Peapack Private's Tenth Straight Growth Quarter — but the Fee Engine Didn't Show Up

Core PPNR up 76% and return on tangible equity at 11.4%: the NYC build-out is finally paying. So why did noninterest income fall 10% and a $1.8M tax credit do part of the EPS work?

PGC · Earnings Call · 2026-10-28

Ten quarters in, the slide became the business

Doug Kennedy has been narrating the same arc since 2023: take the regional-bank dislocation, hire experienced New York banking teams, rebrand, and let operating leverage do the talking. Third quarter 2026 is the first print where the arithmetic is unarguable rather than directional. Revenue of $88 million rose 24% year-over-year; net interest income of $68 million rose 33%; operating expenses of $55 million actually fell 1% sequentially while rising only 5% year-over-year; and core pretax pre-provision earnings hit $32.3 million, up 76% year-over-year. Diluted EPS of $0.99 was up 15% linked-quarter. Return on average tangible equity reached 11.4%, up 587 basis points from the third quarter of 2024. Loans grew $403 million and deposits $301 million against a stated quarterly cadence of $200 million, $200 million and $2 million of core earnings. “Revenue continued to grow significantly faster than expenses and expenses actually declined from the second quarter.” — Douglas Kennedy, President and Chief Executive Officer · 2026-10-28 Net interest income of $68 million is up 33% year-over-year, and the quarterly series has compounded from $24 million a decade ago into an outright inflection that finally justifies the team build-out. The margin, though, is still a repair job, not a record: the 18.2% operating margin booked in the June quarter is up 8.1 percentage points year-over-year, yet remains less than half the 35.9% peak set in 2022. The fundamentals file still ends in the June quarter; the September numbers are a quarter fresher and confirm the direction of travel.

The fee side is where the story wobbles

Wealth management is supposed to be the anchor — $13.6 billion of assets under management and administration, $17.3 million of revenue up 9% year-over-year, $51 million year-to-date. Yet total noninterest income fell roughly 10% sequentially to $20 million. Frank Cavallaro was unusually granular about which half of that was noise: a loss on the sale of an ORE property and a negative fair value mark on a CRA equity security accounted for about half the decline, and the remainder is structural — the bank exited SBA gain-on-sale revenue. The run-rate guide walked down a full dollar. “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.” — Frank Cavallaro, Chief Financial Officer · 2026-10-28 That is not a crisis, but it is a quiet downgrade of the diversification thesis at exactly the moment the spread business is doing the heavy lifting. John Babcock's explanation was honest: with the Russell 2000 down 7.5% in the quarter against a slightly higher S&P, flows and the associated fee impact were roughly flat. The pivot here is that a company selling itself as a wealth-anchored private bank just had a quarter where the spread line beat the fee line by a wide margin.

The rate math cuts both ways — and so does the rent-regulated book

This is squarely a sector story, not a Peapack original. The broader tape is loud with Fed rate hike risk, core deposits pricing, and cost of deposits; the same week, NTB flagged rate increases, WSFS guided to a December hike, AVBH discussed further hikes, and EBC talked about gathering core deposits while balancing growth. Peapack's twist is the size of its repricing tail. Interest-bearing liabilities rose 10 basis points sequentially on the 25bp Fed move plus incremental Federal Home Loan Bank borrowings, and the net interest margin widened only 2 basis points to 3.34% — new loans at roughly 6.4%, new deposits in the mid-2s, with overall beta managed to 50%–60%.

Higher for longer is not good for us. That's the executive summary. ... the longer we sit in the ZIP code, the more time people have to sort of talk about getting a higher rate.
Douglas Kennedy, President and Chief Executive Officer · 2026-10-28

Cavallaro added the mechanical asymmetry that matters more than the narrative: “the pressure always seems like it feels like it comes from the deposit side faster and more rapidly.” — Frank Cavallaro, Chief Financial Officer · 2026-10-28 The offset is a genuinely large back-book tailwind.

$1.4 billion in fixed-rate assets will reprice. The weighted average coupon on that is ... around 3.90. And we think that we could pick up somewhere between 150 to 200 bps on a repricing over that time period.
Frank Cavallaro, Chief Financial Officer · 2026-10-28

One caution the call handled well but investors should keep: the rent regulated multifamily portfolio is now $775 million, down to 11% of total loans from 18% two years ago, with about $500 million repricing over the next five quarters. Lisa Chalkan noted that “the repricing in the documents is over market” — Lisa Chalkan, Chief Credit Officer · 2026-10-28 — meaning borrowers will arrive asking for modifications rather than accepting the step-up. Credit is currently cooperating (nonperforming assets down 20% sequentially to $58 million, 0.68% of assets, 30–89 day delinquencies down 18%), but the reprice calendar is a slow fuse, not a resolved item.

Capital, a hundred agents, and a bending cost curve

Growth has consumed some of the capital cushion. The bank issued the remaining $20 million of convertible preferred in July and launched a voluntary dividend reinvestment program in the fourth quarter, closing mid-November — a pragmatic supplement to retained earnings that sits awkwardly beside the capital discipline refrain. Deposits crossed $7 billion for the first time in the June quarter, and management put them at $7.4 billion at September 30, with noninterest-bearing balances up 18% year-over-year. That mix is the real defence against the funding pressure. The most under-discussed disclosure of the call was operational. Kennedy, on expense growth: “we've actually stood up 100 agents across the institution” — Douglas Kennedy, President and Chief Executive Officer · 2026-10-28 — with loan closings in final testing. That underwrites the 2027 guidance of mid- to upper single digit growth on the expense line against a multi-year history of high-teens increases. Non-interest expense of $56 million in the June quarter grew just 7% year-over-year, and management has held it essentially flat for three consecutive quarters. Worth noting the market's AI complex is currently de-rating — AI data center names are among the heaviest decliners in both the 30- and 90-day tapes — whereas Peacack's AI is a cost line, not a capital line. Finally, quality of earnings: the effective tax rate of 20.5% versus 28.4% in the second quarter included “a discrete benefit of approximately $1.8 million related to the purchase of production tax credits” — Frank Cavallaro, Chief Financial Officer · 2026-10-28, which management explicitly called non-recurring. Strip that out and the EPS beat is good, not spectacular. The destination is well defined — above 1% ROA by early 2027, 1.25% by the fourth quarter of 2027, annualised core earnings from roughly $130 million toward $180 million. The quarter supports the path. But the honest read is that Peapack is currently winning on spread and expense, not on the fee franchise it markets as its rarefied asset — and the deposit side of the rate equation is squeezing faster than the asset side is releasing.