Q2 2026 Peapack-Gladstone Financial Corp Earnings Call

July 28, 2026

Operator 3: Welcome to Peapack-Gladstone Financial Corp.'s Q2 2026 Earnings Call. Please be advised, today's conference is being recorded. I will now hand the conference over to Matthew Remo, Treasurer and Head of Corporate Finance. Please go ahead.

Operator: Welcome to Peapack-Gladstone Financial Corp.'s Q2 2026 Earnings Call. Please be advised, today's conference is being recorded. I will now hand the conference over to Matthew Remo, Treasurer and Head of Corporate Finance. Please go ahead.

Speaker #1: Please go ahead.

Speaker #2: Thank you, and good morning, everyone. I'm joined today by our President and CEO, Doug Krieg, and our CFO, Frank Cavaliere, who will be providing an overview of our Q4 results.

Matt P. Remo: Thank you, and good morning, everyone. I am joined today by our President and CEO, Doug Re, our CFO, John Cavalero, who will be providing an overview of our Q2 results. John Babcock, our President of Wealth Management, and Lisa Chalkin, our Chief Credit Officer, are also here to answer any questions. If you have not yet read the earnings release and investor presentation we issued yesterday afternoon, you may access them by going to the investor relations page on our company website at peapackprivate.com. You may also access the investor presentation directly within the webcast today. After the presentation, we will be happy to take questions. Our comments today may contain forward-looking statements, which are subject to risks and uncertainties that may cause our results to differ materially from expectations.

Matthew Remo: Thank you, and good morning, everyone. I am joined today by our President and CEO, Doug Re, our CFO, John Cavalero, who will be providing an overview of our Q2 results. John Babcock, our President of Wealth Management, and Lisa Chalkin, our Chief Credit Officer, are also here to answer any questions. If you have not yet read the earnings release and investor presentation we issued yesterday afternoon, you may access them by going to the investor relations page on our company website at peapackprivate.com.

Speaker #2: John Babcock, our President of Wealth Management, and Lisa Chalkin, our Chief Credit Officer, are also here to answer any questions. If you have not yet read the earnings release and investor presentation we issued yesterday afternoon, you may access them by going to the investor relations page on our company website at peapackprivate.com.

Speaker #2: You may also access the investor presentation directly within the webcast today. After the presentation, we will be happy to take questions. Our comments today may contain forward-looking statements, which are subject to risks and uncertainties that may cause our results to differ materially from expectations.

Matthew Remo: You may also access the investor presentation directly within the webcast today. After the presentation, we will be happy to take questions. Our comments today may contain forward-looking statements, which are subject to risks and uncertainties that may cause our results to differ materially from expectations. Cautionary statements about reliance on this information are included in the earnings release and investor presentation, as well as our SEC filings and other investor materials. The earnings release and presentation also include non-GAAP financial measures, so it is important to review the appropriate reconciliations in the appendices to each document. With that, it is my pleasure to turn the call over to Doug.

Speaker #2: Cautionary statements about reliance on this information are included in the earnings release and investor presentation, as well as in our SEC filings and other investor materials.

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

Speaker #2: The earnings release and presentation also include non-GAAP financial measures, so it is important to review the appropriate reconciliations in the appendices to each document.

Speaker #2: And with that, it is my pleasure to turn the call over to Doug.

Speaker #3: Thanks, Matt, and good morning, everybody. And thank you for joining us today. On behalf of the entire team at PEAPACK PRIVATE, I'm really pleased to report that our strategy continues to deliver solid results.

Doug L. Kennedy: Thanks, Matt, good morning, everybody, and thank you for joining us today. On behalf of the entire team at Peapack Private, I am really pleased to report that our strategy continues to deliver solid results. We believe that we are building a durable and valuable franchise that has significant barriers to entry. Our people, our product offering, grounded in wealth, is very rare and extremely difficult to replicate. Revenue and profitability have been positive for seven consecutive quarters, and we expect that trend to continue for the foreseeable future. We continue to be on track to deliver a 1% ROA and 10% ROE for the Q4 of this year, possibly slipping into the Q1 of next, which is what we communicated to all of you previously. We have entered the Q3 with a very strong new business pipeline, and we feel very positive about the future.

Doug Kennedy: Thanks, Matt, good morning, everybody, and thank you for joining us today. On behalf of the entire team at Peapack Private, I am really pleased to report that our strategy continues to deliver solid results. We believe that we are building a durable and valuable franchise that has significant barriers to entry. Our people, our product offering, grounded in wealth, is very rare and extremely difficult to replicate.

Speaker #3: We believe that we're building a durable and valuable franchise that has significant barriers to entering, our people, our product offering, grounded in wealth, is very rare, and extremely difficult to replicate.

Speaker #3: Revenue and profitability have been positive for seven consecutive quarters, and we expect that trend to continue for the foreseeable future. We continue to be on track to deliver a 1% ROA and 10% ROE by the fourth quarter of this year, possibly slipping into the first quarter of next, which is what we communicated to all of you previously.

Doug Kennedy: Revenue and profitability have been positive for seven consecutive quarters, and we expect that trend to continue for the foreseeable future. We continue to be on track to deliver a 1% ROA and 10% ROE for the Q4 of this year, possibly slipping into the Q1 of next, which is what we communicated to all of you previously. We have entered the Q3 with a very strong new business pipeline, and we feel very positive about the future.

Speaker #3: We have entered the third quarter with a very strong new business pipeline, and we feel very positive about the future. For this past quarter, we reported net income of $15.8 million, consistent with where we had guided.

Doug L. Kennedy: For this past quarter, we reported net income of $15.8 million, consistent with where we had guided. This was an increase of 11% on a linked quarter basis and was 99% year-over-year. Our wealth management business grew 6% year-to-date and 13% year-over-year with positive flows. Our deposits grew $231 million in the quarter, 35% of which was non-interest-bearing, and we continue to see relationships in that $2 to $2.5 million average size. Also notable is the fact that 56% of our deposit growth over the last 12 months have been in the form of non-interest-bearing accounts. Our loans are up $236 million. Strong growth in C&I, equipment finance, and CRE. Multifamily was down an additional $21 million in the quarter and $58 million year-to-date. Where are we in terms of our strategy and where we have been and where we are going?

Doug Kennedy: For this past quarter, we reported net income of $15.8 million, consistent with where we had guided. This was an increase of 11% on a linked quarter basis and was 99% year-over-year. Our wealth management business grew 6% year-to-date and 13% year-over-year with positive flows. Our deposits grew $231 million in the quarter, 35% of which was non-interest-bearing, and we continue to see relationships in that $2 to $2.5 million average size.

Speaker #3: This was an increase of 11% on a linked-quarter basis and was up 99% year over year. Our wealth management business grew 6% year to date, and 13% year over year, with positive flows.

Speaker #3: Our deposits grew $231 million in the quarter, 35% of which was non-interest-bearing, and we continue to see relationships in that 2% to 2.5 million average size.

Speaker #3: Also notable is the fact that 56% of our deposit growth over the last 12 months has been in the form of non-interest-bearing accounts. Our loans are up $236 million, with strong growth in C&I, equipment finance, and CRE. Multifamily was down an additional $21 million in the quarter, and $58 million year to date.

Doug Kennedy: Also notable is the fact that 56% of our deposit growth over the last 12 months have been in the form of non-interest-bearing accounts. Our loans are up $236 million. Strong growth in C&I, equipment finance, and CRE. Multifamily was down an additional $21 million in the quarter and $58 million year-to-date. Where are we in terms of our strategy and where we have been and where we are going? In 2023, as you know, we made some bold strategic moves.

Speaker #3: So, where are we in terms of our strategy—where we've been and where we're going? In 2023, as you know, we made some bold strategic moves.

Doug L. Kennedy: In 2023, as you know, we made some bold strategic moves. We invested heavily in building out our product offering. We lifted teams from First Republic and Signature. To date, we've hired a total of 20 teams and nearly 200 professionals to cover the metro New York market, which includes Westchester and Long Island. Of course, all of this hiring temporarily impacted earnings, which bottomed out in Q3 2024. We expected that. As we modeled through where we are right now, we're a little ahead of where we thought we would be. Profits have rebounded quickly. Given the level of investment, what's really incredible is that we essentially have built a de novo bank in New York and made it profitable in under 2 years. Where are we headed and where are we going?

Speaker #3: We invested heavily in building out our product offering. We lifted teams from First Republic and Signature. And to date, we've hired a total of 20 teams and nearly 200 professionals to cover the Metro New York market, which includes Westchester and Long Island.

Doug Kennedy: We invested heavily in building out our product offering. We lifted teams from First Republic and Signature. To date, we've hired a total of 20 teams and nearly 200 professionals to cover the metro New York market, which includes Westchester and Long Island. Of course, all of this hiring temporarily impacted earnings, which bottomed out in Q3 2024. We expected that. As we modeled through where we are right now, we're a little ahead of where we thought we would be.

Speaker #3: Of course, all of this hiring temporarily impacted earnings, which bottomed out in the third quarter of 2024, but we expected that, and as we modeled through where we are right now, we're a little ahead of where we thought we would be.

Speaker #3: Profits have rebounded quickly, and given the level of investment and what's really incredible, is that we essentially have built a de novo bank in New York and made it profitable in under two years.

Doug Kennedy: Profits have rebounded quickly. Given the level of investment, what's really incredible is that we essentially have built a de novo bank in New York and made it profitable in under 2 years. Where are we headed and where are we going? The momentum that we built continues to grow. On page five of our investor deck, we shared the level of non-interest-bearing DDAs that have been opened in the quarter. When you compare that to what happened a year ago earlier, that activity is up over 20% year over year.

Speaker #3: So where are we headed, and where are we going? The momentum that we built continues to grow. On page five of our investor deck, we shared the level of non-interest-bearing DDAs that have been opened in the quarter.

Doug L. Kennedy: The momentum that we built continues to grow. On page five of our investor deck, we shared the level of non-interest-bearing DDAs that have been opened in the quarter. When you compare that to what happened a year ago earlier, that activity is up over 20% year over year. As stated, our current pipeline remains strong, and the number of positive conversations we're having in the market leads me to believe that the strength that we're seeing will continue. I should also note that the competition for deposits in the market has increased markedly in the last quarter. Frank will touch on that a little bit more, but we do see a little bit of headwinds in terms of pricing. We're reiterating that the net interest margin, going back to Q1, will grow a total of 6 to 9 basis points through the end of this year.

Speaker #3: When you compare that to what happened a year earlier, that activity is up over 20% year-over-year. As stated, our current pipeline remains strong, and the number of positive conversations we're having in the market leads me to believe that the strength we're seeing will continue.

Doug Kennedy: As stated, our current pipeline remains strong, and the number of positive conversations we're having in the market leads me to believe that the strength that we're seeing will continue. I should also note that the competition for deposits in the market has increased markedly in the last quarter. Frank will touch on that a little bit more, but we do see a little bit of headwinds in terms of pricing. We're reiterating that the net interest margin, going back to Q1, will grow a total of 6 to 9 basis points through the end of this year.

Speaker #3: I should also note that the competition for deposits in the market has increased markedly, in the last quarter, and Frank will touch on that a little bit more, but we do see a little bit of headwinds in terms of pricing.

Speaker #3: We're reiterating that the net interest margin, going back to the first quarter, will grow a total of 6 to 9 basis points through the end of this year, which basically says it's going to sort of bounce around where it is.

Doug L. Kennedy: Which basically says it's going to bounce around where it is. It'll have some volatility to it, but we're still committed to what we had shared last quarter. From a strategic standpoint, we have everything that we need. It's really all now about dedicated and focused execution. Our brand, we've come a long way. We rebranded the company, and I think about that a little bit as we go forward through the end of next year. I believe that by then we will have built a very credible private banking institution offering bespoke credit solutions that cater to affluent individuals and their families. At present, we're offering life insurance premium finance. We have jumbo mortgages and HELOCs. We have invested lines of credit. We have professional lines of credit. We've done some fine art, some collectibles. We recently began to launch aviation and yacht finance.

Doug Kennedy: Which basically says it's going to bounce around where it is. It'll have some volatility to it, but we're still committed to what we had shared last quarter. From a strategic standpoint, we have everything that we need. It's really all now about dedicated and focused execution. Our brand, we've come a long way. We rebranded the company, and I think about that a little bit as we go forward through the end of next year. I believe that by then we will have built a very credible private banking institution offering bespoke credit solutions that cater to affluent individuals and their families.

Speaker #3: It'll have some volatility to it, but we're still committed to what we had shared last quarter. From a strategic standpoint, we have everything that we need; it's really all now about dedicated and focused execution.

Speaker #3: So our brands, we've come a long way. We rebranded the company. And I think about that a little bit, as we go forward through the end of next year, I believe that by then we will have built a very credible private banking institution, offering bespoke credit solutions that cater to affluent individuals and their families.

Speaker #3: At present, we're offering life insurance premium finance. We have jumbo mortgages and HELOCs. We have investment lines of credit. We have professional lines of credit.

Doug Kennedy: At present, we're offering life insurance premium finance. We have jumbo mortgages and HELOCs. We have invested lines of credit. We have professional lines of credit. We've done some fine art, some collectibles. We recently began to launch aviation and yacht finance. All of this is geared towards meeting the needs of our clientele. How we would present our company externally will increasingly look and feel niche private bank with a focus on commercial and wealth management and the needs of high-net-worth individuals and their families.

Speaker #3: We have done some fine art and some collectibles, and we recently began to launch aviation and yacht finance. All of this is geared towards meeting the needs of our clientele.

Doug L. Kennedy: All of this is geared towards meeting the needs of our clientele. How we would present our company externally will increasingly look and feel niche private bank with a focus on commercial and wealth management and the needs of high-net-worth individuals and their families. With that, let me just summarize in saying that it's been a great strategic journey over the last couple of years and a strong quarter for us at Peapack Private. We've had lots of momentum and a clear vision and path to execute that we remain confident that we will deliver strong, durable results leading to superior shareholder value. With that, I'll hand the call over to Frank, who will provide a detailed overview of the quarter's results. Frank?

Speaker #3: So, how will we present our company externally? We'll increasingly look and feel like a niche private bank, with a focus on commercial and wealth management, and the needs of high-net-worth individuals and their families.

Speaker #3: So with that, let me just summarize in saying that it's been a great strategic journey over the last couple of years, and a strong quarter for us at PEAPACK PRIVATE.

Doug Kennedy: With that, let me just summarize in saying that it's been a great strategic journey over the last couple of years and a strong quarter for us at Peapack Private. We've had lots of momentum and a clear vision and path to execute that we remain confident that we will deliver strong, durable results leading to superior shareholder value. With that, I'll hand the call over to Frank, who will provide a detailed overview of the quarter's results. Frank?

Speaker #3: We've had lots of momentum, and a clear vision and path to execute. We remain confident that we will deliver strong, durable results leading to superior shareholder value.

Speaker #3: With that, I'll hand the call over to Frank. He'll provide a detailed overview of the quarter's results. Frank?

Speaker #4: Thanks, Doug. And good morning, everyone. I'll review the quarter in more detail. Beginning with earnings, then moving through the balance sheet, credit, and capital.

Frank A. Cavallaro: Thanks, Doug, and good morning, everyone. I'll review the quarter in more detail, beginning with earnings, then moving through the balance sheet, credit, and capital. Net income available to common shareholders for the quarter was $15.8 million or $0.85 per diluted share, compared to $14.2 million or $0.80 a share in Q1. Core earnings, which is pre-tax income before the provision, increased to $30.4 million, up 12% sequentially and 70% from a year ago. Total revenue increased to $86.1 million, up 4% compared to Q1 and 23% year over year. Net interest income was $63.9 million, an increase of $4 million from Q1 and $15.6 million from a year ago. This marked another quarter of consistent net interest income growth supported by balance sheet expansion, disciplined pricing, and improved earning asset yields.

Frank Cavallaro: Thanks, Doug, and good morning, everyone. I'll review the quarter in more detail, beginning with earnings, then moving through the balance sheet, credit, and capital. Net income available to common shareholders for the quarter was $15.8 million or $0.85 per diluted share, compared to $14.2 million or $0.80 a share in Q1. Core earnings, which is pre-tax income before the provision, increased to $30.4 million, up 12% sequentially and 70% from a year ago.

Speaker #4: Net income available to common shareholders for the quarter was $15.8 million, or 85 cents per diluted share, compared to $14.2 million, or 80 cents a share, in the first quarter.

Speaker #4: Core earnings, which is pre-tax income before the provision, increased to $30.4 million, up 12% sequentially and 70% from a year ago. Total revenue increased to $86.1 million, up 4% compared to the first quarter, and 23% year over year.

Frank Cavallaro: Total revenue increased to $86.1 million, up 4% compared to Q1 and 23% year over year. Net interest income was $63.9 million, an increase of $4 million from Q1 and $15.6 million from a year ago. This marked another quarter of consistent net interest income growth supported by balance sheet expansion, disciplined pricing, and improved earning asset yields.

Speaker #4: Net interest income was $63.9 million, an increase of $4 million from the first quarter, and $15.6 million from a year ago. This marked another quarter of consistent net interest income growth, supported by balance sheet expansion, discipline pricing, and improved earning asset yields.

Speaker #4: Net interest margin during Q2 increased by 6 basis points to 3.32%. The improvement this quarter was driven more by asset yields, while we largely held our ground on funding costs.

Frank A. Cavallaro: Net interest margin during Q2 increased by six basis points to 3.32%. The improvement this quarter was driven more by asset yields, while we largely held our ground on funding costs. We're really pleased with this, considering what's happened to Fed futures over the last three months and the increasingly competitive deposit environment we are seeing every day. Average earning asset yields increased for two primary reasons. First, we continue to hold our discipline on low pricing with average yields on new originations in the quarter just north of 6%. Second, we're also seeing some impact from backfill repricing. Our prior comments on average quarterly margin expansion of two to three basis points remains largely intact when reviewed over a longer period, but the progression will not necessarily be linear.

Frank Cavallaro: Net interest margin during Q2 increased by six basis points to 3.32%. The improvement this quarter was driven more by asset yields, while we largely held our ground on funding costs. We're really pleased with this, considering what's happened to Fed futures over the last three months and the increasingly competitive deposit environment we are seeing every day. Average earning asset yields increased for two primary reasons.

Speaker #4: We're really pleased with this, considering what's happened to Fed futures over the last three months, and the increasingly competitive deposit environment we're seeing every day.

Speaker #4: Average earning asset yields increased for two primary reasons. First, we continue to hold our discipline on loan pricing, with average yields on new originations in the quarter just north of 6%.

Frank Cavallaro: First, we continue to hold our discipline on low pricing with average yields on new originations in the quarter just north of 6%. Second, we're also seeing some impact from backfill repricing. Our prior comments on average quarterly margin expansion of two to three basis points remains largely intact when reviewed over a longer period, but the progression will not necessarily be linear. Following the six basis points increase in this quarter, we may give some back over the coming quarters, as Doug mentioned, and report changes below the two to three basis point range in individual periods, but remaining consistent with the broader outlook.

Speaker #4: And second, we're also seeing some impact from backbook repricing. Our prior comments on average quarterly margin expansion of 2 to 3 basis points remains largely intact when reviewed over a longer period, but the progression will not necessarily be linear.

Speaker #4: Following the 6 basis points increase in this quarter, we may give some back over the coming quarters, as Doug mentioned, and report changes below the 2 to 3 basis point range in individual periods, but remaining consistent with the broader outlook.

Frank A. Cavallaro: Following the six basis points increase in this quarter, we may give some back over the coming quarters, as Doug mentioned, and report changes below the two to three basis point range in individual periods, but remaining consistent with the broader outlook. Non-interest income was $22.1 million, driven by wealth management fee income, which increased to $17.2 million, up 4% sequentially and 8% from a year ago. Operating expenses were $55.7 million, which is up less than 1% from Q1. Revenue growth outpaced expense growth 10 to 1, producing another strong quarter of positive operating leverage. The reported efficiency ratio declined to 65%, marking the seventh consecutive quarter of improvement. We expect expense growth will continue to normalize as the investments made over the past several years become more productive. Turning to the balance sheet, growth remains strong across the company.

Speaker #4: Non-interest income was 22.1 million, driven by wealth management fee income, which increased to 17.2 million, up 4% sequentially and 8% from a year ago.

Frank Cavallaro: Non-interest income was $22.1 million, driven by wealth management fee income, which increased to $17.2 million, up 4% sequentially and 8% from a year ago. Operating expenses were $55.7 million, which is up less than 1% from Q1. Revenue growth outpaced expense growth 10 to 1, producing another strong quarter of positive operating leverage. The reported efficiency ratio declined to 65%, marking the seventh consecutive quarter of improvement.

Speaker #4: Operating expenses were $55.7 million, which is up less than 1% from the first quarter. Revenue growth outpaced expense growth 10 to 1, producing another strong quarter of positive operating leverage.

Speaker #4: The reported efficiency ratio declined to 65%, marking the seventh consecutive quarter of improvement. We expect expense growth will continue to normalize as the investments made over the past several years become more productive.

Frank Cavallaro: We expect expense growth will continue to normalize as the investments made over the past several years become more productive. Turning to the balance sheet, growth remains strong across the company. Total loans increased $236 million during the quarter to $6.7 billion, up 15% year over year. Growth remained concentrated in our core areas of strength, particularly C&I and commercial real estate.

Speaker #4: Turning to the balance sheet, growth remains strong across the company. Total loans increased $236 million during the quarter to $6.7 billion, up 15% year over year.

Frank A. Cavallaro: Total loans increased $236 million during the quarter to $6.7 billion, up 15% year over year. Growth remained concentrated in our core areas of strength, particularly C&I and commercial real estate. Deposits increased $231 million up to $7.1 billion, which is up 11% year over year. Non-interest-bearing deposits increased approximately $80 million in the quarter and have grown $386 million from a year ago. We opened and funded more than 650 new non-interest-bearing DDA accounts in the quarter, which is consistent with our average volumes over recent quarters. As Doug mentioned, this continued growth in operating accounts is an important indicator of relationship quality and supports a more durable funding profile over time. The loan-to-deposit ratio remained well managed at about 95%.

Speaker #4: Growth remained concentrated in our core areas of strength, particularly C&I and commercial real estate. Deposits increased $231 million, up to $7.1 billion, which is up 11% year over year.

Frank Cavallaro: Deposits increased $231 million up to $7.1 billion, which is up 11% year over year. Non-interest-bearing deposits increased approximately $80 million in the quarter and have grown $386 million from a year ago. We opened and funded more than 650 new non-interest-bearing DDA accounts in the quarter, which is consistent with our average volumes over recent quarters. As Doug mentioned, this continued growth in operating accounts is an important indicator of relationship quality and supports a more durable funding profile over time. The loan-to-deposit ratio remained well managed at about 95%.

Speaker #4: And non-interest-bearing deposits increased approximately $80 million in the quarter, and have grown $386 million from a year ago. We opened and funded more than 650 new non-interest-bearing DDA accounts in the quarter, which is consistent with our average volumes over recent quarters.

Speaker #4: As Doug mentioned, this continued growth in operating accounts is an important indicator of relationship quality and supports a more durable funding profile over time.

Speaker #4: The loan to deposit ratio remained well managed at about 95%. We continue to maintain substantial on and off balance sheet liquidity, no broker deposits, and a diversified funding base.

Frank A. Cavallaro: We continue to maintain substantial on and off-balance-sheet liquidity, no broker deposits, and a diversified funding base. Turning to credit, the provision for credit losses was $8.1 million. Net charge-offs were $5.9 million in the quarter and were concentrated in one multifamily loan and one commercial mortgage relationship. The allowance for credit losses remained stable at 1.04% of total loans. Non-performing assets increased to $72.2 million, or 0.91% of total assets, compared to 0.77% in Q1. The increase was primarily driven by the migration of a previously disclosed larger multifamily relationship. At the same time, special mention loans declined, performing modifications decreased materially, and early-stage delinquencies were relatively stable. We continue to see no evidence of broad-based deterioration across the portfolio.

Frank Cavallaro: We continue to maintain substantial on and off-balance-sheet liquidity, no broker deposits, and a diversified funding base. Turning to credit, the provision for credit losses was $8.1 million. Net charge-offs were $5.9 million in the quarter and were concentrated in one multifamily loan and one commercial mortgage relationship. The allowance for credit losses remained stable at 1.04% of total loans. Non-performing assets increased to $72.2 million, or 0.91% of total assets, compared to 0.77% in Q1.

Speaker #4: Turning to credit, the provision for credit losses was 8.1 million. Net charge-offs were 5.9 million, in the quarter, and were concentrated in one monthly family loan and one commercial mortgage relationship.

Speaker #4: The allowance for credit losses remained stable at 1.04% of total loans. Non-performing assets increased to $72.2 million, or 0.91% of total assets, compared to 0.77% in the first quarter.

Speaker #4: The increase was primarily driven by the migration of a previously disclosed larger multifamily relationship. At the same time, special mention loans declined, performing modifications, decreased materially, and early-stage delinquencies were relatively stable.

Frank Cavallaro: The increase was primarily driven by the migration of a previously disclosed larger multifamily relationship. At the same time, special mention loans declined, performing modifications decreased materially, and early-stage delinquencies were relatively stable. We continue to see no evidence of broad-based deterioration across the portfolio. Capital remains solid and continue to benefit from earnings generation.

Speaker #4: We continue to see no evidence of broad-based deterioration across the portfolio. Capital remained solid and continued to benefit from earnings generation. Tangible book value per share increased 3% during the quarter to $36.26, and is up 9% from a year ago.

Frank A. Cavallaro: Capital remains solid and continue to benefit from earnings generation. Tangible book value per share increased 3% during the quarter to $36.26 and is up 9% from a year ago. Holding company common equity Tier One capital was 10.38%, and Tier One capital was 10.83%. Based on this quarter's results and the continued momentum across the company, we elected to draw the remaining $20 million of available convertible preferred equity in July. You may recall that in Q1 of this year, we announced a $50 million commitment to issue convertible preferred equity with an initial draw of $30 million back in March. After assessing current results and projected growth rates going forward, we felt that this was the appropriate time to add the remaining $20 million in capital to our balance sheet.

Frank Cavallaro: Tangible book value per share increased 3% during the quarter to $36.26 and is up 9% from a year ago. Holding company common equity Tier One capital was 10.38%, and Tier One capital was 10.83%. Based on this quarter's results and the continued momentum across the company, we elected to draw the remaining $20 million of available convertible preferred equity in July. You may recall that in Q1 of this year, we announced a $50 million commitment to issue convertible preferred equity with an initial draw of $30 million back in March.

Speaker #4: Holding company common equity tier one capital was 10.38%, and tier one capital was $1.083 billion. Based on this quarter's results and the continued momentum across the company, we elected to draw the remaining $20 million of available convertible preferred equity in July.

Speaker #4: You may recall that in the first quarter of this year, we announced a $50 million commitment to issue convertible preferred equity, with an initial draw of $30 million back in March.

Speaker #4: After assessing current results and projected growth rates going forward, we felt that this was the appropriate time to add the remaining $20 million in capital to our balance sheet.

Frank Cavallaro: After assessing current results and projected growth rates going forward, we felt that this was the appropriate time to add the remaining $20 million in capital to our balance sheet. Overall, the quarter reflected continued progress across each of our key financial priorities: sustained revenue growth, positive operating leverage, margin expansion, disciplined balance sheet growth, and continued tangible book value creation. We remain upbeat on the earnings trajectory of the company and the durability of the underlying relationship activity. With that, we are happy to answer any questions.

Speaker #4: Overall, the quarter reflected continued progress across each of our key financial priorities. Sustained revenue growth, positive operating leverage, margin expansion, discipline balance sheet growth, and continued tangible book value creation.

Frank A. Cavallaro: Overall, the quarter reflected continued progress across each of our key financial priorities: sustained revenue growth, positive operating leverage, margin expansion, disciplined balance sheet growth, and continued tangible book value creation. We remain upbeat on the earnings trajectory of the company and the durability of the underlying relationship activity. With that, we are happy to answer any questions.

Speaker #4: We remain upbeat on the earnings trajectory of the company and the durability of the underlying relationship activity. With that, we are happy to answer any questions.

Speaker #1: We will now begin the question and answer session.

Operator 3: We will now begin the question and an-

Speaker #3: Thank you, and good morning, everyone. I'm joined today by...

Operator 3: Thank you. Good morning, everyone. I'm joined today by.

Speaker #1: We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand.

Operator 3: We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. If you are muted, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Manuel Navas with Piper Sandler. Manuel, your line is now open. Please go ahead.

Operator: We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. If you are muted, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Manuel Navas with Piper Sandler. Manuel, your line is now open. Please go ahead.

Speaker #1: To withdraw your question, press star 1 again. If you are muted, please remember to unmute your device. Please stand by while we compile the Q&A roster.

Speaker #1: Your first question comes from the line of Emmanuel Navas with Piper Sandler. Emmanuel, your line is now open. Please go ahead.

Speaker #5: Hey, good morning. Could we have an update on the deposit growth pipeline? You've had some commentary in the past about the mix, so just looking for more color there to start with.

Manuel Navas: Hey, good morning. Could we have an update on the deposit growth pipeline? You've had some commentary in the past about the mix, and just more color there to start with.

Speaker #3: Sure. So good morning, Manuel. How are you? I would say that the strength of the pipeline is very consistent with what we've seen so far.

Frank A. Cavallaro: Sure. Good morning, Manuel. How are you? I would say that the strength of the pipeline is very consistent with what we've seen so far to date. As you would imagine, money market accounts get funded right away. Non-interest-bearing actually take time to sort of make the transfer over to us. The forward look for us is how many accounts are sitting there waiting to get funded. I will tell you that that inventory of pipeline is as robust as it's ever been. I think that in terms of guidance, we sort of have talked to $200 million each quarter. We still believe that about a third of that would be in non-interest-bearing. That could fluctuate from time to time or quarter to quarter.

Doug Kennedy: Sure. Good morning, Manuel. How are you? I would say that the strength of the pipeline is very consistent with what we've seen so far to date. As you would imagine, money market accounts get funded right away. Non-interest-bearing actually take time to sort of make the transfer over to us. The forward look for us is how many accounts are sitting there waiting to get funded. I will tell you that that inventory of pipeline is as robust as it's ever been.

Speaker #3: To date, as you would imagine, money market accounts get funded right away. Non-interest-bearing actually take time to sort of make the transfer over to us.

Speaker #3: So, sort of the forward look for us is: How many accounts are sitting there waiting to get funded? And I will tell you that that inventory, or pipeline, is as robust as it's ever been.

Speaker #3: I think that, in terms of guidance, we've sort of talked to $200 million each quarter. We still believe that about a third of that would be in non-interest-bearing.

Doug Kennedy: I think that in terms of guidance, we sort of have talked to $200 million each quarter. We still believe that about a third of that would be in non-interest-bearing. That could fluctuate from time to time or quarter to quarter. I would say that as we look through the end of this year, I would say that we feel very comfortable that that's the trajectory that we're on.

Speaker #3: That could fluctuate from time to time or quarter to quarter, but I would say that as we look through the end of this year, I would say that we're we feel very comfortable that that's the trajectory that we're on.

Frank A. Cavallaro: I would say that as we look through the end of this year, I would say that we feel very comfortable that that's the trajectory that we're on.

Speaker #5: I appreciate that. It also sounds like loan pipelines are pretty strong. Could you just comment on what you're seeing out there in the market?

Manuel Navas: I appreciate that. It also sounds like loan pipelines are pretty strong. Could you just comment on what you're seeing out there in the market? Is it going to be at a continued similar mix to this quarter's really impressive growth? Just any further color there.

Speaker #5: Is it going to be at a continued similar mix to this quarter's really impressive growth? Just any further color there?

Speaker #3: So there was some volume actually kicked into this quarter. So we actually came out of the gate pretty strong. And the pipelines Lisa Chalk is here.

Frank A. Cavallaro: There was some volume actually kicked into this quarter. We actually came out of the gate pretty strong. The pipelines, Lisa Chalkan and here. Lisa, I'm going to

Doug Kennedy: There was some volume actually kicked into this quarter. We actually came out of the gate pretty strong. The pipelines, Lisa Chalkan and here. Lisa, I'm going to Still very strong?

Speaker #3: Lisa, I mean, I think they're still very strong.

Doug L. Kennedy: Still very strong?

Speaker #4: Yeah, I think we believe that the growth number will be about $300 million, which means that we'll be closing $450 to $500 million in order to be able to do that.

Lisa Chalkan: Yeah, I think we think that the growth number will be about $300 million, which means that we'll be closing $450 to 500 million in order to be able to do that.

Speaker #3: So, stronger than the quarter we just had, Emma.

Doug L. Kennedy: Stronger than the quarter we just had in loan.

Doug Kennedy: Stronger than the quarter we just had in loan.

Speaker #5: Is that maybe driving the potential variability in the NIM, that you're just having such strong opportunities on the growth side?

Manuel Navas: Is that maybe driving the potential variability in the NIM that you're just having such strong opportunities on the growth side?

Speaker #3: The answer to that is yes, because we'll never get the timing right on deposits hitting our balance sheet at the same time that we're funding the loan pipe.

Doug L. Kennedy: The answer to that is yes, because we'll never get the timing right on for deposits hitting our balance sheet at the same time that we're funding the loan pipe. That's part of it. The other part of it is that just in general, there's been elevated competition, and we're seeing rates with a four handle on it as being very common. The longer we sit in this sort of, even if it's transitory, higher elevated rate environment, the more pressure we're seeing. Also, the economy's on fire. Other banks are growing their balance sheets. There is elevated competition for deposits. I don't know exactly where it lands. As Frank said, we still hold onto the original guidance that we gave in Q1, in terms of where we'll land by the end of the year.

Doug Kennedy: The answer to that is yes, because we'll never get the timing right on for deposits hitting our balance sheet at the same time that we're funding the loan pipe. That's part of it. The other part of it is that just in general, there's been elevated competition, and we're seeing rates with a four handle on it as being very common. The longer we sit in this sort of, even if it's transitory, higher elevated rate environment, the more pressure we're seeing. Also, the economy's on fire. Other banks are growing their balance sheets. There is elevated competition for deposits.

Speaker #3: So that's part of it. The other part is that, just in general, there's been elevated competition, and we're seeing rates with a four-handle on it as being very common.

Speaker #3: So, the longer we sit in this, even in its transitory, higher-elevated rate environment, the more pressure we're seeing. And also, the economy is on fire.

Speaker #3: Other banks are growing their balance sheets. So there is elevated competition for deposits. So I don't know exactly where it lands as Frank said, we still hold on to the original guidance that we gave in the first quarter.

Doug Kennedy: I don't know exactly where it lands. As Frank said, we still hold onto the original guidance that we gave in Q1, in terms of where we'll land by the end of the year. We had a stronger performance this quarter, we may give some of that back this quarter that we're in. We'll land where we said that we were. We still see some improvement in NIM, we're definitely seeing some headwinds and the timing of the loan closings ahead of the deposits could potentially elevate costs as well.

Speaker #3: In terms of where we'll land by the end of the year, we had a stronger performance this quarter, but we may give some of that back in the quarter that we're in.

Doug L. Kennedy: We had a stronger performance this quarter, we may give some of that back this quarter that we're in. We'll land where we said that we were. We still see some improvement in NIM, we're definitely seeing some headwinds and the timing of the loan closings ahead of the deposits could potentially elevate costs as well.

Speaker #3: But we'll land where we said that we would. So, we still see some improvement in NIM, but we're definitely seeing some headwinds. The timing of loan closings ahead of deposits could potentially elevate costs as well.

Speaker #5: I appreciate that. I'll jump back into the queue.

Manuel Navas: I appreciate that. I'll jump back into the queue.

Speaker #1: Your next question comes from the line of Steve Moss with Raymond James. Steve, your line is now open. Please go ahead.

Operator 3: Your next question comes from the line of Steve Moss with Raymond James. Steve, your line is now open. Please go ahead.

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

Speaker #6: Hey, guys. Good morning. This is Chase on for Steve.

[Analyst] (Raymond James): Hey, guys. Good morning. This is Chase on for Steve.

Speaker #3: Hey, Chase. Hey, Chase.

Doug L. Kennedy: Hey, Chase.

Doug Kennedy: Hey, Chase.

Manuel Navas: Hey, Chase.

Frank Cavallaro: Hey, Chase.

Speaker #6: So I hear you on the elevated deposit competition in the market. So I was just curious, what costs were deposits coming on at in the quarter?

[Analyst] (Raymond James): I hear you're on the elevated deposit competition in the market. I was just curious, what costs were deposits coming on at in the quarter?

Speaker #3: Give a coupon. Do you have a coupon on deposit?

Doug L. Kennedy: Give the coupon. Do you have the coupon on deposits?

Doug Kennedy: Give the coupon. Do you have the coupon on deposits?

Speaker #4: Yeah, during the quarter, what we added was about two and a half percent.

Lisa Chalkan: Yeah. During the quarter, what we added was about 2.5%.

Frank Cavallaro: Yeah. During the quarter, what we added was about 2.5%.

Speaker #6: Got it. I appreciate that. And on the multifamily MTA inflow, do you have any indication on resolution timing there?

[Analyst] (Raymond James): Got it. Appreciate that. On the multifamily NPA inflow, do you have any indication on resolution timing there?

Speaker #4: This is Lisa Chalk and Chief Credit Officer. Now, it's hard to predict. I mean, the loans that just moved over, we're still negotiating with the client.

Lisa Chalkan: This is Lisa Chalkan, Chief Credit Officer. No, it's hard to predict. The loans that just moved over, we're still negotiating with the client. We have started the foreclosure process. We are awaiting for a receiver to be appointed. In New York City, the foreclosure process is incredibly protracted post-COVID. It's not gotten any better. In the event that we can come to some sort of an agreement that works for both the borrower and us, then maybe we'll be able to restructure and get them back paying. Otherwise, we're just going to continue to go through the foreclosure process. That can take some time. We could choose to sell the note at some point if that makes sense. I think the plan at the present time is to just move through the foreclosure process to get title.

Speaker #4: We have started the foreclosure process. We are awaiting the appointment of a receiver. In New York City, the foreclosure process is incredibly protracted post-COVID, and it's not gotten any better.

Speaker #4: So, in the event that we can come to some sort of agreement that works for both the borrower and us, then maybe we'll be able to restructure and get them back to paying.

Speaker #4: But otherwise, we're just going to continue to go through the foreclosure process, and that can take some time. We could choose to sell the note at some point if that makes sense.

Speaker #4: But I think the plan at the present time is to just move through the foreclosure process to get title.

Speaker #6: I appreciate all that color, and just one last one for me. Can you size up the back book repricing opportunity and the roll-off yields there?

[Analyst] (Raymond James): I appreciate all that color. Just one last one for me. Can you size up the back book repricing opportunity in the roll-off yields there?

Speaker #3: Yeah, it's about a billion and a half dollars over the next six quarters. There's that's not all multi. It's sort of a mix. And so we've the coupon there is just a little bit north of four.

Doug L. Kennedy: Yeah, it's about a billion and a half dollars over the next six quarters. That's not all multi. It's sort of a mix. The coupon there is just a little bit north of four. Is that right? Four and change.

Doug Kennedy: Yeah, it's about a billion and a half dollars over the next six quarters. That's not all multi. It's sort of a mix. The coupon there is just a little bit north of four. Is that right? Four and change.

Speaker #3: Is that right? Four and change. Four and change. The current rate today is six and change. And there'll be some of the multi the rent stabilized stuff, I'm certain that we some of those have got sort of contractual rates that are in the sevens, which we'll negotiate on the client by client basis.

Lisa Chalkan: Four and change.

Frank Cavallaro: Four and change.

Doug L. Kennedy: Four and change. The current rate today is six and change. There'll be some of the multi, the rent-stabilized stuff. I'm certain that some of those have got sort of contractual rates that are in the sevens, which we'll negotiate on a client-by-client basis. I think we have modeled in some assumptions that I think high fives is where we sort of conservatively took a look at.

Doug Kennedy: Four and change. The current rate today is six and change. There'll be some of the multi, the rent-stabilized stuff. I'm certain that some of those have got sort of contractual rates that are in the sevens, which we'll negotiate on a client-by-client basis. I think we have modeled in some assumptions that I think high fives is where we sort of conservatively took a look at.

Speaker #3: So I think we've modeled we have modeled in some assumptions that I think high fives is where we sort of conservatively took a look at.

Speaker #4: We expect to get north of 1%, maybe 1.25 pickup on the repricing. For the billion dollars, it's going to reprice over the next the next six quarters.

Lisa Chalkan: We expect to get north of 1%, maybe 1.5 pickup on the repricing for the $1 billion that's going to reprice over the next six quarters.

Frank Cavallaro: We expect to get north of 1%, maybe 1.5 pickup on the repricing for the $1 billion that's going to reprice over the next six quarters.

Speaker #6: Got it. Thank you for all the color, guys.

[Analyst] (Raymond James): Got it. Thank you for all the color, guys.

Speaker #1: Your next question comes from the line of Christopher Marinac with Breen Capital LLC. Christopher, your line is now open. Please go ahead.

Operator 3: Your next question comes from the line of Christopher Marinac with Janney Montgomery Scott. Christopher, your line is now open. Please go ahead.

Operator: Your next question comes from the line of Christopher Marinac with Janney Montgomery Scott. Christopher, your line is now open. Please go ahead.

Speaker #5: Hey, thanks. Good morning. Can you talk about the criticized loans in terms of what is past rated within some of the past dues? I just wanted to kind of get back to—I think it's slide 18—and the details you gave us there.

Christopher Marinac: Hey, thanks. Good morning. Can you talk about the criticized loans in terms of what is pass rated within some of the past dues? Just wanted to kind of get back to kind of, I think it's slide 18 and the details you gave us there on the New York multifamily.

Speaker #5: On the New York multifamily.

Speaker #4: So just for multifamily, you want to know what is past rated within past due versus criticized or classified?

Lisa Chalkan: Just for multifamily, you want to know what is pass rated within past due versus criticized or classified?

Speaker #5: Right. Just to get to a kind of bottom number. Yeah, just to get Lisa to a bottom number in terms of what is criticized and what is passed.

Christopher Marinac: Right. Just to get to a kind of a bottom number. Yeah. Just to get Lisa to a bottom number.

Lisa Chalkan: Yeah

Christopher Marinac: In terms of what is criticized and what is pass.

Speaker #4: Yeah. I'm doing the math in my head—there's about $20 million in special mention, and the balance of the multifamily is in past due.

Lisa Chalkan: Yes. I'm doing the math in my head. There is about $20 million is in special mention, and the balance of the multifamily is in pass.

Christopher Marinac: Gotcha.

Lisa Chalkan: The pass-rated loans are in the 30-day bucket versus the ones that are special mention are 61 days at the end of the quarter.

Speaker #4: The past due rated loans are in the 30-day bucket, versus the ones that are special mention, which are at 61 days at the end of the quarter.

Speaker #5: Okay, great. Thank you for that. And are you at a point now where the downgrade can slow and maybe even possibly switch? Or what would be the timeline for that?

Christopher Marinac: Okay, great. Thank you for that. Are you at a point now where the downgrades can slow, maybe even possibly switch, or what would be the timeline for that?

Speaker #4: I guess if I had a crystal ball, but it's hard to say. I do think that they have slowed. I mean, I do think that the downward migration in risk rating has slowed. I think this quarter we saw five of the loans that were in the relationship that we've been talking about for a while move to non-performing.

Lisa Chalkan: I guess if I had a crystal ball, but it is hard to say. I do think that they have slowed. I do think that the downward migration in risk grading has slowed. I think this quarter we saw five of the loans that were in the relationship that we have been talking about for a while moved to non-performing. There was nothing else that moved to non-performing. I think from a risk grading perspective, I think that we have seen improvement. Even on the past dues, if I look at the past dues, once I net out the three loans that are part of that relationship, the balance of the $10-ish million in multifamily that is past due, that is seven different relationships.

Speaker #4: But there was nothing else that moved to non-performing. So I think from a risk rating perspective, I think that we've seen improvement. And even on the past dues, if I look at the past dues, once I net out the three loans that are part of that relationship, the balance of the 10-ish million dollars in multifamily that is past due, that's seven different relationships.

Speaker #3: But yet with the wave of repricings and maturities that are coming up, there could be downgrades.

Doug L. Kennedy: Yet with the wave of repricings and maturities that are coming up, there could be downgrades.

Doug Kennedy: Yet with the wave of repricings and maturities that are coming up, there could be downgrades.

Lisa Chalkan: There could be.

Speaker #4: There could be. I can't predict it.

Doug L. Kennedy: It's hard to tell.

Doug Kennedy: It's hard to tell.

Lisa Chalkan: I can't predict it.

Doug L. Kennedy: It's relationship by relationship, and that's kind of how the conversations are going.

Doug Kennedy: It's relationship by relationship, and that's kind of how the conversations are going.

Speaker #3: It's relationship by relationship, and that's kind of how the conversations are going.

Speaker #4: Correct. I mean, every single loan we're dealing with individually, but I'm not seeing a pervasive, every-quarter trend that the past dues in multifamily are down this quarter.

Lisa Chalkan: Correct. Every single loan we're dealing with individually, but I'm not seeing a pervasive every quarter. The past dues in multifamily are down this quarter compared to last.

Speaker #4: Compared to last.

Speaker #3: I guess really we're not seeing anything systemic. There's nothing that is that's bothersome. There's this one relationship that's skewed the numbers we sort of disclosed to bake that out.

Doug L. Kennedy: I guess really we're not seeing anything systemic. There's nothing that's bothersome. There's this one relationship that skewed the numbers. We sort of disclose if you take that out, it's very sanguine. Having said that, as we go through repricing, part of the negotiation may be that a client that has been servicing, never been delinquent, could stop paying us in order to negotiate. There's going to be things that we think that we're going to have a rocky road as we go client by client, loan by loan through this repricing cycle over the next six quarters, that ultimately could create some noise inside delinquencies, inside of non-performers, et cetera. In the end, there's nothing that was systemic. If it does show up, it's a negotiation is really what's going on.

Doug Kennedy: I guess really we're not seeing anything systemic. There's nothing that's bothersome. There's this one relationship that skewed the numbers. We sort of disclose if you take that out, it's very sanguine. Having said that, as we go through repricing, part of the negotiation may be that a client that has been servicing, never been delinquent, could stop paying us in order to negotiate. There's going to be things that we think that we're going to have a rocky road as we go client by client, loan by loan through this repricing cycle over the next six quarters, that ultimately could create some noise inside delinquencies, inside of non-performers, et cetera. In the end, there's nothing that was systemic. If it does show up, it's a negotiation is really what's going on.

Speaker #3: I mean, it's very, very sanguine. Having said that, as we go through repricing, part of the negotiation may be that a client that has been servicing, never been delinquent, could stop paying us in order to negotiate.

Speaker #3: So, there are going to be things that we think will create a rocky road as we go client by client, loan by loan, through this repricing cycle over the next six quarters.

Speaker #3: That ultimately could create some noise inside delinquencies, inside of non-performers, etc. But in the end, there's nothing that we see as systemic. If it does show up, it's a negotiation—that's really what's going on.

Speaker #3: Which, by the way, is what's going on with this other question.

Christopher Marinac: Great. Thank you for that.

Doug L. Kennedy: Which is, by the way, what's going on with this other platform.

Doug Kennedy: Which is, by the way, what's going on with this other platform.

Speaker #4: That's exactly what we're saying.

Lisa Chalkan: That's exactly what we're seeing.

Speaker #3: That's exactly right. The craziest thing has never happened in my career, and I've been doing this for a few decades. I've never had a loan that actually has the capacity to pay, has more than one-to-one debt coverage, has an appraisal that shows there's equity in it, and the borrower says, "I'm not making any payments."

Doug L. Kennedy: The craziest thing that's never happened in my career, I've only been doing this for a few decades. I've never had a loan that actually has the capacity to pay, has more than one-to-one debt coverage, has an appraisal that shows that there's equity in it, and the borrower says, I'm not making any payments.

Doug Kennedy: The craziest thing that's never happened in my career, I've only been doing this for a few decades. I've never had a loan that actually has the capacity to pay, has more than one-to-one debt coverage, has an appraisal that shows that there's equity in it, and the borrower says, I'm not making any payments.

Lisa Chalkan: We've commenced foreclosure.

Speaker #3: And we started foreclosure. I've never seen that in my entire career. It's negotiating, is what they're doing.

Doug L. Kennedy: We started foreclosure. I've never seen that in my entire career. It's negotiating is what they're doing.

Doug Kennedy: We started foreclosure. I've never seen that in my entire career. It's negotiating is what they're doing.

Speaker #5: Understood. Thank you for sharing all that. And then just one last, related question: does the reserve already anticipate some downgrades, so that if some of those happen on a case-by-case basis, the reserve may have already covered a portion of it?

Christopher Marinac: Understood. Thank you for sharing all that. Just last related question. Does the reserve already anticipate some downgrades so that if some of those happen on a case-by-case basis, that the reserve may have already covered a portion of it?

Lisa Chalkan: I missed the beginning.

Speaker #4: I missed the beginning.

Speaker #3: Has the increase in the reserve already covered some of the potential downgrades? It's a mix. There's some yes and some no.

Doug L. Kennedy: Has the reserve increase in the reserve already covered some of the potential downgrades? It's a mix. There's some yes and some no.

Doug Kennedy: Has the reserve increase in the reserve already covered some of the potential downgrades? It's a mix. There's some yes and some no.

Lisa Chalkan: It's a mix. We would get an updated appraisal and sort out the specific reserve when something hits substandard. Of the ones that we just downgraded to non-performing, for them, the appraisals are pending at this point. One of the appraisals that we did get in, the reserve that we had to put against it was only like $80,000 or something. It was minimal. Every quarter, anything that's in non-performing, every single quarter, we're looking at the value of the collateral in order to make a determination, and the specific reserve is adjusted at that point in time.

Speaker #4: It's a mix. I mean, we would get an updated appraisal and sort out the specific reserve when something hits substandard. And so, of the ones that we just downgraded to non-performing for Q2, the appraisals are pending at this point.

Speaker #4: But one of the appraisals that we did get in, the reserve that we had to put against it was only like $80,000 or something.

Speaker #4: It was minimal. But every quarter, anything that's non-performing—every single quarter—we're looking at the value of the collateral in order to make a determination, and the specific reserve is adjusted at that point in time.

Speaker #3: We had sort of communicated at the end of last year, or third quarter, fourth quarter last year, that we thought we would have an elevated provision in the first half of this year.

Doug L. Kennedy: We had sort of communicated at the end of last year, Q3, Q4 last year, that we thought we would have an elevated provision in the H1 of this year. We've aggressively attacked a lot of the stuff that's there. Having said that, we believe that at least through the end of this year, that it's going to remain sort of at that $7.5 million level. It's a consequence of not something that we're seeing right now, but it's something that would arise because of what I just stated in a negotiation. There's some hard conversations that are going to take place that has the potential of keeping it sort of at that $7.5 million quarter would be sort of our best guess.

Doug Kennedy: We had sort of communicated at the end of last year, Q3, Q4 last year, that we thought we would have an elevated provision in the H1 of this year. We've aggressively attacked a lot of the stuff that's there. Having said that, we believe that at least through the end of this year, that it's going to remain sort of at that $7.5 million level. It's a consequence of not something that we're seeing right now, but it's something that would arise because of what I just stated in a negotiation. There's some hard conversations that are going to take place that has the potential of keeping it sort of at that $7.5 million quarter would be sort of our best guess.

Speaker #3: We've aggressively attacked a lot of the stuff that's there. Having said that, we believe that at least through the end of this year, that it's going to remain sort of at that seven and a half million dollar level.

Speaker #3: And it's a consequence—not of something that we're seeing right now, but of something that would arise because of what I just started in a negotiation.

Speaker #3: So there are some hard conversations that are going to take place. That has the potential of keeping it sort of at that $7.5 million quarter.

Speaker #3: That would be sort of our best guess for total growth.

Speaker #4: Correct. Well, I was going to say loan growth and the economic conditions have had an impact. About half of the reserve that we've put up this quarter is due either to the loan growth or because of weakening economic conditions, which the model factors in.

Lisa Chalkan: Correct.

Christopher Marinac: Loan growth.

Frank Cavallaro: Loan growth.

Lisa Chalkan: Well, I was going to say loan growth-

Doug L. Kennedy: Loan growth. Yeah.

Doug Kennedy: Loan growth. Yeah.

Lisa Chalkan: The economic conditions have had an impact. About half-ish of the reserve that we've put up this quarter is due either to the loan growth or because of weakening economic conditions, which the model factors in.

Speaker #5: Great. Thanks again, very much, for all the detail on this topic.

Operator 3: Great. Thanks again very much for all the detail on this topic. At this time, we would like to re-prompt. If you would like to ask a question, please press star one. Again, that is star one. We shall hold for any additional questions. There are no further questions at this time. I will now turn the call back to Doug for closing remarks.

Operator: Great. Thanks again very much for all the detail on this topic. At this time, we would like to re-prompt. If you would like to ask a question, please press star one. Again, that is star one. We shall hold for any additional questions. There are no further questions at this time. I will now turn the call back to Doug for closing remarks.

Speaker #2: At this time, we would like to re-prompt, so if you would like to ask a question, please press star one. Again, that is star one.

Speaker #2: We will hold for any additional questions. There are no further questions at this time. I will now turn the call back to Doug for closing remarks.

Speaker #3: Well, thank you all for joining us today. Q2 was clearly a validation of the strategy that we laid out during the disruption in our industry in 2023.

Doug L. Kennedy: Well, thank you all for joining us today. Q2 was clearly a validation of the strategy that we laid out during the disruption in our industry in 2023. We've invested where a lot of the other institutions that we compete against in this market pulled back. I want to really the message to deliver this quarter is that that investment is clearly behind us. What you're seeing now is a platform that's producing the ninth consecutive quarter of revenue growth, our seventh consecutive quarter of efficiency improvement, and we've also got an accelerated earnings and profitability path. In some ways, a lot of the risk of us going into New York is behind us, and we do see a lot of momentum turning into Q3 and continuing out right through the end of the year.

Doug Kennedy: Well, thank you all for joining us today. Q2 was clearly a validation of the strategy that we laid out during the disruption in our industry in 2023. We've invested where a lot of the other institutions that we compete against in this market pulled back. I want to really the message to deliver this quarter is that that investment is clearly behind us. What you're seeing now is a platform that's producing the ninth consecutive quarter of revenue growth, our seventh consecutive quarter of efficiency improvement, and we've also got an accelerated earnings and profitability path. In some ways, a lot of the risk of us going into New York is behind us, and we do see a lot of momentum turning into Q3 and continuing out right through the end of the year.

Speaker #3: We've invested where a lot of the other institutions that we compete against in this market pulled back. But what I really want to deliver as the message this quarter is that that investment is clearly behind us.

Speaker #3: And what you're seeing now is a platform that's producing the ninth consecutive quarter of revenue growth, our seventh consecutive quarter of efficiency improvement, and we've also got an accelerated earnings and profitability path.

Speaker #3: And so, in some ways, a lot of the risk of us going into New York is behind us, and we do see a lot of momentum turning into the third quarter and continuing out right through the end of the year.

Speaker #3: So with that, I want to thank you all, and we look forward to sharing our progress and continuing as we move into October. Of course, our door is open for anyone that wants to reach out to us.

Doug L. Kennedy: With that, I want to thank you all, and we look forward to sharing our progress continuing as we pull up in October. Of course, our door is open for anyone that wants to give us a shout. We're an open door here, and we'd love to be able to address any questions that you may have regarding our company. Thanks for your investment and thank you for your loyalty and a lot of great stuff happening at Peapack-Gladstone Financial Corporation.

Doug Kennedy: With that, I want to thank you all, and we look forward to sharing our progress continuing as we pull up in October. Of course, our door is open for anyone that wants to give us a shout. We're an open door here, and we'd love to be able to address any questions that you may have regarding our company. Thanks for your investment and thank you for your loyalty and a lot of great stuff happening at Peapack-Gladstone Financial Corporation.

Speaker #3: We're an open door here, and we'd love to be able to address any questions that you may have regarding our company. Thanks for your investment, and thank you for your loyalty. There’s a lot of great stuff happening at Peapack Private.

Christopher Marinac: This concludes today's call. Thank you for attending. You may now disconnect.

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

Q2 2026 Peapack-Gladstone Financial Corp Earnings Call

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