Q3 2026 Peapack-Gladstone Financial Corp Earnings Call

October 28, 2026

Operator: Welcome to the PEAPACK GLADSTONE FINANCIAL CORP third quarter 2026 earnings call. Please be advised that 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.

Matthew Remo: Of wealth management, and Lisa Chalk. Thank you, and good morning, everyone. I am joined today by our President and CEO, Doug Kennedy, and our CFO, Frank Cavallaro, who will provide an overview of our Q3 results. John Babcock, our President of Wealth Management, and Lisa Chalkan, 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 our 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.

Speaker #2: 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: You may also access the investor presentation directly within our 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: 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 our SEC filings and other investor materials.

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.

Doug Kennedy: Thanks, Matt. Good morning, everybody, and thank you for joining us on our Q3 call. On behalf of the entire team at Peapack Private, I am pleased to report yet another strong quarter for our company. Before we get into the numbers, I want to frame the quarter. What you are seeing in Q3 is not a one-quarter story. It is the result of a strategy that we have been executing on in 2023 and is now showing up consistently in our results. The big takeaway for the quarter is continued growth and profitability. Revenue continued to grow significantly faster than expenses, and expenses actually declined from the second quarter. That combination drove core pre-tax, pre-provision revenue to $32.3 million, up 76% year over year, and net income available to common shareholders to $18.5 million. Diluted earnings per share were $0.99, up 15% on a linked-quarter basis.

Doug Kennedy: Thanks, Matt. Good morning, everybody, and thank you for joining us on our Q3 call. On behalf of the entire team at Peapack Private, I am pleased to report yet another strong quarter for our company. Before we get into the numbers, I want to frame the quarter. What you are seeing in Q3 is not a one-quarter story. It is the result of a strategy that we have been executing on in 2023 and is now showing up consistently in our results. The big takeaway for the quarter is continued growth and profitability. Revenue continued to grow significantly faster than expenses, and expenses actually declined from the H2. That combination drove core pre-tax, pre-provision revenue to $32.3 million, up 76% year over year, and net income available to common shareholders to $18.5 million. Diluted earnings per share were $0.99, up 15% on a linked-quarter basis.

Speaker #3: Thanks, Matt. Good morning, everybody. And thank you for joining us in our third quarter call. On behalf of the entire team at PEAPACK PRIVATE, I'm pleased to report yet another strong quarter for our company.

Speaker #3: Before we get into the numbers, I want to frame the quarter. What you're seeing in Q3 is not a one-quarter story. It's the result of a strategy that we've been executing on in 2023.

Speaker #3: It is now showing up consistently in our results. The big takeaway for the quarter is continued growth and profitability. Revenue continued to grow significantly faster than expenses, and expenses actually declined from the second quarter.

Speaker #3: That combination drove core pre-tax pre-provision revenue to $32.3 million up 76% year over year, and net income available to common shareholders to $18.5 million.

Speaker #3: Diluted earnings per share were 99 cents, up 15% on a linked quarter basis. This forward momentum marks 10 consecutive quarters of revenue and 6 consecutive quarters of earnings growth.

Doug Kennedy: This forward momentum marks 10 consecutive quarters of revenue and six consecutive quarters of earnings growth. I will add that during the quarter, Moody's affirmed our investment grade rating with a stable outlook. So how did we get here? Let me put that in context. In 2023, the banking industry went through a real stress. Three large bank failures and a significant dislocation. We saw that dislocation as an opportunity, and we acted. In May 2023, we hired our first experienced New York City team. By April 2024, we had 13 teams and the leadership in place. In January 2025, we rebranded to Peapack Private. That April, we opened our flagship branch on 300 Park Avenue. Over the past year, we expanded to Long Island and added wealth, commercial real estate, and equipment finance talent.

Speaker #3: And I'll add that, during the quarter, Moody's affirmed our investment-grade rating with a stable outlook. So, how did we get here? Let me put that in context.

Speaker #3: In 2023, the banking industry went through a real stress. Three large bank failures, and a significant dislocation. We saw that dislocation as an opportunity, and we acted.

Speaker #3: In May 2023, we hired our first experienced New York City team. By April 2024, we had 13 teams in the leadership in place. In January 2025, we rebranded to PEAPACK PRIVATE.

Speaker #3: That April, we opened our flagship branch at 300 Park Avenue. Over the past year, we expanded to Long Island and added wealth, commercial real estate, and equipment finance talent.

Doug Kennedy: This past quarter, our annualized pre-tax, pre-provision revenue reached $129 million, which was approximately 2.7 times the trough that we saw in Q3 2024. We made the investment. We built the teams and repositioned our brand. Now these investments are showing up in higher core earnings. What did we see this quarter? Our net interest margin continued to improve despite funding cost pressure, and our efficiency ratio improved even further. That positive operating leverage is in its simplest form. Revenues are up, our expenses are down, and improved earnings are following. During the quarter, loans grew $403 million, deposits grew $301 million. As we have said before, growth is never going to be linear, and we do not expect that to ever be the fact.

Speaker #3: This past quarter, our annualized pre-tax pre-provision revenue reached $129 million, which was approximately $2.7 times the trough that we saw in the third quarter of 2024.

Speaker #3: We made the investment. We built the teams and repositioned our brand. And now, these investments are showing up in higher core earnings. So, what did we see this quarter?

Speaker #3: Our net interest margin continued to improve despite funding cost pressure, and our efficiency ratio improved even further. That positive operating leverage is in its simplest form revenues are up, our expenses are down, and improved earnings are following.

Speaker #3: During the quarter, loans grew 403 million, deposits grew 301 million. Now, as we've said before, growth is never going to be linear. And we don't expect that to ever be, the fact.

Doug Kennedy: Our quarterly operating objectives remain $200 million of loan growth, $200 million of deposit growth, and $2 million in core earnings growth. Q3 exceeded the loan and deposit objectives and delivered $2 million of core earnings growth. We begin Q4 with a strong loan and deposit pipeline. The quality of that growth has been meaningful. We continue to see growth in non-interest-bearing operating relationships, which have increased 18% year over year. On the loan side, commercial industrial lending grew $409 million year over year, up 15%, and we are seeing growth across virtually every asset category. That healthy margin expansion, combined with strong balance sheet growth, as you would expect, are improving our returns. Our return on average tangible equity was 11.4%, up 587 basis points since Q3 2024. Despite all our growth and some isolated headwinds, our capital and credit have remained very solid.

Speaker #3: But our quarterly operating objectives remain $200 million of loan growth, $200 million of deposit growth, and $2 million in core earnings growth. Q3 exceeded the loan and deposit objectives and delivered $2 million of core earnings growth.

Speaker #3: We began Q4 with a strong loan and deposit pipeline. And the quality of that growth has been meaningful. We continue to see growth in non-interest-bearing operating relationships, which have increased 18% year over year.

Speaker #3: On the loan side, commercial industrial lending grew 409 million year over year, up 15%, and we're seeing growth across virtually every asset category. That healthy margin expansion combined with strong balance sheet growth, as you would expect, are improving our returns.

Speaker #3: Our return on average tangible equity was 11.4%, up 587 basis points since the third quarter of 2024. So despite all our growth and some isolated headwinds, our capital and credit have remained very solid.

Doug Kennedy: Our capital position continues to provide buffers that give us the capacity to support continued growth, and we are managing that capacity thoughtfully. Our focus is on balancing attractive growth opportunities with capital discipline as earnings improve. Frank is going to cover capital position and the current offering under our voluntary dividend reinvestment program, which will supplement organic capital generation as we support anticipated growth. Credit quality also improved sequentially with lower non-performing assets and early-stage delinquencies declining. As a result, our allowance coverage for non-performing loans improved to 126% in the quarter. Our New York rent-regulated multifamily portfolio is down 12% year over year and now represents 11% of total loans versus 18% at 30 September 2024. We expect that this will continue into the future. Wealth management remains a foundational aspect of our company, who we are, and how we act as a private bank.

Speaker #3: Our capital position continues to provide buffers that give us the capacity to support continued growth, and we're managing that capacity thoughtfully. Our focus is on balancing attractive growth opportunities with capital discipline as earnings improve.

Speaker #3: Frank's going to cover capital position in the current offering under our voluntary dividend reinvestment program, which will supplement organic capital generation as we support anticipated growth.

Speaker #3: Credit quality also improved sequentially, with lower non-performing assets and early-stage delinquencies declining. As a result, our allowance coverage for non-performing loans improved to 126% in the quarter.

Speaker #3: Our New York rent-regulated multifamily portfolio is down 12% year over year, and now represents 11% of total loans versus 18% at September 30, 2024.

Speaker #3: We expect that this will continue into the future. Wealth management remains a foundational aspect of our company, who we are, and how we act as a private bank.

Doug Kennedy: We ended the quarter with $13.6 billion in assets under management and administration, down slightly from the second quarter. Gross inflows remain solid. Wealth revenue was $17.3 million, up 9% year over year and $51 million year to date. This is a scaled, long-established franchise. It deepens relationships across generations. It gives us real scarcity value through fiduciary expertise, specialist investment talent, sell-side advisory for business owners. It is the cornerstone of what it is that we do. Client trust in this space is very hard to replicate. It takes decades of performance and the highest level of professionalism to build. Wealth management, as you would expect, anchors the entire strategy. Customized banking, bespoke credit, and treasury delivered through one coordinated team providing a high level of customer service. A single point of contact solving the complex needs of affluent families and business owners one client at a time.

Doug Kennedy: We ended the quarter with $13.6 billion in assets under management and administration, down slightly from the H2. Gross inflows remain solid. Wealth revenue was $17.3 million, up 9% year over year and $51 million year to date. This is a scaled, long-established franchise. It deepens relationships across generations. It gives us real scarcity value through fiduciary expertise, specialist investment talent, sell-side advisory for business owners. It is the cornerstone of what it is that we do. Client trust in this space is very hard to replicate. It takes decades of performance and the highest level of professionalism to build. Wealth management, as you would expect, anchors the entire strategy. Customized banking, bespoke credit, and treasury delivered through one coordinated team providing a high level of customer service. A single point of contact solving the complex needs of affluent families and business owners one client at a time.

Speaker #3: We ended the quarter with 13.6 billion in assets under management and administration, down slightly from the second quarter, gross inflows remained solid, wealth revenue was 17.3 million, up 9% year over year, and $51 million year to date.

Speaker #3: This is a scaled long-established franchise. It deepens relationships across generations. It gives us real scarcity value through fiduciary expertise, specialist investment talent, sell-side advisory for business owners, it is the cornerstone of what it is that we do.

Speaker #3: Client trust in this space is very hard to replicate. It takes decades of performance and the highest level of professionalism to build. Wealth management, as you would expect, anchors the entire strategy: customized banking, bespoke credit, and treasury, delivered through one coordinated team providing a high level of customer service.

Speaker #3: A single point of contact, solving the complex needs of affluent families and business owners one client at a time. So to summarize, our differentiated model is driving growth and improved profitability.

Doug Kennedy: To summarize, our differentiated model is driving growth and improved profitability. Momentum is strong, and we are very constructive about our company's future. We have an established platform and are building an enviable differentiated franchise across metro New York. Experienced teams, specialist capabilities, scaled infrastructure, and an integrated client relationship, wealth and fiduciary advice, private and commercial banking, credit Treasury solutions, all coordinated and made easy through a single point of contact. Our long-term objectives remain unchanged. A 125-plus return on assets and a 14%-plus return on equity or better. We are not there yet, but we are moving forward, achieving both benchmarks incrementally in a very thoughtful manner. With that, I want to thank you again for your confidence and support. At this point I am going to turn it over to Frank, who will give you a detailed overview of the quarter.

Speaker #3: Momentum is strong, and we're very constructive about our company's future. We have an established platform, and our building an enviable differentiated franchise across Metro New York.

Speaker #3: Experienced teams, specialist capabilities, scaled infrastructure, and the integrated client relationship, wealth and fiduciary advice, private and commercial banking, credit treasury solutions, all coordinated and made easy through a single point of contact.

Speaker #3: Our long-term objectives remain unchanged: a 1.25% plus return on assets, and a 14% plus return on equity or better. We are not there yet, but we're moving forward, achieving both benchmarks incrementally in a very thoughtful manner.

Speaker #3: So with that, I want to thank you again for your confidence and support. And at this point, I'm going to turn it over to Frank who will give you a detailed overview of the quarter.

Frank Cavallaro: Thanks, Doug, and good morning, everyone. I will begin with earnings and then take you through the balance sheet, credit quality, and wrap up with a few comments on capital. Net income available to common shareholders increased 17% sequentially to $18.5 million, or $0.99 per diluted share, compared with $15.8 million or $0.86 in Q2. Total revenue was $88 million, up 2% sequentially and 24% year over year. That growth was primarily driven by net interest income, which increased to $68 million, up $3.6 million, which is 6% growth sequentially and 33% year over year. Net interest margin was 3.34%, an increase of 2 basis points from Q2. This change is consistent with our expectations and aligns with our prior guidance. Pricing on new business remained attractive.

Speaker #2: Thanks, Doug. And good morning, everyone. I'll begin with earnings and then take you through the balance sheet, credit quality, and wrap up with a few comments on capital.

Speaker #2: Net income available to common shareholders increased 17% sequentially to 18.5 million or 99 cents per diluted share, compared with 15.8 million or 86 cents in the second quarter.

Speaker #2: Total revenue was $88 million, up 2% sequentially in 24% year over year. That growth was primarily driven by net interest income, which increased to $68 million up 3.6 million which is 6% growth sequentially in 33% year over year.

Speaker #2: Net interest margin was 3.34% and increased of 2 basis points from the second quarter. This change is consistent with our expectations and aligns with our prior guidance.

Speaker #2: Pricing on new business remained attractive. Loans originated during the quarter, carried yields of approximately 6.4%, while new deposits came in in the mid-2% range.

Frank Cavallaro: Loans originated during the quarter carried yields of approximately 6.4%, while new deposits came in in the mid-2% range. However, rapid loan growth and increased competition for deposits required us to use more borrowings than in recent quarters, tempering the margin benefit of that growth. Non-interest income totaled $20 million, down $2.1 million, or approximately 10% sequentially. A loss on the sale of an OREO property, in addition to a fair value mark on a CRA equity security, were responsible for approximately half of the linked quarter decline. As revenue continues to grow, expense growth is moderating. We supported substantial new business during Q3 using the infrastructure we have built while holding expenses essentially flat. Operating expenses totaled $55 million, down 1% sequentially and up 5% year over year.

Speaker #2: However, rapid loan growth and increased competition for deposits required us to use more borrowings than in recent quarters tempering the margin benefit of that growth.

Speaker #2: Non-interest income totaled $20 million down 2.1 million or approximately 10% sequentially. A loss on the sale of an ORE property in addition to a fair value mark on a CRA equity security were responsible for approximately half of the linked quarter decline.

Speaker #2: As revenue continues to grow, expense growth is moderate. We supported substantial new business during the third quarter using the infrastructure we have built while holding expenses essentially flat.

Speaker #2: Operating expenses totaled $55 million, down 1% sequentially and up 5% year over year. Combined with the 24% year-over-year increase in revenue, this has produced strong positive operating leverage and contributed to earnings growth.

Frank Cavallaro: Combined with a 24% year over year increase in revenue, this is producing strong positive operating leverage and contributing to earnings growth. Core earnings or pre-provision net revenue totaled $32.3 million, up approximately $2 million or 6% on a linked quarter basis. Our efficiency ratio improved to 63%, which is down approximately 1.7 percentage points sequentially and nearly 16 full percentage points lower than Q3 2024. The effective tax rate in the quarter was approximately 20.5%, compared to 28.4% in Q2. The Q3 rate includes a discrete benefit of approximately $1.8 million related to the purchase of production tax credits, resulting in a lower tax provision. We consider this a one-time item and do not expect that benefit to recur next quarter. Turning to the balance sheet, growth was strong across the company during Q3.

Speaker #2: Poor earnings or pre-provision net revenue totaled $32.3 million up approximately 2 million or 6% on a linked quarter basis. Our efficiency ratio improved to 63%, which is down approximately 1.7 percentage points sequentially and nearly 16 full percentage points lower than the third quarter of 2024.

Speaker #2: The effective tax rate in the quarter was approximately 20.5% compared to 28.4 in the second quarter, the third quarter rate includes a discrete benefit of approximately 1.8 million related to the purchase of production tax credits resulting in a lower tax provision.

Speaker #2: We consider this a one-time item and do not expect that benefit to recur next quarter. Turning to the balance sheet, growth was strong across the company during the third quarter.

Frank Cavallaro: Total loans increased $403 million sequentially to $7.1 billion, up 17% year-over-year. Growth was diversified across the franchise with C&I and commercial real estate showing particularly strong results. At the same time, our New York rent-regulated multifamily portfolio continued to run off and become a smaller portion of the overall balance sheet. Deposits increased $301 million or 4% quarter-to-quarter to $7.4 billion. Deposits increased approximately $800 million or 12% year-over-year. Deposit growth continues to come from across the franchise with a focus on delivering core relationships with significant operating account balances. Over the past five quarters, we have opened an average of more than 600 non-interest-bearing operating accounts per quarter. We also monitor how those accounts fund and develop over time to assess the depth and the economics of each relationship.

Speaker #2: Total loans increased 403 million sequentially to 7.1 billion up 17% year over year. Growth was diversified across the franchise with C&I and commercial real estate showing particularly strong results.

Speaker #2: At the same time, our New York rent-regulated multifamily portfolio continued to run off and become a smaller portion of the overall balance sheet. Deposits increased $301 million, or 4% quarter to quarter, to $7.4 billion.

Speaker #2: Deposits increased approximately 800 million or 12% year over year. Deposit growth continues to come from across the franchise with a focus on delivering core relationships with significant operating account balances.

Speaker #2: Over the past five quarters, we have opened an average of more than 600 non-interest-bearing operating accounts per quarter. We also monitor how those accounts fund and develop over time to assess the depth and the economics of each relationship.

Frank Cavallaro: Non-interest-bearing demand deposits ended Q3 at approximately $1.6 billion, which reflects 18% growth year-over-year. We remain confident in our comprehensive relationship strategy as it continues to deliver fully banked relationships, supporting growth, and managing our funding mix over time. Turning to credit, non-performing assets declined by $14 million or 20% sequentially to $58 million, representing 0.68% of total assets compared to 1.13% a year ago. Loans 30 to 89 days past due declined $9 million or 18% sequentially to $39 million, representing 0.56% of total loans. The provision for credit losses was $8.5 million compared to $8.1 million in Q2. Of that amount, $5 million of it was attributable to loan growth. Loan losses associated with loan workouts were lower than anticipated during the current quarter. Net charge-offs were $4.7 million compared with $5.9 million in Q2 2026.

Speaker #2: Non-interest-bearing demand deposits ended the third quarter at approximately 1.6 billion which reflects 18% growth year over year. We remain confident in our comprehensive relationship strategy as it continues to deliver fully banked relationships, supporting growth and managing our funding mix over time.

Speaker #2: Turning to credit, non-performing assets declined by 14 million or 20% sequentially to 58 million representing 0.68% of total assets compared to 1.13% a year ago.

Speaker #2: Loans 30 to 89 days past due declined $9 million or 18% sequentially to 39 million representing 0.56% of total loans. The provision for credit losses was 8.5 million compared to 8.1 million in the second quarter.

Speaker #2: Of that amount, 5 million of it was attributable to loan growth. Loan losses associated with loan workouts were lower than anticipated during the current quarter.

Speaker #2: Net charge-offs were 4.7 million compared with 5.9 million in the second quarter of 2026. These improvements are encouraging and we continue to actively manage individual problem credits.

Frank Cavallaro: These improvements are encouraging, and we continue to actively manage individual problem credits. Within the New York rent-regulated multifamily portfolio, balances declined to $775 million as of 30 September. That portfolio represented approximately 11% of total loans compared to 18% two years ago. The reduction reflects both portfolio runoff and growth elsewhere in the loan portfolio. Turning to capital, as Doug Kennedy noted, we maintain buffers above regulatory capital thresholds. Our strong balance sheet growth has reduced some of those buffers even as earnings have improved. While we are managing capital proactively to support attractive relationship growth while preserving an appropriate cushion. To support our growth, we issued the remaining $20 million of convertible preferred equity in July of this year. This supported capital at both the bank and the holding company levels. As profitability improves, we expect retained earnings to support a greater portion of our capital growth internally.

Speaker #2: Within the New York rent-regulated multifamily portfolio, balances have declined to 775 million as of September 30th. That portfolio represented approximately 11% of total loans compared to 18% two years ago.

Speaker #2: The reduction reflects both portfolio runoff and growth elsewhere in the loan portfolio. Turning to capital, as Doug noted, we maintained buffers above regulatory capital thresholds.

Speaker #2: Our strong balance sheet growth has reduced some of those buffers, even as earnings have improved. While we are managing capital proactively to support attractive relationship growth, we are also preserving an appropriate cushion.

Speaker #2: To support our growth, we issued the remaining $20 million of convertible preferred equity in July of this year. This supported capital at both the bank and the holding company levels.

Speaker #2: As profitability improves, we expect retained earnings to support a greater portion of our capital growth internally in the meantime, we are actively managing the capital needed to support the business we are generating today.

Frank Cavallaro: In the meantime, we are actively managing the capital needed to support the business we are generating today. We launched our voluntary dividend reinvestment program in Q4, which is scheduled to close in mid-November. This program has successfully increased common equity in the past and provides a supplemental source of capital as earnings improve. Going forward, we continue to evaluate capital in the context of business opportunities, risk, and the interests of existing shareholders. We enter Q4 with a stronger earnings base. Continued relationship growth and expense discipline are supporting earnings, and our priority is to translate that progress into higher returns while maintaining funding, credit, and capital discipline. With that, we are happy to answer your questions.

Speaker #2: We launched our voluntary dividend reinvestment program in the fourth quarter which is scheduled to close in mid-November. This program is successfully increased common equity in the past and provides a supplemental source of capital as earnings improve.

Speaker #2: Going forward, we continue evaluate capital in the context of business opportunities risk and the interests of existing shareholders. We enter the fourth quarter with a stronger earnings base continued relationship growth and expense discipline are supporting earnings and are priorities to translate that progress into higher returns while maintaining funding, credit, and capital discipline.

Speaker #2: With that, we are happy to answer your questions.

Operator: We will now begin the question and answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. If you are muted, please remember to unmute your device. Please stand by while we compile the Q&A roster. Our first question from Christopher Marinac with Brean Capital, LLC. Your line is now open. Please go ahead.

Speaker #1: 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.

Speaker #1: 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.

Speaker #1: Our first question is from Christopher Marinac with Breen Capital LLC. Your line is now open. Please go ahead.

Christopher Marinac: Hey, good morning Frank and Doug and team. Can you talk a little bit about where you see deposit pricing going from here? Do you see any further mix shift beyond what we've seen the last quarters?

Speaker #3: Hey, good morning. Frank and Doug and team, can you talk a little bit about where you see deposit pricing going from here, and do you see any further mix shift beyond what we've seen in the last few quarters?

Doug Kennedy: Hey, Chris. Good morning. How are you? This is Doug. I would say, listen, we absolutely have seen a little bit of pressure. We've been trying to gauge at that 200 range. If you look at the 200 that we got in core during the quarter, the pricing and the spread between that and what we were lending out at was north of that 4% target that we set for each other. I think that the pricing, while it's been more competitive, I think it certainly has not gotten out of hand. Maybe Frank.

Speaker #4: Hey, Chris. Good morning. How are you? This is Doug. I would say, listen, we absolutely have seen a little bit of pressure. We've been sort of trying to gate at sort of the 200, 200 range and if you look at sort of the 200 that we got in core during the quarter, the pricing and the spread between that and what we were lending out at was north of that 4% target that we set for each other.

Speaker #4: So I think that the pricing, while it's been more competitive, I think it's not certainly has not gotten out of hand. Maybe Frank.

Frank Cavallaro: Yeah. I was just looking at the quarter to quarter. The interest-bearing liabilities went up 10 basis points. We expected that because of the 25 basis point move by the Fed during the quarter. In addition, we were borrowing a little bit of money from the Federal Home Loan Bank. So putting some pressure there. I think to answer your question, we do expect to see upward pricing pressure on the cost of deposits. But if we've managed the overall beta to 50% to 60%, we think that's a comfortable level for us to manage the overall interest rate risk.

Speaker #5: Yeah. I was just looking at the quarter to quarter, the interest-bearing liabilities went up 10 basis points. So we expected that because of the 25 basis point move by the Fed during the quarter.

Speaker #5: In addition, we were borrowing a little bit of money from the Federal Loan Bank, so putting some pressure there. But I think, to answer your question, we do expect to see upward pricing pressure on the cost of deposits.

Speaker #5: But if we've managed the overall beta to 50 to 60 percent, we think that's a comfortable level for us to manage the overall interest rate risk.

Doug Kennedy: In terms of NIM, at Q1, we guided sort of 6 to 9 basis points for the year. We are kind of right in that range now. We expect that will play out this year. Between the backbook repricing, even with the added pressure on funding costs, we think that we can still sort of get a 2 to 3 basis point improvement in NIM in each of the quarters going into 2027.

Speaker #4: In terms of NIM, we've been at the Q1; we've got sort of 6 to 9 basis points for the year. We're kind of right in that range now.

Speaker #4: We expect that will play out this year. Between the backbook repricing, even with the added pressure on funding costs, we think that we can still sort of get a 2 to 3 basis point improvement in NIM in each of the quarters going into '27.

Christopher Marinac: Great. Thank you for that. Then just to follow up on the credit side, do you see any further shift on multifamily values for you in terms of how you have calibrated it at this point?

Speaker #3: Great. Thank you for that. And then just to follow up for on the credit side, do you see any further shift on multifamily values for you in terms of how you've calibrated it at this point?

Doug Kennedy: Lisa Chalkan is here, so I will have Lisa respond to that.

Speaker #4: Well, at least it’s ROCKETS here, so we’ll have at least a response to that.

Lisa Chalkan: Values on the underlying collateral or value of the actual loans in a trade?

Speaker #6: Values on the underlying collateral or a value of the actual loans in a trade?

Christopher Marinac: Well, it is actually just the collateral. Would you have to make additional reserve additions and/or write-downs from here?

Speaker #3: Well, it's actually just the collateral and would you have to make additional reserve additions and/or write downs from here?

Lisa Chalkan: Yeah. As we are getting updated appraisals, and again, we only have to get an updated appraisal if something is non-performing. The first time it goes substandard, we do, and then if it is non-performing, we get them annually. I would say that we are seeing a mix. We are seeing some properties where there seems to be some softening of value. At the same time, we are seeing some properties that are either holding up or actually have an improvement in value over the appraisal that was obtained a year ago. So I do not think that there is anything pervasive. Could there be one-offs? Absolutely. It does not seem to be that we are seeing it across the board or systemically.

Speaker #6: Yeah. As we're getting updated appraisals—and again, we only have to get an updated appraisal if something is non-performing in substance. The first time it goes substandard, we do.

Speaker #6: And then if it's non-performing, we get them annually. And I would say that we're seeing a mix. We are seeing some properties where there seems to be some softening of value.

Speaker #6: But at the same time, we are seeing some properties that are either holding up or actually have an improvement in value. Over the appraisal that was obtained a year ago.

Speaker #6: So, I don't think that there's anything pervasive. Could there be one-offs? Absolutely. But it doesn't seem that we're seeing it across the board or systemically.

Frank Cavallaro: Additional provisioning to your question, we are absorbing it in our normal provision run rate. So like Lisa Chalkan said, there is going to be one-offs. We are dealing with them as they come up, but we do not see a landslide of deals coming our way. So we are pretty comfortable with how it has been performing to date.

Speaker #5: Yeah. Additional provisioning to your question, we're absorbing it in our normal provision run rate. So like Lisa said, there's going to be one-offs we're dealing with them as they come up.

Speaker #5: And but we don't see a landslide of deals coming our way. So we're pretty comfortable with how it's been performing to date.

Christopher Marinac: Great. Thank you, Frank Cavallaro, and thank you, Lisa Chalkan. Appreciate you taking our questions.

Christopher Marinac: Great. Thank you, Frank, and thank you, Lisa. Appreciate you taking our questions.

Speaker #3: Great. Thank you, Frank. And thank you, Lisa. I appreciate you taking our questions.

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

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

Steve Moss: Good morning. Maybe just following up here on the multifamily. Just curious how to think about the cadence of potential pay downs over the next 4 to 5 quarters. Just curious what percentage of those loans may reprice over that time period as well.

Speaker #7: Good morning. Maybe just following up here on the multifamily. Just kind of curious how to think about the cadence of potential paydowns over the next four to five quarters.

Speaker #7: And just curious, what percentage of those loans might reprice over that time period as well?

Lisa Chalkan: Do you want to take the repricing?

Speaker #6: Do you want to take the repricing?

Frank Cavallaro: Yeah. The repricing, I think we looked at, we have got over the next 5 quarters, so let's say through the end of next year, we think there is $500,000 in rent-regulated multifamily that reprices.

Speaker #5: Yeah, so the repricing—I think we looked at it. We’ve got, over the next five quarters, so let's say through the end of next year, we think there's $500,000 in rent-regulated multifamily that reprices.

Steve Moss: Billion.

Frank Cavallaro: I think a billion is the total.

Speaker #5: I think a billion is the total yeah. But on the rent, I think he's asking specifically rent-regulated.

Steve Moss: No, final. Sorry. Right.

Frank Cavallaro: Yeah. But on the rent, I think he is asking specifically rent-regulated.

Steve Moss: It is about $500 million.

Speaker #4: It's about 500 million.

Frank Cavallaro: Yeah, so $500 million. We are comfortable with that. As far as you can answer the second answer.

Speaker #5: Yeah. So 500 million. We're comfortable with that. And as far as you can answer the second answer.

Lisa Chalkan: Yeah, I mean, the normal amortization on the portfolio of the New York rent-regulated is, I would say $5 million or $6 million a quarter. We have seen some small payoffs. I am anticipating more than not. Many of the loans will either reprice or be looking for some that were pricing in the documents is over market. So they may be looking for some level of a modification to make it a little bit more in line with what a current market rate might be.

Speaker #6: Yeah. I mean, the normal amortization on the portfolio of the New York rent-regulated is I would say 5 or 6 million dollars a quarter.

Speaker #6: We have seen some small payoffs on anticipating more than not. Many of the loans will either reprice or will be looking for some repricing, and the documents show that the repricing is over market.

Speaker #6: So they may be looking for some level of modification to make it a little bit more in line with what a current market rate might be.

Frank Cavallaro: It is declining, not as quickly as we would hope it, but the important thing is it is not increasing. We are not originating anything new in that space. Then we continue to let pay downs happen, obviously on monthly P&I payments. But anytime we see a relationship that is just transactional, we kind of encourage them to seek other funding when their maturity date comes up.

Speaker #5: Yeah, it's declining. Not as quickly as we would hope, but the important thing is it's not increasing. We're not originating anything new in that space.

Speaker #5: And then we continue to let paydowns happen obviously on monthly P&I payments. But anytime we see a relationship that's just transactional, we kind of encourage them to seek other funding when their maturity date comes up.

Lisa Chalkan: Correct.

Speaker #6: Correct.

Steve Moss: Okay. So just kind of curious in terms of potential modification, would it be a new five-year loan at maybe 6% is kind of how you guys are thinking about it? Or just as this half, $500 million comes through in the next five quarters, what does that kind of refi process look like? Are borrowers able to put up equity?

Speaker #7: Okay. And so just kind of curious in terms of potential modification, would it be a new five-year loan at maybe 6%? Kind of how you guys are thinking about it, or just as this half 500 million comes through in the next five quarters, just what does that kind of refi process look like?

Speaker #7: Are borrowers able to put up equity?

Lisa Chalkan: Yeah. It runs the gamut. I wish that there was a menu of here is the two or three scenarios. Every single one is something different. Sometimes we look for a pay down. We have had clients who have actually posted collateral accounts with us. We have had clients who have given us guarantees. We have done something that is maturing, done a one-year IO to give them time to be able to refinance it or sort out how they want to move forward. We have reset the interest rate and reset the amortization for a two-year period, a three-year period, nothing more than a five-year period. But every single loan is looked at individually, discussed, and negotiated.

Speaker #6: Yeah, it runs the gamut. I wish that there was—I wish that there was a menu of, "Here's the two or three scenarios." Every single one is something different.

Speaker #6: Sometimes we look for a paydown. We have had clients who've actually posted collateral accounts with us. We've had clients who've given us guarantees. We have done something that's maturing—done a one-year I/O to give them time to be able to refinance it or sort out how they want to move forward.

Speaker #6: We have reset the interest rate and reset the amortization for a two-year period, a three-year period—nothing more than a five-year period. But really, every single loan is looked at individually, discussed, and negotiated.

Frank Cavallaro: The important thing is that we are agreeing to a modification. We are conceding something to the borrower, but we are getting something in return.

Speaker #5: So the important thing is that we're agreeing to a modification. We're conceding something to the borrower, but we're getting something in return. And that's we're open to discussion on what that something is in every case.

Lisa Chalkan: Yes, that is exact.

Frank Cavallaro: We are open to discussion on what that something is in every case.

Steve Moss: Okay, great. No, appreciate that color there. Just in terms of the margin here, I guess a couple things that I apologize, Frank, I had a hard time hearing you on your margin comments. Just curious in terms of where were new loan originations this quarter and just in terms of just thinking about what percentage of loans are variable rate as well?

Speaker #7: Okay. Great. No, I appreciate that color there. And then just in terms of the margin here, I guess a couple of things that I apologize, Frank, I had a hard time hearing you on your margin comments.

Speaker #7: But just curious, in terms of where new loan originations were this quarter, and just thinking about what percentage of loans are variable rate as well.

Frank Cavallaro: The origination question, I think we announced that the originations were at about 6.4%, so mid sixes on the new loans. The mix, I mean, overall, the mix of the variable rate is about two-thirds fixed, one-third at 25%. I am sorry, 75% fixed, 25% variable is probably the answer to the question on the mix.

Speaker #5: So the origination question, I think we announced that the originations were at about a 6.4%. So mid-sixes on the new loans. The mix I mean, overall, the mix of the variable rate is about two-thirds fixed, one-third 25% I'm sorry, 75% fixed, 25% variable is probably the answer to the question on the mix.

Steve Moss: Okay, great. Just in terms of just the pipeline here, rates have moved up. Just kind of curious, as we handle the Q4 here, have origination yields stepped up from there, or are they holding steady?

Speaker #7: Okay. Great. And then in terms of just the pipeline here, rates have moved up. Just kind of curious, have as we handle the fourth quarter here, have origination yields stepped up from there, or are they holding steady?

Frank Cavallaro: The 10-year, Steve, is just bouncing around. Right now in every business, including real estate, which is recent, everything we are quoting is a spread to the Treasury. We do not lock the rate until we get to a closing. Those spreads are pretty much constant. It is 2 to 2.5, depending on the buy business. The spreads to-

Doug Kennedy: The 10-year, Steve, is just bouncing around. Right now in every business, including real estate, which is recent, everything we are quoting is a spread to the Treasury. We do not lock the rate until we get to a closing. Those spreads are pretty much constant. It is 2 to 2.5, depending on the buy business. The spreads to-

Speaker #5: So the 10 years Steve is just bouncing around. So right now, in every business, including real estate, which is recent, everything we're quoting is a spread to the treasury.

Speaker #5: We don't lock the rate until we get to a closing. And those spreads are pretty much constant. It's 2 to 2 and a half depending on the business.

Speaker #5: So the spreads to the five-year or it's typically the five-year, three or five-year, somewhere in there. That has been very consistent, the spread.

Doug Kennedy: The five-year or it is typically the five-year, 3 or 5-year, somewhere in there. That has been very consistent, the spread.

Steve Moss: Okay. Appreciate that. Then in terms of just kind of thinking, the other thing I was curious on here, in terms of loan growth, good loan growth overall, the consumer book definitely shot up this quarter. I am just kind of curious on the drivers there.

Speaker #7: Okay. Appreciate that. And then in terms of just kind of thinking the other thing I was curious on here, in terms of loan growth, good loan growth overall, the consumer book, definitely shot up this quarter.

Speaker #7: I'm just kind of curious as the on the drivers there.

Lisa Chalkan: Yeah. Some of it was growth in the residential loan origination. I think we have raised before that we have this professional line of credit that we are offering to attorneys and accountants. We have seen more volume there. We also have had a pool of loans that we purchased from a third party. We had been doing that, so that was also a piece of it. So those are the three drivers. We also are seeing a lot more volume in the investment credit lines tied to the growth in John's business. We offer a product that allows people to borrow against their margin collateral. We are definitely seeing a lot more volume there, although I would say many of those lines remain unused. They are liquidity lines, but there is a lot more volume.

Speaker #6: Yeah. Some of it was growth in the residential loan origination. I think we've raised before that we have this professional line of credit that we are offering to attorneys and accountants.

Speaker #6: We've seen more volume there. We also have had a pool of loans that we purchased from a third party. We had been doing that.

Speaker #6: And so that was also a piece of it. And so those are the three drivers. We also are seeing a lot more volume in the investment credit lines tied to the growth in John's business.

Speaker #6: We offer a product whose margin allows people to borrow against their margin collateral. And we are definitely seeing a lot more volume there, although I would say many of those lines remain unused.

Speaker #6: They're liquidity lines, but there's a lot more volume.

Doug Kennedy: We have also closed out a couple of yacht loans as well.

Speaker #4: And we've also closed out a couple of yellows as well.

Lisa Chalkan: Correct. I think that probably in these results, there were probably three yacht loans that we closed.

Speaker #6: Correct. I think that we it probably in these results, there were probably three yacht loans that we closed.

Steve Moss: Okay, great. Appreciate that. And maybe just in terms of expenses here, efficiency ratio has steadily improved. And Doug, I hear you on operational improvement. Just kind of curious here, it is definitely going to first come from your net interest income, but how are you guys thinking about the cadence of expense growth into 2027 and any investments you may have to make?

Speaker #7: Okay, great. I appreciate that. And maybe just in terms of expenses here, the efficiency ratio has steadily improved. And Doug, I hear you on operational improvement.

Speaker #7: I'm just kind of curious here, and I can definitely infer some things from your net income color. But how do you guys think about the cadence of expense growth into '27, and any investments you may have to make?

Doug Kennedy: We have really leaned into AI across the enterprise. I have a meeting actually this afternoon. It is literally we have AI champions in every area of the bank. We have actually stood up 100 agents across the institution. They are right now in final testing. For example, loan closings, which was a very complicated sort of do. I would say that the inclination is probably going to be more towards technology, the investment going into 2027, than it will be on people. And the idea is to take a lot of what we do that is, I will call it like an arts and crafts business, getting our processes very consistent and then being able to scale and set ourselves up to scale going forward, leveraging technology. We also we have ordinary raises. Healthcare, we are expecting to have an increase.

Speaker #5: So we've really leaned into AI across the enterprise. I've got a meeting actually this afternoon. It's literally we've got AI champions in every area of the bank.

Speaker #5: We've actually stood up 100 agents across the institution. They're right now in final testing for example, loan closings, which was a very complicated sort of do.

Speaker #5: So, I would say that the inclination is probably going to be more towards technology—the investment going into '27—than it will be on people.

Speaker #5: And the idea is to take a lot of what we do that's I'll call it like an arts and crafts business, getting our processes very consistent and then being able to scale and set ourselves up to scale going forward, leveraging technology.

Speaker #5: So, we've also got ordinary raises and healthcare; we're expecting to see an increase. So, Frank, I think it's probably mid to upper single digits is probably where we'll land for next year.

Doug Kennedy: Frank, I think it is probably mid to upper single digit is probably where we will land for next year.

Frank Cavallaro: Yeah.

Doug Kennedy: On the operating expense line.

Speaker #5: Yeah. I mean, looking on the operating expense line, if you look at the last three quarters, we've held it flat, which we're very pleased with.

Frank Cavallaro: If you look at the last three quarters, we have held it flat, which we are very pleased with. There is a natural in Q1, there is kind of that natural merit increases and resets for leases and things like that. That will step up. But we are targeting when we look at our multi-year projection for next year, mid to single-digit growth on the expense line. The last couple of years you have seen us higher teens and the full year run rate has carried into the following year. That will trickle off, and we will get back to kind of a normalized growth rate as we look into 2027 and beyond.

Speaker #5: There's a natural in Q1, there's kind of that natural merit increases and resets for leases and things like that that'll step up. But we're targeting when we look at our multi-year projection for next year, mid to single digit growth on the expense line, the last couple of years, you've seen us hire teams and the full-year run rate has carried into the following year.

Speaker #5: That will trickle off and we'll get back to kind of a normalized growth rate as we look into '27 and beyond.

Steve Moss: Okay, great. I appreciate all the color here. I will step back.

Speaker #7: Okay. Great. I appreciate all the call here. I'll step back.

Operator: Your next.

Operator: I would say, Steve, the only comment.

Doug Kennedy: I would say, Steve, the only comment.

Speaker #2: Your next question.

Speaker #4: I would say, Steve, the only comment.

Operator: Oh.

Speaker #2: Oh.

Doug Kennedy: Oh, Steve, let me just say the last commentary is that, as I have said before, we are really focused on Q4 of 2027 to get the returns. It won't be a destination return, but it sort of gets us to the zip code that we want to be in based on the investments that we have made. We are very focused on executing through the end of next year.

Speaker #4: Oh, Steve, let me just say the last commentary is that and I've said before, we're really focused on Q4 of '27. To get the returns it won't be a destination return, but it'll be it sort of gets us to the zip code that we want to be in based on the investments that we've made.

Speaker #4: So we're very focused on executing through the end of next year.

Operator: Your next question from the line of Manuel Navas with Piper Sandler. Your line is now open. Please go ahead.

Speaker #2: Your next question from the line of Manuel Navas with Piper Sandler. Your line is now open. Please go ahead.

Manuel Navas: Hey, good morning. Could you quantify the pipeline a little bit more? Just thoughts on how the Q4 looks versus the 200 targets because you exceeded them so much here in the Q3. How long can this kind of accelerated pace go into next year?

Speaker #7: Hey, good morning. Can you quantify the pipeline a little bit more? Just thoughts on how the fourth quarter looks versus the 200/200 targets, because you've exceeded them so much here in the third quarter.

Speaker #7: And how long can this kind of accelerated pace go into next year?

Doug Kennedy: Pipelines are very strong. That is the only way I will describe it. In terms of visibility on the 2022, we have absolute visibility in Q4. I would say that we have enough strength that we could actually see Q1 of next year as well.

Speaker #5: Pipelines are very strong. That's the only way I'll describe it. In terms of visibility on the Q2, we have absolute visibility in the fourth quarter.

Speaker #5: And I would say that we have enough strength that we could actually see the first quarter of next year as well.

Manuel Navas: I appreciate that.

Speaker #7: I appreciate that.

Doug Kennedy: We expect good growth. Awesome.

Speaker #5: So I was just going to add to that: Will it be as strong as Q3? Q3 was probably abnormally strong, so we expect the overall growth to step back a little bit as we go into the coming quarters, probably closer to the Q2 plan.

Frank Cavallaro: I was just going to add to that, will it be as strong as Q3? Q3 was probably abnormally strong. We expect the overall growth to step back a little bit as we go into the coming quarters, probably closer to the 2022 plan.

Doug Kennedy: I would say us managing to the 222 in this quarter, Manuel, is that some stuff may fall into January that could have, if we pulled it forward, could happen. So we are managing to a 222, but not because we are leaning in to get stuff closed. It is kind of trying to manage a pipeline into the next quarter. So we feel very comfortable about this quarter and next quarter as well.

Speaker #4: I would say us managing to the Q2 in this quarter as well as the is that some stuff may fall into January. That could have if we pulled it forward, could happen.

Speaker #4: So we're managing to a Q2, Q2, but not because we're leaning in to get stuff closed. It's kind of trying to manage a pipeline into the next quarter, so.

Speaker #4: So we feel very comfortable about this quarter and next quarter as well.

Manuel Navas: As we think about getting closer to 200, the NIM benefit should increase since you are getting an accretive margin on those new loans and deposits. So that could bode well into next year, correct?

Speaker #7: And as we think about getting closer to 200/200, the min benefit should increase since you're getting an accretive margin on those new loans and deposits.

Speaker #7: So that could bode well into next year, correct?

Frank Cavallaro: Yeah, the volume, clearly. The volume plus the back book repricing that we talked about earlier. Those two things are really what is going to help us with the mid-next year as we kind of face the pressure of the funding cost increasing.

Speaker #5: Yeah. The volume clearly the volume plus the backbook repricing that we talked about earlier, those two things are really what's going to help us with the min next year.

Speaker #5: As we kind of face the pressure of the funding cost increasing.

Doug Kennedy: So 222, it is $200 million loans, $200 million deposits, and $2 million in pre-tax, pre-provision. That is what we are focused on.

Speaker #4: So Q2, Q2, it's 200 million loans, 200 million deposits, and $2 million in pre-tax, pre-provision. That's what we're focused on.

Manuel Navas: On the back book repricing, can you just quantify that a bit more? I do not know if I misheard. I did not hear a dollar amount outside of the New York City multifamily piece, but just overall back book repricing and kind of what yield is it going from? What it could potentially reprice to?

Speaker #7: On the backbook repricing, am I missing something? Can you just quantify that a bit more? I don't know if I misheard, but I didn't hear a dollar amount.

Speaker #7: Outside of the New York City multifamily piece. But just overall backbook repricing and kind of where is it what yield is it going from what it could potentially reprice to?

Frank Cavallaro: Yeah. So I think the earlier question was just focused on the rent-regulated. So we kind of gave just an answer there. If we step back and look at the whole portfolio, over the next two years, about 20% of our book or about $1.4 billion in fixed-rate assets will reprice. The weighted average coupon on that is just it is around 390. And we think that we could pick up somewhere between 150 to 200 bps on a repricing over that time period.

Speaker #5: Yeah. So I think the earlier question was just focused on the rent regulated. So we kind of get just an answer there. If we step back and look at the whole portfolio, over the next two years, about 20% of our book or about a billion four in fixed-rate assets will reprice the weighted average coupon on that is just it's around 390.

Speaker #5: And we think that we could pick up somewhere between 150 to 200 bps on a repricing over that time period.

Manuel Navas: That is powerful. So that is next year.

Speaker #7: That's powerful. So that's next year.

Doug Kennedy: Getting back to the earlier discussion, I was going to say that would completely mitigate the pressure that we are feeling on the funding side.

Speaker #4: I'm getting back to the early discussion. I was going to say that would completely mitigate the pressure that we're feeling on the funding side.

Manuel Navas: Over the next few years, is that pretty steady or is it lumpier in any particular half of the year or anything like that?

Speaker #7: Over the next few years, is that pretty steady or is it lumpier in any particular half of year or anything like that?

Frank Cavallaro: I would say, I think if we look at it quarterly, I think in the middle of next year, like Q2 and Q3, it is a little lumpy. Outside of that, I think it kind of smooths out.

Speaker #5: I would say, if we look at it quarterly, I think in the middle of next year, like Q2 and Q3, it's a little lumpy.

Speaker #5: Outside of that, I think it kind of smooths out.

Manuel Navas: I appreciate that. Any impact of pricing so far from the September rate hike? Just thoughts about future hikes and impact on your originations, loans, and deposits?

Speaker #7: Okay. I appreciate that. Any impact to pricing so far from the September rate hike and just thoughts about future hikes and impact on your originations?

Speaker #7: Loans and deposits?

Doug Kennedy: Higher for longer is not good for us. That is the executive summary. Folks, the longer we sit in the ZIP code, the more time people have to sort of talk about getting a higher rate. So higher for longer is not good. Where it ultimately ends up, there was a flurry of folks that we had to reprice. Frank mentioned that we are up 10 basis points. I think those conversations have quieted down a little bit. So we are not seeing a lot of follow-on from there. But another rate increase in December, assuming we get through today, I think it will add a little bit more pressure. So two more rate increases, sort of having the ten-year hang at 5% over the next, where Fed funds are right now, I would say will continue to bring pressure.

Speaker #5: Higher for longer is not good for us. That's the executive summary. Folks the longer we sit in the zip code, the more time people have to sort of talk about getting a higher rate.

Speaker #5: And so higher for longer is not good. We're ultimately it ends up there was a flurry of folks that we had to reprice. Frank mentioned that we're up 10 basis points.

Speaker #5: I think those conversations have quieted down a little bit, so we're not seeing a lot of follow-on from there. But another rate increase in December, assuming we get through today, I think will just add a little bit more pressure.

Speaker #5: So two more rate increases, sort of hanging having the 10-year hang at 5 over the next where Fed funds are right now, I would say we'll continue to bring pressure.

Frank Cavallaro: Yeah. Look, we have talked about before that we see ourselves as a kind of neutral position on the balance sheet. Asset and liabilities neutral. But the pressure always seems like it feels like it comes from the deposit side faster and more rapidly. A lot of the loans that reset and reprice that 25% that we mentioned earlier, it takes 30 days or the end of a period takes a little bit longer. So, we are optimistic, but overall, Doug kind of gave you the guidance, and we would reiterate it that 2 to 3 basis points per quarter an increase in margin is what we are expecting, and that is what we think will carry into next year.

Speaker #5: Yeah. Look, we've talked about before that our we see ourselves as a kind of neutral position on the balance sheet. Asset and liabilities neutral.

Speaker #5: But the pressure always seems like it feels like it comes from the deposit side faster and more rapidly. A lot of the loans that reset and repriced that 25% that we mentioned earlier, it takes 30 days or the end of a period.

Speaker #5: It takes a little bit longer. So we're optimistic, but overall, it does kind of give you the guidance. And we'd reiterate it that two to three basis points per quarter and increase in margin is what we're expecting.

Speaker #5: And that's what we think we'll carry into next year.

Speaker #4: Yeah. Even with the uncertainty on the headlines, we believe it. We will get that. Yeah.

Doug Kennedy: Yeah. Even with the uncertainty and the headwinds, we believe that we will get that. Yeah.

Manuel Navas: I appreciate that. Could you give some color on recent initiatives in the fee side and how that could progress into next year? Wealth management was a little bit flat this quarter, but it is definitely up year over year. Just kind of recent initiatives and where the opportunities are, and what could that produce in terms of growth next year.

Speaker #7: I appreciate that. Could you give some color on recent initiatives on the fee side, and how that could progress into next year? Wealth management was a little bit flat this quarter, but it's definitely up year over year.

Speaker #7: Just kind of recent initiatives and were the opportunities are and what could that produce in terms of growth next year?

Frank Cavallaro: I will say that in this quarter, if you look at our fee revenue, it was running at about overall at about $22 million a quarter. And this quarter it dipped down to $20 million. There were two things in there that we would call one-time events. There was a loss on the disposition of an OREO property that runs through that line. And then there was also a negative fair value adjustment on a CRA equity security in there. So those two, that is about half of the decline. We see them as one time and should not repeat going forward. The other decline was attributable to the SBA. We used to capture gains on SBA sales, and we have exited that business. So that is probably more of a longer-term decline. I do not know that we have any anticipation of stepping back into that or replacing it.

Speaker #5: So I'll say that in this quarter, if you look at our fee revenue, it was running at about overall at about 22 million dollars a quarter.

Speaker #5: And this quarter, it dipped down to 20 million. There were two things in there that we would call one-time events. There was a loss or on the disposition of an ORE property that runs through that line.

Speaker #5: And then there was also a negative fair value adjustment on a CRA equity security in there. So those two—that's about half of the decline.

Speaker #5: We see them as one-time and should not repeat going forward. The other decline was attributable to the SBA. We used to capture gains on SBA sales.

Speaker #5: And we've exited that business. So that was that's probably more of a longer-term decline. I don't know this. We have any anticipation of stepping back into that or replacing it.

Frank Cavallaro: But if you took $22 million a quarter down to $21 million a quarter, that is probably where I would say I would be comfortable looking at it into the future. I do not know, John, if there is any color on the fee revenue for wealth, which is a big component of that you would like to add.

Speaker #5: But if you took $22 million a quarter down to $21 million a quarter, that's probably where I would say I'd be comfortable looking at it into the future.

Speaker #5: I don't know if John, if there's any color on the fee revenue for wealth, which is a big component of that, that you'd like to add.

John Babcock: No. Look, I mean, Q3 was interesting in the markets. While the S&P was up a couple of percent, the Russell 2000, which probably looks more like many of our portfolios, was down 7.5% in the quarter. Our flows were, when you kind of mix it all up, pretty flat. We had some inflows and outflows. In trying to separate kind of the fee impact of those inflows and outflows, that was about flat as well. But I will tell you, we have booked some good business in October. I am really encouraged with our pipeline. I think we will have a good Q4, and that also includes New York, where we continue to build momentum, working with the bankers there in New York as well as with outside COIs and self-sourced new business. So I think we are on track. It was just one of those quarters.

Speaker #3: No, look, I mean, the third quarter was interesting in the markets. While the S&P was up a couple of percent, the Russell 2000, which probably looks more like many of our portfolios, was down 7.5% in the quarter.

Speaker #3: So our flows were when you kind of mix it all up, pretty flat. We had some inflows and outflows and trying to separate kind of the fee impact of those inflows and outflows.

Speaker #3: That was about flat as well. So but I'll tell you our we booked some good business in October. I'm really encouraged with our pipeline.

Speaker #3: I think we'll have a good fourth quarter. And that also includes New York, where we continue to build momentum. Working with the bankers there in New York as well as with outside COIs and self-sourced new business.

Speaker #3: So I think we're on track. It was just one of those quarters.

Manuel Navas: I appreciate the color. Thank you, guys. I will step back into the queue.

Speaker #7: I appreciate the color. Thank you, guys. I'll step back into the queue.

Operator: Your next question from the line of David Konrad with KBW. Your line is now open. Please go ahead.

Speaker #1: Your next question from the line of David Conrad with KBW. Your line is now open. Please go ahead.

David Konrad: Yeah, good morning. Most of my questions have been asked and answered, so appreciate that. But one comment Doug made about Q4 2027. I think, Frank, historically, you've talked about maybe 90 basis points ROA, approaching 1% is maybe a goal. But on a core basis, you're already around 86 basis points this quarter. So it feels like you're ahead of schedule. So maybe any updated thoughts about ROA at the end of next year?

Speaker #2: Yeah. Good morning. Most of my questions have been asked and answered. So I appreciate that. But one comment Doug made about 4Q27, I think Frank historically you've talked about maybe 90 bips ROA approaching one is maybe a goal.

Speaker #2: But on a core basis, you were already around 86 basis points this quarter. So it feels like you're ahead of schedule. Do you have any updated thoughts about ROA at the end of next year?

Frank Cavallaro: No. I think what we've kind of guided to, 90 basis points now, maybe getting to 1% early next year, is what we're targeting. As we look to the fourth quarter of jumping a year ahead, we put it in our investor deck that our target is really closer to 125. We're not just striving to get to 1%. We want to get into the upper tier of returns. So if you just continue to look at the string that we've been on for the last five or six quarters and just keep stacking those quarters together, I would say that we're right around the pace that we expected. And hopefully, as we flip into 2027, we get back above 1% on a quarterly run rate and then continue that upward trend through the end of next year.

Speaker #5: No. I think what we've kind of gotten to 90 bips now, maybe getting to 1% early next year, is what we're targeting. As we look to the fourth quarter of jumping a year ahead, we put it in our investor deck that our target is really closer to 125.

Speaker #5: We want to get to where we're not just striving to get to one. We want to get into the upper tier of returns.

Speaker #5: So if you just continue to look at the string that we've been on for the last five or six quarters and just keep stacking those quarters together, I would say that we're right around the pace that we expected.

Speaker #5: And hopefully, as we flip into '27, we get back above 1% on a quarterly run rate and then continue that upward trend through the end of next year.

David Konrad: Perfect. Thank you. Appreciate it.

Speaker #2: Perfect. Thank you. Appreciate it.

Doug Kennedy: The idea is to control expenses as tight as we can, continue to build revenue. And there's the chart, I call it the smiley chart, but if you look at the annualized core earnings of the company, which is about $130 million. The goal is to get that to about $180 million, and that'll drive all the results that Frank just described. So we know exactly what number, where, and the timing of all of that. And the 2, 2, if you model that with the margins that we discussed, you'll land right in that ZIP code.

Speaker #4: The idea is the control expenses as tight as we can. Continue to build revenue. And the chart I call it the smiley chart, but if you look at the annualized core earnings of the company, which is about 130 million, the goal is to get that to about 180 million dollars.

Speaker #4: And that'll drive all the results that Frank just described. So we know exactly what number, where, and the timing of all of that. And the 222, if you model that with the margins that we discussed, you'll come you'll land right in that zip code.

Frank Cavallaro: Yeah. We don't have a crystal ball.

Speaker #5: Yeah.

Speaker #3: And on a crystal ball, shape of the yield curve, or asset quality headwinds—but if we continue on the track that we're on, we're pretty comfortable that we can get to that destination.

Doug Kennedy: Right

Frank Cavallaro: or the shape of the yield curve or asset quality headwinds. But if we continue on the track that we're on, we're pretty comfortable that we can get to that destination.

Doug Kennedy: Yeah. It's a realistic plan. Let's put it that way.

Speaker #4: Yeah. It's a realistic plan. Let's put it that way.

David Konrad: Great. Appreciate it. Thank you.

Speaker #2: Great. Appreciate it. Thank you.

Operator: The line is now open for additional questions. As a reminder, 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 a Q&A roster. There are no further questions at this time. I will now turn the call back to Doug for closing remarks.

Speaker #1: The line is now open for additional questions. As a reminder, if you would like to ask a question, please press star one to raise your hand.

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

Speaker #1: There are no further questions at this time. I will now turn the call back to Doug for closing remarks.

Doug Kennedy: Well, thank you very much you all, and a special thanks to all of our employees who have really committed themselves to delivering outstanding performance on behalf of our shareholders. We have got a tremendous franchise that we have been able to build based on those people, and we have got all the product. As you can see, based on results, we are executing in a way that is exceeding what we thought we could reasonably achieve when we set out on this course a couple of years ago. Our wealth franchise continues to be rarefied air. There is a lot of institutions that would love to have what we have.

Speaker #4: Well, thank you very much, all. And a special thanks to all of our employees who have really committed themselves to delivering outstanding performance on behalf of our shareholders.

Speaker #4: We've got a tremendous franchise that we've been able to build based on those people. And we've got all the product and as you can see, based on results, we're executing on a way that is exceeding what we thought we could reasonably achieve.

Speaker #4: We've set out on this course a couple of years ago. Our wealth franchise continues to be rarefied air. There's a lot of institutions that would love to have what we have.

Doug Kennedy: It is anchoring a private banking sort of business model, and we are truly delivering a differentiated service model to the greater New York area and have a very viable plan, as we just discussed, that we are executing on, that we think is going to give great returns over time for our shareholders. So with that, again, thanks for dialing in, listening, and thanks for your commitment and patience, and we will continue to deliver results as we move forward in executing our strategy. Thanks all. Be well, and great seeing you again.

Speaker #4: It is anchoring a private banking sort of business model, and we are truly delivering a differentiated service model to the greater New York area.

Speaker #4: And have a very viable plan as we just discussed that we're executing on that we think is going to give great returns. Over time for our shareholders.

Speaker #4: So with that, again, thanks for dialing in, listening, and thanks for your commitment. And patience. And we'll continue to deliver results as we move forward and executing our strategy.

Speaker #4: Thanks all. Be well. And great seeing you again.

Operator: This concludes today's call. Thank you for attending. You may now disconnect. This event has now concluded. Thank you for joining PEAPACK GLADSTONE FINANCIAL CORP. Q3 2026 earnings call. The line will disconnect automatically.

Speaker #1: This concludes today's call. Thank you for attending. You may now disconnect. This event has now concluded. Thank you for joining PEAPACK GLADSTONE Financial Corporation Q3 2026 earnings call.