3 million. Capital also improved as a result of a decline in accumulated other comprehensive loss of $18.9 million, net of tax. The decrease was primarily due to a $22.9 million gain related to the available for sale securities portfolio partially offset by a $4.0 million loss on cash flow hedges.
The increases in capital were partially offset by share repurchases of $5.4 million and cash dividends of $3.5 million during the year ended December 31, 2025.
At December 31, 2025, the Company’s GAAP capital as a percent of total assets was 8.75 percent. At December 31, 2025, the Company’s regulatory leverage, common equity tier 1, tier 1 and total risk-based capital ratios were 8.87 percent, 10.33 percent, 10.33 percent and 12.68 percent, respectively. At December 31, 2025, the Bank’s regulatory leverage, common equity tier 1, tier 1 and total risk-based capital ratios were 9.89 percent, 11.52 percent, 11.52 percent and 12.64 percent, respectively. At December 31, 2025, the Company’s and the Bank’s regulatory capital ratios were all above the ratios to be considered well capitalized under regulatory guidance.
As a result of the enacted Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies were required to develop a “Community Bank Leverage Ratio” (the ratio of a bank’s tangible equity capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes. The federal banking agencies set the minimum capital for the new Community Bank Leverage Ratio at 9 percent. The Bank did not opt into the CBLR and will continue to comply with the requirements under Basel III.
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.
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 December 31, 2025:
Total capital
(to risk-weighted assets)
Tier I capital
(to risk-weighted assets)
Common equity tier I
(to risk-weighted assets)
Tier I capital
(to average assets)
As of December 31, 2024:
Total capital
(to risk-weighted assets)
Tier I capital
(to risk-weighted assets)
Common equity tier I
(to risk-weighted assets)
Tier I capital
(to average assets)
The Basel Rules require the Company and the Bank to maintain a 2.5 percent “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) CET1 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 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 December 31, 2025:
Total capital
(to risk-weighted assets)
Tier I capital
(to risk-weighted assets)
Common equity tier I
(to risk-weighted assets)
Tier I capital
(to average assets)
As of December 31, 2024:
Total capital
(to risk-weighted assets)
Tier I capital
(to risk-weighted assets)
Common equity tier I
(to risk-weighted assets)
Tier I capital
(to average assets)
The Basel Rules require the Company and the Bank to maintain a 2.5 percent “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) CET1 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 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 shares of common stock. Voluntary share purchases in the Reinvestment Plan can be filled from the Company’s authorized but unissued shares and/or in the open market, at the discretion of the Company. All shares purchased through the Plan in both 2025 and 2024 were purchased in the open market.
Management believes the Company’s capital position and capital ratios are adequate at December 31, 2025. Further, Management believes the Company has sufficient common 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, temporary investments, 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 federal funds sold and interest-earning deposits, totaled $187.8 million at December 31, 2025. In addition, the Company had $774.2 million in securities designated as available for sale at December 31, 2025. 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 $553.2 million and $93.9 million as of December 31, 2025, respectively, were pledged to secure public funds and for other purposes required or permitted by law. However, only $46.6
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 December 31, 2025, the Company had approximately $3.63 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 244 percent coverage of our uninsured/unprotected deposits.
The Company has a Board-approved Contingency Funding Plan, which 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.
Peapack-Gladstone Financial Corporation is a separate legal entity from the Bank and must provide for its own liquidity to pay dividends to its shareholders, to repurchase shares of its common stock, satisfy debt obligations and for other corporate purposes. Peapack-Gladstone Financial Corporation’s primary source of income is dividends received from the Bank. The Bank’s ability to pay dividends is governed by applicable law. At December 31, 2025, Peapack-Gladstone Financial Corporation (unconsolidated basis) had liquid assets of $15.9 million.
Management believes the Company’s liquidity position and sources were adequate at December 31, 2025.
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, in Long Island and at the Bank’s subsidiary, PGB Trust & Investments of Delaware in Greenville, Delaware.
The following table presents certain key aspects of the Wealth Management Division's performance for the years ended December 31, 2025, 2024 and 2023.
Years Ended December 31,
Change
(In thousands)
Total fee income
Assets under management and/or
administration (AUM) (market value)
13.1 billion
11.9 billion
10.9 billion
The following table presents a roll forward of the Wealth Management Division's assets under management and/or administration for the years ended December 31, 2025, 2024 and 2023.
(In billions)
AUM
AUA
AUM
AUA
AUM
AUA
Beginning AUM/AUA
Inflows
Outflows
Net other
Net Flows
Market appreciation
Ending AUM/AUA
The following table presents a breakdown of the Wealth Management Division's assets under management and/or administration by investment class for the years ended December 31, 2025, 2024 and 2023.
Equities
Fixed income
Cash/other
Total
The following tables present a breakdown of the Wealth Management Division's fee income for the years ended December 31, 2025, 2024 and 2023.
Recurring
Nonrecurring
Brokerage
Total fees
Recurring
Nonrecurring
Total fees
Average bps managed
Average bps unmanaged
2025 compared to 2024
The market value of assets under management and/or administration (“AUM”) at December 31, 2025 and 2024 was $13.1 billion and $11.9 billion, respectively, an increase of 10 percent, primarily due to an improved equity market and modest net client inflows.
Wealth management fees increased $1.8 million, or 3 percent, to $63.2 million for the year ended December 31, 2025 from $61.5 million in 2024. The increase in fee income for the year ended December 31, 2025 was largely due to growth in AUM balances driven by the improved equity and bond markets during 2025. Nonrecurring fees were $2.5 million for the year ended December 31, 2025 as compared to $3.6 million for the same period in 2024. The prior year reflected elevated levels of trust and estate activity.
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 in future periods.
EFFECTS OF INFLATION AND CHANGING PRICES: The financial statements and related financial data presented herein have been prepared in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant impact on a financial institution’s performance than do general levels of inflation.
Item 7A. QUANTI TATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company’s Asset/Liability Committee (“ALCO”) is responsible for developing, implementing and monitoring asset/liability management strategies and advising the Board of Directors on such strategies, as well as the related level of interest rate risk. In this regard, interest rate risk simulation models are prepared on a quarterly basis. These models demonstrate balance sheet gaps and predict changes to net interest income and economic/market value of portfolio equity under various interest rate scenarios. In addition, these models, as well as ALCO processes and reporting, are subject to annual independent third-party review.
ALCO generally manages interest rate risk through the management of capital, cash flows and the duration of assets and liabilities, including sales and purchases of assets, as well as additions of wholesale borrowings and other sources of medium/longer-term funding.
The following strategies are among those used to manage interest rate risk:
Actively market C&I loans, which tend to have adjustable-rate features, and which generate customer relationships that can result in higher core deposit accounts;
Actively market equipment finance leases and loans, which tend to have shorter terms and higher interest rates than real estate loans;
Limit residential mortgage portfolio originations to adjustable-rate and/or shorter-term and/or “relationship” loans that result in core deposit and/or wealth management relationships;
Actively market core deposit relationships, which are generally longer duration liabilities;
Utilize medium-to-longer term certificates of deposit and/or wholesale borrowings to extend liability duration;
Utilize interest rate swaps to extend liability duration;
Utilize a loan level / back-to-back interest rate swap program, which converts a borrower’s fixed rate loan to adjustable rate for the Company;
Closely monitor and actively manage the investment portfolio, including management of duration, prepayment and interest rate risk;
Maintain adequate levels of capital; and
Utilize loan sales.
The interest rate swap program is administered by ALCO and follows procedures and documentation in accordance with regulatory guidance and standards as set forth in ASC 815 for cash flow hedges. The program incorporates pre-purchase analysis, liability designation, sensitivity analysis, correlation analysis, daily mark-to-market analysis and collateral posting as required. The Board is advised of all swap activity. In these swaps, the Company is receiving floating and paying fixed interest rates with total notional value of $305.0 million as of December 31, 2025.
In addition, the Company initiated a loan level / back-to-back swap program in support of its commercial lending business. Pursuant to this program, the Company extends a floating-rate loan and executes a floating to fixed swap with the borrower. At the same time, the Company executes a third-party swap, the terms of which fully offset the fixed exposure and, result in a final floating-rate exposure for the Company. As of December 31, 2025, $429.3 million of notional value in swaps were executed and outstanding with borrowers under this program.
As noted above, ALCO uses simulation modeling to analyze the Company’s net interest income sensitivity, as well as the Company’s economic value of portfolio equity under various interest rate scenarios. The models are based on the actual maturity and repricing characteristics of rate sensitive assets and liabilities. The models incorporate certain prepayment and interest rate assumptions, which management believes to be reasonable as of December 31, 2025. The models assume changes in interest rates without any proactive change in the balance sheet by management. In the models, the forecasted shape of the yield curve remained static as of December 31, 2025.
In an immediate and sustained 100 basis point increase in market rates at December 31, 2025, net interest income would decrease approximately 1.6 percent for year 1 and increase 2.2 percent for year 2, compared to a flat interest rate scenario. In an immediate and sustained 100 basis point decrease in market rates at December 31, 2025, net interest income would increase approximately 0.4 percent for year 1 and decrease 4.5 percent for year 2, compared to a flat interest rate scenario.
In an immediate and sustained 200 basis point increase in market rates at December 31, 2025, net interest income would decrease approximately 3.1 percent for year 1 and increase 4.3 percent for year 2, compared to a flat interest rate scenario. In an immediate and sustained 200 basis point decrease in market rates at December 31, 2025, net interest income for year 1 would increase approximately 0.7 percent, when compared to a flat interest rate scenario. In year 2, net interest income would decrease 9.4 percent, when compared to a flat interest rate scenario.
The Company's interest rate sensitivity models indicate the Company is liability sensitive as of December 31, 2025 and that net interest income would decline in a rising rate environment, but improve in a falling rate environment.
The table below shows the estimated changes in the Company’s economic value of portfolio equity (“EVPE”) that would result from an immediate parallel change in the market interest rates at December 31, 2025.
(Dollars in thousands)
Change In
Estimated Increase/
EVPE as a Percentage of
Interest
Decrease in EVPE
Present Value of Assets (B)
Rates
Estimated
EVPE
Increase/(Decrease)
(Basis Points)
EVPE (A)
Amount
Percent
Ratio (C)
(basis points)
Flat interest rates
EVPE is the discounted present value of expected cash flows from assets and liabilities.
Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.
EVPE ratio represents EVPE divided by the present value of assets.
Certain shortcomings are inherent in the methodologies used in determining interest rate risk. Simulation modeling requires making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the modeling assumes that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the information provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our net interest income and will differ from actual results.
Item 8. FINANCIAL STATEME NTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
Shareholders and the Board of Directors of Peapack-Gladstone Financial Corporation
Bedminster, New Jersey
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated statements of condition of Peapack-Gladstone Financial Corporation (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three‑year period ended December 31, 2025, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2025, based criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2045 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Allowance for Credit Losses – Qualitative Factors
As described in Note 1 to the consolidated financial statements, the Company accounts for credit losses under ASC 326, Financial Instruments – Credit Losses. ASC 326 requires the measurement of expected lifetime credit losses for financial assets measured at amortized cost at the reporting date. As of December 31, 2025, the balance of the allowance for credit losses on loans was $71.0 million.
Management employs a process and methodology to estimate the ACL on pooled loans that evaluated both the quantitative and qualitative factors. The methodology for evaluating quantitative factors includes pooling loans into portfolio segments for loans that share common characteristics.
For pooled loans, the Company utilizes a discounted cash flow (“DCF”) methodology to estimate credit losses. The DCF Model captures losses over the historical charge-off and prepayment cycle and applies those losses at a loan level over the remaining maturity of the loan. The model then calculates a historical loss rate using the average losses over the reporting period, which is then applied to each segment utilizing a standard reversion rate.
This loss rate is then supplemented with adjustments for reasonable and supportable forecasts of relevant economic indicators. Also included in the ACL are qualitative factors based on the risks present for each portfolio segment. These qualitative factors include the following: levels of and trends in delinquencies and impaired loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures and practices; experience, ability and depth of lending management and other relevant staffing and experience; industry conditions; and effects of changes in credit concentrations. These factors are susceptible to change, which may be significant. Management performed a hypothetical sensitivity analysis to understand the impact of changes in the economic forecast as a key input in their allowance for credit losses for collectively evaluated loans; the output of this analysis forms the maximum loss rate for the qualitative factors.
We identified auditing the qualitative component of the ACL on pooled loans in the commercial and industrial, multifamily, and investment commercial real estate loan segments as a critical audit matter because the methodology to determine the estimate of credit losses relies on management judgment for key assumptions that may materially affect the estimate. Performing audit procedures to evaluate the qualitative factors on the commercial and industrial, multifamily, owner-occupied commercial real estate and investment commercial real estate loan segments involved a high degree of auditor judgment and required significant effort, including the need to involve more experienced audit personnel including the use of internal specialists.
The primary procedures we performed to address this critical audit matter included:
Testing the effectiveness of controls over the evaluation of the ACL on pooled loans, including controls addressing:
Methodology and accounting policies related to the qualitative factors.
Data inputs, judgments and calculations used to determine the qualitative factors.
Information technology general controls and application controls.
Management’s review of the qualitative factors.
Substantively testing management’s process related to, the ACL on pooled loans, which included:
Evaluation of the Company’s ACL methodology and accounting policies related to pooled loans.
Testing the mathematical accuracy of the calculation.
Testing the completeness and accuracy of data used in the calculation including utilizing internal specialists to assist in testing the accuracy of the underlying data used to develop the historical loss rate.
Evaluation of the reasonableness of management’s judgments related to qualitative factors to determine if they are calculated to conform with management’s policies and were consistently applied period over period. Our evaluation considered evidence from internal and external sources and loan portfolio composition and performance.
/s/ Crowe LLP
Crowe LLP
We have served as the Company's auditor since 2006.
Livingston, New Jersey
March 11, 2026
CONSOLIDATED STATE MENTS OF CONDITION
December 31,
(In thousands, except share and per share data)
ASSETS
Cash and due from banks
Federal funds sold
Interest-earning deposits
Total cash and cash equivalents
Securities held to maturity (fair value $ 87,491 at December 31, 2025 and $ 88,650 at December 31, 2024)
Securities available for sale
CRA equity security, at fair value
FHLB and FRB stock, at cost (A)
Loans held for sale, at fair value
Loans held for sale, at lower of cost or fair value
Loans
Less: allowance for credit losses
Net loans
Premises and equipment
Accrued interest receivable
Bank owned life insurance
Goodwill
Other intangible assets
Finance lease right-of-use assets
Operating lease right-of-use assets
Deferred tax assets, net
Other assets
Total assets
LIABILITIES
Deposits:
Noninterest-bearing demand deposits
Interest-bearing deposits:
Checking
Savings
Money market accounts
Certificates of deposit - retail
Certificates of deposit - listing service
Subtotal deposits
Interest-bearing demand – Brokered
Total deposits
Short-term borrowings
Finance lease liabilities
Operating lease liabilities
Subordinated debt, net
Due to brokers
Accrued expenses and other liabilities
Total liabilities
SHAREHOLDERS’ EQUITY
Preferred stock ( no par value; authorized 500,000 shares)
Common stock (no par value; stated value $ 0.83 per share; authorized
42,000,000 shares; issued shares, 21,707,259 at December 31, 2025 and
21,535,856 at December 31, 2024; outstanding shares, 17,558,019 at
December 31, 2025 and 17,586,616 at December 31, 2024)
Surplus
Treasury stock at cost ( 4,149,240 shares at December 31, 2025 and
3,949,240 shares at December 31, 2024)
Retained earnings
Accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
(A) FHLB means "Federal Home Loan Bank" and FRB means "Federal Reserve Bank."
See accompanying notes to consolidated financial statements
CONSOLIDATED STAT EMENTS OF INCOME
Years Ended December 31,
(In thousands, except per share data)
INTEREST INCOME
Loans, including fees
Taxable securities
Tax-exempt securities
Interest-earning deposits
Total interest income
INTEREST EXPENSE
Savings and interest-bearing deposit accounts
Certificates of deposit
Borrowed funds
Finance lease liability
Subordinated debt
Subtotal – interest expense
Interest-bearing demand - brokered
Interest on certificates of deposits – brokered
Total interest expense
Net interest income before provision for credit losses
Provision for credit losses
Net interest income after provision for credit losses
OTHER INCOME
Wealth management fee income
Service charges and fees
Bank owned life insurance
Gain on loans held for sale at fair value (mortgage banking)
(Loss)/gain on loans held for sale at lower of cost or fair value
Fee income related to loan level, back-to-back swaps
Gain on sale of SBA loans
Corporate advisory fee income
Other income
Securities gains
Fair value adjustment for equity securities
Total other income
OPERATING EXPENSES
Compensation and employee benefits
Premises and equipment
FDIC insurance expense
Other operating expenses
Total operating expenses
Income before income tax expense
Income tax expense
Net income
EARNINGS PER SHARE
Basic
Diluted
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended December 31,
(In thousands)
Net income
Other comprehensive income/(loss):
Unrealized gains/(losses) on available for sale securities:
Unrealized gains/(losses) arising during the period
Reclassification adjustment for amounts
included in net income
Tax effect
Net of tax
Unrealized gains/(losses) on cash flow hedge:
Unrealized holding (losses)/gains arising during the period
Reclassification adjustment for amounts
included in net income
Tax effect
Net of tax
Total other comprehensive income/(loss)
Total comprehensive income
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CH ANGES IN SHAREHOLDERS’ EQUITY
Accumulated Other
Preferred
Common
Treasury
Retained
Comprehensive
(In thousands, except share and per share data)
Stock
Stock
Surplus
Stock
Earnings
(Loss)
Total
Balance at January 1, 2023
17,813,451 common shares outstanding
Net income 2023
Other comprehensive gain
Restricted stock units issued 434,000 shares
Restricted stock units repurchased on
vesting to pay taxes, ( 107,918 ) shares
Amortization of restricted stock units
Cash dividends declared on common stock
($ 0.20 per share)
Shares repurchase, ( 455,341 ) shares
Common stock options exercised, 2,600
net of 60 used to exercise and related
taxes benefits, 2,540 shares
Issuance of shares for Employee Stock
Purchase plan, 33,748 shares
Issuance of common stock for
acquisition, 19,197 shares
Balance at December 31, 2023
17,739,677 common shares outstanding
Accumulated Other
Preferred
Common
Treasury
Retained
Comprehensive
(In thousands, except share and per share data)
Stock
Stock
Surplus
Stock
Earnings
(Loss)
Total
Balance at January 1, 2024
17,739,677 common shares outstanding
Net income 2024
Other comprehensive loss
Restricted stock units issued 148,989 shares
Restricted stock units repurchased on
vesting to pay taxes, ( 36,625 ) shares
Amortization of restricted stock units
Modification of restricted stock units
distributed in cash
Cash dividends declared on common stock
($ 0.20 per share)
Shares repurchase, ( 300,000 ) shares
Issuance of shares for Employee Stock
Purchase Plan, 34,575 shares
Balance at December 31, 2024
17,586,616 common shares outstanding
Accumulated Other
Preferred
Common
Treasury
Retained
Comprehensive
Stock
Stock
Surplus
Stock
Earnings
(Loss)
Total
Balance at January 1, 2025
Net income 2025
Other comprehensive income
Restricted stock units issued 175,124 shares
Restricted stock units repurchased
on vesting to pay taxes, ( 42,284 ) shares
Amortization of restricted stock units
Cash dividends declared on common
stock ($ 0.20 per share)
Shares repurchase, ( 200,000 ) shares
Issuance of shares for Employee Stock
Purchase Plan, 38,563 shares
Equity adjustment related to REIT minority interest
Balance at December 31, 2025
17,558,019 common shares outstanding
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEM ENTS OF CASH FLOWS
Years Ended December 31,
(In thousands)
Operating activities:
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation
Amortization of premium and accretion of discount on
securities, net
Amortization of restricted stock
Amortization of intangible assets
Amortization of subordinated debt costs
Provision for credit losses
Stock-based compensation and employee stock purchase
plan expense
Deferred tax expense/(benefit)
Fair value adjustment for equity security
Gain on sale of securities, available for sale, net
Proceeds from sales of loans held for sale (A)
Loans originated for sale (A)
Gain on loans held for sale (A)
Loss/(gain) on loans held for sale at lower of cost or fair value
Loss on disposal of fixed assets
Gain on life insurance death benefit
Increase in cash surrender value of life insurance, net
(Increase)/decrease in accrued interest receivable
Increase in other assets
(Decrease)/increase in accrued expenses and other liabilities
Net cash provided by operating activities
Investing activities:
Principal repayments, maturities and calls of securities held
to maturity
Principal repayments, maturities and calls of securities available
for sale
Redemptions for FHLB & FRB stock
Sales of securities available for sale
Proceeds from sales of equity securities
Purchase of securities held to maturity
Purchase of securities available for sale
Purchase of FHLB & FRB stock
Proceeds from sale of loans held for sale at lower of cost or fair value
Net increase in loans, net of participations sold
Sales of OREO
Purchases of premises and equipment
Disposal of premises and equipment
Proceeds from life insurance death benefit
Net cash used in investing activities
Years Ended December 31,
Financing activities:
Net increase in deposits
Net increase/(decrease) in short-term borrowings
Dividends paid on common stock
Exercise of stock options, net of stock swaps
Restricted stock repurchased on vesting to pay taxes
Issuance of restricted stock
Redemption of subordinated debt
Equity adjustment related to REIT minority interest
Issuance of shares for employee stock purchase plan
Shares repurchased
Net cash provided by financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest
Income tax, net
Right-of-use asset obtained in exchange for operating lease liabilities
Includes mortgage loans originated with the intent to sell which are carried at fair value. In addition, includes the guaranteed portion of SBA loans, which are carried at the lower of cost or fair value.
See accompanying notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Organization: The consolidated financial statements of the Company are prepared on the accrual basis and include the accounts of the Company and its wholly-owned subsidiary, Peapack Private Bank & Trust (the “Bank”). The consolidated financial statements also include the Bank’s wholly-owned subsidiaries:
Peapack Capital Corporation (“PCC”)
Peapack-Gladstone Mortgage Group, Inc., which owns 99 percent of Peapack Ventures, LLC and 79 percent of Peapack-Gladstone Realty, Inc., a New Jersey real estate investment company
PGB Trust & Investments of Delaware, which owns one percent of Peapack Ventures, LLC
Peapack Ventures, LLC, which owns the remaining 21 percent of Peapack-Gladstone Realty, Inc.
Peapack-Gladstone Realty, Inc.
PGB Securities, Inc.
While the following footnotes include the collective results of the Company, the Bank and their subsidiaries, these footnotes primarily reflect the Bank’s and its subsidiaries’ activities. All significant intercompany balances and transactions have been eliminated from the accompanying consolidated financial statements.
Business: The Bank is a commercial bank that provides private banking services to businesses, non-profits and consumers. Wealth management services are also provided through its subsidiary, PGB Trust & Investments of Delaware. The Bank is subject to competition from other financial institutions and other financial service companies, is regulated by certain federal and state agencies and undergoes periodic examinations by those regulatory authorities.
Basis of Financial Statement Presentation : The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. In preparing the financial statements, Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenues and expenses and disclosure of contingent assets and liabilities as of the date of the statement of condition. Actual results could differ from those estimates.
Segment Information : The Company has two reportable segments as determined by the Chief Financial Officer, who is the designated Chief Operating Decision Maker (the "CODM"), based upon information provided about the Company's products and services offered, primarily distinguished between banking and wealth management services provided by the Bank's wealth management division. They are also distinguished by the level of information provided to the CODM, who uses such information to review performance of various components of the business. The CODM evaluates the financial performance of the Company's business segments such as by evaluating revenue streams, significant expenses, and budget to actual results in assessing the performance of the Company's segments and in the determination of allocating resources. The CODM uses revenue streams to evaluate product pricing and significant expense to assess performance of each segment to evaluate compensation of certain employees. Segment pretax profit or loss is used to assess the performance of the banking segment by monitoring the margin between interest revenue and interest expense. Segment pretax profit or loss is used to assess the performance of the Wealth Management Division by monitoring wealth management fee income and assets under management and/or administration ("AUM"). Loans and investments primarily provide the revenues in the banking operation and wealth management fee income provides the revenues for the Wealth Management Division. Interest expense, provision for credit losses, payroll and premises and equipment provide the significant expenses in the banking segment, while payroll, occupancy and trust expenses are the significant expenses in the Wealth Management Division. All operations are domestic.
The Banking segment includes: commercial (includes C&I and equipment financing), commercial real estate, multifamily, residential and consumer lending activities; treasury management services; C&I advisory services; escrow management; deposit generation; operation of ATMs; telephone and internet banking services; merchant credit card services and customer support sales.
The Wealth Management Division includes: investment management services for individuals and institutions; personal trust services, including services as executor, trustee, administrator, custodian; and other financial planning and advisory services. This segment also includes the activity from the Delaware subsidiary, PGB Trust and Investments of Delaware. The majority
of wealth management fees are collected on a monthly or quarterly basis and are calculated on either a fixed or tiered fee schedule, based upon the market value of AUM. Other non AUM-based revenues such as personal or fiduciary tax return preparation fees, executor fees, trust termination fees and/or financial planning and advisory fees are charged as services are rendered.
Cash and Cash Equivalents: For purposes of the statements of cash flows, cash and cash equivalents include cash and due from banks, interest-earning deposits and federal funds sold. Generally, federal funds are sold for one-day periods. Cash equivalents are of original maturities of 90 days or less. Net cash flows are reported for customer loan and deposit transactions and short-term borrowings with original maturities of 90 days or less.
Interest-Earning Deposits in Other Financial Institutions : Interest-earning deposits in other financial institutions mature within one year and are carried at cost.
Securities : Under Accounting Standards Update ("ASU") 2016-13, debt securities available-for-sale are measured at fair value and subject to impairment testing. When an available-for-sale debt securities is considered impaired, the Company must determine if the decline in fair value has resulted from a credit-related loss or other factors and then, (1) recognize an allowance for credit losses ("ACL") by a charge to earnings for the credit-related component (if any) of the decline in fair value, and (2) recognize in other comprehensive income (loss) any non-credit related components of the fair value change. If the amount of the amortized cost basis expected to be recovered increases in a future period, the valuation reserve would be reduced, but not more than the amount of the current existing reserve for that security.
Debt securities are classified as held to maturity and carried at amortized cost when Management has the positive intent and ability to hold them to maturity. Under ASU 2016-13, held-to-maturity securities in a loss position are evaluated to determine if the decline in fair value has resulted from a credit-related loss or other factors and then, recognize a provision to the ACL through a charge to earnings for the decline in fair value. The Company also has an investment in a Community Reinvestment Act ("CRA") investment fund, which is classified as an equity security.
Interest income includes amortization of purchase premiums and discounts. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated and premiums on callable debt securities, which are amortized to the earliest call date. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.
Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) Stock: The Bank is a member of the FHLB system. Members are required to own a certain amount of FHLB stock, based on the level of borrowings and other factors. FHLB stock is carried at cost, classified as a restricted security and periodically evaluated for impairment based on ultimate recovery of par value. Cash and stock dividends are reported as income.
The Bank is also a member of the Federal Reserve Bank of New York and required to own a certain amount of FRB stock. FRB stock is carried at cost and classified as a restricted security. Cash and stock dividends are reported as income.
Loans Held for Sale: Mortgage loans originated with the intent to sell in the secondary market are carried at fair value, as determined by outstanding commitments from investors.
Mortgage loans held for sale are generally sold with servicing rights released; therefore, no servicing rights are recorded. Gains and losses on sales of mortgage loans, shown as gain on sale of loans on the Statement of Income, are based on the difference between the selling price and the carrying value of the related loan sold.
SBA loans originated with the intent to sell in the secondary market are carried at the lower of cost or fair value. SBA loans are generally sold with the servicing rights retained. Gains and losses on the sale of SBA loans are based on the difference between the selling price and the carrying value of the related loan sold. Total SBA loans serviced totaled $ 132.5 million and $ 139.4 million as of December 31, 2025 and 2024, respectively. SBA loans held for sale, including gains and losses, totaled $ 4.8 million and $ 9.3 million as of December 31, 2025 and 2024, respectively. The servicing asset recorded was not material.
Loans originated with the intent to hold and subsequently transferred to loans held for sale are carried at the lower of cost or fair value. These are loans that the Company no longer has the intent to hold for the foreseeable future.
Loans: Loans that Management has the intent and ability to hold for the foreseeable future or until maturity are stated at the principal amount outstanding. Interest on loans is recognized based upon the principal amount outstanding. Loans are stated at face value, less purchased premium and discounts and net deferred fees. Loan origination fees and certain direct loan
origination costs are deferred and recognized on a level-yield method, over the life of the loan as an adjustment to the loan’s yield. The definition of recorded investment in loans includes accrued interest receivable and deferred fees/cost, however, for the Company’s loan disclosures, accrued interest and deferred fees/costs were excluded as the impact was not material.
Loans are considered past due when they are not paid within 30 days in accordance with contractual terms. The accrual of income on loans, including impaired loans, is discontinued if, in the opinion of Management, principal or interest is not likely to be paid in accordance with the terms of the loan agreement, or when principal or interest is past due 90 days or more. All interest accrued but not received for loans placed on nonaccrual status are reversed against interest income. Payments received on nonaccrual loans are recorded as principal payments, but do not diminish the borrower’s obligation. A nonaccrual loan is returned to accrual status only when interest and principal payments are brought current and future payments are reasonably assured, generally after the Bank receives contractual payments for a minimum of six consecutive months. Commercial loans are generally charged off, in whole or in part, after an analysis is completed which indicates that collectability of the full principal balance is in doubt. Consumer loans are generally charged off after they become 120 days past due. Subsequent payments are credited to income only if collection of principal is not in doubt. If principal and interest payments are brought contractually current and future collectability is reasonably assured, loans are returned to accrual status. Nonaccrual mortgage loans are generally charged off when the value of the underlying collateral does not cover the outstanding principal balance. The majority of the Company’s loans are secured by real estate in New Jersey, metropolitan New York and, to a lesser extent, Pennsylvania.
Allowance for Credit Losses: Current Expected Credit Losses ("CECL") requires the immediate recognition of estimated credit losses expected to occur over the estimated remaining life of the asset. The forward-looking concept of CECL requires loss estimates to consider historical experience, current conditions and reasonable and supportable economic forecasts.
The allowance for credit losses ("ACL") on loans held for investment is the combination of the allowance for loan losses and the reserve for unfunded loan commitments. The allowance for loan losses is reported as a reduction of the amortized cost basis of loans, while the reserve for unfunded loan commitments is included within "other liabilities" on the Consolidated Statements of Condition. The estimate of credit loss for unfunded loan commitments incorporates assumptions for both the likelihood and amount of funding over the estimated life of the commitments, including adjustments for current conditions and reasonable and supportable economic forecasts. Management periodically reviews and updates its assumptions for estimated funding rates. The amortized cost basis of loans does not include accrued interest receivable, which is included in "accrued interest receivable" on the Consolidated Statements of Condition. The "Provision for credit losses" on the Consolidated Statements of Income is a combination of the provision for credit losses and the provision for unfunded loan commitments.
ACL in accordance with CECL methodology
With respect to pools of similar loans that are collectively evaluated, an appropriate level of allowance is determined by portfolio segment using a discounted cash flow ("DCF") model. The DCF model captures losses over the historical charge-off and prepayment cycle and applies those losses at a loan level over the remaining maturity of the loan. The model then calculates a historical loss rate using the average losses over the reporting period, which is then applied to each segment utilizing a standard reversion rate. This loss rate is then supplemented with adjustments for reasonable and supportable forecasts of relevant economic indicators, including but not limited to unemployment rates, national gross domestic product and other indices. Forecast data is sourced from Moody's Analytics, a firm widely recognized for its research, analysis, and economic forecasts. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. Also included in the ACL are qualitative factors based on the risks present for each portfolio segment. These qualitative factors include: levels of and trends in delinquencies and impaired loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures and practices; experience, ability and depth of lending management and other relevant staffing and experience; industry conditions; and effects of changes in credit concentrations. These factors could also include social, political, economic, and terrorist events or activities. All of these factors are susceptible to change, which may be significant. As a result of this detailed process, the ACL results in two forms of allocations, quantitative and qualitative. These two components represent the total ACL deemed adequate to cover current expected credit losses in the loan portfolio.
When management identifies loans that do not share common risk characteristics (i.e., are not similar to other loans within a pool) they are evaluated on an individual basis. These loans are not included in the collective evaluation. For loans identified as having a likelihood of foreclosure or that the borrower is experiencing financial difficulty, a collateral dependent approach is used. These are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral. Under CECL, for collateral dependent loans, the Company has adopted the practical expedient method to measure the ACL based on the fair value of collateral. The ACL is calculated on an individual loan basis based on the shortfall
between the fair value of the loan's collateral, which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required.
The CECL methodology requires a significant amount of management judgment in determining the appropriate ACL. Several of the steps in the methodology involve judgment and are subjective in nature including, among other things: segmenting the loan portfolio; determining the amount of loss history to consider; selecting predictive econometric regression models that use appropriate macroeconomic variables; determining the methodology to forecast prepayments; selecting the most appropriate economic forecast scenario; determining the length of the reasonable and supportable forecast and reversion periods; estimating expected utilization rates on unfunded loan commitments; and assessing relevant and appropriate qualitative factors. In addition, the CECL methodology is dependent on economic forecasts, which are inherently imprecise and will change from period to period. Although the ACL is considered appropriate, there can be no assurance that it will be sufficient to absorb future losses.
In determining an appropriate amount for the allowance, the Bank segments and evaluates the loan portfolio based on Federal call report codes, which are based on collateral or purpose. The following portfolio classes have been identified:
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. Loans are secured by first liens on the primary residence or investment property. Primary risk characteristics associated with 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 major medical issues or 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 loss exposure for the Bank.
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. These loans are subordinate to a first mortgage, which may be from another lending institution. Primary risk characteristics associated with JLLs and home equity lines of credit typically involve: major living or lifestyle changes to the borrower; including unemployment or other loss of income; unexpected significant expenses, such as for major medical issues or catastrophic events; and divorce or death. In addition, home equity lines of credit typically are made with variable or floating interest rates, which 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 loss exposure for the Bank.
Multifamily . The Bank provides mortgage loans for multifamily properties (i.e., buildings which have five or more residential units). 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, property management and maintenance, taxes and debt service. Increases in vacancy rates, interest rates of other changes in general economic conditions can have an impact on the borrower and its ability to repay the loan.
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. Commercial real estate properties primarily include retail buildings/shopping centers, hotels, office/medical buildings and industrial/warehouse space. Some properties are mixed use as they are a combination of building types, such as a building with retail space on the ground floor and either residential apartments or office suites on the upper floors. Commercial real estate loans are generally considered to have a higher degree of credit risk 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 economic conditions.
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. Non-owner-occupied properties primarily include retail buildings/shopping centers, hotels, office/medical buildings and industrial/warehouse space. Some properties are considered "mixed use." Commercial real estate loans are generally considered to have a higher degree of credit risk 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 economic conditions.
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. Commercial and industrial loans are typically repaid by the cash flows generated by the borrower’s business operation. 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. To mitigate the risk characteristics of commercial and industrial loans, these loans often include commercial real estate as collateral and the Bank will often require more frequent reporting requirements from the borrower in order to better monitor its business performance. However, the ability of the Bank to foreclose and realize sufficient value from the assets is often highly uncertain.
Equipment finance and Leasing. PCC offers a wide range of equipment finance solutions nationally and goes to market through capital markets, intermediary, vendor and direct platforms. PCC provides term loans and leases secured by assets financed for U.S. based companies and governments. Payment terms are typically payable in monthly or quarterly installments under fixed-rate terms. Lease transactions may contain renewal or purchase options that allow the lessee options at the end of the lease term. PCC estimates the expected residual value of the leased property at lease inception by considering both internal and third party valuations and may obtain partial or full residual value guarantees to reduce its residual asset risk. PCC serves a broad range of industries including transportation, manufacturing, medical, construction and utilities.
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 loss of interest/lease/rental income and/or higher costs and expenses related to the repossession, refurbishment, re-marketing and or re-leasing of assets. PCC's ongoing risk management strategy for residual assets includes regular reviews of estimated residual value, which may result in an impairment of the asset carrying value at any time during the life of the asset.
Construction. The Bank 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 needed to complete construction, inaccurate estimates of the period of 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.
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.
Loan Modifications: The Company will provide modifications, which may include other than insignificant delays in payment of amounts due, extension of the terms of the notes or reduction in the interest rates on the notes. In certain instances, the Company may grant more than one type of modification. Loan modifications are disclosed in accordance with ASU 2022-02, "Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructuring and Vintage Disclosures."
Leases : At inception, contracts are evaluated to determine whether the contract constitutes a lease agreement. For contracts that are determined to be an operating lease, a corresponding right-of-use (“ROU”) asset and operating lease liability are recorded as separate line items on the Consolidated Statements of Condition. An ROU asset represents the Company’s right to use an underlying asset during the lease term and a lease liability represents the Company’s commitment to make contractually obligated lease payments. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease and are based on the present value of lease payments over the lease term. The measurement of the operating lease ROU asset includes any lease payments made.
If the rate implicit in the lease is not readily determinable, the incremental collateralized borrowing rate is used to determine the present value of lease payments. This rate gives consideration to the applicable FHLB over-collateralized borrowing rates and is based on the information available at the commencement date. The Company has elected to apply the short-term lease measurement and recognition exemption to leases with an initial term of 12 months or less; therefore, these leases are not recorded on the Company’s statement of condition, but rather, lease expense is recognized over the lease term on a
straight-line basis. The Company’s lease agreements may include options to extend or terminate the lease. The Company’s decision to exercise renewal options is based on an assessment of its current business needs and market factors at the time of the renewal. The Company maintains certain property and equipment under direct financing and operating leases. Substantially all of the leases in which the Company is the lessee are comprised of real estate property for branches, wealth management offices and office space and are classified as operating leases.
The ROU asset is measured at the amount of the lease liability adjusted for lease incentives received, and cumulative prepaid or accrued rent if the lease payments are uneven throughout the lease term, any unamortized initial direct costs, and any impairment of the ROU asset. Operating lease expense consists of: a single lease cost allocated over the remaining lease term on a straight-line basis and any impairment of the ROU asset. However, variable lease payments are not included in the lease liability.
There are no terms or conditions related to residual value guarantees and no restrictions or covenants that would impact the Company’s ability to pay dividends or to incur additional financial obligations.
Premises and Equipment: Land is carried at cost. Premises and equipment are stated at cost, less accumulated depreciation. Depreciation charges are computed using the straight-line method. Equipment and other fixed assets are depreciated over the estimated useful lives, which range from three to ten years . Premises are depreciated over the estimated useful life of 40 years, while leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the term of the lease. Expenditures for maintenance and repairs are expensed as incurred. The cost of major renewals and improvements are capitalized. Gains or losses realized on routine dispositions are recorded as other income or other expense.
Other Real Estate Owned ("OREO"): OREO acquired through foreclosure on loans secured by real estate is initially recorded at fair value, less estimated costs to sell. Physical possession of residential real estate property collateralizing a residential mortgage loan occurs when legal title is obtained upon completion of foreclosure or when the borrower conveys all interest in the property to satisfy the loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. The assets are subsequently accounted for at the lower of cost or fair value, as established by a current appraisal, less estimated costs to sell. Any write-downs at the date of foreclosure are charged to the allowance for credit losses. Expenses incurred to maintain these properties, losses resulting from write-downs after the date of foreclosure, and realized gains and losses upon sale of the properties are included in other non-interest expense and other non-interest income, as appropriate.
Bank Owned Life Insurance ("BOLI"): The Bank has purchased life insurance policies on certain key executives. BOLI is recorded at the amount that can be realized under the insurance contract at the statement of condition, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.
Loan Commitments and Related Financial Instruments: Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.
Derivatives: At the inception of a derivative contract, the Company designates the derivative as one of three types based on the Company’s intentions and belief as to likely effectiveness as a hedge. These three types are (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”), (2) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”), or (3) an instrument with no hedging designation. For a fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item, are recognized in current earnings as fair values change. For a cash flow hedge, the gain or loss on the derivative is reported in other comprehensive income and is reclassified into earnings in the same periods during which the hedged transaction affects earnings. For cash flow hedges, changes in the fair value of derivatives that are not highly effective in hedging the changes in fair value or expected cash flows of the hedged item are recognized immediately in current earnings. Changes in the fair value of derivatives that do not qualify for hedge accounting are reported currently in earnings, as non-interest income. When hedge accounting is discontinued on a fair value hedge that no longer qualifies as an effective hedge, the derivative continues to be reported at fair value in the statement of condition, but the carrying amount of the hedged item is no longer adjusted for future changes in fair value. The adjustment to the carrying amount of the hedged item that existed at the date hedge accounting is discontinued is amortized over the remaining life of the hedged item into earnings.
Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged. Net cash settlements on derivatives that do not qualify for hedge accounting are reported in
non-interest income. Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the items being hedged.
The Company formally documents the relationship between derivatives and hedged items, as well as the risk-management objective and the strategy for undertaking hedge transactions at the inception of the hedging relationship. This documentation includes linking fair value or cash flow hedges to specific assets and liabilities on the statement of condition or to specific firm commitments or forecasted transactions. The Company discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in the fair value or cash flows of the hedged item, the derivative is settled or terminates, a hedged forecasted transaction is no longer probable, a hedged firm commitment is no longer firm, or treatment of the derivative as a hedge is no longer appropriate or intended.
When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as non-interest income. When a cash flow hedge is discontinued but the hedged cash flows or forecasted transactions are still expected to occur, gains or losses that were accumulated in other comprehensive income are amortized into earnings over the same periods which the hedged transactions will affect earnings.
The Company also offers facility specific / loan level swaps to its customers and offsets its exposure from such contracts by entering into mirror image swaps with a financial institution / swap counterparty (loan level/back-to-back swap program). The customer accommodations and any offsetting swaps are treated as non-hedging derivative instruments which do not qualify for hedge accounting (“standalone derivatives”). The notional amount of the swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual contracts. The fair value of the swaps is recorded as both an asset and a liability, in other assets and other liabilities, respectively, in equal amounts for these transactions. The Company is exposed to losses if a customer counterparty fails to make its payments under a contract in which the Company is in a net receiving position. At this time, the Company anticipates that its counterparties will be able to fully satisfy their obligations under the agreements. All of the contracts to which the Company is a party settle monthly. Further, the Company has netting agreements with the dealers with which it does business.
Income Taxes: The Company files a consolidated Federal income tax return. State income tax returns are filed either on a combined or separate company basis based on the current laws and regulations of the state.
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in its financial statements or tax returns. The measurement of deferred tax assets and liabilities is based on the enacted tax rates. Such tax assets and liabilities are adjusted for the effect of a change in tax rates in the period of enactment.
The Company recognizes a tax position as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50 percent likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.
The Company is no longer subject to examination by the U.S. Federal tax authorities for years prior to 2022 or by state and local tax authorities for years prior to 2020.
The Company recognizes interest and/or penalties related to income tax matters in income tax expense.
Employee’s Savings and Investment Plan: The Company has a 401(k) profit-sharing and investment plan, which covers substantially all salaried employees over the age of 21 with at least 12 months of service.
Stock-Based Compensation: Compensation cost is recognized for stock options and restricted stock awards/units issued to employees and non-employee directors, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the fair value of the Company’s common stock at the date of grant is used for restricted stock awards/units. Compensation expense is recognized over the required service or performance period, generally defined as the vesting period. For awards with time-based vesting, compensation expense is recognized on a straight-line basis over the requisite service period. The stock options granted under these plans are exercisable at a price equal to the fair value of common stock on the date of grant and expire not more than ten years after the date of grant.
During the first quarter of 2024, the Company adopted the Peapack-Gladstone Financial Corporation 2024 Phantom Stock Plan (the "Phantom Plan"). The Phantom Plan allows the Company to issue performance-based and service-based awards
which will be paid in cash. The award of a phantom unit entitles the participant to a cash payment equal to the value of the unit on the vesting date, which is the fair market value of a common share of the Company's stock on such vesting date.
Employee Stock Purchase Plan (“ESPP”): The 2014 ESPP expired in April 2024 and was replaced by the 2024 ESPP, which was approved by shareholders on April 30, 2024 and allowed for the issuance of 150,000 shares.
The ESPP allows for the purchase of shares during four three-month Offering Periods of each calendar year. The Offering Periods end on March 31, June 30, September 30 and December 31 of each calendar year.
Each participant in the Offering Period is granted an option to purchase a number of shares and may contribute between one percent and 15 percent of their compensation. At the end of each Offering Period, the number of shares to be purchased by the employee is determined by dividing the employee’s contributions accumulated during the Offering Period by the applicable purchase price. The purchase price is an amount equal to 85 percent of the closing market price of a share of common stock on the purchase date. Participation in the ESPP is voluntary and employees can cancel their purchases at any time during the period without penalty. The fair value of each share purchase right is determined using the Black-Scholes option pricing model.
The Company recorded $ 199,000 , $ 154,000 and $ 178,000 of expense in salaries and employee benefits expense for the years ended December 31, 2025, 2024 and 2023, respectively, related to the ESPP. Total shares issued under the ESPP for the years ended December 31, 2025, 2024 and 2023 were 38,563 , 34,575 and 33,748 , respectively.
Earnings Per Share (“EPS”): In calculating earnings per share, there are no adjustments to net income available to common shareholders, which is the numerator of both the Basic and Diluted EPS. The weighted average number of shares outstanding used in the denominator for Diluted EPS is increased from the denominator used for Basic EPS by the effect of potentially dilutive common stock equivalents utilizing the treasury stock method. Common stock options outstanding are common stock equivalents, as are restricted stock units until vested.
The following table shows the calculation of both basic and diluted earnings per share for the years ended December 31, 2025, 2024 and 2023:
(In thousands, except share and per share data)
Net income available to common shareholders
Basic weighted average shares outstanding
Plus: common stock equivalents
Diluted weighted average shares outstanding
Earnings per share:
Basic
Diluted
Restricted stock units totaling 18,583 , 107,727 and 387,768 were not included in the computation of diluted earnings per share because they were anti-dilutive as of December 31, 2025, 2024 and 2023, respectively. Anti-dilutive shares are common stock equivalents with weighted average grant date values in excess of the average market value for the periods presented.
Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there are any such matters that will have a material effect on the financial statements.
Restrictions on Cash: Cash on hand or on deposit with the Federal Reserve Bank of New York was required to meet regulatory reserve and clearing requirements.
Comprehensive Income/(Loss): Comprehensive income/(loss) consists of net income and the change during the period in the Company’s net unrealized gains or losses on securities available for sale and unrealized gains and losses on cash flow hedge, net of tax, less adjustments for realized gains and losses.
Shareholders’ Equity: Treasury stock is carried at cost.
Transfers of Financial Assets: Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the
Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.
Goodwill and Other Intangible Assets: Goodwill is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree (if any), over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill assets acquired in a purchase business combination and determined to have an indefinite useful life is not amortized but tested for impairment at least annually or more frequently if events and circumstances exist that indicate that a goodwill impairment test should be performed. The Company performs its annual goodwill impairment test in the third quarter of every year. Goodwill was primarily attributable to the Bank's wealth acquisitions. Management monitors the impact of changes in the financial markets and includes these assessments in our impairment process.
Other intangible assets primarily consist of customer relationship intangible assets arising from acquisitions are amortized on an accelerated method over their estimated useful lives, which range from 5 to 15 years .
Reclassification: Certain reclassifications have been made in the prior periods’ financial statements in order to conform to the current year's presentation and had no effect on the consolidated income statements or the consolidated statements of changes in shareholders’ equity.
Accounting Pronouncements: In November 2023, the FASB issued ASU 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures (Topic 280), to improve reportable segment disclosure requirements through enhanced disclosures about significant segments and became effective in 2024 and for interim periods in 2025. See Note 19 for additional information on business segments.
In December 2023, the FASB issued ASU 2023-09, Income Tax - Improvements to Income Tax Disclosures (Topic 740), which requires reporting companies to break out their income tax expense and tax rate reconciliation in more detail. For public companies, the requirements will become effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company has elected to retrospectively adopt the expanded disclosure requirements of this ASU in Note 11 - Income Taxes in its annual financial statements as of December 31, 2025. The ASU did not have a material impact to the financial statements of the Company.
In March 2024, the FASB issued ASU No. 2024-01, Compensation-Stock Compensation (Topic 718): Scope Applications of Profits Interests and Similar Awards . ASU 2024-01 adds an example to Topic 718 which illustrates how to apply the scope guidance to determine whether profits interest and similar awards should be accounted for as share-based payment arrangements under Topic 718 or under other U.S. GAAP. ASU 2024-01 is effective for annual periods beginning after December 15, 2024, although early adoption is permitted. This ASU did not have an impact on our consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income (Subtopic 220-40): Disaggregation of Income Statement Expenses. This amendment requires public business entities to provide additional disaggregated disclosures in the notes to the financial statements for certain income statement expense captions. The amendment enhances disclosure requirements but does not change the recognition, measurement, or presentation of expenses on the face of the financial statements. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this guidance.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses for Accounts Receivable and Contract Assets . The amendments in this update provide the option to elect a practical expedient to assume that the current conditions as of the balance sheet date will remain unchanged for the remaining life of the asset when developing a reasonable and supportable forecast as part of estimating expected credit losses on these assets. This amendment is effective for the Company for fiscal years beginning after December 15, 2025 and interim periods within those fiscal years. The Company does not expect adoption of ASU 2025-05 to have a material impact on its consolidated financial statements.
In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), Targeted Improvements to the Accounting for Internal-Use Software . This amendment clarifies and modernizes the accounting for costs related to internal-use software. The amendments remove all references to project stages throughout Subtopic 350-40 and clarify the threshold entities apply to begin capitalizing costs. The amendments will be effective for the
Company for fiscal years beginning after December 15, 2027 and interim periods within those fiscal years. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
2. INVESTMENT SECURITIES
A summary of amortized cost and approximate fair value of investment securities available for sale and held to maturity included in the consolidated statements of condition as of December 31, 2025 and 2024 follows:
Gross
Gross
Allowance
Amortized
Unrealized
Unrealized
For Credit
Fair
(In thousands)
Cost
Gains
Losses
Losses
Value
Securities Available for Sale:
U.S. government-sponsored agencies
Mortgage-backed securities-residential
SBA pool securities
Corporate bond
Total securities available for sale
Securities Held to Maturity:
U.S. government-sponsored agencies
Mortgage-backed securities-residential
Total securities held to maturity
Gross
Gross
Allowance
Amortized
Unrealized
Unrealized
For Credit
Fair
(In thousands)
Cost
Gains
Losses
Losses
Value
Securities Available for Sale:
U.S. government-sponsored agencies
Mortgage-backed securities-residential
SBA pool securities
Corporate bond
Total securities available for sale
Securities Held to Maturity:
U.S. government-sponsored agencies
Mortgage-backed securities-residential
Total securities held to maturity
The amortized cost and fair value of investment securities available for sale and held to maturity as of December 31, 2025, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or repay obligations with or without call or prepayment penalties. Securities not due at a single maturity, such as mortgage-backed securities and SBA pool securities are shown separately.
(In thousands)
Available for Sale
Held to Maturity
Maturing in:
Amortized Cost
Fair Value
Amortized Cost
Fair Value
One year or less
After one year through five years
After five years through ten years
After ten years
Mortgage-backed securities-residential
SBA pool securities
Total
Securities available for sale with a fair value of $ 553.2 million and $ 558.9 million as of December 31, 2025 and December 31, 2024, respectively, were pledged, but not necessarily encumbered, to secure public funds and for other purposes required or permitted by law. In addition, securities held to maturity with a carrying value of $ 93.9 million and $ 99.6 million were also pledged as of December 31, 2025 and December 31, 2024, respectively, for the same purposes.
The following is a summary of gross gains, gross losses and net tax benefit related to proceeds on sales of securities available for sale for the years ended December 31:
(In thousands)
Proceeds on sales
Gross gains
Net tax expense
The following table presents the Company’s available for sale and held to maturity securities with continuous unrealized losses and the approximate fair value of these investments as of December 31, 2025 and 2024.
Duration of Unrealized Loss
Less Than 12 Months
12 Months or Longer
Total
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
(In thousands)
Value
Losses
Value
Losses
Value
Losses
Securities Available for Sale:
U.S. government-
sponsored agencies
Mortgage-backed
securities-residential
SBA pool securities
Corporate bond
Total securities available for sale
Securities Held to Maturity:
U.S. government-
sponsored agencies
Mortgage-backed
securities-residential
Total securities held to maturity
Total securities
Duration of Unrealized Loss
Less Than 12 Months
12 Months or Longer
Total
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
(In thousands)
Value
Losses
Value
Losses
Value
Losses
Securities Available for Sale:
U.S. government-
sponsored agencies
Mortgage-backed
securities-residential
SBA pool securities
Corporate Bond
Total securities available for sale
Securities Held to Maturity:
U.S. government-
sponsored agencies
Mortgage-backed
securities-residential
Total securities held to maturity
Total securities
Available for sale and held to maturity securities are evaluated to determine if a decline in fair value below the amortized cost basis has resulted from a credit loss or other factors. An unrealized loss related to credit factors would be recorded through an allowance for credit losses. The allowance is limited to the amount by which the security's amortized cost basis exceeds the fair value. An unrealized loss on available for sale securities that has not been recorded through an allowance for credit losses shall be recorded through other comprehensive income, net of applicable taxes. Investment securities will be written down to fair value through the Consolidated Statements of Income when management intends to sell, or may be required to sell, the securities before they recover in value. The issuers of securities currently in a continuous loss position continue to make timely principal and interest payments and none of these securities were past due or were placed in nonaccrual status at December 31, 2025. Primarily all of the investment securities are backed by loans guaranteed by either U.S. government agencies or U.S. government-sponsored entities, and management believes that default is highly unlikely given the lack of historical credit losses and governmental backing. Management believes that the unrealized losses on these securities are a function of changes in market interest rates and credit spreads, not changes in credit quality. Therefore, no allowance for credit losses was recorded for the years ended December 31, 2025, December 31, 2024 or December 31, 2023.
The Company has an investment in a CRA investment fund with a fair value of $ 13.5 million and $ 13.0 million at December 31, 2025 and 2024, respectively. The investment is classified as an equity security in our Consolidated Statements of Condition. This security had a gain of $ 418,000 for the year ended December 31, 2025, a loss of $ 125,000 for the year ended December 31, 2024 and a gain o f $ 181,000 for the year ended December 31, 2023. This amount is included in the fair value adjustment for equity securities on the Consolidated Statements of Income. Additionally, the Company sold its Visa B shares which resulted in a positive fair value adjustment to equity securities of $ 953,000 recognized in our Consolidated Statements of Income during the year ended December 31, 2024.
3. LOANS
The following table presents loans outstanding, by type of loan, as of December 31:
% of Total
% of Total
(Dollars in thousands)
Loans
Loans
Residential mortgage
Multifamily mortgage
Commercial mortgage
Commercial loans (including equipment financing)
Commercial construction
Home equity lines of credit
Consumer loans, including
fixed rate home equity loans
Other loans
Total loans
In determining an appropriate amount for the allowance, the Bank segments and aggregates the loan portfolio based on common characteristics. The following pool segments identified as of December 31, 2025 and 2024 are based on the CECL methodology:
% of Total
% of Total
(Dollars in thousands)
Loans
Loans
Primary residential mortgage
Junior lien loan on residence
Multifamily property
Owner-occupied commercial real estate
Investment commercial real estate
Commercial and industrial
Lease financing
Construction
Consumer and other
Total loans
Net deferred costs
Total loans including net deferred costs
The Company, through the Bank, may extend credit to officers, directors and their associates. These loans are subject to the Company’s normal lending policy and Federal Reserve Bank Regulation O.
The following table shows the changes in loans to officers, directors and their associates:
(In thousands)
Balance, beginning of year
New loans
Repayments
Loans with individuals no longer considered related parties
Balance, at end of year
The following tables present the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of December 31, 2025 and 2024:
Nonaccrual
With No
Loans Past Due Over
Allowance
90 Days and Still
(In thousands)
for Credit Loss
Nonaccrual
Accruing Interest
Primary residential mortgage
Junior lien loan on residence
Multifamily property
Investment commercial real estate
Commercial and industrial
Lease financing
Total
Nonaccrual
With No
Loans Past Due Over
Allowance
90 Days and Still
(In thousands)
for Credit Loss
Nonaccrual
Accruing Interest
Primary residential mortgage
Junior lien loan on residence
Multifamily property
Investment commercial real estate
Commercial and industrial
Lease financing
Consumer and other
Total
The following tables present the recorded investment in past due loans as of December 31, 2025 and 2024 by class of loans, excluding nonaccrual loans:
Greater Than
Days
Days
90 Days
Total
(In thousands)
Past Due
Past Due
Past Due
Past Due
Primary residential mortgage
Junior lien loan on residence
Multifamily property
Commercial and industrial
Total
Greater Than
Days
Days
90 Days
Total
(In thousands)
Past Due
Past Due
Past Due
Past Due
Primary residential mortgage
Junior lien loan on residence
Commercial and industrial
Total
Credit Quality Indicators:
The Bank places all commercial loans into various credit risk rating categories based on an assessment of the expected ability of the borrowers to properly service their debt. The assessment considers numerous factors including, but not limited to, current financial information on the borrower, historical payment experience, strength of any guarantor, nature of and value of any collateral, acceptability of the loan structure and documentation, relevant public information and current economic trends. This credit risk rating analysis is performed when the loan is initially underwritten and then annually based on set criteria in the loan policy.
In addition, the Bank has engaged an independent loan review firm to validate risk ratings and to ensure compliance with our policies and procedures. This review of the following types of loans is performed quarterly:
A large sample of relationships or new lending to existing relationships greater than $ 1,000,000 originated since the prior review;
All criticized and classified rated borrowers with relationship exposure of more than $ 500,000 ;
A large sample of Pass-rated (including Pass Watch) borrowers with total relationships in excess of $ 1,000,000 and a small sample of Pass related relationships less than $ 1,000,000 ;
All leveraged loans of $ 1,000,000 or greater;
At least two borrowing relationships managed by each commercial banker;
Any new Federal Reserve Bank Regulation “O” loan commitments over $ 1,000,000 ; and
Any other credits requested by Bank senior management or a member of the Board of Directors and any borrower for which the reviewer determines a review is warranted based upon knowledge of the portfolio, local events, industry stresses, etc.
The review excludes borrowers with commitments of less than $ 500,000 .
The Bank uses the following regulatory definitions for criticized and classified risk ratings:
Special Mention: These loans have a potential weakness that deserves Management’s close attention. If left uncorrected, the potential weaknesses may result in deterioration of the repayment prospects for the loans or of the institution’s credit position at some future date.
Substandard: These loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful: These loans have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable, based on currently existing facts, conditions and values.
Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass-rated loans.
With the adoption of CECL, loans that are in the process of or expected to be in foreclosure are deemed to be collateral dependent with respect to measuring potential loss and allowance adequacy and are individually evaluated by Management. Loans that do not share common risk characteristics are also evaluated on an individual basis. All other loans are evaluated using a linear discounted cashflow methodology for measuring potential loss and allowance adequacy.
The following is a summary of the credit risk profile of loans by internally assigned grade as of December 31, 2025 and 2024 based on originations for the periods indicated; the years represent the year of origination for non-revolving loans:
Grade as of December 31, 2025 for Loans Originated During
Revolving-
(In thousands)
and Prior
Revolving
Term
Total
Primary residential mortgage:
Pass
Special mention
Substandard
Doubtful
Total primary residential mortgages
Current period gross charge-offs
Junior lien loan on residence:
Pass
Special mention
Substandard
Doubtful
Total junior lien loan on residence
Current period gross charge-offs
Multifamily property:
Pass
Special mention
Substandard
Doubtful
Total multifamily property
Current period gross charge-offs
Owner-occupied commercial real estate:
Pass
Special mention
Substandard
Doubtful
Total owner-occupied commercial real estate
Current period gross charge-offs
Investment commercial real estate:
Pass
Special mention
Substandard
Doubtful
Total investment commercial real estate
Current period gross charge-offs
Commercial and industrial:
Pass
Special mention
Substandard
Doubtful
Total commercial and industrial
Current period gross charge-offs
Lease financing:
Pass
Special mention
Substandard
Doubtful
Total lease financing
Current period gross charge-offs
Construction loans:
Pass
Special mention
Substandard
Doubtful
Total commercial construction loans
Current period gross charge-offs
Consumer and other loans:
Pass
Special mention
Substandard
Doubtful
Total consumer and other loans
Current period gross charge-offs
Total:
Pass
Special mention
Substandard
Doubtful
Total Loans
Total Current Period Gross Charge-offs
Grade as of December 31, 2024 for Loans Originated During
Revolving-
(In thousands)
and Prior
Revolving
Term
Total
Primary residential mortgage:
Pass
Special mention
Substandard
Doubtful
Total primary residential mortgages
Current period gross charge-offs
Junior lien loan on residence:
Pass
Special mention
Substandard
Doubtful
Total junior lien loan on residence
Current period gross charge-offs
Multifamily property:
Pass
Special mention
Substandard
Doubtful
Total multifamily property
Current period gross charge-offs
Owner-occupied commercial real estate:
Pass
Special mention
Substandard
Doubtful
Total owner-occupied commercial real estate
Current period gross charge-offs
Investment commercial real estate:
Pass
Special mention
Substandard
Doubtful
Total investment commercial real estate
Current period gross charge-offs
Commercial and industrial:
Pass
Special mention
Substandard
Doubtful
Total commercial and industrial
Current period gross charge-offs
Lease financing:
Pass
Special mention
Substandard
Doubtful
Total lease financing
Current period gross charge-offs
Construction loans:
Pass
Special mention
Substandard
Doubtful
Total commercial construction loans
Current period gross charge-offs
Consumer and other loans:
Pass
Special mention
Substandard
Doubtful
Total consumer and other loans
Current period gross charge-offs
Total:
Pass
Special mention
Substandard
Doubtful
Total Loans
Total Current Period Gross Charge-offs
At December 31, 2025, $ 68.2 million of substandard loans were individually evaluated as compared to $ 99.8 million at December 31, 2024. The decrease in individually evaluated substandard loans was primarily due to the resolution of three multifamily loans totaling $ 16.1 million and three equipment finance related loans totaling $ 20.3 million during 2025.
Total charge-offs increased by $ 21.1 million to $ 26.9 million for the year ended December 31, 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.
Loan Modifications: The Company will provide modifications, which may include other than insignificant delays in payment of amounts due, extension of the terms of the notes or reduction in the interest rates on the notes. In certain instances, the Company may grant more than one type of modification. All accruing modified loans were paying in accordance with their modified terms as of December 31, 2025. The Company has not committed to lend additional amounts as of December 31, 2025 to customers with outstanding loans that are classified as modified loans. The following tables provide information related to the modifications during the year ended December 31, 2025 by pool segment and type of concession granted:
Significant Payment Delay
Year ended December 31, 2025
% of Total
Amortized
Class of
Cost Basis
Financing
(Dollars in thousands)
at Period End
Receivable
Primary residential mortgage
Multifamily property
Commercial and industrial
Total
Term Extension
Year ended December 31, 2025
% of Total
Amortized
Class of
Cost Basis
Financing
(Dollars in thousands)
at Period End
Receivable
Commercial and industrial
Total
Interest Rate Reduction and
Significant Payment Delay
Year ended December 31, 2025
% of Total
Amortized
Class of
Cost Basis
Financing
(Dollars in thousands)
at Period End
Receivable
Multifamily property
Total
Significant Payment Delay and
Term Extension
Year ended December 31, 2025
% of Total
Amortized
Class of
Cost Basis
Financing
(Dollars in thousands)
at Period End
Receivable
Commercial and industrial
Total
Interest Rate Reduction,
Significant Payment Delay and
Term Extension
Year ended December 31, 2025
% of Total
Amortized
Class of
Cost Basis
Financing
(Dollars in thousands)
at Period End
Receivable
Multifamily property
Total
The following tables provide information related to the modifications during the year ended December 31, 2024 by pool segment and type of concession granted:
Significant Payment Delay
Year ended December 31, 2024
% of Total
Amortized
Class of
Cost Basis
Financing
(Dollars in thousands)
at Period End
Receivable
Primary residential mortgage
Commercial and industrial
Total
Interest Rate Reduction and
Term Extension
Year Ended December 31, 2024
% of Total
Amortized
Class of
Cost Basis
Financing
(Dollars in thousands)
at Period End
Receivable
Commercial and industrial
Total
Significant Payment Delay and
Term Extension
Year Ended December 31, 2024
% of Total
Amortized
Class of
Cost Basis
Financing
(Dollars in thousands)
at Period End
Receivable
Investment commercial real estate
Commercial and industrial
Total
The following table depicts the payment status of the loans that were modified to a borrower experiencing financial difficulties as of December 31, 2025:
Payment Status at December 31, 2025
30-89 Days
90+ Days
(Dollars in thousands)
Current
Past Due
Past Due
Primary residential mortgage
Multifamily property
Commercial and industrial
Total
The following table depicts the payment status of the loans that were modified to a borrower experiencing financial difficulties as of December 31, 2024:
Payment Status at December 31, 2024
30-89 Days
90+ Days
(Dollars in thousands)
Current
Past Due
Past Due
Primary residential mortgage
Investment commercial real estate
Commercial and industrial
Total
The Company has not committed to lend additional amounts as of December 31, 2025 to customers with outstanding loans that are classified as modified loans.
The following table presents loans by class that were modified that failed to comply with the modified terms in the year following modification and resulted in a payment default during the year ended December 31, 2025:
Amortized Cost Basis of Modified Loans
That Subsequently Defaulted
Year Ended December 31, 2025
Combination
Combination
Interest Rate
Interest Rate
Reduction, Term
Reduction and
Extension and
Significant
Significant
Significant
Significant
Payment Delay and
(Dollars in thousands)
Payment Delay
Payment Delay
Payment Delay
Term Extension
Primary residential mortgage
Multifamily property
Commercial and industrial
Total
The following table presents loans by class that were modified that failed to comply with the modified terms in the year following modification and resulted in a payment default during the year December 31, 2024:
Amortized Cost Basis of Modified Loans
That Subsequently Defaulted
Year Ended December 31, 2024
Significant
Payment Delay
Significant
and
(Dollars in thousands)
Payment Delay
Term Extension
Primary residential mortgage
Investment commercial real estate
Commercial and industrial
Total
Upon the Company's determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.
4. ALLOWANCE FOR CREDIT LOSSES
The ACL on loans held for investment is the combination of the allowance for credit losses on loans and the reserve for unfunded loan commitments. The ACL is reported as a reduction of the amortized cost basis of loans, while the reserve for unfunded loan commitments is included within "other liabilities" on the Consolidated Statements of Condition. The estimate of credit loss for unfunded commitments incorporates assumptions for both the likelihood and amount of funding over the estimated life of the commitments, including adjustments for current conditions and reasonable and supportable economic forecasts. Management periodically reviews and updates its assumptions for estimated funding rates. The "provision for
credit losses" on the Consolidated Statements of Income is a combination of the provision for credit losses and the provision for unfunded loan commitments.
The Company does not estimate expected credit losses on accrued interest receivable ("AIR") on loans, as AIR is reversed or written off when the full collection of the AIR related to a loan becomes doubtful. AIR on loans totaled $ 28.5 million at December 31, 2025 and $ 26.2 million at December 31, 2024.
The following tables present the loan balances by segment, and the corresponding balances in the allowance as of December 31, 2025 and 2024.
December 31, 2025
Ending
ACL
Ending
Attributable
ACL
Total
Total
Attributable
Individually
Individually
Loans
To Loans
Total
Evaluated
Evaluated
Collectively
Collectively
Total
Ending
(In thousands)
Loans
Loans
Evaluated
Evaluated
Loans
ACL
Primary residential mortgage
Junior lien loan on residence
Multifamily property
Owner-occupied commercial
real estate
Investment commercial real
estate
Commercial and industrial
Lease financing
Construction
Consumer and other
Total ACL
December 31, 2024
Ending
ACL
Ending
Attributable
ACL
Total
Total
Attributable
Individually
Individually
Loans
To Loans
Total
Evaluated
Evaluated
Collectively
Collectively
Total
Ending
(In thousands)
Loans
Loans
Evaluated
Evaluated
Loans
ACL
Primary residential mortgage
Junior lien loan on residence
Multifamily property
Owner-occupied commercial
real estate
Investment commercial real
estate
Commercial and industrial
Lease financing
Construction
Consumer and other
Total ACL
Individually evaluated loans include nonaccrual loans of $ 68.2 million at December 31, 2025 and $ 99.8 million at December 31, 2024. Individually evaluated loans did no t include any performing modified loans at December 31, 2025. An allowance of $ 5.8 million was allocated to modified loans at December 31, 2025, of which $ 5.6 million was allocated for one commercial and industrial relationship. All accruing modified loans were paying in accordance with their modified terms as of December 31, 2025.
The ACL was $ 71.0 million as of 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 during 2025. Charge-offs of $ 13.9 million were related to several
C&I loans with an additional $ 13.0 million related to five multifamily property credits that were resolved in 2025. A significant portion of the charge-offs were tied to previously established specific reserves. The reduction in the ACL due to charge-offs was partially offset by a provision for credit losses of $ 23.6 million.
The ACL as a percentage of loans was 1.14 percent and 1.32 percent at December 31, 2025 and 2024, respectively. 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.
Under Topic 326, the Company's methodology for determining the ACL on loans is based upon historic net charge-offs, and key assumptions, including economic forecasts, reversion periods, prepayments and qualitative adjustments. The allowance is measured on a collective, or pool, basis when similar risk characteristics exist. Loans that do not share common risk characteristics are evaluated on an individual basis and are excluded from the collective evaluation.
The following tables present collateral dependent loans individually evaluated by segment as of December 31, 2025 and 2024:
December 31, 2025
Average
Unpaid
Individually
Principal
Recorded
Related
Evaluated
(In thousands)
Balance
Investment
Allowance
Loans
With no related allowance recorded:
Primary residential mortgage (A)
Junior lien loan on residence (A)
Multifamily property (B)
Investment commercial real estate (C)
Commercial and industrial (A)(C)(D)
Lease financing (E)
Total loans with no related allowance
With related allowance recorded:
Multifamily property (B)
Investment commercial real estate (C)
Commercial and industrial (A)(C)(D)
Total loans with related allowance
Total loans individually evaluated for impairment
Secured by residential real estate.
Secured by multifamily residential properties.
Secured by commercial real estate.
Secured by all business assets.
Secured by machinery and equipment.
December 31, 2024
Unpaid
Average
Principal
Recorded
Specific
Impaired
(In thousands)
Balance
Investment
Reserves
Loans
With no related allowance recorded:
Primary residential mortgage (A)
Junior lien loan on residence (A)
Multifamily property (B)
Investment commercial real estate (C)
Commercial and industrial (A)(C)(D)
Lease financing (E)
Total loans with no related allowance
With related allowance recorded:
Multifamily property (B)
Investment commercial real estate (C)
Commercial and industrial (A)(C)(D)(E)
Lease financing (E)
Total loans with related allowance
Total loans individually evaluated for impairment
Secured by residential real estate.
Secured by multifamily residential properties.
Secured by commercial real estate.
Secured by all business assets.
Secured by machinery and equipment.
Interest income recognized on individually evaluated loans for the years ended December 31, 2025 and 2024 was not material. The Company did not recognize any income on non-accruing impaired loans for the years ended December 31, 2025 and 2024.
The activity in the allowance for credit losses for the years ended December 31, 2025, 2024 and 2023 are summarized below:
January 1,
December 31,
Beginning
Charge-
Provision/
Ending
(In thousands)
ACL
Offs
Recoveries
(Credit)(A)
ACL
Primary residential mortgage
Junior lien loan on residence
Multifamily property
Owner-occupied commercial real estate
Investment commercial real estate
Commercial and industrial
Lease financing
Construction
Consumer and other
Total ACL
(A) Provision to roll forward the ACL excludes a credit of $ 83,000 for off-balance sheet commitments.
January 1,
December 31,
Beginning
Provision/
Ending
(In thousands)
ACL
Charge-Offs
Recoveries
(Credit)(A)
ACL
Primary residential mortgage
Junior lien loan on residence
Multifamily property
Owner-occupied commercial real estate
Investment commercial real estate
Commercial and industrial
Lease financing
Construction
Consumer and other
Total ACL
(A) Provision to roll forward the ACL excludes a provision of $ 4,000 for off-balance sheet commitments.
January 1,
December 31,
Beginning
Provision/
Ending
(In thousands)
ACL
Charge-Offs
Recoveries
(Credit)(A)
ACL
Primary residential mortgage
Junior lien loan on residence
Multifamily property
Owner-occupied commercial real estate
Investment commercial real estate
Commercial and industrial
Lease financing
Construction
Consumer and other
Total ACL
(A) Provision to roll forward the ACL excludes a credit of $ 65,000 for off-balance sheet commitments.
Allowance for Credit Losses on Off Balance Sheet Commitments
The following tables present the activity in the ACL for off balance sheet commitments for the years ended December 31, 2025, 2024 and 2023:
January 1,
December 31,
Provision
(In thousands)
ACL
(Credit)
Ending ACL
Off balance sheet commitments
Total ACL
January 1,
December 31,
Provision
(In thousands)
ACL
(Credit)
Ending ACL
Off balance sheet commitments
Total ACL
January 1,
December 31,
Provision
(In thousands)
ACL
(Credit)
Ending ACL
Off balance sheet commitments
Total ACL
5. PREMISES AND EQUIPMENT
The following table presents premises and equipment as of December 31,
(In thousands)
Land and land improvements
Buildings
Furniture and equipment
Leasehold improvements
Projects in progress
Less: accumulated depreciation
Total
The following table presents finance lease right-of-use assets as of December 31,
(In thousands)
Finance lease
Less: accumulated depreciation
Total
Projects in progress represents costs associated with smaller renovation or equipment installation projects at various locations.
The Company recorded depreciation expense of $ 4.1 million, $ 3.5 million, and $ 3.7 million for the years ended December 31, 2025, 2024, and 2023, respectively.
The Company modified the existing lease for its corporate headquarters building in 2024 which is classified as an operating lease right-of-use asset in accordance with lease accounting guidance. The lease arrangement requires monthly payments through 2036. Under the previous lease, the main office was classified as a finance lease with related depreciation expense of $ 202,000 in 2024 and $ 607,000 in 2023.
The Company also leases its Gladstone branch after completing a sale-leaseback transaction involving the property in 2011. The lease arrangement requires monthly payments through 2031. The deferred gain was removed as a cumulative-effect adjustment in accordance with lease accounting guidance. Related depreciation expense and accumulated depreciation of $ 141,000 is included in each of the 2025, 2024 and 2023 results.
The following is a schedule by year of future minimum lease payments under finance lease right-of-use asset, together with the present value of net minimum lease payments as of December 31, 2025:
(In thousands)
Thereafter
Total minimum lease payments
Less: amount representing interest
Present value of net minimum lease payments
6. DEPOSITS
Time deposits over $250,000 totaled $ 138.1 million and $ 137.3 million at December 31, 2025 and 2024, respectively. These totals exclude brokered certificates of deposit.
The following table sets forth the details of total deposits as of December 31:
(Dollars in thousands)
Noninterest-bearing demand deposits
Interest-bearing checking (A)
Savings
Money market (B)
Certificates of deposit - retail
Certificates of deposit - listing service
Subtotal deposits
Interest-bearing demand - Brokered
Total deposits
(A) Interest-bearing checking includes $ 1.98 billion at December 31, 2025 and $ 1.57 billion at December 31, 2024 of reciprocal balances in the Reich & Tang or Promontory Demand Deposit Marketplace programs, respectively.
(B) Money market includes $ 165.6 million at December 31, 2025 and $ 85.3 million at December 31, 2024 of reciprocal balances in the Promontory Demand Deposit Marketplace program.
The scheduled maturities of time deposits as of December 31, 2025 are as follows:
(In thousands)
Over 5 Years
Total
7. FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS
At December 31, 2025, the Company had $ 73.3 million of overnight borrowings at the FHLB at a rate of 3.96 percent. At December 31, 2024, the Company had no overnight borrowings. At December 31, 2025, unused short-term overnight borrowing commitments totaled $ 1.70 billion from the FHLB, $ 15.0 million from correspondent bankers and $ 2.47 billion at the Federal Bank of New York.
8. FAIR VALUE
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:
Level 1:
Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2:
Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3:
Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing as asset or liability.
The Company used the following methods and significant assumptions to estimate the fair value:
Investment Securities: The fair values for investment securities are determined by quoted market prices (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).
Loans Held for Sale, at Fair Value: The fair value of loans held for sale is determined using quoted prices for similar assets, adjusted for specific attributes of that loan or other observable market data, such as outstanding commitments from third party investors (Level 2).
Derivatives : The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2). Our derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services.
Individually Evaluated Loans: The fair value of collateral dependent loans with specific allocations of the allowance for credit losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Individually evaluated loans may, in some cases, also be measured by the discounted cash flow methodology where payments are anticipated. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.
Appraisals for collateral-dependent impaired loans are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by Management. Once received, a member of the Credit Department reviews the assumptions and approaches utilized in the appraisal, as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. Appraisals on collateral dependent impaired loans and other real estate owned (consistent for all loan types) are obtained on an annual basis, unless a significant change in the market or other factors warrants a more frequent appraisal. On an annual basis, Management compares the actual selling price of any collateral that has been sold to the most recent appraised value to determine what additional adjustment should be made to the appraisal value to arrive at fair value for other properties. The most recent analysis performed indicated that a discount up to 15 percent should be applied to appraisals on properties. The discount is determined based on the nature of the underlying properties, aging of appraisal and other factors. For each collateral-dependent impaired loan we consider other factors, such as certain indices or other market information, as well as property specific circumstances to determine if an adjustment to the appraised value is needed. In situations where there is evidence of change in value, the Bank will determine if there is need for an adjustment to the specific reserve on the collateral dependent impaired loans. When the Bank applies an interim adjustment, it generally shows the adjustment as an incremental specific reserve against the loan until it has received the full updated appraisal. All
collateral-dependent impaired loans and other real estate owned valuations were supported by an appraisal less than 12 months old or in the process of obtaining an appraisal as of December 31, 2025.
The following tables summarize, at the dates indicated, assets measured at fair value on a recurring basis, including financial assets for which the Company has elected the fair value option:
Fair Value Measurements Using
Quoted
Prices In
Active
Markets
Significant
For
Other
Significant
Identical
Observable
Unobservable
Assets
Inputs
Inputs
(In thousands)
December 31, 2025
(Level 1)
(Level 2)
(Level 3)
Assets:
Securities available for sale:
U.S. government-sponsored agencies
Mortgage-backed securities-residential
SBA pool securities
Corporate bond
CRA investment fund
Derivatives:
Cash flow hedges
Loan level swaps
Total
Liabilities:
Derivatives:
Cash flow hedges
Loan level swaps
Total
(In thousands)
December 31, 2024
Assets:
Securities available for sale:
U.S. government-sponsored agencies
Mortgage-backed securities-residential
SBA pool securities
Corporate bond
CRA investment fund
Derivatives:
Cash flow hedges
Loan level swaps
Total
Liabilities:
Derivatives:
Loan level swaps
Total
The Company has elected the fair value option for certain loans held for sale. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment. None of these loans are 90 days or more past due or on nonaccrual as of December 31, 2025 and December 31, 2024.
The following table presents residential loans held for sale, at fair value, at the dates indicated:
December 31, 2025
December 31, 2024
Residential loans contractual balance
Fair value adjustment
Total fair value of residential loans held for sale
The following tables summarize, at the date indicated, assets measured at fair value on a non-recurring basis:
Fair Value Measurements Using
Quoted
Prices In
Active
Markets
Significant
For
Other
Significant
Identical
Observable
Unobservable
Assets
Inputs
Inputs
(In thousands)
December 31, 2025
(Level 1)
(Level 2)
(Level 3)
Assets:
Individually evaluated loans:
Multifamily property (A)
Investment commercial real estate (A)
Commercial and industrial (A)
(A) These amounts represent the carrying amounts on the Consolidated Statements of Condition for individually evaluated loans.
The significant unobservable (Level 3) inputs used in the fair value measurement of collateral for individually evaluated loans primarily relate to customized discounting criteria applied to the customer’s reported amount of collateral. The amount of the collateral discount depends upon the condition and marketability of the underlying collateral. As the Company’s primary objective in the event of default would be to monetize the collateral to settle the outstanding balance of the loan, less marketable collateral would receive a larger discount. During the reported periods, collateral discounts ranged from approximately 10 percent to 50 percent.
Fair Value Measurements Using
Quoted
Prices In
Active
Markets
Significant
For
Other
Significant
Identical
Observable
Unobservable
Assets
Inputs
Inputs
(In thousands)
December 31, 2024
(Level 1)
(Level 2)
(Level 3)
Assets:
Individually evaluated loans:
Multifamily property (A)
Investment commercial real estate (A)
Commercial and industrial (A)
Lease financing (A)
(A) These amounts represent the carrying amounts on the Consolidated Statements of Condition for individually evaluated loans.
The significant unobservable (Level 3) inputs used in the fair value measurement of collateral for individually evaluated loans primarily relate to customized discounting criteria applied to the customer’s reported amount of collateral. The amount of the collateral discount depends upon the condition and marketability of the underlying collateral. As the Company’s primary
objective in the event of default would be to monetize the collateral to settle the outstanding balance of the loan, less marketable collateral would receive a larger discount. During the reported periods, collateral discounts ranged from approximately 10 percent to 50 percent.
The carrying amounts and estimated fair values of financial instruments at December 31, 2025 are as follows:
Fair Value Measurements at December 31, 2025 Using
(In thousands)
Carrying
Amount
Level 1
Level 2
Level 3
Total
Financial assets
Cash and cash equivalents
Securities available for sale
Securities held to maturity
CRA investment fund
FHLB and FRB stock
Loans held for sale, at fair value
Loans held for sale, at lower of cost
or fair value
Loans, net of allowance for credit losses
Accrued interest receivable
Accrued interest receivable loan
level swaps (A)
Cash flow hedges
Loan level swaps
Financial liabilities
Deposits
Short-term borrowings
Subordinated debt
Accrued interest payable
Accrued interest payable loan
level swaps (B)
Cash flow hedges
Loan level swaps
Included in other assets in the Consolidated Statements of Condition.
Included in accrued expenses and other liabilities in the Consolidated Statements of Condition.
The carrying amounts and estimated fair values of financial instruments at December 31, 2024 are as follows:
Fair Value Measurements at December 31, 2024 Using
(In thousands)
Carrying
Amount
Level 1
Level 2
Level 3
Total
Financial assets
Cash and cash equivalents
Securities available for sale
Securities held to maturity
CRA investment fund
FHLB and FRB stock
Loans held for sale, at lower of cost
or fair value
Loans, net of allowance for loan losses
Accrued interest receivable
Accrued interest receivable loan level
swaps (A)
Cash flow hedges
Loan level swaps
Financial liabilities
Deposits
Subordinated debt
Accrued interest payable
Accrued interest payable loan level
swaps (B)
Loan level swaps
(A) Included in other assets in the Consolidated Statements of Condition.
(B) Included in accrued expenses and other liabilities in the Consolidated Statements of Condition.
The methods and assumptions, not previously presented, used to estimate fair values are described as follows:
Cash and cash equivalents: The carrying amounts of cash and short-term instruments approximate fair values and are classified as either Level 1 or Level 2. Cash and due from banks is classified as Level 1.
CRA investment fund: The fair value of the investment fund is determined by quoted prices in an active market.
FHLB and FRB stock: It is not practicable to determine the fair value of FHLB or FRB stock due to restrictions placed on its transferability.
Loans held for sale, at lower of cost or fair value: The fair value of loans held for sale is determined using quoted prices for similar assets, adjusted for specific attributes of that loan or other observable market data, such as outstanding commitments from third party investors. Loans held for sale are classified as Level 2.
Loans: At December 31, 2025 and 2024, respectively, the exit price observations are obtained from a third-party using its proprietary valuation model and methodology and may not reflect actual or prospective market valuations. The valuation utilizes a discounted cash-flow based model relying on various assumptions including the probability of default, loss given default, portfolio liquidity and remaining term of the portfolio.
Deposits: The fair values disclosed for demand deposits (e.g., interest and noninterest checking, savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date, (i.e., the carrying amount) resulting in a Level 1 classification. The carrying amounts of variable-rate certificates of deposit approximate the fair values at the reporting date resulting in Level 2 classification. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.
Overnight borrowings: The carrying amounts of overnight borrowings approximate fair values and are classified as Level 2.
Federal Home Loan Bank advances: The fair values of the Company’s long-term borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.
Subordinated debentures: The fair values of the Company’s subordinated debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.
Accrued interest receivable/payable: The carrying amounts of accrued interest approximate fair value resulting in a Level 2 or Level 3 classification. Accrued interest on deposits and securities are included in Level 2. Accrued interest on loans and subordinated debt are included in Level 3.
Off-balance sheet instruments: Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of commitments is not material.
9. REVENUE FROM CONTRACTS WITH CUSTOMERS:
All of the Company’s revenue from contracts with customers in the scope of ASC 606 is recognized within noninterest income.
The following table presents the sources of noninterest income for the years ended December 31:
(In thousands)
Service charges on deposits
Overdraft fees
Interchange income
Other
Wealth management fees (A)
Gain/(loss) on sale of property
Gain on lease termination
Corporate advisory fee income
Other (B)
Total noninterest other income
Includes investment brokerage fees.
All of the other category is outside the scope of ASC 606.
The following table presents the sources of noninterest income by operating segment for the years ended December 31:
Revenue by Operating
Wealth
Segment
Banking
Management
Total
Service charges on deposits
Overdraft fees
Interchange income
Other
Wealth management fees (A)
Gain on sale of property
Gain on lease termination
Corporate advisory fee income
Other (B)
Total noninterest income
Revenue by Operating
Wealth
Segment
Banking
Management
Total
Service charges on deposits
Overdraft fees
Interchange income
Other
Wealth management fees (A)
Loss on sale of property
Corporate advisory fee income
Other (B)
Total noninterest income
Revenue by Operating
Wealth
Segment
Banking
Management
Total
Service charges on deposits
Overdraft fees
Interchange income
Other
Wealth management fees (A)
Loss on sale of property
Corporate advisory fee income
Other (B)
Total noninterest income
Includes investment brokerage fees.
All of the other category is outside the scope of ASC 606.
A description of the Company’s revenue streams accounted for under ASC 606 follows:
Service charges on deposit accounts : The Company earns fees from its deposit customers for certain transaction account maintenance, and overdraft fees. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance.
Interchange income : The Company earns interchange fees from debit cardholder transactions conducted through the Visa payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. Interchange income is presented gross of cardholder rewards. Cardholder rewards are included in other expenses in the statement of income. Cardholder rewards reduced interchange income b y $ 56,000 , $ 19,000 , and $ 8,000 for 2025, 2024, and 2023, respectively.
Wealth management fees (gross) : The Company earns wealth management fees from its contracts with wealth management clients to manage assets for investment. These fees are charged on a monthly or quarterly basis in accordance with its investment advisory agreements. Fees are generally assessed based on a tiered scale, based on the market value of AUM at month or quarter end. Other non-AUM based fees are charged on a fixed basis or as services are rendered.
Investment brokerage fees (net) : The Company earns fees from investment brokerage services provided to its customers by a third-party service provider. The Company receives commissions from the third-party service provider twice a month based upon customer activity for the month. The fees are recognized monthly, and a receivable is recorded until commissions are generally paid by the 15 th of the following month. Because the Company (i) acts as an agent in arranging the relationship between the customer and the third-party service provider and (ii) does not control the services rendered to the customers, investment brokerage fees are presented net of related costs.
Gains/(losses) on sales of property : The Company records a gain or loss from the sale of property when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of property to the buyer, the Company assesses whether the buyer is committed to perform its obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the property asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain/(loss) on sale if a significant financing component is present. The Company recorded a gain on sale of property of $ 304,000 for 2025, a loss on sale of property of $ 102,000 for 2024 and a loss on sale of property of $ 6,000 for 2023.
Gain on lease termination : In June 2025, the Company terminated its lease agreement for its Piscataway branch location that was no longer in use. The lease termination was finalized through a negotiated buyout payment of $ 275,000 . At the time of termination, the Company had an accrued lease liability of $ 1.1 million related to the remaining lease obligation. As a result of the termination, the Company recognized a gain of $ 875,000 , which is included in other income in the Consolidated Statements of Income. The gain reflects the difference between the accrued lease liability and the buyout payment.
Corporate advisory fee income : The Company provides our clients with financial advisory and underwriting services. Investment banking revenues, which includes mergers and acquisition advisory fees and private placement fees, are recorded when the performance obligation for the transaction is satisfied under the terms of each engagement. Reimbursed expenses are reported in other revenue on the statement of operations. Expenses related to investment banking are recognized as non-compensation expenses on the statement of operations. Amounts received and unearned are included on the statement of financial condition. Expenses related to investment banking deals not completed are recognized in non-compensation expenses on the statement of operations.
The Company’s mergers and acquisition advisory fees generally consist of a nonrefundable up-front fee and success fee. The nonrefundable fee is recorded as deferred revenue upon receipt and recognized at a point in time when the performance obligation is satisfied, or when the transaction is deemed by management to be terminated. Management’s judgment is required in determining when a transaction is considered to be terminated.
Other : All of the other income items are outside the scope of ASC 606.
10. OTHER OPERATING EXPENSES
The following table presents the major components of other operating expenses for the years ended December 31:
(In thousands)
Professional and legal fees
Trust department expense
Telephone
Loan expense
Amortization of intangible assets
Advertising
Other operating expenses
Total other operating expenses
11. INCOME TAXES
All of the Company's income tax expense as reported for the years ended December 31, 2025, 2024, and 2023 is attributable to domestic operations. The income tax expense included in the consolidated financial statements for the years ended December 31 is allocated as follows:
(In thousands)
Federal:
Current expense
Deferred (benefit)/expense
State:
Current expense
Deferred (benefit)/expense
Change in valuation allowance
Total income tax expense
Total income tax expense differed from the amounts computed by applying the U.S. Federal income tax rate of 21 percent for 2025, 2024, and 2023, respectively, to income before taxes as a result of the following:
(In thousands)
Amount
Percent
Amount
Percent
Amount
Percent
U.S. federal statutory rate
Federal reconciling items:
Nontaxable and nondeductible items, net
Change in valuation allowance
Other reconciling items
State and local income taxes, net of federal effect (1):
Total income tax expense
(1) State taxes in New Jersey made up the majority (greater than 50 percent) of the tax effect in this category.
The components of income taxes paid for the periods ended December 31, 2025, 2024, and 2023 were as follows:
(In thousands)
Total Income Taxes Paid
Federal
State
New Jersey
New York
Other
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31 are as follows:
(In thousands)
Deferred tax assets:
Allowance for credit losses
Tax net operating loss carryforward
Capital loss carryforward
Unrealized loss on securities available for sale
Unrealized loss on equity security
Stock compensation expense
Accrued compensation
Accrued expenses
Discount accretion
Lease liabilities
Finance lease
Other
Total deferred tax assets
Deferred tax liabilities:
Lease financing
Cash flow hedge
Deferred loan origination costs and fees
Deferred income
Amortization of intangible assets
Lease right-of-use asset
Other
Total deferred tax liabilities
Net deferred tax asset/(liability) before valuation allowance
Valuation allowance
Net deferred tax asset/(liability)
Management believes that not all existing net deductible temporary differences that comprise the net deferred tax asset will reverse during periods in which the Company generates sufficient taxable income of appropriate character. Accordingly, management has established a valuation allowance on all of the Company’s capital loss carryforward. Based on all available evidence, Management believes it is more likely than not the Company will realize the remaining deferred tax assets. Significant changes in the Company's operations and or economic conditions could affect the benefits of the recognized net deferred tax assets.
At December 31, 2025, the Company had $ 2.8 million of Federal net operating loss carryforward balances available to offset future taxable income that do not expire and $ 1.5 million of state net operating loss carryforward balances available to offset future taxable income that have various expirations beginning in 2033.
On June 28 2024, the governor of New Jersey signed into law a new Corporate Transit Fee, which increases the New Jersey corporate tax rate from 9 percent to 11.5 percent. This fee will be imposed on businesses that have New Jersey taxable income of $10 million or more for tax years beginning January 1, 2024 through December 31, 2028.
The Company is subject to U.S. Federal income tax as well as income tax of various state jurisdictions. The Company is no longer subject to federal examination for tax years prior to 2022 or by state and local tax authorities for years prior to 2021.
12. BENEFIT PLANS
The Company sponsors a profit sharing plan and a savings plan under Section 401(k) of the Internal Revenue Code, covering substantially all salaried employees over the age of 21 with at least 12 months of service. The Company contributed two percent of compensation for each employee that participates in the 401(k) plan regardless of the employees’ contributions for the years ended December 31, 2025 and 2024. The Company contributed three percent of compensation for each employee
that participates in the 401(k) plan regardless of the employees' contributions for the year ended December 31, 2023. In addition, the Company partially matches empl oyee contributions up to three percent. Expense for the savings plan totaled $ 4.6 million for the year ended December 31, 2025, $ 2.4 million for the year ended December 31, 2024, and $ 3.5 million for the year ended December 31, 2023.
Additional contributions to the profit sharing plan are made at the discretion of the Board of Directors. The Company did not make additional contributions to the profit sharing plan in 2025, 2024 or 2023.
13. STOCK-BASED COMPENSATION
The Company’s 2025 Long-Term Stock Incentive Plan allows the granting of shares of the Company’s common stock as incentive stock options, nonqualified stock options, restricted stock awards, restricted stock units and stock appreciation rights to directors, officers and employees of the Company and its subsidiaries. There are no shares remaining for issuance with respect to the Company's 2021 Long-Term Stock Incentive Plan. As of December 31, 2025, the total number of shares available for grant under the 2025 Plan was 499,413 . There are no shares remaining for issuance with respect to the stock incentive plans approved in 2006, 2012 and 2021.
Options granted are, in general, exercisable not earlier than one year after the date of grant, at a price equal to the fair value of common stock on the date of grant and expire not more than ten years after the date of grant. Stock options may vest during a period of up to five years after the date of grant. The Company has a policy of using authorized but unissued shares to satisfy option exercises. There were no stock options granted in 2025.
Upon adoption of ASU 2016-09, “Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting,” the Company has elected to account for forfeitures as they occur, rather than estimate expected forfeitures.
As of December 31, 2025, there was no unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Company’s stock incentive plans.
The Company issued performance and service-based restricted stock units in 2025, 2024 and 2023. Service-based units vest ratably over a three - or five-year period. There were 88,101 service-based restricted stock units granted under the 2021 Long-Term Stock Incentive Plan during 2025.
The performance-based awards are dependent upon the Company meeting certain performance criteria and, to the extent the performance criteria are met, will cliff vest at the end of the performance period, which is generally three years . There were 66,252 performance-based restricted stock units granted under the 2021 Long-Term Stock Incentive Plan during 2025.
Changes in non-vested shares dependent on performance criteria for 2025 were as follows:
Weighted
Average
Number of
Grant Date
Shares
Fair Value
Balance, January 1, 2025
Granted during 2025
Vested during 2025
Forfeited during 2025
Balance, December 31, 2025
Changes in service-based restricted stock awards/units for 2025 were as follows:
Weighted
Average
Number of
Grant Date
Shares
Fair Value
Balance, January 1, 2025
Granted during 2025
Vested during 2025
Forfeited during 2025
Balance, December 31, 2025
As of December 31, 2025, there was $ 4.8 million of total unrecognized compensation cost related to both service- and performance-based units. That cost is expected to be recognized over a weighted average period of 1.89 years. Total stock-based compensation expense recognized for stock awards/units totaled $ 10.9 million, $ 13.0 million and $ 10.7 million in 2025, 2024 and 2023, respectively. There was no stock-based compensation expense related to stock options for the years ended December 31, 2025, 2024 and 2023, respectively.
Phantom Stock Plan: During the first quarter of 2024, the Company adopted the Peapack-Gladstone Financial Corporation 2024 Phantom Stock Plan (the "Phantom Plan"). The Phantom Plan allows the Company to issue performance-based and service-based awards which will be paid in cash. The award of a phantom unit entitles the participant to a cash payment equal to the value of the unit on the vesting date, which is the fair market value of a common share of the Company's stock on such vesting date.
The Company did not issue performance-based phantom units in 2025. The Company issued service-based phantom units in 2025. Service-based phantom units vest ratably over a three-year period. There were 209,688 service-based phantom units granted under the Phantom Plan during 2025.
Phantom units are recorded in compensation and employee benefits expense based on the fair value of the units on the balance sheet date. The fair value of these awards is updated at each balance sheet date and changes in the fair value of the vested portions of the awards are recorded as increases or decreases to compensation expense within compensation and employee benefits in the Consolidated Statements of Income. All of the outstanding phantom units at December 31, 2025 met the criteria to be treated under liability classification in accordance with ASC 718, given that these awards will settle in cash on the vesting date.
Compensation expense for the phantom units is based on the fair value of the units as of the balance sheet date as further discussed above, and such costs are recognized ratably over the service period of the awards. As the fair value of liability awards is required to be re-measured each period end, stock compensation expense amounts recognized in future periods for these awards will vary. The estimated future cash payments of these awards are presented as liabilities within "Accrued expenses and other liabilities" in the Consolidated Statements of Condition. As of December 31, 2025, there was $ 8.1 million of unrecognized compensation costs related to non-vested phantom units.
14. COMMITMENTS AND CONTINGENCIES
The Company, in the ordinary course of business, is a party to litigation arising from the conduct of its business. Management does not consider that these actions depart from routine legal proceedings and believes that such actions will not affect its financial position or results of its operations in any material manner.
There are various outstanding commitments and contingencies, such as guarantees and credit extensions, including mostly variable-rate loan commitments of $ 1.6 billion and $ 1.2 billion at December 31, 2025 and 2024, respectively, which are not included in the accompanying consolidated financial statements. These commitments include unused commercial and home equity lines of credit.
The Company issues financial standby letters of credit that are irrevocable undertakings by the Company to guarantee payment of a specified financial obligation. Most of the Company’s financial standby letters of credit arise in connection with lending relations and have terms of one year or less. The maximum potential future payments the Company could be required to make equal the contract amount of the standby letters of credit and amounted to $ 57.3 million and $ 28.3 million
at December 31, 2025 and 2024, respectively. The fair value of the Company’s liability for financial standby letters of credit was insignificant at December 31, 2025.
For commitments to originate loans, the Company’s maximum exposure to credit risk is represented by the contractual amount of those instruments. Those commitments represent ultimate exposure to credit risk only to the extent that they are subsequently drawn upon by customers. The Company uses the same credit policies and underwriting standards in making loan commitments as it does for on-balance-sheet instruments. For loan commitments, the Company would generally be exposed to interest rate risk from the time a commitment is issued with a defined contractual interest rate.
The Company is also obligated under legally binding and enforceable agreements to purchase goods and services from third parties, including data processing service agreements.
The Company is a limited partner in several Small Business Investment Company (“SBIC”) funds. The Company had unfunded commitments of $ 6.7 million and $ 9.4 million for its investment in SBIC qualified funds at December 31, 2025 and 2024, respectively.
15. LEASES
The Company maintains certain property and equipment under direct financing and operating leases. As of December 31, 2025, the Company’s operating lease ROU asset and operating lease liability totaled $ 39.9 million and $ 43.3 million, respectively. As of December 31, 2024, the Company’s operating lease ROU asset and operating lease liability totaled $ 40.3 million and $ 43.6 million, respectively. A weighted average discount rate of 4.44 percent and 4.40 percent was used in the measurement of the ROU asset and lease liability as of December 31, 2025 and 2024, respectively.
The Company's leases had remaining lease terms between six months to 11 years, with a weighted average lease term of 8.47 years, at December 31, 2025. The Company's leases had remaining lease terms between four months to 12 years, with a weighted average lease term of 9.28 years, at December 31, 2024. The Company’s lease agreements may include options to extend or terminate the lease. The Company’s decision to exercise renewal options is based on an assessment of its current business needs and market factors at the time of the renewal.
Total operating lease costs were $ 6.5 million and $ 5.7 million for the years ended December 31, 2025 and 2024, respectively. The variable lease costs were $ 492,000 and $ 366,000 for the years ended December 31, 2025 and 2024, respectively.
The following is a schedule of the Company's operating lease liabilities by contractual maturity as of December 31, 2025:
(In thousands)
Thereafter
Total lease payments
Less: imputed interest
Total present value of lease payments
The following table shows the supplemental cash flow information related to the Company’s direct finance and operating leases for the years ended December 31:
(In thousands)
Right-of-use asset obtained in exchange for lease obligation
Operating cash flows from operating leases
Operating cash flows from direct finance leases
Financing cash flows from direct finance leases
16. REGULATORY CAPITAL
Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet minimum capital requirements can initiate certain mandatory – and possibly additional discretionary – actions by regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank’s financial statements and results of operations. The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (Basel III rules) became effective for the Company on January 1, 2015, with full compliance of all the requirements being fully phased in on January 1, 2019. The Company has chosen to exclude net unrealized gain or loss on available for sale securities in computing regulatory capital. Management believes that as of December 31, 2025, the Company and the Bank meet all capital adequacy requirements to which they were subject at that date.
Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At December 31, 2025 and 2024, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.
To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based, common equity Tier 1 and Tier I leverage ratios as set forth in the table.
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 December 31, 2025:
Total capital
(to risk-weighted assets)
Tier I capital
(to risk-weighted assets)
Common equity tier I
(to risk-weighted assets)
Tier I capital
(to average assets)
As of December 31, 2024:
Total capital
(to risk-weighted assets)
Tier I capital
(to risk-weighted assets)
Common equity tier I
(to risk-weighted assets)
Tier I capital
(to average assets)
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 December 31, 2025:
Total capital
(to risk-weighted assets)
Tier I capital
(to risk-weighted assets)
Common equity tier I
(to risk-weighted assets)
Tier I capital
(to average assets)
As of December 31, 2024:
Total capital
(to risk-weighted assets)
Tier I capital
(to risk-weighted assets)
Common equity tier I
(to risk-weighted assets)
Tier I capital
(to average assets)
The Basel Rules require the Company and the Bank to maintain a 2.5 percent “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) CET1 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.
17. DERIVATIVES
The Company utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements.
Interest Rate Swaps Designated as Cash Flow Hedges: Interest rate swaps with a notional amount of $ 305.0 million as of December 31, 2025 and $ 360.0 million as of December 31, 2024 were designated as cash flow hedges of certain interest-bearing deposits. On a quarterly basis, the Company performs a qualitative hedge effectiveness assessment. This assessment takes into consideration any adverse developments related to the counterparty’s risk of default and any negative events or circumstances that affect the factors that originally enabled the Company to assess that it could reasonably support, qualitatively, an expectation that the hedging relationship was and will continue to be highly effective. As of December 31, 2025, there were no events or market conditions that would result in hedge ineffectiveness. The aggregate fair value of the swaps is recorded in other assets/liabilities with changes in fair value recorded in other comprehensive income. The amount included in accumulated other comprehensive income would be reclassified to current earnings should the hedges no longer be considered effective. The Company expects the hedges to remain fully effective during the remaining terms of the swaps.
The following tables present information about the interest rate swaps designated as cash flow hedges as of December 31, 2025 and December 31, 2024:
(Dollars in thousands)
Notional amount
Weighted average pay rate
Weighted average receive rate
Weighted average maturity
2.08 years
Unrealized gain/(loss), net
Number of contracts
Notional
Fair
(In thousands)
Amount
Value
Interest rate swaps related to interest-bearing
deposits
Total included in other assets
Total included in other liabilities
Notional
Fair
(In thousands)
Amount
Value
Interest rate swaps related to interest-bearing
deposits
Total included in other assets
Total included in other liabilities
Cash Flow Hedges
The following table presents the net gains/(losses) recorded in accumulated other comprehensive income and the consolidated financial statements relating to the cash flow derivative instruments for the year ended December 31:
(In thousands)
Interest rate contracts
Gain/(loss) recognized in other comprehensive income (effective portion)
Net interest income recorded on these swap transactions totaled $ 3.7 million and $ 5.8 million for the years ended December 31, 2025 and 2024, respectively. Net interest income/expense for these swap transactions is reported as a component of interest expense.
Derivatives Not Designated as Accounting Hedges
The Company offers facility specific/loan level swaps to its customers and offsets its exposure from such contracts by entering mirror image swaps with a financial institution/swap counterparty (loan level-/-back-to-back swap program). The customer accommodations and any offsetting swaps are treated as non-hedging derivative instruments which do not qualify for hedge accounting (“standalone derivatives”). The notional amount of the swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual contracts. The fair value of the swaps is recorded as both an asset and a liability, in other assets and other liabilities, respectively, in equal amounts for these transactions.
The accrued interest receivable and payable related to these swaps of $ 541,000 and $ 849,000 at December 31, 2025 and December 31, 2024, respectively, is recorded in other assets and other liabilities.
Information about these swaps at December 31 is as follows:
(Dollars in thousands)
Notional amount
Fair value
Weighted average pay rates
Weighted average receive rates
Weighted average maturity
3.02 years
3.65 years
Number of contracts
18. SHAREHOLDERS’ EQUITY
On January 26, 2023, the Company authorized a share repurchase program of up to 890,000 shares, or approximately 5 percent of its outstanding shares. The Company purchased 712,327 shares at an average price of $ 25.37 for a total cost of $ 18.1 million under this program, which expired on December 31, 2024. On January 30, 2025, the Company authorized a plan to repurchase up to 880,000 shares, which was approximately 5 percent of the outstanding shares as of that date, through December 31, 2026. During the year ended December 31, 2025, the Company purchased 200,000 shares at an average price of $ 27.22 for a total cost of $ 5.4 million. During the year ended December 31, 2024, the Company purchased 300,000 shares at an average price of $ 23.96 for a total cost of $ 7.2 million.
The Dividend Reinvestment Plan of the Company (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 filled from the Company’s authorized but unissued shares and/or in the open market, at the discretion of the Company. All shares purchased during 2025 and 2024 were purchased in the open market.
19. BUSINESS SEGMENTS
The Company has two reportable segments as determined by the Chief Financial Officer , who is the designated CODM, based upon information provided about the Company's products and services offered, primarily distinguished between banking and wealth management services provided by the Bank's wealth management division. They are also distinguished by the level of information provided to the CODM, who uses such information to review performance of various components of the business. The CODM evaluates the financial performance of the Company's business segments such as by evaluating revenue streams, significant expenses, and budget to actual results in assessing the performance of the Company's segments and in the determination of allocating resources. The CODM uses revenue streams to evaluate product pricing and significant expense to assess performance of each segment to evaluate compensation of certain employees. Segment pretax profit or loss is used to assess the performance of the banking segment by monitoring the margin between interest revenue and interest expense. Segment pretax profit or loss is used to assess the performance of the Wealth Management Division by monitoring wealth management fee income and AUM. Loans and investments primarily provide the revenues in the banking operation and wealth management fee income provide the revenues for the Wealth Management Division. Interest expense, provision for credit losses, payroll and premises and equipment provide the significant expenses in the banking segment, while payroll, occupancy, and trust expenses are the significant expenses in the Wealth Management Division. All operations are domestic.
Management uses certain methodologies to allocate income and expense to the business segments. A funds transfer pricing methodology is used to assign interest income and interest expense. Certain indirect expenses are allocated to segments. These include support unit expenses such as technology and operations and other support functions. Taxes are allocated to each segment based on the effective rate for the period shown.
Banking
The Banking segment includes: commercial (includes C&I and equipment finance), commercial real estate, multifamily, residential and consumer lending activities; treasury management services; C&I advisory services; escrow management; deposit generation; operation of ATMs; telephone and internet banking services; merchant credit card services and customer support and sales.
Wealth Management
The Wealth Management Division, which includes the operations of PGB Trust & Investments of Delaware, consists of: 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.
The following tables present the statements of income and total assets for the Company’s reportable segments for the years ended December 31, 2025, 2024 and 2023:
Year Ended December 31, 2025
Wealth
(In thousands)
Banking
Management
Total
Net interest income
Noninterest income
Total income
Provision for credit losses
Compensation and benefits
Premises and equipment expense
Depreciation expense
FDIC expense
Other noninterest expense
Total noninterest expense
Income before income tax expense
Income tax expense
Net income
Total assets at period end
Year Ended December 31, 2024
Wealth
(In thousands)
Banking
Management
Total
Net interest income
Noninterest income
Total income
Provision for credit losses
Compensation and benefits
Premises and equipment expense
Depreciation expense
FDIC expense
Other noninterest expense
Total noninterest expense
Income before income tax expense
Income tax expense
Net income
Total assets at period end
Year Ended December 31, 2023
Wealth
(In thousands)
Banking
Management
Total
Net interest income
Noninterest income
Total income
Provision for credit losses
Compensation and benefits
Premises and equipment expense
Depreciation expense
FDIC expense
Other noninterest expense
Total noninterest expense
Income before income tax expense
Income tax expense
Net income
Total assets at period end
20. 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 were non-callable for five years , had a stated maturity of December 15, 2027 , and had a fixed interest rate of 4.75 percent per year until December 15, 2022. From December 16, 2022, to the maturity date or early redemption date, the 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.
21. ACQUISITIONS
The Company did no t complete any acquisitions in 2025 or 2024.
Goodwill on the Company’s consolidated statement of financial condition totaled $ 36.2 million at December 31, 2025 and 2024. Of the $ 36.2 million of goodwill, $ 563,000 relates to the Banking segment and $ 35.6 million relates to the Wealth Management segment.
The Company conducted its annual impairment analysis in the third quarter of 2025 and concluded that there was no impairment of goodwill.
The table below presents a roll forward of goodwill and intangible assets for the years ended December 31, 2025, 2024 and 2023:
Identifiable
(In thousands)
Goodwill
Intangible Assets
Balance as of January 1, 2023
Amortization and impairment during the period
Balance as of December 31, 2023
Amortization and impairment during the period
Balance as of December 31, 2024
Amortization and impairment during the period
Balance as of December 31, 2025
Amortization expense related to identifiable intangible assets was $ 1.1 million for 2025, $ 1.1 million for 2024 and $ 1.3 million for 2023.
Estimated amortization expense for each of the next five years is shown in the table below.
(In thousands)
22. ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)
The following is a summary of the accumulated other comprehensive income/(loss) balances, net of tax, for the years ended December 31, 2025, 2024 and 2023:
Amount
Other
Reclassified
Comprehensive
Other
From
Income/(Loss)
Comprehensive
Accumulated
Year
Balance at
Income/(Loss)
Other
Ended
Balance at
January 1,
Before
Comprehensive
December 31,
December 31,
(In thousands)
Reclassifications
Income/(Loss)
Net unrealized holding gain/(loss) on
securities available for sale, net of tax
Gain/(loss) on cash flow hedges
Accumulated other comprehensive
gain/(loss), net of tax
Amount
Other
Reclassified
Comprehensive
Other
From
Income/(Loss)
Comprehensive
Accumulated
Year
Balance at
Income/(Loss)
Other
Ended
Balance at
January 1,
Before
Comprehensive
December 31,
December 31,
(In thousands)
Reclassifications
Income/(Loss)
Net unrealized holding gain/(loss) on
securities available for sale, net of tax
Gain/(loss) on cash flow hedges
Accumulated other comprehensive
gain/(loss), net of tax
Amount
Other
Reclassified
Comprehensive
Other
From
Income/(Loss)
Comprehensive
Accumulated
Year
Balance at
Income/(Loss)
Other
Ended
Balance at
January 1,
Before
Comprehensive
December 31,
December 31,
(In thousands)
Reclassifications
Income/(Loss)
Net unrealized holding gain/(loss) on
securities available for sale, net of tax
Gain/(loss) on cash flow hedges
Accumulated other comprehensive
gain/(loss), net of tax
The following represents the reclassifications out of accumulated other comprehensive income/(loss) for the years ended December 31, 2025, 2024 and 2023:
Years Ended
December 31,
(In thousands)
Affected Line Item in Statements of Income
Unrealized gain/(losses) on securities available
for sale:
Reclassification adjustment for amounts included
in net income
Securities losses, net
Tax effect
Income tax expense
Total reclassifications, net of tax
Unrealized gain/(losses) on cash flow
hedge derivatives:
Reclassification adjustment for amounts included
in net income
Interest expense/other income
Tax effect
Income tax expense
Total reclassifications, net of tax
23. CONDENSED FINANCIAL STATEMENTS OF PEAPACK-GLADSTONE FINANCIAL CORPORATION (PARENT COMPANY ONLY)
STATEMENTS OF CONDITION
December 31,
(In thousands)
Assets
Cash
Interest-earning deposits
Total cash and cash equivalents
Investment in subsidiary
Other assets
Total assets
Liabilities
Subordinated debt
Other liabilities
Total liabilities
Shareholders’ equity
Common stock
Surplus
Treasury stock
Retained earnings
Accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Years Ended December 31,
(In thousands)
Income
Dividend from Bank
Other income
Total income
Expenses
Interest expense
Other expenses
Total expenses
Income before income tax benefit and
equity in undistributed earnings of Bank
Income tax benefit
Net income before equity in undistributed earnings of Bank
(Dividends in excess of earnings)/equity in undistributed
earnings of Bank
Net income
Other comprehensive income/(loss)
Comprehensive income
STATEMENTS OF CASH FLOWS
Years Ended December 31,
(In thousands)
Cash flows from operating activities:
Net income
Dividends in excess of earnings/(undistributed earnings of Bank)
Amortization of subordinated debt costs
Increase in other assets
(Decrease/(increase) in other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Capital contribution to subsidiary
Net cash used in investing activities
Cash flows from financing activities:
Cash dividends paid on common stock
Exercise of stock options, net of stock swaps
Repayments of subordinated debt
Purchase of treasury shares
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
24. SUPPLEMENTAL DATA (unaudited)
The following tables set forth certain unaudited quarterly financial data for the periods indicated:
Selected 2025 Quarterly Data:
(In thousands, except per share data)
March 31
June 30
September 30
December 31
Interest income
Interest expense
Net interest income
Provision for credit losses
Wealth management fee income
Fair value adjustment for equity securities
Other income
Operating expenses
Income before income tax expense
Income tax expense
Net income
Earnings per share-basic
Earnings per share-diluted
Selected 2024 Quarterly Data:
(In thousands, except per share data)
March 31
June 30
September 30
December 31
Interest income
Interest expense
Net interest income
Provision for credit losses
Wealth management fee income
Fair value adjustment for equity securities
Other income
Operating expenses
Income before income tax expense
Income tax expense
Net income
Earnings per share-basic
Earnings per share-diluted
