Peapack-Gladstone Financial Corporation Q2 FY2026 earnings call

• Strategic Investment Results: The firm’s strategy, implemented after 2023 industry disruption, is validated in Q2. Management invested in growth while competing institutions pulled back from the market, and the major investment phase for the firm’s New York expansion is now complete.
• Operational Track Record: The firm has achieved its ninth consecutive quarter of revenue growth, seventh consecutive quarter of efficiency improvement, and is on an accelerated path for earnings and profitability growth.
• Loan Loss Reserve Process: For non-performing loans, the firm updates collateral valuations and adjusts specific reserve levels on a quarterly, case-by-case basis. Appraisals are still pending for recently downgraded non-performing loans, and reserve additions for completed appraisals have been minimal to date. Approximately half of the quarter’s reserve increase is attributed to loan growth and model adjustments for weakening economic conditions.

No detailed financial performance data for individual product or business segments was provided in the transcript, so no absolute revenue figures or revenue contribution percentages can be reported.

• Management expects elevated credit loss provisioning to continue at an average of ~$7.5 million per quarter through the end of the current year, driven by ongoing borrower negotiation dynamics during the loan repricing cycle.
• Management expects positive business momentum to continue into Q3 and through the end of the full year.

• The loan repricing cycle, expected to last six more quarters, will create ongoing volatility in delinquency and non-performing loan volumes as the firm works through adjustments client by client and loan by loan.
• A new, unprecedented dynamic has emerged where borrowers with the capacity to repay (strong debt coverage, documented collateral equity) are voluntarily halting payments to negotiate better terms, forcing the firm to commence foreclosure proceedings.
• While the issues are idiosyncratic rather than systemic, hard borrower negotiations carry ongoing risk that elevated provisioning will persist through the end of the year.

Q: Does the current loan loss reserve already account for potential future loan downgrades linked to the ongoing repricing cycle stress? / A: Reserve coverage is mixed for these potential downgrades. Specific reserves are only set after updated appraisals are completed for loans downgraded to substandard/non-performing status. For recently downgraded non-performing loans, appraisals are still pending, but any required reserve additions for completed appraisals so far have been minimal.

Q: What is the expected outlook for quarterly credit loss provisions through the end of the year? / A: Management guided that quarterly provisions will remain around the $7.5 million level through the end of the year, driven by the expected negotiation dynamics around repricing. Approximately half of recent reserve increases have come from loan growth and model adjustments for weakening broader economic conditions.