Peapack-Gladstone Financial 10Q 2024 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended September 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-16197

PEAPACK-GLADSTONE FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)


New Jersey	22-3537895
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

500 Hills Drive, Suite 300

Bedminster, New Jersey 07921-0700

(Address of principal executive offices, including zip code)

(908) 234-0700

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	PGC	The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act:


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of Common Stock outstanding as of November 1, 2024: 17,585,306

PEAPACK-GLADSTONE FINANCIAL CORPORATION

PART I FINANCIAL INFORMATION


Item 1	Financial Statements (Unaudited)	3
	Consolidated Statements of Condition at September 30, 2024 and December 31, 2023	3
	Consolidated Statements of Income for the three and nine months ended September 30, 2024 and 2023	4
	Consolidated Statements of Comprehensive Income/(Loss) for the three and nine months ended September 30, 2024 and 2023	5
	Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended September 30, 2024 and 2023	6
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023	8
	Notes to Consolidated Financial Statements	9
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	48
Item 3	Quantitative and Qualitative Disclosures About Market Risk	67
Item 4	Controls and Procedures	70

PART II OTHER INFORMATION


Item 1	Legal Proceedings	70
Item 1A	Risk Factors	70
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	71
Item 3	Defaults Upon Senior Securities	71
Item 4	Mine Safety Disclosures	71
Item 5	Other Information	71
Item 6	Exhibits	73

Item 1. Financial Statements

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CONDITION

(Dollars in thousands, except per share data)


	(unaudited)			(audited)
	September 30,			December 31,
	2024			2023
ASSETS
Cash and due from banks	$	8,129		$	5,887
Federal funds sold		—			—
Interest-earning deposits		484,529			181,784
Total cash and cash equivalents		492,658			187,671
Securities available for sale		682,713			550,617
Securities held to maturity (fair value $92,438 at September 30, 2024 and $94,415 at December 31, 2023)		103,158			107,755
CRA equity security, at fair value		13,445			13,166
FHLB and FRB stock, at cost (A)		12,459			31,044
Loans held for sale, at fair value		561			100
Loans held for sale, at lower of cost or fair value		4,189			6,695
Loans		5,315,417			5,429,325
Less: allowance for credit losses		71,283			65,888
Net loans		5,244,134			5,363,437
Premises and equipment		25,716			24,166
Accrued interest receivable		31,973			30,676
Bank owned life insurance		47,837			47,581
Goodwill		36,212			36,212
Other intangible assets		8,986			9,802
Finance lease right-of-use assets		1,020			2,087
Operating lease right-of-use assets		41,650			12,096
Deferred tax assets, net		8,756			505
Other assets		38,325			53,247
TOTAL ASSETS	$	6,793,792		$	6,476,857
LIABILITIES
Deposits:
Noninterest-bearing demand deposits	$	1,079,877		$	957,687
Interest-bearing deposits:
Checking		3,316,217			2,882,193
Savings		103,979			111,573
Money market accounts		902,562			740,559
Certificates of deposit - retail		515,297			443,791
Certificates of deposit - listing service		7,454			7,804
Subtotal deposits		5,925,386			5,143,607
Interest-bearing demand - brokered		10,000			10,000
Certificates of deposit - brokered		—			120,507
Total deposits		5,935,386			5,274,114
Short-term borrowings		—			403,814
Finance lease liabilities		1,388			3,430
Operating lease liabilities		44,775			12,876
Subordinated debt, net		133,489			133,274
Accrued expenses and other liabilities		71,140			65,668
TOTAL LIABILITIES		6,186,178			5,893,176
SHAREHOLDERS’ EQUITY
Preferred stock (no par value; authorized 500,000 shares; liquidation preference of $1,000 per share)		—			—
Common stock (no par value; stated value $0.83 per share; authorized 42,000,000 shares; issued shares, 21,526,987 at September 30, 2024 and 21,388,917 at December 31, 2023; outstanding shares, 17,577,747 at September 30, 2024 and 17,739,677 at December 31, 2023)		17,946			17,831
Surplus		346,811			346,954
Treasury stock at cost (3,949,240 shares at September 30, 2024 and 3,649,240 shares at December 31, 2023)		(117,509	)		(110,320	)
Retained earnings		415,186			394,094
Accumulated other comprehensive loss, net of income tax		(54,820	)		(64,878	)
TOTAL SHAREHOLDERS’ EQUITY		607,614			583,681
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY	$	6,793,792		$	6,476,857

(A)

FHLB means "Federal Home Loan Bank" and FRB means "Federal Reserve Bank."

See accompanying notes to consolidated financial statements.

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

(Unaudited)


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2024		2023			2024		2023
INTEREST INCOME
Interest and fees on loans	$	73,111	$	71,846		$	217,287	$	204,808
Interest on investments:
Taxable		6,107		5,170			16,411		14,541
Tax-exempt		—		5			—		22
Interest on loans held for sale		3		5			15		9
Interest on interest-earning deposits		3,982		1,463			7,922		4,452
Total interest income		83,203		78,489			241,635		223,832
INTEREST EXPENSE
Interest on savings and interest-bearing deposit accounts		38,042		28,851			106,453		76,351
Interest on certificates of deposit		5,540		3,459			15,762		7,650
Interest on borrowed funds		—		6,569			3,848		13,249
Interest on finance lease liability		15		46			75		149
Interest on subordinated debt		1,685		1,730			5,055		4,966
Subtotal - interest expense		45,282		40,655			131,193		102,365
Interest on interest-bearing demand - brokered		134		136			394		469
Interest on certificates of deposits - brokered		106		1,183			2,950		1,584
Total interest expense		45,522		41,974			134,537		104,418
NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES		37,681		36,515			107,098		119,414
Provision for credit losses		1,224		5,856			5,762		9,065
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		36,457		30,659			101,336		110,349
OTHER INCOME
Wealth management fee income		15,150		13,975			45,976		41,989
Service charges and fees		1,327		1,319			3,994		3,897
Bank owned life insurance		390		310			1,221		912
Gain on loans held for sale at fair value (mortgage banking)		15		37			105		73
Gain on loans held for sale at lower of cost or fair value		—		—			23		—
Gain on sale of SBA loans		365		491			1,214		2,194
Corporate advisory fee income		55		85			976		180
Other income		1,162		3,541			5,406		7,147
Fair value adjustment for CRA equity security		474		(404	)		279		(404	)
Total other income		18,938		19,354			59,194		55,988
OPERATING EXPENSES
Compensation and employee benefits		31,050		25,264			89,410		76,204
Premises and equipment		5,633		5,214			16,490		14,317
FDIC insurance expense		870		741			2,685		2,181
Other operating expense		7,096		6,194			19,231		17,977
Total operating expenses		44,649		37,413			127,816		110,679
INCOME BEFORE INCOME TAX EXPENSE		10,746		12,600			32,714		55,658
Income tax expense		3,159		3,845			8,966		15,403
NET INCOME	$	7,587	$	8,755		$	23,748	$	40,255

EARNINGS PER SHARE
Basic	$	0.43	$	0.49		$	1.34	$	2.25
Diluted	$	0.43	$	0.49		$	1.34	$	2.23
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic		17,616,046		17,856,961			17,691,309		17,876,316
Diluted		17,700,042		18,010,127			17,746,560		18,091,524

See accompanying notes to consolidated financial statements.

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(Dollars in thousands)

(Unaudited)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023
Net income	$	7,587		$	8,755		$	23,748		$	40,255
Comprehensive income/(loss):
Unrealized gains/(losses) on available for sale securities:
Unrealized holding gains/(losses) arising during the period		23,974			(20,629	)		16,637			(18,882	)

		23,974			(20,629	)		16,637			(18,882	)

Tax effect		(6,400	)		5,642			(4,442	)		8,820
Net of tax		17,574			(14,987	)		12,195			(10,062	)

Unrealized gains/(losses) on cash flow hedges:
Unrealized holding gains/(losses) arising during the period		(5,600	)		1,861			(2,953	)		3,904
Reclassification adjustment for amounts included in net income		—			—			—			(84	)
		(5,600	)		1,861			(2,953	)		3,820

Tax effect		1,548			(530	)		816			(1,200	)
Net of tax		(4,052	)		1,331			(2,137	)		2,620


Total other comprehensive income/(loss)		13,522			(13,656	)		10,058			(7,442	)

Total comprehensive income/(loss)	$	21,109		$	(4,901	)	$	33,806		$	32,813

See accompanying notes to consolidated financial statements.

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Dollars in thousands, except per share amounts)

(Unaudited)

Three Months Ended September 30, 2024 and September 30, 2023


															Accumulated
															Other			Total
(In thousands, except share and	Preferred		Common						Treasury			Retained			Comprehensive			Shareholders'
per share data)	Stock		Stock			Surplus			Stock			Earnings			Loss			Equity
Balance at July 1, 2024 17,666,490 common shares outstanding	$	—	$	17,936		$	345,164		$	(114,917	)	$	408,481		$	(68,342	)	$	588,322
Net income		—		—			—			—			7,587			—			7,587
Comprehensive income		—		—			—			—			—			13,522			13,522
Amortization of restricted stock units		—		—			1,395			—			—			—			1,395
Cash dividends declared on common stock ($0.05 per share)		—		—			—			—			(882	)		—			(882	)
Share repurchase, (100,000) shares		—		—			—			(2,592	)		—			—			(2,592	)
Issuance of shares for Employee Stock Purchase Plan, 11,257 shares		—		10			252			—			—			—			262
Balance at September 30, 2024 17,577,747 common shares outstanding	$	—	$	17,946		$	346,811		$	(117,509	)	$	415,186		$	(54,820	)	$	607,614

															Accumulated
															Other			Total
(In thousands, except share and	Preferred		Common						Treasury			Retained			Comprehensive			Shareholders'
per share data)	Stock		Stock			Surplus			Stock			Earnings			Loss			Equity
Balance at July 1, 2023 17,887,895 common shares outstanding	$	—	$	17,797		$	342,137		$	(105,393	)	$	378,525		$	(67,997	)	$	565,069
Net income		—		—			—			—			8,755			—			8,755
Comprehensive loss		—		—			—			—			—			(13,656	)		(13,656	)
Restricted stock units issued 1,495 shares		—		(1	)		(67	)		—			—			—			(68	)
Restricted stock units repurchased on vesting to pay taxes, (515) shares		—		1			53			—			—			—			54
Amortization of restricted stock units		—		—			2,269			—			—			—			2,269
Cash dividends declared on common stock ($0.05 per share)		—		—			—			—			(893	)		—			(893	)
Share repurchase, (100,000) shares		—		—			—			(2,815	)		—			—			(2,815	)
Issuance of shares for Employee Stock Purchase Plan, 8,850 shares		—		8			233			—			—			—			241
Issuance of common stock for acquisition, 19,197 shares		—		16			(16	)		—			—			—			—
Balance at September 30, 2023 17,816,922 common shares outstanding	$	—	$	17,821		$	344,609		$	(108,208	)	$	386,387		$	(81,653	)	$	558,956

Nine Months Ended September 30, 2024 and September 30, 2023


															Accumulated
															Other
(In thousands, except share and	Preferred		Common						Treasury			Retained			Comprehensive
per share data)	Stock		Stock			Surplus			Stock			Earnings			Loss			Total
Balance at January 1, 2024 17,739,677 common shares outstanding	$	—	$	17,831		$	346,954		$	(110,320	)	$	394,094		$	(64,878	)	$	583,681
Net income													23,748						23,748
Comprehensive income																10,058			10,058
Restricted stock units issued, 147,679 shares				123			(123	)											—
Restricted stock units repurchased on vesting to pay taxes, (36,625) shares				(31	)		(846	)											(877	)
Amortization of restricted stock units							4,533												4,533
Modification of restricted stock units distributed in cash							(4,336	)											(4,336	)
Cash dividends declared on common stock ($0.15 per share)													(2,656	)					(2,656	)
Share repurchase, (300,000) shares										(7,189	)								(7,189	)
Issuance of shares for Employee Stock Purchase Plan, 27,016 shares				23			629												652
Balance at September 30, 2024 17,577,747 common shares outstanding	$	—	$	17,946		$	346,811		$	(117,509	)	$	415,186		$	(54,820	)	$	607,614

															Accumulated
															Other
(In thousands, except share and	Preferred		Common						Treasury			Retained			Comprehensive
per share data)	Stock		Stock			Surplus			Stock			Earnings			Loss			Total
Balance at January 1, 2023 17,813,451 common shares outstanding	$	—	$	17,513		$	338,706		$	(97,826	)	$	348,798		$	(74,211	)	$	532,980
Net income		—		—			—			—			40,255			—			40,255
Comprehensive loss		—		—			—			—			—			(7,442	)		(7,442	)
Restricted stock units issued, 429,909 shares		—		358			(358	)		—			—			—			—
Restricted stock units repurchased on vesting to pay taxes, (106,452) shares		—		(89	)		(3,115	)		—			—			—			(3,204	)
Amortization of restricted stock units		—		—			8,578			—			—			—			8,578
Cash dividends declared on common stock ($0.15 per share)		—		—			—			—			(2,666	)		—			(2,666	)
Share repurchase, (367,014) shares		—		—			—			(10,382	)		—			—			(10,382	)
Common stock options exercised, 1,400 net of 60 used to exercise and related taxes benefits, 1,340 shares		—		1			18			—			—			—			19
Issuance of shares for Employee Stock Purchase Plan, 26,491 shares		—		22			796			—			—			—			818
Issuance of common stock for acquisition, 19,197 shares		—		16			(16	)		—			—			—			—
Balance at September 30, 2023 17,816,922 common shares outstanding	$	—	$	17,821		$	344,609		$	(108,208	)	$	386,387		$	(81,653	)	$	558,956

See accompanying notes to consolidated financial statements.

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2024			2023
OPERATING ACTIVITIES:
Net income	$	23,748		$	40,255
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		2,692			2,720
Amortization of premium and accretion of discount on securities, net		226			458
Amortization of restricted stock		4,533			8,578
Amortization of intangible assets		816			1,048
Amortization of subordinated debt costs		215			216
Provision for credit losses		5,762			9,065
Deferred tax benefit		(11,133	)		(10,717	)
Stock-based compensation and employee stock purchase plan expense		131			140
Fair value adjustment for equity security		(279	)		404
Loans originated for sale (A)		(20,856	)		(24,786	)
Proceeds from sales of loans held for sale (A)		24,220			35,963
Gain on loans held for sale (A)		(1,319	)		(2,267	)
Gain on loans held for sale at lower of cost or fair value		(23	)		—
Loss on disposal of fixed assets		76			6
Gain on death benefit		(236	)		—
Increase in cash surrender value of life insurance, net		(174	)		(362	)
(Increase)/decrease in accrued interest receivable		(1,297	)		2,268
Decrease in other assets		(26,279	)		(1,019	)
Increase in accrued expenses and other liabilities		43,822			6,794
NET CASH PROVIDED BY OPERATING ACTIVITIES		44,645			68,764
INVESTING ACTIVITIES:
Principal repayments, maturities and calls of securities available for sale		496,781			476,363
Principal repayments, maturities and calls of securities held to maturity		4,531			3,638
Redemptions of FHLB and FRB stock		59,623			83,385
Purchase of securities held to maturity		—			(10,347	)
Purchase of securities available for sale		(612,400	)		(462,000	)
Purchase of FHLB and FRB stock		(41,038	)		(86,871	)
Proceeds from sales of loans held for sale at lower of cost or fair value		23			—
Net decrease/(increase) in loans, net of participations sold		113,541			(202,777	)
Proceeds from sales of other real estate		—			116
Purchase of premises and equipment		(4,068	)		(2,297	)
Disposal of premises and equipment		143			(6	)
Proceeds from death benefit		154			—
NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES		17,290			(200,796	)
FINANCING ACTIVITIES:
Net increase in deposits		661,272			54,195
Net (decrease)/increase in short-term borrowings		(403,814	)		91,046
Dividends paid on common stock		(2,656	)		(2,666	)
Exercise of stock options, net of stock swaps		—			19
Restricted stock repurchased on vesting to pay taxes		(877	)		(3,273	)
Issuance of restricted stock		—			69
Modification of restricted stock units distributed in cash		(4,336	)		—
Issuance of shares for employee stock purchase plan		652			818
Shares repurchased		(7,189	)		(10,382	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		243,052			129,826
Net increase/(decrease) in cash and cash equivalents		304,987			(2,206	)
Cash and cash equivalents at beginning of period		187,671			190,075
Cash and cash equivalents at end of period	$	492,658		$	187,869
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest	$	124,717		$	97,583
Income tax, net		13,753			9,668
Right-of-use asset obtained in exchange for operating lease liabilities		32,483			1,926

(A)

Includes mortgage loans originated with the intent to sell, which are carried at fair value. In addition, this includes the guaranteed portion of Small Business Administration (“SBA”) loans, which are carried at the lower of cost or fair value.

See accompanying notes to consolidated financial statements.

PEAPACK-GLADSTONE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Certain information and footnote disclosures normally included in the audited consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2023 for Peapack-Gladstone Financial Corporation (the “Corporation” or the “Company”). In the opinion of Management of the Corporation, the accompanying unaudited consolidated interim financial statements contain all adjustments (consisting solely of normal and recurring accruals) necessary to present fairly the financial position as of September 30, 2024, and the results of operations, comprehensive income, changes in shareholders’ equity and cash flow statements for the three and nine months ended September 30, 2024 and 2023. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the full year or for any future period.

Principles of Consolidation and Organization: The consolidated financial statements of the Company are prepared on the accrual basis and include the accounts of the Company and its wholly-owned subsidiary, Peapack-Gladstone Bank (the “Bank”). The consolidated financial statements also include the Bank’s wholly-owned subsidiaries:

•

Peapack Capital Corporation (“PCC”)

•

Peapack-Gladstone Mortgage Group, Inc., which owns 99 percent of Peapack Ventures, LLC and 79 percent of Peapack-Gladstone Realty, Inc., a New Jersey real estate investment company

•

PGB Trust & Investments of Delaware, which owns one percent of Peapack Ventures, LLC

•

Peapack Ventures, LLC, which owns the remaining 21 percent of Peapack-Gladstone Realty, Inc.

•

Peapack-Gladstone Realty, Inc.

•

PGB Securities, Inc.

While the following notes to the consolidated financial statements include the consolidated results of the Company, the Bank and their subsidiaries, these notes primarily reflect the Bank’s and its subsidiaries’ activities. All significant intercompany balances and transactions have been eliminated from the accompanying consolidated financial statements.

Basis of Financial Statement Presentation: The consolidated financial statements have been prepared in accordance with GAAP. In preparing the financial statements, Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the statement of condition and revenues and expenses for the periods presented. Actual results could differ from those estimates.

Segment Information: The Company’s business is conducted through two business segments: (1) its banking segment (“Banking”), which involves the delivery of loan and deposit products to customers, and (2) the Peapack Private Wealth Management Division ("Peapack Private"), which includes investment management services to individuals and institutions. Management uses certain methodologies to allocate income and expense to the business segments.

The Banking segment includes: commercial (including commercial and industrial (“C&I”) and equipment financing), commercial real estate, multifamily, commercial construction, residential and consumer lending activities; treasury management services; C&I advisory services; escrow management; deposit generation; operation of ATMs; telephone and internet banking services; merchant credit card services and customer support services.

Peapack Private includes: investment management services for individuals and institutions; personal trust services, including services as executor, trustee, administrator, custodian; and other financial planning and advisory services. This segment also includes the activity from the Delaware subsidiary, PGB Trust & Investments of Delaware. The majority of wealth management fees are collected on a monthly or quarterly basis and are calculated on either a fixed or tiered fee schedule, based upon the market value of assets under management and/or administration (“AUMs”). Other non AUM-based revenues such as personal or fiduciary tax return preparation fees, executor fees, trust termination fees and/or financial planning and advisory fees are charged as services are rendered.

Cash and Cash Equivalents: For purposes of the statements of cash flows, cash and cash equivalents include cash and due from banks, interest-earning deposits and federal funds sold. Generally, federal funds are sold for one-day periods. Cash equivalents are of original maturities of 90 days or less. Net cash flows are reported for customer loan and deposit transactions and short-term borrowings with original maturities of 90 days or less.

Interest-Earning Deposits in Other Financial Institutions: Interest-earning deposits in other financial institutions mature within one year and are carried at cost.

Securities: Under Accounting Standards Update ("ASU") 2016-13, debt securities available-for-sale are measured at fair value and subject to impairment testing. When an available-for-sale debt security is considered impaired, the Company must determine if the decline in fair value has resulted from a credit-related loss or other factors and then, (1) recognize an allowance for credit losses ("ACL") by a charge to earnings for the credit-related component (if any) of the decline in fair value, and (2) recognize in other comprehensive income (loss) any non-credit related components of the fair value change. If the amount of the amortized cost basis expected to be recovered increases in a future period, the valuation reserve would be reduced, but not more than the amount of the current existing reserve for that security.

Debt securities are classified as held to maturity and carried at amortized cost when Management has the positive intent and ability to hold them to maturity. Under ASU 2016-13, held-to-maturity securities in a loss position are evaluated to determine if the decline in fair value has resulted from a credit-related loss or other factors, and then recognize a charge to earnings for the decline in fair value. The Company also has an investment in a Community Reinvestment Act (“CRA”) investment fund, which is classified as an equity security.

Interest income includes amortization of purchase premiums and discounts. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated, and premiums on callable debt securities, which are amortized to the earliest call date. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

Federal Home Loan Bank (FHLB) and Federal Reserve Bank ("FRB") Stock: The Bank is a member of the FHLB system. Members are required to own a certain amount of FHLB stock, based on the level of borrowings and other factors. FHLB stock is carried at cost, classified as a restricted security and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

The Bank is also a member of the Federal Reserve Bank of New York and required to own a certain amount of FRB stock. FRB stock is carried at cost and classified as a restricted security. Dividends are reported as income.

Loans Held for Sale: Mortgage loans originated with the intent to sell in the secondary market are carried at fair value, as determined by outstanding commitments from investors.

Mortgage loans held for sale are generally sold with servicing rights released; therefore, no servicing rights are recorded. Gains and losses on sales of mortgage loans, shown as gain on loans held for sale at fair value (mortgage loans) on the Statement of Income, are based on the difference between the selling price and the carrying value of the related loan sold.

SBA loans originated with the intent to sell in the secondary market are carried at the lower of cost or fair value. SBA loans are generally sold with the servicing rights retained. Gains and losses on the sale of SBA loans are based on the difference between the selling price and the carrying value of the related loan sold. Total SBA loans serviced totaled $157.0 million and $162.9 million as of September 30, 2024 and December 31, 2023, respectively. SBA loans held for sale totaled $4.5 million and $7.2 million at September 30, 2024 and December 31, 2023, respectively.

Loans originated with the intent to hold and subsequently transferred to loans held for sale are carried at the lower of cost or fair value. These are loans that the Company no longer has the intent to hold for the foreseeable future.

Loans: Loans that Management has the intent and ability to hold for the foreseeable future or until maturity are stated at the principal amount outstanding. Interest on loans is recognized based upon the principal amount outstanding. Loans are stated at face value, less purchased premium and discounts and net deferred fees. Loan origination fees and certain direct loan origination costs are deferred and recognized on a level-yield method over the life of the loan as an adjustment to the loan’s yield. The definition of recorded investment in loans includes accrued interest receivable and deferred fees/costs, however, for the Company’s loan disclosures, accrued interest and deferred fees/costs were excluded as the impact was not material.

Loans are considered past due when they are not paid within 30 days in accordance with contractual terms. The accrual of income on loans, including individually evaluated loans, is discontinued if, in the opinion of Management, principal or interest is not likely to be paid in accordance with the terms of the loan agreement, or when principal or interest is past due 90 days unless the asset is

both well secured and in the process of collection. All interest accrued but not received for loans placed on nonaccrual status are reversed against interest income. Payments received on nonaccrual loans are recorded as principal payments. A nonaccrual loan is returned to accrual status only when interest and principal payments are brought current and future payments are reasonably assured, generally when the Bank receives contractual payments for a minimum of six consecutive months. Commercial loans are generally charged off, in whole or in part, after an analysis is completed which indicates that collectability of the full principal balance is in doubt. Consumer closed-end loans are generally charged off after they become 120 days past due and open-end loans after 180 days. Subsequent payments are credited to income only if collection of principal is not in doubt. If principal and interest payments are brought contractually current and future collectability is reasonably assured, loans may be returned to accrual status. Nonaccrual mortgage loans are generally charged off to the extent that the value of the underlying collateral does not cover the outstanding principal balance. The majority of the Company’s loans are secured by real estate in New Jersey, New York and Pennsylvania.

Allowance for Credit Losses: Current expected credit losses ("CECL") requires the immediate recognition of estimated credit losses expected to occur over the estimated remaining life of the asset. The forward-looking concept of CECL requires loss estimates to consider historical experience, current conditions and reasonable and supportable economic forecasts.

The allowance for credit losses (“ACL”) on loans held for investment is the combination of the allowance for loan losses and the reserve for unfunded loan commitments. The allowance for loan losses is reported as a reduction of the amortized cost basis of loans, while the reserve for unfunded loan commitments is included within "other liabilities" on the Consolidated Statements of Condition. The estimate of credit loss incorporates assumptions for both the likelihood and amount of funding over the estimated life of the commitments, including adjustments for current conditions and reasonable and supportable forecasts. Management periodically reviews and updates its assumptions for estimated funding rates. The amortized cost basis of loans does not include accrued interest receivable, which is included in "accrued interest receivable" on the Consolidated Statements of Condition. The "Provision for credit losses" on the Consolidated Statements of Income is a combination of the provision for credit losses and the provision for unfunded loan commitments.

ACL in accordance with CECL methodology

With respect to pools of similar loans that are collectively evaluated, an appropriate level of general allowance is determined by portfolio segment using a non-linear discounted cash flow (“DCF”) model. The DCF model captures losses over the historical charge-off and prepayment cycle and applies those losses at a loan level over the remaining maturity of the loan. The model then calculates a historical loss rate using the average losses over the reporting period, which is then applied to each segment utilizing a standard reversion rate. This loss rate is then supplemented with adjustments for reasonable and supportable forecasts of relevant economic indicators, including but not limited to unemployment rates and national consumer price and confidence indices. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. Also included in the ACL are qualitative factors based on the risks present for each portfolio segment. These qualitative factors include the following: levels of and trends in delinquencies and impaired loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures and practices; experience, ability and depth of lending management and other relevant staffing and experience; industry conditions; and effects of changes in credit concentrations. It is also possible that these factors could include social, political, economic, and terrorist events or activities. All of these factors are susceptible to change, which may be significant. The ACL results in two forms of allocations, specific and general. These two components represent the total ACL deemed adequate to cover current expected credit losses in the loan portfolio.

When management identifies loans that do not share common risk characteristics (i.e., are not similar to other loans within a pool) they are evaluated on an individual basis. These loans are not included in the collective evaluation. For loans identified as having a likelihood of foreclosure or that the borrower is experiencing financial difficulty, a collateral dependent approach is used. These are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral. Under CECL, for collateral dependent loans, the Company has adopted the practical expedient method to measure the ACL based on the fair value of collateral. The ACL is calculated on an individual loan basis based on the shortfall between the fair value of the loan's collateral, which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required.

The CECL methodology requires a significant amount of management judgment in determining the appropriate ACL. Several of the steps in the methodology are subjective including, among other things: segmenting the loan portfolio; determining the amount of loss history to consider; selecting predictive econometric regression models that use appropriate macroeconomic variables; determining the methodology to forecast prepayments; selecting the most appropriate economic forecast scenario; determining the length of the reasonable and supportable forecast and reversion periods; estimating expected utilization rates on unfunded loan commitments; and assessing relevant and appropriate qualitative factors. In addition, the CECL methodology is dependent on economic forecasts, which are inherently imprecise and may change from period to period. Although the ACL is considered appropriate, there can be no assurance that it will be sufficient to absorb future losses.

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

Primary Residential Mortgages. The Bank originates one to four family residential mortgage loans in the Tri-State area (which is comprised of New York, New Jersey and Connecticut), Pennsylvania and Florida. Loans are secured by first liens on the primary residence or investment property. Primary risk characteristics associated with residential mortgage loans typically involve: major living or lifestyle changes to the borrower, including unemployment or other loss of income; unexpected significant expenses, such as for major medical issues or catastrophic events; and divorce or death. In addition, residential mortgage loans that have adjustable rates could expose the borrower to higher debt service requirements in a rising interest rate environment. Further, real estate values could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential loss exposure for the Bank.

Junior Lien Loan on Residence (which include home equity lines of credit). The Bank provides junior lien loans (“JLL”) and revolving home equity lines of credit against one to four family properties in the Tri-State area. These loans are subordinate to a first mortgage, which may be from another lending institution. Primary risk characteristics associated with JLLs and home equity lines of credit typically involve: major living or lifestyle changes to the borrower, including unemployment or other loss of income; unexpected significant expenses, such as for major medical issues or catastrophic events; and divorce or death. In addition, home equity lines of credit typically are made with variable or floating interest rates, which could expose the borrower to higher debt service requirements in a rising interest rate environment. Further, real estate values could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential loss exposure for the Bank.

Multifamily. The Bank provides mortgage loans for multifamily properties (i.e., buildings which have five or more residential units). Multifamily loans are expected to be repaid from the cash flows of the underlying property so the collective amount of rents must be sufficient to cover all operating expenses, property management and maintenance, taxes and debt service. Increases in vacancy rates, interest rates, other changes in general economic conditions or changes in rent regulation can have an impact on the borrower and its ability to repay the loan.

Owner-Occupied Commercial Real Estate Loans. The Bank provides mortgage loans for owner-occupied commercial real estate properties in the Tri-State area and Pennsylvania. Commercial real estate properties primarily include retail buildings/shopping centers, hotels, office/medical buildings and industrial/warehouse space. Some properties are mixed use as they are a combination of building types, such as a building with retail space on the ground floor and either residential apartments or office suites on the upper floors. Commercial real estate loans are generally considered to have a higher degree of credit risk as they may be dependent on the ongoing success and operating viability of a fewer number of tenants who are occupying the property and who may have a greater degree of exposure to economic conditions.

Investment Commercial Real Estate Loans. The Bank provides mortgage loans for properties managed as an investment property (non-owner-occupied) in the Tri-State area and Pennsylvania. Non-owner-occupied properties primarily include retail buildings/shopping centers, hotels, office/medical buildings and industrial/warehouse space. Some properties are considered mixed use. Commercial real estate loans are generally considered to have a higher degree of credit risk as they may be dependent on the ongoing success and operating viability of a fewer number of tenants who are occupying the property and who may have a greater degree of exposure to economic conditions.

Commercial and Industrial Loans. The Bank provides lines of credit and term loans to operating companies for business purposes. The loans are generally secured by business assets such as accounts receivable, inventory, business vehicles and equipment as well as the stock of a company, if privately held. Commercial and industrial loans are typically repaid first by the cash flows generated by the borrower’s business operations. The primary risk characteristics are specific to the underlying business and its ability to generate sustainable profitability and resulting positive cash flows. Factors that may influence a business’ profitability include, but are not limited to, demand for its products or services, quality and depth of management, degree of competition, regulatory changes, and general economic conditions. To mitigate the risk characteristics of commercial and industrial loans, these loans often include commercial real estate as collateral and the Bank will often require more frequent reporting requirements from the borrower in order to better monitor its business performance. However, the ability of the Bank to foreclose and realize sufficient value from the assets is often highly uncertain.

Leasing Finance. PCC offers a range of finance solutions nationally. PCC provides term loans and leases secured by assets financed for U.S. based mid-size and large companies. Facilities tend to be fully drawn under fixed-rate terms. PCC serves a broad range of industries including transportation, manufacturing, heavy construction and utilities.

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

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

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

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

Loan Modifications: On January 1, 2023, the Company adopted ASU 2022-02, which replaced the accounting and recognition of troubled debt restructurings. ASU 2022-02 eliminates the accounting guidance on troubled debt restructurings for creditors in ASC 310-40 and amends the guidance on “vintage disclosures” to require disclosure of current-period gross write-offs by year of origination. ASU 2022-02 also updates the requirements related to accounting for credit losses under ASC 326 and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty.

Leases: At inception, contracts are evaluated to determine whether the contract constitutes a lease agreement. For contracts that are determined to be an operating lease, a corresponding right-of-use (“ROU”) asset and operating lease liability are recorded as separate line items on the statement of condition. An ROU asset represents the Company’s right to use an underlying asset during the lease term and a lease liability represents the Company’s commitment to make contractually obligated lease payments. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease and are based on the present value of lease payments over the lease term. The measurement of the operating lease ROU asset includes any lease payments made.

If the rate implicit in the lease is not readily determinable, the incremental collateralized borrowing rate is used to determine the present value of lease payments. This rate gives consideration to the applicable FHLB collateralized borrowing rates and is based on the information available at the commencement date. The Company has elected to apply the short-term lease measurement and recognition exemption to leases with an initial term of 12 months or less; therefore, these leases are not recorded on the Company’s statement of condition, but rather, lease expense is recognized over the lease term on a straight-line basis. The Company’s lease agreements may include options to extend or terminate the lease. The Company’s decision to exercise renewal options is based on an assessment of its current business needs and market factors at the time of the renewal. The Company maintains certain property and equipment under direct financing and operating leases. Substantially all of the leases in which the Company is the lessee are comprised of real estate property for branches and office space and are classified as operating leases.

The ROU asset is measured at the amount of the lease liability adjusted for lease incentives received, any cumulative prepaid or accrued rent if the lease payments are uneven throughout the lease term, any unamortized initial direct costs, and any impairment of the ROU asset. Operating lease expense consists of a single lease cost allocated over the remaining lease term on a straight-line basis, variable lease payments not included in the lease liability, and any impairment of the ROU asset.

There are no terms or conditions related to residual value guarantees and no restrictions or covenants that would impact the Company’s ability to pay dividends or to incur additional financial obligations.

Derivatives: At the inception of a derivative contract, the Company designates the derivative as one of three types based on the Company’s intentions and belief as to likely effectiveness as a hedge. These three types are (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”); (2) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”); or (3) an instrument with no hedging designation. For a fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item, are recognized in current earnings as fair values change. For a cash flow hedge, the gain or loss on the derivative is

reported in other comprehensive income and is reclassified into earnings in the same periods during which the hedged transaction affects earnings. For cash flow hedges, changes in the fair value of derivatives that are not highly effective in hedging the changes in fair value or expected cash flows of the hedged item are recognized immediately in current earnings. Changes in the fair value of derivatives that do not qualify for hedge accounting are reported currently in earnings, as non-interest income. When hedge accounting is discontinued on a fair value hedge that no longer qualifies as an effective hedge, the derivative continues to be reported at fair value in the statement of condition, but the carrying amount of the hedged item is no longer adjusted for future changes in fair value. The adjustment to the carrying amount of the hedged item that existed at the date hedge accounting is discontinued is amortized over the remaining life of the hedged item into earnings.

Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged. Net cash settlements on derivatives that do not qualify for hedge accounting are reported in non-interest income. Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the items being hedged.

The Company formally documents the relationship between derivatives and hedged items, as well as the risk-management objective and the strategy for undertaking hedge transactions at the inception of the hedging relationship. This documentation includes linking fair value or cash flow hedges to specific assets and liabilities on the statement of condition or to specific firm commitments or forecasted transactions. The Company discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in the fair value or cash flows of the hedged item, the derivative is settled or terminated, a hedged forecasted transaction is no longer probable, a hedged firm commitment is no longer firm, or treatment of the derivative as a hedge is no longer appropriate or intended.

When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as non-interest income. When a cash flow hedge is discontinued but the hedged cash flows or forecasted transactions are still expected to occur, gains or losses that were accumulated in other comprehensive income are amortized into earnings over the same periods which the hedged transactions will affect earnings.

The Company also offers facility specific / loan level swaps to its customers and offsets its exposure from such contracts by entering into mirror image swaps with a financial institution / swap counterparty (loan level / back-to-back swap program). The customer accommodations and any offsetting swaps are treated as non-hedging derivative instruments which do not qualify for hedge accounting (“standalone derivatives”). The notional amount of the swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual contracts. The fair value of the swaps is recorded as both an asset and a liability, in other assets and other liabilities, respectively, in equal amounts for these transactions. The Company is exposed to losses if a customer counterparty fails to make its payments under a contract in which the Company is in a net receiving position. At this time, the Company anticipates that its counterparties will be able to fully satisfy their obligations under the agreements. All of the contracts to which the Company is a party settle monthly. Further, the Company has netting agreements with the dealers with which it does business.

Stock-Based Compensation: The Company’s 2021 Long-Term Stock Incentive Plan allows the granting of shares of the Company’s common stock as incentive stock options, nonqualified stock options, restricted stock awards, restricted stock units and stock appreciation rights to directors, officers and employees of the Company and its subsidiaries. There are no shares remaining for issuance with respect to the stock incentive plans approved in 2006 and 2012.

Options granted under this plan are, in general, exercisable not earlier than one year after the date of grant, at a price equal to the fair value of common stock on the date of grant and expire not more than ten years after the date of grant. Stock options may vest during a period of up to five years after the date of grant. The Company has a policy of using authorized but unissued shares to satisfy option exercises.

Upon adoption of ASU 2016-09, “Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting,” the Company has elected to account for forfeitures as they occur, rather than estimate expected forfeitures.

Changes in options outstanding during the nine months ended September 30, 2024 were as follows:


						Weighted
				Weighted		Average		Aggregate
				Average		Remaining		Intrinsic
	Number of			Exercise		Contractual		Value
	Options			Price		Term		(In thousands)
Balance, January 1, 2024		1,400		$	19.15
Exercised during 2024		—			—
Expired during 2024		(1,400	)		19.15
Forfeited during 2024		—			—
Balance, September 30, 2024		—		$	—		—	$	—
Vested and expected to vest		—		$	—		—	$	—
Exercisable at September 30, 2024		—		$	—		—	$	—

There were no stock options granted during the three or nine months ended September 30, 2024.

As of September 30, 2024, there was no unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Company's stock incentive plans.

The Company issued performance-based and service-based restricted stock units in 2023. Service-based units vest ratably over a three- or five-year period. There were no service-based restricted stock units granted under the 2021 Long-Term Stock Incentive Plan during the first nine months of 2024.

The performance-based awards are dependent upon the Company meeting certain performance criteria and, to the extent the performance criteria are met, will cliff vest at the end of the performance period, which is generally three years. There were no performance-based restricted stock units granted under the 2021 Long-Term Stock Incentive Plan in the first nine months of 2024.

Changes in non-vested shares dependent on performance criteria for the nine months ended September 30, 2024 were as follows:


				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value
Balance, January 1, 2024		176,364		$	32.40
Granted during 2024		4,705			31.36
Vested during 2024 (1)		(45,592	)		31.36
Forfeited during 2024		—			—
Balance, September 30, 2024		135,477		$	32.71

(1) Settled in cash.

Changes in service-based restricted stock awards/units for the nine months ended September 30, 2024 were as follows:


				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value
Balance, January 1, 2024		626,742		$	29.62
Granted during 2024		—			—
Vested during 2024 (1)		(248,028	)		27.83
Shares to be settled in cash		(120,046	)		22.13
Forfeited during 2024		(6,647	)		31.98
Balance, September 30, 2024		252,021		$	29.81

(1) Includes 100,349 shares that settled in cash.

As of September 30, 2024, there was $7.8 million of total unrecognized compensation cost related to service-based and performance-based restricted stock units. That cost is expected to be recognized over a weighted average period of 1.07 years. Stock compensation expense recorded for the third quarters of 2024 and 2023 totaled $3.4 million and $2.3 million, respectively. Stock compensation expense recorded for the nine months ended September 30, 2024 and 2023 totaled $9.3 million and $8.6 million, respectively.

Phantom Plan: During the first quarter of 2024, the Company adopted the Peapack-Gladstone Financial Corporation 2024 Phantom Stock Plan ("Phantom Plan"). The Phantom Plan allows the Company to issue performance-based and service-based awards which will be paid in cash. The award of a phantom unit entitles the participant to a cash payment equal to the value of the unit on the vesting date, which is the fair market value of a common share of the Company's stock on such vesting date.

The Company issued performance-based and service-based phantom units in 2024. Service-based phantom units vest ratably over a three-year period. There were 262,811 service-based phantom units granted under the Phantom Plan during the first nine months of 2024. Additionally, there are 120,046 restricted stock units that will settle in cash in 2025 and 2026.

The performance-based phantom units are dependent upon the Company meeting certain performance criteria and, to the extent the performance criteria are met, will cliff vest at the end of the performance period, which is three years. There were 110,047 performance-based units granted under the Phantom Plan in the first nine months of 2024.

Phantom units are recorded in salary and employee benefits expense based on the fair value of the units on the balance sheet date. The fair value of these awards is updated at each balance sheet date and changes in the fair value of the vested portions of the awards are recorded as increases or decreases to compensation expense within salary and employee benefits in the Consolidated Statements of Income. All of the outstanding phantom units at September 30, 2024 met the criteria to be treated under liability classification in accordance with ASC 718, given that these awards will settle in cash on the vesting date.

Compensation expense for the phantom units is based on the fair value of the units as of the balance sheet date as further discussed above, and such costs are recognized ratably over the service period of the awards. As the fair value of liability awards is required to be re-measured each period end, stock compensation expense amounts recognized in future periods for these awards will vary. The estimated future cash payments of these awards are presented as liabilities within "Accrued expenses and other liabilities" in the Consolidated Statement of Condition. As of September 30, 2024, there was $8.6 million of unrecognized compensation costs related to non-vested phantom units.

Employee Stock Purchase Plan (“ESPP”): The 2014 ESPP expired in April 2024 and was replaced by the 2024 ESPP, which was approved by shareholders on April 30, 2024 and allowed for the issuance of 150,000 shares.

The ESPP allows for the purchase of shares during four three-month Offering Periods of each calendar year. The Offering Periods end on March 31, June 30, September 30 and December 31 of each calendar year.

Each participant in the Offering Period is granted an option to purchase a number of shares and may contribute between one percent and 15 percent of their compensation. At the end of each Offering Period, the number of shares to be purchased by the employee is determined by dividing the employee’s contributions accumulated during the Offering Period by the applicable purchase price. The purchase price is an amount equal to 85 percent of the closing market price of a share of common stock on the purchase date. Participation in the ESPP is voluntary and employees can cancel their purchases at any time during the period without penalty. The fair value of each share purchase right is determined using the Black-Scholes option pricing model.

The Company recorded $56,000 and $34,000 in salaries and employee benefits expense for the three months ended September 30, 2024 and 2023, respectively, related to the ESPP. Total shares issued under the ESPP during the third quarter ended September 30, 2024 and 2023 were 11,257 and 8,850, respectively.

The Company recorded $131,000 and $140,000 in salaries and employee benefits expense for the nine months ended September 30, 2024 and 2023, respectively, related to the ESPP. Total shares issued under the ESPP during the nine months ended September 30, 2024 and 2023 were 27,016 and 26,491, respectively.

Earnings per share – Basic and Diluted: The following is a reconciliation of the calculation of basic and diluted earnings per share. Basic net income per share is calculated by dividing net income available to shareholders by the weighted average shares outstanding during the reporting period. Diluted net income per share is computed similarly to that of basic net income per share, except that the denominator is increased to include the number of additional shares that would have been outstanding utilizing the

Treasury Stock Method if all shares underlying potentially dilutive stock options were issued and all shares of restricted stock, stock warrants or restricted stock units were to vest during the reporting period.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands, except per share data)	2024		2023		2024		2023
Net income available to common shareholders	$	7,587	$	8,755	$	23,748	$	40,255

Basic weighted average shares outstanding		17,616,046		17,856,961		17,691,309		17,876,316
Plus: common stock equivalents		83,996		153,166		55,251		215,208
Diluted weighted average shares outstanding		17,700,042		18,010,127		17,746,560		18,091,524
Net income per share
Basic	$	0.43	$	0.49	$	1.34	$	2.25
Diluted		0.43		0.49		1.34		2.23

For the three months ended September 30, 2024 and 2023, restricted stock units totaling 125,152 and 235,902, respectively, were not included in the computation of diluted earnings per share because they were anti-dilutive. For the nine months ended September 30, 2024 and 2023, restricted stock units totaling 277,141 and 416,712, respectively, were not included in the computation of diluted earnings per share because they were anti-dilutive. Anti-dilutive shares are common stock equivalents with weighted average exercise prices in excess of the average market value for the periods presented.

Income Taxes: The Company files a consolidated Federal income tax return. Separate state income tax returns are filed for each subsidiary based on current laws and regulations.

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in its financial statements or tax returns. The measurement of deferred tax assets and liabilities is based on the enacted tax rates. Such tax assets and liabilities are adjusted for the effect of a change in tax rates in the period of enactment.

The Company recognizes a tax position as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50 percent likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

The Company is no longer subject to examination by the U.S. Federal tax authorities for years prior to 2020 or by New Jersey tax authorities for years prior to 2018.

The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there are any such matters that will have a material effect on the financial statements.

Restrictions on Cash: Cash on hand or on deposit with the Federal Reserve Bank of New York was required to meet regulatory reserve and clearing requirements.

Comprehensive Income: Comprehensive income consists of net income and the change during the period in the Company’s net unrealized gains or losses on securities available for sale and unrealized gains and losses on cash flow hedge, net of tax, less adjustments for realized gains and losses.

Transfers of Financial Assets: Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Goodwill and Other Intangible Assets: Goodwill is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree (if any), over the fair value of any net assets acquired and liabilities assumed as of the date of acquisition in a purchase business combination. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized but tested for impairment at least annually or more frequently if events and circumstances exist that indicate that a goodwill impairment test should be performed.

Goodwill was primarily attributable to the Bank’s wealth management acquisitions. Management monitors the impact of changes in the financial markets and includes these assessments in our impairment process.

The Company has selected December 31 as the date to perform the annual impairment test. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill, which includes assembled workforce has an indefinite life on our statement of financial condition.

Other intangible assets, which primarily consist of customer relationship intangible assets arising from acquisitions, are amortized on an accelerated basis over their estimated useful lives, which range from 5 to 15 years.

2. INVESTMENT SECURITIES

A summary of amortized cost and approximate fair value of investment securities available for sale and held to maturity included in the Consolidated Statements of Condition as of September 30, 2024 and December 31, 2023 follows:


	September 30, 2024
			Gross		Gross			Allowance
	Amortized		Unrealized		Unrealized			for		Fair
(In thousands)	Cost		Gains		Losses			Credit Losses		Value
Securities Available for Sale:
U.S government-sponsored agencies	$	244,808	$	—	$	(39,795	)	$	—	$	205,013
Mortgage-backed securities–residential		476,695		2,845		(37,458	)		—		442,082
SBA pool securities		24,291		—		(2,878	)		—		21,413
Corporate bond		15,500		29		(1,324	)		—		14,205
Total securities available for sale	$	761,294	$	2,874	$	(81,455	)	$	—	$	682,713
Securities Held to Maturity:
U.S. government-sponsored agencies	$	40,000	$	—	$	(2,302	)	$	—	$	37,698
Mortgage-backed securities–residential		63,158		—		(8,418	)		—		54,740
Total securities held to maturity	$	103,158	$	—	$	(10,720	)	$	—	$	92,438


	December 31, 2023
			Gross		Gross			Allowance
	Amortized		Unrealized		Unrealized			for		Fair
(In thousands)	Cost		Gains		Losses			Credit Losses		Value
Securities Available for Sale:
U.S government-sponsored agencies	$	244,794	$	—	$	(47,103	)	$	—	$	197,691
Mortgage-backed securities–residential		363,893		80		(43,177	)		—		320,796
SBA pool securities		27,148		—		(3,744	)		—		23,404
Corporate bond		10,000		—		(1,274	)		—		8,726
Total securities available for sale	$	645,835	$	80	$	(95,298	)	$	—	$	550,617
Securities Held to Maturity:
U.S. government-sponsored agencies	$	40,000	$	—	$	(3,369	)	$	—	$	36,631
Mortgage-backed securities–residential		67,755		—		(9,971	)		—		57,784
Total securities held to maturity	$	107,755	$	—	$	(13,340	)	$	—	$	94,415

The following tables present the Company’s available for sale and held to maturity securities with continuous unrealized losses and the approximate fair value of these investments as of September 30, 2024 and December 31, 2023.


	September 30, 2024
	Duration of Unrealized Loss
	Less Than 12 Months					12 Months or Longer					Total
	Approximate					Approximate					Approximate
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(In thousands)	Value		Losses			Value		Losses			Value		Losses
Securities Available for Sale:
U.S. government-sponsored agencies	$	—	$	—		$	205,013	$	(39,795	)	$	205,013	$	(39,795	)
Mortgage-backed securities residential		8,162		(101	)		229,706		(37,357	)		237,868		(37,458	)
SBA pool securities		—		—			21,088		(2,878	)		21,088		(2,878	)
Corporate bond		—		—			8,676		(1,324	)		8,676		(1,324	)
Total securities available for sale	$	8,162	$	(101	)	$	464,483	$	(81,354	)	$	472,645	$	(81,455	)
Securities Held to Maturity:
U.S. government-sponsored agencies	$	—	$	—		$	37,698	$	(2,302	)	$	37,698	$	(2,302	)
Mortgage-backed securities residential		—		—			54,740		(8,418	)		54,740		(8,418	)
Total securities held to maturity	$	—	$	—		$	92,438	$	(10,720	)	$	92,438	$	(10,720	)
Total securities	$	8,162	$	(101	)	$	556,921	$	(92,074	)	$	565,083	$	(92,175	)


	December 31, 2023
	Duration of Unrealized Loss
	Less Than 12 Months					12 Months or Longer					Total
	Approximate					Approximate					Approximate
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(In thousands)	Value		Losses			Value		Losses			Value		Losses
Securities Available for Sale:
U.S. government-sponsored agencies	$	—	$	—		$	197,691	$	(47,103	)	$	197,691	$	(47,103	)
Mortgage-backed securities residential		36,634		(963	)		217,513		(42,214	)		254,147		(43,177	)
SBA pool securities		655		(1	)		22,749		(3,743	)		23,404		(3,744	)
Corporate bond		—		—			8,726		(1,274	)		8,726		(1,274	)
Total securities available for sale	$	37,289	$	(964	)	$	446,679	$	(94,334	)	$	483,968	$	(95,298	)
Securities Held to Maturity:
U.S. government-sponsored agencies	$	—	$	—		$	36,631	$	(3,369	)	$	36,631	$	(3,369	)
Mortgage-backed securities residential		9,647		(135	)		48,137		(9,836	)		57,784		(9,971	)
Total securities held to maturity	$	9,647	$	(135	)	$	84,768	$	(13,205	)	$	94,415	$	(13,340	)
Total securities	$	46,936	$	(1,099	)	$	531,447	$	(107,539	)	$	578,383	$	(108,638	)

Available for sale and held to maturity securities are evaluated to determine if a decline in fair value below the amortized cost basis has resulted from a credit loss or other factors. An impairment related to credit factors would be recorded through an allowance for credit losses. The allowance is limited to the amount by which the security’s amortized cost basis exceeds the fair value. An impairment that has not been recorded through an allowance for credit losses is recorded through other comprehensive income, net of applicable taxes. Investment securities will be written down to fair value through the Consolidated Statements of Income when management intends to sell, or may be required to sell, the securities before they recover in value. The issuers of securities currently in a continuous loss position continue to make timely principal and interest payments and none of these securities were past due or were placed in nonaccrual status at September 30, 2024. Substantially all of the investment securities are backed by loans guaranteed by either U.S. government agencies or U.S government-sponsored entities, and Management believes that default is highly unlikely given the lack of historical credit losses and governmental backing. Management believes that the unrealized losses on these securities are a function of changes in market interest rates and credit spreads, not changes in credit quality. Therefore, no allowance for credit losses was recorded for the nine months ended September 30, 2024 or 2023, respectively.

The Company has an investment in a CRA investment fund with a fair value of $13.4 million at September 30, 2024. This investment is classified as an equity security in our Consolidated Statements of Condition. This security had a gain of $474,000 and $279,000 for the three and nine months ended September 30, 2024, respectively. This amount was included in the fair value adjustment for CRA equity security on the Consolidated Statements of Income.

3. LOANS AND LEASES

Loans outstanding, excluding those held for sale, by general ledger classification, as of September 30, 2024 and December 31, 2023, consisted of the following:


			% of					% of
	September 30,		Totals			December 31,		Total
(Dollars in thousands)	2024		Loans			2023		Loans
Residential mortgage	$	590,813		11.12	%	$	578,327		10.65	%
Multifamily mortgage		1,784,861		33.58			1,836,390		33.82
Commercial mortgage		578,559		10.88			637,625		11.74
Commercial loans (including equipment financing)		2,221,243		41.79			2,260,524		41.64
Commercial construction		22,421		0.42			17,721		0.33
Home equity lines of credit		38,971		0.73			36,464		0.67
Consumer loans, including fixed rate home equity loans		78,160		1.47			62,036		1.14
Other loans		389		0.01			238		0.01
Total loans	$	5,315,417		100.00	%	$	5,429,325		100.00	%

In determining an appropriate amount for the allowance, the Bank segments and aggregated the loan portfolio based on common characteristics. The following pool segments identified as of September 30, 2024 and December 31, 2023 are based on the CECL methodology:


			% of					% of
	September 30,		Totals			December 31,		Total
(Dollars in thousands)	2024		Loans			2023		Loans
Primary residential mortgage	$	590,681		11.12	%	$	585,126		10.78	%
Junior lien loan on residence		42,159		0.79			40,203		0.74
Multifamily property		1,784,861		33.59			1,836,390		33.85
Owner-occupied commercial real estate		269,743		5.08			255,110		4.70
Investment commercial real estate		979,188		18.43			1,061,197		19.56
Commercial and industrial		1,306,170		24.58			1,314,781		24.23
Lease financing		231,284		4.35			251,423		4.63
Construction		28,578		0.54			17,987		0.33
Consumer and other		80,795		1.52			63,906		1.18
Total loans		5,313,459		100.00	%		5,426,123		100.00	%
Net deferred costs		1,958					3,202
Total loans including net deferred costs	$	5,315,417				$	5,429,325

The following tables present the recorded investment in nonaccrual and loans past due 90 days or over still on accrual by class of loans as of September 30, 2024 and December 31, 2023:


			September 30, 2024
	Nonaccrual				Loans Past Due
	With No				90 Days or Over
	Allowance				And Still
(In thousands)	for Credit Loss		Nonaccrual		Accruing Interest
Primary residential mortgage	$	2,136	$	2,136	$	—
Junior lien loan on residence		96		96		—
Multifamily property		15,294		33,337		—
Investment commercial real estate		—		11,715		—
Commercial and industrial		3,641		29,810		—
Lease financing		2,555		3,355		—
Consumer and other		4		4		—
Total	$	23,726	$	80,453	$	—


			December 31, 2023
	Nonaccrual				Loans Past Due
	With No				90 Days or Over
	Allowance				And Still
(In thousands)	for Credit Loss		Nonaccrual		Accruing Interest
Primary residential mortgage	$	1,263	$	1,263	$	—
Junior lien loan on residence		100		100		—
Multifamily property		16,645		16,645		—
Investment commercial real estate		9,881		9,881		—
Commercial and industrial		3,965		31,430		—
Lease financing		946		2,002		—
Consumer and other		3		3		—
Total	$	32,803	$	61,324	$	—

The following tables present the aging of the recorded investment in past due loans as of September 30, 2024 and December 31, 2023 by class of loans, excluding nonaccrual loans:


	September 30, 2024
	30-59		60-89		90 Days or
	Days		Days		Greater		Total
(In thousands)	Past Due		Past Due		Past Due		Past Due
Primary residential mortgage	$	2,170	$	1,144	$	—	$	3,314
Junior lien loan on residence		52		—		—		52
Multifamily property		—		28,080		—		28,080
Total	$	2,222	$	29,224	$	—	$	31,446


	December 31, 2023
	30-59		60-89		90 Days or
	Days		Days		Greater		Total
(In thousands)	Past Due		Past Due		Past Due		Past Due
Primary residential mortgage	$	2,448	$	1,061	$	—	$	3,509
Junior lien on residence		84		—		—		84
Multifamily property		11,814		—		—		11,814
Commercial and industrial		7,297		11,498		—		18,795
Consumer and other		387		—		—		387
Total	$	22,030	$	12,559	$	—	$	34,589

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.

Credit Quality Indicators:

The Company places all commercial loans into various credit risk rating categories based on an assessment of the expected ability of the borrowers to properly service their debt. The assessment considers numerous factors including, but not limited to, current financial information on the borrower, historical payment experience, strength of any guarantor, nature of and value of any collateral, acceptability of the loan structure and documentation, relevant public information and current economic trends. This credit risk rating analysis is performed when the loan is initially underwritten and then annually based on set criteria in the loan policy.

In addition, the Bank has engaged an independent loan review firm to validate risk ratings and to ensure compliance with our policies and procedures. This review of the following types of loans is performed quarterly:

•

A large sample of relationships or new lending to existing relationships greater than $1,000,000 booked since the prior review;

•

All criticized and classified rated borrowers with relationship exposure of more than $500,000;

•

A large sample of Pass-rated (including Pass Watch) borrowers with total relationships in excess of $1,000,000 and a small sample of Pass related relationships less than $1,000,000;

•

All leveraged loans of $1,000,000 or greater;

•

At least two borrowing relationships managed by each commercial banker;

•

Any new Federal Reserve Board Regulation O loan commitments over $1,000,000; and

•

Any other credits requested by Bank senior management or a member of the Board of Directors and any borrower for which the reviewer determines a review is warranted based upon knowledge of the portfolio, local events, industry stresses, etc.

The review excludes borrowers with commitments of less than $500,000.

The Company uses the following regulatory definitions for criticized and classified risk ratings:

Special Mention: These loans have a potential weakness that deserves Management’s close attention. If left uncorrected, the potential weaknesses may result in deterioration of the repayment prospects for the loans or of the institution’s credit position at some future date.

Substandard: These loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful: These loans have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable, based on currently existing facts, conditions and values.

Loans not meeting the criteria above that are analyzed individually as part of the above-described process are considered to be pass-rated loans.

With the adoption of CECL, loans that are in the process of or expected to be in foreclosure are deemed to be collateral dependent with respect to measuring potential loss and allowance adequacy and are individually evaluated by Management. Loans that do not share common risk characteristics are also evaluated on an individual basis. All other loans are evaluated using a non-linear discounted cash flow methodology for measuring potential loss and allowance adequacy.

The following is a summary of the credit risk profile of loans by internally assigned grade as of September 30, 2024 and December 31, 2023 based on originations for the periods indicated; the years represent the year of origination for non-revolving loans:


	Grade as of September 30, 2024 for Loans Originated During
											2019				Revolving-
(In thousands)	2024		2023		2022		2021		2020		and Prior		Revolving		Term		Total
Primary residential mortgage:
Pass	$	41,801	$	90,809	$	110,932	$	76,105	$	53,790	$	208,748	$	—	$	5,680	$	587,865
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		1,087		97		—		450		1,182		—		—		2,816
Doubtful		—		—		—		—		—		—		—		—		—
Total primary residential mortgages		41,801		91,896		111,029		76,105		54,240		209,930		—		5,680		590,681
Current period gross charge-offs		—		43		—		—		—		—		—		—		43

Junior lien loan on residence:
Pass		—		819		1,188		103		—		1,080		32,410		6,463		42,063
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		95		1		96
Doubtful		—		—		—		—		—		—		—		—		—
Total junior lien loan on residence		—		819		1,188		103		—		1,080		32,505		6,464		42,159
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Multifamily property:
Pass		17,512		51,742		455,228		598,057		118,001		438,991		4,939		3,524		1,687,994
Special mention		—		—		3,405		28,343		—		20,962		—		—		52,710
Substandard		—		—		13,366		—		—		30,791		—		—		44,157
Doubtful		—		—		—		—		—		—		—		—		—
Total multifamily property		17,512		51,742		471,999		626,400		118,001		490,744		4,939		3,524		1,784,861
Current period gross charge-offs		—		—		—		2,088		—		3,291		—		—		5,379

Owner-occupied commercial real estate:
Pass		26,172		4,233		23,033		43,842		19,096		125,011		15,315		10,546		267,248
Special mention		—		—		—		1,161		—		1,334		—		—		2,495
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total owner-occupied commercial real estate		26,172		4,233		23,033		45,003		19,096		126,345		15,315		10,546		269,743
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Investment commercial real estate:
Pass		24,234		124,323		170,365		138,114		55,937		357,040		14,443		26,592		911,048
Special mention		—		—		—		—		—		25,189		—		13,910		39,099
Substandard		—		—		9,786		—		—		19,255		—		—		29,041
Doubtful		—		—		—		—		—		—		—		—		—
Total investment commercial real estate		24,234		124,323		180,151		138,114		55,937		401,484		14,443		40,502		979,188
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Commercial and industrial:
Pass		165,508		140,258		168,705		129,582		14,002		24,813		549,628		26,371		1,218,867
Special mention		—		210		—		10,983		—		1,350		6,193		615		19,351
Substandard		—		1,894		30,266		52		2,049		3,563		27,419		2,709		67,952
Doubtful		—		—		—		—		—		—		—		—		—
Total commercial and industrial		165,508		142,362		198,971		140,617		16,051		29,726		583,240		29,695		1,306,170
Current period gross charge-offs		—		—		—		—		241		—		—		—		241

Lease financing:
Pass		31,987		45,673		41,099		53,629		28,090		27,450		—		—		227,928
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		801		—		—		—		2,555		—		—		3,356
Doubtful		—		—		—		—		—		—		—		—		—
Total lease financing		31,987		46,474		41,099		53,629		28,090		30,005		—		—		231,284


	Grade as of September 30, 2024 for Loans Originated During
											2019				Revolving-
(In thousands)	2024		2023		2022		2021		2020		and Prior		Revolving		Term		Total
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Construction:
Pass		—		—		—		—		—		—		28,578		—		28,578
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total commercial construction loans		—		—		—		—		—		—		28,578		—		28,578
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Consumer and other loans:
Pass		29,855		3,063		—		238		129		3,678		40,947		2,881		80,791
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		4		—		4
Doubtful		—		—		—		—		—		—		—		—		—
Total consumer and other loans		29,855		3,063		—		238		129		3,678		40,951		2,881		80,795
Current period gross charge-offs		—		—		—		—		—		2		—		19		21

Total:
Pass		337,069		460,920		970,550		1,039,670		289,045		1,186,811		686,260		82,057		5,052,382
Special mention		—		210		3,405		40,487		—		48,835		6,193		14,525		113,655
Substandard		—		3,782		53,515		52		2,499		57,346		27,518		2,710		147,422
Doubtful		—		—		—		—		—		—		—		—		—
Total Loans	$	337,069	$	464,912	$	1,027,470	$	1,080,209	$	291,544	$	1,292,992	$	719,971	$	99,292	$	5,313,459
Total Current Period Gross Charge-offs	$	—	$	43	$	—	$	2,088	$	241	$	3,293	$	—	$	19	$	5,684


	Grade as of December 31, 2023 for Loans Originated During
											2018				Revolving-
(In thousands)	2023		2022		2021		2020		2019		and Prior		Revolving		Term		Total
Primary residential mortgage:
Pass	$	94,688	$	114,532	$	80,175	$	56,191	$	35,418	$	196,251	$	—	$	5,535	$	582,790
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		473		935		928		—		—		2,336
Doubtful		—		—		—		—		—		—		—		—		—
Total primary residential mortgages		94,688		114,532		80,175		56,664		36,353		197,179		—		5,535		585,126
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Junior lien loan on residence:
Pass		872		1,394		135		—		530		808		29,620		6,680		40,039
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		163		1		164
Doubtful		—		—		—		—		—		—		—		—		—
Total junior lien loan on residence		872		1,394		135		—		530		808		29,783		6,681		40,203
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Multifamily property:
Pass		52,072		476,972		645,093		119,934		209,299		295,226		8,451		—		1,807,047
Special mention		—		—		—		—		—		1,650		—		—		1,650
Substandard		—		1,572		7,491		—		10,370		8,260		—		—		27,693
Doubtful		—		—		—		—		—		—		—		—		—
Total multifamily property		52,072		478,544		652,584		119,934		219,669		305,136		8,451		—		1,836,390
Current period gross charge-offs		—		—		2,223		—		—		—		—		—		2,223

Owner-occupied commercial real estate:
Pass		4,333		23,590		39,563		19,457		11,788		126,430		17,559		10,731		253,451
Special mention		—		—		1,197		—		—		—		462		—		1,659
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total owner-occupied commercial real estate		4,333		23,590		40,760		19,457		11,788		126,430		18,021		10,731		255,110
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Investment commercial real estate:
Pass		125,568		173,660		150,026		57,811		144,447		314,411		30,124		13,379		1,009,426
Special mention		—		—		—		—		21,936		3,834		—		14,172		39,942
Substandard		—		9,881		—		—		1,948		—		—		—		11,829
Doubtful		—		—		—		—		—		—		—		—		—
Total investment commercial real estate		125,568		183,541		150,026		57,811		168,331		318,245		30,124		27,551		1,061,197
Current period gross charge-offs		—		1,199		—		—		—		—		—		—		1,199

Commercial and industrial:
Pass		226,699		216,864		191,389		39,003		26,570		16,845		516,844		23,687		1,257,901
Special mention		—		—		758		—		1,161		190		14,232		194		16,535
Substandard		1,212		22,297		1,467		1,865		953		2,524		7,571		2,456		40,345
Doubtful		—		—		—		—		—		—		—		—		—
Total commercial and industrial		227,911		239,161		193,614		40,868		28,684		19,559		538,647		26,337		1,314,781
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Lease financing:
Pass		50,706		42,447		61,547		39,710		24,113		19,287		—		—		237,810
Special mention		—		9,631		511		—		1,375		94		—		—		11,611
Substandard		1,056		—		—		—		946		—		—		—		2,002
Doubtful		—		—		—		—		—		—		—		—		—


	Grade as of December 31, 2023 for Loans Originated During
											2018				Revolving-
(In thousands)	2023		2022		2021		2020		2019		and Prior		Revolving		Term		Total
Total lease financing		51,762		52,078		62,058		39,710		26,434		19,381		—		—		251,423
Current period gross charge-offs		—		4,800		—		—		—		794		—		—		5,594

Construction:
Pass		—		—		—		—		—		—		17,987		—		17,987
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total commercial construction loans		—		—		—		—		—		—		17,987		—		17,987
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Consumer and other loans:
Pass		3,934		—		301		158		—		4,141		51,788		3,581		63,903
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		3		—		3
Doubtful		—		—		—		—		—		—		—		—		—
Total consumer and other loans		3,934		—		301		158		—		4,141		51,791		3,581		63,906
Current period gross charge-offs		—		—		—		—		—		—		139		—		139

Total:
Pass		558,872		1,049,459		1,168,229		332,264		452,165		973,399		672,373		63,593		5,270,354
Special mention		—		9,631		2,466		—		24,472		5,768		14,694		14,366		71,397
Substandard		2,268		33,750		8,958		2,338		15,152		11,712		7,737		2,457		84,372
Doubtful		—		—		—		—		—		—		—		—		—
Total Loans	$	561,140	$	1,092,840	$	1,179,653	$	334,602	$	491,789	$	990,879	$	694,804	$	80,416	$	5,426,123
Total Current Period Gross Charge-offs	$	—	$	5,999	$	2,223	$	—	$	—	$	794	$	139	$	—	$	9,155

At September 30, 2024, $80.0 million of substandard loans were individually evaluated, compared to $60.6 million at December 31, 2023. The increase in individually evaluated substandard loans was primarily due to six multifamily loans with a balance of $31.8 million that were graded as substandard during the nine months of 2024, offset by the sale of two multifamily individually evaluated loans totaling $15.1 million.

Loan Modifications:

On January 1, 2023, the Company adopted Accounting Standards Update 2022-02, which replaced the accounting and recognition of troubled debt restructurings. The Company will provide modifications, which may include other than insignificant delays in payment of amounts due, extension of the terms of the notes or reduction in the interest rates on the notes. In certain instances, the Company may grant more than one type of modification. All accruing modified loans were paying in accordance with their modified terms as of September 30, 2024. The Company has not committed to lend additional amounts as of September 30, 2024 to customers with outstanding loans that are classified as modified loans.

The following table provides information related to the modifications during the three months ended September 30, 2024 by pool segment and type of concession granted:


	Significant Payment Delay
	Three Months Ended September 30, 2024
			% of Total
	Amortized		Class of
	Cost Basis		Financing
(Dollars in thousands)	at Period End		Receivable
Primary residential mortgage	$	542		0.09	%
Investment commercial real estate		17,326		1.77	%
Commercial and industrial		68		0.01	%
Total	$	17,936		1.87	%


	Significant Payment Delay
	and Term Extension
	Three Months Ended September 30, 2024
			% of Total
	Amortized		Class of
	Cost Basis		Financing
(Dollars in thousands)	at Period End		Receivable
Commercial and industrial	$	10,521		0.81	%
Total	$	10,521		0.81	%

The following tables provide information related to the modifications during the nine months ended September 30, 2024 by pool segment and type of concession granted:


	Interest Rate Reduction and Term Extension
	Nine Months Ended September 30, 2024
			% of Total
	Amortized		Class of
	Cost Basis		Financing
(Dollars in thousands)	at Period End		Receivable
Commercial and industrial	$	12,169		0.93	%
Total	$	12,169		0.93	%


	Significant Payment Delay
	Nine Months Ended September 30, 2024
			% of Total
	Amortized		Class of
	Cost Basis		Financing
(Dollars in thousands)	at Period End		Receivable
Primary residential mortgage	$	542		0.09	%
Investment commercial real estate		17,326		1.77	%
Commercial and industrial		11,780		0.90	%
Total	$	29,648		2.76	%


	Significant Payment Delay
	and Term Extension
	Nine Months Ended September 30, 2024
			% of Total
	Amortized		Class of
	Cost Basis		Financing
(Dollars in thousands)	at Period End		Receivable
Commercial and industrial	$	10,521		0.81	%
Total	$	10,521		0.81	%

There were no modifications during the three months ended September 30, 2023.

The following tables provide information related to the modifications during the nine months ended September 30, 2023 by pool segment and type of concession granted:


	Significant Pay Delay
	Nine Months Ended September 30, 2023
			% of Total
	Amortized		Class of
	Cost Basis		Financing
(Dollars in thousands)	at Period End		Receivable
Commercial and industrial	$	248		0.02	%
Total	$	248		0.02	%


	Interest Rate Reduction
	Nine Months Ended September 30, 2023
			% of Total
	Amortized		Class of
	Cost Basis		Financing
(Dollars in thousands)	at Period End		Receivable
Commercial and industrial	$	3,077		0.23	%
Total	$	3,077		0.23	%

The following table depicts the payment status of the loans that were modified to a borrower experiencing financial difficulties on or after January 1, 2023, the date we adopted ASU 2022-02, through September 30, 2024:


	Payment Status at September 30, 2024
			30-89 Days		90+ Days
(Dollars in thousands)	Current		Past Due		Past Due
Primary residential mortgage	$	542	$	118	$	—
Investment commercial real estate		17,326		—		—
Commercial and industrial		34,470		2,799		248
Total	$	52,338	$	2,917	$	248

The following table presents loans by class modified that failed to comply with the modified terms in the twelve months following modification and resulted in a payment default at September 30, 2024:


	Amortized Cost Basis of Modified Loans
	That Subsequently Defaulted
	Nine Months Ended September 30, 2024
	Significant		Interest
(Dollars in thousands)	Pay Delay		Rate Reduction
Primary residential mortgage	$	118	$	—
Total	$	118	$	—

The following table presents loans by class modified that failed to comply with the modified terms in the twelve months following modification and resulted in a payment default at September 30, 2023:


	Amortized Cost Basis of Modified Loans
	That Subsequently Defaulted
	Nine Months Ended September 30, 2023
	Significant		Interest
(Dollars in thousands)	Pay Delay		Rate Reduction
Commercial and industrial	$	248	$	—
Total	$	248	$	—

4. ALLOWANCE FOR CREDIT LOSSES

On January 1, 2022, the Company adopted ASU 2016-13, which replaced the incurred loss methodology with an expected loss methodology that is referred to as the CECL methodology. See Note 1, Summary of Significant Accounting Policies for additional information on Topic 326.

The Company does not estimate expected credit losses on accrued interest receivable (“AIR”) on loans, as AIR is reversed or written off when the full collection of the AIR related to a loan becomes doubtful. AIR on loans totaled $28.9 million at September 30, 2024 and $27.8 million at December 31, 2023.

The following tables present the loan balances by segment, and the corresponding balances in the allowance as of September 30, 2024 and December 31, 2023. The allowance was based on the CECL methodology.


	September 30, 2024
			Ending ACL
			Attributable				Ending ACL
	Total		To		Total		Attributable
	Individually		Individually		Loans		To Loans				Total
	Evaluated		Evaluated		Collectively		Collectively		Total		Ending
(In thousands)	Loans		Loans		Evaluated		Evaluated		Loans		ACL
Primary residential mortgage	$	1,658	$	—	$	589,023	$	4,411	$	590,681	$	4,411
Junior lien loan on residence		96		—		42,063		200		42,159		200
Multifamily property		33,337		2,242		1,751,524		10,539		1,784,861		12,781
Owner-occupied commercial real estate		—		—		269,743		4,909		269,743		4,909
Investment commercial real estate		11,715		745		967,473		13,411		979,188		14,156
Commercial and industrial		29,810		6,501		1,276,360		24,808		1,306,170		31,309
Lease financing		3,356		197		227,928		1,524		231,284		1,721
Construction		—		—		28,578		770		28,578		770
Consumer and other loans		—		—		80,795		1,026		80,795		1,026
Total ACL	$	79,972	$	9,685	$	5,233,487	$	61,598	$	5,313,459	$	71,283


	December 31, 2023
			Ending ACL
			Attributable				Ending ACL
	Total		To		Total		Attributable
	Individually		Individually		Loans		To Loans				Total
	Evaluated		Evaluated		Collectively		Collectively		Total		Ending
(In thousands)	Loans		Loans		Evaluated		Evaluated		Loans		ACL
Primary residential mortgage	$	652	$	—	$	584,474	$	3,931	$	585,126	$	3,931
Junior lien loan on residence		100		—		40,103		177		40,203		177
Multifamily property		16,645		—		1,819,745		8,782		1,836,390		8,782
Owner-occupied commercial real estate		—		—		255,110		4,840		255,110		4,840
Investment commercial real estate		9,881		—		1,051,316		15,403		1,061,197		15,403
Commercial and industrial		31,430		4,518		1,283,351		25,189		1,314,781		29,707
Lease financing		2,002		20		249,421		1,643		251,423		1,663
Construction		—		—		17,987		516		17,987		516
Consumer and other loans		—		—		63,906		869		63,906		869
Total ACL	$	60,710	$	4,538	$	5,365,413	$	61,350	$	5,426,123	$	65,888

Individually evaluated loans include nonaccrual loans of $80.0 million at September 30, 2024 and $60.6 million at December 31, 2023. Individually evaluated loans did not include any performing modified loans at September 30, 2024. An allowance of $229,000 was allocated to modified loans at September 30, 2024.

The allowance for credit losses was $71.3 million as of September 30, 2024, compared to $65.9 million at December 31, 2023. The increase in the allowance for credit losses (“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 to $33.3 million and certain qualitative adjustments 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.

Under Topic 326, the Company's methodology for determining the ACL on loans is based upon key assumptions, including historic net charge-offs, economic forecasts, reversion periods, prepayments and qualitative adjustments. The allowance is measured on a collective, or pool, basis when similar risk characteristics exist. Loans that do not share common risk characteristics are evaluated on an individual basis and are excluded from the collective evaluation.

The following tables present collateral dependent loans individually evaluated by segment as of September 30, 2024 and December 31, 2023:


	September 30, 2024
							Average
	Unpaid						Individually
	Principal		Recorded		Related		Evaluated
(In thousands)	Balance		Investment (A)		Allowance		Loans
With no related allowance recorded:
Primary residential mortgage (A)	$	1,754	$	1,658	$	—	$	1,539
Junior lien loan on residence (A)		99		96		—		103
Multifamily property (B)		15,320		15,295		—		17,526
Commercial and industrial (A)(C)(D)		3,902		2,733		—		3,798
Lease financing (E)		2,671		2,555		—		1,662
Total loans with no related allowance	$	23,746	$	22,337	$	—	$	24,628
With related allowance recorded:
Multifamily property (B)	$	18,138	$	18,042	$	2,242	$	10,090
Investment commercial real estate (D)		14,430		11,715		745		10,684
Commercial and industrial (A)(C)(D)(E)		29,513		27,077		6,501		22,184
Lease financing (E)		841		801		197		889
Total loans with related allowance	$	62,922	$	57,635	$	9,685	$	43,847
Total loans individually evaluated	$	86,668	$	79,972	$	9,685	$	68,475

(A) Secured by residential real estate.

(B) Secured by multifamily residential properties.

(D) Secured by all business assets.

(E) Secured by machinery and equipment.


	December 31, 2023
							Average
	Unpaid						Individually
	Principal		Recorded		Related		Evaluated
(In thousands)	Balance		Investment		Allowance		Loans
With no related allowance recorded:
Primary residential mortgage (A)	$	712	$	652	$	—	$	428
Junior lien loan on residence (A)		100		100		—		8
Multifamily property (B)		18,868		16,645		—		5,964
Investment commercial real estate (C)		12,500		9,881		—		5,781
Commercial and industrial (A)(C)(D)		6,275		3,965		—		2,146
Lease financing (E)		1,035		946		—		2,067
Total loans with no related allowance	$	39,490	$	32,189	$	—	$	16,394
With related allowance recorded:
Commercial and industrial (C)(D)(E)	$	28,359	$	27,465	$	4,518	$	9,814
Lease financing (E)		1,079		1,056		20		1,611
Total loans with related allowance	$	29,438	$	28,521	$	4,538	$	11,425
Total loans individually evaluated for impairment	$	68,928	$	60,710	$	4,538	$	27,819

(A) Secured by residential real estate.

(B) Secured by multifamily residential properties.

(D) Secured by all business assets.

(E) Secured by machinery and equipment.

Interest income recognized on individually evaluated loans for the three and nine months ended September 30, 2024 and 2023 was not material. The Company did not recognize any income on non-accruing loans for the three and nine months ended September 30, 2024 and 2023.

The activity in the allowance for credit losses for the three months ended September 30, 2024 and September 30, 2023 is summarized below:


	July 1,										September 30,
	2024										2024
	Beginning							Provision			Ending
(In thousands)	ACL		Charge-offs			Recoveries		(Credit) (A)			ACL
Primary residential mortgage	$	4,191	$	(43	)	$	—	$	263		$	4,411
Junior lien loan on residence		187		—			—		13			200
Multifamily property		12,601		—			—		180			12,781
Owner-occupied commercial real estate		4,712		—			—		197			4,909
Investment commercial real estate		14,452		—			—		(296	)		14,156
Commercial and industrial		28,568		—			2,115		626			31,309
Lease financing		1,690		—			4		27			1,721
Construction		655		—			—		115			770
Consumer and other loans		928		(4	)		—		102			1,026
Total ACL	$	67,984	$	(47	)	$	2,119	$	1,227		$	71,283

(A) Provision to roll forward the ACL excludes a credit of $3,000 for off-balance sheet commitments.


	July 1,										September 30,
	2023										2023
	Beginning							Provision			Ending
(In thousands)	ACL		Charge-offs			Recoveries		(Credit) (A)			ACL
Primary residential mortgage	$	3,148	$	—		$	—	$	115		$	3,263
Junior lien loan on residence		151		—			—		3			154
Multifamily property		10,537		—			—		45			10,582
Owner-occupied commercial real estate		4,708		—			—		(46	)		4,662
Investment commercial real estate		13,548		—			—		(23	)		13,525
Commercial and industrial		27,433		—			—		4,701			32,134
Lease financing		2,063		—			—		904			2,967
Construction		421		—			—		131			552
Consumer and other loans		695		(57	)		1		114			753
Total ACL	$	62,704	$	(57	)	$	1	$	5,944		$	68,592

(A) Provision to roll forward the ACL excludes a provision of $88,000 for off-balance sheet commitments.


	January 1,										September 30,
	2024										2024
	Beginning							Provision			Ending
(In thousands)	ACL		Charge-offs			Recoveries		(Credit) (A)			ACL
Primary residential mortgage	$	3,931	$	(43	)	$	—	$	523		$	4,411
Junior lien loan on residence		177		—			—		23			200
Multifamily property		8,782		(5,379	)		—		9,378			12,781
Owner-occupied commercial real estate		4,840		—			—		69			4,909
Investment commercial real estate		15,403		—			—		(1,247	)		14,156
Commercial and industrial		29,707		(241	)		2,120		(277	)		31,309
Lease financing		1,663		—			3,214		(3,156	)		1,721
Construction		516		—			—		254			770
Consumer and other loans		869		(21	)		2		176			1,026
Total ACL	$	65,888	$	(5,684	)	$	5,336	$	5,743		$	71,283

(A)

Provision to roll forward the ACL excludes a provision of $19,000 for off-balance sheet commitments.


	January 1,										September 30,
	2023										2023
	Beginning							Provision			Ending
(In thousands)	ACL		Charge-offs			Recoveries		(Credit) (A)			ACL
Primary residential mortgage	$	2,894	$	—		$	—	$	369		$	3,263
Junior lien loan on residence		154		—			—		—			154
Multifamily property		8,849		—			—		1,733			10,582
Owner-occupied commercial real estate		4,835		—			—		(173	)		4,662
Investment commercial real estate		15,480		(1,199	)		—		(756	)		13,525
Commercial and industrial		25,530		—			—		6,604			32,134
Lease financing		2,314		—			—		653			2,967
Construction		236		—			—		316			552
Consumer and other loans		537		(118	)		6		328			753
Total ACL	$	60,829	$	(1,317	)	$	6	$	9,074		$	68,592

(A)

Provision to roll forward the ACL excludes a credit of $9,000 for off-balance sheet commitments.

Allowance for Credit Losses on Off-Balance Sheet Commitments

The following tables present the activity in the ACL for off-balance sheet commitments for the nine months ended September 30, 2024 and 2023:


	January 1,
	2024				September 30,
	Beginning		Provision		2024
(In thousands)	ACL		(Credit)		Ending ACL
Off balance sheet commitments	$	687	$	19	$	706
Total ACL	$	687	$	19	$	706


	January 1,
	2023					September 30,
	Beginning		Provision			2023
(In thousands)	ACL		(Credit)			Ending ACL
Off balance sheet commitments	$	752	$	(9	)	$	743
Total ACL	$	752	$	(9	)	$	743

5. DEPOSITS

Certificates of deposit that met or exceeded $250,000 totaled $140.7 million and $105.9 million at September 30, 2024 and December 31, 2023, respectively. These totals exclude brokered certificates of deposit, which the Company had none at September 30, 2024 and $120.5 million at December 31, 2023.

The following table sets forth the details of total deposits as of September 30, 2024 and December 31, 2023:


	September 30,				December 31,
	2024				2023
(Dollars in thousands)
Noninterest-bearing demand deposits	$	1,079,877	18.19	%	$	957,687	18.16	%
Interest-bearing checking (A)		3,316,217	55.87			2,882,193	54.65
Savings		103,979	1.75			111,573	2.12
Money market		902,562	15.21			740,559	14.04
Certificates of deposit - retail		515,297	8.68			443,791	8.41
Certificates of deposit - listing service		7,454	0.13			7,804	0.15
Subtotal deposits		5,925,386	99.83			5,143,607	97.53
Interest-bearing demand - Brokered		10,000	0.17			10,000	0.19
Certificates of deposit - Brokered		—	—			120,507	2.28
Total deposits	$	5,935,386	100.00	%	$	5,274,114	100.00	%

(A)

Interest-bearing checking includes $1.4 billion at September 30, 2024 and $990.7 million at December 31, 2023 of reciprocal balances in the Reich & Tang or Promontory Demand Deposit Marketplace program.

The scheduled maturities of certificates of deposit, including brokered certificates of deposit, as of September 30, 2024, are as follows:


(In thousands)
2024	$	158,997
2025		337,013
2026		24,070
2027		1,240
2028		871
2029 and later		560
Total	$	522,751

6. FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

At September 30, 2024, the Company had no overnight borrowings with the FHLB compared to $403.8 million of overnight borrowings at the FHLB at a rate of 5.62 percent at December 31, 2023. At September 30, 2024, the Company also had available unused short-term overnight borrowing capacity through the FHLB of $1.8 billion, $22.0 million from correspondent banks and $1.8 billion at the Federal Reserve Bank of New York.

7. BUSINESS SEGMENTS

The Company assesses its results among two operating segments, Banking and Peapack Private. Management uses certain methodologies to allocate income and expense to the business segments. A funds transfer pricing methodology is used to assign interest income and interest expense. Certain indirect expenses are allocated to segments. These include support unit expenses such as technology and operations and other support functions. Taxes are allocated to each segment based on the effective rate for the period shown.

Banking

The Banking segment includes: commercial (includes C&I and equipment finance), commercial real estate, multifamily, commercial construction, residential and consumer lending activities; treasury management services; C&I advisory services; escrow management; deposit generation; operation of ATMs; telephone and internet banking services; merchant credit card services and customer support and sales.

Peapack Private

Peapack Private which includes the operations of PGB Trust & Investments of Delaware, consists of: investment management services provided for individuals and institutions; personal trust services, including services as executor, trustee, administrator, custodian and guardian; and other financial planning, tax preparation and advisory services.

The following tables present the statements of income and total assets for the Company’s reportable segments for the three and nine months ended September 30, 2024 and 2023.


	Three Months Ended September 30, 2024
			Peapack
(In thousands)	Banking		Private		Total
Net interest income	$	37,077	$	604	$	37,681
Noninterest income		3,604		15,334		18,938
Total income		40,681		15,938		56,619

Provision for credit losses		1,224		—		1,224
Compensation and benefits		23,988		7,062		31,050
Premises and equipment expense		4,794		839		5,633
FDIC expense		870		—		870
Other operating expense		5,013		2,083		7,096
Total operating expense		35,889		9,984		45,873
Income before income tax expense		4,792		5,954		10,746
Income tax expense		1,404		1,755		3,159
Net income	$	3,388	$	4,199	$	7,587


	Three Months Ended September 30, 2023
			Peapack
(In thousands)	Banking		Private		Total
Net interest income	$	35,811	$	704	$	36,515
Noninterest income		5,120		14,234		19,354
Total income		40,931		14,938		55,869

Provision for credit losses		5,856		—		5,856
Compensation and employee benefits		18,440		6,824		25,264
Premises and equipment expense		4,436		778		5,214
FDIC insurance expense		741		—		741
Other operating expense		4,188		2,006		6,194
Total operating expense		33,661		9,608		43,269
Income before income tax expense		7,270		5,330		12,600
Income tax expense		2,275		1,570		3,845
Net income	$	4,995	$	3,760	$	8,755


	Nine Months Ended September 30, 2024
			Peapack
(In thousands)	Banking		Private		Total
Net interest income	$	105,299	$	1,799	$	107,098
Noninterest income		12,616		46,578		59,194
Total income		117,915		48,377		166,292

Provision for credit losses		5,762		—		5,762
Compensation and employee benefits		67,585		21,825		89,410
Premises and equipment expense		14,214		2,276		16,490
FDIC insurance expense		2,685		—		2,685
Other operating expense		13,231		6,000		19,231
Total operating expense		103,477		30,101		133,578
Income before income tax expense		14,438		18,276		32,714
Income tax expense		3,958		5,008		8,966
Net income	$	10,480	$	13,268	$	23,748

Total assets at period end	$	6,663,410	$	130,382	$	6,793,792


	Nine Months Ended September 30, 2023
			Peapack
(In thousands)	Banking		Private		Total
Net interest income	$	116,004	$	3,410	$	119,414
Noninterest income		13,027		42,961		55,988
Total income		129,031		46,371		175,402

Provision for credit losses		9,065		—		9,065
Compensation and employee benefits		54,558		21,646		76,204
Premises and equipment expense		12,072		2,245		14,317
FDIC insurance expense		2,181		—		2,181
Other operating expense		11,317		6,660		17,977
Total operating expense		89,193		30,551		119,744
Income before income tax expense		39,838		15,820		55,658
Income tax expense		11,021		4,382		15,403
Net income	$	28,817	$	11,438	$	40,255

Total assets at period end	$	6,405,796	$	115,785	$	6,521,581

8. FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate the fair value:

Investment Securities: The fair values for investment securities are determined by quoted market prices (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).

Loans Held for Sale, at Fair Value: The fair value of loans held for sale is determined using quoted prices for similar assets, adjusted for specific attributes of that loan or other observable market data, such as outstanding commitments from third party investors (Level 2).

Derivatives: The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2). Our derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services.

Individually Evaluated Loans: The fair value of collateral dependent loans with specific allocations of the allowance for credit losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Individually evaluated loans may, in some cases, also be measured by the discounted cash flow methodology where payments are anticipated. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Other Real Estate Owned: Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate owned (“OREO") are measured at fair value, less estimated costs to sell. Fair values are based on recent real estate

appraisals. These appraisals may use a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by Management. Once received, a third party conducts a review of the appraisal for compliance with the Uniform Standards of Professional Appraisal Practice and appropriate analysis methods for the type of property. Subsequently, a member of the Credit Department reviews the assumptions and approaches utilized in the appraisal, as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. Appraisals on collateral dependent impaired loans and other real estate owned (consistent for all loan types) are obtained on an annual basis, unless a significant change in the market or other factors warrants a more frequent appraisal. On an annual basis, Management compares the actual selling price of any collateral that has been sold to the most recent appraised value to determine what additional adjustment should be made to the appraisal value to arrive at fair value for other properties. The most recent analysis performed indicated that a discount up to 15 percent should be applied to appraisals on properties. The discount is determined based on the nature of the underlying properties, aging of appraisals and other factors. For each collateral-dependent impaired loan, we consider other factors, such as certain indices or other market information, as well as property specific circumstances to determine if an adjustment to the appraised value is needed. In situations where there is evidence of change in value, the Bank will determine if there is a need for an adjustment to the specific reserve on the collateral dependent impaired loans. When the Bank applies an interim adjustment, it generally shows the adjustment as an incremental specific reserve against the loan until it has received the full updated appraisal. All collateral-dependent impaired loans and other real estate owned valuations were supported by an appraisal less than 12 months old or in the process of obtaining an appraisal as of September 30, 2024.

The following tables summarize, at the dates indicated, assets measured at fair value on a recurring basis, including financial assets for which the Company has elected the fair value option:

Assets Measured on a Recurring Basis


			Fair Value Measurements Using
			Quoted
			Prices in
			Active		Significant
			Markets For		Other		Significant
			Identical		Observable		Unobservable
	September 30,		Assets		Inputs		Inputs
(In thousands)	2024		(Level 1)		(Level 2)		(Level 3)
Assets:
Available for sale:
U.S. government-sponsored agencies	$	205,013	$	—	$	205,013	$	—
Mortgage-backed securities-residential		442,082		—		442,082		—
SBA pool securities		21,413		—		21,413		—
Corporate bond		14,205		—		14,205		—
CRA investment fund		13,445		13,445		—		—
Derivatives:
Cash flow hedges		3,970		—		3,970		—
Loan level swaps		14,297		—		14,297		—
Total	$	714,425	$	13,445	$	700,980	$	—

Liabilities:
Derivatives:
Cash flow hedges		109		—		109		—
Loan level swaps		14,297		—		14,297		—
Total	$	14,406	$	—	$	14,406	$	—

Assets Measured on a Recurring Basis


			Fair Value Measurements Using
			Quoted
			Prices in
			Active		Significant
			Markets For		Other		Significant
			Identical		Observable		Unobservable
	December 31,		Assets		Inputs		Inputs
(In thousands)	2023		(Level 1)		(Level 2)		(Level 3)
Assets:
Securities available for sale:
U.S. government-sponsored agencies	$	197,691	$	—	$	197,691	$	—
Mortgage-backed securities-residential		320,796		—		320,796		—
SBA pool securities		23,404		—		23,404		—
Corporate bond		8,726		—		8,726		—
CRA investment fund		13,166		13,166		—		—
Derivatives:
Cash flow hedges		6,814		—		6,814		—
Loan level swaps		23,826		—		23,826		—
Total	$	594,423	$	13,166	$	581,257	$	—

Liabilities:
Derivatives:
Loan level swaps	$	23,826	$	—	$	23,826	$	—
Total	$	23,826	$	—	$	23,826	$	—

The Company has elected the fair value option for certain loans held for sale. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment. None of these loans are 90 days or more past due or on nonaccrual as of September 30, 2024 and December 31, 2023.

The following table presents residential loans held for sale, at fair value, at the dates indicated:


(In thousands)	September 30, 2024		December 31, 2023
Residential loans contractual balance	$	554	$	98
Fair value adjustment		7		2
Total fair value of residential loans held for sale	$	561	$	100

The following tables summarize, at the dates indicated, assets measured at fair value on a non-recurring basis:


			Fair Value Measurements Using
			Quoted
			Prices in
			Active		Significant
			Markets For		Other		Significant
			Identical		Observable		Unobservable
	September 30,		Assets		Inputs		Inputs
(In thousands)	2024		(Level 1)		(Level 2)		(Level 3)
Assets:
Individually evaluated loans:
Multifamily property	$	15,800	$	—	$	—	$	15,800
Investment commercial real estate		10,970		—		—		10,970
Commercial and industrial		20,575		—		—		20,575
Lease financing		604		—		—		604

Fair Value Measurements Using

Quoted

Prices in

Active

Significant

Markets For

Other

Significant

Identical

Observable

Unobservable

December 31,

Assets

Inputs

(In thousands)

2023

(Level 1)

(Level 2)

(Level 3)

Assets:

Individually evaluated loans:

Commercial and industrial

22,947

—

22,947

Lease financing

1,035

—

1,035

The carrying amounts and estimated fair values of financial instruments at September 30, 2024 are as follows:


			Fair Value Measurements at September 30, 2024 using
	Carrying
(In thousands)	Amount		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	492,658	$	492,658	$	—	$	—	$	492,658
Securities available for sale		682,713		—		682,713		—		682,713
Securities held to maturity		103,158		—		92,438		—		92,438
CRA investment fund		13,445		13,445		—		—		13,445
FHLB and FRB stock		12,459		—		—		—	N/A
Loans held for sale, at fair value		561		—		561		—		561
Loans held for sale, at lower of cost or fair value		4,189		—		4,540		—		4,540
Loans, net of allowance for credit losses		5,244,134		—		—		5,075,349		5,075,349
Accrued interest receivable		31,973		—		3,112		28,861		31,973
Accrued interest receivable loan level swaps (A)		1,159		—		1,159		—		1,159
Cash flow hedges		3,970		—		3,970		—		3,970
Loan level swaps		14,297		—		14,297		—		14,297
Financial liabilities
Deposits	$	5,935,386	$	5,412,635	$	521,577	$	—	$	5,934,212
Subordinated debt		133,489		—		—		120,402		120,402
Accrued interest payable		10,252		7,046		2,142		1,064		10,252
Accrued interest payable loan level swaps (B)		1,159		—		1,159		—		1,159
Cash flow hedges		109		—		109		—		109
Loan level swap		14,297		—		14,297		—		14,297

(A)

Included in other assets in the Consolidated Statement of Condition.

(B)

Included in accrued expenses and other liabilities in the Consolidated Statement of Condition.

The carrying amounts and estimated fair values of financial instruments at December 31, 2023 are as follows:


			Fair Value Measurements at December 31, 2023 using
	Carrying
(In thousands)	Amount		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	187,671	$	187,671	$	—	$	—	$	187,671
Securities available for sale		550,617		—		550,617		—		550,617
Securities held to maturity		107,755		—		94,415		—		94,415
CRA investment fund		13,166		13,166		—		—		13,166
FHLB and FRB stock		31,044		—		—		—	N/A
Loans held for sale, at fair value		100		—		100		—		100
Loans held for sale, at lower of cost or fair value		6,695		—		7,201		—		7,201
Loans, net of allowance for loan and lease losses		5,363,437		—		—		5,294,942		5,294,942
Accrued interest receivable		30,676		—		2,868		27,808		30,676
Accrued interest receivable loan level swaps (A)		1,373		—		1,373		—		1,373
Cash flow hedges		6,814		—		6,814		—		6,814
Loan level swaps		23,826		—		23,826		—		23,826
Financial liabilities
Deposits	$	5,274,114	$	4,702,012	$	567,696	$	—	$	5,269,708
Short-term borrowings		403,814		—		403,814		—		403,814
Subordinated debt		133,274		—		—		111,924		111,924
Accrued interest payable		7,115		4,989		1,968		158		7,115
Accrued interest payable loan level swaps (B)		1,373		—		1,373		—		1,373
Loan level swaps		23,826		—		23,826		—		23,826

(A)

Included in other assets in the Consolidated Statement of Condition.

(B)

Included in accrued expenses and other liabilities in the Consolidated Statement of Condition.

9. REVENUE FROM CONTRACTS WITH CUSTOMERS

All of the Company’s revenue from contracts with customers within the scope of ASC 606 is recognized within noninterest income.

The following tables present the sources of noninterest income for the periods indicated:


	For the Three Months Ended September 30,
(In thousands)	2024		2023
Service charges on deposits
Overdraft fees	$	123	$	129
Interchange income		256		283
Other		948		907
Wealth management fees (A)		15,150		13,975
Corporate advisory fee income		55		85
Other (B)		2,406		3,975
Total noninterest other income	$	18,938	$	19,354


	For the Nine Months Ended September 30,
(In thousands)	2024			2023
Service charges on deposits
Overdraft fees	$	345		$	392
Interchange income		761			903
Other		2,888			2,602
Wealth management fees (A)		45,976			41,989
Loss on sale of property		(4	)		—
Corporate advisory fee income		976			180
Other (B)		8,252			9,922
Total noninterest other income	$	59,194		$	55,988

(A)

Includes investment brokerage fees.

(B)

All of the other category is outside the scope of ASC 606.

The following table presents the sources of noninterest income by operating segment for the periods indicated:


	For the Three Months Ended September 30,						For the Three Months Ended September 30,
	2024						2023
(In thousands)			Wealth						Wealth
Revenue by Operating Segment	Banking		Management		Total		Banking		Management		Total
Service charges on deposits
Overdraft fees	$	123	$	—	$	123	$	129	$	—	$	129
Interchange income		256		—		256		283		—		283
Other		948		—		948		907		—		907
Wealth management fees (A)		—		15,150		15,150		—		13,975		13,975
Corporate advisory fee income		55		—		55		85		—		85
Other (B)		2,222		184		2,406		3,716		259		3,975
Total noninterest income	$	3,604	$	15,334	$	18,938	$	5,120	$	14,234	$	19,354


	For the Nine Months Ended September 30,								For the Nine Months Ended September 30,
(In thousands)	2024								2023
Revenue by Operating				Wealth							Wealth
Segment	Banking			Management		Total			Banking		Management		Total
Service charges on deposits
Overdraft fees	$	345		$	—	$	345		$	392	$	—	$	392
Interchange income		761			—		761			903		—		903
Other		2,888			—		2,888			2,602		—		2,602
Wealth management fees (A)		—			45,976		45,976			—		41,989		41,989
Loss on sale of property		(4	)		—		(4	)		—		—		—
Corporate advisory fee income		976			—		976			180		—		180
Other (B)		7,650			602		8,252			8,950		972		9,922
Total noninterest income	$	12,616		$	46,578	$	59,194		$	13,027	$	42,961	$	55,988

(A)

Includes investment brokerage fees.

(B)

All of the other category is outside the scope of ASC 606.

A description of the Company’s revenue streams accounted for under ASC 606 follows:

Service charges on deposit accounts: The Company earns fees from its deposit customers for certain transaction account maintenance, and overdraft fees. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance.

Interchange income: The Company earns interchange fees from debit cardholder transactions conducted through the Visa payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. Interchange income is presented gross of cardholder rewards. Cardholder rewards are included in other expenses in the statement of income. Cardholder rewards reduced interchange income for the third quarter of 2024 by $6,000 and $2,000 for the same quarter in 2023. Cardholder rewards reduced interchange income by $12,000 and $6,000 for the nine months ended September 30, 2024 and 2023, respectively.

Wealth management fees (gross): The Company earns wealth management fees from its contracts with wealth management clients to manage assets for investment, and/or to transact on their accounts. These fees are primarily earned over time as the Company charges its clients on a monthly or quarterly basis in accordance with its investment advisory agreements. Fees are generally assessed based on a tiered scale of the market value of AUM at month end. Fees that are transaction based, including trade execution services, are recognized at the point in time that the transaction is executed (i.e. trade date).

Investment brokerage fees (net): The Company earns fees from investment brokerage services provided to its customers by a third-party service provider. The Company receives commissions from the third-party service provider twice a month based upon customer activity for the month. The fees are recognized monthly, and a receivable is recorded until commissions are generally paid by the 15th of the following month. Because the Company (i) acts as an agent in arranging the relationship between the customer and the third-party service provider and (ii) does not control the services rendered to the customers, investment brokerage fees are presented net of related costs.

Gains/(losses) on sales of property: The Company records a gain or loss from the sale of property when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of property to the buyer, the Company assesses whether the buyer is committed to perform its obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the property asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain/(loss) on sale if a significant financing component is present. The Company recorded a loss on sale of property of $4,000 for the nine months ended September 30, 2024.

Corporate advisory fee income: The Company provides our clients with financial advisory and underwriting services. Investment banking revenues, which includes mergers and acquisition advisory fees and private placement fees, are recorded when the performance obligation for the transaction is satisfied under the terms of each engagement. Reimbursed expenses are reported in other revenue on the statement of operations. Expenses related to investment banking are recognized as non-compensation expenses on the statement of operations. Amounts received and unearned are included on the statement of financial condition. Expenses related to investment banking deals not completed are recognized in non-compensation expenses on the statement of operations.

The Company’s mergers and acquisition advisory fees generally consist of a nonrefundable up-front fee and success fee. The nonrefundable fee is recorded as deferred revenue upon receipt and recognized at a point in time when the performance obligation is satisfied, or when the transaction is deemed by management to be terminated. Management’s judgment is required in determining when a transaction is considered to be terminated.

Other: All of the other income items are outside the scope of ASC 606.

10. OTHER OPERATING EXPENSES

The following table presents the major components of other operating expenses for the periods indicated:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2024		2023		2024		2023
Professional and legal fees	$	2,014	$	1,619	$	5,069	$	4,143
Trust department expense		1,064		977		2,938		2,856
Telephone		390		407		1,182		1,138
Advertising		340		482		1,308		1,584
Amortization of intangible assets		272		339		816		1,048
Branch/office restructure		—		—		—		175
Other operating expenses		3,016		2,370		7,918		7,033
Total other operating expenses	$	7,096	$	6,194	$	19,231	$	17,977

11. ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)

The following is a summary of the accumulated other comprehensive income/(loss) balances, net of tax, for the three months ended September 30, 2024 and 2023:


							Other
							Comprehensive
				Other			Income/(Loss)
				Comprehensive			Three Months
	Balance at			Income/(Loss)			Ended			Balance at
	July 1,			Before			September 30,			September 30,
(In thousands)	2024			Reclassifications			2024			2024
Net unrealized holding gain/(loss) on securities available for sale, net of tax	$	(75,188	)	$	17,574		$	17,574		$	(57,614	)

Gain/(loss) on cash flow hedges		6,846			(4,052	)		(4,052	)		2,794

Accumulated other comprehensive gain/(loss), net of tax	$	(68,342	)	$	13,522		$	13,522		$	(54,820	)


							Other
							Comprehensive
				Other			Income/(Loss)
				Comprehensive			Three Months
	Balance at			Income/(Loss)			Ended			Balance at
	July 1,			Before			September 30,			September 30,
(In thousands)	2023			Reclassifications			2023			2023
Net unrealized holding gain/(loss) on securities available for sale, net of tax	$	(76,047	)	$	(14,987	)	$	(14,987	)	$	(91,034	)

Gain/(loss) on cash flow hedges		8,050			1,331			1,331			9,381

Accumulated other comprehensive gain/(loss), net of tax	$	(67,997	)	$	(13,656	)	$	(13,656	)	$	(81,653	)

The following is a summary of the accumulated other comprehensive income/(loss) balances, net of tax, for the nine months ended September 30, 2024 and 2023:


							Amount		Other
							Reclassified		Comprehensive
				Other			From		Income/(Loss)
				Comprehensive			Accumulated		Nine Months
	Balance at			Income/(Loss)			Other		Ended			Balance at
	January 1,			Before			Comprehensive		September 30,			September 30,
(In thousands)	2024			Reclassifications			Income/(Loss)		2024			2024
Net unrealized holding gain/(loss) on securities available for sale, net of tax	$	(69,809	)	$	12,195		$	—	$	12,195		$	(57,614	)

Gain/(loss) on cash flow hedges		4,931			(2,137	)		—		(2,137	)		2,794

Accumulated other comprehensive gain/(loss), net of tax	$	(64,878	)	$	10,058		$	—	$	10,058		$	(54,820	)


							Amount			Other
							Reclassified			Comprehensive
				Other			From			Income/(Loss)
				Comprehensive			Accumulated			Nine Months
	Balance at			Income/(Loss)			Other			Ended			Balance at
	January 1,			Before			Comprehensive			September 30,			September 30,
(In thousands)	2023			Reclassifications			Income/(Loss)			2023			2023
Net unrealized holding gain/(loss) on securities available for sale, net of tax	$	(80,972	)	$	(10,062	)	$	—		$	(10,062	)	$	(91,034	)

Gain/(loss) on cash flow hedges		6,761			2,680			(60	)		2,620			9,381

Accumulated other comprehensive gain/(loss), net of tax	$	(74,211	)	$	(7,382	)	$	(60	)	$	(7,442	)	$	(81,653	)

The following represents the reclassifications out of accumulated other comprehensive income/(loss) for the nine months ended September 30, 2024 and 2023:


	Nine Months Ended
	September 30,
(In thousands)	2024		2023			Affected Line Item in Income
Unrealized gains/(losses) on cash flow hedge derivatives:
Reclassification adjustment for amounts included in net income	$	—	$	(84	)	Interest Expense
Tax effect		—		24		Income tax expense
Total reclassifications, net of tax	$	—	$	(60	)

12. DERIVATIVES

The Company utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements.

Interest Rate Swaps Designated as Cash Flow Hedges: Interest rate swaps with a notional amount of $360.0 million and $310.0 million as of September 30, 2024 and December 31, 2023, respectively, were designated as cash flow hedges of certain interest-bearing deposits. On a quarterly basis, the Company performs a qualitative hedge effectiveness assessment. This assessment takes into consideration any adverse developments related to the counterparty’s risk of default and any negative events or circumstances that affect the factors that originally enabled the Company to assess that it could reasonably support, qualitatively, an expectation that the hedging relationship was and will continue to be highly effective. As of September 30, 2024, there were no events or market conditions that would result in hedge ineffectiveness. The aggregate fair value of the swaps is recorded in other assets/liabilities with changes in fair value recorded in other comprehensive income. The amount included in accumulated other comprehensive income would be reclassified to current earnings should the hedges no longer be considered effective. The Company expects the hedges to remain fully effective during the remaining terms of the swaps.

The following table presents information about the interest rate swaps designated as cash flow hedges as of September 30, 2024 and December 31, 2023:


(Dollars in thousands)	September 30, 2024			December 31, 2023
Notional amount	$	360,000		$	310,000
Weighted average pay rate		2.29	%		2.22	%
Weighted average receive rate		4.20	%		4.14	%
Weighted average maturity	2.60 years			2.98 years
Unrealized gain/(loss), net	$	3,861		$	6,814

Number of contracts		14			12


	September 30, 2024
	Notional		Fair
(In thousands)	Amount		Value
Interest rate swaps related to interest-bearing deposits	$	360,000	$	3,861
Total included in other assets	$	335,000		3,970
Total included in other liabilities	$	25,000		(109	)


	December 31, 2023
	Notional		Fair
(In thousands)	Amount		Value
Interest rate swaps related to interest-bearing deposits	$	310,000	$	6,814
Total included in other assets		310,000		6,814
Total included in other liabilities		—		—

Cash Flow Hedges

The following table presents the net gains/(losses) recorded in accumulated other comprehensive income/(loss) and the consolidated financial statements relating to the cash flow derivative instruments for the three month and nine months ended September 30, 2024 and 2023:


	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
(In thousands)	2024			2023		2024			2023
Interest rate contracts
Gain/(loss) recognized in other comprehensive income (effective portion)	$	(5,600	)	$	1,861	$	(2,953	)	$	3,904
Gain/(loss) recognized in other noninterest income		—			—		—			(84	)

Net interest income recorded on these swap transactions totaled $1.5 million and $4.5 million for the three and nine months ended September 30, 2024, respectively. Net interest income recorded on these swap transactions totaled $1.5 million and $3.5 million for the three and nine months ended September 30, 2023, respectively. Net interest income/expense for these swap transactions is reported as a component of interest expense.

Derivatives Not Designated as Accounting Hedges

The Company offers facility specific/loan level swaps to its customers and offsets its exposure from such contracts by entering mirror image swaps with a financial institution/swap counterparty (loan level / back-to-back swap program). The customer accommodations and any offsetting swaps are treated as non-hedging derivative instruments which do not qualify for hedge accounting (“standalone derivatives”). The notional amount of the swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual contracts. The fair value of the swaps is recorded as both an asset and a liability, in other assets and other liabilities, respectively, in equal amounts for these transactions.

The accrued interest receivable and payable related to these swaps of $1.2 million and $1.4 million at September 30, 2024 and December 31, 2023, respectively, is recorded in other assets and other liabilities.

Information about these swaps is as follows:


(Dollars in thousands)	September 30, 2024			December 31, 2023
Notional amount	$	466,777		$	545,983
Fair value	$	(13,138	)	$	(22,452	)
Weighted average pay rates		3.91	%		3.95	%
Weighted average receive rates		6.90	%		7.09	%
Weighted average maturity	3.64 years			3.93 years

Number of contracts		60			71

13. SUBORDINATED DEBT

In December 2017, the Company issued $35.0 million in aggregate principal amount of fixed-to-floating subordinated notes (the “2017 Notes”) to certain institutional investors. The 2017 Notes are non-callable for five years, have a stated maturity of December 15, 2027, and had a fixed interest rate of 4.75 percent until December 15, 2022. From December 16, 2022 to the maturity date or early redemption date, the interest rate will reset quarterly to a level equal to the then current three-month London Interbank Offered Rate (“LIBOR”) rate plus 254 basis points, payable quarterly in arrears (which was 8.14 percent at September 30, 2024). Debt issuance costs incurred totaled $875,000 and are being amortized to maturity.

In December 2020, the Company issued $100.0 million in aggregate principal amount of fixed-to-floating subordinated notes (the “2020 Notes”) to certain institutional investors. The 2020 Notes are non-callable for five years, have a stated maturity of December 22, 2030, and bear interest at a fixed rate of 3.50 percent until December 22, 2025. From December 23, 2025 to the maturity date or early redemption date, the interest rate will reset quarterly to a level equal to the then current three-month Secured Overnight Financing Rate (“SOFR”) plus 326 basis points, payable quarterly in arrears. Debt issuance costs incurred totaled $1.9 million and are being amortized to maturity.

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

14. LEASES

The Company maintains certain property and equipment under direct financing and operating leases. As of September 30, 2024, the Company's operating lease ROU asset and operating lease liability totaled $41.7 million and $44.8 million, respectively. As of December 31, 2023, the Company's operating lease ROU asset and operating lease liability totaled $12.1 million and $12.9 million, respectively. The increase in the Company’s operating lease liability and ROU asset was primarily due to the modification of the existing lease on the main office which had an operating lease liability balance of $19.0 million and an ROU asset balance of $18.2 million as of September 30, 2024. Additionally, the Company executed a lease for our New York City location, which resulted in an operating lease liability of $15.0 million and an ROU asset of $13.4 million as of September 30, 2024. A weighted average discount rate of 4.39 percent and 2.72 percent was used in the measurement of the ROU asset and lease liability as of September 30, 2024 and December 31, 2023, respectively.

The Company's leases have remaining lease terms between two months to 12 years, with a weighted average lease term of 9.46 years at September 30, 2024. The Company's leases had remaining lease terms between four months to 13 years, with a weighted average lease term of 6.75 years at December 31, 2023. The Company’s lease agreements may include options to extend or terminate the lease. The Company’s decision to exercise renewal options is based on an assessment of its current business needs and market factors at the time of the renewal.

Total operating lease costs were $1.7 million and $792,000 for the three months ended September 30, 2024 and 2023, respectively. The variable lease costs were $104,000 and $58,000 for the three months ended September 30, 2024 and 2023, respectively.

Total operating lease costs were $4.0 million and $2.4 million for the nine months ended September 30, 2024 and 2023, respectively. The variable lease costs were $262,000 and $200,000 for the nine months ended September 30, 2024 and 2023, respectively.

The following is a schedule of the Company's operating lease liabilities by contractual maturity as of September 30, 2024:


(In thousands)
2024		1,282
2025		6,162
2026		6,173
2027		5,839
2028		5,659
Thereafter		30,195
Total lease payments		55,310
Less: imputed interest		10,535
Total present value of lease payments	$	44,775

The following table shows the supplemental cash flow information related to the Company’s direct finance and operating leases for the periods indicated:


	For the Nine Months Ended September 30,
(In thousands)	2024		2023
Right-of-use asset obtained in exchange for lease obligation	$	32,483	$	1,926
Operating cash flows from operating leases		3,108		2,184
Operating cash flows from direct finance leases		74		149
Financing cash flows from direct finance leases		308		561

15. ACCOUNTING PRONOUNCEMENTS

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments In Response to the SEC's Disclosure Update and Simplification Initiative to clarify or improve disclosure and presentation requirements on a variety of topics and align the requirements in the FASB accounting standard codification with the Securities and Exchange Commission ("SEC") regulations. The amendments will be effective for the Company only if the SEC removes the related disclosure requirement from its existing regulations no later than June 30, 2027. If the SEC timely removes such a related requirement from its existing regulations, the corresponding amendments within the ASU will become effective for the Company on the same date with early adoption permitted. The Company does not expect the amendments in this update to have a material impact on our consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures (Topic 280), to improve reportable segment disclosure requirements through enhanced disclosures about significant segment and interim periods with fiscal years beginning after December 15, 2024 with early adoption permitted. The Company does not expect this ASU to have a material effect on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Tax - Improvements to Income Tax Disclosures (Topic 740), which requires reporting companies to break out their income tax expense and tax rate reconciliation in more detail. For public companies, the requirements will become effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company does not expect this ASU to have a material effect on our consolidated financial statements.

In March 2024, the FASB issued ASU No. 2024-01, Compensation-Stock Compensation (Topic 718): Scope Applications of Profits Interests and Similar Awards. ASU 2024-01 adds an example to Topic 718 which illustrates how to apply the scope guidance to determine whether profits interest and similar awards should be accounted for as share-based payment arrangements under Topic 718 or under other U.S. GAAP. ASU 2024-01 is effective for annual periods beginning after December 15, 2024, although early adoption is permitted. Upon adoption of ASU 2024-01, the Company does not expect this ASU to have an impact on our consolidated financial statements.

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS: This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about Management’s confidence and strategies and Management’s expectations about operations, growth, financial results, 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:

•

our ability to successfully grow our business and implement our strategic plan, including our ability to generate revenues to offset the increased personnel and other costs related to the strategic plan;

•

the impact of anticipated higher operating expenses in 2024 and beyond;

•

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

•

our ability to successfully integrate our expanded employee base;

•

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

•

declines in our net interest margin caused by the interest rate environment and/or our highly competitive market;

•

declines in the value in our investment portfolio;

•

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

•

higher than expected increases in our allowance for credit losses;

•

higher than expected increases in credit losses or in the level of delinquent, nonperforming, classified and criticized loans or charge-offs;

•

inflation and changes in interest rates, which may adversely impact our margins and yields, reduce the fair value of our financial instruments, reduce our loan originations and lead to higher operating costs;

•

decline in real estate values within our market areas;

•

legislative and regulatory actions (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Basel III and related regulations) that may result in increased compliance costs;

•

successful cyberattacks against our IT infrastructure and that of our IT and third-party providers;

•

higher than expected FDIC insurance premiums;

•

adverse weather conditions;

•

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

•

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

•

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

•

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

•

our inability to adapt to technological changes;

•

claims and litigation pertaining to fiduciary responsibility, environmental laws and other matters;

•

our inability to retain key employees;

•

demand for loans and deposits in our market areas;

•

adverse changes in securities markets;

•

changes in New York City rent regulation law;

•

changes in governmental regulation, including, but not limited to, any increase in FDIC insurance premiums and changes in the monetary policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System;

•

changes in accounting policies and practices; and/or

•

other unexpected material adverse changes in our financial condition, operations or earnings.

Except as may be required by applicable law or regulation, the Company undertakes no duty to update any forward-looking statements to conform the statement to actual results or change in the Company’s expectations. Although we believe that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES: Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon the Company’s consolidated financial statements, which have been prepared in accordance

with GAAP. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Note 1 to the Company’s Audited Consolidated Financial Statements for the year ended December 31, 2023 contains a summary of the Company’s significant accounting policies.

The Company’s determination of the allowance for credit losses involves a higher degree of complexity and requires Management to make difficult and subjective judgments, which often require assumptions or estimates about highly uncertain matters. Changes in the methodology for determining the allowance for credit losses or in these judgments, assumptions or estimates could materially impact results of operations. This critical policy and its application are periodically reviewed with the Audit Committee and the Board of Directors.

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.

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.

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.

EXECUTIVE SUMMARY: The following table presents certain key aspects of our performance for the three months ended September 30, 2024 and 2023.


	For the Three Months Ended September 30,						Change
(Dollars in thousands, except per share data)	2024			2023			2024 vs 2023
Results of Operations:
Interest income	$	83,203		$	78,489		$	4,714
Interest expense		45,522			41,974			3,548
Net interest income		37,681			36,515			1,166
Wealth management fee income		15,150			13,975			1,175
Other income		3,788			5,379			(1,591	)
Total other income		18,938			19,354			(416	)

Total revenue (net interest income + total other income)		56,619			55,869			750

Operating expense		44,649			37,413			7,236
Pretax income before provision for credit losses		11,970			18,456			(6,486	)
Provision for credit losses		1,224			5,856			(4,632	)
Pretax income		10,746			12,600			(1,854	)
Income tax expense		3,159			3,845			(686	)
Net income	$	7,587		$	8,755		$	(1,168	)

Diluted average shares outstanding		17,700,042			18,010,127			(310,085	)

Diluted earnings per share	$	0.43		$	0.49		$	(0.06	)

Return on average assets annualized ("ROAA")		0.46	%		0.54	%		(0.08	)%
Return on average equity annualized ("ROAE")		5.12			6.20			(1.08	)

The following table presents certain key aspects of our performance for the nine months ended September 30, 2024 and 2023.


	For the Nine Months Ended September 30,						Change
(Dollars in thousands, except per share data)	2024			2023			2024 vs 2023
Results of Operations:
Interest income	$	241,635		$	223,832		$	17,803
Interest expense		134,537			104,418			30,119
Net interest income		107,098			119,414			(12,316	)
Wealth management fee income		45,976			41,989			3,987
Other income		13,218			13,999			(781	)
Total other income		59,194			55,988			3,206

Total revenue (net interest income + total other income)		166,292			175,402			(9,110	)

Operating expense		127,816			110,679			17,137
Pretax income before provision for credit losses		38,476			64,723			(26,247	)
Provision for loan and lease losses		5,762			9,065			(3,303	)
Pretax income		32,714			55,658			(22,944	)
Income tax expense		8,966			15,403			(6,437	)
Net income	$	23,748		$	40,255		$	(16,507	)

Diluted average shares outstanding		17,746,560			18,091,524			(344,964	)

Diluted earnings per share	$	1.34		$	2.23		$	(0.89	)

Return on average assets annualized (ROAA)		0.49	%		0.84	%		(0.35	)%
Return on average equity annualized (ROAE)		5.42			9.66			(4.24	)


	September 30,			December 31,			Change
	2024			2023			2024 vs 2023
Selected Balance Sheet Ratios:
Total capital (Tier I + II) to risk-weighted assets		15.19	%		14.95	%		0.24	%
Tier I leverage ratio	9.33				9.19			0.14
Loans to deposits		89.55			102.94			(13.39	)
Allowance for credit losses to total loans		1.34			1.21			0.13
Allowance for credit losses to nonperforming loans		88.60			107.44			(18.84	)
Nonperforming loans to total loans		1.51			1.13			0.38

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.

For the nine months ended September 30, 2024, the Company recorded total revenue of $166.3 million, pretax income of $32.7 million, net income of $23.7 million and diluted earnings per share of $1.34, compared to revenue of $175.4 million, pretax income of $55.7 million, net income of $40.3 million and diluted earnings per share of $2.23 for the same period last year.

During 2024, the Company expanded into the metro New York market, leading with our "Single Point of Contact" private banking strategy, which continues to demonstrate progress and positive momentum. Increasing deposits through the growth of core deposit relationships has enabled us to repay all short-term borrowings, which enhances our liquidity position and improves net interest margin.

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.

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.”

EARNINGS ANALYSIS

NET INTEREST INCOME (“NII”) / NET INTEREST MARGIN (“NIM”) / AVERAGE BALANCE SHEET:

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 fees earned on loans, and interest paid on interest-bearing liabilities. 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 earning assets and the average cost of interest-bearing liabilities (“net interest spread”) and the relative amounts of earning assets and interest-bearing liabilities. Net interest margin is net interest income as a percent of total interest-earning assets on an annualized basis. 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.

The following table summarizes the loans that the Company closed during the periods indicated:


	For the Three Months Ended
	September 30,		September 30,
(In thousands)	2024		2023
Residential mortgage loans originated for portfolio	$	26,955	$	21,310
Residential mortgage loans originated for sale		1,853		2,503
Total residential mortgage loans		28,808		23,813

Commercial real estate loans		4,300		3,900
Multifamily		11,295		3,000
C&I loans (A) (B)		242,829		176,845
Small business administration		9,106		300
Wealth lines of credit (A)		11,675		6,875
Total commercial loans		279,205		190,920

Installment loans		8,137		6,999
Home equity lines of credit (A)		10,421		6,275
Total loans closed	$	326,571	$	228,007


	For the Nine Months Ended
	September 30,		September 30,
(In thousands)	2024		2023
Residential mortgage loans originated for portfolio	$	54,703	$	90,971
Residential mortgage loans originated for sale		8,239		5,052
Total residential mortgage loans		62,942		96,023

Commercial real estate loans		18,400		66,125
Multifamily		17,525		59,812
C&I loans (A) (B)		491,697		543,631
Small business administration		20,096		23,963
Wealth lines of credit (A)		26,475		34,050
Total commercial loans		574,193		727,581

Installment loans		16,669		23,672
Home equity lines of credit (A)		17,311		15,303
Total loans closed	$	671,115	$	862,579

(A) Includes loans and lines of credit that closed in the period but were not necessarily funded.

(B) Includes equipment finance leases and loans.

At September 30, 2024, December 31, 2023 and September 30, 2023, the Bank had a concentration in commercial real estate (“CRE”) loans as defined by applicable regulatory guidance as follows:


	September 30,			December 31,			September 30,
	2024			2023			2023
Multifamily real estate loans as a percent of total regulatory capital of the Bank		226	%		238	%		243	%

Non-owner occupied commercial real estate loans as a percent of total regulatory capital of the Bank		124			137			137

Total CRE concentration		350	%		375	%		380	%

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.

The following table reflects the components of the average balance sheet and of net interest income for the periods indicated:

Average Balance Sheet

Unaudited

Three Months Ended


	September 30, 2024									September 30, 2023
	Average			Income/			Annualized			Average			Income/			Annualized
(Dollars in thousands)	Balance			Expense			Yield			Balance			Expense			Yield
ASSETS:
Interest-earning assets:
Investments:
Taxable (A)	$	865,892		$	6,107			2.82	%	$	806,861		$	5,170			2.56	%
Tax-exempt (A) (B)		—			—			—			1,198			11			3.67
Loans (B) (C):
Residential mortgages		579,949			5,834			4.02			580,951			5,208			3.59
Commercial mortgages		2,381,771			27,362			4.60			2,502,351			27,746			4.44
Commercial		2,159,648			37,588			6.96			2,298,723			37,357			6.50
Commercial construction		22,371			507			9.07			12,346			282			9.14
Installment		73,440			1,267			6.90			56,248			967			6.88
Home equity		38,768			814			8.40			34,250			680			7.94
Other		239			6			10.04			234			7			11.97
Total loans		5,256,186			73,378			5.58			5,485,103			72,247			5.27
Federal funds sold		—			—			—			—			—			—
Interest-earning deposits		326,707			3,982			4.88			136,315			1,463			4.29
Total interest-earning assets		6,448,785			83,467			5.18	%		6,429,477			78,891			4.91	%
Noninterest-earning assets:
Cash and due from banks		7,521									6,954
Allowance for credit losses		(70,317	)								(63,625	)
Premises and equipment		25,530									23,880
Other assets		139,042									85,582
Total noninterest-earning assets		101,776									52,791
Total assets	$	6,550,561								$	6,482,268
LIABILITIES:
Interest-bearing deposits:
Checking	$	3,214,186		$	31,506			3.92	%	$	2,813,080		$	24,318			3.46	%
Money markets		833,325			6,419			3.08			771,781			4,458			2.31
Savings		104,293			117			0.45			118,718			75			0.25
Certificates of deposit - retail		512,794			5,540			4.32			415,665			3,459			3.33
Subtotal interest-bearing deposits		4,664,598			43,582			3.74			4,119,244			32,310			3.14
Interest-bearing demand - brokered		10,000			134			5.36			10,000			136			5.44
Certificates of deposit - brokered		7,913			106			5.36			102,777			1,183			4.60
Total interest-bearing deposits		4,682,511			43,822			3.74			4,232,021			33,629			3.18
FHLB advances and borrowings		—			—			—			470,616			6,569			5.58
Finance lease liabilities		1,401			15			4.28			3,863			46			4.76
Subordinated debt		133,449			1,685			5.05			133,163			1,730			5.20
Total interest-bearing liabilities		4,817,361			45,522			3.78	%		4,839,663			41,974			3.47	%
Noninterest-bearing liabilities:
Demand deposits		1,016,014									990,854
Accrued expenses and other liabilities		124,399									86,598
Total noninterest-bearing liabilities		1,140,413									1,077,452
Shareholders’ equity		592,787									565,153
Total liabilities and shareholders’ equity	$	6,550,561								$	6,482,268
Net interest income (tax-equivalent basis)				$	37,945								$	36,917
Net interest spread								1.40	%								1.44	%
Net interest margin (D)								2.34	%								2.28	%
Tax equivalent adjustment				$	(264	)							$	(402	)
Net interest income				$	37,681								$	36,515

(A)

Average balances for available for sale securities are based on amortized cost.

(B)

Interest income is presented on a tax-equivalent basis using a 21 percent federal tax rate.

(C)

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

(D)

Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.

Average Balance Sheet

Unaudited

Nine Months Ended


	September 30, 2024									September 30, 2023
	Average			Income/			Annualized			Average			Income/			Annualized
(Dollars in thousands)	Balance			Expense			Yield			Balance			Expense			Yield
ASSETS:
Interest-earning assets:
Investments:
Taxable (A)	$	820,594		$	16,411			2.67	%	$	801,535		$	14,541			2.42	%
Tax-exempt (A) (B)		—			—			—			1,637			49			3.99
Loans (B) (C):
Residential mortgages		578,187			16,836			3.88			556,220			14,433			3.46
Commercial mortgages		2,420,772			81,783			4.50			2,495,175			80,503			4.30
Commercial		2,196,921			112,214			6.81			2,247,803			106,182			6.30
Commercial construction		20,981			1,425			9.06			7,903			536			9.04
Installment		68,605			3,524			6.85			49,214			2,416			6.55
Home equity		37,255			2,298			8.22			33,914			1,903			7.48
Other		218			19			11.62			260			22			11.28
Total loans		5,322,939			218,099			5.46			5,390,489			205,995			5.10
Federal funds sold		—			—			—			—			—			—
Interest-earning deposits		225,070			7,922			4.69			147,071			4,452			4.04
Total interest-earning assets		6,368,603			242,432			5.08	%		6,340,732			225,037			4.73	%
Noninterest-earning assets:
Cash and due from banks		8,384									8,388
Allowance for loan and lease losses		(68,337	)								(62,753	)
Premises and equipment		24,917									23,850
Other assets		109,152									76,992
Total noninterest-earning assets		74,116									46,477
Total assets	$	6,442,719								$	6,387,209
LIABILITIES:
Interest-bearing deposits:
Checking	$	3,088,218		$	88,192			3.81	%	$	2,739,115		$	63,018			3.07	%
Money markets		794,297			17,959			3.01			893,567			13,185			1.97
Savings		106,200			302			0.38			128,437			148			0.15
Certificates of deposit - retail		498,353			15,762			4.22			386,488			7,650			2.64
Subtotal interest-bearing deposits		4,487,068			122,215			3.63			4,147,607			84,001			2.70
Interest-bearing demand - brokered		10,000			394			5.25			15,311			469			4.08
Certificates of deposit - brokered		78,042			2,950			5.04			51,916			1,584			4.07
Total interest-bearing deposits		4,575,110			125,559			3.66			4,214,834			86,054			2.72
FHLB advances and borrowings		87,224			3,848			5.88			331,170			13,249			5.33
Finance lease liabilities		2,491			75			4.01			4,179			149			4.75
Subordinated debt		133,377			5,055			5.05			133,090			4,966			4.98
Total interest-bearing liabilities		4,798,202			134,537			3.74	%		4,683,273			104,418			2.97	%
Noninterest-bearing liabilities:
Demand deposits		959,571									1,066,162
Accrued expenses and other liabilities		101,247									82,215
Total noninterest-bearing liabilities		1,060,818									1,148,377
Shareholders’ equity		583,699									555,559
Total liabilities and shareholders’ equity	$	6,442,719								$	6,387,209
Net interest income (tax-equivalent basis)				$	107,895								$	120,619
Net interest spread								1.34	%								1.76	%
Net interest margin (D)								2.26	%								2.54	%
Tax equivalent adjustment				$	(797	)							$	(1,205	)
Net interest income				$	107,098								$	119,414

(A)

Average balances for available for sale securities are based on amortized cost.

(B)

Interest income is presented on a tax-equivalent basis using a 21 percent federal tax rate.

(C)

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

(D)

Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.

The effect of volume and rate changes on net interest income (on a tax-equivalent basis) for the three month period ended September 30, 2024 compared to September 30, 2023 are shown below:


	For the Three Months Ended September 30, 2024
	Difference due to						Change In
	Change In:						Income/
(In Thousands):	Volume			Rate			Expense
ASSETS:
Investments	$	320		$	606		$	926
Loans		(2,919	)		4,050			1,131
Interest-earning deposits		2,293			226			2,519
Total interest income	$	(306	)	$	4,882		$	4,576
LIABILITIES:
Interest-bearing checking	$	3,597		$	3,591		$	7,188
Money market		658			1,303			1,961
Savings		(10	)		52			42
Certificates of deposit - retail		919			1,162			2,081
Certificates of deposit - brokered		(1,244	)		167			(1,077	)
Interest bearing demand brokered		—			(2	)		(2	)
Borrowed funds		(6,569	)		—			(6,569	)
Capital lease obligation		(26	)		(5	)		(31	)
Subordinated debt		4			(49	)		(45	)
Total interest expense	$	(2,671	)	$	6,219		$	3,548
Net interest income (tax-equivalent basis)	$	2,365		$	(1,337	)	$	1,028

The effect of volume and rate changes on net interest income (on a tax-equivalent basis) for the nine month period ended September 30, 2024 compared to September 30, 2023 are shown below:


	For the Nine Months Ended September 30, 2024
	Difference due to						Change In
	Change In:						Income/
(In Thousands):	Volume			Rate			Expense
ASSETS:
Investments	$	163		$	1,658		$	1,821
Loans		(2,003	)		14,107			12,104
Interest-earning deposits		2,662			808			3,470
Total interest income	$	822		$	16,573		$	17,395
LIABILITIES:
Interest-bearing checking	$	9,812		$	15,362		$	25,174
Money market		(829	)		5,603			4,774
Savings		(29	)		183			154
Certificates of deposit - retail		2,644			5,468			8,112
Certificates of deposit - brokered		927			439			1,366
Interest bearing demand brokered		(187	)		112			(75	)
Borrowed funds		(10,518	)		1,117			(9,401	)
Capital lease obligation		(53	)		(21	)		(74	)
Subordinated debt		11			78			89
Total interest expense	$	1,778		$	28,341		$	30,119
Net interest income (tax-equivalent basis)	$	(956	)	$	(11,768	)	$	(12,724	)

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.

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.

The decline in the average balance of loans for the quarter ended September 30, 2024 was primarily driven by a decline in commercial mortgages and commercial loans, offset slightly by growth in installment loans. The average balance of commercial loans declined by $139.1 million, or 6 percent, to $2.16 billion for the quarter ended September 30, 2024 when compared to $2.30 billion for the same 2023 period. The average balance of commercial mortgages for the three months ended September 30, 2024 declined by $120.6 million, or 5 percent, to $2.38 billion when compared to the same 2023 period. These decreases were partially offset by an increase in the average balance of installment loans of $17.2 million to $73.4 million for the quarter ended September 30, 2024 when compared to the same 2023 period. The average balance of loans for the nine months ended September 30, 2024 decreased due to declines in commercial mortgages and commercial loans partially offset by growth in installment loans and residential mortgages. The average balance of commercial loans declined by $50.9 million to $2.20 billion for the nine months ended September 30, 2024 when compared to the same 2023 period. The average balance of commercial mortgages for the nine months ended September 30, 2024 declined by $74.4 million to $2.42 billion when compared to the same 2023 period. Residential mortgages increased by $22.0 million to $578.2 million for the nine months ended September 30, 2024 from $556.2 million for the nine months ended September 30, 2023. The average balance of installment loans increased by $19.4 million to $68.6 million for the nine months ended September 30, 2024 from $49.2 million for the same period in 2023. The decline in the average balance of loans for both the three- and nine-month periods were mostly a result of the Company tightening underwriting guidelines, pay downs of higher rate lines of credit and lower originations due to the higher interest rate environment.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

The carrying value of investment securities available for sale and held to maturity as of September 30, 2024 and December 31, 2023 are shown below:


	September 30, 2024				December 31, 2023
			Estimated				Estimated
	Amortized		Fair		Amortized		Fair
(In thousands)	Cost		Value		Cost		Value
Investment securities available for sale:
U.S. government-sponsored agencies	$	244,808	$	205,013	$	244,794	$	197,691
Mortgage-backed securities-residential (principally U.S. government-sponsored entities)		476,695		442,082		363,893		320,796
SBA pool securities		24,291		21,413		27,148		23,404
Corporate bond		15,500		14,205		10,000		8,726
Total investment securities available for sale	$	761,294	$	682,713	$	645,835	$	550,617
Investment securities held to maturity:
U.S. government-sponsored agencies		40,000		37,698		40,000		36,631
Mortgage-backed securities-residential (principally U.S. government-sponsored entities)		63,158		54,740		67,755		57,784
Total investment securities held to maturity	$	103,158	$	92,438	$	107,755	$	94,415
Total	$	864,452	$	775,151	$	753,590	$	645,032

The following table presents the contractual maturities and yields of debt securities available for sale and held to maturity as of September 30, 2024. The weighted average yield is a computation of income within each maturity range based on the amortized cost of securities:


				After 1			After 5
				But			But			After
	Within			Within			Within			10
(Dollars in thousands)	1 Year			5 Years			10 Years			Years			Total
Investment securities available for sale:
U.S. government-sponsored agencies	$	—		$	40,579		$	113,299		$	51,135		$	205,013
		—			1.24	%		1.56	%		1.77	%		1.56	%
Mortgage-backed securities-residential (A)		50,495			8,675			31,992			350,920			442,082
		5.73	%		3.21	%		3.11	%		3.45	%		3.66	%
SBA pool securities		—			263			7,508			13,642			21,413
		—			5.37	%		2.12	%		1.50	%		1.75	%
Corporate bond		—			—			14,205			—			14,205
		—			—			6.32	%		—			6.32	%
Total investments available for sale	$	50,495		$	49,517		$	167,004		$	415,697		$	682,713
		5.73	%		1.58	%		2.24	%		3.15	%		2.98	%
Investment securities held to maturity:
U.S. government-sponsored agencies		—			40,000			—			—			40,000
		—			1.53	%		—			—			1.53	%
Mortgage-backed securities-residential (A)		—			—			—			63,158			63,158
		—			—			—			2.17	%		2.17	%
Total investments held to maturity	$	—		$	40,000		$	—		$	63,158			103,158
		—			1.53	%		—			2.17	%		1.92	%
Total	$	50,495		$	89,517		$	167,004		$	478,855		$	785,871
		5.73	%		1.56	%		2.24	%		3.02	%		2.84	%

(A)

Shown using stated final maturity.

OTHER INCOME: The following table presents other income, excluding income from wealth management services, which is summarized and discussed subsequently:


	For the Three Months Ended September 30,					Change
(In thousands)	2024		2023			2024 vs 2023
Service charges and fees	$	1,327	$	1,319		$	8
Bank owned life insurance		390		310			80
Gain on sale of loans (mortgage banking)		15		37			(22	)
Gain on sale of SBA loans		365		491			(126	)
Corporate advisory fee income		55		85			(30	)
Other income		1,162		3,541			(2,379	)
Fair value adjustment for CRA equity security		474		(404	)		878
Total other income (excluding wealth management income)	$	3,788	$	5,379		$	(1,591	)


	For the Nine Months Ended September 30,					Change
(In thousands)	2024		2023			2024 vs 2023
Service charges and fees	$	3,994	$	3,897		$	97
Bank owned life insurance		1,221		912			309
Gain on sale of loans (mortgage banking)		105		73			32
Gain on loans held for sale at lower of cost or fair value		23		—			23
Gain on sale of SBA loans		1,214		2,194			(980	)
Corporate advisory fee income		976		180			796
Other income		5,406		7,147			(1,741	)
Fair value adjustment for CRA equity security		279		(404	)		683
Total other income (excluding wealth management income)	$	13,218	$	13,999		$	(781	)

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

$14.0 million, respectively, reflecting a decrease of $781,000. The decreases were primarily due to income associated with equipment transfers upon the termination of leases, which declined $2.1 million to $225,000 for the three months ended September 30, 2024 from $2.3 million for the same 2023 period and declined $727,000 to $1.9 million for the nine months ended September 30, 2024 from $2.7 million for the same 2023 period.

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.

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.

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.

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.

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.

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.

OPERATING EXPENSES: The following table presents the components of operating expenses for the periods indicated:


	For the Three Months Ended September 30,				Change
(In thousands)	2024		2023		2024 vs 2023
Compensation and employee benefits	$	31,050	$	25,264	$	5,786
Premises and equipment		5,633		5,214		419
FDIC assessment		870		741		129
Other Operating Expenses:
Professional and legal fees		2,014		1,619		395
Trust department expense		1,064		977		87
Telephone		390		407		(17	)
Advertising		340		482		(142	)
Amortization of intangible assets		272		339		(67	)
Other		3,016		2,370		646
Total operating expenses	$	44,649	$	37,413	$	7,236


	For the Nine Months Ended September 30,				Change
(In thousands)	2024		2023		2024 vs 2023
Compensation and employee benefits	$	89,410	$	76,204	$	13,206
Premises and equipment		16,490		14,317		2,173
FDIC assessment		2,685		2,181		504
Other Operating Expenses:
Professional and legal fees		5,069		4,143		926
Trust department expense		2,938		2,856		82
Telephone		1,182		1,138		44
Advertising		1,308		1,584		(276	)
Amortization of intangible assets		816		1,048		(232	)
Branch/office restructure		—		175		(175	)
Other		7,918		7,033		885
Total operating expenses	$	127,816	$	110,679	$	17,137

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.

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.

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.

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.

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.

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.

NONPERFORMING ASSETS: OREO, loans past due in excess of 90 days and still accruing, and nonaccrual loans are considered nonperforming assets.

The following table sets forth asset quality data as of the dates indicated:


	As of
	September 30,			June 30,			March 31,			December 31,			September 30,
(Dollars in thousands)	2024			2024			2024			2023			2023
Loans past due 90 days or more and still accruing	$	—		$	—		$	35		$	—		$	—
Nonaccrual loans		80,453			82,075			69,811			61,324			70,809
Other real estate owned		—			—			—			—			—
Total nonperforming assets	$	80,453		$	82,075		$	69,846		$	61,324		$	70,809

Performing modifications (A)(B)	$	51,796		$	26,788		$	12,311		$	248		$	248

Loans past due 30 through 89 days and still accruing	$	31,446		$	34,714		$	73,699		$	34,589		$	9,780

Loans subject to special mention	$	113,655		$	140,791		$	59,450		$	71,397		$	53,328

Classified loans	$	147,422		$	128,311		$	117,869		$	84,372		$	94,866

Individually evaluated loans	$	79,972		$	81,802		$	69,530		$	60,710		$	70,184

Nonperforming loans as a % of total loans (C)		1.51	%		1.56	%		1.30	%		1.13	%		1.29	%
Nonperforming assets as a % of total assets (C)		1.18	%		1.26	%		1.09	%		0.95	%		1.09	%
Nonperforming assets as a % of total loans plus other real estate owned (C)		1.51	%		1.56	%		1.30	%		1.13	%		1.29	%

(A)

Amounts reflect modifications that are paying according to modified terms.

(B)

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.

(C)

Nonperforming loans/assets do not include performing modifications.

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.

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.

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 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.

A summary of the allowance for credit losses for the quarterly periods indicated follows:


	September 30,			June 30,			March 31,			December 31,			September 30,
(Dollars in thousands)	2024			2024			2024			2023			2023
Allowance for credit losses:
Beginning of period	$	67,984		$	66,251		$	65,888		$	68,592		$	62,704
Provision for credit losses (A)		1,227			3,901			615			5,082			5,944
(Charge-offs)/recoveries, net		2,072			(2,168	)		(252	)		(7,786	)		(56	)
End of period	$	71,283		$	67,984		$	66,251		$	65,888		$	68,592

Allowance for credit losses as a % of total loans		1.34	%		1.29	%		1.24	%		1.21	%		1.25	%

Collectively evaluated allowance for credit losses as a % of total loans		1.16	%		1.14	%		1.15	%		1.13	%		1.10	%

Allowance for credit losses as a % of nonperforming loans		88.60	%		82.83	%		94.85	%		107.44	%		96.87	%

(A)

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.

The decrease in the allowance for credit losses as a percentage of nonperforming loans was primarily due to the increase in nonperforming loans of $9.6 million to $80.5 million at September 30, 2024 from $70.8 million at September 30, 2023.

INCOME TAXES: Income tax expense for the quarter ended September 30, 2024 was $3.2 million as compared to $3.8 million for the same period in 2023. During the nine months ended September 30, 2024, the Company recorded income tax expense of $9.0 million compared to $15.4 million for the same period in 2023.

The effective tax rate for the three months ended September 30, 2024 was 29.40 percent compared to 30.52 percent for the same quarter in 2023. The effective tax rate was 27.41 percent and 27.67 percent for the nine months ended September 30, 2024 and 2023, respectively.

The nine months ended September 30, 2024 periods included a benefit related to the Company's deferred tax asset associated with a surtax imposed by the State of New Jersey. This benefit was partially offset by adjustments related to the vesting of restricted stock at prices lower than original grant prices in 2024, while 2023 benefited from the vesting of restricted stock at prices higher than original grant prices.

CAPITAL RESOURCES: A solid capital base provides the Company with financial strength and the ability to support future growth and is essential to executing the Company’s current Strategic Plan. The Company’s capital strategy is intended to provide stability to expand its business, even in stressed environments. Quarterly stress testing is integral to the Company’s capital management process.

The Company strives to maintain capital levels in excess of internal “triggers” and in excess of those considered to be well capitalized under regulatory guidelines applicable to banks and bank holding companies. Maintaining an adequate capital position supports the Company’s goal of providing shareholders an attractive and stable long-term return on investment.

Capital increased as a result of net income of $23.7 million for the nine months ended September 30, 2024. Additionally, during the nine months of 2024, the Company recorded a decrease in accumulated other comprehensive loss of $10.1 million, net of tax. The total accumulated other comprehensive loss declined to $54.8 million as of September 30, 2024, ($57.6 million loss related to the available for sale securities portfolio partially offset by a $2.8 million gain on the cash flow hedges). This was partially offset by the repurchase of 300,000 shares, at an average price of $23.96 through the Company's stock repurchase program at a total cost of $7.2 million and payment of dividends of $2.7 million.

The Company employs quarterly capital stress testing by modeling adverse case and severely adverse case scenarios. In the most recent completed stress test based on June 30, 2024 financial information, under the severely adverse case, and no growth scenarios, the Bank remains well capitalized over a two-year stress period.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios of Total, Common Equity Tier 1 and Tier 1 capital (each as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). At September 30, 2024 and December 31, 2023, all of the Bank’s capital ratios remain above the levels required to be considered “well capitalized” and the Company’s capital ratios remain above regulatory requirements. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based, common equity Tier I and Tier I leverage ratios as set forth in the table below.

As a result of the Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies were required to develop a “Community Bank Leverage Ratio” ("CBLR") (the ratio of a bank’s tangible equity capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes. The federal banking agencies set the minimum capital for the CBLR at 9 percent. The Bank did not opt into the CBLR and will continue to comply with the requirements under Basel III. The Bank’s leverage ratio was 10.99 percent at September 30, 2024.

The Bank’s regulatory capital amounts and ratios are presented in the following table:


						To Be Well										For Capital
						Capitalized Under					For Capital					Adequacy Purposes
						Prompt Corrective					Adequacy					Including Capital
	Actual					Action Provisions					Purposes					Conservation Buffer (A)
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
As of September 30, 2024:
Total capital (to risk-weighted assets)	$	789,954		15.00	%	$	526,726		10.00	%	$	421,381		8.00	%	$	553,062		10.50	%

Tier I capital (to risk-weighted assets)		724,038	13.75				421,381		8.00			316,035		6.00			447,717		8.50

Common equity tier I (to risk-weighted assets)		724,026	13.75				342,372		6.50			237,027		4.50			368,708		7.00

Tier I capital (to average assets)		724,038	10.99				329,528		5.00			263,622		4.00			263,622		4.00

As of December 31, 2023:
Total capital (to risk-weighted assets)	$	773,083		14.73	%	$	525,001		10.00	%	$	420,001		8.00	%	$	551,251		10.50	%

Tier I capital (to risk-weighted assets)		707,446		13.48			420,001		8.00			315,000		6.00			446,251		8.50

Common equity tier I (to risk-weighted assets)		707,434		13.47			341,250		6.50			236,250		4.50			367,500		7.00

Tier I capital (to average assets)		707,446		10.83			326,507		5.00			261,205		4.00			261,205		4.00

(A)

See footnote on following table.

The Company’s regulatory capital amounts and ratios are presented in the following table:


						To Be Well							For Capital
						Capitalized Under		For Capital					Adequacy Purposes
						Prompt Corrective		Adequacy					Including Capital
	Actual					Action Provisions		Purposes					Conservation Buffer (A)
(Dollars in thousands)	Amount		Ratio			Amount	Ratio	Amount		Ratio			Amount		Ratio
As of September 30, 2024:
Total capital (to risk-weighted assets)	$	800,961		15.19	%	N/A	N/A	$	421,829		8.00	%	$	553,651		10.50	%

Tier I capital (to risk-weighted assets)		615,486	11.67			N/A	N/A		316,372		6.00			448,194		8.50

Common equity tier I (to risk-weighted assets)		615,474	11.67			N/A	N/A		237,279		4.50			369,101		7.00

Tier I capital (to average assets)		615,486	9.33			N/A	N/A		263,863		4.00			263,863		4.00

As of December 31, 2023:
Total capital (to risk-weighted assets)	$	785,413		14.95	%	N/A	N/A	$	420,377		8.00	%	$	551,745		10.50	%

Tier I capital (to risk-weighted assets)		600,444		11.43		N/A	N/A		315,283		6.00			446,651		8.50

Common equity tier I (to risk-weighted assets)		600,432		11.43		N/A	N/A		236,462		4.50			367,830		7.00

Tier I capital (to average assets)		600,444		9.19		N/A	N/A		261,358		4.00			261,358		4.00

(A)

The Basel Rules require the Company and the Bank to maintain a 2.5% “capital conservation buffer” on top of the minimum risk-weighted asset ratios. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of (i) Common Equity Tier 1 to risk-weighted assets, (ii) Tier 1 capital to risk-weighted assets or (iii) total capital to risk-weighted assets above the respective minimum but below the capital conservation buffer face constraints on dividends, equity repurchases and discretionary bonus payments to executive officers based on the amount of the shortfall.

The Dividend Reinvestment Plan of Peapack-Gladstone Financial Corporation, or the “Reinvestment Plan,” allows shareholders of the Company to purchase additional shares of common stock using cash dividends without payment of any brokerage commissions or other charges. Shareholders may also make voluntary cash payments of up to $200,000 per quarter to purchase additional shares of common stock. Voluntary share purchases in the “Reinvestment Plan” can be filled from the Company’s authorized but unissued shares and/or in the open market, at the discretion of the Company. All shares purchased during the quarter ended September 30, 2024 were purchased in the open market.

On September 25, 2024, the Board of Directors declared a regular cash dividend of $0.05 per share payable on November 22, 2024 to shareholders of record on November 7, 2024.

Management believes the Company’s capital position and capital ratios are adequate. Further, Management believes the Company has sufficient common equity to support its planned growth for the immediate future. The Company continually assesses other potential sources of capital to support future growth.

LIQUIDITY: Liquidity refers to an institution’s ability to meet short-term requirements including funding of loans, deposit withdrawals and maturing obligations, as well as long-term obligations, including potential capital expenditures. The Company’s liquidity risk management is intended to ensure the Company has adequate funding and liquidity to support its assets across a range of market environments and conditions, including stressed conditions. Principal sources of liquidity include cash, temporary

investments, securities available for sale, customer deposit inflows, loan repayments and secured borrowings. Other liquidity sources include loan sales, loan participations and brokered CDs.

Management actively monitors and manages the Company’s liquidity position and believes it is sufficient to meet future needs. Cash and cash equivalents, including interest-earning deposits, totaled $492.7 million at September 30, 2024. The Company's elevated liquidity position was due to deposit growth of $661.3 million and loan contraction of $113.9 million during the first nine months of 2024. In addition, the Company had $682.7 million in securities designated as available for sale at September 30, 2024. These securities can be sold, or used as collateral for borrowings, in response to liquidity concerns. Available for sale and held to maturity securities with a carrying value of $590.8 million and $101.1 million as of September 30, 2024, respectively, were pledged to secure public funds and for other purposes required or permitted by law. In addition, the Company generates significant liquidity from scheduled and unscheduled principal repayments of loans and mortgage-backed securities.

As of September 30, 2024, the Company had approximately $3.0 billion of external borrowing capacity available on a same day basis (subject to any practical constraints affecting the FHLB or FRB), which when combined with balance sheet liquidity provided the Company with 293 percent coverage of our uninsured/unprotected deposits.

Brokered interest-bearing demand (“overnight”) deposits were $10.0 million at September 30, 2024. The interest rate paid on these deposits allows the Bank to fund operations at attractive rates and engage in interest rate swaps to hedge its asset-liability interest rate risk. The Company ensures ample available collateralized liquidity as a backup to these short-term brokered deposits. As of September 30, 2024, the Company had transacted pay fixed, receive floating interest rate swaps totaling $360.0 million in notional amount.

The Company allowed $120.5 million of brokered certificates of deposits to mature during the nine months ended September 30, 2024. These deposits were replaced by lower cost core relationship deposits as of September 30, 2024.

The Company has a Board-approved Contingency Funding Plan. This plan provides a framework for managing adverse liquidity stress and contingent sources of liquidity. The Company conducts liquidity stress testing on a regular basis to ensure sufficient liquidity in a stressed environment. The Company believes it has sufficient liquidity given the current environment.

Management believes the Company’s liquidity position and sources were adequate at September 30, 2024.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

ASSET/LIABILITY MANAGEMENT: The Company’s management Asset/Liability Committee (“ALCO”) is responsible for developing, implementing and monitoring asset/liability strategies and advising the Board of Directors on such strategies, as well as the related level of interest rate risk. In this regard, interest rate risk simulation models are prepared on a quarterly basis. These models demonstrate balance sheet gaps and predict changes to net interest income and the economic/market value of portfolio equity under various interest rate scenarios. In addition, these models, as well as ALCO processes and reporting, are subject to annual independent third-party review.

ALCO generally manages interest rate risk through the management of capital, cash flows and the duration of assets and liabilities, including sales and purchases of assets, as well as additions of wholesale borrowings and other sources of medium/longer-term funding. ALCO engages in interest rate swaps as a means of extending the duration of shorter-term liabilities.

The following strategies are among those used to manage interest rate risk:

•

Actively market C&I loans, which tend to have adjustable-rate features, and which generate customer relationships that can result in higher core deposit accounts;

•

Actively market equipment finance leases and loans, which tend to have shorter terms and higher interest rates than real estate loans;

•

Limit residential mortgage portfolio originations to adjustable-rate and/or shorter-term and/or “relationship” loans that result in core deposit and/or wealth management relationships;

•

Actively market core deposit relationships, which are generally longer duration liabilities;

•

Utilize medium-to-longer term certificates of deposit and/or wholesale borrowings to extend liability duration;

•

Utilize interest rate swaps to extend liability duration;

•

Utilize a loan level / back-to-back interest rate swap program, which converts a borrower’s fixed rate loan to adjustable rate for the Company;

•

Closely monitor and actively manage the investment portfolio, including management of duration, prepayment and interest rate risk;

•

Maintain adequate levels of capital; and

•

Utilize loan sales.

The interest rate swap program is administered by ALCO and follows procedures and documentation in accordance with regulatory guidance and standards as set forth in ASC 815 for cash flow hedges. The program incorporates pre-purchase analysis, liability designation, sensitivity analysis, correlation analysis, daily mark-to-market analysis and collateral posting as required. The Board is advised of all swap activity. In these swaps, the Company is receiving floating and paying fixed interest rates with total notional value of $360.0 million as of September 30, 2024.

In addition, the Company initiated a loan level/back-to-back swap program in support of its commercial lending business. Pursuant to this program, the Company extends a floating rate loan and executed a floating to fixed swap with the borrower. At the same time, the Company executes a third-party swap, the terms of which fully offset the fixed exposure and, result in a final floating rate exposure for the Company. As of September 30, 2024, $466.8 million of notional value in swaps were executed and outstanding with borrowers under this program.

As noted above, ALCO uses simulation modeling to analyze the Company’s net interest income sensitivity, as well as the Company’s economic value of portfolio equity under various interest rate scenarios. The models are based on the actual maturity and repricing characteristics of rate sensitive assets and liabilities. The models incorporate certain prepayment and interest rate assumptions, which management believes to be reasonable as of September 30, 2024. The models assume changes in interest rates without any proactive change in the balance sheet by management. In the models, the forecasted shape of the yield curve remained static as of September 30, 2024.

In an immediate and sustained 100 basis point increase in market rates at September 30, 2024, net interest income would be flat in year 1 and increase by 2.2 percent in year 2, compared to a flat interest rate scenario. In an immediate and sustained 100 basis point decrease in market rates at September 30, 2024, net interest income would decrease approximately 1.2 percent for year 1 and decrease 4.1 percent for year 2, compared to a flat interest rate scenario.

In an immediate and sustained 200 basis point increase in market rates at September 30, 2024, net interest income would increase approximately 1.1 percent in year 1 and increase by 5.2 percent in year 2, compared to a flat interest rate scenario. In an immediate and sustained 200 basis point decrease in market rates at September 30, 2024, net interest income for year 1 would decrease approximately 3.2 percent, when compared to a flat interest rate scenario. In year 2, net interest income would decrease 9.2 percent, when compared to a flat interest rate scenario.

The Company's interest rate sensitivity models indicate the Company is asset sensitive as of September 30, 2024 and that net interest income would improve in a rising rate environment, but decline in a falling rate environment.

The table below shows the estimated changes in the Company’s economic value of portfolio equity (“EVPE”) that would result from an immediate parallel change in the market interest rates at September 30, 2024.


	Estimated Increase/								EVPE as a Percentage of
(Dollars in thousands)	Decrease in EVPE								Present Value of Assets (B)
Change In
Interest
Rates	Estimated								EVPE			Increase/(Decrease)
(Basis Points)	EVPE (A)		Amount			Percent			Ratio (C)			(basis points)
+200	$	651,295	$	(26,667	)		(3.93	)%		10.29	%		(1	)
+100		665,595		(12,367	)		(1.82	)		10.32			2
Flat interest rates		677,962		—			—			10.30			—
-100		695,466		17,504			2.58			10.35			5
-200		670,831		(7,131	)		(1.05	)		9.83			(47	)

(A) EVPE is the discounted present value of expected cash flows from assets and liabilities.

(B) Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.

Certain shortcomings are inherent in the methodologies used in determining interest rate risk. Simulation modeling requires making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the modeling assumes that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the information provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our net interest income and will differ from actual results.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to provide reasonable assurance that information required to be disclosed in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the forms and rules of the Securities and Exchange Commission and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Corporation’s disclosure controls and procedures are effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

The Company’s management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, provides reasonable, not absolute, assurance that the objectives of the control system are met. The design of a control system reflects resource constraints. Because there are inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been or will be detected. These inherent limitations include that judgments in decision-making can be faulty and that breakdowns occur because of simple error or mistake. Further, controls can be circumvented. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all future conditions; over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with the policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

In the normal course of its business, lawsuits and claims may be brought against the Company and its subsidiaries. There are no currently pending or threatened litigation or proceedings against the Company or its subsidiaries, which if adversely decided, we believe would have a material adverse effect on the Company.

ITEM 1A. Risk Factors

There have been no material changes in risk factors applicable to the Company from those disclosed in “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds


	Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs		Total Number of Shares Withheld (A)		Average Price Paid Per Share		Maximum Number of Shares That May Yet Be Purchased Under the Plans Or Programs (B)
July 1, 2024 -
July 31, 2024		—		—	$	—		277,673
August 1, 2024 -
August 31, 2024		100,000		—		25.92		177,673
September 1, 2024 -
September 30, 2024		—		—		—		177,673
Total		100,000		—	$	25.92

(A) Represents shares withheld to satisfy tax withholding obligations upon the exercise of stock options and/or the vesting of restricted stock awards/units. Such shares are repurchased pursuant to the applicable plan and are not under the Company's share repurchase program.

(B) On January 26, 2023, the Company’s Board of Directors approved a plan to repurchase up to 890,000 shares, which was approximately 5 percent of the outstanding shares as of that date, through December 31, 2024. The timing and amount of shares repurchased will depend on certain factors, including but not limited to, market conditions and prices, the Company’s liquidity and capital requirements and alternative uses of capital.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

Securities Trading Plans of Directors and Executive Officers

During the three months ended September 30, 2024, none of our directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

2024 Phantom Stock Plan.

On February 22, 2024, the Company adopted the Peapack-Gladstone Financial Corporation 2024 Phantom Stock Plan (the “Phantom Stock Plan”), effective as of February 22, 2024, to promote the long-term financial success of the Company and its subsidiaries by providing a means to attract, retain and reward individuals who contribute to such success and to further align their interests with those of the Company’s shareholders. Any employee or director of the Company or a subsidiary selected by the Compensation Committee of the Company’s Board of Directors (the “Committee”) is eligible to participate in the Plan.

Pursuant to the Phantom Stock Plan, the Company may grant phantom stock units and phantom stock appreciation units to eligible participants. A phantom stock unit represents the right to receive a cash payment on the determination date established by the Committee equal to the value of a share of the Company’s stock on the determination date. A phantom stock appreciation unit represents the right to receive a cash payment on the determination date established by the Committee equal to the positive difference between the strike price on the grant date and the tangible book value of a share of the Company’s stock on the determination date.

The awards granted may be subject to either time-based vesting or pre-established performance goals. Unless the Committee determines otherwise, the required period of service for full vesting will generally be three years for all awards, subject to acceleration of vesting in the event of the participant’s death, disability, involuntary termination without cause within two years following the occurrence of a change in control, and retirement. In the event of separation of service (as defined in the Plan) for any reason other than disability, death or termination without cause within two years following the occurrence of a change in control, or retirement, unvested awards will be forfeited. In the event of termination for cause, the awards granted to a participant will

expire and be forfeited. Upon separation of service due to disability or death, all awards granted to the participant will become fully vested and payment of the cash value of the awards will be made no later than 75 days after the participant’s separation of service. At the time of an involuntary termination without cause within two years following a change in control, the awards held by a participant will be deemed to have been fully earned and the cash value of outstanding awards will be paid no later than 75 days after the change in control. To the extent vesting of any performance awards is accelerated, vesting will be pro-rata, based target achievement (or actual achievement, if higher) of the performance goals and on the number of completed months in the performance period.

Amended and Restated Deferred Restricted Stock Unit Plan.

On October 2, 2024, the Company adopted the Amended and Restated Peapack-Gladstone Financial Corporation Restricted Stock Unit Deferred Compensation Plan, effective as of October 2, 2024 (the “RSU Deferral Plan”). The RSU Deferral Plan is provided to directors and a select group of management and highly compensated employees, including the named executive officers listed in the Corporation’s proxy statement. Pursuant to the amended and restated plan, prior to the applicable plan year, participants may elect to defer all or a portion of their grants of restricted stock units, phantom stock units, or similar awards to a deferral account maintained on behalf of the participant. Participants are at all times 100% vested in their deferral accounts. Subject to certain limitations designated by the Board of Directors of the Company, a participant may direct the investment of the participant’s deferral account in certain investment funds options or in shares of Company common stock. The deferral account will generally be paid on the earliest to occur of separation from employment, a scheduled distribution date (if elected by the participant), death, disability, or in the event of a change in control (if elected by the participant). The deferral account will be distributed either in a lump sum or in annual installments (of up to 15 years) in accordance with the participant’s pre-established election. If the distribution is due to a scheduled distribution date or retirement (separation from service after age 62); if the distribution is for any other reason, the distribution shall be made in a lump sum payment.

The foregoing descriptions of the Phantom Stock Plan and the RSU Deferral Plan do not purport to be complete and are qualified in their entirety by reference to the Phantom Stock Plan, form of time-based Phantom Stock Unit Award Agreement, form of performance-based Phantom Stock Unit Award Agreement, and the RSU Deferral Plan, copies of which are included as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, to this report on Form 10-Q and incorporated by reference into this Item 5.

ITEM 6. Exhibits


3	Articles of Incorporation and By-Laws:

	A. Certificate of Incorporation of the Registrant, as amended, incorporated herein by reference to Exhibit 3 of the Registrant’s Quarterly Report on Form 10-Q filed on November 9, 2009 (File No. 001-16197).

	B. By-Laws of the Registrant, incorporated herein by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K filed on March 23, 2023 (File No. 001-16197).

10.1	Peapack-Gladstone Financial Corporation 2024 Phantom Stock Plan.

10.2	Form of Time-Based Phantom Stock Unit Award Agreement under the Peapack-Gladstone Financial Corporation 2024 Phantom Stock Plan.

10.3	Form of Performance-Based Phantom Stock Unit Award Agreement under the Peapack-Gladstone Financial Corporation 2024 Phantom Stock Plan.

10.4	Amended and Restated Peapack-Gladstone Financial Corporation Restricted Stock Unit Deferred Compensation Plan.

31.1	Certification of Douglas L. Kennedy, Chief Executive Officer of the Corporation, pursuant to Securities Exchange Act Rule 13a-14(a).

31.2	Certification of Frank A. Cavallaro, Chief Financial Officer of the Corporation, pursuant to Securities Exchange Act Rule 13a-14(a).

32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Douglas L. Kennedy, Chief Executive Officer of the Corporation and Frank A. Cavallaro, Chief Financial Officer of the Corporation.

101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because iXBRL tags are embedded within the Inline XBRL document.

101.SCH	Inline XBRL Taxonomy Extension Schema Document.

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	PEAPACK-GLADSTONE FINANCIAL CORPORATION
	(Registrant)

DATE: November 7, 2024	By:	/s/ Douglas L. Kennedy
		Douglas L. Kennedy
		President and Chief Executive Officer
		(Principal Executive Officer)

DATE: November 7, 2024	By:	/s/ Frank A. Cavallaro
		Frank A. Cavallaro
		Senior Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

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Peapack-Gladstone Financial (PGC) 10-Q2024 Q3 Quarterly report

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