PEAPACK GLADSTONE FINANCIAL CORP

Previous wording

FORWARD LOOKING STATEMENTS: This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about Management’s confidence and strategies and Management’s expectations about operations, growth, financial results, new and existing programs and products, investments, relationships, opportunities and market conditions. These statements may be identified by such forward-looking terminology as “expect”, “look”, “believe”, “anticipate”, “may”, or similar statements or variations of such terms. Actual results may differ materially from such forward-looking statements. Factors that may cause results to differ materially from those contemplated by such forward-looking statements include, among others, those risk factors identified in the Company’s Form 10-K for the year ended December 31, 2023, in addition to/which include the following:

Current wording

FORWARD LOOKING STATEMENTS: This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about Management’s confidence and strategies and Management’s expectations about operations, growth, financial results, new and existing programs and products, investments, relationships, opportunities and market conditions. These statements may be identified by such forward-looking terminology as “expect”, “look”, “believe”, “anticipate”, “may”, or similar statements or variations of such terms. Actual results may differ materially from such forward-looking statements. Factors that may cause results to differ materially from those contemplated by such forward-looking statements include, among others, those risk factors identified in the Company’s Form 10-K for the year ended December 31, 2024, which include the following:

Previous wording

a reduction in the availability of lower-cost funding sources;

Current wording

a reduction in our lower-cost funding sources;

Previous wording

changes in liquidity, including the size and composition of our deposit portfolio and the percentage of uninsured deposits in the portfolio;

Current wording

changes in liquidity, including the size and composition of our deposit portfolio, including the percentage of uninsured deposits in the portfolio;

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 for 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 economic conditions, as well as the incorporation of reasonable and supportable forecasts. Management evaluates a variety of factors including available published economic information in arriving at its forecast. 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 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, among others. 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 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, 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 the 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, rent control regulations and any adverse economic conditions. Future adjustments to the provision for credit losses and allowance for credit losses may be necessary due to economic, operating, regulatory and other conditions beyond the Company’s control.

Previous wording

For the quarter ended September 30, 2024, the Company recorded total revenue of $56.6 million, pretax income of $10.7 million, net income of $7.6 million and diluted earnings per share of $0.43, compared to revenue of $55.9 million, pretax income of $12.6 million, net income of $8.8 million and diluted earnings per share of $0.49 for the same period last year.

Current wording

For the quarter ended March 31, 2025, the Company recorded total revenue of $64.4 million, pretax income of $10.4 million, net income of $7.6 million and diluted earnings per share of $0.43, compared to revenue of $53.1 million, pretax income of $12.4 million, net income of $8.6 million and diluted earnings per share of $0.48 for the same period last year.

Previous wording

The decrease in net income for both the three and nine month 2024 periods when compared to the same 2023 periods was principally driven by increased operating expenses, which was principally attributable to the Company's expansion into New York City and expanding our unique private banking model that offers a single point of contact for all banking services. The decrease in net income for the nine month 2024 period when compared to the same 2023 period was also driven by the Company's decreased net interest income due to net interest margin contraction, as a result of higher deposit and borrowings rates. The Company has seen positive momentum in net interest margin during the second and third quarters of 2024, as a result of paying down overnight borrowings with core deposit growth at a lower cost. During 2024, deposits grew $661.3 million, which included $122.2 million in noninterest-bearing demand deposits. Other income and wealth management fee income continue to be a consistent and steady revenue stream for the Company.

Current wording

The decrease in net income for 2025 when compared to the same 2024 period was principally driven by increased operating expenses, which was principally attributable to the addition of new employees related to the Company's expansion into New York City, increased health insurance costs and annual merit increases. The Company has seen positive momentum in net interest margin, which increased to 2.68 percent for the first quarter of 2025 as compared to 2.20 percent for the same period in 2024. The Company's single point of contact private banking strategy and New York City expansion continues to deliver lower-cost core deposit relationships resulting in consistent improvement in the net interest margin and net interest income. During the first quarter of 2025, deposits grew $157.5 million, which included $72.1 million in noninterest bearing demand deposits. Other income and wealth management fee income continue to be a consistent and steady revenue stream for the Company and represented 29 percent of total revenue for the first quarter of 2025.

Previous wording

OFF-BALANCE SHEET ARRANGEMENTS: For a discussion of our off-balance sheet arrangements, see the information set forth in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2023 under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Off-Balance Sheet Arrangements and Aggregate Contractual Obligations.”

Current wording

OFF-BALANCE SHEET ARRANGEMENTS: For a discussion of our off-balance sheet arrangements, see the information set forth in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2024 under the heading “Management’s

Previous wording

Total CRE concentration as a percentage of regulatory capital continues to steadily decline. 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.

Current wording

Total CRE concentration as a percentage of regulatory capital is monitored by Management. Management believes it satisfactorily addresses the key elements in the risk management framework laid out by its regulators for the effective management of CRE concentration risks.

Previous wording

Net interest income, on a fully tax-equivalent basis, increased $1.0 million, or 3 percent, for the third quarter of 2024 to $37.9 million from $36.9 million for the same 2023 period. The net interest margin ("NIM") was 2.34 percent and 2.28 percent for the three months ended September 30, 2024 and 2023, respectively, an increase of 6 basis points. For the nine months ended September 30, 2024, the Company recorded net interest income, on a fully tax-equivalent basis, of $107.9 million compared to $120.6 million for the same 2023 period. The NIM was 2.26 percent and 2.54 percent for the nine months ended September 30, 2024 and 2023, respectively, a decrease of 28 basis points. Net interest income, on a fully tax- equivalent basis, and NIM expanded during the quarter ended September 30, 2024, due to the Bank's focus on growing client deposit relationships, which were used to pay down higher cost overnight borrowings. The decrease in net interest income, on a fully tax-equivalent basis, and NIM for the nine months ended September 30, 2024 compared to the same 2023 period, 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. The Federal Reserve monetary policy 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 . The Federal Reserve decreased the target Federal Funds rate by 50 basis points at the September Federal Open Market Committee meeting though the impact of these rate cuts had minimal impact on results for the three month period ended September 30, 2024.

Current wording

Net interest income, on a fully tax-equivalent basis, increased $11.1 million, or 32 percent, for the first quarter of 2025 to $45.7 million from $34.6 million for the same 2024 period. The net interest margin ("NIM") was 2.68 percent and 2.20 percent for the three months ended March 31, 2025 and 2024, respectively, an increase of 48 basis points. Net interest income, on a fully tax- equivalent basis, and NIM expanded during the quarter ended March 31, 2025 due to the Bank's focus on growing client deposit relationships, which were used to purchase investments as well as fund loans. Additionally, the Federal Reserve decreased the target Federal Funds rate by 100 basis points during the latter half of 2024, which has helped to improve NIM, as the Bank effectively lowered deposit rates during the fourth quarter of 2024.

Previous wording

The average balance of interest-earning assets increased slightly to $6.45 billion during the third quarter of 2024 from $6.43 billion for the same 2023 period, reflecting an increase of $19.3 million. Average interest-earning assets were $6.37 billion for the nine months ended September 30, 2024 compared to $6.34 billion in the same 2023 period, representing an increase of $27.9 million. The increase in average interest-earning assets included an increase in the average balance of interest-earning deposits of $190.4 million and $78.0 million, respectively, as well as an increase in average investments of $57.8 million and $17.4 million, respectively, for both the three and nine months ended September 30, 2024 as compared to the same 2023 periods. These increases were partially offset by a decline in the average balance of loans for both the three and nine months ended September 30, 2024 of $228.9 million and $67.6 million, respectively, when compared to the same 2023 periods.

Current wording

The average balance of interest-earning assets increased to $6.91 billion during the first quarter of 2025 from $6.33 billion for the same 2024 period, reflecting an increase of $578.5 million. The increase in average interest-earning assets included an increase in the average balance of interest-earning deposits of $150.6 million, an increase in average investments of $238.6 million, as well as an increase in average loans of $189.3 million for the three months ended March 31, 2025 as compared to the same 2024 period.

Previous wording

For the quarters ended September 30, 2024 and 2023, the average yields earned on interest-earning assets were 5.18 percent and 4.91 percent, respectively, an increase of 27 basis points. For the nine months ended September 30, 2024 and 2023, the average yield on interest-earning assets were 5.08 percent and 4.73 percent, respectively, an increase of 35 basis points. The increase in yields on interest-earning assets for the three and nine months ended September 30, 2024, was primarily due to the increase in the 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 increases for the three-month periods of 31 basis points on loans to 5.58 percent, of 59 basis points on interest-earning deposits to 4.88 percent and of 26 basis points on investments to 2.82 percent, when comparing the quarter ended September 30, 2024 to the same 2023 period. Increases in the average yields for the nine-month periods were 36 basis points on loans to 5.46 percent, 65 basis points on interest-earning deposits to 4.69 percent and 25 basis points on investments to 2.67 percent.

Current wording

The average yields earned on interest-earning assets were relatively flat when comparing the quarter ended March 31, 2025 to the same period in 2024. For the quarters ended March 31, 2025 and 2024, the average yields earned on interest-earning assets were 5.01 percent and 5.02 percent, respectively, a decline of 1 basis point.

Previous wording

The average yield on total loans for the three and nine months ended September 30, 2024 compared to the same 2023 periods was driven by an increase in the yield on commercial loans, commercial mortgages and residential mortgages. The yield on commercial loans for the three months ended September 30, 2024 increased 46 basis points to 6.96 percent from 6.50 percent at September 30, 2023. The yield on commercial loans for the nine months ended September 30, 2024 increased 51 basis points to 6.81 percent from 6.30 percent for the same period in 2023. The average yield on commercial loans increased for both the three- and nine-month periods 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 16 basis points to 4.60 percent and 20 basis points to 4.50 percent for the three and nine months ended September 30, 2024, respectively, when compared to the same 2023 periods. The average yield on residential mortgages increased 43 basis points to 4.02 percent and 42 basis points to 3.88 percent, for the three and nine months ended September 30, 2024, respectively, when compared to the same 2023 periods. The increase for both commercial and residential mortgages for the three- and nine-month periods were driven by the origination of loans with higher yields in the current higher interest rate environment. As of September 30, 2024, 30 percent of our loans will reprice within one month, 35 percent within three months and 49 percent within one year.

Current wording

The average yield on total loans for the three months ended March 31, 2025 compared to the same 2024 period was driven by an increase in the yield on residential mortgages offset by the decline in yields on commercial mortgages and commercial loans. The yield on residential mortgages increased 57 basis points to 4.32 percent for the three months ended March 31, 2025, as compared to 3.75 percent for the same 2024 period. The increase in the average yield for residential mortgages for the three-month period was driven by the origination of loans with higher yields than the yields on the existing portfolio. The average yield on commercial loans for the three months ended March 31, 2025 decreased 12 basis points to 6.59 percent from 6.71 percent at March 31, 2024. The average yield on commercial mortgages decreased 9 basis points to 4.39 percent from 4.48 percent for the same period in 2024. The average yield on commercial loans decreased for the three-month period due to a decrease in the target Federal Funds rate, which had a greater impact on these loans, that are typically floating rates with short repricing periods.

Previous wording

For the three months ended September 30, 2024, the average balance of interest-bearing liabilities totaled $4.82 billion representing a decrease of $22.3 million from $4.84 billion for the same 2023 period due a decrease in overnight borrowings of $470.6 million to no overnight borrowings at September 30, 2024. This decrease was partially offset by an increase in interest-bearing deposits of $450.5 million to $4.68 billion at September 30, 2024. For the nine months ended September 30, 2024, the average balance of interest-bearing liabilities totaled $4.80 billion representing an increase of $114.9 million from $4.68 billion for the same 2023 period due to an increase in interest-bearing deposits of $360.3 million to $4.58 billion partially offset by a decrease in overnight borrowings of $243.9 million to $87.2 million for the nine months ended September 30, 2024.

Current wording

For the three months ended March 31, 2025, the average balance of interest-bearing liabilities totaled $5.14 billion representing an increase of $332.4 million from $4.81 billion for the same 2024 period due to an increase in interest-bearing deposits of $575.3 million to $5.01 billion for the three months ended March 31, 2025. This increase was partially offset by a decrease in overnight borrowings of $234.4 million to $1.0 million in overnight borrowings for the three months ended March 31, 2025.

Previous wording

The increase in the average balance of interest-bearing deposits for the quarter ended September 30, 2024 compared to the 2023 comparable period was primarily due to an increase in the average balances of interest-bearing checking deposits of $401.1 million, retail certificate of deposits ("CD") of $97.1 million and money market accounts of $61.5 million. The increase in the average balance of interest-bearing deposits for the nine months ended September 30, 2024 compared to the 2023 comparable period was primarily due to increases in the average balances of interest-bearing checking deposits of $349.1 million, retail CDs of $111.9 million and short-term brokered CDs of $26.1 million, partially offset by declines in the average balance of money market and savings accounts of $121.5 million. The increase in interest-bearing checking deposits for the three and nine months ended September 30, 2024 was principally attributable to client demand for FDIC insured products. The Company added short-term brokered CDs to provide additional liquidity and replace brokered deposit run-off. The decrease for the savings and money market accounts for the nine months ended September 30, 2024 included clients shifting balances into higher-yielding short-term Treasuries and interest-bearing checking accounts. The expansion into New York City is starting to benefit deposit growth and has reduced the Company's reliance on overnight borrowings, brokered deposits and other high cost funding sources while shifting funding into lower cost, relationship deposits.

Current wording

The increase in the average balance of interest-bearing deposits for the quarter ended March 31, 2025 compared to the 2024 comparable period was primarily due to an increase in the average balances of interest-bearing checking deposits of $491.2 million and money market accounts of $224.5 million, partially offset by a decline in the average balance of brokered certificates of deposit of $128.3 million. The increase in interest-bearing checking deposits for the three months ended March 31, 2025 was principally attributable to client demand for FDIC insured products, which we can offer through a reciprocal deposit program. 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 program and the Promontory Program. The Company uses these deposit sweep services to place customer funds into interest-bearing demand (checking) accounts issued by other participating banks. Customer funds are placed at one or more participating banks to increase the level of FDIC insurance available to deposit customers. As a participant, the Company receives reciprocal amounts of deposits from other participating banks. Average reciprocal deposit balances for the quarters ended September 30, 2024 and 2023, were $1.32 billion and $982.9 million, respectively. Average reciprocal deposit balances for the nine months ended September 30, 2024 and 2023, were $1.20 billion and $809.4 million, respectively. The additional growth for the three and nine months ended September 30, 2024 was directly related to clients' desire for the increased level of FDIC insurance offered by these programs.

Current wording

The Company is a participant in the Reich & Tang Demand Deposit Marketplace program and the Promontory Program. The Company uses these deposit sweep services to place customer funds into interest-bearing demand (checking) accounts issued by other participating banks. Customer funds are placed at one or more participating banks to increase the level of FDIC insurance available to deposit customers. As a participant, the Company receives reciprocal amounts of deposits from other participating banks. Average reciprocal deposit balances for the quarters ended March 31, 2025 and 2024 were $1.37 billion and $792.0 million, respectively. The additional growth for the three months ended March 31, 2025 was directly related to clients' desire for the increased level of FDIC insurance offered by these programs.

Previous wording

At September 30, 2024, uninsured/unprotected deposits were approximately $1.4 billion, or 24 percent of total deposits. This amount was adjusted to exclude $354 million of public fund deposit balances, which are fully-collateralized and protected with securities and an FHLBNY letter of credit.

Current wording

At March 31, 2025, uninsured/unprotected deposits were approximately $1.6 billion, or 25 percent of total deposits. This amount was adjusted to exclude $325 million of public fund deposit balances, which are fully-collateralized and protected with securities and an FHLBNY letter of credit.

Previous wording

The Company did not have any short-term borrowings during the third quarter of 2024 compared to $470.6 million for the same 2023 period. The average balance of borrowings decreased $243.9 million to $87.2 million for the nine months ended September 30, 2024, compared to $331.2 million for the same 2023 period. The decrease in borrowings for both periods 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.

Current wording

The Company had $1.0 million in average short-term borrowings during the first quarter of 2025 compared to $235.4 million for the same 2024 period. The decrease in borrowings 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.

Previous wording

For the quarters ended September 30, 2024 and 2023, the cost of interest-bearing liabilities was 3.78 percent and 3.47 percent, respectively, reflecting an increase of 31 basis points. The cost of interest-bearing liabilities was 3.74 percent and 2.97 percent for the nine months ended September 30, 2024 and 2023, respectively. The increases for both the three and nine months ended September 30, 2024 were driven by an increase in the average cost of interest-bearing deposits of 56 basis points to 3.74 percent for the third quarter of 2024 and 94 basis points to 3.66 percent for the nine months ended September 30, 2024. The Company benefitted from no short-term borrowing costs in the third quarter of 2024 compared to an average cost of 5.58 percent for the same 2023 period. For the nine months ended September 30, 2024, the average cost of borrowings increased 55 basis points to 5.88 percent from 5.33 percent for the same 2023 period. 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, as clients continue to migrate into higher-yielding alternatives.

Current wording

For the quarters ended March 31, 2025 and 2024, the cost of interest-bearing liabilities was 3.18 percent and 3.73 percent, respectively, reflecting a decrease of 55 basis points. The decrease for the three months ended March 31, 2025 was driven by a decrease in the average cost of interest-bearing deposits of 43 basis points to 3.14 percent for the first quarter of 2025. The Company benefited from lower short-term borrowing costs in the first quarter of 2025 of 4.54 percent compared to an average cost of 5.89 percent for the same 2024 period. The decrease in deposit and borrowing rates was due to the Federal Reserve lowering the target Federal Funds rate by 100 basis points during the latter half of 2024 and a change in the composition of the deposit portfolio with a greater concentration of lower-cost transaction deposits.

Previous wording

INVESTMENT SECURITIES: Investment securities available for sale are purchased, sold and/or maintained as a part of the Company’s overall balance sheet and interest rate risk management strategies, and in response to liquidity needs, prepayment speeds and/or other factors. These securities are carried at estimated fair value, and unrealized changes in fair value are recognized as a separate component of shareholders’ equity, net of income taxes. Realized gains and losses are recognized in income at the time the securities are sold. Investment securities held to maturity are those securities that the Company has both the ability and intent to hold to maturity. These securities are carried at amortized cost. Equity securities are carried at fair value with unrealized gains and losses recorded in noninterest income.

Current wording

INVESTMENT SECURITIES: Investment securities available for sale are purchased, sold and/or maintained as a part of the Company’s overall balance sheet, liquidity and interest rate risk management strategies, and in response to changes in interest rates, liquidity needs, prepayment speeds and/or other factors. These securities are carried at estimated fair value, and unrealized changes in fair value are recognized as a separate component of shareholders’ equity, net of income taxes. Realized gains and losses are recognized in income at the time the securities are sold. Investment securities held to maturity are those securities that the Company has both the ability and intent to hold to maturity. These securities are carried at amortized cost. Equity securities are carried at fair value with unrealized gains and losses recorded in noninterest income as incurred.

Previous wording

At September 30, 2024, the Company had investment securities available for sale with a fair value of $682.7 million compared with $550.6 million at December 31, 2023. The increase in investment securities available for sale was due to the use of excess funds for security purchases as deposit growth outpaced loan growth during the first nine months of 2024. A net unrealized loss (net of income tax) of $57.6 million and of $69.2 million related to these securities were included in shareholders’ equity at September 30, 2024 and December 31, 2023, respectively.

Current wording

At March 31, 2025, the Company had investment securities available for sale with a fair value of $832.0 million compared with $784.5 million at December 31, 2024. The increase in investment securities available for sale was driven by the use of excess cash for security purchases (primarily mortgage-backed securities) during the first three months of 2025. A net unrealized loss (net of income tax) of $61.5 million and $72.1 million related to these securities were included in shareholders’ equity at March 31, 2025 and December 31, 2024, respectively.

Previous wording

At September 30, 2024, the Company had investment securities held to maturity with a carrying cost of $103.2 million and an estimated fair value of $92.4 million compared with a carrying cost of $107.8 million and an estimated fair value of $94.4 million at December 31, 2023.

Current wording

At March 31, 2025, the Company had investment securities held to maturity with a carrying cost of $100.3 million and an estimated fair value of $88.7 million compared with a carrying cost of $101.6 million and an estimated fair value of $88.7 million at December 31, 2024.

Previous wording

The Company had one equity security (a CRA investment security) with a fair value of $13.4 million and $13.2 million at September 30, 2024 and December 31, 2023, respectively, with changes in fair value recognized in the Consolidated Statements of Income. The Company recorded an unrealized gain of $474,000 and $279,000 for the three and nine months ended September 30, 2024, respectively, as compared to an unrealized loss of $404,000 for the three and nine months ended September 30, 2023.

Current wording

The Company had one equity security (a CRA investment security) with a fair value of $13.2 million and $13.0 million at March 31, 2025 and December 31, 2024, respectively, with changes in fair value recognized in the Consolidated Statements of Income. The Company recorded an unrealized gain of $195,000 for the three months ended March 31, 2025, respectively, as compared to an unrealized loss of $111,000 for the three months ended March 31, 2024.

Previous wording

The Company recorded total other income, excluding wealth management fee income, of $3.8 million for the third quarter of 2024 compared to $5.4 million for the same 2023 period, reflecting a decrease of $1.6 million. For the nine months ended September 30, 2024 and 2023, the Company recorded total other income, excluding wealth management fee income, of $13.2 million and

Current wording

The Company recorded total other income, excluding wealth management fee income, of $3.4 million for the first quarter of 2025 compared to $4.3 million for the same 2024 period, reflecting a decrease of $875,000. The decrease was primarily due to lower corporate advisory fee income and service charges and fees, which was partially offset by an increase in the fair value adjustment for the CRA equity security.

Previous wording

The Company provides loans that are partially guaranteed by the SBA to provide working capital and/or finance the purchase of equipment, inventory or commercial real estate that could be used for start-up businesses. All SBA loans are underwritten and documented as prescribed by the SBA. The Company generally sells the guaranteed portion of the SBA loans in the secondary market, with the non-guaranteed portion of SBA loans held in the loan portfolio. The Company recorded a gain on the sale of SBA loans of $365,000 and $491,000 for the quarters ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024 and 2023, the Company recorded a gain on the sale of SBA loans of $1.2 million and $2.2 million, respectively. The Company continues to see pressure from market volatility and the higher interest rate environment resulting in lower sale premiums and origination volumes.

Current wording

The Company provides loans that are partially guaranteed by the SBA to provide working capital and/or finance the purchase of equipment, inventory or commercial real estate that could be used for start-up businesses. All SBA loans are underwritten and documented as prescribed by the SBA. The Company generally sells the guaranteed portion of the SBA loans in the secondary market, with the non-guaranteed portion of SBA loans held in the loan portfolio. The Company recorded a gain on the sale of SBA loans of $302,000 and $400,000 for the quarters ended March 31, 2025 and 2024, respectively. The Company continues to see pressure from market volatility and the higher interest rate environment resulting in lower sale premiums and origination volumes.

Previous wording

The Company recorded corporate advisory fee income for the third quarter of 2024 of $55,000 compared to $85,000 for the same period ended September 30, 2023. The nine months ended September 30, 2024 included $976,000 of corporate advisory fee income compared to $180,000 for the same 2023 period. The higher amount for the nine months ended September 30, 2024 was related to a corporate advisory/investment banking acquisition transaction completed in the first quarter of 2024.

Current wording

The Company recorded corporate advisory fee income for the first quarter of 2025 of $90,000 compared to $818,000 for the same period ended March 31, 2024. The higher amount for the three months ended March 31, 2024 was related to a lower corporate advisory/investment banking acquisition transaction completed in the first quarter of 2024.

Previous wording

Income from the back-to-back swap, SBA programs, and corporate advisory fee income are dependent on volume, and thus are typically not consistent from quarter to quarter.

Current wording

Income from the SBA programs, and corporate advisory fee income are dependent on volume, and thus are typically not consistent from quarter to quarter.

Previous wording

For the quarter ended September 30, 2024, income from the sale of newly originated residential mortgage loans was $15,000 compared to $37,000 for the same period in 2023. The Company recorded income from the sale of newly originated residential mortgage loans for the nine months ended September 30, 2024 and 2023 of $105,000 and $73,000, respectively. The Company continues to be impacted by the industry wide slowdown in refinancing and home purchase activity in the higher interest rate environment.

Current wording

For the quarter ended March 31, 2025, income from the sale of newly originated residential mortgage loans was $63,000 compared to $56,000 for the same period in 2024. The Company continues to be impacted by the industry wide slowdown in refinancing and home purchase activity in the higher interest rate environment.

Previous wording

Other income included $225,000 of income by the Equipment Finance Division related to equipment transfers to lessees upon the termination of leases for the third quarter of 2024 compared to $2.3 million for the same 2023 period. The nine months ended September 30, 2024 and 2023 included $1.9 million and $2.7 million, respectively, of income related to equipment transfers to lessees upon the termination of leases. Additionally, the Company recorded $845,000 of unused commercial line fees for the quarter ended September 30, 2024 compared to $794,000 for the same 2023 period. Unused line fees were $2.5 million for both the nine months ended September 30, 2024 and 2023. The three and nine months ended September 30, 2024 included $55,000 and $236,000, respectively, of additional income from life insurance proceeds.

Current wording

Other income included a loss of $415,000 recorded by the Equipment Finance Division related to equipment transfers to lessees upon the termination of leases for the first quarter of 2025 compared to income of $141,000 for the same 2024 period. The loss on termination was due to the reduction in residual values of equipment realized upon disposition during the first quarter of 2025. The Company recorded $932,000 of unused commercial line fees for the quarter ended March 31, 2025 compared to $827,000 for the same 2024 period.

Previous wording

The Company recorded a $474,000 of positive fair value adjustment and $404,000 negative fair value adjustment for CRA equity securities in the third quarter of 2024 and 2023, respectively. The nine months ended September 30, 2024 included a $279,000 positive fair value adjustment for CRA equity securities, compared to a $404,000 negative fair value adjustment for the same 2023 period. The increase in 2024 was predominantly due to the underlying assets being tied to medium-term investments and the Federal Reserve's decision to lower interest rates in September 2024.

Current wording

The Company recorded a $195,000 of positive fair value adjustment and $111,000 negative fair value adjustment for CRA equity securities in the first quarter of 2025 and 2024, respectively. The increase in 2025 was due to a decline in medium-term rates during the first quarter of 2025.

Previous wording

Operating expenses for the quarter ended September 30, 2024 and 2023 totaled $44.6 million and $37.4 million, respectively, reflecting an increase of $7.2 million, or 19 percent. Operating expenses for the nine months ended September 30, 2024 increased $17.1 million, or 15 percent, to $127.8 million from $110.7 million for the same 2023 period. The increase in operating expenses for both 2024 periods, when compared to the same prior year periods, was principally attributable to the Company's expansion into New York City, which included the hiring of multiple teams and expenses related to the opening of office and retail space in our Park Avenue location in New York City. The 2024 periods included additional expense associated with annual merit increases and increased employee benefits, increased credit costs, as well as increased office space, computer and software equipment costs related to the New York City expansion. The nine months ended September 30, 2023 included $2.0 million of expense associated with retirements of certain employees and $175,000 of expenses associated with the closure of three retail branch locations.

Current wording

Operating expenses for the quarter ended March 31, 2025 and 2024 totaled $49.4 million and $40.0 million, respectively, reflecting an increase of $9.4 million, or 23 percent. Increased operating expenses in the first three months of 2025 were principally attributable to the Company's expansion into New York City, which included the hiring of multiple teams and expenses related to the opening of office and retail space in our Park Avenue location in New York City. There were also increased computer and software equipment costs. The first quarter of 2025 also included additional expense associated with annual merit increases and increased employee benefit costs.

Previous wording

PEAPACK PRIVATE: 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 Peapack Private are available to provide wealth management, trust and investment services at the Bank’s headquarters in Bedminster, New Jersey, and at private banking locations in Morristown, Princeton, Red Bank, Summit and Teaneck, New Jersey and at the Bank’s subsidiary, PGB Trust & Investments of Delaware, in Greenville, Delaware.

Current wording

WEALTH MANAGEMENT DIVISION: This division includes: investment management services provided for individuals and institutions; personal trust services, including services as executor, trustee, administrator, custodian and guardian; and other financial planning, tax preparation and advisory services. Officers from the wealth management division are available to provide wealth management, trust and investment services at the Bank’s headquarters in Bedminster, New Jersey, at private banking locations in Morristown, Princeton, Red Bank, Summit and Teaneck, New Jersey, in New York City and at the Bank’s subsidiary, PGB Trust & Investments of Delaware, in Greenville, Delaware.

Previous wording

The market value of the assets under management and/or administration (“AUM/AUA”) of Peapack Private was $12.1 billion at September 30, 2024, reflecting a 11 percent increase from $10.9 billion at December 31, 2023 and an increase of 16 percent from $10.4 billion at September 30, 2023. The equity market improved during the first nine months of 2024 and coupled with gross business inflows of $547 million, contributed to the increase in AUM/AUA.

Current wording

The market value of the assets under management and/or administration (“AUM/AUA”) was $11.8 billion at March 31, 2025, reflecting a 1 percent decrease from $11.9 billion at December 31, 2024 and an increase of 3 percent from $11.5 billion at March 31, 2024 due primarily to market conditions offset by new client inflows.

Previous wording

In the September 2024 quarter, Peapack Private generated $15.2 million in fee income compared to $14.0 million for the September 2023 quarter, reflecting an 8 percent increase. For the nine months ended September 30, 2024, Peapack Private generated $46.0 million in fee income compared to $42.0 million in fee income for the same period in 2023, reflecting a 10 percent increase. The increase in fee income for the three and nine months ended September 30, 2024 was largely due to the improved equity and bond markets during the first nine months of 2024 and new business inflows.

Current wording

In the March 2025 quarter, the Wealth Management Division generated $15.4 million in fee income compared to $14.4 million for the March 2024 quarter, reflecting a 7 percent increase. The increase in fee income for the three months ended March 31, 2025 was largely due to strong client inflows driven by new accounts and client additions.

Previous wording

Operating expenses relative to Peapack Private, for the three months ended September 30, 2024, increased slightly to $10.0 million as compared to $9.6 million for the third quarter of 2023. Operating expenses relative to Peapack Private, for the nine months ended September 30, 2024, declined to $30.1 million as compared to $30.6 million for the nine months ended September 30, 2023. Expenses are in line with the Company’s Strategic Plan, particularly the hiring of key management and revenue-producing personnel.

Current wording

Operating expenses relative to the Wealth Management Division, for the three months ended March 31, 2025, increased to $9.6 million as compared to $9.4 million for the first quarter of 2024. Expenses are in line with the Company’s Strategic Plan, particularly the hiring of key management and revenue-producing personnel.

Previous wording

Peapack Private currently generates adequate revenue to support the salaries, benefits and other expenses of the wealth division and Management believes it will continue to do so as the Company grows organically and/or by acquisition. Management believes that the Bank generates adequate liquidity to support the expenses of Peapack Private should it be necessary.

Current wording

The Wealth Management Division currently generates adequate revenue to support the salaries, benefits and other expenses of the wealth division and Management believes it will continue to do so as the Company grows organically and/or by acquisition. Management believes that the Bank generates adequate liquidity to support the expenses of the Wealth Management Division should it be necessary.

Previous wording

Excludes modifications included in nonaccrual loans of $3.7 million at September 30, 2024, $3.2 million at June 30, 2024, $3.2 million at March 31, 2024, $3.0 million at December 31, 2023 and $3.1 million at September 30, 2023.

Current wording

Excludes modifications included in nonaccrual loans of $3.9 million at March 31, 2025, $3.6 million at December 31, 2024, $3.7 million at September 30, 2024, $3.2 million at June 30, 2024 and $3.2 million at March 31, 2024.

Previous wording

The Company had increases in nonperforming assets, performing modifications, loans subject to special mention, classified loans and individually evaluated loans at September 30, 2024 compared to December 31, 2023. The persistent nature of the elevated interest rate environment combined with inflationary pressures have presented challenges for certain borrowers, which is reflected in the trend of asset quality data in recent quarters. The increase in nonperforming assets since the beginning of 2024 was primarily driven by six multifamily loan relationships that have been classified as nonperforming loans during the current year. The increase in special mention loans was primarily due to an increase in multifamily loans of $51.1 million. There were several loan modifications made during the first nine months of 2024, which included one investment commercial real estate loan, one commercial loan and one equipment finance of $17.3 million, $11.7 million and $10.5 million, respectively, that were completed during the third quarter of 2024. Loans past due 30 through 89 days at September 30, 2024 included $19.7 million of multifamily loans to two sponsors. Subsequent to September 30, 2024 these loans have been placed on nonaccrual status and downgraded to substandard. The increase in classified loans was primarily driven by an increase in multifamily loans of $16.5 million, investment commercial real estate of $17.2 million and commercial loans of $27.6 million when compared to December 31, 2023. The increase in the balance of individually evaluated substandard loans was primarily due to six multifamily relationships totaling $31.8 million that transferred to nonaccrual status during the first nine months of 2024 which was partially offset by the sale of two multifamily individually evaluated loans totaling $15.1 million.

Current wording

The Company had increases in performing modifications, loans past due 30 through 89 days and still accruing and loans subject to special mention at March 31, 2025 compared to December 31, 2024. The persistent nature of the elevated interest rate environment combined with inflationary pressures have presented challenges for certain borrowers, which is reflected in the trend of asset quality data in recent quarters. The increase in performing modifications was primarily due to loan modifications related to multifamily loans of $17.6 million and C&I loans of $11.1 million during the first quarter of 2025. This was partially offset by $12.1 million in C&I loans that are no longer classified as loan modifications. The increase in loans past due 30 through 89 days and still accruing was primarily due to $19.4 million of multifamily loans and $6.3 million of C&I loans that were past due as of March 31, 2025. The slight decrease in individually evaluated substandard loans was primarily due to a $1.9 million charge-off recorded on one commercial and industrial relationship during the first quarter of 2025. The increase in special mention loans was primarily due to increases of $9.0 million in multifamily, $22.5 million in investment commercial real estate and $5.4 million in C&I loans during the first three months of 2025.

Previous wording

PROVISION FOR CREDIT LOSSES: The provision for credit losses was $1.2 million and $5.9 million for the third quarters of 2024 and 2023, respectively. For the nine months ended September 30, 2024 and 2023, the provision for loan losses was $5.8 million and $9.1 million, respectively. The decreased provision for credit losses for the three months ended September 30, 2024, when compared to the three months ended September 30, 2023 was driven by overall slower loan growth and a recovery of approximately $2.1 million, partially offset by additional specific reserves related to certain isolated credits of $1.8 million. The higher provision for credit losses for the third quarter of 2023 was due principally to a specific reserve of $4.5 million for a freight-related credit that was transferred to nonaccrual. The allowance for credit losses (“ACL”) was $71.3 million as of September 30, 2024, compared to $65.9 million at December 31, 2023. The increase in the ACL was primarily related to an increase in the ACL related to multifamily loans, which was driven by the increase in individually evaluated loans of $16.7 million and certain qualitative adjustments in the CECL calculation made during the first nine months of 2024. The allowance for credit losses as a percentage of loans was 1.34 percent at September 30, 2024 compared to 1.21 percent at December 31, 2023. The ACL recorded on individually evaluated loans was $9.7 million at September 30, 2024 compared to $4.5 million as of December 31, 2023. Total individually evaluated loans were $80.0 million and $60.7 million as of September 30, 2024 and December 31, 2023, respectively. The general component of the allowance increased from $61.4 million at December 31, 2023 to $61.6 million at September 30, 2024.

Current wording

PROVISION FOR CREDIT LOSSES: The provision for credit losses was $4.5 million and $627,000 for the first quarters of 2025 and 2024, respectively. The allowance for credit losses (“ACL”) was $75.2 million as of March 31, 2025, compared to $73.0 million at December 31, 2024. The increased provision for credit losses for the three months ended March 31, 2025 was driven by overall loan growth (particularly in the C&I portfolio) and increased charge-offs, in addition to deterioration of key economic data points used in the CECL model. Charge-offs totaled $2.4 million during the first quarter of 2025 of which $2.3 million was related to one transportation credit compared to charge-offs of $254,000 during the first quarter of 2024. The allowance for credit losses as a percentage of loans was 1.31 percent at March 31, 2025 compared to 1.32 percent at December 31, 2024. The ACL recorded on individually evaluated loans was $12.6 million at March 31, 2025 compared to $12.7 million as of December 31, 2024. Total individually evaluated loans were $97.2 million and $99.8 million as of March 31, 2025 and December 31, 2024, respectively. The general component of the allowance increased from $60.3 million at December 31, 2024 to $62.6 million at March 31, 2025. The increase in the general reserve was primarily due to growth in the C&I portfolio of $121.6 million, which typically carry a higher level of reserves.

Previous wording

Excludes a credit of $3,000 at September 30, 2024, a provision of $10,000 at June 30, 2024, a provision of $12,000 at March 31, 2024, a credit of $55,000 at December 31, 2023 and a credit of $88,000 at September 30, 2023 related to off-balance sheet commitments.

Current wording

Excludes a credit of $23,000 at March 31, 2025, a credit of $15,000 at December 31, 2024, a credit of $3,000 at September 30, 2024, a provision of $10,000 at June 30, 2024 and a provision of $12,000 at March 31, 2024 related to off-balance sheet commitments.