Peapack-Gladstone Financial Corporation
11/06/2026 | Press release | Distributed by Public on 11/06/2026 10:06
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
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, asset quality, 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, 2025, 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 2026 and beyond;
•
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, the shape of the yield curve and/or our highly competitive market;
•
declines in the value of 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;
•
changes in the methodology and assumptions used to calculate the allowance for credit losses;
•
higher than expected increases in credit losses or in the level of delinquent, nonperforming, classified and criticized loans or charge-offs;
•
inflation and changes in interest rates, which may adversely impact our margins and yields, reduce the fair value of our financial instruments, reduce our loan originations and lead to higher operating costs;
•
declines in real estate values within our market areas;
•
legislative and regulatory actions (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Basel III and related regulations) that may result in increased compliance costs;
•
the imposition of tariffs or other domestic or international governmental policies, trade restrictions and retaliatory measures impacting our borrowers and the broader economy;
•
the impact of any federal government shutdown, debt ceiling impasses or fiscal uncertainty;
•
the failure to maintain current technologies and/or to successfully implement future information technology enhancements and the operational risks associated with the adoption of artificial intelligence and other emerging technologies;
•
risks associated with cybersecurity threats, data breaches, ransomware attacks, or other failures in our operational or security systems and infrastructure, including the risks arising from our dependence on third-party service providers and vendors;
•
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;
•
a reduction in our lower-cost funding sources;
•
changes in liquidity, including the size and composition of our deposit portfolio, including the percentage of uninsured deposits in the portfolio;
•
our inability to adapt to technological changes;
•
claims and litigation pertaining to fiduciary responsibility, environmental laws and other matters;
•
our inability to attract and retain key employees;
•
demand for loans and deposits in our market areas;
•
adverse changes in securities markets;
•
changes in New York City rent regulation and real estate tax laws;
•
changes in governmental regulation, including, but not limited to, any increase in FDIC insurance premiums and changes in the monetary and fiscal policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System;
•
changes in accounting policies and practices; and/or
•
other unexpected material adverse changes in our 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, 2025 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 our results of operations. This critical policy and its application are reviewed periodically with the Audit Committee and the Board of Directors.
The allowance for credit losses is a valuation allowance of Management's estimate of expected credit losses in the loan portfolio calculated in accordance with ASC 326, "Credit Losses". The process to determine expected credit losses utilizes analytic tools and Management judgment and is reviewed on a quarterly basis. When Management is reasonably certain that a loan balance is not fully collectable, an analysis is completed whereby a specific reserve may be established or a full or partial charge-off is recorded against the allowance. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance via a quantitative analysis, which considers available information from internal and external sources related to past loan loss and prepayment experience and current economic conditions, as well as the incorporation of reasonable and supportable forecasts. Management evaluates a variety of factors, including available published economic information, in arriving at its forecasts. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. Also included in the allowance for credit losses are qualitative reserves that are expected, but, in the Management's assessment, may not be adequately represented in the quantitative analysis or the forecasts described above. Factors may include, among others, changes in lending policies and procedures, size and composition of the portfolio, experience and depth of Management and the effect of external factors such as competition and legal and regulatory requirements. The allowance is available for any loan that, in Management's judgment, should be charged off.
Although Management uses the best information available, the level of the allowance for credit losses remains an estimate, which is subject to significant judgment and short-term change. Various regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance for credit losses. Such agencies may require the Company to make additional provisions for credit losses based upon information available to them at the time of their examination. Furthermore, the majority of the Company's loans are secured by real estate in New Jersey and the boroughs of New York City. Accordingly, the collectability of a substantial portion of the carrying value of the Company's loan portfolio is susceptible to changes in local market conditions, rent control regulations and any adverse economic conditions. Future adjustments to the provision for credit losses and allowance for credit losses may be necessary due to economic, operating, regulatory and other conditions beyond the Company's control.
EXECUTIVE SUMMARY: The following tables present certain key aspects of our performance for the three and nine months ended September 30, 2026 and 2025.
|
For the Three Months Ended September 30, |
Change |
|||||||||||
|
(Dollars in thousands, except per share data) |
2026 |
2025 |
2026 vs 2025 |
|||||||||
|
Results of Operations: |
||||||||||||
|
Interest income |
$ |
106,871 |
$ |
92,545 |
$ |
14,326 |
||||||
|
Interest expense |
39,379 |
41,972 |
(2,593 |
) |
||||||||
|
Net interest income |
67,492 |
50,573 |
16,919 |
|||||||||
|
Wealth management fee income |
17,279 |
15,798 |
1,481 |
|||||||||
|
Other income |
2,717 |
4,323 |
(1,606 |
) |
||||||||
|
Total other income |
19,996 |
20,121 |
(125 |
) |
||||||||
|
Total revenue (A) |
87,488 |
70,694 |
16,794 |
|||||||||
|
Operating expenses |
55,148 |
52,297 |
2,851 |
|||||||||
|
Pretax income before provision for credit losses |
32,340 |
18,397 |
13,943 |
|||||||||
|
Provision for credit losses |
8,499 |
4,790 |
3,709 |
|||||||||
|
Pretax income |
23,841 |
13,607 |
10,234 |
|||||||||
|
Income tax expense |
4,895 |
3,976 |
919 |
|||||||||
|
Net income |
18,946 |
9,631 |
9,315 |
|||||||||
|
Dividends on preferred stock |
495 |
- |
495 |
|||||||||
|
Net income available to common shareholders |
$ |
18,451 |
$ |
9,631 |
$ |
8,820 |
||||||
|
Diluted average shares outstanding |
19,069,474 |
17,686,979 |
1,382,495 |
|||||||||
|
Diluted earnings per share |
$ |
0.99 |
$ |
0.54 |
$ |
0.45 |
||||||
|
Return on average assets annualized ("ROAA") |
0.93 |
% |
0.53 |
% |
0.40 |
% |
||||||
|
Return on average common equity annualized ("ROACE") |
10.70 |
6.12 |
4.58 |
|||||||||
(A) The sum of net interest income and other income.
|
For the Nine Months Ended |
Change |
|||||||||||
|
(Dollars in thousands, except per share data) |
2026 |
2025 |
2026 vs 2025 |
|||||||||
|
Results of Operations: |
||||||||||||
|
Interest income |
$ |
302,130 |
$ |
268,541 |
$ |
33,589 |
||||||
|
Interest expense |
110,821 |
124,173 |
(13,352 |
) |
||||||||
|
Net interest income |
191,309 |
144,368 |
46,941 |
|||||||||
|
Wealth management fee income |
51,002 |
47,176 |
3,826 |
|||||||||
|
Other income |
13,722 |
13,250 |
472 |
|||||||||
|
Total other income |
64,724 |
60,426 |
4,298 |
|||||||||
|
Total revenue (A) |
256,033 |
204,794 |
51,239 |
|||||||||
|
Operating expenses |
166,255 |
153,630 |
12,625 |
|||||||||
|
Pretax income before provision for credit losses |
89,778 |
51,164 |
38,614 |
|||||||||
|
Provision for credit losses |
23,914 |
15,847 |
8,067 |
|||||||||
|
Pretax income |
65,864 |
35,317 |
30,547 |
|||||||||
|
Income tax expense |
16,793 |
10,150 |
6,643 |
|||||||||
|
Net income |
49,071 |
25,167 |
23,904 |
|||||||||
|
Dividends on preferred stock |
690 |
- |
690 |
|||||||||
|
Net income available to common shareholders |
$ |
48,381 |
$ |
25,167 |
$ |
23,214 |
||||||
|
Diluted average shares outstanding |
18,500,371 |
17,763,871 |
736,500 |
|||||||||
|
Diluted earnings per share |
$ |
2.65 |
$ |
1.42 |
$ |
1.23 |
||||||
|
Return on average assets annualized (ROAA) |
0.83 |
% |
0.47 |
% |
0.36 |
% |
||||||
|
Return on average common equity annualized (ROACE) |
9.54 |
5.41 |
4.13 |
|||||||||
(A) The sum of net interest income and other income.
|
September 30, |
December 31, |
Change |
||||||||||
|
2026 |
2025 |
2026 vs 2025 |
||||||||||
|
Selected Balance Sheet Ratios: |
||||||||||||
|
Total capital (Tier I + II) to risk-weighted assets |
11.81 |
% |
12.68 |
% |
(0.87 |
)% |
||||||
|
Tier I leverage ratio |
9.29 |
8.87 |
0.42 |
|||||||||
|
Loans to deposits |
96.22 |
94.91 |
1.31 |
|||||||||
|
Allowance for credit losses to total loans |
1.03 |
1.14 |
(0.11 |
) |
||||||||
|
Allowance for credit losses to nonperforming loans |
126.35 |
104.10 |
22.25 |
|||||||||
|
Nonperforming loans to total loans |
0.82 |
1.09 |
(0.27 |
) |
||||||||
For the quarter ended September 30, 2026, the Company recorded total revenue of $87.5 million, pretax income of $23.8 million, net income available to common shareholders of $18.5 million and diluted earnings per share of $0.99, compared to revenue of $70.7 million, pretax income of $13.6 million, net income available to common shareholders of $9.6 million and diluted earnings per share of $0.54 for the same period last year.
The increase in net income for the third quarter of 2026 was primarily due to a $16.9 million increase in net interest income, reflecting growth in commercial and commercial mortgage loans and improved yields on average interest-earning assets, and a lower cost of average interest-bearing liabilities. This was partially offset by a $2.9 million increase in operating expenses and a $3.7 million increase in the provision for credit losses. The increase in operating expenses was principally attributable to the strategic addition of employees supporting the Company's expansion in New York City and Long Island, the expansion of the equipment financing team, increased health insurance costs and annual merit increases. Net interest margin improved to 3.34 percent for the third quarter of 2026 as compared to 2.81 percent for the same period in 2025. Wealth management fee income continues to be a consistent and steady revenue stream for the Company and represented 20 percent of total revenue for the third quarter of 2026.
For the nine months ended September 30, 2026, the Company recorded total revenue of $256.0 million, pretax income of $65.9 million, net income available to common shareholders of $48.4 million and diluted earnings per share of $2.65 compared to revenue of $204.8 million, pretax income of $35.3 million, net income available to common shareholders of $25.2 million and diluted earnings per share of $1.42 for the same period in 2025.
The increase in total revenue was primarily driven by higher net interest income, which was a result of growth in average interest earning assets, along with a lower cost of interest-bearing liabilities. Net interest margin, increased to 3.30 percent for the first nine months of 2026 from 2.76 percent for the same period in 2025. Wealth management fee income and other income also contributed to revenue growth, increasing $3.8 million and $472,000 for the nine months ended September 30, 2026, respectively. These revenue increases were partially offset by higher operating expenses and a higher provision for credit losses. Operating expenses increased principally due to the employee additions supporting the Company's expansion into New York City and Long Island, expansion of the equipment financing team, increased health insurance costs and annual merit increases.
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, 2025 under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations - Off-Balance Sheet Arrangements and Aggregate Contractual Obligations."
NET INTEREST INCOME ("NII") / NET INTEREST MARGIN ("NIM") / AVERAGE BALANCE SHEETS:
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 calculating 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.
Outstanding loan balances are the primary driver of the yields on interest-earning assets. The following tables summarize the loans that the Company closed during the periods indicated:
|
For the Three Months Ended |
||||||||||||
|
September 30, |
September 30, |
Change |
||||||||||
|
(In thousands) |
2026 |
2025 |
2026 vs 2025 |
|||||||||
|
Residential mortgage loans originated for portfolio |
$ |
25,698 |
$ |
18,323 |
$ |
7,375 |
||||||
|
Residential mortgage loans originated for sale |
2,077 |
445 |
1,632 |
|||||||||
|
Total residential mortgage loans |
27,775 |
18,768 |
9,007 |
|||||||||
|
Commercial real estate loans |
183,231 |
78,825 |
104,406 |
|||||||||
|
Multifamily |
58,895 |
47,991 |
10,904 |
|||||||||
|
C&I loans (A) (B) |
514,517 |
453,554 |
60,963 |
|||||||||
|
Small business administration |
- |
6,821 |
(6,821 |
) |
||||||||
|
Wealth lines of credit (A) |
12,450 |
2,700 |
9,750 |
|||||||||
|
Total commercial loans |
769,093 |
589,891 |
179,202 |
|||||||||
|
Installment loans |
123,422 |
47,115 |
76,307 |
|||||||||
|
Home equity lines of credit (A) |
10,394 |
11,755 |
(1,361 |
) |
||||||||
|
Total loans closed |
$ |
930,684 |
$ |
667,529 |
$ |
263,155 |
||||||
|
For the Nine Months Ended |
||||||||||||
|
September 30, |
September 30, |
Change |
||||||||||
|
(In thousands) |
2026 |
2025 |
2026 vs 2025 |
|||||||||
|
Residential mortgage loans originated for portfolio |
$ |
107,327 |
$ |
78,470 |
$ |
28,857 |
||||||
|
Residential mortgage loans originated for sale |
11,549 |
6,231 |
5,318 |
|||||||||
|
Total residential mortgage loans |
118,876 |
84,701 |
34,175 |
|||||||||
|
Commercial real estate loans |
457,878 |
150,191 |
307,687 |
|||||||||
|
Multifamily |
137,220 |
128,141 |
9,079 |
|||||||||
|
C&I loans (A) (B) |
1,171,915 |
911,507 |
260,408 |
|||||||||
|
Small business administration |
11,445 |
19,839 |
(8,394 |
) |
||||||||
|
Wealth lines of credit (A) |
40,930 |
15,000 |
25,930 |
|||||||||
|
Total commercial loans |
1,819,388 |
1,224,678 |
594,710 |
|||||||||
|
Installment loans |
180,437 |
132,220 |
48,217 |
|||||||||
|
Home equity lines of credit (A) |
21,401 |
21,714 |
(313 |
) |
||||||||
|
Total loans closed |
$ |
2,140,102 |
$ |
1,463,313 |
$ |
676,789 |
||||||
(A) Includes loans and lines of credit that closed in the period but were not necessarily funded.
(B) Includes equipment finance leases and loans.
Loan growth for both periods was driven primarily by strategic business development initiatives, including the hiring of a new head of commercial real estate and the Company's expansion into the New York City and Long Island, the expansion of our equipment financing team and continued customer demand across key lending categories.
At September 30, 2026, December 31, 2025 and September 30, 2025, 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, |
||||||||||
|
2026 |
2025 |
2025 |
||||||||||
|
Multifamily real estate loans as a percent of |
223 |
% |
231 |
% |
227 |
% |
||||||
|
Non-owner occupied commercial real estate |
179 |
136 |
131 |
|||||||||
|
Total CRE concentration |
402 |
% |
367 |
% |
358 |
% |
||||||
Total CRE concentration increased to 402 percent of the Bank's total regulatory capital at September 30, 2026 from 367 percent at December 31, 2025. The increase was primarily attributable to growth in non-owner occupied commercial real estate lending, reflecting increased loan originations resulting from the Company's strategic business development initiatives, including the hiring of a new head of commercial real estate. In addition, the Bank's regulatory capital declined as a result of the Company's decision to redeem its outstanding subordinated debt in the first quarter of 2026. Total CRE concentration as a percentage of regulatory capital is monitored by Management. Management believes it satisfactorily addresses the key elements in the risk management framework laid out by its regulators for the effective management of CRE concentration risks.
The following tables reflect 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, 2026 |
September 30, 2025 |
|||||||||||||||||||||||
|
Average |
Income/ |
Annualized |
Average |
Income/ |
Annualized |
|||||||||||||||||||
|
(Dollars in thousands) |
Balance |
Expense |
Yield |
Balance |
Expense |
Yield |
||||||||||||||||||
|
ASSETS: |
||||||||||||||||||||||||
|
Interest-earning assets: |
||||||||||||||||||||||||
|
Investments: |
||||||||||||||||||||||||
|
Taxable (A) |
$ |
939,090 |
$ |
7,430 |
3.16 |
% |
$ |
963,706 |
$ |
7,504 |
3.11 |
% |
||||||||||||
|
Loans (B) (C): |
||||||||||||||||||||||||
|
Residential mortgages |
668,213 |
7,909 |
4.73 |
650,299 |
7,337 |
4.51 |
||||||||||||||||||
|
Commercial mortgages |
2,839,401 |
36,229 |
5.06 |
2,458,008 |
28,447 |
4.63 |
||||||||||||||||||
|
Commercial |
3,008,999 |
48,106 |
6.39 |
2,586,780 |
42,790 |
6.62 |
||||||||||||||||||
|
Commercial construction |
807 |
13 |
6.39 |
- |
- |
- |
||||||||||||||||||
|
Installment |
307,122 |
4,753 |
6.14 |
156,471 |
2,718 |
6.95 |
||||||||||||||||||
|
Home equity |
55,640 |
962 |
6.86 |
53,781 |
1,020 |
7.59 |
||||||||||||||||||
|
Other |
1,033 |
4 |
1.54 |
363 |
5 |
5.43 |
||||||||||||||||||
|
Total loans |
6,881,215 |
97,976 |
5.65 |
5,905,702 |
82,317 |
5.58 |
||||||||||||||||||
|
Interest-earning deposits |
226,092 |
1,679 |
2.95 |
304,681 |
2,960 |
3.89 |
||||||||||||||||||
|
Total interest-earning assets |
8,046,397 |
107,085 |
5.28 |
% |
7,174,089 |
92,781 |
5.17 |
% |
||||||||||||||||
|
Noninterest-earning assets: |
||||||||||||||||||||||||
|
Cash and due from banks |
8,293 |
12,279 |
||||||||||||||||||||||
|
Allowance for credit losses |
(71,902 |
) |
(82,803 |
) |
||||||||||||||||||||
|
Premises and equipment |
41,471 |
37,608 |
||||||||||||||||||||||
|
Other assets |
132,562 |
136,238 |
||||||||||||||||||||||
|
Total noninterest-earning assets |
110,424 |
103,322 |
||||||||||||||||||||||
|
Total assets |
$ |
8,156,821 |
$ |
7,277,411 |
||||||||||||||||||||
|
LIABILITIES: |
||||||||||||||||||||||||
|
Interest-bearing deposits: |
||||||||||||||||||||||||
|
Checking |
$ |
3,811,998 |
$ |
26,454 |
2.75 |
% |
$ |
3,640,088 |
$ |
29,975 |
3.29 |
% |
||||||||||||
|
Money market accounts |
1,315,270 |
8,848 |
2.67 |
1,005,633 |
7,225 |
2.87 |
||||||||||||||||||
|
Savings |
106,103 |
197 |
0.74 |
104,777 |
178 |
0.68 |
||||||||||||||||||
|
Certificates of deposit - retail |
376,680 |
2,736 |
2.88 |
429,389 |
3,657 |
3.41 |
||||||||||||||||||
|
Subtotal interest-bearing deposits |
5,610,051 |
38,235 |
2.70 |
5,179,887 |
41,035 |
3.17 |
||||||||||||||||||
|
Interest-bearing demand - brokered |
- |
- |
- |
- |
- |
- |
||||||||||||||||||
|
Total interest-bearing deposits |
5,610,051 |
38,235 |
2.70 |
5,179,887 |
41,035 |
3.17 |
||||||||||||||||||
|
FHLB advances and borrowings |
111,630 |
1,133 |
4.03 |
- |
- |
- |
||||||||||||||||||
|
Finance lease liabilities |
1,075 |
11 |
4.06 |
1,242 |
13 |
4.19 |
||||||||||||||||||
|
Subordinated debt |
- |
- |
- |
98,954 |
924 |
3.74 |
||||||||||||||||||
|
Total interest-bearing liabilities |
5,722,756 |
39,379 |
2.73 |
% |
5,280,083 |
41,972 |
3.18 |
% |
||||||||||||||||
|
Noninterest-bearing liabilities: |
||||||||||||||||||||||||
|
Demand deposits |
1,583,319 |
1,261,607 |
||||||||||||||||||||||
|
Accrued expenses and other liabilities |
115,929 |
106,630 |
||||||||||||||||||||||
|
Total noninterest-bearing liabilities |
1,699,248 |
1,368,237 |
||||||||||||||||||||||
|
Shareholders' equity |
734,817 |
629,091 |
||||||||||||||||||||||
|
Total liabilities and shareholders' equity |
$ |
8,156,821 |
$ |
7,277,411 |
||||||||||||||||||||
|
Net interest income (tax-equivalent basis) |
$ |
67,706 |
$ |
50,809 |
||||||||||||||||||||
|
Net interest spread |
2.55 |
% |
1.99 |
% |
||||||||||||||||||||
|
Net interest margin (D) |
3.34 |
% |
2.81 |
% |
||||||||||||||||||||
|
Tax equivalent adjustment |
$ |
(214 |
) |
$ |
(236 |
) |
||||||||||||||||||
|
Net interest income |
$ |
67,492 |
$ |
50,573 |
||||||||||||||||||||
(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, 2026 |
September 30, 2025 |
|||||||||||||||||||||||
|
Average |
Income/ |
Annualized |
Average |
Income/ |
Annualized |
|||||||||||||||||||
|
(Dollars in thousands) |
Balance |
Expense |
Yield |
Balance |
Expense |
Yield |
||||||||||||||||||
|
ASSETS: |
||||||||||||||||||||||||
|
Interest-earning assets: |
||||||||||||||||||||||||
|
Investments: |
||||||||||||||||||||||||
|
Taxable (A) |
$ |
925,220 |
$ |
21,503 |
3.10 |
% |
$ |
1,010,936 |
$ |
24,087 |
3.18 |
% |
||||||||||||
|
Loans (B) (C): |
||||||||||||||||||||||||
|
Residential mortgages |
666,410 |
23,988 |
4.80 |
636,268 |
21,146 |
4.43 |
||||||||||||||||||
|
Commercial mortgages |
2,749,181 |
100,896 |
4.91 |
2,423,225 |
82,017 |
4.51 |
||||||||||||||||||
|
Commercial |
2,879,869 |
136,708 |
6.33 |
2,520,420 |
124,909 |
6.61 |
||||||||||||||||||
|
Commercial construction |
711 |
35 |
6.58 |
- |
- |
- |
||||||||||||||||||
|
Installment |
242,244 |
11,205 |
6.18 |
134,883 |
6,914 |
6.83 |
||||||||||||||||||
|
Home equity |
56,179 |
2,871 |
6.83 |
50,143 |
2,811 |
7.47 |
||||||||||||||||||
|
Other |
914 |
13 |
1.90 |
339 |
15 |
5.95 |
||||||||||||||||||
|
Total loans |
6,595,508 |
275,716 |
5.59 |
5,765,278 |
237,812 |
5.50 |
||||||||||||||||||
|
Interest-earning deposits |
245,408 |
5,554 |
3.03 |
259,707 |
7,354 |
3.78 |
||||||||||||||||||
|
Total interest-earning assets |
7,766,136 |
302,773 |
5.21 |
% |
7,035,921 |
269,253 |
5.10 |
% |
||||||||||||||||
|
Noninterest-earning assets: |
||||||||||||||||||||||||
|
Cash and due from banks |
8,282 |
9,646 |
||||||||||||||||||||||
|
Allowance for credit losses |
(70,221 |
) |
(78,040 |
) |
||||||||||||||||||||
|
Premises and equipment |
40,339 |
34,382 |
||||||||||||||||||||||
|
Other assets |
134,264 |
130,645 |
||||||||||||||||||||||
|
Total noninterest-earning assets |
112,664 |
96,633 |
||||||||||||||||||||||
|
Total assets |
$ |
7,878,800 |
$ |
7,132,554 |
||||||||||||||||||||
|
LIABILITIES: |
||||||||||||||||||||||||
|
Interest-bearing deposits: |
||||||||||||||||||||||||
|
Checking |
$ |
3,779,199 |
$ |
75,602 |
2.67 |
% |
$ |
3,548,745 |
$ |
87,168 |
3.28 |
% |
||||||||||||
|
Money market accounts |
1,194,479 |
22,881 |
2.56 |
979,675 |
20,487 |
2.79 |
||||||||||||||||||
|
Savings |
110,058 |
595 |
0.72 |
104,983 |
443 |
0.56 |
||||||||||||||||||
|
Certificates of deposit - retail |
394,755 |
8,782 |
2.97 |
448,187 |
12,022 |
3.58 |
||||||||||||||||||
|
Subtotal interest-bearing deposits |
5,478,491 |
107,860 |
2.63 |
5,081,590 |
120,120 |
3.15 |
||||||||||||||||||
|
Interest-bearing demand - brokered |
- |
- |
- |
6,337 |
210 |
4.42 |
||||||||||||||||||
|
Total interest-bearing deposits |
5,478,491 |
107,860 |
2.63 |
5,087,927 |
120,330 |
3.15 |
||||||||||||||||||
|
FHLB advances and borrowings |
57,569 |
1,719 |
3.99 |
15,215 |
516 |
4.53 |
||||||||||||||||||
|
Finance lease liabilities |
1,117 |
35 |
4.19 |
1,282 |
40 |
4.16 |
||||||||||||||||||
|
Subordinated debt |
21,767 |
1,207 |
7.41 |
108,065 |
3,287 |
4.06 |
||||||||||||||||||
|
Total interest-bearing liabilities |
5,558,944 |
110,821 |
2.67 |
% |
5,212,489 |
124,173 |
3.18 |
% |
||||||||||||||||
|
Noninterest-bearing liabilities: |
||||||||||||||||||||||||
|
Demand deposits |
1,506,443 |
1,185,955 |
||||||||||||||||||||||
|
Accrued expenses and other liabilities |
111,106 |
113,521 |
||||||||||||||||||||||
|
Total noninterest-bearing liabilities |
1,617,549 |
1,299,476 |
||||||||||||||||||||||
|
Shareholders' equity |
702,307 |
620,589 |
||||||||||||||||||||||
|
Total liabilities and shareholders' equity |
$ |
7,878,800 |
$ |
7,132,554 |
||||||||||||||||||||
|
Net interest income (tax-equivalent basis) |
$ |
191,952 |
$ |
145,080 |
||||||||||||||||||||
|
Net interest spread |
2.54 |
% |
1.92 |
% |
||||||||||||||||||||
|
Net interest margin (D) |
3.30 |
% |
2.76 |
% |
||||||||||||||||||||
|
Tax equivalent adjustment |
$ |
(643 |
) |
$ |
(712 |
) |
||||||||||||||||||
|
Net interest income |
$ |
191,309 |
$ |
144,368 |
||||||||||||||||||||
(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 and nine month periods ended September 30, 2026 compared to September 30, 2025 are shown below:
|
For the Three Months Ended September, 2026 |
||||||||||||
|
Difference due to |
Change In |
|||||||||||
|
Change In: |
Income/ |
|||||||||||
|
(In Thousands): |
Volume |
Rate |
Expense |
|||||||||
|
ASSETS: |
||||||||||||
|
Investment securities |
$ |
(194 |
) |
$ |
120 |
$ |
(74 |
) |
||||
|
Loans |
13,743 |
1,916 |
15,659 |
|||||||||
|
Interest-earning deposits |
(674 |
) |
(607 |
) |
(1,281 |
) |
||||||
|
Total interest income |
$ |
12,875 |
$ |
1,429 |
$ |
14,304 |
||||||
|
LIABILITIES: |
||||||||||||
|
Interest-bearing checking |
$ |
1,303 |
$ |
(4,824 |
) |
$ |
(3,521 |
) |
||||
|
Money market |
2,154 |
(531 |
) |
1,623 |
||||||||
|
Savings |
2 |
17 |
19 |
|||||||||
|
Certificates of deposit - retail |
(416 |
) |
(505 |
) |
(921 |
) |
||||||
|
Borrowed funds |
567 |
566 |
1,133 |
|||||||||
|
Capital lease obligation |
(2 |
) |
- |
(2 |
) |
|||||||
|
Subordinated debt |
(466 |
) |
(458 |
) |
(924 |
) |
||||||
|
Total interest expense |
$ |
3,142 |
$ |
(5,735 |
) |
$ |
(2,593 |
) |
||||
|
Net interest income (tax-equivalent basis) |
$ |
9,733 |
$ |
7,164 |
$ |
16,897 |
||||||
|
For the Nine Months Ended September, 2026 |
||||||||||||
|
Difference due to |
Change In |
|||||||||||
|
Change In: |
Income/ |
|||||||||||
|
(In Thousands): |
Volume |
Rate |
Expense |
|||||||||
|
ASSETS: |
||||||||||||
|
Investment securities |
$ |
(2,013 |
) |
$ |
(571 |
) |
$ |
(2,584 |
) |
|||
|
Loans |
34,476 |
3,428 |
37,904 |
|||||||||
|
Interest-earning deposits |
(364 |
) |
(1,436 |
) |
(1,800 |
) |
||||||
|
Total interest income |
$ |
32,099 |
$ |
1,421 |
$ |
33,520 |
||||||
|
LIABILITIES: |
||||||||||||
|
Interest-bearing checking |
$ |
5,135 |
$ |
(16,701 |
) |
$ |
(11,566 |
) |
||||
|
Money market |
4,303 |
(1,909 |
) |
2,394 |
||||||||
|
Savings |
24 |
128 |
152 |
|||||||||
|
Certificates of deposit - retail |
(1,311 |
) |
(1,929 |
) |
(3,240 |
) |
||||||
|
Interest bearing demand brokered |
(105 |
) |
(105 |
) |
(210 |
) |
||||||
|
Borrowed funds |
1,351 |
(148 |
) |
1,203 |
||||||||
|
Capital lease obligation |
(5 |
) |
- |
(5 |
) |
|||||||
|
Subordinated debt |
(3,760 |
) |
1,680 |
(2,080 |
) |
|||||||
|
Total interest expense |
$ |
5,632 |
$ |
(18,984 |
) |
$ |
(13,352 |
) |
||||
|
Net interest income (tax-equivalent basis) |
$ |
26,467 |
$ |
20,405 |
$ |
46,872 |
||||||
Net interest income increased $16.9 million, or 33 percent, for the third quarter of 2026 to $67.5 million from $50.6 million in the third quarter of 2025. Net interest margin ("NIM") was 3.34 percent and 2.81 percent for the three months ended September 30, 2026 and 2025, respectively, an increase of 53 basis points year over year. For the nine months ended September 30, 2026 the Company recorded net interest income of $191.3 million compared to $144.4 million for the same 2025 period. NIM was 3.30 percent and 2.76 percent for the nine months ended September 30, 2026 and 2025, respectively, an increase of 54 basis points. The improvement in net interest income, on a fully tax-equivalent basis, and NIM for both periods reflected strong loan growth and higher loan yields, together with lower average funding costs relative to the comparable 2025 periods, primarily reflected in lower costs of interest-bearing checking accounts. Continued growth in lower-cost client deposit relationships, including noninterest-bearing demand deposits and interest-bearing checking accounts, drove an increase in deposit balances, while reducing the Company's overall cost of funds relative to the comparable 2025 periods. Although market interest rates increased during the third quarter of 2026, average funding costs for the three- and nine-month periods remained below the comparable prior-year periods, which supported margin expansion.
The average balance of interest-earning assets increased to $8.05 billion during the third quarter of 2026 from $7.17 billion for the third quarter of 2025, reflecting an increase of $872.3 million, or 12 percent. Average interest-earning assets were $7.77 billion for the nine months ended September 30, 2026 compared to $7.04 billion in the same 2025 period, reflecting an increase of $730.2 million, or 10 percent. The increase in the average balance of interest-earning assets during the third quarter of 2026 when compared to the same quarter of 2025 was due to an increase in the average balance of outstanding loans of $975.5 million, partially offset by decreases in the average balance of investments of $24.6 million and the average balance of interest-earning deposits of $78.6 million. The increase in the average balance of interest-earning assets during the nine months ended September 30, 2026 when compared to the same period of 2025 was due to an increase in the average balance of loans of $830.2 million, partially offset by decreases in the average balance of investments of $85.7 million and the average balance of interest-earning deposits of $14.3 million.
The increase in the average balance of outstanding loans for the three and nine months ended September 30, 2026 was primarily driven by an increase in commercial loans, commercial mortgages, and installment loans. The average balance of commercial loans increased by $422.2 million, or 16 percent, to $3.01 billion for the quarter ended September 30, 2026 when compared to $2.59 billion for the quarter ended September 30, 2025. The average balance of commercial mortgages increased by $381.4 million, or 16 percent, to $2.84 billion for the quarter ended September 30, 2026 when compared to $2.46 billion during the quarter ended September 30, 2025. The average balance of installment loans increased by $150.7 million, or 96 percent, to $307.1 million for the quarter ended September 30, 2026 when compared to $156.5 million during the quarter ended September 30, 2025.
The average balance of commercial loans increased by $359.4 million, or 14 percent, to $2.88 billion for the nine months ended September 30, 2026 when compared to $2.52 billion for the nine months ended September 30, 2025. The average balance of commercial mortgages increased $326.0 million, or 13 percent, to $2.75 billion for the nine months ended September 30, 2026 when compared to $2.42 billion for the same period in 2025. The average balance of installment loans increased by $107.4 million, or 80 percent, to $242.2 million for the nine months ended September 30, 2026 when compared to $134.9 million for the nine months ended September 30, 2025. The increase in the average balance of loans for the three- and nine-month periods was primarily driven by the Company's strategic business development initiatives which included the addition of a new head of the commercial real estate lending team, along with our expansion into New York City and Long Island, the expansion of our equipment financing team and continued customer demand across key lending categories.
The average yield on total loans for the three months ended September 30, 2026 increased to 5.65 percent when compared to 5.58 percent for the three months ended September 30, 2025. The average yield on total loans for the nine months ended September 30, 2026 increased to 5.59 percent when compared to 5.50 percent for the same 2025 period. The yield on residential mortgages increased 22 basis points to 4.73 percent for the three months ended September 30, 2026, as compared to 4.51 percent for the same 2025 period. The yield on residential mortgages increased to 4.80 percent for the nine months ended September 30, 2026, when compared to 4.43 percent for the same 2025 period. The increase in the average yield for residential mortgages both periods was driven by the origination of loans at higher rates than the existing portfolio.
The average yield on commercial mortgages for the three months ended September 30, 2026, increased 43 basis points to 5.06 percent as compared to 4.63 percent for the same period in 2025. The average yield on commercial mortgages for the nine months ended September 30, 2026, increased to 4.91 percent when compared to 4.51 percent for the same 2025 period. The increase in the average yield on commercial mortgages for the three and nine months ended September 30, 2026, compared to the same periods in 2025, was primarily attributable to changes in portfolio mix and loan repricing characteristics, as higher yielding new origination and the runoff of lower-yielding legacy loans more than offset the effects of lower market rates during the comparative periods.
The average yield on commercial loans for the three months ended September 30, 2026 decreased 23 basis points to 6.39 percent from 6.62 percent at September 30, 2025. The average yield on commercial loans for the nine months ended September 30, 2026, decreased 28 basis points to 6.33 percent from 6.61 percent at September 30, 2025. The decline was primarily due to the cumulative 175 basis point reduction in the target Federal Funds rate from the second half of 2024 through December 31, 2025, which had a greater impact on these loans, which are typically floating rate loans with shorter repricing periods. The increase in the target federal funds rate during the third quarter of 2026 partially offset the effect of the earlier rate reductions. As of September 30, 2026, 28 percent of loans will reprice within one month, 33 percent within three months and 50 percent within one year.
The average yield on installment loans decreased to 6.14 percent for the three months ended September 30, 2026, compared to 6.95 percent for the same 2025 period. For the nine months ended September 30, 2026, the average yield on installment loans decreased to 6.18 percent from 6.83 percent for the comparable 2025 period. The lower yields primarily reflected the mix of loans added to the portfolio and lower market interest rates relative to the comparable prior-year periods.
Interest-earning deposits are an additional component of the Company's liquidity and interest rate risk management strategies. The combined average balance of these deposits for the three months ended September 30, 2026 was $226.1 million with an average yield of 2.95 percent as compared to $304.7 million and an average yield of 3.89 percent for the same period in 2025. The average balance of interest-earning deposits for the nine months ended September 30, 2026 was $245.4 million with an average yield of 3.03 percent as compared to $259.7 million and an average yield of 3.78 percent for the same period in 2025. The lower average balances for both periods reflected the deployment of available liquidity to fund loan growth. The decline in average yields was a result of the lower interest rate environment relative to the comparable 2025 periods.
The average balance of total investments declined by $24.6 million to $939.1 million for the three months ended September 30, 2026 as compared to $963.7 million for the three months ended September 30, 2025. The yield on investments increased by five basis points to 3.16 percent for the three months ended September 30, 2026, compared to 3.11 percent for the same period a year ago. For the nine months ended September 30, 2026, the average balance on total investments declined by $85.7 million to $925.2 million compared to $1.01 billion for the comparable 2025 period, while the average yield decreased eight basis points to 3.10 percent from 3.18 percent for the same period in 2025. The lower average balances were primarily the result of a security sale of $97.0 million as part of a portfolio repositioning completed during the first quarter of 2026. The Company purchased $114.3 million of investment securities during the third quarter of 2026, partially offsetting the reduction in average balances. The increase in investment yields during the third quarter of 2026 reflected the sale of lower-yielding securities during the first quarter of 2026 and the purchase of higher-yielding securities during the third quarter of 2026. The lower average yield of the nine-month period primarily reflected the decline in market interest rates through the end of 2025, following reductions in the target federal funds rate.
For the quarters ended September 30, 2026 and 2025, the average yields earned on interest-earning assets were 5.28 percent and 5.17 percent, respectively, an increase of 11 basis points year over year. For the nine months ended September 30, 2026 and 2025, the average yields earned on interest-earning assets were 5.21 percent and 5.10 percent, respectively, an increase of 11 basis points year over year.
For the three months ended September 30, 2026, the average balance of interest-bearing liabilities totaled $5.72 billion representing an increase of $442.7 million from $5.28 billion for the three month period ended September 30, 2025 primarily due to an increase in interest-bearing deposits and FHLB advances and borrowings. The increase primarily reflected a $430.2 million increase in average interest-bearing deposits to $5.61 billion and an $111.6 million increase in average FHLB advances and borrowings to $111.6 million. These increases were partially offset by a $99.0 million decrease in average subordinated debt resulting from the redemption of $100.0 million of subordinated debt in March 2026.
For the nine months ended September 30, 2026, the average balance of interest-bearing liabilities totaled $5.56 billion representing an increase of $352.8 million from $5.21 billion for the nine-month period ended September 30, 2025 primarily due to an increase in interest-bearing deposits of $390.6 million to $5.48 billion and a $42.4 million increase in average FHLB advances and borrowings to $57.6 million. These increases were partially offset by an $86.3 million decrease in average subordinated debt to $21.8 million, compared to $108.1 million for the comparable 2025 period.
The increase in the average balance of interest-bearing deposits for the three months ended September 30, 2026 compared to the three months ended September 30, 2025 was primarily due to an increase in the average balances of interest-bearing checking deposits of $171.9 million and money market accounts of $309.6 million, partially offset by a decline in the average balance of certificates of deposit of $52.7 million.
The increase in average balance of interest-bearing deposits for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 was primarily due to an increase in the average balances of interest-bearing checking deposits of $230.5 million and money market accounts of $214.8 million, partially offset by the decline in the average balance of certificates of deposit of $53.4 million and interest-bearing brokered deposits of $6.3 million. The increase in interest-bearing checking deposits for the three and nine months ended September 30, 2026 was due to our continued expansion into the New York City and Long Island markets and client demand for FDIC-insured products, which we offer through reciprocal deposit programs. Our expansion around metro NY has allowed us to grow lower cost, relationship-based deposits, while reducing the Company's reliance on brokered deposits and other high-cost funding sources.
For the three months ended September 30, 2026, the average balance of FHLB advances and borrowings was $111.6 million, compared to no average borrowings for the comparable 2025 period. For the nine months ended September 30, 2026, the average balance of FHLB advances and borrowings was $57.6 million, compared to $15.2 million for the comparable 2025 period. The increase in average borrowings for both periods reflected the Company's use of wholesale funding to support continued loan growth and manage liquidity. The average cost of FHLB advances and borrowings was 4.03 percent for the three months ended September 30, 2026. For the nine months ended September 30, 2026, the average cost of FHLB advances and borrowings decreased to 3.99 percent, compared to 4.53 percent for the comparable 2025 period, primarily reflecting lower market interest rates.
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 three months ended September 30, 2026 and 2025 were $2.34 billion and $1.97 billion, respectively. Average reciprocal deposit balances for the nine months ended September 30, 2026 and 2025 were $2.32 billion and $1.86 billion, respectively.
At September 30, 2026, uninsured/unprotected deposits were approximately $2.49 billion, or 34 percent of total deposits. This amount was adjusted to exclude $144 million of public fund deposit balances, which are fully-collateralized and protected with an FHLB of New York letter of credit.
For the three months ended September 30, 2026 and 2025, the cost of interest-bearing liabilities was 2.73 percent and 3.18 percent, respectively, reflecting a decrease of 45 basis points. For the nine months ended September 30, 2026 and 2025, the cost of interest-bearing liabilities was 2.67 percent and 3.18 percent, respectively, reflecting a decrease of 51 basis points. The decrease for the three- and nine-month periods ended September 30, 2026 was driven by a decrease in the average cost of interest-bearing deposits. The Company also benefited from lower short-term borrowing costs for the nine months ended September 30, 2026, which decreased by 54 basis points to 3.99 percent when compared to 4.53 percent for the same 2025 period. The decrease in deposit and borrowing rates was due to the Federal Reserve lowering the target Federal Funds rate by 175 basis points during the latter half of 2024 through the end of 2025, and a change in the composition of the deposit portfolio with a greater concentration of lower-cost, core relationship deposits.
INVESTMENT SECURITIES: Investment securities available for sale are purchased, sold and/or maintained as a part of the Company's overall balance sheet, liquidity and interest rate risk management strategies, and in response to changes in interest rates, liquidity needs, prepayment speeds and/or other factors. These securities are carried at estimated fair value, and unrealized changes in fair value are recognized as a separate component of shareholders' equity, net of income taxes. Realized gains and losses are recognized in income at the time the securities are sold. Investment securities held to maturity are securities that the Company has both the ability and intent to hold to maturity. These securities are carried at amortized cost. Equity securities are carried at fair value with unrealized gains and losses recorded in noninterest income as incurred.
At September 30, 2026, the Company had investment securities available for sale with a fair value of $812.0 million compared with $774.2 million at December 31, 2025. The increase in investment securities was primarily due to the purchase of $114.3 million in the third quarter of 2026 partially offset by the sale of $97.0 million of mostly lower-yielding mortgage-backed securities during the nine months ended September 30, 2026 for a loss of $81,000. A net unrealized loss (net of income tax) of $72.4 million and $49.3 million related to these securities were included in shareholders' equity at September 30, 2026 and December 31, 2025, respectively.
At September 30, 2026, the Company had investment securities held to maturity with a carrying cost of $77.4 million and an estimated fair value of $66.7 million compared with a carrying cost of $95.9 million and an estimated fair value of $87.5 million at December 31, 2025.
The Company had one equity security (a CRA investment security) with a fair value of $12.8 million at September 30, 2026 compared to $13.5 million at December 31, 2025, with changes in fair value recognized in the Consolidated Statements of Income. The Company recorded unrealized losses of $502,000 and $641,000 for the three and nine months ended September 30, 2026, respectively, compared to unrealized gains of $125,000 and $362,000 for the three and nine months ended September 30, 2025.
The carrying value of investment securities available for sale and held to maturity as of September 30, 2026 and December 31, 2025 are shown below:
|
September 30, 2026 |
December 31, 2025 |
|||||||||||||||
|
Estimated |
Estimated |
|||||||||||||||
|
Amortized |
Fair |
Amortized |
Fair |
|||||||||||||
|
(In thousands) |
Cost |
Value |
Cost |
Value |
||||||||||||
|
Investment securities available for sale: |
||||||||||||||||
|
U.S. treasuries |
$ |
13,911 |
$ |
13,739 |
$ |
- |
$ |
- |
||||||||
|
U.S. government-sponsored agencies |
219,846 |
178,410 |
244,833 |
211,223 |
||||||||||||
|
Mortgage-backed securities-residential (principally |
647,788 |
592,437 |
561,794 |
530,365 |
||||||||||||
|
SBA pool securities |
17,123 |
14,469 |
19,345 |
17,212 |
||||||||||||
|
Corporate bond |
13,000 |
12,939 |
15,500 |
15,403 |
||||||||||||
|
Total investment securities available for sale |
$ |
911,668 |
$ |
811,994 |
$ |
841,472 |
$ |
774,203 |
||||||||
|
Investment securities held to maturity: |
||||||||||||||||
|
U.S. government-sponsored agencies |
25,000 |
23,833 |
40,000 |
38,875 |
||||||||||||
|
Mortgage-backed securities-residential (principally |
52,350 |
42,908 |
55,862 |
48,616 |
||||||||||||
|
Total investment securities held to maturity |
$ |
77,350 |
$ |
66,741 |
$ |
95,862 |
$ |
87,491 |
||||||||
|
Total |
$ |
989,018 |
$ |
878,735 |
$ |
937,334 |
$ |
861,694 |
||||||||
The following table presents the contractual maturities and yields of debt securities available for sale and held to maturity as of September 30, 2026. The weighted average yield is a computation of income within each maturity range based on the amortized cost of securities:
|
After 1 |
After 5 |
|||||||||||||||||||
|
But |
But |
After |
||||||||||||||||||
|
Within |
Within |
Within |
||||||||||||||||||
|
(Dollars in thousands) |
1 Year |
5 Years |
10 Years |
Years |
Total |
|||||||||||||||
|
Investment securities available for sale: |
||||||||||||||||||||
|
U.S. treasuries |
$ |
- |
$ |
13,739 |
$ |
- |
$ |
- |
$ |
13,739 |
||||||||||
|
- |
4.31 |
% |
- |
- |
4.31 |
% |
||||||||||||||
|
U.S. government-sponsored agencies |
- |
74,321 |
104,089 |
- |
178,410 |
|||||||||||||||
|
- |
1.36 |
% |
1.83 |
% |
- |
1.65 |
% |
|||||||||||||
|
Mortgage-backed securities-residential (A) |
50,033 |
8,257 |
27,972 |
506,175 |
592,437 |
|||||||||||||||
|
4.59 |
% |
2.32 |
% |
3.63 |
% |
4.01 |
% |
4.01 |
% |
|||||||||||
|
SBA pool securities |
- |
1,307 |
7,384 |
5,778 |
14,469 |
|||||||||||||||
|
- |
3.32 |
% |
1.96 |
% |
1.18 |
% |
1.73 |
% |
||||||||||||
|
Corporate bond |
- |
- |
12,939 |
- |
12,939 |
|||||||||||||||
|
- |
- |
6.96 |
% |
- |
6.96 |
% |
||||||||||||||
|
Total investments available for sale |
$ |
50,033 |
$ |
97,624 |
$ |
152,384 |
$ |
511,953 |
$ |
811,994 |
||||||||||
|
Weighted-average yield (A) |
4.59 |
% |
1.84 |
% |
2.49 |
% |
3.97 |
% |
3.45 |
% |
||||||||||
|
Investment securities held to maturity: |
||||||||||||||||||||
|
U.S. government-sponsored agencies |
- |
25,000 |
- |
- |
25,000 |
|||||||||||||||
|
- |
1.64 |
% |
- |
- |
1.64 |
% |
||||||||||||||
|
Mortgage-backed securities-residential (B) |
- |
- |
- |
52,350 |
52,350 |
|||||||||||||||
|
- |
- |
- |
2.15 |
% |
2.15 |
% |
||||||||||||||
|
Total investments held to maturity |
$ |
- |
$ |
25,000 |
$ |
- |
$ |
52,350 |
77,350 |
|||||||||||
|
1.64 |
% |
- |
2.15 |
% |
1.99 |
% |
||||||||||||||
|
Total |
$ |
50,033 |
$ |
122,624 |
$ |
152,384 |
$ |
564,303 |
$ |
889,344 |
||||||||||
|
Weighted-average yield (A) |
4.59 |
% |
1.80 |
% |
2.49 |
% |
3.80 |
% |
3.32 |
% |
||||||||||
(A)
Weighted-average yields are based on amortized cost with effective yields weighted for the contractual maturity of each security.
(B)
Shown using stated final maturity.
OTHER INCOME: The following tables present further detail on other income which is summarized and discussed subsequently:
|
For the Three Months Ended September 30, |
Change |
|||||||||||
|
(In thousands) |
2026 |
2025 |
2026 vs 2025 |
|||||||||
|
Wealth management fee income |
$ |
17,279 |
$ |
15,798 |
$ |
1,481 |
||||||
|
Service charges and fees |
1,443 |
1,184 |
259 |
|||||||||
|
Bank owned life insurance |
406 |
383 |
23 |
|||||||||
|
Loan fee income |
1,517 |
1,879 |
(362 |
) |
||||||||
|
Gain on sale of loans (mortgage banking) |
28 |
6 |
22 |
|||||||||
|
Loss on loans held for sale at lower of cost or fair value |
- |
(364 |
) |
364 |
||||||||
|
Gain on sale of SBA loans |
84 |
203 |
(119 |
) |
||||||||
|
Loss on sale of OREO property |
(510 |
) |
- |
(510 |
) |
|||||||
|
Corporate advisory fee income |
19 |
692 |
(673 |
) |
||||||||
|
Other income |
232 |
215 |
17 |
|||||||||
|
Fair value adjustment for CRA equity security |
(502 |
) |
125 |
(627 |
) |
|||||||
|
Total other income |
$ |
19,996 |
$ |
20,121 |
$ |
(125 |
) |
|||||
|
For the Nine Months Ended September 30, |
Change |
|||||||||||
|
(In thousands) |
2026 |
2025 |
2026 vs 2025 |
|||||||||
|
Wealth management fee income |
$ |
51,002 |
$ |
47,176 |
$ |
3,826 |
||||||
|
Service charges and fees |
4,192 |
3,490 |
702 |
|||||||||
|
Bank owned life insurance |
1,137 |
1,124 |
13 |
|||||||||
|
Loan fee income |
7,430 |
4,767 |
2,663 |
|||||||||
|
Gain on sale of loans (mortgage banking) |
162 |
96 |
66 |
|||||||||
|
Loss on loans held for sale at lower of cost or fair value |
- |
(364 |
) |
364 |
||||||||
|
Fee income related to loan level, back-to-back swaps |
385 |
221 |
164 |
|||||||||
|
Gain on sale of SBA loans |
931 |
1,026 |
(95 |
) |
||||||||
|
Loss on sale of OREO property |
(510 |
) |
- |
(510 |
) |
|||||||
|
Corporate advisory fee income |
122 |
812 |
(690 |
) |
||||||||
|
Other income |
595 |
1,709 |
(1,114 |
) |
||||||||
|
Securities gains/(losses), net |
(81 |
) |
7 |
(88 |
) |
|||||||
|
Fair value adjustment for CRA equity security |
(641 |
) |
362 |
(1,003 |
) |
|||||||
|
Total other income |
$ |
64,724 |
$ |
60,426 |
$ |
4,298 |
||||||
The Company recorded total other income of $20.0 million for the third quarter of 2026 compared to $20.1 million for the third quarter of 2025, a decrease of $125,000. The decrease was primarily attributable to a $673,000 decline in corporate advisory fee income, a $627,000 unfavorable change in the fair value adjustment of CRA equity securities, a $510,000 loss on the sale of an OREO property, and a $362,000 decrease in loan fee income. These items were substantially offset by a $1.5 million increase in wealth management fee income, a $364,000 loss on loans held for sale in 2025 and a $259,000 increase in service charges and fees.
Total other income was $64.7 million for the nine months ended September 30, 2026 compared to $60.4 million for the comparable 2025 period, an increase of $4.3 million. The increase was primarily drive by a $3.8 million increase in wealth management fee income and a $2.7 million increase in loan fee income. These increases were partially offset by a $1.1 million decrease in other income, a $1.0 million unfavorable change in the fair value adjustment of CRA equity securities, a $690,000 decrease in corporate advisory fee income, and a $510,000 loss on the sale of an OREO property.
Service charges and fee income increased $259,000 to $1.4 million during the quarter ended September 30, 2026 from $1.2 million for the same period in 2025. For the nine months ended September 30, 2026 and 2025, the Company recorded service charges and fee income of $4.2 million and $3.5 million, respectively. The increases for both periods reflected an increase in our commercial client base and the related increase in fee-generating activity.
The Company exited the SBA lending business during the first half of 2026 and no longer originates new SBA loans. Historically, the Company originated loans that are partially guaranteed by the SBA to provide working capital and/or finance the purchase of equipment, inventory or commercial real estate. All SBA loans were underwritten and documented as prescribed by the SBA. The Company generally sold the guaranteed portion of the SBA loans in the secondary market and retained the non-guaranteed portion of SBA loans in its loan portfolio. Gain on the sale of SBA loans was $84,000 for the quarter ended September 30, 2026, compared
to $203,000 in gains for the quarter ended September 30, 2025. For the nine months ended September 30, 2026 and 2025, the Company recorded gains on the sale of SBA loans of $931,000 and $1.0 million, respectively. Gains recorded during 2026 primarily related to the sale of guaranteed portions of loans originated before the Company exited the SBA lending business. As a result of the exit, SBA loan sale activity and related gains are expected to decline in future periods.
Corporate advisory fee income for the third quarter of 2026 was $19,000 compared to $692,000 for the same 2025 period. For the nine months ended September 30, 2026, corporate advisory fee income was $122,000 compared to $812,000 for the same 2025 period. Corporate advisory fee income, as well as income from the SBA, loan sales is dependent on transaction volume, and may vary from period to period.
Gain on the sale of newly originated residential mortgage loans was $28,000 for the three months ended September 30, 2026 as compared to $6,000 for the comparable 2025 period. For the nine months ended September 30, 2026, gain on the sale of newly originated residential mortgage loans was $162,000 compared to $96,000 for the same period in 2025. Residential mortgage activity continues to be influenced by prevailing interest rates, limited housing inventory and affordability considerations, which moderated both refinancing and home purchase volumes.
Loan fee income decreased to $1.5 million for the third quarter of 2026 as compared to $1.9 million for the quarter ended September 30, 2025. Loan fee income increased to $7.4 million for the nine months ended September 30, 2026 compared to $4.8 million for the same period in 2025. Loan fee income included gains of $190,000 and $3.8 million for the three and nine months ended September 30, 2026, respectively, as compared to gains of $398,000 and $465,000 for the same periods in 2025 related to equipment transfers to lessees upon the termination of leases recorded by the Equipment Finance Division. The changes primarily reflected differences in the volume and timing of lease terminations and the underlying fair value of the equipment at lease end, which can vary based on market conditions and asset-specific factors. Loan fee income also included unused commercial line fees of $885,000 and $2.4 million for the three and nine months ended September 30, 2026, respectively, compared to $825,000 and $2.6 million for the comparable 2025 periods. Letter of credit fee income was $614,000 for the nine months ended September 30, 2026, compared to $503,000 for the comparable 2025 period, reflecting increased trade-finance product utilization amount the Company's growing commercial client base in the metropolitan New York market.
The Company completed a security sale of $97.0 million resulting in a loss of $81,000 during the first nine months of 2026 and a $53.2 million security sale with a gain of $7,000 during the same period in 2025. These sales were completed as part of a portfolio repositioning.
The Company recorded a negative fair value adjustment of $502,000 for CRA equity securities during the three months ended September 30, 2026 compared to a positive fair value adjustment of $125,000 for the same 2025 period. For the nine months ended September 30, 2026, the Company recorded a negative fair value adjustment of $641,000 compared to a positive fair value adjustment of $362,000 for the same 2025 period. The unfavorable change in 2026 primarily reflected higher medium-term interest rates, which reduced the fair value of the Company's CRA equity securities.
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) |
2026 |
2025 |
2026 vs 2025 |
|||||||||
|
Compensation and employee benefits |
$ |
39,306 |
$ |
36,756 |
$ |
2,550 |
||||||
|
Premises and equipment |
7,190 |
6,676 |
514 |
|||||||||
|
FDIC assessment |
1,557 |
1,345 |
212 |
|||||||||
|
Other Operating Expenses: |
||||||||||||
|
Professional and legal fees |
1,509 |
1,972 |
(463 |
) |
||||||||
|
Trust department expense |
1,186 |
1,111 |
75 |
|||||||||
|
Telephone |
363 |
391 |
(28 |
) |
||||||||
|
Loan expense |
430 |
475 |
(45 |
) |
||||||||
|
Amortization of intangible assets |
236 |
273 |
(37 |
) |
||||||||
|
Advertising |
377 |
651 |
(274 |
) |
||||||||
|
Other |
2,994 |
2,647 |
347 |
|||||||||
|
Total operating expenses |
$ |
55,148 |
$ |
52,297 |
$ |
2,851 |
||||||
|
For the Nine Months Ended September 30, |
Change |
|||||||||||
|
(In thousands) |
2026 |
2025 |
2026 vs 2025 |
|||||||||
|
Compensation and employee benefits |
$ |
118,273 |
$ |
108,696 |
$ |
9,577 |
||||||
|
Premises and equipment |
21,057 |
19,471 |
1,586 |
|||||||||
|
FDIC assessment |
4,440 |
3,245 |
1,195 |
|||||||||
|
Other Operating Expenses: |
||||||||||||
|
Professional and legal fees |
4,595 |
4,807 |
(212 |
) |
||||||||
|
Trust department expense |
3,555 |
3,246 |
309 |
|||||||||
|
Telephone |
1,093 |
1,175 |
(82 |
) |
||||||||
|
Loan expense |
1,673 |
1,847 |
(174 |
) |
||||||||
|
Amortization of intangible assets |
724 |
816 |
(92 |
) |
||||||||
|
Advertising |
1,112 |
1,724 |
(612 |
) |
||||||||
|
Other |
9,733 |
8,603 |
1,130 |
|||||||||
|
Total operating expenses |
$ |
166,255 |
$ |
153,630 |
$ |
12,625 |
||||||
Operating expenses for the three months ended September 30, 2026 and 2025 totaled $55.1 million and $52.3 million, respectively, reflecting an increase of $2.9 million, or 5 percent year over year. Operating expenses for the nine months ended September 30, 2026 and 2025 totaled $166.3 million and $153.6 million, respectively, reflecting an increase of $12.6 million, or 8 percent.
The increase in operating expenses for both periods was primarily attributable to higher compensation and employee benefits, health insurance costs and premises and equipment expenses associated with the Company's continued expansion into New York City and Long Island, as well as the expansion of its equipment financing business.
Compensation and employee benefits expense increased $2.6 million and $9.6 million for the three and nine months ended September 30, 2026, respectively, compared to the corresponding prior-year periods. These increases were primarily attributable to additional personnel supporting the Company's geographic and business line expansion, including the addition of commercial banking production teams, as well as annual merit increases.
Premises and equipment expense increased $514,000 and $1.6 million for the three and nine months ended September 30, 2026, respectively, compared to the corresponding prior-year periods, primarily reflecting additional occupancy and infrastructure costs associated with the Company's continued geographic expansion, including two Long Island offices opened during the latter half of 2025. FDIC assessment expense increased for the three and nine months ended September 30, 2026 due primarily to higher assessment rates implemented by the FDIC and an increase in the Bank's average total assets subject to assessment.
Advertising expense for the three months ended September 30, 2026 decreased $274,000 to $377,000, compared to $651,000 for the same period in 2025. Advertising expense for the nine months ended September 30, 2026 decreased $612,000 to $1.1 million compared to $1.7 million for the same period in 2025. The decrease in both periods was primarily due to marketing expenditures incurred in the prior-year period in connection with the Company's expansion into the New York market that did not recur in 2026.
WEALTH MANAGEMENT DIVISION: This division includes: investment management services provided for individuals and institutions; personal trust services, including services as executor, trustee, administrator, custodian and guardian; and other financial planning, tax preparation and advisory services.
The market value of the assets under management and/or administration ("AUM/AUA") was $13.6 billion at September 30, 2026, reflecting a 4 percent increase from $13.1 billion at December 31, 2025, and an increase of 5 percent from $12.9 billion at September 30, 2025. The increases primarily reflected improved market conditions and new client inflows.
Wealth Management fee income was $17.3 million for the September 2026 quarter compared to $15.8 million for the September 2025 quarter, an increase of 9 percent. For the nine months ended September 30, 2026, Wealth Management fee income was $51.0 million compared to $47.2 million in fee income for the same period in 2025, an increase of 8 percent. The increase in both periods was due to strong client inflows driven by new accounts and client additions and as well as favorable equity market performance. New business inflows for the third quarter ended September 30, 2026 totaled $346 million, as compared to $214 million for the third quarter ended September 30, 2025. New business inflows for the nine months ended September 30, 2026 totaled $779 million, as compared to $751 million for the nine months ended September 30, 2025.
Operating expenses relative to the Wealth Management Division, for the three months ended September 30, 2026 increased to $9.9 million as compared to $8.2 million for the third quarter of 2025. Operating expenses relative to the Wealth Management Division
were $30.3 million and $28.4 million for the nine months ended September 30, 2026 and September 30, 2025, respectively. The increase in operating expenses reflected business growth and strategic investments in key management and revenue-producing personnel.
NONPERFORMING ASSETS: Loans past due in excess of 90 days and still accruing, nonaccrual loans, and other real estate owned 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) |
2026 |
2026 |
2026 |
2025 |
2025 |
|||||||||||||||
|
Loans past due 90 days or more and still accruing |
$ |
200 |
$ |
3,300 |
$ |
- |
$ |
- |
$ |
- |
||||||||||
|
Nonaccrual loans |
57,535 |
68,034 |
59,321 |
68,243 |
84,142 |
|||||||||||||||
|
Other real estate owned |
96 |
908 |
- |
- |
- |
|||||||||||||||
|
Total nonperforming assets |
$ |
57,831 |
$ |
72,242 |
$ |
59,321 |
$ |
68,243 |
$ |
84,142 |
||||||||||
|
Performing modifications (A)(B) |
$ |
28,388 |
$ |
27,268 |
$ |
85,835 |
$ |
95,266 |
$ |
101,501 |
||||||||||
|
Loans past due 30 through 89 days and still accruing |
$ |
39,379 |
$ |
48,080 |
$ |
47,053 |
$ |
26,555 |
$ |
28,817 |
||||||||||
|
Loans subject to special mention |
$ |
56,380 |
$ |
59,832 |
$ |
75,935 |
$ |
51,027 |
$ |
56,534 |
||||||||||
|
Classified loans |
$ |
89,498 |
$ |
97,713 |
$ |
90,583 |
$ |
118,912 |
$ |
134,982 |
||||||||||
|
Individually evaluated loans |
$ |
57,535 |
$ |
68,034 |
$ |
59,321 |
$ |
68,243 |
$ |
84,142 |
||||||||||
|
Nonperforming loans as a % of total loans (C) |
0.82 |
% |
1.07 |
% |
0.92 |
% |
1.09 |
% |
1.40 |
% |
||||||||||
|
Nonperforming assets as a % of total assets (C) |
0.68 |
% |
0.91 |
% |
0.77 |
% |
0.91 |
% |
1.13 |
% |
||||||||||
|
Nonperforming assets as a % of total loans |
0.82 |
% |
1.08 |
% |
0.92 |
% |
1.09 |
% |
1.40 |
% |
||||||||||
(A)
Amounts reflect modifications that are paying according to modified terms.
(B)
Excludes modifications included in nonaccrual loans of $24.7 million at September 30, 2026, $21.6 million at June 30, 2026, $19.6 million at March 31, 2026, $36.0 million at December 31, 2025, and $37.6 million at September 30, 2025.
(C)
Nonperforming loans/assets do not include performing modifications.
Loans past due 30 through 89 days and still accruing increased to $39.4 million, or 0.56 percent of total loans at September 30, 2026 compared to $26.6 million, or 0.42 percent, at December 31, 2025. The increase in past due loans at September 30, 2026 was primarily due to six multifamily loans with an aggregate outstanding balance of $30.3 million, partially offset by the return of one commercial and industrial loan of $10.3 million to current status. The persistent nature of inflationary pressures has presented challenges for certain borrowers as operating expenses, including insurance, utilities and maintenance costs continue to rise faster than revenue streams.
Nonperforming assets decreased by $10.4 million to $57.8 million at September 30, 2026, as compared to $68.2 million at December 31, 2025. The decrease primarily reflected the resolution of certain problem loans through charge-offs, asset sales, principal payments, and the return of one commercial mortgage loan totaling $9.5 million to accrual status. These reductions were partially offset by loans transferred to nonaccrual status during the period. During the third quarter of 2026, nonaccrual loans declined by $10.5 million, primarily reflecting the return of the $9.5 commercial mortgage to loan accrual status, $4.2 million of charge-offs, and $1.4 million of principal payments. These reductions were partially offset by $5.1 million of commercial and industrial loans and $93,000 of residential loans transferred to nonaccrual during the quarter. Multifamily loans represented approximately 68 percent of nonperforming assets as of September 30, 2026.
The decrease in performing modifications was primarily related to ten multifamily loans totaling $52.8 million that had performed in accordance with their modified terms for at least twelve consecutive months and accordingly no longer meet the reporting criteria for loan modifications. Additionally, $15.5 million in multifamily loans and one commercial and industrial loan with a balance of $3.9 million were placed on nonaccrual status.
The increase in special mention loans was primarily due to five multifamily loans totaling $28.3 million and eight commercial and industrial loans totaling $3.1 million. This increase was partially offset by the sale of one multifamily loan of $8.3 million, the
payoff of one investment commercial real estate loan of $2.6 million, the downgrade of five commercial and industrial loans of $8.5 million and the upgrade of one multifamily loan totaling $4.5 million.
Classified loans declined primarily due to the upgrade of four multifamily loans totaling $22.7 million, the liquidation of one multifamily loan totaling $7.2 million, the payoff of one multifamily loan totaling $2.3 million, and the improvement in the risk rating of five commercial and industrial loans totaling $19.7 million. These reductions were partially offset by the downgrade of five multifamily loans totaling $17.8 million to substandard classifications during the nine months ended September 30, 2026.
PROVISION FOR CREDIT LOSSES: The provision for credit losses was $8.5 million and $4.8 million for the third quarters of 2026 and 2025, respectively. The increase primarily reflected continued loan growth and higher specific reserves established on certain individually evaluated loans. Of the third quarter 2026 provision, approximately $3.9 million was attributable to loan growth and changes in economic data, while $4.6 million related to increases in specific reserves related to $3.0 million of commercial and industrial loans. Although improved macroeconomic forecast assumptions favorably affected the quantitative component of the allowance during the third quarter, this benefit was more than offset by loan growth and the increase in specific reserves.
For the nine months ended September 30, 2026 and 2025, the provision for loan losses was $23.9 million and $15.8 million, respectively. The year-over-year increase primarily reflected continued loan growth and higher specific reserves established on certain individually evaluated loans.
The allowance for credit losses ("ACL") was $73.0 million as of September 30, 2026, compared to $71.0 million at December 31, 2025. During the first nine months of 2026, the Company recorded a $23.9 million provision for credit losses and net charge-offs totaled $21.9 million compared to net charge-offs of $20.3 million during the comparable 2025 period. Third quarter 2026 charge-offs included $1.7 million which were related to one commercial and industrial relationship and $1.7 million associated with the sale and payoff of two multifamily loans. The related charge-offs had been substantially reserved for through specific provisions recorded in prior periods. For the nine-month period, net charge-offs included $10.7 million associated with several commercial and industrial lending relationships and $10.0 million related to four multifamily loans.
The ACL as a percentage of loans was 1.03 percent at September 30, 2026 compared to 1.14 percent at December 31, 2025. The decrease was primarily attributable to $21.9 million in net charge-offs recorded during the nine months ended September 30, 2026, including $10.4 million for which specific reserves had been established in prior periods as well as $826.7 million of loan growth. These factors were partially offset by the provision for credit losses of $23.9 million recorded during the nine months ended September 30, 2026.
After considering charge-off activity, changes in portfolio risk characteristics, delinquency trends, economic conditions, and qualitative factors, Management believes the allowance remains adequate to absorb expected losses as of September 30, 2026. Management continues to closely monitor asset quality trends, including criticized and delinquent loan migration, and will adjust the ACL as conditions warrant. The ACL recorded on individually evaluated loans was $4.6 million at September 30, 2026 compared to $12.0 million as of December 31, 2025. Total individually evaluated loans were $57.5 million and $68.2 million as of September 30, 2026 and December 31, 2025, respectively. The general component of the allowance on loans collectively evaluated increased from $59.0 million at December 31, 2025 to $68.3 million at September 30, 2026.
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) |
2026 |
2026 |
2026 |
2025 |
2025 |
|||||||||||||||
|
Allowance for credit losses: |
||||||||||||||||||||
|
Beginning of period |
$ |
69,167 |
$ |
67,026 |
$ |
71,039 |
$ |
68,642 |
$ |
81,770 |
||||||||||
|
Provision for credit losses (A) |
8,436 |
8,012 |
7,322 |
7,659 |
4,871 |
|||||||||||||||
|
(Charge-offs)/recoveries, net |
(4,652 |
) |
(5,871 |
) |
(11,335 |
) |
(5,262 |
) |
(17,999 |
) |
||||||||||
|
End of period |
$ |
72,951 |
$ |
69,167 |
$ |
67,026 |
$ |
71,039 |
$ |
68,642 |
||||||||||
|
Allowance for credit losses as a % of |
1.03 |
% |
1.04 |
% |
1.04 |
% |
1.14 |
% |
1.14 |
% |
||||||||||
|
Collectively evaluated allowance for credit |
0.97 |
% |
0.97 |
% |
0.94 |
% |
0.94 |
% |
0.95 |
% |
||||||||||
|
Allowance for credit losses as a % of |
126.35 |
% |
96.96 |
% |
112.99 |
% |
104.10 |
% |
81.58 |
% |
||||||||||
(A)
Excludes provision of $63,000 at September 30, 2026, provision of $76,000 at June 30, 2026, provision of $5,000 at March 31, 2026, provision of $12,000 at December 31, 2025, and a credit of $81,000 at September 30, 2025 related to off-balance sheet commitments.
The increase in the allowance for credit losses as a percentage of nonperforming loans was primarily due to a decrease in nonperforming loans of $10.7 million to $57.5 million at September 30, 2026, as compared to nonperforming loans of $68.2 million at December 31, 2025, offset by an increase in the ACL to $73.0 million at September 30, 2026.
INCOME TAXES: Income tax expense for the quarter ended September 30, 2026 was $4.9 million as compared to $4.0 million for the same period in 2025. The increase in income tax expense reflected higher pretax income of $23.8 million for the quarter ended September 30, 2026 as compared to $13.6 million for the same quarter in 2025.
The effective tax rate for the three months ended September 30, 2026 was 20.5 percent compared to 29.2 percent for the same quarter in 2025. The 2026 effective tax rate included a discrete income tax benefit of approximately $1.8 million related to the purchase of transferable tax credits.
Income tax expense for the nine months ended September 30, 2026 was $16.8 million as compared to $10.2 million for the same period in 2025. The increase in income tax expense reflected higher pretax income of $65.9 million for the nine months ended September 30, 2026 as compared to $35.3 million for the same period in 2025.
The effective tax rate for the nine months ended September 30, 2026 was 25.5 percent compared to 28.7 percent for the same period in 2025. The lower effective tax rate for the nine-month period primarily reflected the discrete tax benefit recognized during the third quarter.
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 $49.1 million and the issuance of 50,000 shares of Series B Preferred Stock totaling $50.0 million during the nine months ended September 30, 2026. These increases were partially offset by cash dividends of $2.7 million, preferred stock dividends of $690,000 and an increase in accumulated other comprehensive loss of $21.8 million during the nine months ended September 30, 2026. Total accumulated other comprehensive loss grew to $69.4 million as of September 30, 2026 ($72.4 million loss related to the available for sale securities portfolio partially offset by a $3.0 million gain on the cash flow hedges), as compared to $47.6 million at December 31, 2025. The unrealized loss on available for sale securities was primarily due to higher market interest rates during the first nine months of 2026, which reduced the fair value of fixed-rate securities.
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, 2026 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, 2026 and December 31, 2025, 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.
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, 2026: |
||||||||||||||||||||||||||||||||||||||
|
Total capital |
$ |
820,782 |
11.63 |
% |
$ |
705,617 |
10.00 |
% |
$ |
564,494 |
8.00 |
% |
$ |
740,898 |
10.50 |
% |
||||||||||||||||||||||
|
Tier I capital |
747,076 |
10.59 |
564,494 |
8.00 |
423,370 |
6.00 |
599,774 |
8.50 |
||||||||||||||||||||||||||||||
|
Common equity tier I |
747,017 |
10.59 |
458,651 |
6.50 |
317,528 |
4.50 |
493,932 |
7.00 |
||||||||||||||||||||||||||||||
|
Tier I capital |
747,076 |
9.13 |
409,045 |
5.00 |
327,236 |
4.00 |
327,236 |
4.00 |
||||||||||||||||||||||||||||||
|
As of December 31, 2025: |
||||||||||||||||||||||||||||||||||||||
|
Total capital |
$ |
807,580 |
12.64 |
% |
$ |
638,896 |
10.00 |
% |
$ |
511,117 |
8.00 |
% |
$ |
670,841 |
10.50 |
% |
||||||||||||||||||||||
|
Tier I capital |
735,931 |
11.52 |
511,117 |
8.00 |
383,338 |
6.00 |
543,062 |
8.50 |
||||||||||||||||||||||||||||||
|
Common equity tier I |
735,872 |
11.52 |
415,282 |
6.50 |
287,503 |
4.50 |
447,227 |
7.00 |
||||||||||||||||||||||||||||||
|
Tier I capital |
735,931 |
9.89 |
372,195 |
5.00 |
297,756 |
4.00 |
297,756 |
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, 2026: |
|||||||||||||||||||||||||||||||
|
Total capital |
$ |
834,593 |
11.81 |
% |
N/A |
N/A |
$ |
565,287 |
8.00 |
% |
$ |
741,939 |
10.50 |
% |
|||||||||||||||||
|
Tier I capital |
760,887 |
10.77 |
N/A |
N/A |
423,965 |
6.00 |
600,617 |
8.50 |
|||||||||||||||||||||||
|
Common equity tier I |
710,828 |
10.06 |
N/A |
N/A |
317,974 |
4.50 |
494,626 |
7.00 |
|||||||||||||||||||||||
|
Tier I capital |
760,887 |
9.29 |
N/A |
N/A |
327,622 |
4.00 |
327,622 |
4.00 |
|||||||||||||||||||||||
|
As of December 31, 2025: |
|||||||||||||||||||||||||||||||
|
Total capital |
$ |
811,375 |
12.68 |
% |
N/A |
N/A |
$ |
511,816 |
8.00 |
% |
$ |
671,759 |
10.50 |
% |
|||||||||||||||||
|
Tier I capital |
660,696 |
10.33 |
N/A |
N/A |
383,862 |
6.00 |
543,805 |
8.50 |
|||||||||||||||||||||||
|
Common equity tier I |
660,637 |
10.33 |
N/A |
N/A |
287,897 |
4.50 |
447,839 |
7.00 |
|||||||||||||||||||||||
|
Tier I capital |
660,696 |
8.87 |
N/A |
N/A |
298,086 |
4.00 |
298,086 |
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, stock repurchases and discretionary bonus payments to executive officers based on the amount of the shortfall.
The Dividend Reinvestment Plan of Peapack-Gladstone Financial Corporation, or the "Reinvestment Plan," allows shareholders of the Company to purchase 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 fulfilled through 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, 2026 were purchased in the open market.
In September 2026, the Company amended its Reinvestment Plan to reinstate a 3% discount on shares purchased under the Plan. The Company believes the Plan, including reinvested dividends and voluntary cash purchases of up to $200,000 per quarter can provide an additional source of common equity capital and support its capital management strategy.
On October 29, 2026, the Board of Directors declared a regular cash dividend of $0.05 per share payable on November 27, 2026 to shareholders of record on November 12, 2026.
Management believes the Company's capital position and capital ratios were adequate at September 30, 2026. Further, Management believes the Company has sufficient 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, securities
available for sale, customer deposit inflows, loan repayments and secured borrowings. Other liquidity sources include loan and security sales and loan participations.
Management actively monitors and manages the Company's liquidity position and believes it is sufficient to meet future needs. Cash and cash equivalents, including interest-earning deposits, totaled $268.9 million at September 30, 2026. In addition, the Company had $812.0 million in securities designated as available for sale at September 30, 2026. 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 $392.8 million and $75.4 million as of September 30, 2026, respectively, were pledged to secure public funds and for other purposes required or permitted by law. None of the pledged securities are encumbered. In addition, the Company generates significant liquidity from scheduled and unscheduled principal repayments of loans and mortgage-backed securities.
As of September 30, 2026, the Company had approximately $4.2 billion of external borrowing capacity available on a same day basis, which when combined with balance sheet liquidity provided the Company with 214 percent coverage of our uninsured/unprotected deposits.
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. Management believes the Company's liquidity position and sources were adequate at September 30, 2026.
Peapack-Gladstone Financial Corporation published this content on November 06, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 06, 2026 at 16:06 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]