PEAPACK GLADSTONE FINANCIAL CORP (PGC) stock intrinsic value fair value estimate & owner earnings analysis

Peapack-Gladstone Financial is the holding company for Peapack Private Bank & Trust, a private bank based in Bedminster, New Jersey. It pairs commercial, multifamily and residential lending (about $6.7 billion of loans at June 30, 2026) funded by about $7.1 billion of deposits, with a wealth-management business that oversaw $13.9 billion of client assets at mid-2026 and brings in about $17 million of fees a quarter. In recent years it has added about 20 private-banking teams in the New York City area and opened a flagship office on Park Avenue. How we measure earnings. For a bank, the money it borrows from depositors is its raw material, so interest paid is treated as an ordinary operating cost and deposits are not subtracted as debt. We start from the cash the bank generates for shareholders, after charging stock compensation and the cost of maintaining its offices and systems. One adjustment matters a great deal: the cash-flow statement adds loan-loss provisions back as a "non-cash" charge, but for a lender, loans that go bad are the main cost of doing business. We therefore charge credit losses in every year. Over the last ten years provisions averaged about $11 million a year, roughly 0.23% of loans, and that is the normal cost we charge going forward (about $15 million a year on today's loan book). Measured this way, earnings per share ranged from about $0.93 in 2024, when deposit costs squeezed the net interest margin to 2.32%, to about $4.45 in 2022, with a ten-year median of about $2.94. In 2025 they recovered to about $2.48 even after $23.5 million of provisions and $25.6 million of net charge-offs as the bank cleared problem multifamily and commercial property loans. What has changed recently. The margin has kept rising: 2.84% for 2025 and 3.32% in the second quarter of 2026, and quarterly net interest income has climbed three quarters in a row, from $56.5 million to $63.9 million. Earnings per share were $0.69, $0.80 and $0.85 over the last three quarters. At today's margin and a normal credit cost, the bank would earn about $4.00 a share. Credit costs are still running high, though: provisions were $7.3 million and $8.1 million in the first two quarters of 2026, and nonperforming assets were $72.2 million (0.91% of assets) at June 30. The bank has $854 million of loans on New York rent-regulated apartment buildings, 13.7% of all loans. The annual report itself describes these buildings as under stress from rent limits, non-paying tenants and slow evictions. Base case (about $55 per share). The margin gives back about half of its recent gain and settles near 3.15%. That is still above the 2025 average but below today's level, because 3.32% is higher than anything the bank earned in the prior decade. Credit costs stay elevated for another year (about $22 million) and then return to the long-run average. That gives about $3.21 a share in the first year and about $3.48 after that. Year 1 is about 29% above 2025's $2.48, well below the 167% actual increase in 2025, and in line with the $1.65 earned in the first half of 2026. We credit no further growth. Growing loans and deposits depends on winning new clients from competitors, and growing wealth fees depends on markets and new accounts; neither is secured in advance. Past growth in the balance sheet has also not translated into steady growth in per-share earnings. We assume the earning power lasts indefinitely at that level, because the bank has kept its deposit and wealth relationships through every cycle since 1921. At a 6% discount rate the business is worth about $1,033 million. Ahead of common shareholders sit $50 million of 6% non-cumulative convertible preferred shares sold to Strategic Value Bank Partners in 2026 ($30 million in March and $20 million more committed). They cannot be converted for five years, so we treat them as a claim ahead of the common rather than as future shares. That leaves about $983 million, or $54.93 a share on 17.9 million diluted common shares. Bear case (about $37 per share). The margin falls back to the 2025 average of 2.84%. The rent-regulated New York multifamily book produces a real loss cycle: provisions of about $35 million a year for three years, somewhat above the 2020 and 2025 peaks ($32.4 million and $23.5 million). After that, credit returns to normal. Earnings are about $1.74 a share for three years and about $2.53 after that. The business is worth about $717 million; less the $50 million of preferred stock, that is about $667 million, or $37.28 a share. Even in this case the bank stays solidly profitable before credit costs (about $78 million a year), so it can absorb the losses without being forced to raise capital. Banks are leveraged, though, and a deeper loss cycle than the one modeled would come straight out of common equity. Bull case (about $71 per share). The margin holds at today's 3.32%, credit costs normalize within a year, and the New York teams already hired and already paid for keep building their books for three more years at about 4% a year. After that we assume no further growth. Earnings rise from about $3.81 to about $4.50 a share. The business is worth about $1,322 million; less the $50 million of preferred stock, that is about $1,272 million, or $71.07 a share. Debt. The $99 million of subordinated notes outstanding at the end of 2025 had been fully repaid by June 30, 2026, so the only claim ranked ahead of common shareholders is the new preferred stock. Deposits and other bank funding are part of the business itself, and their cost is already charged in the earnings above. What changed since our previous estimate. We previously put the base case near $94 and the bull case near $133. Three things lowered those figures. First, the earlier estimate did not charge loan losses as a cost. Second, it assumed years of high-single-digit growth that the bank's own record does not secure. Third, it did not account for the new preferred stock, which ranks ahead of the common. Working in the other direction, we now start from a higher level of earnings, because three consecutive quarters confirm the margin recovery. The bear case is little changed. What would make this wrong. The main risks are a larger or longer loss cycle in New York rent-regulated apartment loans, especially if rent limits are tightened, and a faster fall in the margin if deposit costs rise again. The upside risks are that the margin holds at today's level and that the New York expansion keeps adding low-cost deposits and wealth clients faster than we have assumed.