PEAPACK GLADSTONE FINANCIAL CORP

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CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING STATEMENTS: This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about Management’s confidence and strategies and Management’s expectations about new and existing programs and products, investments, relationships, opportunities and market conditions. These statements may be identified by such forward-looking terminology as “expect,” “look,” “believe,” “anticipate,” “may,”

Current wording

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:

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our ability to successfully integrate wealth management firm acquisitions;

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our ability to successfully integrate wealth management firm and team acquisitions;

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impact from the pandemic on our business, operations, customers, allowance for credit losses and capital levels;

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impact from a pandemic event on our business, operations, customers, allowance for credit losses and capital levels;

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legislative and regulatory actions that may result in increased compliance costs;

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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;

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the current or anticipated impact of military conflict, terrorism or other geopolitical events or natural disasters;

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the current or anticipated impact of military conflict, terrorism or other geopolitical events;

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our inability to successfully generate new business in new geographic markets, including our expansion into New York City;

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our inability to successfully generate new business and brand recognition in new geographic markets, including our expansion into New York City;

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Management believes that the Company’s policy with respect to the methodology for the 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 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.

Current wording

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.

Previous wording

On January 1, 2022, the Company adopted ASU 2016-13(Topic 326), which replaced the incurred loss methodology with CECL for financial instruments measured at amortized cost and other commitments to extend credit. The allowance for credit losses is a valuation allowance Management’s estimate of expected credit losses in the loan portfolio. 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 conditions, as well as the incorporation of reasonable and supportable forecasts. Management evaluates a variety of factors including available published economic information in arriving at its forecasts. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. Also included in the allowance for credit losses are qualitative reserves that are expected, but, in the Management’s assessment, may not be adequately represented in the quantitative analysis or the forecasts described above. Factors may include, among others, changes in lending policies and procedures, size and composition of the portfolio, experience and depth of Management and the effect of external factors such as competition, legal and regulatory requirements. The allowance is available for any loan that, in Management’s judgment, should be charged off.

Current wording

On January 1, 2022, the Company adopted ASU 2016-13(Topic 326), which replaced the incurred loss methodology with current expected credit losses ("CECL") for financial instruments measured at amortized cost and other commitments to extend credit. The allowance for credit losses is a valuation allowance of Management’s estimate of expected credit losses in the loan portfolio. 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 conditions, as well as the incorporation of reasonable and supportable forecasts. Management evaluates a variety of factors, including available published economic information, in arriving at its forecasts. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. Also included in the allowance for credit losses are qualitative reserves that are expected, but, in the Management’s assessment, may not be adequately represented in the quantitative analysis or the forecasts described above. Factors may include, among others, changes in lending policies and procedures, size and composition of the portfolio, experience and depth of Management and the effect of external factors such as competition and legal and regulatory requirements, among others. The allowance is available for any loan that, in Management’s judgment, should be charged off.

Previous wording

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, to a lesser extent, the boroughs of New York City. Accordingly, the collectability of a substantial portion of the carrying value of the Company’s loan portfolio is susceptible to changes in local market conditions and any adverse economic conditions. Future adjustments to the provision for credit losses and allowance for credit losses may be necessary due to economic, operating, regulatory and other conditions beyond the Company’s control.

Current wording

Although Management uses the best information available, the level of the allowance for credit losses remains an estimate, which is subject to significant judgment and short-term change. Various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for credit losses. Such agencies may require the Company to make additional provisions for credit losses based upon information available to them at the time of their examination. Furthermore, the majority of the Company’s loans are secured by real estate in New Jersey and the boroughs of New York City. Accordingly, the collectability of a substantial portion of the carrying value of the Company’s loan portfolio is susceptible to changes in local market conditions and any adverse economic conditions. Future adjustments to the provision for credit losses and allowance for credit losses may be necessary due to economic, operating, regulatory and other conditions beyond the Company’s control.

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The Company accounts for its debt securities in accordance with ASC 320, “Investments - Debt Securities” and its equity security in accordance with ASC 321, “Investments – Equity Securities”. All securities classified as available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income/(loss), net of tax. Securities classified as held to maturity are carried at amortized cost. The Company’s investment in a CRA investment fund is classified as an equity security. In accordance with ASU 2016-01, “Financial Instruments” unrealized holding gains and losses for equity securities are marked to market through the income statement.

Current wording

The Company accounts for its debt securities in accordance with ASC 320, “Investments - Debt Securities” and equity securities in accordance with ASC 321, “Investments – Equity Securities”. All securities classified as available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income/(loss), net of tax. Securities classified as held to maturity are carried at amortized cost. The Company’s investment in a CRA investment fund is classified as an equity security. In accordance with ASU 2016-01, “Financial Instruments” unrealized holding gains and losses for equity securities are marked to market through the income statement.

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For the year ended December 31, 2023, the Company recorded net income of $48.9 million, and diluted earnings per share of $2.71, compared to $74.2 million and $4.00, respectively, for 2022, reflecting decreases of $25.4 million, or 34 percent, and $1.29 per share, or 32 percent, respectively. During 2023, the Company continued to focus on executing its Strategic Plan, which included ongoing investment in our private banking model. During 2023, the Company also made a strategic decision to expand into New York City by hiring a team of experienced professionals to gain entry into this market. The Strategic Plan calls for expansion of the Company’s wealth management business, organically and through acquisitions, and also expansion of the Company’s commercial and industrial (“C&I”) lending platform, through the use of private bankers, who lead with deposit gathering and wealth management discussions.

Current wording

For the year ended December 31, 2024, the Company recorded net income of $33.0 million, and diluted earnings per share of $1.85, compared to $48.9 million and $2.71, respectively, for 2023, reflecting decreases of $15.9 million, or 32 percent, and $0.86 per share, or 32 percent, respectively. During 2024, the Company continued to focus on executing its Strategic Plan, which included ongoing investment in our private banking model. During 2024, the Company hired a team of experienced professionals to gain entry into the New York City market. The Company's New York City initiative has resulted in approximately $950 million in new customer relationship deposits. The Strategic Plan calls for expansion of the Company’s wealth management business, organically and through acquisitions, and also expansion of the Company’s commercial and industrial (“C&I”) lending platform, through the use of private bankers, who lead with deposit gathering and wealth management discussions.

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At December 31, 2023, the market value of assets under management and/or administration, through the Peapack Private Wealth Management Team, was $10.9 billion, reflecting an increase of 10 percent from $9.9 billion at December 31, 2022.

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At December 31, 2024, the market value of assets under management and/or administration, through the Peapack Private Wealth Management Team, was $11.9 billion, reflecting an increase of 9 percent from $10.9 billion at December 31, 2023.

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Wealth Management fee income was $55.7 million in 2023, which comprised 24 percent of total revenue for the year.

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Wealth Management fee income was $61.5 million in 2024, which comprised 27 percent of total revenue for the year.

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Total loans increased by $144 million, or 3 percent, to 5.4 billion at December 31, 2023 compared to $5.3 billion at December 31, 2022.

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Total loans increased by $83 million, or 2 percent, to $5.5 billion at December 31, 2024 compared to $5.4 billion at December 31, 2023.

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At December 31, 2023, total C&I loans (including equipment finance loans) comprised 42 percent of the total loan portfolio.

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At December 31, 2024, total C&I loans (including equipment finance loans) comprised 43 percent of the total loan portfolio. Total deposits increased by $855 million, or 16 percent, to $6.1 billion at December 31, 2024 compared to $5.3 billion at December 31, 2023. The Company allowed $365 million in high cost, non-core relationship deposits to roll off during 2024.

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Core deposits (which includes noninterest-bearing demand and interest-bearing demand, savings and money market accounts) totaled 89 percent of total deposits at December 31, 2023.

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Core deposits (which includes noninterest-bearing demand and interest-bearing demand, savings and money market accounts) totaled 92 percent of total deposits at December 31, 2024.

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Book value per share increased 10 percent to $32.90 at December 31, 2023 from $29.92 at December 31, 2022.

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Book value per share increased 5 percent to $34.45 at December 31, 2024 from $32.90 at December 31, 2023.

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The Company recorded net income of $48.85 million and diluted earnings per share of $2.71 for the year ended December 31, 2023, compared to net income of $74.25 million and diluted earnings per share of $4.00 for the year ended December 31, 2022. These results produced a return on average assets of 0.76 percent and 1.20 percent for 2023 and 2022, respectively, and a return on average shareholders’ equity of 8.77 percent and 14.02 percent for 2023 and 2022, respectively.

Current wording

The Company recorded net income of $33.0 million and diluted earnings per share of $1.85 for the year ended December 31, 2024, compared to net income of $48.9 million and diluted earnings per share of $2.71 for the year ended December 31, 2023. These results produced a return on average assets of 0.50 percent and 0.76 percent for 2024 and 2023, respectively, and a return on average shareholders’ equity of 5.61 percent and 8.77 percent for 2024 and 2023, respectively.

Previous wording

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 general levels of nonperforming assets.

Current wording

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.

Previous wording

Net interest income, on a fully tax-equivalent basis, declined $19.8 million, or 11 percent, in 2023 to $157.7 million compared to $177.5 million in 2022. The net interest margin was 2.48 percent and 2.91 percent for the years ended December 31, 2023 and 2022, respectively, a decrease of 43 basis points year over year. The decline in net interest income and NIM for the year ended December 31, 2023, when compared to 2022 was due to a rapid increase in interest expense mostly driven by higher deposit rates during 2023 and the increase in the average balance of FHLB advances and other borrowings. The ongoing Federal Reserve monetary policy tightening intended to slow inflation has led to a significant increase in interest rates, particularly rates impacting short-term investments and deposits. This has resulted in an inversion of the U.S. Treasury yield curve driving an increase in deposit and borrowing costs at a faster rate than the yields on interest earning assets.

Current wording

Net interest income, on a fully tax-equivalent basis, declined $7.6 million, or 5 percent, in 2024 to $150.1 million compared to $157.7 million in 2023. The net interest margin ("NIM") was 2.32 percent and 2.48 percent for the years ended December 31, 2024 and 2023, respectively, a decrease of 16 basis points year over year. The decrease in net interest income, on a fully tax-equivalent basis, and NIM for 2024 when compared to 2023 was predominately due to a rapid increase in interest expense mostly driven by higher deposit rates, partially offset by a decrease in the average balance of borrowed funds and an increase in loan yields and the average balance of interest-earning deposits. The Federal Reserve monetary policy intended to slow inflation led to a significant increase in interest rates, particularly rates impacting short term investments and deposits. This resulted in an inversion of the U.S. Treasury yield curve for an extended period of time, driving an increase in deposit and borrowing costs at a faster rate than the yields on interest-earning assets. The Federal Reserve decreased the target Federal Funds rate by 100 basis points during the latter half of 2024, though the impact of these rate cuts had minimal immediate impacts on financial results.

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Average interest-earning assets increased by $252.1 million to $6.36 billion at December 31, 2023 compared to $6.11 billion at 2022. The increase was predominately driven by growth in the average balance of loans of $282.0 million to $5.41 billion when comparing 2023 and 2022, which was slightly offset by a decline in the average balance of interest-earning deposits of $24.5 million and investments of $5.4 million.

Current wording

The average balance of interest-earning assets increased by $123.4 million to $6.5 billion at December 31, 2024 compared to $6.4 billion at 2023. The increase was predominately driven by growth in the average balance of investments of $47.9 million to $849.9 million and the growth in the average balance of interest-earning deposits of $150.5 million, which was offset by a decline in the average balance of loans of $75.0 million. The decline in the average balance of loans coupled with an increase of $378.1 million in the average balance of deposits contributed to growth in investments and interest-earning deposits in 2024.

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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, 2023 was $147.0 million with an average yield of 4.13 percent as compared to $171.5 million and an average yield of 1.61 percent for 2022. The increase in the average yield for 2023 was due to the increase in the Federal Funds rate.

Current wording

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, 2024 was $297.4 million with an average yield of 4.59 percent as compared to $147.0 million and an average yield of 4.13 percent for 2023. The increase in the average yield for 2024 was due to the increase in the Federal Funds rate.

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The growth in average balance of loans was driven by growth in commercial loans and residential mortgages. The average balance of commercial loans grew by $207.9 million to $2.25 billion in 2023 compared to $2.05 billion in 2022. Additionally, the average balances of residential mortgages grew $49.3 million to $562.5 million for the year ended December 31, 2023 from $513.2 million for the same 2022 period.

Current wording

The decline in average balance of loans was primarily driven by a decline in commercial mortgages and commercial loans, offset slightly by growth in residential mortgages and installment loans. The average balance of commercial mortgages declined by $87.7 million to $2.4 billion in 2024 compared to $2.5 billion in 2023. The average balance of commercial loans declined by $38.2 million to $2.2 billion in 2024 as compared to $2.3 billion in 2023. The average balance of residential mortgages grew $19.5 million to $582.0 million for the year ended December 31, 2024 from $562.5 million for 2023. Additionally, the average balance of installment loans grew $18.9 million to $70.9 million for the year ended December 31,

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For the 2023 and 2022 periods, the average yields earned on interest-earning assets were 4.81 percent and 3.49 percent, respectively, an increase of 132 basis points. The increase in the yields on interest-earning assets was primarily due to the increase in target Federal Funds rate of 525 basis points. This resulted in an increased yield on loans of 134 basis points to 5.17 percent for 2023 when compared to 3.83 percent for 2022. The yield on interest-earning deposits increased 252 basis points to 4.13 percent for 2023 when compared to 1.61 percent for the prior year.

Current wording

For the 2024 and 2023 periods, the average yields earned on interest-earning assets were 5.07 percent and 4.81 percent, respectively, an increase year over year of 26 basis points. The increase in the yields on interest-earning assets was primarily due to the increase in target Federal Funds rate of 100 basis points during 2023 (525 basis points since the Federal Reserve commenced raising rates in March 2022). This resulted in an increased yield on loans of 30 basis points to 5.47 percent, 46 basis points on interest-bearing deposits to 4.59 percent and 28 basis points on investments to 2.75 percent for 2024 when compared to 2023.

Previous wording

The increase for the year ended December 31, 2023 when compared to the prior period was driven by an increase in the yield on commercial loans of 198 basis points to 6.39 percent for 2023, due to an increase in target Federal Funds rate of 525 basis points which had a greater impact on these loans, which are typically floating rates with short repricing periods. The yield on commercial mortgages for 2023 was 4.36 percent, which reflected an increase of 83 basis points when compared to 2022, which was primarily driven by the origination of loans with higher yields in the current higher interest rate environment. In addition, at December 31, 2023, 20 percent of our loans will reprice within one month, 34 percent within three months and 47 percent within one year.

Current wording

The average yield on loans for the year ended December 31, 2024 compared to 2023 was driven by an increase in the yield on commercial loans, commercial mortgages and residential mortgages. The yield on commercial loans for the year ended December 31, 2024 increased 45 basis points to 6.84 percent from 6.39 percent for the year ended December 31, 2023. The average yield on commercial loans increased for 2024 due to an increase in the target Federal Funds rate, which had a greater impact on these loans, that are typically floating rates with short repricing periods. The average yield on commercial mortgages increased 11 basis points to 4.47 percent for the year ended December 31, 2024, when compared to 2023. The average yield on residential mortgages increased 44 basis points to 3.95 percent for the year ended December 31, 2024, when compared to 3.51 percent for 2023. The increase for both commercial and residential mortgages for 2024 were driven by the originations of loans with higher yields in the current higher interest rate environment. As of December 31, 2024, 32 percent of all loans will reprice within one month, 37 percent within three months and 49 percent within one year.

Previous wording

The average balance of interest-bearing liabilities totaled $4.72 billion for 2023 representing an increase of $267.0 million, or 6 percent, from $4.45 billion in 2022. The increase in interest-bearing liabilities was primarily due to an increase in the average balance of borrowings of $311.1 million to $337.8 million in 2023 from $26.6 million in 2022. This increase was partially offset by a decrease in interest-bearing deposits of $43.2 million to $4.25 billion in 2023 from $4.29 billion in 2022.

Current wording

The average balance of interest-bearing liabilities totaled $4.9 billion for 2024 representing an increase of $146.0 million, or 3 percent, from $4.7 billion in 2023. The increase in interest-bearing liabilities was primarily due to an increase in the average balance of interest-bearing deposits of $420.0 million to $4.67 billion in 2024 from $4.23 billion in 2023. This increase was partially offset by a decrease in overnight borrowings of $272.5 million to $65.3 million in 2024 from $337.8 million in 2023.

Previous wording

The decrease in the average balance of interest-bearing deposits was primarily due to a decline of money market deposits of $390.3 million to $862.7 million from $1.25 billion and savings deposits decreasing $37.9 million in 2023. Money market and savings accounts declined in 2023 due to clients shifting balances into higher-yielding short-term Treasuries and interest-bearing checking accounts. These decreases were offset by an increase into checking accounts for 2023 of $414.0 million due to the clients demand for FDIC insured products. The Company added a short-term brokered certificate of deposit ("CD") of $100.0 million in 2023 to provide additional liquidity and replace brokered deposit run off. The average balance of retail CDs increased in 2023 by $3.0 million due to consumer demand for higher-yielding deposit products.

Current wording

The increase in the average balance of interest-bearing deposits was primarily due to an increase of interest-bearing checking accounts of $372.2 million to $3.15 billion from $2.78 billion and an increase of certificates of deposits of $91.1 million to $559.3 million from $468.2 million, partially offset by decreases of money market and savings deposits of $39.3 million in 2024. The increase in interest-bearing checking deposits was principally attributable to client demand for FDIC insured products, which we can offer through a reciprocal deposit program. The Company added short-term customer CDs to provide additional liquidity and replace brokered deposit run-off. The decrease in savings and money market accounts included clients shifting balances into higher-yielding short-term Treasuries and interest-bearing checking accounts. The expansion into New York City was a significant driver of deposit growth and reduced the Company's reliance on overnight borrowings, brokered deposits and other high cost funding sources while shifting funding into lower cost, relationship deposits.

Previous wording

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 $862.5 million and $662.0 million for 2023 and 2022, respectively.

Current wording

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 $1.3 billion and $862.5 million for 2024 and 2023, respectively.

Previous wording

At December 31, 2023, uninsured/unprotected deposits were approximately $1.18 billion, or 22 percent of total deposits. This amount was adjusted to exclude $287 million of public fund deposit balances, which are fully-collateralized and protected with securities and an FHLBNY letter of credit.

Current wording

At December 31, 2024, uninsured/unprotected deposits were approximately $1.6 billion, or 26 percent of total deposits. This amount was adjusted to exclude $339 million of public fund deposit balances, which are fully-collateralized and protected with securities and an FHLBNY letter of credit.

Previous wording

For the years ended December 31, 2023 and 2022, the cost of interest-bearing liabilities was 3.13 percent and 0.80 percent, respectively, reflecting an increase of 233 basis points. The increase was driven by an increase in the average cost of interest-bearing deposits of 220 basis points to 2.89 percent for 2023. The increase in deposit and borrowing rates was due to the Federal Reserve raising the target Federal Funds rate by 525 basis points since March 2022 and a change in the composition of the deposit portfolio. The cost of borrowings increased by 314 basis points to 5.39 percent in 2023. The average cost of interest-bearing liabilities was also affected by an increase in the cost of subordinated debt of 90 basis points to 5.00 percent for 2023.

Current wording

For the years ended December 31, 2024 and 2023, the cost of interest-bearing liabilities was 3.67 percent and 3.13 percent, respectively, reflecting an increase of 54 basis points. The increase was driven by an increase in the average cost of interest-bearing deposits of 71 basis points to 3.60 percent for 2024. The increase in deposit and borrowing rates was due to the Federal Reserve raising the target Federal Funds rate by 525 basis points since March 2022 and a change in the composition of the deposit portfolio. The cost of borrowings increased by 50 basis points to 5.89 percent in 2024 from 5.39 percent for 2023.

Previous wording

INVESTMENT SECURITIES: Investment securities 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 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.

Current wording

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.

Previous wording

At December 31, 2023, the Company had investment securities held to maturity with a carrying cost of $107.8 million and an estimated fair value of $94.4 million compared with a carrying cost of $102.3 million and an estimated fair value of $87.2 million at December 31, 2022.

Current wording

At December 31, 2024, the Company had investment securities held to maturity with a carrying cost of $101.6 million and an estimated fair value of $88.7 million compared with a carrying cost of $107.8 million and an estimated fair value of $94.4 million at December 31, 2023.

Previous wording

At December 31, 2023, the Company had investment securities available for sale with an estimated fair value of $550.6 million compared with $554.6 million at December 31, 2022. A net unrealized loss (net of income tax) of $69.2 million and a net unrealized loss (net of income tax) of $81.0 million were included in shareholders’ equity at December 31, 2023 and 2022, respectively.

Current wording

At December 31, 2024, the Company had investment securities available for sale with an estimated fair value of $784.5 million compared with $550.6 million at December 31, 2023. The increase was due to the use of excess liquidity for purchases, primarily of residential mortgage-backed securities, as deposit growth outpaced loan growth during 2024. A net unrealized loss (net of income tax) of $72.1 million and a net unrealized loss (net of income tax) of $69.2 million were included in shareholders’ equity at December 31, 2024 and 2023, respectively.

Previous wording

The Company had one equity security (a CRA investment security) with a fair value of $13.2 million and $13.0 million at December 31, 2023 and 2022, respectively, with changes in fair value recognized in the Consolidated Statements of Income. The Company recorded an unrealized gain of $181,000 for the year ended December 31, 2023, as compared to a $1.7 million unrealized loss for the year ended December 31, 2022.

Current wording

The Company had one equity security (a CRA investment security) with a fair value of $13.0 million and $13.2 million at December 31, 2024 and 2023, respectively, with changes in fair value recognized in the Consolidated Statements of Income. The Company recorded an unrealized loss of $125,000 for the year ended December 31, 2024, as compared to a $181,000 unrealized gain for the year ended December 31, 2023. 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 Statement of Income during the year ended December 31, 2024.

Previous wording

LOANS: The loan portfolio represents the largest portion of the Company’s interest-earning assets and is the primary source of interest and fee income. Loans are primarily originated in New Jersey and the boroughs of New York City and, to a lesser extent, Pennsylvania and Delaware. The Company also offers equipment financing loan and leases that are originated nationally. As of December 31, 2023, 42 percent of the total loan portfolio consisted of C&I loans (including equipment financing), 34 percent of multifamily loans and 12 percent of commercial mortgages.

Current wording

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 and Delaware. The Company also offers equipment financing loan and leases that are originated nationally. As of December 31, 2024, 43 percent of the total loan portfolio consisted of C&I loans (including equipment financing), 33 percent of multifamily loans, 11 percent of commercial mortgages and 11 percent of residential mortgages.

Previous wording

Total loans were $5.43 billion and $5.29 billion at December 31, 2023 and 2022, respectively, an increase of $144.1 million, over the previous year. Residential loans increased $52.6 million to $578.3 million at December 31, 2023 from $525.8 million at December 31, 2022. Multifamily mortgage loans were $1.84 billion at December 31, 2023, a decrease of $27.5 million, or 1 percent, when compared to $1.86 billion at December 31, 2022. During 2023, commercial mortgages increased $13.0 million to $637.6 million when compared to $624.6 million for 2022. Commercial loans, which includes equipment financing, totaled $2.26 billion at December 31, 2023. This was an increase of $66.4 million, or 3 percent, when compared to December 31, 2022.

Current wording

Total loans were $5.5 billion and $5.4 billion at December 31, 2024 and 2023, respectively, an increase of $83.0 million, over the previous year. Residential loans increased $36.5 million to $614.8 million at December 31, 2024 from $578.3 million at December 31, 2023. Multifamily mortgage loans were $1.8 billion at December 31, 2024, a decrease of $36.6 million, or 2 percent, when compared to $1.8 billion at December 31, 2023. During 2024, commercial mortgages decreased $49.5 million to $588.1 million when compared to $637.6 million for 2023. Commercial loans, which includes equipment financing, totaled $2.4 billion at December 31, 2024. This was an increase of $128.6 million, or 6 percent, when compared to December 31, 2023.

Previous wording

The Company originates loans that are partially guaranteed by the SBA, for the purposes of providing working capital and/or, financing 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 2023, the Bank sold $32.4 million of the guaranteed portion of SBA loans into the secondary market. As of December 31, 2023, the balance of the non-guaranteed portion of SBA loans held on our balance sheet totaled $47.9 million and was included in commercial loans.

Current wording

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 2024, the Bank sold $15.0 million of the guaranteed portion of SBA loans into the secondary market. As of December 31, 2024, the balance of the non-guaranteed portion of SBA loans held on our balance sheet totaled $41.9 million and was included in commercial loans.

Previous wording

The geographic breakdown of the multifamily portfolio, net of participated multifamily loans, at December 31, 2023 is as follows:

Current wording

The geographic breakdown of the multifamily portfolio, net of participated multifamily loans, at December 31, 2024 was as follows:

Previous wording

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

Current wording

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

Previous wording

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, 2023 are:

Current wording

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, 2024 were: