Peapack-Gladstone Financial Corporation Q3 2026 Earnings Call - Core Pre-Tax Revenue Surges 76% as Expansion Strategy Pays Off

Conference Operator: Welcome to the Peapack-Gladstone Financial Corporation third quarter 2026 earnings call. Please be advised that today’s conference is being recorded. I will now hand the conference over to Matthew Remo, Treasurer and Head of Corporate Finance. Please go ahead.

Matthew Remo, Treasurer and Head of Corporate Finance, Peapack-Gladstone Financial Corporation: Wealth Management, and Lisa Chalkan. Thank you, and good morning, everyone. I am joined today by our President and CEO, Doug Kennedy, and our CFO, Frank Cavallaro, who will provide an overview of our third quarter results. John Babcock, our President of Wealth Management, and Lisa Chalkan, our Chief Credit Officer, are also here to answer any questions. If you have not yet read the earnings release and investor presentation we issued yesterday afternoon, you may access them by going to the investor relations page on our company website at peapackprivate.com. You may also access the investor presentation directly within our webcast today. After the presentation, we will be happy to take questions. Our comments today may contain forward-looking statements, which are subject to risks and uncertainties that may cause our results to differ materially from expectations.

Cautionary statements about reliance on this information are included in the earnings release and investor presentation, as well as our SEC filings and other investor materials. The earnings release and presentation also include non-GAAP financial measures, so it is important to review the appropriate reconciliations in the appendices to each document. With that, it is my pleasure to turn the call over to Doug.

Doug Kennedy, President and CEO, Peapack-Gladstone Financial Corporation: Thanks, Matt. Good morning, everybody, and thank you for joining us on our third quarter call. On behalf of the entire team at Peapack Private, I am pleased to report yet another strong quarter for our company. Before we get into the numbers, I want to frame the quarter. What you are seeing in Q3 is not a one-quarter story. It is the result of a strategy that we have been executing on 2023, and is now showing up consistently in our results. The big takeaway for the quarter is continued growth and profitability. Revenue continued to grow significantly faster than expenses, and expenses actually declined from the second quarter. That combination drove core pre-tax, pre-provision revenue to $32.3 million, up 76% year-over-year, and net income available to common shareholders to $18.5 million. Diluted earnings per share were $0.99, up 15% on a linked-quarter basis.

This forward momentum marks 10 consecutive quarters of revenue and six consecutive quarters of earnings growth. I will add that during the quarter, Moody’s affirmed our investment grade rating with a stable outlook. How did we get here? Let me put that in context. In 2023, the banking industry went through a real stress. Three large bank failures and a significant dislocation. We saw that dislocation as an opportunity, and we acted. In May 2023, we hired our first experienced New York City team. By April 2024, we had 13 teams and the leadership in place. In January 2025, we rebranded to Peapack Private. That April, we opened our flagship branch on 300 Park Avenue. Over the past year, we expanded to Long Island and added wealth, commercial real estate, and equipment finance talent.

This past quarter, our annualized pre-tax, pre-provision revenue reached $129 million, which was approximately 2.7 times the trough that we saw in the third quarter of 2024. We made the investment, we built the teams, and repositioned our brand, and now these investments are showing up in higher core earnings. What did we see this quarter? Our net interest margin continued to improve despite funding cost pressure, and our efficiency ratio improved even further. That positive operating leverage is in its simplest form. Revenues are up, our expenses are down, and improved earnings are following. During the quarter, loans grew $403 million, deposits grew $301 million. As we have said before, growth is never going to be linear, and we do not expect that to ever be the fact.

Our quarterly operating objectives remain $200 million of loan growth, $200 million of deposit growth, and $2 million in core earnings growth. Q3 exceeded the loan and deposit objectives and delivered $2 million of core earnings growth. We begin Q4 with a strong loan and deposit pipeline. The quality of that growth has been meaningful. We continue to see growth in non-interest-bearing operating relationships, which have increased 18% year-over-year. On the loan side, commercial and industrial lending grew $409 million year-over-year, up 15%, and we are seeing growth across virtually every asset category. That healthy margin expansion, combined with strong balance sheet growth, as you would expect, are improving our returns. Our return on average tangible equity was 11.4%, up 587 basis points since the third quarter of 2024. Despite all our growth and some isolated headwinds, our capital and credit have remained very solid.

Our capital position continues to provide buffers that give us the capacity to support continued growth, and we are managing that capacity thoughtfully. Our focus is on balancing attractive growth opportunities with capital discipline as earnings improve. Frank is going to cover capital position and the current offering under our voluntary dividend reinvestment program, which will supplement organic capital generation as we support anticipated growth. Credit quality also improved sequentially with lower non-performing assets and early-stage delinquencies declining. As a result, our allowance coverage for non-performing loans improved to 126% in the quarter. Our New York rent-regulated multifamily portfolio is down 12% year-over-year and now represents 11% of total loans versus 18% at September 30, 2024. We expect that this will continue into the future. Wealth management remains a foundational aspect of our company, who we are, and how we act as a private bank.

We ended the quarter with $13.6 billion in assets under management and administration, down slightly from the second quarter. Gross inflows remained solid. Wealth revenue was $17.3 million, up 9% year-over-year, and $51 million year-to-date. This is a scaled, long-established franchise. It deepens relationships across generations. It gives us real scarcity value through fiduciary expertise, specialist investment talent, sell-side advisory for business owners. It is the cornerstone of what it is that we do. Client trust in this space is very hard to replicate. It takes decades of performance and the highest level of professionalism to build. Wealth management, as you would expect, anchors the entire strategy of customized banking, bespoke credit, and treasury delivered through one coordinated team providing a high level of customer service. A single point of contact solving the complex needs of affluent families and business owners one client at a time.

To summarize, our differentiated model is driving growth and improved profitability. Momentum is strong, and we are very constructive about our company’s future. We have an established platform and are building an enviable differentiated franchise across metro N.Y. Experienced teams, specialist capabilities, scaled infrastructure, and an integrated client relationship, wealth and fiduciary advice, private and commercial banking, credit treasury solutions, all coordinated and made easy through a single point of contact. Our long-term objectives remain unchanged. A 1.25%-plus return on assets and a 14%-plus return on equity or better. We are not there yet, but we are moving forward, achieving both benchmarks incrementally in a very thoughtful manner. With that, I want to thank you again for your confidence and support. At this point, I am going to turn it over to Frank, who will give you a detailed overview of the quarter.

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: Thanks, Doug, and good morning, everyone. I will begin with earnings and then take you through the balance sheet, credit quality, and wrap up with a few comments on capital. Net income available to common shareholders increased 17% sequentially to $18.5 million or $0.99 per diluted share, compared with $15.8 million or $0.86 in the second quarter. Total revenue was $88 million, up 2% sequentially and 24% year-over-year. That growth was primarily driven by net interest income, which increased to $68 million, up $3.6 million, which is 6% growth sequentially and 33% year-over-year. Net interest margin was 3.34%, an increase of two basis points from the second quarter. This change is consistent with our expectations and aligns with our prior guidance. Pricing on new business remained attractive. Loans originated during the quarter carried yields of approximately 6.4%, while new deposits came in in the mid-2% range.

However, rapid loan growth and increased competition for deposits required us to use more borrowings than in recent quarters, tempering the margin benefit of that growth. Non-interest income totaled $20 million, down $2.1 million, or approximately 10% sequentially. A loss on the sale of an OREO property, in addition to a fair value mark on a CRA equity security, were responsible for approximately half of the linked quarter decline. As revenue continues to grow, expense growth is moderating. We supported substantial new business during the third quarter using the infrastructure we have built while holding expenses essentially flat. Operating expenses totaled $55 million, down 1% sequentially and up 5% year-over-year. Combined with a 24% year-over-year increase in revenue, this is producing strong positive operating leverage and contributing to earnings growth.

Core earnings or pre-provision net revenue totaled $32.3 million, up approximately $2 million or 6% on a linked-quarter basis. Our efficiency ratio improved to 63%, which is down approximately 1.7 percentage points sequentially and nearly 16 full percentage points lower than the third quarter of 2024. The effective tax rate in the quarter was approximately 20.5% compared to 28.4% in the second quarter. The third quarter rate includes a discrete benefit of approximately $1.8 million related to the purchase of production tax credits, resulting in a lower tax provision. We consider this a one-time item and do not expect that benefit to recur next quarter. Turning to the balance sheet, growth was strong across the company during the third quarter. Total loans increased $403 million sequentially to $7.1 billion, up 17% year-over-year. Growth was diversified across the franchise, with C&I and commercial real estate showing particularly strong results.

At the same time, our New York rent-regulated multifamily portfolio continued to run off and become a smaller portion of the overall balance sheet. Deposits increased $301 million or 4% quarter-to-quarter to $7.4 billion. Deposits increased approximately $800 million or 12% year-over-year. Deposit growth continued to come from across the franchise with a focus on delivering core relationships with significant operating account balance. Over the past 5 quarters, we have opened an average of more than 600 non-interest-bearing operating accounts per quarter. We also monitor how those accounts fund and develop over time to assess the depth and the economics of each relationship. Non-interest-bearing demand deposits ended the third quarter at approximately $1.6 billion, which reflects 18% growth year-over-year. We remain confident in our comprehensive relationship strategy as it continues to deliver fully banked relationships, supporting growth, and managing our funding mix over time.

Turning to credit, non-performing assets declined by $14 million, or 20% sequentially, to $58 million, representing 0.68% of total assets, compared to 1.13% a year ago. Loans 30 to 89 days past due declined $9 million, or 18% sequentially to $39 million, representing 0.56% of total loans. The provision for credit losses was $8.5 million, compared to $8.1 million in the second quarter. Of that amount, $5 million of it was attributable to loan growth. Loan losses associated with loan workouts were lower than anticipated during the current quarter. Net charge-offs were $4.7 million compared with $5.9 million in the second quarter of 2026. These improvements are encouraging, and we continue to actively manage individual problem credits. Within the New York rent-regulated multifamily portfolio, balances declined to $775 million as of September 30th. That portfolio represented approximately 11% of total loans, compared to 18% 2 years ago.

The reduction reflects both portfolio runoff and growth elsewhere in the loan portfolio. Turning to capital, as Doug noted, we maintain buffers above regulatory capital thresholds. Our strong balance sheet growth has reduced some of those buffers even as earnings have improved. While we are managing capital proactively to support attractive relationship growth while preserving an appropriate cushion. To support our growth, we issued the remaining $20 million of convertible preferred equity in July of this year. This supported capital at both the bank and the holding company levels. As profitability improves, we expect retained earnings to support a greater portion of our capital growth internally. In the meantime, we are actively managing the capital needed to support the business we are generating today. We launched our voluntary dividend reinvestment program in the fourth quarter, which is scheduled to close in mid-November.

This program has successfully increased common equity in the past and provides a supplemental source of capital as earnings improve. Going forward, we continue to evaluate capital in the context of business opportunities, risk, and the interests of existing shareholders. We enter the fourth quarter with a stronger earnings base. Continued relationship growth and expense discipline are supporting earnings, and our priority is to translate that progress into higher returns while maintaining funding, credit, and capital discipline. With that, we are happy to answer your questions.

Conference Operator: We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. If you are muted, please remember to unmute your device. Please stand by while we compile the Q&A roster. Our first question from Christopher Marinac with Brean Capital LLC. Your line is now open. Please go ahead.

Christopher Marinac, Analyst, Brean Capital LLC: Hey, good morning, Frank and Doug and team. Can you talk a little bit about where you see deposit pricing going from here? And do you see any further mix shift beyond what we’ve seen the last quarters?

Doug Kennedy, President and CEO, Peapack-Gladstone Financial Corporation: Hey, Chris. Good morning. How are you? This is Doug. I would say, listen, we absolutely have seen a little bit of pressure. We’ve been sort of trying to gauge at sort of that 200 range. If you look at sort of the 200 that we got in core during the quarter, the pricing and the spread between that and what we were lending out at was north of that 4% target that we set for each other. So I think that the pricing, while it’s been more competitive, I think it certainly has not gotten out of hand. Maybe Frank-

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: Yeah. I was just looking at the quarter-to-quarter. The interest-bearing liabilities went up 10 basis points. We expected that because of the 25 basis point move by the Fed during the quarter. In addition, we were borrowing a little bit of money from the Federal Home Loan Bank, so putting some pressure there. I think to answer your question, we do expect to see upward pricing pressure on the cost of deposits. If we’ve managed the overall beta to 50%-60%, we think that’s a comfortable level for us to manage the overall interest rate risk.

Doug Kennedy, President and CEO, Peapack-Gladstone Financial Corporation: In terms of NIM, after Q1, we’ve guided sort of 6-9 basis points for the year. We’re kind of right in that range now. We expect that will play out this year. Between the back book repricing, even with the added pressure on funding costs, we think that we can still sort of get a 2-3 basis point improvement in NIM in each of the quarters going into 2027.

Christopher Marinac, Analyst, Brean Capital LLC: Great. Thank you for that. Then just a follow-up on the credit side. Do you see any further shift on multifamily values for you, in terms of how you’ve calibrated it at this point?

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: Lisa Trawick’s here, so I’ll have Lisa respond to that.

Lisa Chalkan, Chief Credit Officer, Peapack-Gladstone Financial Corporation: Values on the underlying collateral or value of the actual loans in a trade?

Christopher Marinac, Analyst, Brean Capital LLC: Well, it is actually just the collateral. Would you have to make additional reserve additions and/or write-downs from here?

Lisa Chalkan, Chief Credit Officer, Peapack-Gladstone Financial Corporation: Yeah. As we are getting updated appraisals, and again, we only have to get an updated appraisal if something is non-performing. The first time it goes substandard, we do, and then if it is non-performing, we get them annually. I would say that we are seeing a mix. We are seeing some properties where there seems to be some softening of value. At the same time, we are seeing some properties that are either holding up or actually have an improvement in value over the appraisal that was obtained a year ago. I do not think that there is anything pervasive. Could there be one-offs? Absolutely. It does not seem to be that we are seeing it across the board or systemically.

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: Additional provisioning to your question. We are absorbing it in our normal provision run rate.

Like Lisa said, there is going to be one-offs. We are dealing with them as they come up, but we do not see a landslide of deals coming our way. We are pretty comfortable with how it has been performing to date.

Christopher Marinac, Analyst, Brean Capital LLC: Great. Thank you, Frank, and thank you, Lisa. Appreciate you taking our questions.

Conference Operator: Your next question from the line of Steve Moss with Raymond James. Your line is now open. Please go ahead.

Steve Moss, Analyst, Raymond James: Good morning. Maybe just following up here on the multifamily. Just curious how to think about the cadence of potential pay-downs over the next four to five quarters. Just curious what percentage of those loans may be repriced over that time period as well.

Lisa Chalkan, Chief Credit Officer, Peapack-Gladstone Financial Corporation: You want to take the repricing?

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: Yeah, so the repricing, I think we looked at, we’ve got over the next five quarters, so let’s say through the end of next year. We think there is a half a million dollars in rent-regulated multifamily that reprices.

Steve Moss, Analyst, Raymond James: Billion.

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: I think a billion is the total.

Steve Moss, Analyst, Raymond James: No, final. Right.

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: Yeah, but I think he’s asking specifically rent-regulated.

Steve Moss, Analyst, Raymond James: It’s about $500 million.

Lisa Chalkan, Chief Credit Officer, Peapack-Gladstone Financial Corporation: Yeah.

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: Yeah, so $500 million. We’re comfortable with that. As far as you can answer the second answer.

Lisa Chalkan, Chief Credit Officer, Peapack-Gladstone Financial Corporation: Yeah, I mean, the normal amortization on the portfolio of the New York rent regulated is, I would say $5 million or $6 million, a quarter. We have seen some small payoffs. I’m anticipating more than not. Many of the loans will either reprice or be looking for some. The repricing in the documents is over market, so they may be looking for some level of a modification to make it a little bit more in line with what a current market rate might be.

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: It’s declining. Not as quickly as we would hope.

Lisa Chalkan, Chief Credit Officer, Peapack-Gladstone Financial Corporation: Yeah

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: The important thing is it’s not increasing. We’re not originating anything new in that space. Then we continue to let pay-downs happen, obviously, on monthly P&I payments. But anytime we see a relationship that’s just transactional, we kind of encourage them to seek other funding when their maturity date comes up.

Lisa Chalkan, Chief Credit Officer, Peapack-Gladstone Financial Corporation: Correct.

Steve Moss, Analyst, Raymond James: Okay. Just kind of curious in terms of potential modification. Would it be a new 5-year loan at maybe 6% is kind of how you guys are thinking about it? Or just as this half, $500 million comes through in the next 5 quarters, what does that kind of refi process look like? Are borrowers able to put up equity?

Lisa Chalkan, Chief Credit Officer, Peapack-Gladstone Financial Corporation: Yeah. It runs the gamut. I wish that there was a menu of here’s the 2 or 3 scenarios. Every single one is something different. Sometimes, we look for a pay-down. We have had clients who’ve actually posted collateral accounts with us. We’ve had clients who’ve given us guarantees. We have done something that’s maturing, done a 1-year IO to give them time to be able to refinance it or sort out how they want to move forward. We have reset the interest rate and reset the amortization for a 2-year period, a 3-year period, nothing more than a 5-year period. But every single loan is looked at individually, discussed, and negotiated.

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: The important thing is that we’re agreeing to a modification. We’re conceding something to the borrower, but we’re getting something in return.

Lisa Chalkan, Chief Credit Officer, Peapack-Gladstone Financial Corporation: Exactly.

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: We’re open to discussion on what that something is in every case.

Steve Moss, Analyst, Raymond James: Okay, great. Appreciate that color there. Then just in terms of the margin here, I guess a couple of things that I apologize, Frank, I had a hard time hearing you on your margin comments. Just curious in terms of where were new loan originations this quarter and just in terms of just thinking about what percentage of loans are variable rate as well?

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: The origination question, I think we announced that the originations were at about 6.4%, so mid-6s on the new loans. Overall, the mix of the variable rate is about two-thirds fixed, one-third, 25%. I’m sorry, 75% fixed, 25% variable is probably the answer to the question on the mix.

Steve Moss, Analyst, Raymond James: Okay, great. In terms of just the pipeline here, rates have moved up. Just curious, as we head into the fourth quarter here, have origination yields stepped up from there, or are they holding steady?

Doug Kennedy, President and CEO, Peapack-Gladstone Financial Corporation: The 10-years, Steve, is just bouncing around. Right now in every business, including real estate, which is recent, everything we’re quoting is a spread to the treasury. We don’t lock the rate until we get to a closing. Those spreads are pretty much constant. It’s 2% to 2.5%, depending on the buy business. The spreads to the 5-year or the It’s typically the 5-year, 3 or 5-year, somewhere in there. That has been very consistent, the spread.

Steve Moss, Analyst, Raymond James: Okay. Appreciate that. In terms of just kind of thinking of The other thing I was curious on here, in terms of loan growth, good loan growth overall, the consumer book definitely shot up this quarter. I’m just kind of curious on the drivers there.

Lisa Chalkan, Chief Credit Officer, Peapack-Gladstone Financial Corporation: Yeah, some of it was growth in the residential loan origination. I think we’ve raised before that we have this professional line of credit that we are offering to attorneys and accountants. We’ve seen more volume there. We also have had a pool of loans that we purchased from a third party. We had been doing that was also a piece of it. Those are the three drivers. We also are seeing a lot more volume in the investment credit lines tied to the growth in John’s business. We offer a product that allows people to borrow against their margin collateral. We are definitely seeing a lot more volume there. Although I would say many of those lines remain unused. They’re liquidity lines, but there’s a lot more volume.

Doug Kennedy, President and CEO, Peapack-Gladstone Financial Corporation: And we’ve also closed out a couple yacht loans as well.

Lisa Chalkan, Chief Credit Officer, Peapack-Gladstone Financial Corporation: Correct. I think that probably in these results, there were probably three yacht loans that we closed.

Steve Moss, Analyst, Raymond James: Okay, great. Appreciate that. And maybe just in terms of expenses here, efficiency ratio has steadily improved. And Doug, I hear you on operational improvement. Just kind of curious here, and definitely going to first on from your net income caller, but how are you guys thinking about the cadence of expense growth into 2027 and any investments you may have to make?

Doug Kennedy, President and CEO, Peapack-Gladstone Financial Corporation: We’ve really leaned into AI across the enterprise. I’ve got a meeting actually this afternoon. It’s literally we’ve got AI champions in every area of the bank. We’ve actually stood up 100 agents across the institution. They’re right now in final testing. For example, loan closings, which was a very complicated sort of do. I would say that the inclination is probably going to be more towards technology, the investment, going into 2027, than it will be on people. And the idea is to take a lot of what we do that’s, I’ll call it like an arts and crafts business, getting our processes very consistent and then being able to scale, and set ourselves up to scale going forward, leveraging technology. We also we’ve got ordinary raises. Healthcare, we’re expecting to have an increase. Frank, I think it’s probably-

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: Yeah

Doug Kennedy, President and CEO, Peapack-Gladstone Financial Corporation: mid to upper single digit is probably where we’ll land for next year.

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: Yeah, I mean, look,

Doug Kennedy, President and CEO, Peapack-Gladstone Financial Corporation: On the operating expense line.

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: If you look at the last three quarters, we’ve held it flat, which we’re very pleased with. There’s a natural in Q1, there’s kind of that natural merit increases and resets for leases and things like that that’ll step up. But we’re targeting when we look at our multi-year projection for next year, mid to single digit growth on the expense line. The last couple of years you’ve seen us higher teens and the full year run rate has carried into the following year. That will trickle off and we’ll get back to kind of a normalized growth rate as we look into 2027 and beyond.

Steve Moss, Analyst, Raymond James: Okay, great. I appreciate all the color here. I will step back.

Conference Operator: Your next question.

Doug Kennedy, President and CEO, Peapack-Gladstone Financial Corporation: I would say, Steve, the only comment.

Conference Operator: Oh.

Doug Kennedy, President and CEO, Peapack-Gladstone Financial Corporation: Oh, Steve, let me just say the last commentary is that, and I have said before, we are really focused on Q4 of 2027 to get the returns. It will not be a destination return, but it sort of gets us to the zip code that we want to be in based on the investments that we have made. So we are very focused on executing through the end of next year.

Conference Operator: Your next question from the line of Manuel Navas with Piper Sandler. Your line is now open. Please go ahead.

Manuel Navas, Analyst, Piper Sandler: Hey, good morning. Could you quantify the pipeline a little bit more? Just thoughts on how the fourth quarter looks versus the 200/200 targets because you’ve exceeded them so much here in the third quarter. And how long can this kind of accelerated pace go into next year?

Doug Kennedy, President and CEO, Peapack-Gladstone Financial Corporation: Pipelines are very strong. That’s the only way I’ll describe it. In terms of visibility on the 2-2-2, we have absolute visibility in the fourth quarter, and I would say that we have enough strength that we could actually see the first quarter of next year as well.

Manuel Navas, Analyst, Piper Sandler: I appreciate that.

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: We expect to grow.

Manuel Navas, Analyst, Piper Sandler: Awesome.

Doug Kennedy, President and CEO, Peapack-Gladstone Financial Corporation: Go ahead.

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: I was just going to add to that, will it be as strong as Q3? Q3 was probably abnormally strong. We expect the overall growth to step back a little bit as we go into the coming quarters, probably closer to the 2-2-2 plan.

Doug Kennedy, President and CEO, Peapack-Gladstone Financial Corporation: I would say us managing to the 2-2 in this quarter, Manuel, is that some stuff may fall into January that could have, if we pulled it forward, could happen. We are managing to a 2-2-2, but not because we are leaning in to get stuff closed. It is kind of trying to manage a pipeline into the next quarter. We feel very comfortable about this quarter and next quarter.

Manuel Navas, Analyst, Piper Sandler: As we think about getting closer to 100/200, the NIM benefit should increase since you are getting an accretive margin on those new loans and deposits. That could bode well into next year, correct?

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: Yeah. Clearly, the volume plus the back book repricing that we talked about earlier, those two things are really what is going to help us with the NIM next year as we kind of face the pressure of the funding cost increasing.

Doug Kennedy, President and CEO, Peapack-Gladstone Financial Corporation: Two-two-two, it is $200 million loans, $200 million deposits, and $2 million in pre-tax, pre-provision revenue. That is what we are focused on.

Manuel Navas, Analyst, Piper Sandler: On the back book repricing, can you just quantify that a bit more? I do not know if I misheard. I did not hear a dollar amount outside of the New York City multifamily piece, but just overall back book repricing and kind of what yield is it going from, what it could potentially reprice to.

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: Yeah. I think the earlier question was just focused on the rent-regulated. So we kind of gave just an answer there. If we step back and look at the whole portfolio, over the next two years, about 20% of our book or about $1.4 billion in fixed-rate assets will reprice. The weighted average coupon on that is just around 390. And we think that we could pick up somewhere between 150-200 basis points on a repricing over that time period.

Manuel Navas, Analyst, Piper Sandler: That’s powerful. The next two years-

Doug Kennedy, President and CEO, Peapack-Gladstone Financial Corporation: Getting back to the earlier discussion, I was going to say that would completely mitigate the pressure that we’re feeling on the funding side.

Manuel Navas, Analyst, Piper Sandler: Over the next few years, is that pretty steady or is it lumpier in any particular half of year or anything like that?

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: I would say, I think if we look at it quarterly, I think in the middle of next year, like Q2 and Q3, it’s a little lumpy. Outside of that, I think it kind of smooths out.

Manuel Navas, Analyst, Piper Sandler: Okay. I appreciate that.

Doug Kennedy, President and CEO, Peapack-Gladstone Financial Corporation: Next year.

Manuel Navas, Analyst, Piper Sandler: Any impact of pricing so far from the September rate hike and just thoughts about future hikes and impact on your originations, loans, and deposits?

Doug Kennedy, President and CEO, Peapack-Gladstone Financial Corporation: Higher for longer is not good for us. That is the executive summary. Folks, the longer we sit in the ZIP code, the more time people have to sort of talk about getting a higher rate, and so higher for longer is not good. Where it ultimately ends up, there was a flurry of folks that we had to reprice. Frank mentioned that we are up 10 basis points. I think those conversations have quieted down a little bit. So we are not seeing a lot of follow-on from there. But another rate increase in December, assuming we get through today, I think it will add a little bit more pressure. So two more rate increases, sort of having the 10-year hang at five over the next, where Fed funds are right now, I would say will continue to bring pressure.

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: Yeah. Look, we have talked about before that we see ourselves as a kind of neutral position on the balance sheet, asset and liabilities neutral. But the pressure always seems like it comes from the deposit side faster and more rapidly. A lot of the loans that reset and reprice, that 25% that we mentioned earlier, it takes 30 days or the end of a period. It takes a little bit longer. So we are optimistic, but overall, Doug kind of gave you the guidance, and we would reiterate it that 2 to 3 basis points per quarter an increase in margin is what we are expecting, and that is what we think will carry into next year.

Doug Kennedy, President and CEO, Peapack-Gladstone Financial Corporation: Yeah. Even with the uncertainty and the headwinds, we believe that we will get that. Yeah.

Manuel Navas, Analyst, Piper Sandler: I appreciate that. Could you give some color on recent initiatives in the fee side and how that could progress into next year? Wealth management was a little bit flat this quarter, but it is definitely up year-over-year. Just kind of recent initiatives and where the opportunities are and what could that produce in terms of growth next year.

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: I will say that in this quarter, if you look at our fee revenue, it was running overall at about $22 million a quarter, and this quarter it dipped down to $20 million. There were two things in there that we would call one-time events. There was a loss on the disposition of an OREO property that runs through that line. Then there was also a negative fair value adjustment on a CRA equity security in there. So those two, that is about half of the decline. We see them as one time and should not repeat going forward. The other decline was attributable to the SBA. We used to capture gains on SBA sales and we have exited that business. So that is probably more of a longer-term decline. I do not know that we have any anticipation of stepping back into that or replacing it.

But if you took $22 million a quarter down to $21 million a quarter, that is probably where I would say I would be comfortable looking at it into the future. I do not know, John, if there is any color on the fee revenue for wealth, which is a big component of that you would like to add?

John Babcock, President of Wealth Management, Peapack-Gladstone Financial Corporation: No. Look, the third quarter was interesting in the markets. While the S&P was up a couple of percent, the Russell 2000, which probably looks more like many of our portfolios, was down 7.5% in the quarter. So our flows were, when you kind of mix it all up, pretty flat. We had some inflows and outflows and trying to separate kind of the fee impact of those inflows and outflows, that was about flat as well. But I will tell you, we have booked some good business in October. I am really encouraged with our pipeline. I think we will have a good fourth quarter, and that also includes N.Y., where we continue to build momentum, working with the bankers there in N.Y. as well as with outside COIs and self-sourced new business. So I think we are on track. It was just one of those quarters.

Manuel Navas, Analyst, Piper Sandler: I appreciate the color. Thank you, guys. I will step back into the queue.

Conference Operator: Your next question from the line of David Konrad with KBW. Your line is now open. Please go ahead.

David Konrad, Analyst, KBW: Yeah, good morning. Most of my questions have been asked and answered, so appreciate that. One comment Doug made about Q4 2027, I think Frank, historically, you’ve talked about maybe 90 basis points ROA approaching one is maybe a goal, but on a core basis, you’re already around 86 basis points this quarter. So it feels like you’re ahead of schedule. Maybe any updated thoughts about ROA at the end of next year?

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: I think what we’ve kind of guided to, 90 basis points now, maybe getting to 1% early next year, is what we’re targeting. As we look to the fourth quarter of jumping a year ahead, we put it in our investor deck that our target is really closer to 1.25%. We’re not just striving to get to one. We want to get into the upper tier of returns. If you just continue to look at the string that we’ve been on for the last five or six quarters and just keep stacking those quarters together, I would say that we’re right around the pace that we expected, and hopefully, as we flip into 2027, we get back above 1% on a quarterly run rate and then continue that upward trend through the end of next year.

David Konrad, Analyst, KBW: Perfect. Thank you. Appreciate it.

Doug Kennedy, President and CEO, Peapack-Gladstone Financial Corporation: The idea is to control expenses as tight as we can, continue to build revenue. There is the chart, I call it the smiley chart, but if you look at the annualized core earnings of the company, which is about $130 million, the goal is to get that to about $180 million. That will drive all the results that Frank just described. So we know exactly what number, where, and the timing of all of that. The 2-2-2, if you model that with the margins that we discussed, you will land right in that ZIP code.

Frank Cavallaro, CFO, Peapack-Gladstone Financial Corporation: Yeah. Without a crystal ball

Doug Kennedy, President and CEO, Peapack-Gladstone Financial Corporation: Right

or shape of the yield curve or asset quality headwinds, but if we continue on the track that we are on, we are pretty comfortable that we can get to that destination.

Yeah. It is a realistic plan. Let us put it that way.

David Konrad, Analyst, KBW: Great. Appreciate it. Thank you.

Conference Operator: The line is now open for additional questions. As a reminder, if you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. If you are muted, please remember to unmute your device. Please stand by while we compile a Q&A roster. There are no further questions at this time. I will now turn the call back to Doug for closing remarks.

Doug Kennedy, President and CEO, Peapack-Gladstone Financial Corporation: Well, thank you very much you all, and a special thanks to all of our employees who have really committed themselves to delivering outstanding performance on behalf of our shareholders. We have got a tremendous franchise that we have been able to build based on those people, and we have got all the product. As you can see, based on results, we are executing in a way that is exceeding what we thought we could reasonably achieve when we set out on this course a couple of years ago. Our wealth franchise continues to be rarefied air. There is a lot of institutions that would love to have what we have.

It is anchoring a private banking sort of business model, and we are truly delivering a differentiated service model to the greater New York area and have a very viable plan, as we just discussed, that we are executing on, that we think is going to give great returns over time for our shareholders. With that, again, thanks for dialing in, listening, and thanks for your commitment and patience, and we will continue to deliver results as we move forward in executing our strategy. Thanks all. Be well, and great seeing you again.

Conference Operator: This concludes today’s call. Thank you for attending. You may now disconnect.