As I reflect on our performance in 2023, Peapack-Gladstone Bank faced a number of challenges, largely driven by the historic rise in interest rates resulting from the Federal Reserve Bank's corrective actions to fight inflation. These necessary rate increases have had a significant impact on our Company and the industry at large. As was the case with all but a handful of megabanks, our earnings contracted 34% to $48.9 million due primarily to our net interest margin. In addition to putting pressure on our net interest margin, higher rates also slowed loan growth as businesses and consumers adjusted to the higher-rate environment. Notwithstanding these headwinds, we met our targets for asset and deposit growth and managed our expenses in a way that was consistent with our original plan for the year. Most importantly, our team remained disciplined as we leaned heavily into investing in our core strength of delivering exceptional client service.
In early 2023, we refocused our efforts around client service and rolled out hospitality training to every employee. We have always believed that exceptional client service and nimble execution are our key differentiators that will ultimately serve to provide strong future growth and profitability in all market conditions. This approach to banking cannot be replicated by large bank competitors. Large bank business models are built on the basis of scale; personal relationships are simply not scalable. Our high-touch service model, combined with sophisticated private banking and wealth management solutions, positions our Company uniquely against our competitors, both big and small.
The bank failures that occurred in early 2023 produced volatility that shook the foundation of the banking industry. As has always been the case, our clients looked to us to provide stability and strength during this period of uncertainty. The need for a safe harbor underscored the value of our conservative risk profile and our commitment to financial discipline. In December 2023, Moody's reaffirmed our investment grade ratings for both our holding company and the Bank, reflecting the prudent management of our Company. We are pleased to share that these ratings come with a stable outlook.
Responding to the anticipated shift in market conditions, we proactively found ways to help manage risk and safeguard our capital base. We shifted our investment portfolio holdings to shorter durations, took advantage of interest rate swaps to manage rate risk, and tightened our loan pricing, monitoring, and underwriting guidelines well in advance of the Fed Fund rate increases. While all of these activities did not completely insulate us from the ramifications of the rapid rise in rates, they helped mitigate some of the impact we saw from the dramatic change in market conditions. Our commercial and industrial lending and equipment finance businesses performed well under these changing market conditions, except for two idiosyncratic problem loans tied to the transportation industry. As of this writing, we have exited one of these two credits completely and expect the other to be fully resolved in the second quarter.
Our strong capital base and disciplined financial management allowed us to be opportunistic in the face of industry instability. The bank failures in early 2023 created an opportunity for our Company. In June, we recruited two talented teams to spearhead our entry into New York City.
This now-combined team has considerable private banking and commercial banking experience, and our entry into New York City represents a major milestone for our Company, showcasing our unique private banking business model. NYC is a large and unique market that serves as the economic hub of the tri-state area, and its diverse population and extensive market reach will set the stage for additional future growth.
We have been preparing for this since launching our private banking strategy in 2012. Our historical success in competing against large institutions will carry over to competing in New York. I believe we deliver a compelling alternative to big banks and wirehouse competitors.
Overall, our expansion into New York City is a bold strategic move that, through careful execution, will enhance our future growth and profitability. Being a realist, I also know that success will take longer and be more challenging than we could imagine. Our results to date have met expectations, and we began 2024 with a solid pipeline of new business opportunities.
As a private bank, we are pursuing a highly sophisticated, client-centric business model that focuses on full-bank relationships. We continue to refine our service culture by asking, “Is this the best we can do?” We are embracing the idea that we need to continuously listen to our clients and provide proactive, customized wealth, lending, and deposit solutions to help clients achieve their financial goals. Our differentiator is bespoke services offered by our carefully curated team of professionals.
The financial industry disruption we saw in 2023 has expanded our opportunity to fill this need. Our priorities for 2024 include: 1) sharpening and simplifying our processes to make it easier to do business with us; 2) measurably improving the client experience; 3) deepening relationships; and 4) improving operational efficiency.
I am so proud of our team, who, through their efforts, have created a culture that has been recognized by American Banker as one of the Best Banks to Work For for six consecutive years. Their hard work and dedication have been exceptional, especially through the most recent economic cycle. Their unwavering dedication to serving our clients, our communities, and each other with passion and integrity has been remarkable. They are the face of our Company, and they embody our core principles and values.
On behalf of our team and members of the Board, we are grateful for your continued support. We've positioned ourselves for the future by confronting the challenges of last year head-on and transforming them into opportunities for tomorrow.
Respectfully,
Douglas L. Kennedy
President and Chief Executive Officer