Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of Common Stock outstanding as of ~~November 2, 2020: 18,934,649~~April 30, 2021: 19,035,870

	(unaudited)			(audited)			(unaudited)			(audited)
	September 30,			December 31,			March 31,			December 31,
	2020			2019			2021			2020
ASSETS
Cash and due from banks	$	8,400		$	6,591		$	8,159		$	10,629
Federal funds sold		102			102			102			102
Interest-earning deposits		670,863			201,492			468,276			642,591
Total cash and cash equivalents		679,365			208,185			476,537			653,322
Securities available for sale		596,929			390,755			875,301			622,689
Equity security, at fair value		15,159			10,836			14,852			15,117
FHLB and FRB stock, at cost		18,433			24,068			13,699			13,709
Loans held for sale, at fair value		13,785			2,881			9,219			13,588
Loans held for sale, at lower of cost or fair value		14,455			14,667			53,185			18,520
Loans		4,430,651			4,394,137			4,377,931			4,372,437
Less: Allowance for loan and lease losses		66,145			43,676			67,536			67,309
Net loans		4,364,506			4,350,461			4,310,395			4,305,128
Premises and equipment		21,668			20,913			23,260			21,609
Other real estate owned		50			50			50			50
Accrued interest receivable		22,192			10,494			23,916			22,495
Bank owned life insurance		46,645			46,128			46,448			46,809
Goodwill		30,208			30,208			33,103			33,103
Other intangible assets		9,414			10,380			10,421			10,788
Finance lease right-of-use assets		4,517			5,078			4,143			4,330
Operating lease right-of-use assets		10,011			12,132			10,186			9,421
Other assets		110,770			45,643			64,912			99,764
TOTAL ASSETS	$	5,958,107		$	5,182,879		$	5,969,627		$	5,890,442
LIABILITIES
Deposits:
Noninterest-bearing demand deposits	$	838,307		$	529,281		$	908,922		$	833,500
Interest-bearing deposits:
Checking		1,858,529			1,510,363			1,987,567			1,849,254
Savings		127,737			112,652			141,743			130,731
Money market accounts		1,251,349			1,196,313			1,256,605			1,298,885
Certificates of deposit - retail		586,801			633,763			474,668			530,222
Certificates of deposit - listing service		32,677			47,430			31,631			32,128
Subtotal deposits		4,695,400			4,029,802			4,801,136			4,674,720
Interest-bearing demand - brokered		130,000			180,000			110,000			110,000
Certificates of deposit - brokered		33,750			33,709			33,777			33,764
Total deposits		4,859,150			4,243,511			4,944,913			4,818,484
Short-term borrowings		15,000			128,100			15,000			15,000
Federal Home Loan Bank advances		105,000			105,000
Paycheck Protection Program Liquidity Facility		183,790			—			168,180			177,086
Finance lease liabilities		6,976			7,598			6,528			6,753
Operating lease liabilities		10,318			12,423			10,509			9,737
Subordinated debt, net		83,585			83,417			181,837			181,794
Deferred tax liabilities, net		23,295			26,151			28,341			32,978
Due to brokers, securities settlements		15,088			7,951
Accrued expenses and other liabilities		133,177			65,076			91,878			121,488
TOTAL LIABILITIES		5,435,379			4,679,227			5,447,186			5,363,320
SHAREHOLDERS’ EQUITY
Preferred stock (no par value; authorized 500,000 shares; liquidation preference of $1,000 per share)		—			—			—			—
Common stock (no par value; stated value $0.83 per share; authorized 42,000,000 shares; issued shares, 20,293,131 at September 30, 2020 and 20,074,766 at December 31, 2019; outstanding shares, 18,924,953 at September 30, 2020 and 18,926,810 at December 31, 2019		16,916			16,733
Common stock (no par value; stated value $0.83 per share; authorized 42,000,000 shares; issued shares, 20,561,081 at March 31, 2021 and 20,342,881 at December 31, 2020; outstanding shares, 19,034,870 at March 31, 2021 and 18,974,703 at December 31, 2020								17,140			16,958
Surplus		324,677			319,375			326,251			326,592
Treasury stock at cost, 1,368,178 shares at September 30, 2020 and 1,147,956 shares at December 31, 2019		(36,477	)		(29,990	)
Treasury stock at cost, 1,526,211 shares at March 31, 2021 and 1,368,178 shares at December 31, 2020								(40,856	)		(36,477	)
Retained earnings		219,359			199,029			233,670			221,441
Accumulated other comprehensive loss, net of income tax		(1,747	)		(1,495	)		(13,764	)		(1,392	)
TOTAL SHAREHOLDERS’ EQUITY		522,728			503,652			522,441			527,122
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY	$	5,958,107		$	5,182,879		$	5,969,627		$	5,890,442

	Three Months Ended					Nine Months Ended					Three Months Ended
	September 30,					September 30,					March 31,
	2020		2019			2020		2019			2021			2020
INTEREST INCOME
Interest and fees on loans	$	37,704	$	42,006		$	119,330	$	123,113		$	35,384		$	42,305
Interest on investments:
Taxable		2,182		2,477			6,749		7,800			2,629			2,459
Tax-exempt		51		73			166		257			43			58
Interest on loans held for sale		78		30			153		47			55			21
Interest on interest-earning deposits		159		1,362			820		3,897			128			552
Total interest income		40,174		45,948			127,218		135,114			38,239			45,395
INTEREST EXPENSE
Interest on savings and interest-bearing deposit accounts		2,066		8,710			11,640		25,325			1,789			6,443
Interest on certificates of deposit		2,529		3,781			9,370		10,476			1,470			3,694
Interest on borrowed funds		1,221		886			3,360		2,558			209			1,012
Interest on finance lease liability		84		94			261		290			79			90
Interest on subordinated debt		1,222		1,224			3,667		3,671			2,145			1,223
Subtotal - interest expense		7,122		14,695			28,298		42,320			5,692			12,462
Interest on interest-bearing demand - brokered		636		901			2,259		2,476			493			923
Interest on certificates of deposits - brokered		267		267			794		958			261			263
Total interest expense		8,025		15,863			31,351		45,754			6,446			13,648
NET INTEREST INCOME BEFORE PROVISION FOR LOAN AND LEASE LOSSES		32,149		30,085			95,867		89,360			31,793			31,747
Provision for loan and lease losses		5,150		800			30,050		2,050			225			20,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES		26,999		29,285			65,817		87,310			31,568			11,747
OTHER INCOME
Wealth management fee income		10,119		9,501			30,070		28,243			12,131			9,955
Service charges and fees		785		882			2,296		2,595			846			816
Bank owned life insurance		314		332			960		996			611			328
Gain on loans held for sale at fair value (mortgage banking)		954		198			1,796		377
Gains on loans held for sale at fair value (mortgage banking)												1,025			292
Gain/(loss) on loans held for sale at lower of cost or fair value		7,429		(6	)		7,426		(6	)		282			(3	)
Fee income related to loan level, back-to-back swaps		—		2,349			1,620		3,340			—			1,418
Gain on sale of SBA loans		79		224			1,391		1,216			1,449			1,054
Corporate advisory fee income												1,098			75
Other income		531		902			1,472		2,248			643			384
Securities gains/(losses), net		—		34			323		162
Securities (losses)/gains, net												(265	)		198
Total other income		20,211		14,416			47,354		39,171			17,820			14,517
OPERATING EXPENSES
Compensation and employee benefits		19,202		17,476			57,614		52,175			21,990			19,226
Premises and equipment		4,109		3,849			12,188		10,837			4,113			4,043
FDIC insurance expense/(credit)		605		(277	)		1,310		277
FDIC insurance expense												585			250
Other operating expense		4,545		5,211			14,598		14,858			4,906			4,716
Total operating expenses		28,461		26,259			85,710		78,147			31,594			28,235
INCOME BEFORE INCOME TAX EXPENSE		18,749		17,442			27,461		48,334
Income tax expense		5,202		5,216			4,299		13,133
INCOME/(LOSS) BEFORE INCOME TAX EXPENSE/(BENEFIT)												17,794			(1,971	)
Income tax expense/(benefit)												4,616			(3,344	)
NET INCOME	$	13,547	$	12,226		$	23,162	$	35,201		$	13,178		$	1,373

EARNINGS PER SHARE
Basic	$	0.72	$	0.63		$	1.23	$	1.82		$	0.70		$	0.07
Diluted	$	0.71	$	0.63		$	1.22	$	1.81		$	0.67		$	0.07
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic		18,908,337		19,314,666			18,879,688		19,370,627			18,950,305			18,858,343
Diluted		19,132,650		19,484,905			19,052,605		19,496,721			19,531,689			19,079,575

	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30,						September 30,						March 31,
	2020			2019			2020			2019			2021			2020
Net income	$	13,547		$	12,226		$	23,162		$	35,201		$	13,178		$	1,373
Comprehensive income:
Unrealized gains/(losses) on available for sale securities:
Unrealized holding gains/(losses) arising during the period		(1,029	)		769			6,801			5,928
Unrealized (losses)/gains on available for sale securities:
Unrealized holding (losses)/gains arising during the period														(17,618	)		5,799
		(1,029	)		769			6,801			5,928			(17,618	)		5,799

Tax effect		252			(186	)		(1,649	)		(1,441	)		4,203			(1,412	)
Net of tax		(777	)		583			5,152			4,487			(13,415	)		4,387

Unrealized gains/(losses) on cash flow hedges:
Unrealized holding gains/(losses) arising during the period		1,439			(1,084	)		(7,249	)		(5,540	)		1,450			(8,878	)
Reclassification adjustment for amounts included in net income		(5	)		(80	)		(85	)		(142	)		—			(71	)
		1,434			(1,164	)		(7,334	)		(5,682	)		1,450			(8,949	)

Tax effect		(408	)		356			1,930			1,711			(407	)		2,398
Net of tax		1,026			(808	)		(5,404	)		(3,971	)		1,043			(6,551	)


Total other comprehensive income/(loss)		249			(225	)		(252	)		516
Total other comprehensive loss														(12,372	)		(2,164	)

Total comprehensive income	$	13,796		$	12,001		$	22,910		$	35,717
Total comprehensive income/(loss)													$	806		$	(791	)

Three Months Ended ~~September 30,~~March 31, 2021 and March 31, 2020 ~~and September 30, 2019~~

Accumulated

Other

(In thousands, except share and

Preferred

Common

Treasury

Retained

Comprehensive

per share data)

Stock

Stock

Surplus

Stock

Earnings

Loss

Total

Balance at July 1, 2020 18,905,135
   common shares outstanding

$
—

$
16,900

$
322,796

$
(36,477
)

$
206,757

$
(1,996
)

$
507,980

Net income

—

—

—

—

13,547

—

13,547

Comprehensive income

—

—

—

—

—

249

249

Amortization of restricted stock awards/units

—

—

1,798

—

—

—

1,798

Cash dividends declared on common stock
   ($0.05 per share)

—

—

—

—

(945
)

—

(945
)
Issuance of shares for Employee Stock
   Purchase Plan, 5,598 shares

—

4

95

—

—

—

99

Issuance of common stock for acquisition,
   14,220 shares

—

12

(12
)

—

—

—

—

Balance at September 30, 2020 18,924,953
   common shares outstanding

$
—

$
16,916

$
324,677

$
(36,477
)

$
219,359

$
(1,747
)

$
522,728

Accumulated

Other

(In thousands, except share and

Preferred

Common

Treasury

Retained

Comprehensive

per share data)

Stock

Stock

Surplus

Stock

Earnings

Loss

Total

Balance at July 1, 2019 19,456,312
   common shares outstanding

$
—

$
16,557

$
311,428

$
(8,988
)

$
176,495

$
(1,604
)

$
493,888

Net income

—

—

—

—

12,226

—

12,226

Comprehensive loss

—

—

—

—

—

(225
)

(225
)
Amortization of restricted stock awards/units

—

—

1,509

—

—

—

1,509

Cash dividends declared on common stock
   ($0.05 per share)

—

—

—

—

(973
)

—

(973
)
Share repurchase, (595,853) shares

—

—

—

(16,717
)

—

—

(16,717
)
Common stock options exercised, 140 shares

—

—

1

—

—

—

1

Issuance of common stock for acquisition,
   138,642 shares

—

116

5,525

—

—

—

5,641

Balance at September 30, 2019 18,999,241
   common shares outstanding

$
—

$
16,673

$
318,463

$
(25,705
)

$
187,748

$
(1,829
)

$
495,350

															Accumulated
															Other			Total
(In thousands, except share and	Preferred		Common						Treasury			Retained			Comprehensive			Shareholders'
per share data)	Stock		Stock			Surplus			Stock			Earnings			Loss			Equity
Balance at December 31, 2020 18,974,703 common shares outstanding	$	—	$	16,958		$	326,592		$	(36,477	)	$	221,441		$	(1,392	)	$	527,122
Net income		—		—			—			—			13,178			—			13,178
Other comprehensive loss		—		—			—			—			—			(12,372	)		(12,372	)
Restricted stock units issued 267,148		—		223			(223	)		—			—			—			—
Restricted stock units/awards repurchased on vesting to pay taxes, (64,653) shares		—		(54	)		(1,948	)		—			—			-			(2,002	)
Amortization of restricted stock awards/units		—		—			1,615			—			—			—			1,615
Cash dividends declared on common stock ($0.05 per share)		—		—			—			—			(949	)		—			(949	)
Share repurchase, (158,033) shares		—		—			—			(4,379	)		—			—			(4,379	)
Common stock options exercised, 820 net of 62 shares used to exercise, 758 shares		—		1			9			—			—			—			10
Exercise of warrants, 20,000 net of 13,478 shares used to exercise, 6,522 shares		—		5			(5	)		—			—			—			—
Issuance of shares for Employee Stock Purchase Plan, 8,425 shares		—		7			211			—			—			—			218
Balance at March 31, 2021 19,034,870 common shares outstanding	$	—	$	17,140		$	326,251		$	(40,856	)	$	233,670		$	(13,764	)	$	522,441

															Accumulated
															Other			Total
(In thousands, except share and	Preferred		Common						Treasury			Retained			Comprehensive			Shareholders'
per share data)	Stock		Stock			Surplus			Stock			Earnings			Loss			Equity
Balance at December 31, 2019 18,926,810 common shares outstanding	$	—	$	16,733		$	319,375		$	(29,990	)	$	199,029		$	(1,495	)	$	503,652
Net income		—		—			—			—			1,373			—			1,373
Other comprehensive loss		—		—			—			—			—			(2,164	)		(2,164	)
Restricted stock units issued 150,084		—		125			(125	)		—			—			—			—
Restricted stock units/awards repurchased on vesting to pay taxes, (37,106) shares		—		(31	)		(570	)		—			—			—			(601	)
Amortization of restricted stock awards/units		—		—			1,541			—			—			—			1,541
Cash dividends declared on common stock ($0.05 per share)		—		—			—			—			(949	)		—			(949	)
Share repurchase, (220,222) shares		—		—			—			(6,487	)		—			—			(6,487	)
Common stock options exercised, 5,600 shares		—		4			71			—			—			—			75
Exercise of warrants, 20,000 net of 13,469 shares used to exercise, 6,531 shares		—		6			(6	)		—			—			—			—
Issuance of common stock for acquisition, 20,826 shares		—		17			(17	)		—			—			—			—
Balance at March 31, 2020 18,852,523 common shares outstanding	$	—	$	16,854		$	320,269		$	(36,477	)	$	199,453		$	(3,659	)	$	496,440

Accumulated

Other

(In thousands, except share and

Preferred

Common

Treasury

Retained

Comprehensive

per share data)

Stock

Stock

Surplus

Stock

Earnings

Loss

Total

Balance at January 1, 2020 18,926,810
   common shares outstanding

$
—

$
16,733

$
319,375

$
(29,990
)

$
199,029

$
(1,495
)

$
503,652

Net income

—

—

—

—

23,162

—

23,162

Comprehensive loss

—

—

—

—

—

(252
)

(252
)
Restricted stock units issued 157,690 shares

—

131

(131
)

—

—

—

—

Restricted stock units/awards repurchased on
   vesting to pay taxes, (39,686) shares

—

(33
)

(610
)

—

—

—

(643
)
Amortization of restricted stock awards/units

—

—

5,062

—

—

—

5,062

Cash dividends declared on common stock
   ($0.15 per share)

—

—

—

—

(2,832
)

—

(2,832
)
Share repurchase, (220,222) shares

—

—

—

(6,487
)

—

—

(6,487
)
Common stock options exercised, 8,400 net of
   2,149 shares used to exercise, 6,251 shares

—

7

69

—

—

—

76

Exercise of warrants, 20,000 net of 13,469
   shares used to exercise, 6,531 shares

—

6

(6
)

—

—

—

—

Issuance of shares for Employee Stock
   Purchase Plan, 52,533 shares

—

43

947

—

—

—

990

Issuance of common stock for acquisition,
   35,046 shares

—

29

(29
)

—

—

—

—

Balance at September 30, 2020 18,924,953
   common shares outstanding

$
—

$
16,916

$
324,677

$
(36,477
)

$
219,359

$
(1,747
)

$
522,728

Accumulated

Other

(In thousands, except share and

Preferred

Common

Treasury

Retained

Comprehensive

per share data)

Stock

Stock

Surplus

Stock

Earnings

Loss

Total

Balance at January 1, 2019 19,337,662
   common shares outstanding

$
—

$
16,459

$
309,088

$
(8,988
)

$
154,799

$
(2,345
)

$
469,013

Cumulative adjustment for leases (ASU 842)

—

—

—

—

661

—

661

Balance at January 1, 2019, adjusted

—

16,459

309,088

(8,988
)

155,460

(2,345
)

469,674

Net income

—

—

—

—

35,201

—

35,201

Comprehensive income

—

—

—

—

—

516

516

Restricted stock units issued 131,141 shares

—

109

(109
)

—

—

—

—

Restricted stock units/awards repurchased on
   vesting to pay taxes, (35,949) shares

—

(30
)

(951
)

—

—

—

(981
)
Amortization of restricted stock awards/units

—

—

4,374

—

—

—

4,374

Cash dividends declared on common stock
   ($0.15 per share)

—

—

—

—

(2,913
)

—

(2,913
)
Share repurchase, (595,853) shares

—

—

—

(16,717
)

—

—

(16,717
)
Common stock options exercised, 1,660 shares

—

1

22

—

—

—

23

Exercise of warrants 7,109 net of 4,218
   shares used to exercise, 2,891 shares

—

2

(2
)

—

—

—

—

Issuance of shares for Employee Stock
   Purchase Plan, 18,740 shares

—

15

517

—

—

—

532

Issuance of common stock for acquisition,
   138,949 shares

—

117

5,524

—

—

—

5,641

Balance at September 30, 2019 18,999,241
   common shares outstanding

$
—

$
16,673

$
318,463

$
(25,705
)

$
187,748

$
(1,829
)

$
495,350

	Nine Months Ended September 30,						Three Months Ended March 31,
	2020			2019			2021			2020
OPERATING ACTIVITIES:
Net income	$	23,162		$	35,201		$	13,178		$	1,373
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		2,312			2,342			784			771
Amortization of premium and accretion of discount on securities, net		3,216			1,165			1,578			684
Amortization of restricted stock		5,062			4,374			1,615			1,541
Amortization of intangible assets		966			688			368			324
Amortization of subordinated debt costs		168			168			43			56
Provision for loan and lease losses		30,050			2,050			225			20,000
Deferred tax (benefit)/expense		(2,336	)		3,719
Deferred tax benefit								(841	)		(3,520	)
Stock-based compensation and employee stock purchase plan expense		199			117			30			41
Fair value adjustment for equity security		(323	)		(162	)		265			(198	)
Loans originated for sale (1)		(125,466	)		(40,561	)		(53,886	)		(30,247	)
Proceeds from sales of loans held for sale (1)		117,892			42,188			64,900			31,095
Gain on loans held for sale (1)		(3,188	)		(1,593	)		(2,474	)		(1,346	)
(Gain)/loss on loans held for sale at lower of cost or fair value		(7,426	)		6			(282	)		3
Gain on life insurance death benefit								(302	)		—
Increase in cash surrender value of life insurance, net		(517	)		(587	)		(153	)		(181	)
Increase in accrued interest receivable		(11,674	)		(945	)		(1,421	)		(1,310	)
(Increase)/decrease in other assets		(2,659	)		9,681
(Decrease)/increase in accrued expenses and other liabilities		(10,697	)		9,292
Decrease/(increase) in other assets								4,956			(7,528	)
Increase/(decrease) in accrued expenses and other liabilities								1,722			(4,174	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		18,741			67,143			30,305			7,384
INVESTING ACTIVITIES:
Principal repayments, maturities and calls of securities available for sale		152,273			170,247			52,781			31,037
Redemptions of FHLB and FRB stock		34,737			361			10			12,072
Purchase of securities available for sale		(339,797	)		(140,537	)		(324,589	)		(24,852	)
Purchase of equity securities		(4,000	)		—			—			(3,000	)
Purchase of FHLB and FRB stock		(29,102	)		(3,231	)		—			(28,875	)
Proceeds from sales of loans held for sale at lower of cost or fair value		372,406			(6	)		7,221			10,067
Net increase in loans, net of participations sold		(409,005	)		(233,900	)		(51,268	)		(13,761	)
Purchase of premises and equipment		(2,506	)		(1,097	)		(2,248	)		(914	)
Purchase of wealth management company		—			(2,600	)
Proceeds from life insurance death benefit								582			—
NET CASH USED IN INVESTING ACTIVITIES		(224,994	)		(210,763	)		(317,511	)		(18,226	)
FINANCING ACTIVITIES:
Net increase in deposits		615,639			166,016			126,429			197,722
Net (decrease)/increase in short-term borrowings		(113,100	)		52,000
Proceeds from Paycheck Protection Program Liquidity Facility		535,838			—
Net increase in short-term borrowings								—			386,900
Repayments of Paycheck Protection Program Liquidity Facility		(352,048	)		—			(8,906	)		—
Proceeds from Federal Home Loan Bank short term advances		—			15,000
Repayments of Federal Home Loan Bank advances		—			(3,000	)
Dividends paid on common stock		(2,832	)		(2,913	)		(949	)		(949	)
Exercise of Stock Options, net of stock swaps		76			23			10			75
Restricted stock repurchased on vesting to pay taxes		(643	)		(981	)		(2,002	)		(601	)
Issuance of shares for employee stock purchase plan		990			532			218			—
Purchase of treasury shares		(6,487	)		(16,717	)		(4,379	)		(6,487	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		677,433			209,960			110,421			576,660
Net increase in cash and cash equivalents		471,180			66,340
Net (decrease)/increase in cash and cash equivalents								(176,785	)		565,818
Cash and cash equivalents at beginning of period		208,185			160,773			653,322			208,185
Cash and cash equivalents at end of period	$	679,365		$	227,113		$	476,537		$	774,003
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest	$	30,260		$	44,497		$	4,413		$	12,424
Income tax, net		551			1,047			200			206
Transfer of loans to loans held for sale		364,910			—			45,776			—
Transfer of loans to other real estate owned		—			336
Security purchases settled in subsequent period		15,088			—			—			10,885
Acquisition goodwill		—			9,400

Certain information and footnote disclosures normally included in the audited consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 for Peapack-Gladstone Financial Corporation (the “Corporation” or the “Company”). In the opinion of the management of the Corporation, the accompanying unaudited Consolidated Interim Financial Statements contain all adjustments (consisting solely of normal and recurring accruals) necessary to present fairly the financial position as of ~~September 30, 2020,~~March 31, 2021, and the results of operations, comprehensive ~~income,~~income/(loss), shareholders’ equity for ~~the three and nine months ended September 30,~~ 2020 ~~and 2019~~ and cash flow statements for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020. The results of operations for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 are not necessarily indicative of the results that may be expected for the full year or for any future period.

Principles of Consolidation and Organization: The consolidated financial statements of the Company are prepared on the accrual basis and include the accounts of the Company and its wholly-owned subsidiary, Peapack-Gladstone Bank (the “Bank”). The consolidated financial statements also include the Bank’s wholly-owned subsidiaries:

While the following footnotes include the ~~collective~~consolidated results of the Company, the Bank and their subsidiaries, these footnotes primarily reflect the Bank’s and its subsidiaries’ activities. All significant intercompany balances and transactions have been eliminated from the accompanying consolidated financial statements.

Basis of Financial Statement Presentation: The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. In preparing the financial statements, Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the statement of condition and revenues and expenses for the periods presented. Actual results could differ from those estimates.

Segment Information: The Company’s business is conducted through 2 business segments: its banking ~~subsidiary,~~segment, which involves the delivery of loan and deposit products to customers, and the Peapack Private Wealth Management Division (“Peapack Private”), which includes asset management services to individuals and institutions. Management uses certain methodologies to allocate income and expense to the business segments.

The Banking segment includes commercial (includes C&I and equipment financing), commercial real estate, multifamily, residential and consumer lending activities; treasury management services; C&I advisory services; escrow management; deposit generation; operation of ATMs; telephone and internet banking services; merchant credit card services and customer support services.

Peapack Private includes: investment management services for individuals and institutions; personal trust services, including services as executor, trustee, administrator and custodian; and other financial planning and advisory services. This segment also includes the activity from the Delaware subsidiary, PGB Trust & Investments of Delaware and Murphy ~~Capital, Lassus Wherley, and Point View.~~Capital. Wealth management fees are primarily earned over time as the Company provides the contracted monthly or quarterly services and are generally assessed based on a tiered scale of the market value of AUM at month-end. Fees that are transaction based, including trade execution services, are recognized at the point in time that the transaction is executed (i.e. trade date).

Cash and Cash Equivalents: For purposes of the statements of cash flows, cash and cash equivalents include cash and due from banks, interest-earning deposits and federal funds sold. Generally, federal funds are sold for one-day periods. Cash equivalents

are of original maturities of 90 days or less. Net cash flows are reported for customer loan and deposit transactions and short-term borrowings with original maturities of 90 days or less.

Interest-Earning Deposits in Other Financial Institutions: Interest-earning deposits in other financial institutions mature within one year and are carried at cost.

Securities: All debt securities are classified as available for sale and are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax. The Company also has an investment in a CRA investment fund, which is classified as an equity security.

Interest income includes amortization of purchase premiums and discounts. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated, and premiums on callable debt securities, which are amortized to the earliest call date. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

Management evaluates securities for other-than-temporary impairment on at least a quarterly basis, and more frequently when economic or market conditions ~~warrant such an evaluation.~~warrant. For securities in an unrealized loss position, Management considers the extent and duration of the unrealized loss and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) other-than-temporary impairment related to credit loss, which is recognized in the income statement and 2) other-than-temporary impairment related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis.

Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) Stock: The Bank is a member of the FHLB system. Members are required to own a certain amount of FHLB stock, based on the level of borrowings and other factors. FHLB stock is carried at cost, classified as a restricted security and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

The Bank is also a member of the Federal Reserve Bank of New York and required to own a certain amount of FRB stock. FRB stock is carried at cost and classified as a restricted security. Dividends are reported as income.

Loans Held for Sale: Mortgage loans originated with the intent to sell in the secondary market are carried at fair value, as determined by outstanding commitments from investors.

Mortgage loans held for sale are generally sold with servicing rights released; therefore, 0 servicing rights are recorded. Gains and losses on sales of mortgage loans, shown as gain on sale of loans on the Statement of Income, are based on the difference between the selling price and the carrying value of the related loan sold.

U.S. Small Business Administration (SBA) loans originated with the intent to sell in the secondary market are carried at the lower of cost or fair value. SBA loans are generally sold with the servicing rights retained. Gains and losses on the sale of SBA loans are based on the difference between the selling price and the carrying value of the related loan sold. Total SBA loans serviced totaled ~~$63.1~~$77.0 million and ~~$51.9~~$65.5 million as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.SBA loans held for sale totaled ~~$4.5~~$1.8 million and ~~$4.6~~$6.0 million at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. The Company also has loans originated through the SBA Paycheck Protection Program (PPP) that are held for sale. As of March 31, 2021, the Company had $45.8 million of PPP loans that were designated held for sale.

Loans originated with the intent to hold and subsequently transferred to loans held for sale are carried at the lower of cost or fair value. These are loans that the Company no longer has the intent to hold for the foreseeable future.

Loans: Loans that Management has the intent and ability to hold for the foreseeable future or until maturity are stated at the principal amount outstanding. Interest on loans is recognized based upon the principal amount outstanding. Loans are stated at face value, less purchased premium and discounts and net deferred fees. Loan origination fees and certain direct loan origination costs are deferred and recognized on a level-yield method, over the life of the loan as an adjustment to the loan’s yield. The definition of recorded investment in loans includes accrued interest receivable and deferred fees/cost, however, for the Company’s loan disclosures, accrued interest and deferred fees/cost were excluded as the impact was not material.

Loans are considered past due when they are not paid within 30 days in accordance with contractual terms. The accrual of income on loans, including impaired loans, is discontinued if, in the opinion of Management, principal or interest is not likely to be paid

in accordance with the terms of the loan agreement, or when principal or interest is past due 90 days unless the asset is both well secured and in the process of collection. All interest accrued but not received for loans placed on nonaccrual are reversed against interest income. Payments received on nonaccrual loans are recorded as principal payments. A nonaccrual loan is returned to accrual status only when interest and principal payments are brought current and future payments are reasonably assured, generally when the Bank receives contractual payments for a minimum of six consecutive months. Commercial loans are generally charged off, in whole or in part, after an analysis is completed which indicates that collectability of the full principal balance is in doubt. Consumer closed-end loans are generally charged off after they become 120 days past due and open-end loans after 180 days. Subsequent payments are credited to income only if collection of principal is not in doubt. If principal and interest payments are brought contractually current and future collectability is reasonably assured, loans may be returned to accrual status. Nonaccrual mortgage loans are generally charged off to the extent that the value of the underlying collateral does not cover the outstanding principal balance. The majority of the Company’s loans are secured by real estate in New Jersey, New York and Pennsylvania.

Allowance for Loan and Lease Losses: The allowance for loan and lease losses is a valuation allowance for credit losses that is Management’s estimate of probable losses in the loan portfolio. The process to determine reserves utilizes analytic tools and Management judgment and is reviewed on a quarterly basis. When Management is reasonably certain that a loan balance is not fully collectable, an impairment analysis is completed whereby a specific reserve may be established or a full or partial charge off is recorded against the allowance. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the size and composition of the portfolio, information about specific borrower situations, estimated collateral values, level of and trends in delinquent, classified and nonperforming loans, economic conditions and other factors. Allocations of the allowance may be made for specific loans via a specific reserve, but the entire allowance is available for any loan that, in Management’s judgment, should be charged off.

The allowance consists of specific and general components. The specific component of the allowance relates to loans that are individually classified as impaired.

A loan is impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. Factors considered by Management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

Loans are individually evaluated for impairment when they are classified as substandard by Management. If a loan is considered impaired, a portion of the allowance may be allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or if repayment is expected solely from the underlying collateral, the loan principal balance is compared to the fair value of collateral less estimated disposition costs to determine the need, if any, for a charge off.

The general component of the allowance covers non-impaired loans and is based primarily on the Company’s historical loss experience adjusted for current factors. The historical loss experience is determined by portfolio segment and is based on the actual loss history experience by the Company on a weighted average basis over the previous three years. This actual loss experience is adjusted by other qualitative factors based on the risks present for each portfolio segment. As a result of the effects of the COVID-19 pandemic, the Company increased certain qualitative factors related to elevated levels of unemployment, economic forecasts and approved loan deferral payment requests as businesses both locally and nationally were shut down and have only gradually and partially reopened. The Company also considered qualitative factors related to the following: levels of and trends in delinquencies and impaired loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures and practices; experience, ability and depth of lending management and other relevant staffing and experience; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations. For loans that are graded as non-impaired, the Company allocates a higher general reserve percentage than pass-rated loans using a multiple that is calculated annually through a migration analysis. At both ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the multiple was 2.25 times for non-impaired special mention loans and 3.25 times for non-impaired substandard loans.

A troubled debt restructuring (“TDR”) is a modified loan with concessions made by the lender to a borrower who is experiencing financial difficulty. TDRs are impaired and are generally measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a TDR is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral, less estimated disposition costs. For TDRs that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan and lease losses.

On March 27, 2020, the President of the United States signed the Coronavirus Aid, Relief, and Economic Security ("CARES“) Act, which provides entities with optional temporary relief from certain accounting and financial reporting requirements under U.S. GAAP.

The CARES Act allows financial institutions to suspend application of certain current TDR accounting guidance under Accounting Standards Codification ("ASC") 310-40 for loan modifications related to the COVID-19 pandemic made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the end of the COVID-19 national emergency, provided certain criteria are met. This relief can be applied to loan modifications for borrowers that were not more than 30 days past due as of December 31, 2019 and to loan modifications that defer or delay the payment of principal or interest or change the interest rate on the loan. The revised CARES Act allows for loan modifications through January 1, 2022. In April 2020, federal and state banking regulators issued the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus to provide further interpretation of when a borrower is experiencing financial difficulty, specifically indicating that if the modification is either short-term (e.g., six months) or mandated by a federal or state government in response to the COVID-19 pandemic, the borrower is not experiencing financial difficulty under ASC 310-40. The Company continues to prudently work with borrowers negatively impacted by the COVID-19 pandemic while managing credit risks and recognizing an appropriate allowance for loan and lease losses on its loan portfolio. The Company approved total loan modifications under the CARES Act of ~~$940.2~~$946.7 million, of which ~~$827.8~~$42.8 million remain outstanding as of ~~September 30, 2020.~~March 31, 2021.

Another key program under the CARES Act is the Paycheck Protection Program (“PPP”) administered by the SBA which has provided much needed funding to qualifying businesses and organizations. Under this program, the Company has provided fundings of approximately ~~$600~~$650 million. In the third quarter of 2020, the Company sold approximately $355.0 million of such loans, servicing rights released to a third party. The Company has approximately ~~$202.0~~$232.7 million of PPP loans remaining ~~on our balance sheet~~in its portfolio as of ~~September 30, 2020~~March 31, 2021 and believes that the majority of these loans will be forgiven by the SBA.

In determining an appropriate amount for the allowance, the Bank segments and evaluates the loan portfolio based on Federal call report codes, which are based on collateral or purpose. The following portfolio classes have been identified:

Primary Residential Mortgages. The Bank originates one to four family residential mortgage loans in the Tri-State area (New York, New Jersey and Connecticut), Pennsylvania and Florida. Loans are secured by first liens on the primary residence or investment property. Primary risk characteristics associated with residential mortgage loans typically involve major living or lifestyle changes to the borrower, including unemployment or other loss of income; unexpected significant expenses, such as for major medical issues or catastrophic events; and divorce or death. In addition, residential mortgage loans that have adjustable rates could expose the borrower to higher debt service requirements in a rising interest rate environment. Further, real estate values could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential loss exposure for the Bank.

Home Equity Lines of Credit. The Bank provides revolving lines of credit against one to four family residences in the Tri-State area. Primary risk characteristics associated with home equity lines of credit typically involve major living or lifestyle changes to the borrower, including unemployment or other loss of income; unexpected significant expenses, such as for major medical issues or catastrophic events; and divorce or death. In addition, home equity lines of credit typically are made with variable or floating interest rates, which could expose the borrower to higher debt service requirements in a rising interest rate environment. Further, real estate values could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential loss exposure for the Bank.

Junior Lien Loan on Residence. The Bank provides junior lien loans (“JLL”) against one to four family properties in the Tri-State area. JLLs can be either in the form of an amortizing home equity loan or a revolving home equity line of credit. These loans are subordinate to a first mortgage which may be from another lending institution. Primary risk characteristics associated with JLLs typically involve major living or lifestyle changes to the borrower, including unemployment or other loss of income; unexpected significant expenses, such as for major medical issues or catastrophic events; and divorce or death. Further, real estate values could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential loss exposure for the Bank.

Multifamily and Commercial Real Estate Loans. The Bank provides mortgage loans for multifamily properties (i.e. buildings which have five or more residential units) and other commercial real estate that is either owner occupied or managed as an investment property (non-owner occupied) in the Tri-State area and Pennsylvania. Commercial real estate properties primarily include retail buildings/shopping centers, hotels, office/medical buildings and industrial/warehouse space. Some properties are considered “mixed use” as they are a combination of building types, such as a building with retail space on the ground floor and either residential apartments or office suites on the upper floors. Multifamily loans are expected to be repaid from the cash flows of the underlying property so the collective amount of rents must be sufficient to cover all operating expenses, property management and

maintenance, taxes and debt service. Increases in vacancy rates, interest rates or other changes in general economic conditions can have an impact on the borrower and its ability to repay the loan. Commercial real estate loans are generally considered to have a higher degree of credit risk than multifamily loans as they may be dependent on the ongoing success and operating viability of a fewer number of tenants who are occupying the property and who may have a greater degree of exposure to economic conditions.

Commercial and Industrial Loans. The Bank provides lines of credit and term loans to operating companies for business purposes. The loans are generally secured by business assets such as accounts receivable, inventory, business vehicles and equipment as well as the stock of a company, if privately held. Commercial and industrial loans are typically repaid first by the cash flows generated by the borrower’s business operation. The primary risk characteristics are specific to the underlying business and its ability to generate sustainable profitability and resulting positive cash ~~flow.~~flows. Factors that may influence a business’ profitability include, but are not limited to, demand for its products or services, quality and depth of management, degree of competition, regulatory changes, and general economic conditions. Commercial and industrial loans are generally secured by business assets; however, the ability of the Bank to foreclose and realize sufficient value from the assets is often highly uncertain. To mitigate the risk characteristics of commercial and industrial loans, these loans often include commercial real estate as collateral to strengthen the Bank’s position and the Bank will often require more frequent reporting requirements from the borrower in order to better monitor its business performance.

Leasing and Equipment Finance. PCC offers a range of finance solutions nationally. PCC provides term loans and leases secured by assets financed for U.S. based mid-size and large companies. Facilities tend to be fully drawn under fixed rate terms. PCC serves a broad range of industries including transportation, manufacturing, heavy construction and utilities.

Asset risk in PCC’s portfolio is generally recognized through changes to loan income, or through changes to lease related income streams due to fluctuations in lease rates. Changes to lease income can occur when the existing lease contract expires, the asset comes off lease or the business seeks to enter a new lease agreement. Asset risk may also change depreciation, resulting from changes in the residual value of the operating lease asset or through impairment of the asset carrying value, which can occur at any time during the life of the asset.

Credit risk in PCC’s portfolio generally results from the potential default of borrowers or lessees, which may be driven by customer specific or broader industry related conditions. Credit losses can impact multiple parts of the income statement including loss of interest/lease/rental income and/or higher costs and expenses related to the repossession, refurbishment, re-marketing and or re-leasing of assets.

Consumer and Other. These are loans to individuals for household, family and other personal expenditures as well as obligations of states and political subdivisions in the U.S. This also represents all other loans that cannot be categorized in any of the previous mentioned loan segments. Consumer loans generally have higher interest rates and shorter terms than residential loans but tend to have higher credit risk due to the type of collateral securing the loan or in some cases the absence of collateral.

Leases: At inception, contracts are evaluated to determine whether the contract constitutes a lease agreement. For contracts that are determined to be an operating lease, a corresponding right-of-use (“ROU”) asset and operating lease liability are recorded in separate line items on the statement of condition. A ROU asset represents the Company’s right to use an underlying asset during the lease term and a lease liability represents the Company’s commitment to make contractually obligated lease payments. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease and are based on the present value of lease payments over the lease term. The measurement of the operating lease ROU asset includes any lease payments made.

If the rate implicit in the lease is not readily determinable, the incremental collateralized borrowing rate is used to determine the present value of lease payments. This rate gives consideration to the applicable FHLB collateralized borrowing rates and is based on the information available at the commencement date. The Company has elected to apply the short-term lease measurement and recognition exemption to leases with an initial term of 12 months or less; therefore, these leases are not recorded on the Company’s statement of condition, but rather, lease expense is recognized over the lease term on a straight-line basis. The Company’s lease agreements may include options to extend or terminate the lease. The Company’s decision to exercise renewal options is based on an assessment of its current business needs and market factors at the time of the renewal. The Company maintains certain property and equipment under direct financing and operating leases. Substantially all of the leases in which the Company is the lessee are comprised of real estate property for branches and office space and are classified as operating leases.

The ROU asset is measured at the amount of the lease liability adjusted for lease incentives received, any cumulative prepaid or accrued rent if the lease payments are uneven throughout the lease term, any unamortized initial direct costs, and any impairment of the ROU asset. Operating lease expense consists of: a single lease cost allocated over the remaining lease term on a straight-line basis, variable lease payments not included in the lease liability, and any impairment of the ROU asset.

There are no terms or conditions related to residual value guarantees and no restrictions or covenants that would impact the Company’s ability to pay dividends or to incur additional financial obligations.

Derivatives: At the inception of a derivative contract, the Company designates the derivative as one of three types based on the Company’s intentions and belief as to likely effectiveness as a hedge. These three types are (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”), (2) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”), or (3) an instrument with no hedging designation. For a fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item, are recognized in current earnings as fair values change. For a cash flow hedge, the gain or loss on the derivative is reported in other comprehensive income and is reclassified into earnings in the same periods during which the hedged transaction affects earnings. For cash flow hedges, changes in the fair value of derivatives that are not highly effective in hedging the changes in fair value or expected cash flows of the hedged item are recognized immediately in current earnings. Changes in the fair value of derivatives that do not qualify for hedge accounting are reported currently in earnings, as non-interest income. When hedge accounting is discontinued on a fair value hedge that no longer qualifies as an effective hedge, the derivative continues to be reported at fair value in the statement of condition, but the carrying amount of the hedged item is no longer adjusted for future changes in fair value. The adjustment to the carrying amount of the hedged item that existed at the date hedge accounting is discontinued is amortized over the remaining life of the hedged item into earnings.

Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged. Net cash settlements on derivatives that do not qualify for hedge accounting are reported in non-interest income. Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the items being hedged.

The Company formally documents the relationship between derivatives and hedged items, as well as the risk-management objective and the strategy for undertaking hedge transactions at the inception of the hedging relationship. This documentation includes linking fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Company discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in the fair value or cash flows of the hedged item, the derivative is settled or terminated, a hedged forecasted transaction is no longer probable, a hedged firm commitment is no longer firm, or treatment of the derivative as a hedge is no longer appropriate or intended.

When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as non-interest income. When a cash flow hedge is discontinued but the hedged cash flows or forecasted transactions are still expected to occur, gains or losses that were accumulated in other comprehensive income are amortized into earnings over the same periods which the hedged transactions will affect earnings.

The Company also offers facility specific / loan level swaps to its customers and offsets its exposure from such contracts by entering into mirror image swaps with a financial institution / swap counterparty (loan level / back to back swap program). The customer accommodations and any offsetting swaps are treated as non-hedging derivative instruments which do not qualify for hedge accounting (“standalone derivatives”). The notional amount of the swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual contracts. The fair value of the swaps is recorded as both an asset and a liability, in other assets and other liabilities, respectively, in equal amounts for these transactions. The Company is exposed to losses if a customer counterparty fails to make its payments under a contract in which the Company is in a net receiving position. At this time, the Company anticipates that our counterparties will be able to fully satisfy their obligations under the agreements. All of the contracts to which the Company is a party settle monthly. Further, the Company has netting agreements with the dealers with which it does business.

Stock-Based Compensation: The Company’s 2006 Long-Term Stock Incentive Plan and 2012 Long-Term Stock Incentive Plan allow the granting of shares of the Company’s common stock as incentive stock options, nonqualified stock options, restricted stock awards, restricted stock units and stock appreciation rights to directors, officers and employees of the Company and its subsidiaries. ~~The~~There are no shares remaining for issuance with respect to the stock option plan approved in 2002, however options granted under this plan are still included in the numbers below. Options granted under these plans are, in general, exercisable not earlier than one year after the date of grant, at a price equal to the fair value of common stock on the date of grant and expire not more than ten years after the date of grant. Stock options may vest during a period of up to five years after the date of grant. Some options granted to officers at or above the senior vice president level were immediately exercisable at the date of grant. The Company has a policy of using authorized but unissued shares to satisfy option exercises.

~~The~~Upon adoption of Accounting Standards Update (“ASU”) 2016-09, “Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting” the Company ~~accounts~~has elected to account for forfeitures as they occur, rather than estimate expected forfeitures.

For the Company’s stock option plans, changes in options outstanding during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 were as follows:

The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the ~~third~~first quarter of ~~2020~~2021 and the exercise price, multiplied by the number of in-the-money options). The Company’s closing stock price on ~~September 30, 2020~~March 31, 2021 was ~~$15.15.~~$30.88.

There were 0 stock options granted during the three ~~or nine~~ months ended ~~September 30, 2020.~~March 31, 2021.

The Company ~~has previously granted~~issued performance-based and service-based restricted stock ~~awards/units.~~units in 2021 and 2020. Service-based ~~awards/~~units vest ratably over a three- or five-year period. There were 0187,762 service-based restricted stock units granted during the ~~third~~first quarter of ~~2020.~~2021.

The performance-based awards are dependent upon the Company meeting certain performance criteria and, to the extent the performance criteria are met, will cliff vest at the end of the performance period which is generally three years. There were 051,710 performance-based restricted stock units granted in the ~~third~~first quarter of ~~2020.~~2021.

Changes in non-vested shares dependent on performance criteria for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 were as follows:

Changes in service-based restricted stock awards/units for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 were as follows:

As of ~~September 30, 2020,~~March 31, 2021, there was ~~$13.8~~$17.4 million of total unrecognized compensation cost related to service-based and performance-based units. That cost is expected to be recognized over a weighted average period of ~~1.61~~1.65 years. Stock compensation expense recorded for the ~~third~~first quarters of 2021 and 2020 ~~and 2019~~ totaled ~~$1.8~~$1.7 million and $1.5 ~~million, respectively.Stock compensation expense recorded for the nine months ended September 30, 2020 and 2019 totaled $5.1 million and $4.4~~ million, respectively.

Employee Stock Purchase Plan (“ESPP”): ~~On April 22, 2014, the shareholders of the Company approved the ESPP.~~ In July 2019, the Board appointed ESPP ~~“Committee”~~“committee” revised the ESPP. The ESPP provides for the granting of ~~purchase~~ rights ofto purchase up to 150,000 shares of Peapack-Gladstone Financial Corporation common stock. In May 2020, shareholders approved an increase of 200,000 shares of Peapack-Gladstone Financial Corporation common stock to be issued under the ESPP.

Subject to certain eligibility requirements and restrictions, the ESPP provided for a single Offering Period of twelve months in duration, which commenced on May 16, 2019 and ended on May 15, 2020.

During the second quarter of 2020, the ESPP was revised to allow for the purchase of shares during four three-month Offering Periods. The first Offering Period under this revised plan commenced on May 16, 2020. The next three future Offering Periods will commence on August 16, November 16 and February 16.

Each participant in the Offering Period is granted an option to purchase a number of shares and may contribute between 1 percent and 15 percent of their compensation. At the end of each Offering Period on the purchase date, the number of shares to be purchased by the employee is determined by dividing the employee’s contributions accumulated during the Offering Period by the applicable purchase price. The purchase price is an amount equal to 85 percent of the closing market price of a share of common stock on the purchase date. Participation in the ESPP is entirely voluntary and employees can cancel their purchases at any time during the period without penalty. The fair value of each share purchase right is determined using the Black-Scholes option pricing model.

The Company recorded ~~$9,000~~$30,000 and $41,000 of expense in salaries and employee benefits expense for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively related to the ESPP. Total shares issued under the ESPP during the ~~third quarters~~first quarter of 2021 and 2020 ~~and 2019~~ were ~~5,598~~8,425 and 0, respectively.

The Company recorded $199,000 and $117,000 of expense in salaries and employee benefits expense for the nine months ended September 30, 2020 and 2019, respectively related to the ESPP. Total shares issued under the ESPP for the nine months ended September 30, 2020 and 2019 were 52,533 and 18,740, respectively.

Earnings per share – Basic and Diluted: The following is a reconciliation of the calculation of basic and diluted earnings per share. Basic net income per share is calculated by dividing net income available to shareholders by the weighted average shares outstanding during the reporting period. Diluted net income per share is computed similarly to that of basic net income per share, except that the denominator is increased to include the number of additional shares that would have been outstanding utilizing the Treasury Stock Method if all shares underlying potentially dilutive stock options were issued and all restricted stock, stock warrants or restricted stock units were to vest during the reporting period.

	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
(Dollars in thousands, except per share data)	2020		2019		2020		2019		2021		2020
Net income available to common shareholders	$	13,547	$	12,226	$	23,162	$	35,201	$	13,178	$	1,373

Basic weighted-average shares outstanding		18,908,337		19,314,666		18,879,688		19,370,627
Basic weighted average shares outstanding										18,950,305		18,858,343
Plus: common stock equivalents		224,313		170,239		172,917		126,094		581,384		221,232
Diluted weighted-average shares outstanding		19,132,650		19,484,905		19,052,605		19,496,721
Diluted weighted average shares outstanding										19,531,689		19,079,575
Net income per share
Basic	$	0.72	$	0.63	$	1.23	$	1.82	$	0.70	$	0.07
Diluted		0.71		0.63		1.22		1.81		0.67		0.07

For the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, stock options and~~ restricted stock units totaling ~~374,366~~ 239,472 and 27,497 were not included in the computation of diluted earnings per share because they were anti-dilutive. For the nine months ended September 30, 2020 and 2019, stock options and restricted stock units totaling 207,466~~and 277,677 were not included in the computation of diluted earnings per share because they were anti-dilutive. For both the three and nine months ended September~~

~~30, 2020, warrants of 109,860~~570,102 were not included in the computation of diluted earnings per share because they were anti-dilutive. Anti-dilutive shares are common stock equivalents with weighted average exercise prices in excess of the average market value for the periods presented.

Income Taxes: The Company files a consolidated Federal income tax return. Separate state income tax returns are filed for each subsidiary based on current laws and regulations.

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in its financial statements or tax returns. The measurement of deferred tax assets and liabilities is based on the enacted tax rates. Such tax assets and liabilities are adjusted for the effect of a change in tax rates in the period of enactment.

The Company recognizes a tax position as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50 percent likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

The Company is no longer subject to examination by the U.S. Federal tax authorities for years prior to 2016 or by New Jersey tax authorities for years prior to 2015.

The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there are any such matters that will have a material effect on the financial statements.

Restrictions on Cash: A large portion of cash on hand or on deposit with the Federal Reserve Bank (“FRB”) was required to meet regulatory reserve and clearing requirements. Prior to March 2020, reserves were in the form of cash and balances with the FRB and included in interest-earning deposits in our statement of condition. The FRB suspended cash reserve requirements effective March 26, 2020.

Comprehensive Income/(Loss): Comprehensive income/(loss) consists of net income and the change during the period in the Company’s net unrealized gains or losses on securities available for sale and unrealized gains and losses on cash flow hedge, net of tax, less adjustments for realized gains and losses.

Transfers of Financial Assets: Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Risks and Uncertainties: The COVID-19 pandemic has had a devastating effect on businesses both locally and nationally. As a result, Congress passed the CARES Act to provide fast and direct economic assistance to American workers, families and businesses. The CARES Act contains substantial tax and spending provisions including direct financial aid to American families, extensive emergency funding for hospitals and medical providers, and economic stimulus to significant impacted industry sectors.

The Company expects COVID-19 to have ~~a significant~~an impact on our operations but cannot determine or estimate the full impact at this time. It is possible that estimates made in the Company’s consolidated financial statements could be materially and adversely impacted as a result of the conditions created by COVID-19, including estimates regarding expected provision for loan and lease losses and impairment of goodwill.

Goodwill and Other Intangible Assets: Goodwill is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree (if any), over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized but tested for impairment at least annually or more frequently if events and circumstances exist that indicate that a goodwill impairment test should be performed. As a result of the COVID-19 pandemic and the resulting effect on economic markets due to government shutdowns of businesses both locally and nationally, Management determined that the COVID-19 pandemic resulted in a triggering event and performed an interim evaluation to determine if a quantitative goodwill impairment test should be performed. Goodwill was primarily attributable to the Bank’s recent wealth acquisitions. Assets under management and/or administration (“AUM/AUA”)

The Company has ~~recovered from the market volatility experienced during the first quarter of 2020 and increasedto $7.6 billion at September 30, 2020 from $7.5 billion at~~

selected December 31 ~~2019. Based~~as the date to perform the annual impairment test. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill which includes assembled workforce has an indefinite life on our ~~assessment and the market recovery, Management concluded that a quantitative goodwill impairment test was not required as~~statement of ~~September 30, 2020.~~

financial condition. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill and assembled workforce are the intangible assets with an indefinite life on our balance sheet.

Other intangible assets, which primarily consist of customer relationship intangible assets arising from ~~acquisition,~~acquisitions, are amortized on an accelerated basis over their estimated useful lives, which range from 5 to 15 years. ~~Management determined that there was 0 impairment of intangible assets related to the events created by the COVID-19 pandemic.~~

A summary of amortized cost and approximate fair value of investment securities available for sale included in the ~~consolidated statements~~Consolidated Statements of ~~condition~~Condition as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 follows:

	September 30, 2020									March 31, 2021
			Gross		Gross							Gross		Gross
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
U.S. treasuries	$	2,886	$	2	$	0		$	2,888
U.S government-sponsored agencies		79,424		62		(540	)		78,946	$	229,199	$	0	$	(7,862	)	$	221,337
Mortgage-backed securities–residential		457,597		9,114		(416	)		466,295		598,088		6,786		(8,254	)		596,620
SBA pool securities		37,312		17		(259	)		37,070		47,372		15		(1,144	)		46,243
State and political subdivisions		8,578		116		0			8,694		7,967		86		0			8,053
Corporate bond		3,000		36		0			3,036		3,000		48		0			3,048
Total	$	588,797	$	9,347	$	(1,215	)	$	596,929	$	885,626	$	6,935	$	(17,260	)	$	875,301

	December 31, 2019									December 31, 2020
			Gross		Gross							Gross		Gross
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
U.S. treasuries										$	2,613	$	0	$	0		$	2,613
U.S. government-sponsored agencies	$	34,961	$	37	$	(214	)	$	34,784		84,424		2		(655	)		83,771
Mortgage-backed securities–residential		337,489		2,365		(950	)		338,904		467,915		8,604		(461	)		476,058
SBA pool securities		2,799		0		(15	)		2,784		49,457		31		(359	)		49,129
State and political subdivisions		11,175		41		(1	)		11,215		7,987		102		0			8,089
Corporate bond		3,000		68		0			3,068		3,000		29		0			3,029
Total	$	389,424	$	2,511	$	(1,180	)	$	390,755	$	615,396	$	8,768	$	(1,475	)	$	622,689

The following tables present the Company’s available for sale securities in a continuous unrealized loss position and the approximate fair value of these investments as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

	September 30, 2020															March 31, 2021
	Duration of Unrealized Loss															Duration of Unrealized Loss
	Less Than 12 Months					12 Months or Longer					Total					Less Than 12 Months					12 Months or Longer					Total
	Approximate					Approximate					Approximate					Approximate					Approximate					Approximate
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(In thousands)	Value		Losses			Value		Losses			Value		Losses			Value		Losses			Value		Losses			Value		Losses
U.S government-sponsored agencies	$	49,411	$	(540	)	$	0	$	0		$	49,411	$	(540	)	$	211,882	$	(7,862	)	$	0	$	0		$	211,882	$	(7,862	)
Mortgage-backed securities-residential		47,995		(381	)		15,623		(35	)		63,618		(416	)		290,133		(8,244	)		6,534		(10	)		296,667		(8,254	)
SBA pool securities		26,160		(241	)		2,458		(18	)		28,618		(259	)		36,923		(1,129	)		2,057		(15	)		38,980		(1,144	)
Total	$	123,566	$	(1,162	)	$	18,081	$	(53	)	$	141,647	$	(1,215	)	$	538,938	$	(17,235	)	$	8,591	$	(25	)	$	547,529	$	(17,260	)

	December 31, 2019															December 31, 2020
	Duration of Unrealized Loss															Duration of Unrealized Loss
	Less Than 12 Months					12 Months or Longer					Total					Less Than 12 Months					12 Months or Longer					Total
	Approximate					Approximate					Approximate					Approximate					Approximate					Approximate
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(In thousands)	Value		Losses			Value		Losses			Value		Losses			Value		Losses			Value		Losses			Value		Losses
U.S. government-sponsored agencies	$	19,758	$	(214	)	$	0	$	0		$	19,758	$	(214	)	$	73,769	$	(655	)	$	0	$	0		$	73,769	$	(655	)
Mortgage-backed securities-residential		78,982		(382	)		69,142		(568	)		148,124		(950	)		103,340		(430	)		13,914		(31	)		117,254		(461	)
SBA pool securities		0		0			2,784		(15	)		2,784		(15	)		39,720		(343	)		2,095		(16	)		41,815		(359	)
State and political subdivisions		783		(1	)		0		0			783		(1	)
Total	$	99,523	$	(597	)	$	71,926	$	(583	)	$	171,449	$	(1,180	)	$	216,829	$	(1,428	)	$	16,009	$	(47	)	$	232,838	$	(1,475	)

Management believes that the unrealized losses on investment securities available for sale are temporary and are due to interest rate fluctuations and/or volatile market conditions rather than the credit-worthiness of the issuers. As of ~~September 30, 2020,~~March 31, 2021, the Company does not intend to sell these securities nor is it likely that it will be required to sell the securities before their anticipated recovery; therefore, none of the securities in an unrealized loss position were determined to be other-than-temporarily impaired.

The Company has an investment in a CRA investment fund with a fair value of ~~$15.2~~$14.9 million at ~~September 30, 2020.~~March 31, 2021. The investment is classified as an equity security in our Consolidated Statements of Condition. This security had a ~~gain~~loss of ~~$323,000~~$265,000 for the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021. This amount is included in securities gains/(losses), net on the Consolidated Statements of ~~Income~~Income..

Loans outstanding, excluding those held for sale, by general ledger classification, as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, consisted of the following:

			% of					% of					% of					% of
	September 30,		Totals			December 31,		Total			March 31,		Totals			December 31,		Total
(Dollars in thousands)	2020		Loans			2019		Loans			2021		Loans			2020		Loans
Residential mortgage	$	518,335		11.70	%	$	549,138		12.50	%	$	489,665		11.18	%	$	502,829		11.50	%
Multifamily mortgage		1,168,796		26.38			1,210,003		27.54			1,178,940		26.93			1,126,946		25.77
Commercial mortgage		722,678		16.31			761,244		17.32			697,599		15.94			691,294		15.81
Commercial loans (including equipment financing) (A)		1,909,724		43.10			1,756,477		39.97			1,911,520		43.66			1,950,981		44.62
Commercial construction		6,805		0.15			5,306		0.12			17,865		0.41			12,600		0.29
Home equity lines of credit		52,194		1.18			57,248		1.30			45,623		1.04			50,545		1.15
Consumer loans, including fixed rate home equity loans		51,859		1.17			54,372		1.24			36,519		0.83			37,016		0.85
Other loans		260		0.01			349		0.01			200		0.01			226		0.01
Total loans	$	4,430,651		100.00	%	$	4,394,137		100.00	%	$	4,377,931		100.00	%	$	4,372,437		100.00	%

In determining an appropriate amount for the allowance, the Bank segments and evaluates the loan portfolio based on federal Call Report codes. The following portfolio classes have been identified as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:

			% of					% of					% of					% of
	September 30,		Totals			December 31,		Total			March 31,		Totals			December 31,		Total
(Dollars in thousands)	2020		Loans			2019		Loans			2021		Loans			2020		Loans
Primary residential mortgage	$	530,374		11.98	%	$	578,306		13.17	%	$	498,570		11.39	%	$	512,841		11.74	%
Home equity lines of credit		52,193		1.18			57,248		1.30			45,623		1.04			50,545		1.16
Junior lien loan on residence		5,401		0.12			7,011		0.16			4,686		0.11			4,527		0.10
Multifamily property		1,168,796		26.40			1,210,003		27.56			1,178,940		26.95			1,126,946		25.79
Owner-occupied commercial real estate		252,069		5.69			249,419		5.68			241,094		5.51			253,447		5.80
Investment commercial real estate		1,047,614		23.66			1,095,182		24.95			966,287		22.09			995,613		22.79
Commercial and industrial (A)		1,050,775		23.74			867,295		19.76			1,064,133		24.32			1,059,399		24.24
Lease financing		254,142		5.74			258,401		5.89			312,358		7.14			305,931		7.00
Farmland/agricultural production		1,081		0.02			3,043		0.07			3,349		0.08			3,068		0.07
Commercial construction loans		6,989		0.16			5,520		0.13			18,035		0.41			12,773		0.29
Consumer and other loans		57,711		1.31			58,213		1.33			42,080		0.96			44,483		1.02
Total loans	$	4,427,145		100.00	%	$	4,389,641		100.00	%	$	4,375,155		100.00	%	$	4,369,573		100.00	%
Net deferred costs		3,506					4,496					2,776					2,864
Total loans including net deferred costs	$	4,430,651				$	4,394,137				$	4,377,931				$	4,372,437

The following tables present the loan balances by portfolio class, based on impairment method, and the corresponding balances in the allowance for loan and lease losses (ALLL) as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:

	September 30, 2020												March 31, 2021
	Total		Ending ALLL		Total		Ending ALLL						Total		Ending ALLL		Total		Ending ALLL
	Loans		Attributable		Loans		Attributable						Loans		Attributable		Loans		Attributable
	Individually		To Loans		Collectively		To Loans						Individually		To Loans		Collectively		To Loans
	Evaluated		Individually		Evaluated		Collectively				Total		Evaluated		Individually		Evaluated		Collectively				Total
	For		Evaluated for		For		Evaluated for		Total		Ending		For		Evaluated for		For		Evaluated for		Total		Ending
(In thousands)	Impairment		Impairment		Impairment		Impairment		Loans		ALLL		Impairment		Impairment		Impairment		Impairment		Loans		ALLL
Primary residential mortgage	$	6,231	$	46	$	524,143	$	2,921	$	530,374	$	2,967	$	2,264	$	1	$	496,306	$	2,775	$	498,570	$	2,776
Home equity lines of credit		2		—		52,191		220		52,193		220		—		—		45,623		198		45,623		198
Junior lien loan on residence		—		—		5,401		18		5,401		18		—		—		4,686		16		4,686		16
Multifamily property		—		—		1,168,796		10,664		1,168,796		10,664		—		—		1,178,940		10,427		1,178,940		10,427
Owner-occupied commercial real estate		667		—		251,402		3,011		252,069		3,011		564		—		240,530		2,864		241,094		2,864
Investment commercial real estate		4,625		—		1,042,989		29,166		1,047,614		29,166		—		—		966,287		26,693		966,287		26,693
Commercial and industrial (A)		3,990		41		1,046,785		16,131		1,050,775		16,172		9,136		3,200		1,054,997		16,925		1,064,133		20,125
Lease financing		—		—		254,142		3,473		254,142		3,473		—		—		312,358		3,967		312,358		3,967
Farmland/agricultural production		—		—		1,081		15		1,081		15		—		—		3,349		47		3,349		47
Commercial construction loans		—		—		6,989		77		6,989		77		—		—		18,035		161		18,035		161
Consumer and other loans		—		—		57,711		362		57,711		362		—		—		42,080		262		42,080		262
Total ALLL	$	15,515	$	87	$	4,411,630	$	66,058	$	4,427,145	$	66,145	$	11,964	$	3,201	$	4,363,191	$	64,335	$	4,375,155	$	67,536

	December 31, 2019												December 31, 2020
	Total		Ending ALLL		Total		Ending ALLL						Total		Ending ALLL		Total		Ending ALLL
	Loans		Attributable		Loans		Attributable						Loans		Attributable		Loans		Attributable
	Individually		To Loans		Collectively		To Loans						Individually		To Loans		Collectively		To Loans
	Evaluated		Individually		Evaluated		Collectively				Total		Evaluated		Individually		Evaluated		Collectively				Total
	For		Evaluated for		For		Evaluated for		Total		Ending		For		Evaluated for		For		Evaluated for		Total		Ending
(In thousands)	Impairment		Impairment		Impairment		Impairment		Loans		ALLL		Impairment		Impairment		Impairment		Impairment		Loans		ALLL
Primary residential mortgage	$	6,890	$	215	$	571,416	$	1,875	$	578,306	$	2,090	$	1,490	$	3	$	511,351	$	2,902	$	512,841	$	2,905
Home equity lines of credit		3		—		57,245		128		57,248		128		—		—		50,545		218		50,545		218
Junior lien loan on residence		19		—		6,992		13		7,011		13		—		—		4,527		15		4,527		15
Multifamily property		—		—		1,210,003		6,037		1,210,003		6,037		—		—		1,126,946		9,945		1,126,946		9,945
Owner-occupied commercial real estate		379		—		249,040		2,064		249,419		2,064		807		—		252,640		3,050		253,447		3,050
Investment commercial real estate		22,605		1,000		1,072,577		14,988		1,095,182		15,988		4,593		—		991,020		27,713		995,613		27,713
Commercial and industrial		6,028		1,585		861,267		12,768		867,295		14,353		9,314		2,700		1,050,085		16,347		1,059,399		19,047
Lease financing		—		—		258,401		2,642		258,401		2,642		—		—		305,931		3,936		305,931		3,936
Farmland/agricultural production		—		—		3,043		38		3,043		38		—		—		3,068		43		3,068		43
Commercial construction loans		—		—		5,520		27		5,520		27		—		—		12,773		158		12,773		158
Consumer and other loans		—		—		58,213		296		58,213		296		—		—		44,483		279		44,483		279
Total ALLL	$	35,924	$	2,800	$	4,353,717	$	40,876	$	4,389,641	$	43,676	$	16,204	$	2,703	$	4,353,369	$	64,606	$	4,369,573	$	67,309

Impaired loans include nonaccrual loans of ~~$8.6~~$11.8 million at ~~September 30, 2020~~March 31, 2021 and ~~$28.9~~$11.4 million at December 31, ~~2019. The decrease in impaired loans was due to the transfer of 1 commercial loan with a balance of $10.0 million to held for sale at September 30,~~ 2020. Impaired loans also include performing TDR loans of ~~$2.3 million~~$197,000 at ~~September 30, 2020~~March 31, 2021 and ~~$2.4 million~~$201,000 at December 31, ~~2019. At September 30, 2020, the~~2020. The allowance allocated to TDR loans totaled ~~$87,000,~~$1,000 and $3,000 at March 31, 2021 and December 31, 2020, respectively, of which ~~$41,000~~0ne was allocated to nonaccrual loans. ~~At December 31, 2019, the allowance allocated to TDR loans totaled $2.8 million, of which $2.7 million was allocated to nonaccrual loans.~~ All accruing TDR loans were paying in accordance with restructured terms as of ~~September 30, 2020.~~March 31, 2021. The Company has not committed to lend additional amounts as of ~~September 30, 2020~~March 31, 2021 to customers with outstanding loans that are classified as TDR ~~loans.~~loans.

The following tables present loans individually evaluated for impairment by class of loans as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (The average impaired loans on the following tables represent year to date impaired ~~loans.)~~loans):

	September 30, 2020									March 31, 2021
	Unpaid							Average		Unpaid						Average
	Principal			Recorded		Specific		Impaired		Principal		Recorded		Specific		Impaired
(In thousands)	Balance			Investment		Reserves		Loans		Balance		Investment		Reserves		Loans
With no related allowance recorded:
Primary residential mortgage	$	6,514		$	5,655	$	—	$	6,020	$	2,384	$	2,104	$	—	$	1,579
Owner-occupied commercial real estate		752			667		—		397		577		564		—		645
Investment commercial real estate		4,625			4,625		—		7,242
Home equity lines of credit		4			2		—		2
Commercial and industrial		374			361		—		302		7,033		4,136		—		4,198
Total loans with no related allowance	$	12,269		$	11,310	$	—	$	13,963	$	9,994	$	6,804	$	—	$	6,422
With related allowance recorded:
Primary residential mortgage	$	576		$	576	$	46	$	582	$	160	$	160	$	1	$	161
Commercial and industrial		6,129			3,629		41		4,965		5,000		5,000		3,200		5,000
Total loans with related allowance	$	6,705	��	$	4,205	$	87	$	5,547	$	5,160	$	5,160	$	3,201	$	5,161
Total loans individually evaluated for impairment	$	18,974		$	15,515	$	87	$	19,510	$	15,154	$	11,964	$	3,201	$	11,583

	December 31, 2019								December 31, 2020
	Unpaid						Average		Unpaid						Average
	Principal		Recorded		Specific		Impaired		Principal		Recorded		Specific		Impaired
(In thousands)	Balance		Investment		Reserves		Loans		Balance		Investment		Reserves		Loans
With no related allowance recorded:
Primary residential mortgage	$	7,310	$	6,071	$	—	$	7,186	$	1,601	$	1,328	$	—	$	5,544
Owner-occupied commercial real estate		450		379		—		1,099		817		807		—		516
Investment commercial real estate		9,663		8,138		—		14,115		4,593		4,593		—		6,582
Home equity lines of credit		5		3		—		77
Junior lien loan on residence		92		19		—		29
Commercial and industrial										7,137		4,314		—		1,677
Total loans with no related allowance	$	17,520	$	14,610	$	—	$	22,506	$	14,148	$	11,042	$	—	$	14,319
With related allowance recorded:
Primary residential mortgage	$	819	$	819	$	215	$	1,011	$	162	$	162	$	3	$	526
Investment commercial real estate		15,064		14,467		1,000		4,832
Commercial and industrial		6,229		6,028		1,585		3,685		5,000		5,000		2,700		4,140
Total loans with related allowance	$	22,112	$	21,314	$	2,800	$	9,528	$	5,162	$	5,162	$	2,703	$	4,666
Total loans individually evaluated for impairment	$	39,632	$	35,924	$	2,800	$	32,034	$	19,310	$	16,204	$	2,703	$	18,985

Interest income recognized on impaired loans for the quarters ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ was not material. The Company did not recognize any income on non-accruing impaired loans for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020.

The following tables present the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:

	September 30, 2020				March 31, 2021
			Loans Past Due				Loans Past Due
			Over 90 Days				Over 90 Days
			And Still				And Still
(In thousands)	Nonaccrual		Accruing Interest		Nonaccrual		Accruing Interest
Primary residential mortgage	$	3,992	$	0	$	2,104	$	0
Home equity lines of credit		1		0
Owner-occupied commercial real estate		667		0		564		0
Commercial and industrial		3,951		0		9,099		0
Total	$	8,611	$	0	$	11,767	$	0

	December 31, 2019				December 31, 2020
			Loans Past Due				Loans Past Due
			Over 90 Days				Over 90 Days
			And Still				And Still
(In thousands)	Nonaccrual		Accruing Interest		Nonaccrual		Accruing Interest
Primary residential mortgage	$	4,533	$	0	$	1,328	$	0
Home equity lines of credit		3		0
Junior lien loan on residence		19		0
Owner-occupied commercial real estate		379		0		807		0
Investment commercial real estate		17,919		0
Commercial and industrial		6,028		0		9,275		0
Total	$	28,881	$	0	$	11,410	$	0

The following tables present the aging of the recorded investment in past due loans as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 by class of loans, excluding nonaccrual loans:

	September 30, 2020								March 31, 2021
	30-59		60-89		Greater Than				30-59		60-89		Greater Than
	Days		Days		90 Days		Total		Days		Days		90 Days		Total
(In thousands)	Past Due		Past Due		Past Due		Past Due		Past Due		Past Due		Past Due		Past Due
Primary residential mortgage	$	651	$	—	$	0	$	651	$	990	$	—	$	0	$	990
Home equity lines of credit		129		—	$	—		129
Multifamily property		873		—		—		873
Owner occupied commercial real estate										550		—		—		550
Commercial and industrial		675		1,739		—		2,414		81		—		—		81
Lease financing		546		1,996		—		2,542
Consumer and other loans										—		1		—		1
Total	$	2,874	$	3,735	$	0	$	6,609	$	1,621	$	1	$	0	$	1,622

	December 31, 2019								December 31, 2020
	30-59		60-89		Greater Than				30-59		60-89		Greater Than
	Days		Days		90 Days		Total		Days		Days		90 Days		Total
(In thousands)	Past Due		Past Due		Past Due		Past Due		Past Due		Past Due		Past Due		Past Due
Primary residential mortgage	$	1,264	$	0	$	0	$	1,264	$	2,900	$	141	$	0	$	3,041
Home equity lines of credit		80		—		—		80		181		—		—		181
Consumer and other loans		566		—		—		566
Junior lien loan on residence										—		25		—		25
Multifamily property										—		269		—		269
Owner-occupied commercial real estate										268		—		—		268
Commercial and industrial										497		772		—		1,269
Total	$	1,910	$	0	$	0	$	1,910	$	3,846	$	1,207	$	0	$	5,053

The Company places all commercial loans into various credit risk rating categories based on an assessment of the expected ability of the borrowers to properly service their debt. The assessment considers numerous factors including, but not limited to, current financial information on the borrower, historical payment experience, strength of any guarantor, nature of and value of any collateral, acceptability of the loan structure and documentation, relevant public information and current economic trends. This credit risk rating analysis is performed when the loan is initially underwritten and then annually based on set criteria in the loan policy.

In addition, the Bank has engaged an independent loan review firm to validate risk ratings and to ensure compliance with our policies and procedures. This review of the following types of loans is performed quarterly:

The Company uses the following regulatory definitions for criticized and classified risk ratings:

Special Mention: These loans have a potential weakness that deserves Management’s close attention. If left uncorrected, the potential weaknesses may result in deterioration of the repayment prospects for the loans or of the institution’s credit position at some future date.

Substandard: These loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful: These loans have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable, based on currently existing facts, conditions and values.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass-rated loans.

Loans that are considered to be impaired are individually evaluated for potential loss and allowance adequacy. Loans not deemed impaired are collectively evaluated for potential loss and allowance adequacy.

As of ~~September 30,~~March 31, 2021, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

As of December 31, 2020, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

~~As of December 31, 2019, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:~~

			Special								Special
(In thousands)	Pass		Mention		Substandard		Doubtful		Pass		Mention		Substandard		Doubtful
Primary residential mortgage	$	570,353	$	853	$	7,100	$	—	$	504,795	$	1,398	$	6,648	$	—
Home equity lines of credit		57,245		—		3		—		50,068		—		477		—
Junior lien loan on residence		6,992		—		19		—		4,483		—		44		—
Multifamily property		1,209,288		—		715		—		1,121,145		5,441		360		—
Owner-occupied commercial real estate		247,388		—		2,031		—		240,638		10,417		2,392		—
Investment commercial real estate		1,053,445		6,325		35,412		—		893,115		91,162		11,336		—
Commercial and industrial		847,285		6,382		13,628		—		989,281		53,604		16,514		—
Lease financing		258,401		—		—		—		305,931		—		—		—
Farmland/agricultural production		3,043		—		—		—		3,068		—		—		—
Commercial construction loans		5,437		83		—		—		12,692		81		—		—
Consumer and other loans		58,213		—		—		—		44,483		—		—		—
Total	$	4,317,090	$	13,643	$	58,908	$	—	$	4,169,699	$	162,103	$	37,771	$	—

At ~~September 30, 2020, $15.5~~March 31, 2021, $12.0 million of substandard loans were also considered impaired, compared to December 31, ~~2019,~~2020, when ~~$35.9~~$16.2 million of substandard loans were also considered impaired. ~~The increase in special mention investment and owner-occupied commercial real estate classified loans was a result of the Bank’s credit analysis of sectors with COVID elevated residual risk~~

~~(Hospitality and Food Services and Retail – Non-Grocery Anchored) and the downgrade of several loans within these categories during the third quarter of 2020.~~

The activity in the allowance for loan and lease losses for the three months ended ~~September 30, 2020~~March 31, 2021 is summarized below:

	July 1,										September 30,		January 1,										March 31,
	2020										2020		2021										2021
	Beginning							Provision			Ending		Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL		ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	3,074	$	—		$	217	$	(324	)	$	2,967	$	2,905	$	—		$	—	$	(129	)	$	2,776
Home equity lines of credit		244		—			3		(27	)		220		218		—			9		(29	)		198
Junior lien loan on residence		20		—			—		(2	)		18		15		—			—		1			16
Multifamily property		9,662		—			—		1,002			10,664		9,945		—			—		482			10,427
Owner-occupied commercial real estate		3,177		—			—		(166	)		3,011		3,050		—			—		(186	)		2,864
Investment commercial real estate		29,866		(5,132	)		—		4,432			29,166		27,713		—			—		(1,020	)		26,693
Commercial and industrial		16,218		(164	)		6		112			16,172		19,047		—			7		1,071			20,125
Lease financing		3,349		—			—		124			3,473		3,936		—			—		31			3,967
Farmland/agricultural production		38		—			—		(23	)		15		43		—			—		4			47
Commercial construction loans		49		—			—		28			77		158		—			—		3			161
Consumer and other loans		368		(2	)		2		(6	)		362		279		(15	)		1		(3	)		262
Total ALLL	$	66,065	$	(5,298	)	$	228	$	5,150		$	66,145	$	67,309	$	(15	)	$	17	$	225		$	67,536

The activity in the allowance for loan and lease losses for the three months ended ~~September 30, 2019 is summarized below:~~

~~The activity in the allowance for loan and lease losses for the nine months ended September 30,~~March 31, 2020 is summarized below:

	January 1,										September 30,		January 1,									March 31,
	2020										2020		2020									2020
	Beginning							Provision			Ending		Beginning							Provision		Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL		ALLL		Charge-offs			Recoveries		(Credit)		ALLL
Primary residential mortgage	$	2,090	$	—		$	330	$	547		$	2,967	$	2,090	$	—		$	77	$	1,006	$	3,173
Home equity lines of credit		128		—			8		84			220		128		—			3		106		237
Junior lien loan on residence		13		—			—		5			18		13		—			—		10		23
Multifamily property		6,037		—			—		4,627			10,664		6,037		—			—		3,067		9,104
Owner-occupied commercial real estate		2,064		—			—		947			3,011		2,064		—			—		774		2,838
Investment commercial real estate		15,988		(5,532	)		31		18,679			29,166		15,988		—			31		11,652		27,671
Commercial and industrial		14,353		(2,418	)		11		4,226			16,172		14,353		—			3		2,768		17,124
Lease financing		2,642		—			—		831			3,473		2,642		—			—		499		3,141
Farmland/agricultural production		38		—			—		(23	)		15		38		—			—		—		38
Commercial construction loans		27		—			—		50			77		27		—			—		13		40
Consumer and other loans		296		(15	)		4		77			362		296		(8	)		1		105		394
Total ALLL	$	43,676	$	(7,965	)	$	384	$	30,050		$	66,145	$	43,676	$	(8	)	$	115	$	20,000	$	63,783

~~The activity in the allowance for loan and lease losses for the nine months ended September 30, 2019 is summarized below:~~

The CARES Act allows financial institutions to suspend application of certain current TDR accounting guidance under ASC 310-40 for loan modifications related to the COVID-19 pandemic made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the end of the COVID-19 national emergency, provided certain criteria are met. The revised CARES Act extended loan modifications through January 1, 2022. This relief can be applied to loan modifications for borrowers that were not more than 30 days past due as of December 31, 2019 and to loan modifications that defer or delay the payment of principal or interest or change the interest rate on the loan. In April 2020, federal and state banking regulators issued the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus to provide further interpretation of when a borrower is experiencing financial difficulty, specifically indicating that if the modification is either short-term (e.g., six months) or mandated by a federal or state government in response to the COVID-19 pandemic, the borrower is not experiencing financial difficulty under ASC 310-40.

As of ~~September 30, 2020,~~March 31, 2021, the Bank has modified ~~515~~540 loans with a balance of ~~$940.2~~$946.7 million resulting in the deferral of principal and/or ~~interest for periods ranging from 90 to 180 days.~~interest. The table below summarizes the deferrals as of ~~September 30, 2020.~~March 31, 2021. All of these loans were performing in accordance with their terms prior to modification and are in conformance with the CARES Act. Included in the table below ~~are 27 loans~~is 1 loan related to our back to back swap program totaling ~~$283.6 million of loan level swaps.~~$19.9 million. Details with respect to loan modifications are as follows:

			Post-Modification				Post-Modification
			Outstanding				Outstanding
	Number of		Recorded		Number of		Recorded
(Dollars in thousands)	Loans		Investment		Loans		Investment
Primary residential mortgage		170	$	69,941		21	$	7,477
Home equity lines of credit		16		4,094
Junior lien loan on residence		4		248		1		18
Multifamily property		70		263,877		1		921
Owner-occupied commercial real estate		33		30,058		1		117
Investment commercial real estate		71		400,425		1		19,887
Commercial and industrial		28		28,370		6		12,993
Lease financing		7		26,360
Farmland/agricultural production		1		133
Commercial construction loans		3		4,311		1		1,344
Total		403	$	827,817		32	$	42,757

Thefuture performance of these loans, specifically beyond the term of the deferral, is uncertain. To recognize a credit allowance commensurate with the existing risk, the Company assigned qualitative factors for each of the above portfolio classes for allowance purposes.

The Company has allocated ~~$87,000~~$1,000 and ~~$2.8 million~~$3,000 of specific reserves on TDRs ~~to customers whose loan terms have been modified in TDRs~~ as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. There were no unfunded commitments to lend additional amounts to customers with outstanding loans that are classified as TDRs.

There were no loans modified as TDRs during the three-month period ended ~~September 30, 2020.~~March 31, 2021.

The following table presents loans by class modified as TDRs during the ~~nine-month~~three-month period ended ~~September 30,~~March 31, 2020:

~~The following table presents loans by class modified as TDRs during both the three and nine-month periods ended September 30, 2019:~~

The identification of the TDRs did not have a significant impact on the allowance for loan and lease losses.

The following table presents loans by class modified as TDRs that failed to comply with the modified terms in the twelve months following modification and resulted in a payment default at ~~September 30, 2020:~~March 31, 2021:

	Number of		Recorded		Number of		Recorded
(Dollars in thousands)	Loans		Investment		Loans		Investment
Primary residential mortgage		1	$	193		1	$	132
Commercial and industrial		1		39
Total		2	$	232		1	$	132

~~There were no~~The following table presents loans ~~that were~~by class modified as TDRs ~~for which there was~~that failed to comply with the modified terms in the twelve months following modification and resulted in a payment default ~~within twelve months of modification~~ at ~~September 30, 2019.~~March 31, 2020:

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy. The modification of the terms of such loans may include one or more of the following: (1) a reduction of the stated interest rate of the loan to a rate that is lower than the current market rate for new debt with similar risk; (2) an extension of an interest only period for a predetermined period of time; (3) an extension of the maturity date; or (4) an extension of the amortization period over which future payments will be computed. At the time a loan is restructured, the Bank performs a full re-underwriting analysis, which includes, at a minimum, obtaining current financial statements and tax returns, copies of all leases, and an updated independent appraisal of the property. A loan will continue to accrue interest if it can be reasonably determined that the borrower should be able to perform under the modified terms, that the loan has not been chronically delinquent (both to debt service and real estate taxes) or in nonaccrual status since its inception, and that there have been no charge-offs on the loan. Restructured loans with previous charge-offs would not accrue interest at the time of the TDR. At a minimum, six consecutive months of contractual payments would need to be made on a restructured loan before returning it to accrual status. Once a loan is classified as a TDR, the loan is reported as a TDR until the loan is paid in full, sold or charged-off. In rare circumstances, a loan may be removed from TDR status if it meets the requirements of ASC 310-40-50-2.

Certificates of deposit, over $250,000, totaled ~~$216.2~~$164.1 million and ~~$223.7~~$186.3 million at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. ~~The above~~These totals exclude brokered certificates of deposit.

The following table sets forth the details of total deposits as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:

	September 30,				December 31,				March 31,				December 31,
	2020				2019				2021				2020
(Dollars in thousands)
Noninterest-bearing demand deposits	$	838,307	17.25	%	$	529,281	12.47	%	$	908,922	18.38	%	$	833,500	17.30	%
Interest-bearing checking⁽¹⁾		1,858,529	38.25			1,510,363	35.59			1,987,567	40.19			1,849,254	38.38
Savings		127,737	2.63			112,652	2.66			141,743	2.87			130,731	2.71
Money market		1,251,349	25.75			1,196,313	28.19			1,256,605	25.41			1,298,885	26.96
Certificates of deposit - retail		586,801	12.08			633,763	14.94			474,668	9.60			530,222	11.00
Certificates of deposit - listing service		32,677	0.67			47,430	1.12			31,631	0.64			32,128	0.67
Subtotal deposits		4,695,400	96.63			4,029,802	94.97			4,801,136	97.09			4,674,720	97.02
Interest-bearing demand - Brokered		130,000	2.68			180,000	4.24			110,000	2.23			110,000	2.28
Certificates of deposit - Brokered		33,750	0.69			33,709	0.79			33,777	0.68			33,764	0.70
Total deposits	$	4,859,150	100.00	%	$	4,243,511	100.00	%	$	4,944,913	100.00	%	$	4,818,484	100.00	%

The scheduled maturities of certificates of deposit, including brokered certificates of deposit, as of ~~September 30, 2020~~March 31, 2021 are as follows:

(In thousands)
2020	$	163,537
2021		362,644	$	352,816
2022		60,270		115,218
2023		9,154		11,530
2024		28,379		25,558
2025				29,225
Over 5 Years		29,244		5,729
Total	$	653,228	$	540,076

~~Advances from the FHLB totaled $105.0 million with a weighted average interest rate of 3.20 percent at both September 30, 2020 and December~~

~~The advances~~had fixed maturity dates and were secured by blanket pledges of certain 1-4 family residential mortgages totaling $344.6 million, multifamily mortgages totaling $770.9 million and securities totaling $311.6 million at September 30, 2020, while at December 31, 2019, the fixed rate advances were secured by blanket pledges of certain 1-4 family residential mortgages totaling $347.5 million, multifamily mortgages totaling $773.1 million and securities totaling $154.3 million.

~~Short-term~~2021, short-term borrowings consisted of a one-month FHLB advance totaling $15.0 million with a rate of ~~0.39~~0.36 percent. The one-month FHLB advance for $15.0 million is part of an interest rate swap designated as a cash flow hedge. The cash flow hedge has a term of ~~four~~three years. There were 0 overnight borrowings with the FHLB as of ~~September 30, 2020~~March 31, 2021 or December 31, ~~2019.~~2020. At ~~September 30, 2020,~~March 31, 2021, unused short-term overnight borrowing commitments totaled ~~$1.7~~$1.8 billion from the FHLB, $22.0 million from correspondent banks and ~~$1.0 billion~~$990.0 million at the Federal Reserve Bank of New York.

The Company had ~~$183.8~~$168.2 million in borrowings from the Federal Reserve’s ~~PPPLF~~Paycheck Protection Plan Lending Facility (the “PPPLF”), as of ~~September 30,~~March 31, 2021 as compared to $177.1 million at December 31, 2020. The borrowings have a rate of 0.35 percent, primarily all of which have a 2-year maturity. The Company utilized the PPPLF to fund PPP loan production during the second quarter of 2020. The borrowings are fully pledged by PPP loans as of ~~September 30,~~March 31, 2021.

The Company prepaid $105.0 million of FHLB advances resulting in a prepayment penalty of $4.8 million during 2020. The repayment of the FHLB advances is expected to provide a benefit to interest expense greater than the prepayment penalty over the remaining life of the advances.

The Company assesses its results among 2 operating segments, Banking and Peapack Private. Management uses certain methodologies to allocate income and expense to the business segments. A funds transfer pricing methodology is used to assign interest income and interest expense. Certain indirect expenses are allocated to segments. These include support unit expenses such as technology and operations and other support functions. Taxes are allocated to each segment based on the effective rate for the period shown. The Banking segment’s effective tax rate for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 was affected by a ~~$3.34~~$3.3 million income tax benefit recorded during the first quarter of 2020. For additional information related to this income tax benefit refer to the Income Taxes section of Management’s Discussion and Analysis.

The Banking segment ~~includes~~includes: commercial (includes C&I and equipment finance), commercial real estate, multifamily, residential and consumer lending activities; treasury management services; C&I advisory services; escrow management; deposit generation; operation of ATMs; telephone and internet banking services; merchant credit card services and customer support and sales.

Peapack Private includes PGB Trust & Investments of Delaware and Murphy Capital, ~~Lassus Wherley and Point View,~~ includes investment management services provided for individuals and institutions; personal trust services, including services as executor, trustee, administrator, custodian and guardian, and other financial planning, tax preparation and advisory services.

The following tables present the statements of income and total assets for the Company’s reportable segments for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~

	Three Months Ended September 30, 2019								Three Months Ended March 31, 2021
				Wealth							Wealth
				Management							Management
(In thousands)	Banking			Division		Total			Banking		Division		Total
Net interest income	$	28,836		$	1,249	$	30,085		$	30,226	$	1,567	$	31,793
Noninterest income		4,561			9,855		14,416			5,140		12,680		17,820
Total income		33,397			11,104		44,501			35,366		14,247		49,613

Provision for loan and lease losses		800			0		800			225		0		225
Compensation and employee benefits		11,776			5,700		17,476			16,428		5,562		21,990
Premises and equipment expense		3,294			555		3,849			3,570		543		4,113
FDIC insurance expense		(277	)		0		(277	)		585		0		585
Other operating expense		2,985			2,226		5,211			2,391		2,515		4,906
Total operating expense		18,578			8,481		27,059			23,199		8,620		31,819
Income before income tax expense		14,819			2,623		17,442			12,167		5,627		17,794
Income tax expense		4,399			817		5,216			3,159		1,457		4,616
Net income	$	10,420		$	1,806	$	12,226		$	9,008	$	4,170	$	13,178

Total assets at period end									$	5,883,553	$	86,074	$	5,969,627

	Nine Months Ended September 30, 2019						Three Months Ended March 31, 2020
			Wealth							Wealth
			Management							Management
(In thousands)	Banking		Division		Total		Banking			Division		Total
Net interest income	$	85,336	$	4,024	$	89,360	$	30,409		$	1,338	$	31,747
Noninterest income		9,991		29,180		39,171		4,229			10,288		14,517
Total income		95,327		33,204		128,531		34,638			11,626		46,264

Provision for loan and lease losses		2,050		0		2,050		20,000			0		20,000
Compensation and employee benefits		36,458		15,717		52,175		13,207			6,019		19,226
Premises and equipment expense		9,265		1,572		10,837		3,421			622		4,043
FDIC insurance expense		277		0		277		250			0		250
Other operating expense		8,296		6,562		14,858		2,606			2,110		4,716
Total operating expense		56,346		23,851		80,197		39,484			8,751		48,235
Income before income tax expense		38,981		9,353		48,334
Income tax expense		10,592		2,541		13,133
Net income	$	28,389	$	6,812	$	35,201
(Loss)/income before income tax (benefit)/expense								(4,846	)		2,875		(1,971	)
Income tax (benefit)/expense								(3,893	)		549		(3,344	)
Net (loss)/income							$	(953	)	$	2,326	$	1,373

Total assets at period end	$	4,840,002	$	85,407	$	4,925,409	$	5,734,495		$	96,963	$	5,831,458

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

The Company used the following methods and significant assumptions to estimate the fair value:

Investment Securities: The fair values for investment securities are determined by quoted market prices (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).

Loans Held for Sale, at Fair Value: The fair value of loans held for sale is determined using quoted prices for similar assets, adjusted for specific attributes of that loan or other observable market data, such as outstanding commitments from third party investors (Level 2).

Derivatives: The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2). Our derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services.

Impaired Loans: The fair value of impaired loans with specific allocations of the allowance for loan and lease losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Other Real Estate Owned: Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate owned (OREO) are measured at fair value, less estimated costs to sell. Fair values are based on recent real estate appraisals. These appraisals may use a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by Management. Once received, a third party conducts a review of the appraisal for compliance with the Uniform Standards of Professional Appraisal Practice and appropriate analysis methods for the type of property. Subsequently, a member of the Credit Department reviews the assumptions and approaches utilized in the appraisal, as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. Appraisals on collateral dependent impaired loans and other real estate owned (consistent for all loan types) are obtained on an annual basis, unless a significant change in the market or other factors warrants a more frequent appraisal. On an annual basis, Management compares the actual selling price of any collateral that has been sold to the most recent appraised value to determine what additional adjustment should be made to the appraisal value to arrive at fair value for other properties. The most recent analysis performed indicated that a discount up to 15 percent should be applied to appraisals on properties. The discount is determined based on the nature of the underlying properties, aging of appraisals and other factors. For each collateral-dependent impaired loan, we consider other factors, such as certain indices or other market information, as well as property specific circumstances to determine if an adjustment to the appraised value is needed. In situations where there is evidence of change in value, the Bank will determine if there is a need for an adjustment to the specific reserve on the collateral dependent impaired loans. When the Bank applies an interim adjustment, it generally shows the adjustment as an incremental specific reserve against the loan until it has received the full updated appraisal. All collateral-dependent impaired loans and other real estate owned valuations were supported by an appraisal less than 12 months old or in the process of obtaining an appraisal as of ~~September 30, 2020.~~March 31, 2021.

The following table summarizes, ~~for~~at the ~~periods~~dates indicated, assets measured at fair value on a recurring basis, including financial assets for which the Corporation has elected the fair value option:

			Fair Value Measurements Using								Fair Value Measurements Using
			Quoted								Quoted
			Prices in								Prices in
			Active		Significant						Active		Significant
			Markets For		Other		Significant				Markets For		Other		Significant
			Identical		Observable		Unobservable				Identical		Observable		Unobservable
	September 30,		Assets		Inputs		Inputs		March 31,		Assets		Inputs		Inputs
(In thousands)	2020		(Level 1)		(Level 2)		(Level 3)		2021		(Level 1)		(Level 2)		(Level 3)
Assets:
Available for sale:
U.S. treasuries	$	2,888	$	—	$	2,888	$	—
U.S. government-sponsored agencies		78,946		—		78,946		—	$	221,337	$	—	$	221,337	$	—
Mortgage-backed securities-residential		466,295		—		466,295		—		596,620		—		596,620		—
SBA pool securities		37,070		—		37,070		—		46,243		—		46,243		—
State and political subdivisions		8,694		—		8,694		—		8,053		—		8,053		—
Corporate bond		3,036		—		3,036		—		3,048		—		3,048		—
CRA investment fund		15,159		15,159		—		—		14,852		14,852		—		—
Loans held for sale, at fair value		13,785		—		13,785		—		9,219		—		9,219		—
Derivatives:
Loan level swaps		92,798		—		92,798		—		45,301		—		45,301		—
Total	$	718,671	$	15,159	$	703,512	$	—	$	944,673	$	14,852	$	929,821	$	—

Liabilities:
Derivatives:
Cash flow hedges	$	11,001	$	—	$	11,001	$	—	$	8,166	$	—	$	8,166	$	—
Loan level swaps		92,798		—		92,798		—		45,301		—		45,301		—
Total	$	103,799	$	—	$	103,799	$	—	$	53,467	$	—	$	53,467	$	—

			Fair Value Measurements Using								Fair Value Measurements Using
			Quoted								Quoted
			Prices in								Prices in
			Active		Significant						Active		Significant
			Markets For		Other		Significant				Markets For		Other		Significant
			Identical		Observable		Unobservable				Identical		Observable		Unobservable
	December 31,		Assets		Inputs		Inputs		December 31,		Assets		Inputs		Inputs
(In thousands)	2019		(Level 1)		(Level 2)		(Level 3)		2020		(Level 1)		(Level 2)		(Level 3)
Assets:
Securities available for sale:
U.S. treasuries									$	2,613	$	—	$	2,613	$	—
U.S. government-sponsored agencies	$	34,784	$	—	$	34,784	$	—		83,771		—		83,771		—
Mortgage-backed securities-residential		338,904		—		338,904		—		476,058		—		476,058		—
SBA pool securities		2,784		—		2,784		—		49,129		—		49,129		—
State and political subdivisions		11,215		—		11,215		—		8,089		—		8,089		—
Corporate bond		3,068		—		3,068		—		3,029		—		3,029		—
CRA investment fund		10,836		10,836		—		—		15,117		15,117		—		—
Loans held for sale, at fair value		2,881		—		2,881		—		13,588		—		13,588		—
Derivatives:
Cash flow hedges		121		—		121		—
Loan level swaps		32,381		—		32,381		—		79,529		—		79,529		—
Total	$	436,974	$	10,836	$	426,138	$	—	$	730,923	$	15,117	$	715,806	$	—

Liabilities:
Derivatives:
Cash flow hedges	$	3,788	$	—	$	3,788	$	—	$	9,616	$	—	$	9,616	$	—
Loan level swaps		32,381		—		32,381		—		79,529		—		79,529		—
Total	$	36,169	$	—	$	36,169	$	—	$	89,145	$	—	$	89,145	$	—

The Company has elected the fair value option for certain loans held for sale. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment. None of these loans are 90 days or more past due nor on nonaccrual as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

The following tables present residential loans held for sale, at fair value ~~for~~at the ~~periods~~dates indicated:

(In thousands)	September 30, 2020		December 31, 2019		March 31, 2021		December 31, 2020
Residential loans contractual balance	$	13,525	$	2,839	$	9,029	$	13,295
Fair value adjustment		260		42		190		293
Total fair value of residential loans held for sale	$	13,785	$	2,881	$	9,219	$	13,588

There were 0 transfers between Level 1 and Level 2 during the three ~~and nine~~ months ended ~~September 30, 2020.~~

~~There were 0 loans measured for impairment using the fair value of collateral as of September 30, 2020.~~March 31, 2021.

The following tables summarize, ~~for~~at the ~~periods~~dates indicated, assets measured at fair value on a non-recurring basis:

Fair Value Measurements Using

Quoted

Prices in

Active

Significant

Active

Significant

Markets For

Other

Significant

Markets For

Other

Significant

Identical

Observable

Unobservable

Identical

Observable

Unobservable

December 31,

Assets

Inputs

March 31,

Assets

Inputs

(In thousands)

2019

(Level 1)

(Level 2)

(Level 3)

2021

(Level 1)

(Level 2)

(Level 3)

Assets:

Impaired loans:

Investment commercial real estate

13,467

—

13,467

Commercial and industrial

1,800

—

1,800

The carrying amounts and estimated fair values of financial instruments at ~~September 30, 2020~~March 31, 2021 are as follows:

			Fair Value Measurements at September 30, 2020 using										Fair Value Measurements at March 31, 2021 using
	Carrying										Carrying
(In thousands)	Amount		Level 1		Level 2		Level 3		Total		Amount		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	679,365	$	679,365	$	—	$	—	$	679,365	$	476,537	$	476,537	$	—	$	—	$	476,537
Securities available for sale		596,929		—		596,929		—		596,929		875,301		—		875,301		—		875,301
CRA investment fund		15,159		15,159		—		—		15,159		14,852		14,852		—		—		14,852
FHLB and FRB stock		18,433		—		—		—	N/A			13,699		—		—		—	N/A
Loans held for sale, at fair value		13,785		—		13,785		—		13,785		9,219		—		9,219		—		9,219
Loans held for sale, at lower of cost or fair value		14,455		—		14,943		—		14,943		53,185		—		53,399		—		53,399
Loans, net of allowance for loan and lease losses		4,364,506		—		—		4,493,612		4,493,612		4,310,395		—		—		4,511,593		4,511,593
Accrued interest receivable		22,192		—		1,807		20,385		22,192		23,916		—		2,244		21,672		23,916
Accrued interest receivable loan level swaps (A)												4,660		—		4,660		—		4,660
Loan level swaps		92,798		—		92,798		—		92,798		45,301		—		45,301		—		45,301
Financial liabilities
Deposits	$	4,859,150	$	4,205,922	$	663,005	$	—	$	4,868,927	$	4,944,913	$	4,404,837	$	545,549	$	—	$	4,950,386
Short-term borrowings		15,000		—		15,000		—		15,000		15,000		—		15,000		—		15,000
Federal home loan bank advances		105,000		—		109,908		—		109,908
Paycheck Protection Program Liquidity Facility		183,790		—		183,790		—		183,790		168,180		—		168,180		—		168,180
Subordinated debt		83,585		—		—		84,215		84,215		181,837		—		—		181,076		181,076
Accrued interest payable		3,017		210		1,586		1,221		3,017		3,499		147		1,159		2,193		3,499
Accrued interest payable loan level swaps												4,660		—		4,660		—		4,660
Cash flow hedges		11,001		—		11,001		—		11,001		8,166		—		8,166		—		8,166
Loan level swap		92,798		—		92,798		—		92,798		45,301		—		45,301		—		45,301

The carrying amounts and estimated fair values of financial instruments at December 31, ~~2019~~2020 are as follows:

			Fair Value Measurements at December 31, 2019 using										Fair Value Measurements at December 31, 2020 using
	Carrying										Carrying
(In thousands)	Amount		Level 1		Level 2		Level 3		Total		Amount		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	208,185	$	208,185	$	—	$	—	$	208,185	$	653,322	$	653,322	$	—	$	—	$	653,322
Securities available for sale		390,755		—		390,755		—		390,755		622,689		—		622,689		—		622,689
CRA investment fund		10,836		10,836		—		—		10,836		15,117		15,117		—		—		15,117
FHLB and FRB stock		24,068		—		—		—	N/A			13,709		—		—		—	N/A
Loans held for sale, at fair value		2,881		—		2,881		—		2,881		13,588		—		13,588		—		13,588
Loans held for sale, at lower of cost or fair value		14,667		—		15,126		—		15,126		18,520		—		19,115		—		19,115
Loans, net of allowance for loan and lease losses		4,350,461		—		—		4,268,481		4,268,481		4,305,128		—		—		4,462,243		4,462,243
Accrued interest receivable		10,494		—		1,361		9,133		10,494		22,495		—		1,653		20,842		22,495
Cash flow Hedges		121		—		121		—		121
Loan level swaps		32,381		—		32,381		—		32,381		79,529		—		79,529		—		79,529
Financial liabilities
Deposits	$	4,243,511	$	3,528,609	$	718,818	$	—	$	4,247,427	$	4,818,484	$	4,222,370	$	604,036	$	—	$	4,826,406
Short-term borrowings		128,100		—		128,100		—		128,100		15,000		—		15,000		—		15,000
Federal Home Loan Bank advances		105,000		—		108,354		—		108,354
Paycheck Protection Program Liquidity Facility												177,086		—		177,086		—		177,086
Subordinated debt		83,417		—		—		86,536		86,536		181,794		—		—		183,348		183,348
Accrued interest payable		2,357		392		1,910		55		2,357		1,650		150		1,347		153		1,650
Cash flow hedges		3,788		—		3,788		—		3,788		9,616		—		9,616		—		9,616
Loan level swaps		32,381		—		32,381		—		32,381		79,529		—		79,529		—		79,529

All of the Company’s revenue from contracts with customers within the scope of ASC 606 is recognized within noninterest income.

The following tables present the sources of noninterest income for the periods indicated:

		For the Three Months Ended September 30,					For the Three Months Ended March 31,
(In thousands)		2020		2019			2021		2020
Service charges on deposits
Overdraft fees		$	88	$	176		$	93	$	147
Interchange income			319		323			317		280
Other			378		383			436		389
Wealth management fees (a)			10,119		9,501			12,131		9,955
Other (b)			9,307		4,033			4,843		3,746
Total noninterest other income	Total noninterest other income	$	20,211	$	14,416	Total noninterest other income	$	17,820	$	14,517

The following table presents the sources of noninterest income by operating segment for the periods indicated:

													For the Three Months Ended March 31,						For the Three Months Ended March 31,
	For the Nine Months Ended September 30,						For the Nine Months Ended September 30,						2021						2020
(In thousands)	2020						2019								Wealth						Wealth
Revenue by Operating			Wealth						Wealth
Segment	Banking		Management		Total		Banking		Management		Total
Revenue by Operating Segment													Banking		Management		Total		Banking		Management		Total
Service charges on deposits
Overdraft fees	$	307	$	0	$	307	$	500	$	0	$	500	$	93	$	0	$	93	$	147	$	0	$	147
Interchange income		869		0		869		909		0		909		317		0		317		280		0		280
Other		1,120		0		1,120		1,186		0		1,186		436		0		436		389		0		389
Wealth management fees (a)		0		30,070		30,070		0		28,243		28,243		0		12,131		12,131		0		9,955		9,955
Other (b)		13,740		1,248		14,988		7,396		937		8,333		4,294		549		4,843		3,413		333		3,746
Total noninterest income	$	16,036	$	31,318	$	47,354	$	9,991	$	29,180	$	39,171	$	5,140	$	12,680	$	17,820	$	4,229	$	10,288	$	14,517

A description of the Company’s revenue streams accounted for under ASC 606 follows:

Service charges on deposit accounts: The Company earns fees from its ~~deposits~~deposit customers for transaction-based, account maintenance, and overdraft fees. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance.

Interchange income: The Company earns interchange fees from debit cardholder transactions conducted through the Visa payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. Interchange income is presented gross of cardholder rewards. Cardholder rewards are included in other expenses in the statement of income. Cardholder rewards reduced interchange income for the ~~third~~first quarter of ~~2020~~2021 by ~~$31,000~~$29,000 compared to ~~$37,000~~$32,000 for the same quarter ~~of 2019. Cardholder rewards reduced interchange income by $86,000 and $105,000 for the nine months ended September 30, 2020 and 2019, respectively.~~in 2020.

Wealth management fees (gross): The Company earns wealth management fees from its contracts with wealth management clients to manage assets for investment, and/or to transact on their accounts. These fees are primarily earned over time as the Company charges its clients on a monthly or quarterly basis in accordance with its investment advisory agreements. Fees are generally assessed based on a tiered scale of the market value of AUM at month end. Fees that are transaction based, including trade execution services, are recognized at the point in time that the transaction is executed (i.e. trade date).

Investment brokerage fees (net): The Company earns fees from investment brokerage services provided to its customers by a third-party service provider. The Company receives commissions from the third-party service provider twice a month based upon customer activity for the month. The fees are recognized monthly and a receivable is recorded until commissions are generally paid by the 15^th of the following month. Because the Company (i) acts as an agent in arranging the relationship between the customer and the third-party service provider and (ii) does not control the services rendered to the customers, investment brokerage fees are presented net of related costs.

Gains/(losses) on sales of OREO: The Company records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of OREO to the buyer, the Company assesses whether the buyer is committed to perform its obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain/(loss) on sale if a significant financing component is present.

The following table presents the major components of other operating expenses for the periods indicated:

	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
(In thousands)	2020		2019		2020		2019		2021		2020
Professional and legal fees	$	1,079	$	1,228	$	3,095	$	3,320	$	1,256	$	974
Telephone		370		346		1,089		1,003		334		324
Advertising		226		337		1,294		1,105		214		340
Amortization of intangible assets		321		229		966		688		368		324
Branch restructure		—		—		278		—
Other operating expenses		2,549		3,071		7,876		8,742		2,734		2,754
Total other operating expenses	$	4,545	$	5,211	$	14,598	$	14,858	$	4,906	$	4,716

The following is a summary of the accumulated other comprehensive income/(loss) balances, net of tax, for the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

							Amount			Other												Amount		Other
							Reclassified			Comprehensive												Reclassified		Comprehensive
				Other			From			Income/(Loss)									Other			From		Income/(Loss)
				Comprehensive			Accumulated			Three Months									Comprehensive			Accumulated		Three Months
	Balance at			Income/(Loss)			Other			Ended			Balance at			Balance at			Income/(Loss)			Other		Ended			Balance at
	July 1,			Before			Comprehensive			September 30,			September 30,			January 1,			Before			Comprehensive		March 31,			March 31,
(In thousands)	2020			Reclassifications			Income/(Loss)			2020			2020			2021			Reclassifications			Income/(Loss)		2021			2021
Net unrealized holding gain/(loss) on securities available for sale, net of tax	$	6,935		$	(777	)		—		$	(777	)	$	6,158		$	5,521		$	(13,415	)	$	—	$	(13,415	)	$	(7,894	)

Gain/(loss) on cash flow hedges		(8,931	)		1,030			(4	)		1,026			(7,905	)		(6,913	)		1,043			—		1,043			(5,870	)

Accumulated other comprehensive income/(loss), net of tax	$	(1,996	)	$	253		$	(4	)	$	249		$	(1,747	)
Accumulated other comprehensive gain/(loss), net of tax																$	(1,392	)	$	(12,372	)	$	—	$	(12,372	)	$	(13,764	)

							Amount			Other												Amount			Other
							Reclassified			Comprehensive												Reclassified			Comprehensive
				Other			From			Income/(Loss)									Other			From			Income/(Loss)
				Comprehensive			Accumulated			Three Months									Comprehensive			Accumulated			Three Months
	Balance at			Income/(Loss)			Other			Ended			Balance at			Balance at			Income/(Loss)			Other			Ended			Balance at
	July 1,			Before			Comprehensive			September 30,			September 30,			January 1,			Before			Comprehensive			March 31,			March 31,
(In thousands)	2019			Reclassifications			Income/(Loss)			2019			2019			2020			Reclassifications			Income/(Loss)			2020			2020
Net unrealized holding gain/(loss) on securities available for sale, net of tax	$	898		$	583		$	—		$	583		$	1,481		$	1,006		$	4,387		$	—		$	4,387		$	5,393

Gain/(loss) on cash flow hedges		(2,502	)		(752	)		(56	)		(808	)		(3,310	)
Loss on cash flow hedges																	(2,501	)		(6,499	)		(52	)		(6,551	)		(9,052	)

Accumulated other comprehensive income/(loss), net of tax	$	(1,604	)	$	(169	)	$	(56	)	$	(225	)	$	(1,829	)
Accumulated other comprehensive loss, net of tax																$	(1,495	)	$	(2,112	)	$	(52	)	$	(2,164	)	$	(3,659	)

The following represents the reclassifications out of accumulated other comprehensive income/(loss) for the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

	Three Months Ended							Three Months Ended
	September 30,							March 31,
(In thousands)	2020			2019			Affected Line Item in Income Statement	2021		2020			Affected Line Item in Income Statement
Unrealized gains on cash flow hedge derivatives:
Unrealized gains/(losses) on cash flow hedge derivatives:
Reclassification adjustment for amounts included in net income	$	(5	)	$	(80	)	Interest expense	$	—	$	(71	)	Interest expense
Income tax expense		1			24		Income tax expense
Tax effect									—		19		Income tax expense
Total reclassifications, net of tax	$	(4	)	$	(56	)		$	—	$	(52	)

~~The following is a summary of the accumulated other comprehensive income/(loss) balances, net of tax, for the nine months ended September 30, 2020 and 2019:~~

~~The following represents the reclassifications out of accumulated other comprehensive income/(loss) for the nine months ended September 30, 2020 and 2019:~~

The Company utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements.

Interest Rate Swaps Designated as Cash Flow Hedges: Interest rate swaps with a notional amount of $270.0 million ~~and $245.0 million~~ as of ~~September 30, 2020~~both March 31, 2021 and December 31, ~~2019, respectively,~~2020 were designated as cash flow hedges of certain interest-bearing ~~deposits and FHLB advances.~~deposits. The Company also has a $15.0 million cash flow hedge of a short-term borrowing as of March 31, 2021. On a quarterly basis, the Company performs a qualitative hedge effectiveness assessment. This assessment takes into consideration any adverse developments related to the counterparty’s risk of default and any negative events or circumstances that affect the factors that originally enabled the Company to assess that it could reasonably support, qualitatively, an expectation that the hedging relationship was and will continue to be highly effective. As of ~~September 30, 2020,~~March 31, 2021, there were no events or market conditions that would result in hedge ineffectiveness. The aggregate fair value of the swaps is recorded in other assets/liabilities with changes in fair value recorded in other comprehensive income. The amount included in

accumulated other comprehensive income would be reclassified to current earnings should the hedges no longer be considered effective. The Company expects the hedges to remain fully effective during the remaining terms of the swaps.

The following table presents information about the interest rate swaps designated as cash flow hedges as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:

(Dollars in thousands)	September 30, 2020			December 31, 2019			March 31, 2021			December 31, 2020
Notional amount	$	270,000		$	245,000		$	270,000		$	270,000
Weighted average pay rate		1.93	%		2.05	%		1.93	%		1.93	%
Weighted average receive rate		0.22	%		1.83	%		0.20	%		0.22	%
Weighted average maturity	2.27 years			2.45 years			1.78 years			2.02 years
Unrealized gain, net	$	(11,001	)	$	(3,667	)
Unrealized loss, net							$	(8,166	)	$	(9,616	)

Number of contracts		13			12			13			13

Net interest expense recorded on these swap transactions totaled ~~$1.1~~$1.2 million and ~~$2.4 million~~$106,000 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, respectively. ~~Net interest income recorded on these swap transactions totaled $289,000 and $915,000 for the three and nine months ended September 30, 2019, respectively.~~

The following table presents the net gain/(loss) recorded in accumulated other comprehensive income/(loss) and the consolidated financial statements relating to the cash flow derivative instruments for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended March 31,
(In thousands)	2020			2019			2020			2019			2021		2020
Interest rate contracts
Gain/(loss) recognized in OCI (effective portion)	$	1,026		$	(808	)	$	(5,404	)	$	(3,971	)	$	1,450	$	(8,878	)
Gain/(loss) reclassified from OCI to interest expense		(4	)		56			(63	)		99			—		(71	)
Gain/(loss) recognized in other non-interest expense (ineffective portion)		—			—			—			—
Gain/(loss) recognized in other noninterest expense (ineffective portion)														—		—

During the first quarter of 2020, the Company recognized an unrealized after-tax gain of $26,000 in accumulated other comprehensive income/(loss) related to the termination of 3 interest rate swaps designated as cash flow hedges. During the second quarter of 2019, the Company recognized an unrealized after-tax gain of $189,000 in accumulated other comprehensive income/(loss) related to the termination of 4 interest rate swaps designated as cash flow hedges. These gains ~~are being~~were amortized into earnings over the remaining life of the terminated ~~swaps.~~swaps and completed amortization as of December 31, 2020. The Company did not recognize pre-tax interest income for the three months ended March 31, 2021, related to the amortization of the gain on the terminated interest rate swaps designated as cash flow hedges. The Company recognized pre-tax interest incomeof ~~$5,000 and $85,000~~$71,000 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020, ~~respectively, and $81,000 and $142,000 for the three and nine months ended September 30, 2019, respectively,~~ related to the amortization of the gain on the terminated interest rate swaps designated as cash flow hedges.

	September 30, 2020					March 31, 2021
	Notional		Fair			Notional		Fair
(In thousands)	Amount		Value			Amount		Value
Interest rate swaps related to interest-bearing deposits and FHLB advances	$	270,000	$	(11,001	)
Interest rate swaps related to interest-bearing deposits						$	270,000	$	(8,166	)
Total included in other assets		—		—			—		—
Total included in other liabilities		270,000		(11,001	)		270,000		(8,166	)

	December 31, 2019					December 31, 2020
	Notional		Fair			Notional		Fair
(In thousands)	Amount		Value			Amount		Value
Interest rate swaps related to interest-bearing deposits	$	245,000	$	(3,667	)	$	270,000	$	(9,616	)
Total included in other assets		70,000		121			—		—
Total included in other liabilities		175,000		(3,788	)		270,000		(9,616	)

Derivatives Not Designated as Accounting Hedges: The Company offers facility ~~specific /~~ specific/loan level swaps to its customers and offsets its exposure from such contracts by entering into mirror image swaps with a financial ~~institution /~~ institution/swap counterparty (loan level / back to back swap program). The customer accommodations and any offsetting swaps are treated as non-hedging derivative instruments which do not qualify for hedge accounting (“standalone derivatives”). The notional amount of the swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual contracts. The fair value of the swaps is recorded as both an asset and a liability, in other assets and other liabilities, respectively, in equal amounts for these transactions. The accrued interest receivable and payable of $4.7 million related to our swaps is recorded in other assets and other liabilities as of March 31, 2021.

(Dollars in thousands)	September 30, 2020			December 31, 2019			March 31, 2021			December 31, 2020
Notional amount	$	853,532		$	793,875		$	789,673		$	823,134
Fair value	$	92,238		$	32,381		$	45,301		$	79,529
Weighted average pay rates		4.02	%		4.12	%		4.05	%		4.02	%
Weighted average receive rates		1.92	%		3.54	%		1.89	%		1.91	%
Weighted average maturity	6.7 years			7.3 years			6.13 years			6.5 years

Number of contracts		98			91			93			95

~~During~~In June 2016, the Company issued $50.0 million in aggregate principal amount of fixed-to-floating subordinated notes (the “2016 Notes”) to certain institutional investors. The 2016 Notes are non-callable for five years, have a stated maturity of June 30, 2026, and bear interest at a fixed rate of ~~6.0%~~6.0 percent per year until June 30, 2021. From June 30, 2021 to the maturity date or early

redemption date, the interest rate will reset quarterly to a level equal to the then current three-month LIBOR rate plus 485 basis points, payable quarterly in arrears. Debt issuance costs incurred totaled $1.3 million and are being amortized to maturity.

Approximately $40.0 million of the net proceeds from the sale of the 2016 Notes were contributed by the Company to the Bank in the second quarter of 2016. The remaining funds (approximately $10 million) were retained by the Company for operational purposes.

~~During~~In December 2017, the Company issued $35.0 million in aggregate principal amount of fixed-to-floating subordinated notes (the “2017 Notes”) to certain institutional investors. The 2017 Notes are non-callable for five years, have a stated maturity of December 15, 2027, and bear interest at a fixed rate of ~~4.75%~~4.75 percent per year until December 15, 2022. From December 16, 2022 to the maturity date or early redemption date, the interest rate will reset quarterly to a level equal to the then current three-month LIBOR rate plus 254 basis points, payable quarterly in arrears. Debt issuance costs incurred totaled ~~$875 thousand~~$875,000 and are being amortized to maturity.

Approximately $29.1 million of the net proceeds from the sale of the 2017 Notes were contributed by the Company to the Bank in the fourth quarter of 2017. The remaining funds ~~of approximately~~(approximately $5 ~~million,~~million), representing three years of interest payments, were retained by the Company for operational purposes.

In December 2020, the Company issued $100.0 million in aggregate principal amount of fixed to floating subordinates notes (the “2020 Notes”) to certain institutional investors. The 2020 Notes are non-callable for five years, have a stated maturity of December 22, 2030, and bear interest at a fixed rate of 3.50 percent per year until December 22, 2025. From December 23, 2025 to the maturity date or early redemption date, the interest rate will reset quarterly to a level equal to the then current three-month SOFR plus 326 basis points, payable quarterly in arrears. Debt issuance costs incurred totaled $1.9 million and are being amortized to maturity.

The Company plans for the use of proceeds from the issuance of the 2020 Notes could include stock repurchases, redemption of the 2016 Notes and acquisitions of wealth management firms.

Subordinated debt is presented net of issuance costs on the Consolidated Statements of Condition. The subordinated debt issuances are included in the Company’s regulatory total capital amount and ratio.

In connection with the issuance of the ~~2017~~2020 Notes, the Company obtained ratings from Kroll Bond Rating Agency (“KBRA”) and Moody’s Investors Services (“Moody’s). KBRA an assigned investment grade rating of BBB- and Moody’s assigned investment grade of Baa3 for the ~~Company’s subordinated debt.~~2020 Notes at the time of issuance.

On January 1, 2019, the Company adopted FASB issued ASU No. 2016-02, “Leases” (Topic 842), which establishes a right of use model that requires a lessee to record a ROU asset and a lease liability for all leases with terms longer than 12 months. The Company adopted the new lease guidance using the modified retrospective approach and elected the transition option issued

~~under ASU 2018-11,~~ ~~Leases (Topic 842) Targeted Improvements, which allows entities to continue to apply the legacy guidance in ASC 840,~~ ~~Leases, to prior periods, including disclosure requirements. Accordingly, prior period financial results and disclosures have not been adjusted.~~

The Company maintains certain property and equipment under direct financing and operating leases. ~~Upon adoption~~As of March 31, 2021, the ~~new~~Company's operating lease ~~guidance, on January 1, 2019, the Company recorded a~~ ROU asset and ~~corresponding~~operating lease liability ~~of $7.9~~totaled $10.2 million and ~~$8.2~~$10.5 million, ~~respectively, on the consolidated statement of condition.~~respectively. As of ~~September 30,~~December 31, 2020, the Company's operating lease ROU asset and operating lease liability totaled ~~$10.0~~$9.4 million and ~~$10.3 million, respectively.As of December 31, 2019, the Company's operating lease ROU asset and operating lease liability totaled $12.1 million and $12.4~~$9.7 million, respectively. A weighted average discount rate of ~~3.09%~~3.02 percent and ~~3.05%~~3.11 percent was used in the measurement of the ROU asset and lease liability as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

The Company's leases have remaining lease terms between three months to 16 years, with a weighted average lease term of ~~5.99~~6.67 years at ~~September 30, 2020.~~March 31, 2021. The Company's leases had remaining lease terms between ~~five~~one months to 1716 years, with a weighted average lease term of ~~6.33~~6.01 years, at December 31, ~~2019.~~2020. The Company’s lease agreements may include options to extend or terminate the lease. The Company’s decision to exercise renewal options is based on an assessment of its current business needs and market factors at the time of the renewal.

Total operating lease costs were ~~$789,000~~$701,000 and ~~$756,000~~$827,000 for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. The variable lease costs were ~~$82,000~~$84,000 and ~~$83,000~~$89,000 for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively.~~

Total operating lease costs were $2.4 million and $2.1 million for the nine months ended September 30, 2020 and 2019, respectively. The variable lease costs were $259,000 and $238,000 for the nine months ended September 30, 2020 and 2019, respectively.

The following is a schedule of the Company's operating lease liabilities by contractual maturity as of ~~September 30, 2020:~~March 31, 2021:

(In thousands)
2020	$	2,921
2021		2,262	$	2,523
2022		1,849		2,228
2023		1,382		1,721
2024		1,196		1,426
2025				1,005
Thereafter		2,087		2,825
Total lease payments		11,697		11,728
Less: imputed interest		1,379		1,219
Total present value of lease payments	$	10,318	$	10,509

The following table shows the supplemental cash flow information related to the Company’s direct finance and operating leases for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

	For the Nine Months Ended				For the Three Months Ended
(In thousands)	2020		2019		2021		2020
Right-of-use asset obtained in exchange for lease obligation	$	455	$	7,862	$	1,412	$	157
Operating cash flows from operating leases		2,139		1,844		619		728
Operating cash flows from direct finance leases		261		290		79		90
Financing cash flows from direct finance leases		561		561		187		187

On June 16, 2016, the FASB issued Accounting Standards Update ~~(“ASU”)~~ No. 2016-02, “Leases (Topic 842)”. The standard requires a lessee to recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months. For lessees, virtually all leases will be required to be recognized on the balance sheet by recording a right-of-use asset and lease liability. Subsequent accounting for leases varies depending on whether the lease is an operating lease or a finance lease. The ASU requires additional qualitative and quantitative disclosures with the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

In July 2018, the FASB issued ASU 2018-11 “Leases (Topic 842) Targeted Improvements” which allows entities adopting ASU No. 2016-02 to choose an additional transition method, under which an entity to initially applies the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The amendment in this update becomes effective for annual periods and interim periods within those annual periods beginning after December 15, 2018. The Company has elected the transition method permitted by ASU No. 2018-11 under which an entity shall recognize and measure leases that exist at the application date and prior comparative periods are not adjusted. Upon adoption of the new lease guidance on January 1, 2019, the Company recorded a lease liability of approximately $8.2 million, a right-of-use-asset of approximately $7.9 million and a cumulative effect adjustment to retained earnings of $661,000.

~~In June 2016, the FASB issued ASU~~ 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. This ASU replaces the incurred loss model with an expected loss model, referred to as “current expected credit loss” (CECL) model. It will significantly change estimates for credit losses related to financial assets measured at amortized cost, including loans receivable, ~~held-to-maturity (HTM) debt securities~~ and certain other contracts. ~~Due to the uncertainty created by the current environment u~~nder a provision provided by the CARES Act, the Company elected to delay the adoption of FASB’s new rule covering the CECL standard until the earlier of the termination date of the national emergency declared by President Trump under the National Emergencies Act on March 13, 2020, related to the outbreak of COVID-19, or December 31, 2020. Once the delay provision has been terminated, adoption will be retroactive to January 1, 2020. The largest impact will be on lenders and the allowance for loan and lease losses (ALLL). This ASU will be effective for public business entities (PBEs) in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The ~~impact~~Company has elected to delay the ~~Company’s ALLL has not yet been calculated.~~adoption of ASU 2016-13, as approved by the CARES Act, until January 1, 2022. The Company has reviewed the potential impact to our securities portfolio, which primarily consists of U.S. government sponsored entities, mortgage-backed securities and municipal securities which have no history of credit loss and have strong credit ratings. The Company does not expect the standard to have a material impact on its financial statements as it relates to the Company’s securities portfolio. The Company ~~has formed a~~is also currently evaluating the impact the CECL ~~committee comprised of finance,~~model will have on our accounting and ~~credit members.~~allowance for loans losses. The Company has ~~evaluated and~~ selected a third-party firm to assist in the development of a CECL ~~program, selected portfolio segmentations, loss methodologies and the probability of default/loss given default~~ model to assist in the calculation of the ~~ALLL~~allowance for loan and lease losses in preparation for the change to the expected loss model. The Company ~~continues~~has also engaged a third-party firm to ~~work towards implementing~~perform a model validation of our CECL model. The Company is also in the ~~accounting, reporting~~process of updating its policies and ~~governance processes required under the new standard and completing the model implementation and validation.~~internal controls accordingly. The Company expects to recognize a one-time cumulative-effect adjustment to our ALLL ~~through retained earnings~~ as of ~~the~~ January 1, ~~2020.~~2022, consistent with regulatory expectations set forth in interagency guidance. The Company cannot yet determine the magnitude of any such one-time cumulative adjustment or of the overall impact of the new standard on our consolidated financial condition or results of operations.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”. The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. This ASU removes the following exceptions: exception to the incremental approach for intra-period tax allocation when there is a loss from continuing operations and income or a gain from other items; exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment; exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary; and the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. ~~The Company is assessing~~This ASU ~~2019-12 and its~~did not have a material impact on ~~its~~the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. The amendments in this Update provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this Update apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. The amendments in this ASU can be adopted immediately and are effective through December 31, 2020. The Company is evaluating alternative reference rates including the Secured Overnight Financing Rate (SOFR) in preparation for a rate index replacement and the adoption of this ASU.

FORWARD LOOKING STATEMENTS: This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about Management’s confidence and strategies and Management’s expectations about operations, growth, financial results, new and existing programs and products, investments, relationships, opportunities and market conditions. These statements may be identified by such forward-looking terminology as “expect”, “look”, “believe”, “anticipate”, “may”, or similar statements or variations of such terms. Actual results may differ materially from such forward-looking statements. Factors that may cause results to differ materially from those contemplated by such forward-looking statements include, among others, those risk factors identified in the Company’s Form 10-K for the year ended December 31, ~~2019,~~2020, in addition to/which include the following:

Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and whether the gradual reopening of businesses will result in a meaningful increase in economic activity. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

Moreover, our operations depend on the management skills of our executive officers and directors, many of whom have held officer and director positions with us for many years. The unanticipated loss or unavailability of key employees due to the pandemic could hinder our ability to operate our business or execute our business strategy.

Except as may be required by applicable law or regulation, the Company undertakes no duty to update any forward-looking statements to conform the statement to actual results or change in the Company’s expectations. Although we believe that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES: Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon the Company’s consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Note 1 to the Company’s Audited Consolidated Financial Statements for the year ended December 31, ~~2019~~2020 contains a summary of the Company’s significant accounting policies.

Management believes that the Company’s policy with respect to the methodology for the determination of the allowance for loan and lease losses involves a higher degree of complexity and requires Management to make difficult and subjective judgments, which often require assumptions or estimates about highly uncertain matters. Changes in these judgments, assumptions or estimates could materially impact results of operations. This critical policy and its application are periodically reviewed with the Audit Committee and the Board of Directors.

The provision for loan and lease losses is based upon Management’s evaluation of the adequacy of the allowance, including an assessment of known and inherent risks in the portfolio, giving consideration to the size and composition of the loan portfolio, actual loan loss experience, level of delinquencies, classified loans and nonperforming loans, detailed analysis of individual loans for which full collectability may not be assured, the existence and estimated fair value of any underlying collateral and guarantees securing the loans, and current economic and market conditions. Although Management uses the best information available, the level of the allowance for loan and lease losses remains an estimate, which is subject to significant judgment and short-term change. Various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan and lease losses. Such agencies may require the Company to make additional provisions for loan and lease losses based upon information available to them at the time of their examination. Furthermore, the majority of the Company’s loans are secured by real estate in New Jersey and, to a lesser extent, New York City. Accordingly, the collectability of a substantial portion of the carrying value of the Company’s loan portfolio is susceptible to changes in local market conditions and any adverse economic conditions. Future adjustments to the provision for loan and lease losses and allowance for loan and lease losses may be necessary due to economic, operating, regulatory and other conditions beyond the Company’s control.

The Company accounts for its debt securities in accordance with “Accounting Standards Codification (“ASC”) 320, “Investments - Debt Securities” and its equity security in accordance with ASC 321, “Investments – Equity Securities”. All securities are classified as available for sale and are carried at fair value, with unrealized holding gains and losses reported in other

comprehensive income/(loss), net of tax, with the exception of the Company’s investment in a CRA investment fund which is classified as an equity security. In accordance with ASU 2016-01, “Financial Instruments” unrealized holding gains and losses are marked to market through the income statement.

EXECUTIVE SUMMARY: The following table presents certain key aspects of our performance for the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020.

	For the Three Months Ended September 30,						Change			For the Three Months Ended March 31,						Change
(Dollars in thousands, except per share data)	2020			2019			2020 vs 2019			2021			2020 (1)			2021 vs 2020
Results of Operations:
Net interest income	$	32,149		$	30,085		$	2,064		$	31,793		$	31,747		$	46
Provision for loan and lease losses (1)		5,150			800			4,350			225			20,000			(19,775	)
Net interest income after provision for loan and lease losses		26,999			29,285			(2,286	)		31,568			11,747			19,821
Wealth management fee income (2)		10,119			9,501			618			12,131			9,955			2,176
Other income ~~(3)~~		10,092			4,915			5,177			5,689			4,562			1,127
Operating expense(3)		28,461			26,259			2,202			31,594			28,235			3,359
Income before income tax expense		18,749			17,442			1,307			17,794			(1,971	)		19,765
Income tax expense(4)		5,202			5,216			(14	)		4,616			(3,344	)		7,960
Net income	$	13,547		$	12,226		$	1,321		$	13,178		$	1,373		$	11,805

Total revenue (Net interest income plus wealth management fee income and other income)	$	52,360		$	44,501		$	7,859
Total revenue (5)										$	49,613		$	46,264		$	3,349

Diluted average shares outstanding		19,132,650			19,484,905			(352,255	)		19,531,689			19,079,575			452,114

Diluted earnings per share	$	0.71		$	0.63		$	0.08		$	0.67		$	0.07		$	0.60

Return on average assets annualized (ROAA)		0.89	%		1.00	%		(0.11	)%		0.89	%		0.11	%		0.78	%
Return on average equity annualized (ROAE)		10.53			9.87			0.66			10.03			1.08			8.95

~~The following table presents certain key aspects of our performance for the nine months ended September 30, 2020 and 2019.~~

For the quarter ended ~~September 30, 2020,~~March 31, 2021, the Company recorded revenue of ~~$52.36~~$49.61 million, pretax income of ~~$18.75~~$17.79 million, net income of ~~$13.55~~$13.18 million and diluted earnings per share of ~~$0.71,~~$0.67, compared to revenue of ~~$44.50~~$46.26 million, a pretax ~~income~~loss of ~~$17.44~~$1.97 million, net income of ~~$12.23~~$1.37 million and diluted earnings per share of ~~$0.63~~$0.07 for the same ~~three month~~three-month period last year. The ~~2020~~2021 quarter ~~net interest income and~~included increased noninterest income, ~~reflected earnings from the PPP and increased~~principally wealth management income ~~(primarily due to the acquisition of Point View in September 2019), which was partially offset by increased operating expenses (due in part to the wealth management firm acquired September 2019)~~ and ~~an increase in the provision for~~income from capital markets activities (which includes mortgage banking income, back-to-back swap income, SBA loan income, and ~~lease losses to $5.15 million.~~corporate advisory fee income). The ~~increased~~2021 quarter also included a significantly reduced provision for loan losses when compared to the same quarter last year. The 2021 quarter included a $225,000 provision while the 2020 quarter included a $20.0 million provision, which was due to ~~increased qualitative factors associated with~~ the ~~increased unemployment rate,~~ economic ~~forecasts and the level of loan payment deferral requests~~environment at that time created by the COVID-19 ~~pandemic. In comparing~~pandemic, which led to increased qualitative loss factors when calculating the ~~third~~allowance for loan losses. Fee income generated by capital markets activity totaled $3.57 million for the first quarter of ~~2020 to the third quarter of 2019, revenue increased by 18%. Net interest income benefitted from~~2021, an increase in our average interest-earning assets partially offset by a decline in our net interest margin for the quarter ended September 30, 2020. Capital markets activity (which includes loan level back-to-back swap activities, the SBA lending and sale program and mortgage banking activities)~~resulted in $1.03 million~~ of ~~revenue for the third quarter of 2020 a~~

~~decline of $1.74 million~~$733,000 from ~~$2.77~~$2.84 million for the same period in ~~2019.~~2020, despite a decline in loan level back-to-back swap income of $1.4 million. Income from these programs are not linear each quarter, as some quarters will be higher than others.

The ~~Company recorded revenue~~2021 three-month period also included $1.5 million of ~~$143.22 million, pretax income~~severance expense related to certain staff reorganizations within several areas of ~~$27.46 million, net income of $23.16 million and diluted earnings per share of $1.22 for~~ the nine months ended September 30, 2020 compared to revenue of $128.53 million, pretax income of $48.33 million, net income of $35.20 million and diluted earnings per share of $1.81 for the same 2019 period.Bank. The 2020 ~~nine-month~~three-month period net interest income and noninterest income reflected earnings from the PPP and increased wealth management income (primarily due to the acquisition of Point View in September 2019), which was partially offset by increased operating expenses (due in part to the previous mentioned firm acquired in September 2019). Net interest income benefitted from an increase in our average interest-earning assets partially offset by a decline in our net interest margin for the nine months ended September 30, 2020. Capital markets activity (which includes loan level back-to-back swap activities, the SBA lending and sale program and mortgage banking activities)resulted in $4.81 million of revenue for the nine months ended September 30, 2020, a decline of $126 thousand from $4.93 million for the same period in 2019. Income from these programs are not linear each quarter, as some quarters will be higher than others.

~~The 2020 nine-month period also~~ included a tax benefit of $3.2 million ~~recorded in the first quarter of 2020~~ caused by the changes in the treatment of tax net operating losses (“NOL”) under the CARES Act. The decrease in net income and EPS for the 2020 nine-month period was the result of a $30.05 million provision for loan losses due to the current environment due to the COVID-19 pandemic, as compared to a $2.05 million provision for the 2019 nine-month period.

COVID-19 UPDATE: The COVID-19 pandemic has ~~continued to have~~had a devastating effect on businesses both locally and nationally. ~~As a result,~~In March 2020, Congress passed the CARES Act to provide fast and direct economic assistance to American workers, families and businesses. The CARES Act contains substantial tax and spending provisions including direct financial aid to American families, extensive emergency funding for hospitals and medical providers, and economic stimulus to significant impacted industry sectors. Below are some of the measures the Company has implemented in response to COVID-19.

The Company has an Incident Response Team comprised of senior and departmental leaders that meet frequently to monitor and address the ongoing developments and challenges presented by the COVID-19 pandemic. The following represent responses by Management as a result of COVID-19:

The Company has identified several industry sectors within the loan portfolio that are most impacted by COVID-19 and include but are not limited to: manufacturing, transportation, accommodation and food services, retail trade, real estate – retail and arts, entertainment and recreation. Management has performed portfolio reviews related to these sectors in the second and third quarters of 2020. There are approximately $95 million or 2% of loans with COVID related residual risk as of September 30, 2020. Management will continue to monitor these sectors closely and evaluate for potential impact on our ALLL.

The Company will continue to prudently extend credit to our clients. The Company expects COVID-19 to have ~~a significant~~an impact on our operations but cannot determine or estimate the ultimate impact at this time.

CONTRACTUAL OBLIGATIONS: For a discussion of our contractual obligations, see the information set forth in the Corporation’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations.”

OFF-BALANCE SHEET ARRANGEMENTS: For a discussion of our off-balance sheet arrangements, see the information set forth in the Corporation’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Off-Balance Sheet Arrangements.”

NET INTEREST INCOME (“NII”) / NET INTEREST MARGIN (“NIM”) / AVERAGE BALANCE SHEET:

The primary source of the Company’s operating income is net interest income, which is the difference between interest and dividends earned on earning assets and fees earned on loans, and interest paid on interest-bearing liabilities. Earning assets include loans, investment securities, interest-earning deposits and federal funds sold. Interest-bearing liabilities include interest-bearing checking, savings and time deposits, Federal Home Loan Bank advances, subordinated debt and other borrowings. Net interest income is determined by the difference between the average yields earned on earning assets and the average cost of interest-bearing liabilities (“net interest spread”) and the relative amounts of earning assets and interest-bearing liabilities. Net interest margin is calculated as net interest income as a percent of total interest earning assets on an annualized basis. The Company’s net interest income, spread and margin are affected by regulatory, economic and competitive factors that influence interest rates, loan demand and deposit flows and general levels of nonperforming assets.

The following table summarize the Company’s net interest income and margin for the periods indicated:

	Three Months Ended						Three Months Ended						Three Months Ended						Three Months Ended
	September 30, 2020						September 30, 2019						March 31, 2021						March 31, 2020
(Dollars in thousands)	NII			NIM			NII			NIM			NII			NIM			NII			NIM
NII/NIM excluding the below	$	30,327			2.45	%	$	29,896			2.67	%	$	30,565			2.49	%	$	31,279			2.60	%
Prepayment premiums received on loan paydowns		104			0.01	%		236			0.02	%		704			0.05	%		525			0.05	%
Effect of maintaining excess interest earning cash		(266	)		-0.24	%		(47	)		-0.09	%		(195	)		-0.21	%		(57	)		-0.08	%
Effect of PPP loans		1,984			-0.02	%		—			0.00	%		719			-0.05	%		—			0.00	%
NII/NIM as reported	$	32,149			2.20	%	$	30,085			2.60	%	$	31,793			2.28	%	$	31,747			2.57	%

Net interest income, on a fully tax-equivalent basis, ~~increased $1.7 million, or 6 percent,~~decreased $264,000 for the ~~third~~first quarter of ~~2020~~2021 to ~~$32.5~~$32.1 million ~~from net interest income of $30.8~~as compared to $32.3 million for the same quarter in ~~2019.~~2020. The net interest margin was ~~2.20~~2.28 percent and ~~2.60~~2.57 percent for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively, a decrease of 4029 basis points. Net interest income, on a fully tax-equivalent basis, increased $5.9 million, or 6 percent, for the first nine months ended September 30, 2020 to $97.2 million from net interest income of $91.3 million for the same period in 2019. The net interest margin was 2.33 percent and 2.65 percent for the nine months ended September 30, 2020 and 2019, respectively, a decrease of 32 basis points. As shown above, the Company’s reported NIM declined 40 basis points compared to the September 30, 2019 quarter, while core NIM declined only 22 basis points compared to the September 30, 2019 quarter. As a commercial bank, the Company is asset sensitive with a large portion of its commercial loan portfolio tied to one-month ~~LIBOR.~~London Interbank Offered Rate (“LIBOR”). The decline in the NIM when compared to the quarter ended March 31, 2020 was a function of the large decline in one-month LIBOR which occurred during the second quarter of 2020 and higher levels of interest-earning assets (such as interest-earning deposits, investment securities, and PPP loans) with lower yields.

The growth in net interest income for the three and nine months ended September 30, 2020 was due to increases in the average balance of interest-earning assets and a decrease in the average cost of interest-bearing liabilities, offset by an increase in the average balance of interest-bearing liabilities and by a decrease in the average yield on interest-earning assets. The Company continues to be impacted by competitive pressures in attracting new loans and deposits.

Net interest income ~~has~~ benefitted from interest and fees from PPP loans for ~~both~~ the three ~~and nine~~ months ended ~~September 30, 2020.~~March 31, 2021. As of ~~September 30, 2020,~~March 31, 2021, the Company had ~~$202.0~~$186.9 million of PPP loans excluding held for sale, with net deferred fees of ~~$1.5 million~~$948,000 that will be amortized to net interest income over the life of the loans, which have a stated maturity of two to five years. However, these loans may be eligible for loan forgiveness by the SBA at an earlier date, which would accelerate the amortization of the net deferred fees.

Future net interest income ~~will~~is expected to be benefitted by the repricing of the Company’s time certificates of deposit (“CDs”). Over the twelve-month period ending ~~September 30, 20201,~~March 31, 2022, approximately ~~$510~~$415 million of CDs with an average rate of approximately ~~1.35%~~0.76 percent will mature.

The following table summarizes the loans that the Company closed during the periods indicated:

	For the Nine Months Ended				For the Three Months Ended
	September 30,		September 30,		March 31,		March 31,
(In thousands)	2020		2019		2021		2020
Residential mortgage loans originated for portfolio	$	66,057	$	51,910	$	15,814	$	14,831
Residential mortgage loans originated for sale		110,973		28,721		45,873		19,391
Total residential mortgage loans		177,030		80,631		61,687		34,222

Commercial real estate loans		11,219		98,643		38,363		8,858
Multifamily properties		75,458		156,864		85,009		61,998
C&I loans (A) (B)		260,250		513,975		129,141		42,908
Small business administration (C)		614,443		16,300		58,730		13,830
Wealth Lines of Credit (A)		5,750		21,085		2,475		3,250
Total commercial loans		967,120		806,867		313,718		130,844

Installment loans		1,459		2,417		63		256
Home equity lines of credit (A)		12,671		10,864		1,899		3,632
Total loans closed	$	1,158,280	$	900,779	$	377,367	$	168,954

The Company manages its origination levels in conjunction with anticipated paydowns and payoffs. The Company has managed its balance sheet such that multifamily and 1-4 family residential loans declined as a percentage of the overall loan portfolio and C&I loans became a larger percentage of the overall loan portfolio. Commercial real estate loan originations declined by $41.8 million and $81.4 million for the three and nine months ended September 30, 2020, respectively. C&I loan originations declined by $110.9 million and $253.7 million for the three and nine months ended September 30, 2020, respectively. Multifamily originations also declined by $75.6 million to $1.5 million for the three months ended September 30, 2020 as compared to the prior year. The decreases in originations were due to the Company’s focused efforts on PPP production and loan deferral requests during the second and third quarters of 2020. Residential mortgage loan originations increased by $52.2 million and $96.4 million for the three and nine months ended September 30, 2020, respectively. The increase was primarily due to an increased demand by residential customers reflective of the low interest rate environment and the ability of the Company to sell these mortgages in the secondary market to generate noninterest income.

At ~~September 30, 2020,~~March 31, 2021, December 31, ~~2019~~2020 and ~~September 30, 2019,~~March 31, 2020, the Bank had a concentration in commercial real estate (“CRE”) loans as defined by applicable regulatory guidance as follows:

	September 30,			December 31,			September 30,			March 31,			December 31,			March 31,
	2020			2019			2019			2021			2020			2020
Multifamily mortgage loans as a percent of total regulatory capital of the Bank		195	%		212	%		208	%		191	%		188	%		207	%

Non-owner occupied commercial real estate loans as a percent of total regulatory capital of the Bank		176			192			182			160			168			188

Total CRE concentration		371	%		404	%		390	%		351	%		356	%		395	%

The Bank believes it addresses the key elements in the risk management framework laid out by its regulators for the effective management of CRE concentration risks.

The following table reflects the components of the average balance sheet and of net interest income for the periods indicated:

		September 30, 2020									September 30, 2019										March 31, 2021									March 31, 2020
		Average			Income/						Average			Income/							Average			Income/						Average			Income/
(Dollars in thousands)		Balance			Expense			Yield			Balance			Expense			Yield				Balance			Expense			Yield			Balance			Expense			Yield
ASSETS:
Interest-earning assets:
Investments:
Taxable (1)		$	553,607		$	2,182			1.58	%	$	393,386		$	2,477			2.52	%		$	761,187		$	2,629			1.38	%	$	411,806		$	2,459			2.39	%
Tax-exempt (1) (2)			9,127			116			5.08			13,497			165			4.89				7,980			98			4.91			10,534			131			4.97
Loans (2) (3):
Residential mortgages			529,500			4,437			3.35			567,097			4,811			3.39				501,590			3,954			3.15			535,114			4,576			3.42
Commercial mortgages			1,929,319			15,115			3.13			1,856,216			17,870			3.85				1,840,363			14,420			3.13			1,955,808			18,483			3.78
Commercial			2,134,399			17,653			3.31			1,530,131			18,605			4.86				1,932,692			16,455			3.41			1,758,137			18,593			4.23
Commercial construction			4,395			55			5.01			2,619			51			7.79				15,606			139			3.56			5,629			88			6.25
Installment			52,659			377			2.86			53,891			560			4.16				37,695			276			2.93			53,983			464			3.44
Home equity			53,373			444			3.33			58,573			736			5.03				48,853			399			3.27			55,654			614			4.41
Other			283			7			9.89			396			11			11.11				246			5			8.13			364			9			9.89
Total loans			4,703,928			38,088			3.24			4,068,923			42,644			4.19				4,377,045			35,648			3.26			4,364,689			42,827			3.92
Federal funds sold			102			—			0.25			101			—			0.25				102			—			0.25			102			—			0.25
Interest-earning deposits			652,832			159			0.10			256,865			1,362			2.12				555,331			128			0.09			251,566			552			0.88
Total interest-earning assets			5,919,596			40,545			2.74	%		4,732,772			46,648			3.94	%			5,701,645			38,503			2.70	%		5,038,697			45,969			3.65	%
Noninterest-earning assets:
Cash and due from banks			7,479									5,628										11,129									5,517
Allowance for loan and lease losses			(68,110	)								(40,806	)									(71,160	)								(44,368	)
Premises and equipment			21,511									21,121										22,634									21,145
Other assets			242,017									151,265										228,134									161,452
Total noninterest-earning assets			202,897									137,208										190,737									143,746
Total assets		$	6,122,493								$	4,869,980									$	5,892,382								$	5,182,443
LIABILITIES:
Interest-bearing deposits:
Checking		$	1,828,780		$	1,130			0.25	%	$	1,410,837		$	4,467			1.27	%		$	1,908,380		$	978			0.20	%	$	1,540,798		$	3,447			0.89	%
Money markets			1,235,040			920			0.30			1,184,589			4,227			1.43				1,259,597			794			0.25			1,192,049			2,981			1.00
Savings			125,016			16			0.05			113,961			16			0.06				135,202			17			0.05			110,905			15			0.05
Certificates of deposit - retail			642,732			2,529			1.57			649,393			3,781			2.33				533,488			1,470			1.10			698,019			3,694			2.12
Subtotal interest-bearing deposits			3,831,568			4,595			0.48			3,358,780			12,491			1.49				3,836,667			3,259			0.34			3,541,771			10,137			1.14
Interest-bearing demand - brokered			130,000			636			1.96			180,000			901			2.00				110,000			493			1.79			180,000			923			2.05
Certificates of deposit - brokered			33,742			267			3.17			33,688			267			3.17				33,769			261			3.09			33,715			263			3.12
Total interest-bearing deposits			3,995,310			5,498			0.55			3,572,468			13,659			1.53				3,980,436			4,013			0.40			3,755,486			11,323			1.21
FHLB advances and borrowings			475,465			1,221			1.03			114,584			886			3.09				186,006			209			0.45			183,398			1,012			2.21
Finance lease liabilities			7,054			84			4.76			7,866			94			4.78				6,608			79			4.78			7,475			90			4.82
Subordinated debt			83,552			1,222			5.85			83,329			1,224			5.88				181,795			2,145			4.72			83,439			1,223			5.86
Total interest-bearing liabilities			4,561,381			8,025			0.70	%		3,778,247			15,863			1.68	%			4,354,845			6,446			0.59	%		4,029,798			13,648			1.35	%
Noninterest-bearing liabilities:
Demand deposits			872,560									512,497										848,325									542,557
Accrued expenses and other liabilities			173,816									83,554										163,569									101,662
Total noninterest-bearing liabilities			1,046,376									596,051										1,011,894									644,219
Shareholders’ equity			514,736									495,682										525,643									508,426
Total liabilities and shareholders’ equity		$	6,122,493								$	4,869,980									$	5,892,382								$	5,182,443
Net interest income (tax-equivalent basis)						32,520									30,785										32,057									32,321
Net interest spread									2.04	%								2.26	%									2.11	%								2.30	%
Net interest margin (4)									2.20	%								2.60	%									2.28	%								2.57	%
Tax equivalent adjustment						(371	)								(700	)									(264	)								(574	)
Net interest income	Net interest income				$	32,149								$	30,085					Net interest income				$	31,793								$	31,747

September 30, 2020

September 30, 2019

Average

Income/

Average

Income/

(Dollars in thousands)

Balance

Expense

Yield

Balance

Expense

Yield

ASSETS:

Interest-earning assets:

Investments:

Taxable (1)

$
467,881

$
6,749

1.92
%

$
391,032

$
7,800

2.66
%
Tax-exempt (1) (2)

9,930

376

5.05

15,904

581

4.87

Loans (2) (3):

Residential mortgages

531,563

13,510

3.39

568,902

14,541

3.41

Commercial mortgages

1,989,256

49,745

3.33

1,822,341

53,472

3.91

Commercial

1,977,597

54,450

3.67

1,442,827

52,659

4.87

Commercial construction

4,440

187

5.62

883

51

7.70

Installment

53,165

1,212

3.04

54,552

1,722

4.21

Home equity

54,627

1,512

3.69

60,695

2,319

5.09

Other

321

23

9.55

394

32

10.83

Total loans

4,610,969

120,639

3.49

3,950,594

124,796

4.21

Federal funds sold

102

—

0.25

101

—

0.25

Interest-earning deposits

468,064

820

0.23

245,153

3,897

2.12

Total interest-earning assets

5,556,946

128,584

3.09
%

4,602,784

137,074

3.97
%
Noninterest-earning assets:

Cash and due from banks

6,149

5,436

Allowance for loan and lease losses

(58,896
)

(39,638
)

Premises and equipment

21,373

21,253

Other assets

212,716

133,830

Total noninterest-earning assets

181,342

120,881

Total assets

$
5,738,288

$
4,723,665

LIABILITIES:

Interest-bearing deposits:

Checking

$
1,706,558

$
6,219

0.49
%

$
1,321,248

$
12,299

1.24
%
Money markets

1,211,720

5,374

0.59

1,196,778

12,978

1.45

Savings

118,291

47

0.05

113,552

48

0.06

Certificates of deposit - retail

672,308

9,370

1.86

622,509

10,476

2.24

Subtotal interest-bearing deposits

3,708,877

21,010

0.76

3,254,087

35,801

1.47

Interest-bearing demand - brokered

153,358

2,259

1.96

180,000

2,476

1.83

Certificates of deposit - brokered

33,729

794

3.14

45,412

958

2.81

Total interest-bearing deposits

3,895,964

24,063

0.82

3,479,499

39,235

1.50

FHLB advances and borrowings

330,324

3,360

1.36

108,526

2,558

3.14

Finance lease liabilities

7,266

261

4.79

8,052

290

4.80

Subordinated debt

83,496

3,667

5.86

83,272

3,671

5.88

Total interest-bearing liabilities

4,317,050

31,351

0.97
%

3,679,349

45,754

1.66
%
Noninterest-bearing liabilities:

Demand deposits

763,414

494,023

Accrued expenses and other liabilities

149,187

64,806

Total noninterest-bearing liabilities

912,601

558,829

Shareholders’ equity

508,637

485,487

Total liabilities and shareholders’ equity

$
5,738,288

$
4,723,665

Net interest income (tax-equivalent basis)

97,233

91,320

Net interest spread

2.12
%

2.31
%
Net interest margin (4)

2.33
%

2.65
%
Tax equivalent adjustment

(1,366
)

(1,960
)

Net interest income

$
95,867

$
89,360

The effect of volume and rate changes on net interest income (on a tax-equivalent basis) for the periods indicated are shown below:

	For the Three Months Ended September 30, 2020									For the Three Months Ended March 31, 2021
	Difference due to						Change In			Difference due to						Change In
	Change In:						Income/			Change In:						Income/
(In Thousands):	Volume			Rate			Expense			Volume			Rate			Expense
ASSETS:
Investments	$	734		$	(1,078	)	$	(344	)	$	1,280		$	(1,143	)	$	137
Loans		6,336			(10,892	)		(4,556	)		301			(7,480	)		(7,179	)
Interest-earning deposits		860			(2,063	)		(1,203	)		327			(751	)		(424	)
Total interest income	$	7,930		$	(14,033	)	$	(6,103	)	$	1,908		$	(9,374	)	$	(7,466	)
LIABILITIES:
Interest-bearing checking	$	632		$	(3,969	)	$	(3,337	)	$	234		$	(2,703	)	$	(2,469	)
Money market		130			(3,437	)		(3,307	)		190			(2,377	)		(2,187	)
Savings		1			(1	)		—			3			(1	)		2
Certificates of deposit - retail		(38	)		(1,214	)		(1,252	)		(729	)		(1,495	)		(2,224	)
Certificates of deposit - brokered		—			-			-			—			(2	)		(2	)
Interest bearing demand brokered		(247	)		(18	)		(265	)		(313	)		(117	)		(430	)
Borrowed funds		339			(4	)		335			(51	)		(752	)		(803	)
Capital lease obligation		(10	)		—			(10	)		(11	)		—			(11	)
Subordinated debt		2			(4	)		(2	)		1,160			(238	)		922
Total interest expense	$	809		$	(8,647	)	$	(7,838	)	$	483		$	(7,685	)	$	(7,202	)
Net interest income	$	7,121		$	(5,386	)	$	1,735		$	1,425		$	(1,689	)	$	(264	)

Interest income on interest-earning assets, on a fully tax-equivalent basis, totaled ~~$40.5~~$38.5 million for the ~~third~~first quarter of ~~2020~~2021 compared to ~~$46.6~~$46.0 million for the same quarter of ~~2019,~~2020, reflecting a decrease of ~~$6.1~~$7.5 million, or 13 percent. Interest income on interest-earning assets, on a fully tax-equivalent basis, totaled $128.6 million for the nine months ended September 30, 2020 compared to $137.1 million for the same period of 2019, reflecting a decrease of $8.5 million, or 616 percent. The decrease in ~~both~~ the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, as compared to the ~~comparable periods in 2019~~three months ended March 31, 2020, reflects a decrease in the average yield on interest-earnings assets, partially offset by an increase in the average balance of interest-earning assets.

Average interest-earning assets totaled ~~$5.92~~$5.70 billion for the ~~third~~first quarter of ~~2020,~~2021, an increase of ~~$1.19 billion,~~$663 million, or 2513 percent, from the same period of ~~2019. Average interest-earning assets totaled $5.56 billion for the nine months ended September 30,~~ 2020 ~~an increase of $954.2 million, or 21 percent, from the same period of 2019.~~ . The increase in the average balance of interest-earning assets for the three ~~and nine~~ months ended ~~September 30, 2020, as compared to the comparable periods in 2019 reflects~~March 31, 2021, reflected an increase in the average balance of investment securities, interest-earning deposits and loans, particularly, in the ~~average balance of~~ C&I ~~and~~loans, which was partially offset by a decline in commercial mortgage ~~portfolios.~~loans. Theaverage balance of the ~~C&I~~commercial loan portfolio increased ~~$604.3~~$174.6 million to ~~$2.13~~$1.93 billion, or 3910 percent, for the ~~third~~first quarter of ~~2020, as compared to $1.53~~2021, from $1.76 billion for the three months ended September 30, 2019. The average balance of the C&I loan portfolio increased $534.8 million, or 37 percent, to $1.98 billion for the nine months ended September 30, 2020 as compared to $1.44 billion for the same period in 2019.March 31, 2020. The increase in this portfolio for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 was primarily attributable to the Company’s participation in the PPP program. The Company originated $47 million of PPP loans during the first quarter of 2021. The Company also originated $596 million of PPP loans during the second quarter of 2020, which was partially offset by the sale of $355 million of PPP loans in the third quarter of 2020. The Company has also supported growth in the C&I portfolio through: the addition of seasoned bankers, including a new EVP, Head of Commercial Banking, in 2019 and an equipment finance team in 2017; a continued focus on client service and value-added aspects of the lending process; and a continued focus on markets outside of the immediate branch service area, including markets around the Teaneck and Princeton, New Jersey private banking offices. The average balance of the commercial mortgage portfolio ~~increased $73.1~~decreased $115.4 million to ~~$1.93~~$1.84 billion, or 46 percent, from ~~$1.86~~$1.96 billion for the ~~third~~first quarter of ~~2019.~~2020. The average balance of the commercial mortgage portfolio was $1.99 billion for the nine months ended September 30, 2020 an increase of $166.9 million, or 9 percent, from the same period in 2019. The increasedecrease in the commercial mortgage portfolio for the ~~three and nine months~~quarter ended ~~September 30, 2020 were~~March 31, 2021 was predominately due to ~~maintain the size of the portfolio in anticipation of~~scheduled maturities in the ~~portfolio in the latter part of 2020. These increases were partially offset by decreases in the average balance of the~~portfolio. The residential mortgage portfolio ~~of $37.6~~also decreased by $33.5 million or ~~7 percent, and $37.3 million, or 7~~6 percent to ~~$529.5~~$501.6 million ~~and $531.6 million for~~during the ~~three and nine months ended September 30, 2020, respectively, when compared to~~first quarter of 2021 from the same ~~periods~~period in ~~2019.~~2020. The Company continued to manage its balance sheet such that lower-yielding, primarily fixed rate multifamily loans declined as a percentage of the overall loan portfolio and higher-yielding, primarily floating rate or short duration C&I loans became a larger percentage of the overall loan portfolio.

The average balance of investment securities totaled ~~$562.7~~$769.2 million for the ~~third~~first quarter of ~~2020~~2021 compared to ~~$406.9~~$422.3 million for the same quarter of ~~2019,~~2020, reflecting an increase of ~~$155.9~~$346.8 million, or 38 percent. The average balance of investment securities totaled $477.8 million for the nine months ended September 30, 2020 as compared to $406.9 million for the same period of 2019 reflecting an increase of $70.9 million, or 1782 percent. The increase in the average balance of investment securities was due to the ~~re-purchase~~purchase of securities to maintain the size of the portfolio in anticipation of maturities ~~for the fourth quarter of 2020~~in 2021 and to utilize excess ~~liquidity generated by the sale of PPP loans in the third quarter of 2020.~~liquidity.

The average balance of interest-earning deposits totaled ~~$652.8~~$555.3 million for the three months ended ~~September 30, 2020~~March 31, 2021 when compared to ~~$256.9~~$251.6 million for the same period in ~~2019,~~2020, reflecting an increase of ~~$396.0~~$303.8 million or 154 percent. The average balance of interest-earning deposits increased to $468.1 million for the nine months ended September 30, 2020 when compared to $245.2 million for the same period in 2019 reflecting an increase of $222.9 million or 91121 percent. The increase in

the average balance of interest-earning deposits for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 was primarily to increase the Company’s balance sheet liquidity in the event of significant depositor withdrawals and/or significant borrower draws on existing unused credit lines due to the ~~current~~economic environment created by the COVID-19 pandemic. The Company plans on reducing the level of interest-earning deposits in 2021 through increased loan originations and investment purchases as liquidity has become less of a concern.

For the quarters ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the average yields earned on interest-earning assets were ~~2.74~~2.70 percent and ~~3.94~~3.65 percent, respectively, a decrease of ~~120~~95 basis points. The nine months ended September 30, 2020 had a decrease of 88 basis points on the average yields earned on interest-earning assets to 3.09 percent from 3.97 percent when compared to the same period of 2019. The decrease in average yields on ~~loans~~interest-earning assets for the ~~three- and nine-month~~three-month periods was due to a declining rate environment and elevated levels of interest-bearing cash, ~~and~~ investment securities, and PPP loans at lower yields. ~~The one-month London Interbank Offered Rate (“LIBOR”)~~One-month LIBOR has declined by approximately 150 basis points from the beginning of ~~the year.~~2020. The Federal Open Market Committee also reduced the target Federal Funds rate to 0 percent to 0.25 percent in March 2020 due to the economic disruption caused by COVID-19. With the transformation to a commercial bank balance sheet and business model, the Company’s interest rate sensitivity models indicate the Company is asset sensitive as of ~~September 30, 2020,~~March 31, 2021, and that net interest income would improve in ~~both~~ a rising rate environment ~~and~~but decline in a falling rate ~~environment as our adjustable rate assets have little room to re-price in this low rate~~ environment. We saw a slight decline in net interest income during the third quarter of 2020 as the full effect of rate decreases on our adjustable rate assets occurred in the middle of the second quarter of 2020. The Company believes that our adjustable rate assets will not reprice lower given the floors instituted on our portfolio.

For the ~~third~~first quarter of ~~2020,~~2021, the average balance of interest-bearing deposits was ~~$4.00~~$3.98 billion, an increase of ~~$422.8~~$225.0 million, or 126 percent, from ~~$3.57~~$3.76 billion for the same period of ~~2019. The average balance of interest-bearing deposits totaled $3.90 billion for the nine months ended September 30,~~ 2020 ~~which is an increase of $416.5 million, or 12 percent, from the same 2019 period.~~ . The growth in customer deposits (excluding brokered CDs and brokered interest-bearing demand deposits, but including reciprocal funds discussed below) has come from an increase in retail deposits from our branch network; a focus on providing

high-touch client service; new deposit relationships related to PPP; and a full array of treasury management products that support core deposit growth. The growth was partially offset by a decline of ~~$23.0~~$70.0 million in the average balance of ~~listing service~~brokered deposits from ~~September 30, 2019 as the Company has chosen not to participate in such programs for the foreseeable future, so maturing listing service deposits are not replaced with new listing service deposits.~~March 31, 2020.

Average rates paid on total interest-bearing deposits were ~~0.55~~0.40 percent and ~~1.53~~1.21 percent for the ~~third~~first quarters of ~~2020~~2021 and ~~2019,~~2020, respectively, a decrease of ~~98 basis points. Average rates paid on total interest-bearing deposits were 0.82 percent and 1.50 percent for the nine months ended September 30, 2020 and 2019, respectively, a decrease of 68~~81 basis points. The decrease in the average rate paid on deposits was principally due to repricing of our deposit base to align with the recent Fed rate decreases.

For the ~~third~~first quarter of ~~2020,~~2021, the average balance of borrowings was ~~$475.5~~$186.0 million an increase of ~~$360.9~~$2.6 million ~~when~~from $183.4 million as compared to the same period in ~~2019.~~2020. The average rate paid on borrowings was ~~1.03~~0.45 percent for the three months ended ~~September 30, 2020~~March 31, 2021 as compared to ~~3.09~~2.21 percent for the same period in 2019. For the nine months ended September 30, 2020, the average balance of borrowings was $330.3 million, an increase of $221.8 million when compared to the same period in 2019. The average rate paid on borrowings was 1.36 percent for the nine months ended September 30, 2020 as compared to 3.14 percent for the same period in 2019.2020. The increase in borrowings was principally due to the Company’s participation in the PPPLF ~~as well, for~~partially offset by the ~~nine months ended September 30, 2020 as~~Company’s prepayment of $105.0 million of FHLB advances with a ~~$500.0 million one-month FHLB advance entered in March 2020, which matured in April~~weighted-average rate of 3.20 percent during the fourth quarter of 2020. The average rate paid on borrowings was lower for ~~both~~ the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 as the PPPLF borrowings rate was 0.35 percent.

The Company is a participant in the Reich & Tang Demand Deposit Marketplace (“DDM”) program and the Promontory Program. The Company uses these deposit sweep services to place customer funds into interest-bearing demand (checking) accounts issued by other participating banks. Customer funds are placed at one or more participating banks to ensure that each deposit customer is eligible for the full amount of FDIC insurance. As a program participant, the Company receives reciprocal amounts of deposits from other participating banks. Such reciprocal deposit balances are included in the Company’s interest-bearing checking balances. The average balance of reciprocal deposits was ~~$663.6~~$713.6 million and ~~$596.3~~$478.2 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and March 31, 2020, ~~respectively, compared to $470.9~~respectively.

In December 2020, the Company issued $100.0 million ~~and $447.0~~of subordinated debt ($98.2 million net of issuance costs) bearing interest at an annual rate of 3.50 percent for the ~~same three~~first five years, and ~~nine months ended September 30, 2019, respectively.~~

~~The average balance~~thereafter at an adjustable rate until maturity in December 2025 or earlier redemption. In December 2017, the Company issued $35.0 million of ~~brokered interest-bearing demand deposits was $130.0~~subordinated debt ($34.1 million ~~and $153.4 million~~net of issuance costs) bearing interest at an annual rate of 4.75 percent for the ~~three~~first five years, and ~~nine months ended September 30, 2020, respectively, compared to $180.0~~thereafter at an adjustable rate until maturity in December 2027 or earlier redemption. In June 2016, the Company issued $50.0 million of subordinated debt ($48.7 million net of issuance costs) bearing interest at an annual rate of 6 percent for the ~~three~~first five years, and ~~nine months ended September 30, 2019. The Company has transacted $130.0 million of interest~~thereafter at an adjustable rate ~~swaps against these deposits as part of the Company’s interest rate risk management program.~~until maturity in June 2026 or earlier redemption.

INVESTMENT SECURITIES AVAILABLE FOR SALE: Investment securities available for sale are purchased, sold and/or maintained as a part of the Company’s overall balance sheet, liquidity and interest rate risk management strategies. These securities are carried at estimated fair value, and unrealized changes in fair value are recognized as a separate component of shareholders’ equity, net of income taxes. Realized gains and losses are recognized in income at the time the securities are sold. Equity securities are carried at fair value with unrealized gains and losses recorded in noninterest income.

At ~~September 30, 2020,~~March 31, 2021, the Company had investment securities available for sale with a fair value of ~~$596.9~~$875.3 million compared with ~~$390.8~~$622.7 million at December 31, ~~2019.~~2020. The increase was due to purchases of residential mortgage-backed securities and U.S. government-sponsored agencies with excess liquidity as deposits and borrowings exceeded loan growth. A net unrealized ~~gain~~loss (net of income tax) of ~~$6.2~~$7.9 million and a net unrealized gain (net of income tax) of ~~$1.0~~$5.5 million were included in shareholders’ equity at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

The Company has one equity security (a CRA investment security) with a fair value of ~~$15.2~~$14.9 million at ~~September 30, 2020~~March 31, 2021 compared with ~~$10.8~~$15.1 million at December 31, ~~2019,~~2020, with changes in fair value recognized in the Consolidated Statements of Income. The Company recorded a ~~$323,000~~$265,000 unrealized ~~gain~~loss on the Consolidated Statements of Income for the ~~nine~~three months ended ~~September 30, 2020, respectively,~~March 31, 2021 as compared to an unrealized gain of ~~$34,000 and $162,000~~$198,000 for ~~the three and nine months ended September 30, 2019, respectively. There was no change in the unrealized gain/(loss) on our equity security during~~ the three months ended ~~September 30,~~March 31, 2020.

The carrying value of investment securities available for sale as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 are shown below:

	September 30,		December 31,		March 31,		December 31,
(In thousands)	2020		2019		2021		2020
U.S. treasuries	$	2,888	$	—	$	—	$	2,613
U.S. government-sponsored agencies		78,946		34,784		221,337		83,771
Mortgage-backed securities-residential (principally U.S. government-sponsored entities)		466,295		338,904		596,620		476,058
SBA pool securities		37,070		2,784		46,243		49,129
State and political subdivisions		8,694		11,215		8,053		8,089
Corporate bond		3,036		3,068		3,048		3,029
Total	$	596,929	$	390,755	$	875,301	$	622,689

The following table presents the contractual maturities and yields of debt securities available for sale, stated at fair value, as of ~~September 30, 2020:~~March 31, 2021:

				After 1			After 5												After 1			After 5
				But			But			After									But			But			After
	Within			Within			Within			10						Within			Within			Within			10
(Dollars in thousands)	1 Year			5 Years			10 Years			Years			Total			1 Year			5 Years			10 Years			Years			Total
U.S. treasuries	$	2,888		$	—		$	—		$	—		$	2,888
		0.38	%		—			—			—			0.38	%
U.S. government-sponsored agencies	$	—		$	—		$	44,339		$	34,607		$	78,946		$	—		$	—		$	125,616		$	95,721		$	221,337
		—			—			1.43	%		1.58	%		1.50	%		—			—			1.32	%		1.50	%		1.40	%
Mortgage-backed securities-residential (1)	$	20		$	13,184		$	56,451		$	396,640		$	466,295		$	25,157		$	11,186		$	51,117		$	509,160		$	596,620
		2.01	%		1.67	%		2.06	%		1.41	%		1.50	%		1.25	%		1.94	%		1.98	%		1.61	%		1.63	%
SBA pool securities	$	—		$	—		$	8,998		$	28,072		$	37,070		$	—		$	—		$	7,779		$	38,464		$	46,243
		—			—			1.64	%		1.07	%		1.21	%		—			—			1.79	%		1.17	%		1.27	%
State and political subdivisions (2)	$	2,657		$	5,466		$	571		$	—		$	8,694		$	3,814		$	4,239		$	—		$	—		$	8,053
		3.14	%		2.48	%		4.72	%		—			2.83	%		2.99	%		2.43	%		—			—			2.70	%
Corporate bond	$	—		$	—		$	3,036		$	—		$	3,036		$	—		$	—		$	3,048		$	—		$	3,048
		—			—			5.25	%		—			5.25	%		—			—			5.25	%		—			5.25	%
Total	$	5,565		$	18,650		$	113,395		$	459,319		$	596,929		$	28,971		$	15,425		$	187,560		$	643,345		$	875,301
		1.70	%		1.92	%		1.88	%		1.40	%		1.52	%		1.48	%		2.08	%		1.58	%		1.57	%		1.58	%

Federal funds sold and interest-earning deposits are an additional part of the Company’s liquidity and interest rate risk management strategies. The combined average balance of these investments during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 was ~~$468.2~~$555.4 million compared to ~~$223.7~~$614.1 million for the ~~year~~quarter ended December 31, ~~2019.~~2020. The ~~increase~~higher level of federal funds sold and interest-earning deposits for both periods represented excess cash as deposit and borrowing growth and cash from maturing securities exceeded loan growth.

OTHER INCOME: The following table presents other income, excluding income from wealth management, which is summarized and discussed subsequently:

	For the Three Months Ended September 30,					Change			For the Three Months Ended March 31,						Change
(In thousands)	2020		2019			2020 vs 2019			2021			2020			2021 vs 2020
Service charges and fees	$	785	$	882		$	(97	)	$	846		$	816		$	30
Bank owned life insurance		314		332			(18	)		611			328			283
Gain on sale of loans (mortgage banking)		954		198			756			1,025			292			733
Gain/(loss) on loans held for sale at lower of cost or fair value		7,429		(6	)		7,435			282			(3	)		285
Fee income related to loan level, back-to-back swaps		—		2,349			(2,349	)		—			1,418			(1,418	)
Gain on sale of SBA loans		79		224			(145	)		1,449			1,054			395
Corporate advisory fee income										1,098			75			1,023
Other income		531		902			(371	)		643			384			259
Securities gains, net		—		34			(34	)		(265	)		198			(463	)
Total other income	$	10,092	$	4,915		$	5,177		$	5,689		$	4,562		$	1,127

The Company recorded total other income, excluding wealth management fee income, of ~~$10.1~~$5.7 million for the ~~third~~first quarter of ~~2020,~~2021, reflecting an increase of ~~$5.2~~$1.1 million, or ~~105~~25 percent, compared to the same period in 2019. For the nine months ended September 30, 2020 the Company recorded total other income, excluding wealth management fee income, of $17.3 million reflecting an increase of $6.4 million, or 58 percent from the same period in 2019. The increase in other income for the three and nine months ended September 30, 2020 was primarily attributable to a gain of $7.4 million on the sale of $354.9 million of PPP loans during the third quarter of 2020.

For the ~~third~~first quarter of ~~2020,~~2021, income from the sale of newly originated residential mortgage loans was ~~$954,000~~$1.0 million compared to ~~$198,000~~$292,000 for the same period in ~~2019. For the nine months ended September 30, 2020 and 2019, income from the sale of newly originated residential mortgage loans was $1.8 million and $377,000 respectively. Such income~~2020. This increase was the result of ~~an increase in~~ the increased volume of residential mortgage ~~loan volume~~loans originated for sale during the first ~~nine~~three months of ~~2020~~2021 due to more refinancing and home purchase activity in the current low interest rate environment.

For the quarter ended ~~September 30, 2020,~~March 31, 2021, the Company did not record any loan level, back-to-back swap income compared to ~~$2.3~~$1.4 million for the same quarter of ~~2019. The nine months ended September 30, 2020 included $1.6 million of loan level, back-to-back swap income compared to $3.3 million for the same period of 2019.~~2020. The program provides a borrower with a degree of interest rate protection on a variable rate loan, while still providing an adjustable rate to the Company, thus helping to manage the Company’s interest rate risk, while contributing to income. The Company expects back-to-back swap activity will continue to be minimal in the current rate environment.

The ~~third~~Company provides loans that are partially guaranteed by the SBA, for the purposes of providing working capital and/or financing the purchase of equipment, inventory or commercial real estate and that could be used for start-up business. All SBA loans are underwritten and documented as prescribed by the SBA. The Company generally sells the guaranteed portion of the SBA loans in the secondary market, with the non-guaranteed portion of SBA loans held in the loan portfolio. The first quarter of 2020 included $79,000 of income, on sales of $825,000, related to the Company’s SBA lending and sale program compared to $224,000 of income, on sales of $2.2 million, for the same quarter in 2019. The nine months ended September 30, 20202021 included $1.4 million of income, on sales of ~~$14.8~~$12.2 million, related to the Company’s SBA lending and sale program compared to ~~$1.2~~$1.1 million of income, on sales of ~~$12.1~~$11.4 million, for the same quarter in 2020. The first quarter of 2021 benefited by certain changes to SBA lending requirements.

The Company recorded corporate advisory fee income of $1.1 million for the first quarter of 2021 compared to $75,000 in the same three-month period ~~in 2019.~~of 2020. This included the Company’s first major corporate advisory/investment banking acquisition transaction. These transactions tend to be larger and take longer to complete.

The first quarter of 2021 included $302,000 of additional income related to a net life insurance death benefit under its BOLI policies.

Income from the back-to-back swap, ~~and~~ SBA programs, and corporate advisory fee income are dependent on volume, and thus are not linear from quarter to quarter, as some quarters will be higher than others.

The Company recorded a $323,000 mark to market gain on its equity security investment for the nine months ended September 30, 2020, respectively, compared to a $34,000 and $162,000 mark to market gain on its equity security investment for the three and nine months ended September 30, 2019, respectively. There was no change in the unrealized gain/(loss) of our equity investment for the three months ended September 20, 2020.

Other income was ~~$531,000~~$643,000 for the quarter ended ~~September 30, 2020~~March 31, 2021 compared to ~~$902,000~~$384,000 for the same quarter in ~~2019. For the nine months ended September 30, 2020 other income was $1.5 million compared to $2.2 million for the same period in 2019.~~2020. The ~~decrease~~increase in other income for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 was primarily due to loan servicing income, offset by decreases in commercial lending fees, particularly unused credit line ~~fees, income related to our corporate advisory program, and loan servicing income.~~fees.

OPERATING EXPENSES: The following table presents the components of operating expenses for the periods indicated:

	For the Three Months Ended Sept 30,					Change			For the Three Months Ended March 31,				Change
(In thousands)	2020		2019			2020 vs 2019			2021		2020		2021 vs 2020
Compensation and employee benefits	$	19,202	$	17,476		$	1,726		$	21,990	$	19,226	$	2,764
Premises and equipment		4,109		3,849			260			4,113		4,043		70
FDIC assessment		605		(277	)		882			585		250		335
Other Operating Expenses:
Professional and legal fees		1,079		1,228			(149	)		1,256		974		282
Telephone		370		346			24			334		324		10
Advertising		226		337			(111	)		214		340		(126	)
Amortization of intangible assets		321		229			92			368		324		44
Branch restructure		—		—			—
Other		2,549		3,071			(522	)		2,734		2,754		(20	)
Total operating expenses	$	28,461	$	26,259		$	2,202		$	31,594	$	28,235	$	3,359

Increased operating expenses in the three month ~~and nine month~~ period ended ~~September 30, 2020~~March 31, 2021 was principally attributable to: (1) an increase in compensation and employee benefits of ~~$1.7~~$2.8 million to ~~$19.2~~$22.0 million for the ~~third~~first quarter of ~~2020 and~~2021 which includes $1.5 million of severance expense related to a ~~$5.4 million increase to $57.6 million for~~staff reorganization within several areas of the ~~nine months ended September 30, 2020, which includes~~Bank; expenses related to the ~~Point View acquisition~~Lucas and Noyes team lift outs completed ~~on September 1, 2019,~~in December 2020, hiring in line with the Company’s strategic plan; and normal salary increases; (2) additional premises and equipment expenses, which ~~includes~~included expenses related to ~~Point View;~~Lucas, Noyes, and the opening of a new retail location partially offset by savings related to the closure of one retail branch and two private banking locations; (3) ongoing operating expenses including amortization of ~~intangibles.~~ ~~Further, the three~~intangibles; and ~~nine months ended September 30, 2020 included~~(4) increased ~~medical insurance costs when compared to the same 2019 period.~~ During the nine months ended September 30, 2020 the Company also incurred one-time expenses of $278,000 related to the closure of one branch office and $225,000 of increased marketing expense directly related to the COVID-19 pandemic and the Company’s participation in the PPP program. The Company anticipates the branch closure will lower future expenses. FDIC expense, increased for the three and nine months ended September 30, 2020 by $882,000 and $1.0 million, respectively. During 2019, the FDIC provided a small bank assessment credit as the FDIC had met its reserve ratio. The increase in FDIC expense for three and nine month periods ended September 30, 2020 were alsowhich was impacted by asset growth which negatively affected certain ratios used in calculating the assessment rate.

PEAPACK PRIVATE: This division includes: investment management services provided for individuals and institutions; personal trust services, including services as executor, trustee, administrator, custodian and guardian, and other financial planning, tax preparation and advisory services. Officers from Peapack Private are available to provide wealth management, trust and investment services at the Bank’s headquarters in Bedminster, at private banking locations in Morristown, New Providence, Princeton, Red Bank, Summit and Teaneck, New Jersey and at the Bank’s subsidiaries, PGB Trust & Investments of Delaware, in Greenville, Delaware and Murphy Capital, in ~~Gladstone, New Jersey, Lassus Wherley, in New Providence, New Jersey and Bonita Springs, Florida and Point View, in Summit,~~Bedminster, New Jersey.

The market value of the assets under management and/or administration (“AUM/AUA”) of the Peapack Private Wealth Management Division was ~~$7.6~~$9.4 billion at ~~September 30, 2020,~~March 31, 2021, reflecting a 2%7 percent increase from ~~$7.5~~$8.8 billion at December 31, ~~2019~~2020 and ~~a recovery~~an increase of ~~19%~~47 percent from $6.4 billion at March 31, 2020. Effective December 18, 2020, the Bank completed the lift out of teams from Lucas, based in Red Bank, New Jersey, and from Noyes, based in New Vernon, New Jersey, which combined contributed approximately $400 million of AUM/AUA at the time of acquisition. Net organic growth and equity market appreciation contributed an additional $197 million in AUM.

In the ~~September 2020~~March 2021 quarter, Peapack Private generated ~~$10.1~~$12.1 million in fee income compared to ~~$9.5~~$10.0 million for the ~~September 2019~~March 2020 quarter, reflecting a 7% increase. For the nine months ended September 30, 2020, the Private Wealth Management Division generated $30.1 million in fee income compared to $28.2 million for the same period in 2019, reflecting a 6%22 percent increase. The growth in fee income was ~~primarily~~ due to several factors, including the ~~acquisition~~acquisitions noted above, as well as continued new business, partially offset by normal levels of ~~Point View on September 1, 2019.~~ disbursements and outflows.

Operating expenses relative to Peapack Private for the March 2021 quarter reflected ~~increases due~~a 1 percent decrease when compared to ~~overall growth in~~ the ~~business, new hires and select third party expenditures. The nine months ended September 30,~~March 2020 ~~also included a full nine months of expense from Point View. Remaining expenses~~quarter. Expenses are in line with the Company’s Strategic Plan, particularly the hiring of key management and revenue-producing personnel.

The Peapack Private Wealth Management Division currently generates adequate revenue to support the salaries, benefits and other expenses of the Division and Management believes it will continue to do so as the Company grows organically and/or by acquisition. Management believes that the Bank generates adequate liquidity to support the expenses of the Peapack Private Wealth Management Division should it be necessary.

NONPERFORMING ASSETS: OREO, loans past due in excess of 90 days and still accruing, and nonaccrual loans are considered nonperforming assets.

	As of															As of
	Sept 30,			June 30,			March 31,			Dec 31,			Sept 30,			March 31,			Dec 31,			Sept 30,			June 30,			March 31,
(Dollars in thousands)	2020			2020			2020			2019			2019			2021			2020			2020			2020			2020
Loans past due over 90 days and still accruing	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Nonaccrual loans (1)		8,611			26,697			29,324			28,881			29,383			11,767			11,410			8,611			26,697			29,324
Other real estate owned		50			50			50			50			336			50			50			50			50			50
Total nonperforming assets	$	8,661		$	26,747		$	29,374		$	28,931		$	29,719		$	11,817		$	11,460		$	8,661		$	26,747		$	29,374

Performing TDRs	$	2,278		$	2,376		$	2,389		$	2,357		$	2,527		$	197		$	201		$	2,278		$	2,376		$	2,389

Loans past due 30 through 89 days and still accruing ~~(2)~~(3)	$	6,609		$	3,785		$	8,261		$	1,910		$	6,333		$	1,622		$	5,053		$	6,609		$	3,785		$	8,261

Loans subject to special mention	$	129,700		$	27,922		$	13,222		$	13,643		$	21,870		$	166,013		$	162,103		$	129,700		$	27,922		$	13,222

Classified loans (1)	$	41,263		$	63,562		$	58,938		$	58,908		$	53,882		$	25,714		$	37,771		$	41,263		$	63,562		$	58,938

Impaired loans (1)	$	15,514		$	33,708		$	36,369		$	35,924		$	36,627		$	11,964		$	16,204		$	15,514		$	33,708		$	36,369

Nonperforming loans as a % of total loans ~~(3)~~(4)		0.19	%		0.55	%		0.67	%		0.66	%		0.71	%		0.27	%		0.26	%		0.19	%		0.55	%		0.66	%
Nonperforming assets as a % of total assets ~~(3)~~(4)		0.15	%		0.43	%		0.50	%		0.56	%		0.60	%		0.20	%		0.19	%		0.15	%		0.43	%		0.50	%
Nonperforming assets as a % of total loans plus other real estate owned ~~(3)~~(4)		0.20	%		0.55	%		0.67	%		0.66	%		0.71	%		0.27	%		0.26	%		0.19	%		0.55	%		0.66	%

The increase in special mention loans primarily relates to investment and owner-occupied commercial real estate classified loans and was the result of the Bank’s credit analysis of sectors with COVID elevated residual risk (Hospitality and Food Services and Retail – Non-Grocery Anchored) and the downgrade of several loans within these categories during ~~the third quarter of~~ 2020.

PROVISION FOR LOAN AND LEASE LOSSES: The provision for loan and lease losses was ~~$5.2~~$225,000 and $20.0 million ~~and $800,000~~ for the ~~third~~first quarters of ~~2020~~2021 and ~~2019, respectively. For the nine months ended September 30,~~ 2020, ~~and 2019, the provision for~~

~~loan losses was $30.1 million and $2.1 million,~~ respectively. The ~~increased~~decreased provision for loan and lease losses ~~for~~in the ~~three and nine months ended September 30, 2020 was primarily due~~2021 quarter when compared to the ~~current environment created by~~2020 quarter reflect the reduced qualitative factors when calculating the allowance for loan losses as loan deferrals entered into during the COVID-19 pandemic ~~and was driven principally by increased qualitative factors. The increase in qualitative factors was primarily related~~have come down significantly from the prior year (declined from $914 million at June 30, 2020 to elevated levels of unemployment and approved loan deferral requests partially offset by a decrease in non-PPP loan production for those same periods. For additional details, see the provision for loan and lease losses table below.$43 million at March 31, 2021). The Company’s provision for loan and lease losses ~~and the level of the allowance for loan and lease losses~~ also reflect ~~several other factors including Management’s evaluation~~the Company’s assessment of ~~probable losses inherent in the portfolio, after consideration of appraised collateral values, financial condition and past credit history of the borrowers, type of and amount of loan growth,~~ asset quality metrics, net ~~charge-off activity,~~charge-offs/recoveries, and the composition of the loan portfolio. Commercial credits generally carry a higher risk profile compared to some of the other credits, which is reflected in Management’s determination of the adequacy of the allowance for loan and lease losses.

The allowance for loan and lease losses was ~~$66.1~~$67.5 million as of ~~September 30, 2020,~~March 31, 2021, compared to ~~$43.7~~$67.3 million at December 31, ~~2019.~~2020. As a percentage of loans, ~~(excluding PPP loans),~~ the allowance for loan and lease losses was ~~1.56~~1.54 percent at ~~September 30, 2020~~both March 31, 2021 and ~~0.99 percent at~~ December 31, ~~2019.~~2020, respectively. The specific reserves recorded on impaired loans were ~~$87,000~~$3.2 million at ~~September 30, 2020~~March 31, 2021 compared to ~~$2.8~~$2.7 million as of December 31, ~~2019.~~2020. Specific reserves ~~declined~~increased by ~~$4.2 million~~$498,000 during the ~~third~~first quarter of ~~2020 largely due to the release of reserves on a senior living facility relationship and subsequent charge-off of this credit upon transfer to held for sale.~~ 2021. Total impaired loans were ~~$15.5~~$12.0 million and ~~$35.9~~$16.2 million as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. The general component of the allowance ~~increased~~decreased from ~~$40.9~~$64.6 million at December 31, ~~2019~~2020 to ~~$66.1~~$64.3 million at ~~September 30, 2020 due to the reasons noted above.~~March 31, 2021.

A summary of the allowance for loan and lease losses for the quarterly periods indicated follows:

	September 30,			June 30,			March 31,			December 31,			September 30,			March 31,			December 31,			September 30,			June 30,			March 31,
(Dollars in thousands)	2020			2020			2020			2019			2019			2021			2020			2020			2020			2020
Allowance for loan and lease losses:
Beginning of period	$	66,065		$	63,783		$	43,676		$	41,580		$	39,791		$	67,309		$	66,145		$	66,065		$	63,783		$	43,676
Provision for loan and lease losses		5,150			4,900			20,000			1,950			800			225			2,350			5,150			4,900			20,000
Recoveries/(charge-offs), net		(5,070	)		(2,618	)		107			146			989			2			(1,186	)		(5,070	)		(2,618	)		107
End of period	$	66,145		$	66,065		$	63,783		$	43,676		$	41,580		$	67,536		$	67,309		$	66,145		$	66,065		$	63,783

Allowance for loan and lease losses as a % of total loans (A)		1.493	%		1.359	%		1.447	%		0.994	%		1.000	%		1.54	%		1.54	%		1.49	%		1.36	%		1.45	%

General allowance for loan and lease losses as a % of total loans (A)		1.491	%		1.270	%		1.303	%		0.930	%		0.934	%		1.47	%		1.48	%		1.49	%		1.27	%		1.30	%

Allowance for loan and lease losses as a % of non-performing loans		768.15	%		247.46	%		217.51	%		151.23	%		141.51	%		573.94	%		589.91	%		768.15	%		247.46	%		217.51	%

~~The following table details the Company’s provision for loan and lease losses for the quarter ended September 30, 2020:~~

~~(A)The September 30, 2020 ALLL ratio exclude PPP loans of $202.0 million from total loans~~

~~The following table details the Company’s provision for loan and lease losses for the nine months ended September 30, 2020:~~

~~(A)The September 30, 2020 ALLL ratio exclude PPP loans of $202.0 million from total loans~~

INCOME TAXES: Income tax expense for ~~both~~ the three months ended ~~September 30, 2020 and September 30, 2019, respectively,~~March 31, 2021 was ~~$5.2 million.~~ $4.6 million as compared to an income tax benefit of $3.3 million for the same period in 2020.

The effective tax rate for the three months ended ~~September 30, 2020~~March 31, 2021 was ~~27.75% as compared to 29.90%~~25.94 percent. The March 31, 2021 quarter benefitted from life insurance proceeds that were not taxable and from the vesting of restricted stock.

The tax benefit for the ~~September 2019 quarter. The slightly higher rate in the September 2019~~ quarter ~~included higher NJ State Income Tax due to the change in NJ tax law noted below.~~

~~Income tax expense for the nine months~~ ended ~~September 30,~~March 31. 2020 was $4.3 million as compared to income tax expense of $13.1 million for the same period in 2019. The effective tax rate for the nine months ended September 30, 2020 was 15.65% as compared to 27.17% for the same period in 2019. The lower effective rate for the nine months ended September 30, 2020 was due to a $3.34 million tax benefit recorded during the first quarter of 2020. The tax benefit was primarily due to a $3.2 million Federal income tax benefit that resulted from a tax NOL carryback. The Company had a $23 million operating loss for tax purposes in 2018 (when the Federal tax rate was ~~21%)~~21 percent) resulting from accelerated tax depreciation. Under the CARES Act, the Company was allowed to carry this NOL back to a period when the Federal tax rate was ~~35%,~~35 percent, generating a permanent tax benefit.

On July 1, 2018, the 2019 New Jersey Budget (“Budget”) was passed, which established a 2.5 percent surtax on businesses that have New Jersey allocated net income in excess of $1.0 million and was in place for 2019. In September 2020, New Jersey made the surtax a permanent increase to the corporate state tax rate. In addition, effective for taxable years beginning on or after January 1, 2019, banks will be required to file combined reports of taxable income including their parent holding company. New Jersey requires entities to report their real estate investment trust, registered investment company and investment company on a separate entity basis.

CAPITAL RESOURCES: A solid capital base provides the Company with the ability to support future growth and financial strength and is essential to executing the Company’s Strategic Plan – “Expanding Our Reach.” The Company’s capital strategy is intended to provide stability to expand its business, even in stressed environments. Quarterly stress testing is integral to the Company’s capital management process.

The Company strives to maintain capital levels in excess of internal “triggers” and in excess of those considered to be well capitalized under regulatory guidelines applicable to banks. Maintaining an adequate capital position supports the Company’s goal of providing shareholders an attractive and stable long-term return on investment.

Capital was benefitted by net income of ~~$23.2~~$13.2 million for the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, which was ~~partially~~ offset by the purchase of shares through the Company’s stock repurchase ~~program. Early~~program and a change in the ~~first quarter, the~~unrealized loss on securities, net of tax of $13.4 million. The Company purchased ~~220,222~~158,033 shares, at an average price of ~~$29.45,~~$27.71, for a total cost of ~~$6.5 million.~~$4.4 million during the three months ended March 31, 2021.

The Company employs quarterly capital stress testing – adverse case and severely adverse case. In the ~~June 30,~~December 31, 2020 severely, adverse case, no growth scenario, the Bank remains well capitalized over a two-year stress period. With a Pandemic stress overlay, the Bank still remains well capitalized over the two-year stress period.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios of Total, Common Equity Tier 1 and Tier 1 capital (each as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined).At ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, all of the Bank’s capital ratios remain above the levels required to be considered “well capitalized” and the Company’s

capital ratios remain above regulatory requirements. The Company’s capital ratios were not affected by our

participation in the PPP. The Company pledged its PPP loans as collateral and utilized funding provided by the FRB’s PPPLF. PPP loans funded by the PPPLF are risk-weighted at 0 percent for regulatory risk-based capital ratios and are excluded from average assets in the calculation of the regulatory leverage ratio.

To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based, common equity Tier I and Tier I leverage ratios as set forth in the table.

As a result of the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies are required to develop a “Community Bank Leverage Ratio” (the ratio of a bank’s tangible equity capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes. The federal banking agencies set the minimum capital for the Community Bank Leverage Ratio (“CBLR”) at 9 percent, effective January 1, 2020. Under the CARES Act, the Community Bank Leverage Ratio was temporarily lowered to 8 percent. The Bank did not opt into the CBLR and will continue to comply with the requirements under Basel III. The Bank’s leverage ratio was ~~9.68~~9.95 percent at ~~September 30, 2020.~~March 31, 2021.

The Bank’s regulatory capital amounts and ratios are presented in the following table:

						To Be Well										For Capital										To Be Well										For Capital
						Capitalized Under					For Capital					Adequacy Purposes										Capitalized Under					For Capital					Adequacy Purposes
						Prompt Corrective					Adequacy					Including Capital										Prompt Corrective					Adequacy					Including Capital
	Actual					Action Provisions					Purposes					Conservation Buffer (A)					Actual					Action Provisions					Purposes					Conservation Buffer (A)
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
As of September 30, 2020:
As of March 31, 2021:
Total capital (to risk-weighted assets)	$	599,314		14.58	%	$	410,967		10.00	%	$	328,774		8.00	%	$	431,515		10.50	%	$	615,925		15.04	%	$	409,521		10.00	%	$	327,617		8.00	%	$	429,997		10.50	%

Tier I capital (to risk-weighted assets)		547,761		13.33			328,774		8.00			246,580		6.00			349,322		8.50			564,533		13.79			327,617		8.00			245,713		6.00			348,093		8.50

Common equity tier I (to risk-weighted assets)		547,726		13.33			267,129		6.50			184,935		4.50			287,677		7.00			564,504		13.78			266,189		6.50			184,285		4.50			286,665		7.00

Tier I capital (to average assets)		547,761		9.68			282,899		5.00			226,319		4.00			226,319		4.00			564,533		9.95			283,733		5.00			226,986		4.00			226,986		4.00

As of December 31, 2019:
As of December 31, 2020:
Total capital (to risk-weighted assets)	$	571,509		13.76	%	$	415,487		10.00	%	$	332,389		8.00	%	$	436,261		10.50	%	$	600,478		14.81	%	$	405,587		10.00	%	$	324,469		8.00	%	$	425,866		10.50	%

Tier I capital (to risk-weighted assets)		527,833		12.70			332,389		8.00			249,292		6.00			353,164		8.50			549,575		13.55			324,469		8.00			243,352		6.00			344,749		8.50

Common equity tier I (to risk-weighted assets)		527,832		12.70			270,066		6.50			186,969		4.50			290,841		7.00			549,540		13.55			263,631		6.50			182,514		4.50			283,911		7.00

Tier I capital (to average assets)		527,833		10.63			248,252		5.00			198,602		4.00			198,602		4.00			549,575		9.71			283,083		5.00			226,466		4.00			226,466		4.00

The Company’s regulatory capital amounts and ratios are presented in the following table:

						To Be Well							For Capital										To Be Well							For Capital
						Capitalized Under		For Capital					Adequacy Purposes										Capitalized Under		For Capital					Adequacy Purposes
						Prompt Corrective		Adequacy					Including Capital										Prompt Corrective		Adequacy					Including Capital
	Actual					Action Provisions		Purposes					Conservation Buffer (A)					Actual					Action Provisions		Purposes					Conservation Buffer (A)
(Dollars in thousands)	Amount		Ratio			Amount	Ratio	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount	Ratio	Amount		Ratio			Amount		Ratio
As of September 30, 2020:
As of March 31, 2021:
Total capital (to risk-weighted assets)	$	618,993		15.04	%	N/A	N/A	$	329,249		8.00	%	$	432,139		10.50	%	$	724,599		17.70	%	N/A	N/A	$	327,531		8.00	%	$	429,884		10.50	%

Tier I capital (to risk-weighted assets)		483,782		11.76		N/A	N/A		246,937		6.00			349,827		8.50			491,384		12.00		N/A	N/A		245,648		6.00			348,002		8.50

Common equity tier I (to risk-weighted assets)		483,747		11.75		N/A	N/A		185,202		4.50			288,093		7.00			491,355		12.00		N/A	N/A		184,236		4.50			286,590		7.00

Tier I capital (to average assets)		483,782		8.54		N/A	N/A		226,547		4.00			226,547		4.00			491,384		8.66		N/A	N/A		226,925		4.00			226,925		4.00

As of December 31, 2019:
As of December 31, 2020:
Total capital (to risk-weighted assets)	$	590,614		14.20	%	N/A	N/A	$	332,783		8.00	%	$	436,778		10.50	%	$	716,210		17.67	%	N/A	N/A	$	324,322		8.00	%	$	425,673		10.50	%

Tier I capital (to risk-weighted assets)		463,521		11.14		N/A	N/A		249,587		6.00			353,582		8.50			483,535		11.93		N/A	N/A		243,242		6.00			344,592		8.50

Common equity tier I (to risk-weighted assets)		463,520		11.14		N/A	N/A		187,190		4.50			291,185		7.00			483,500		11.93		N/A	N/A		182,431		4.50			283,782		7.00

Tier I capital (to average assets)		463,521		9.33		N/A	N/A		198,792		4.00			198,792		4.00			483,535		8.53		N/A	N/A		226,624		4.00			226,624		4.00

The Company’s regulatory total risk-based capital ratio was benefitted by the $48.7 million (net) subordinated debt issuance that closed in June 2016. At that time, the Company down-streamed approximately $40.0 million of proceeds to the Bank as capital, benefitting the Bank’s regulatory capital ratios.

~~In addition, on~~On December 12, 2017, the Company issued $35.0 million in aggregate principal amount of ~~Fixed-to-Floating Subordinated Notes~~fixed-to-floating subordinated notes due December 15, 2027. The Company down-streamed approximately $29.1 million of those proceeds to the Bank as capital.

In addition, in December 2020, the Company issued $100.0 million in aggregate principal amount of fixed-to-floating subordinated notes due December 22, 2030. The Company plans for the proceeds from the issuance of the 2020 Notes could include stock repurchases, redemption of the 2016 Notes and acquisitions of wealth management firms.

The Dividend Reinvestment Plan of Peapack-Gladstone Financial Corporation, or the “Reinvestment Plan,” allows shareholders of the Company to purchase additional shares of common stock using cash dividends without payment of any brokerage commissions or other charges. Shareholders may also make voluntary cash payments of up to $200 thousand per quarter to purchase additional shares of common stock, which up to January 30, 2019 were purchased at a 3 percent discount to ~~market.~~market for plan participants. On January 30, 2019, the Company filed a Registration Statement on Form S-3 eliminating the ~~feature in our “Reinvestment Plan” under which participants could purchase shares of our common stock through the Plan at a~~ 3 percent discount to market price. Voluntary share purchases in the “Reinvestment Plan” can be filled from the Company’s authorized but unissued shares and/or in the open market, at the discretion of the Company. All shares purchased during the quarter ended ~~September 30, 2020~~March 31, 2021 were in the open market.

On ~~October~~April 27, ~~2020,~~2021, the Board of Directors declared a regular cash dividend of $0.05 per share payable on ~~November~~May 25, ~~2020~~2021 to shareholders of record on ~~November 10, 2020.~~May 11, 2021.

Management believes the Company’s capital position and capital ratios are adequate. Further, Management believes the Company has sufficient capital to support its planned balance sheet growth for the immediate future. The Company continually assesses other potential sources of capital to support future growth.

LIQUIDITY: Liquidity refers to an institution’s ability to meet short-term requirements including funding of loans, deposit withdrawals and maturing obligations, as well as long-term obligations, including potential capital expenditures. The Company’s liquidity risk management is intended to ensure the Company has adequate funding and liquidity to support its assets across a range of market environments and conditions, including stressed conditions. Principal sources of liquidity include cash, temporary investments, securities available for sale, customer deposit inflows, loan repayments and secured borrowings. Other liquidity sources include loan sales and loan participations.

Management actively monitors and manages the Company’s liquidity position and believes it is sufficient to meet future needs. Cash and cash equivalents, including federal funds sold and interest-earning deposits, totaled ~~$679.4~~$476.5 million at ~~September 30, 2020.~~March 31, 2021. In addition, the Company had ~~$596.9~~$875.3 million in securities designated as available for sale at ~~September 30, 2020.~~March 31, 2021. These securities can be sold, or used as collateral for borrowings, in response to liquidity concerns. Securities available for sale with a fair value of ~~$463.3~~$841.9 million as of ~~September 30, 2020~~March 31, 2021 were pledged to secure public funds and for other purposes required or permitted by law. In addition, the Company generates significant liquidity from scheduled and unscheduled principal repayments of loans and mortgage-backed securities.

For the quarter ended ~~September 30, 2020,~~March 31, 2021, the Company’s balance sheet liquidity was funded by increased client deposits of ~~$615.6 million and $183.8 million in borrowings through the PPPLF.~~$126.4 million. The Company approved loans of approximately $600 million under the PPP and have a balance of ~~$202.0~~$232.7 million at ~~September 30, 2020.~~March 31, 2021, of which $45.8 million are designated held for sale. The Federal Reserve has supplied a source of liquidity for the PPP to participating financial institutions through the PPPLF, which extends credit to eligible financial institutions, at a rate of 0.35 percent, that originate PPP loans, taking the loans as collateral at face value. The Company utilized this facility to fund its 2020 PPP ~~loans.~~loan originations.

As of ~~September 30, 2020,~~March 31, 2021, in addition to the ~~$1.3~~$1.4 billion of balance sheet liquidity, the Company also had approximately $1.8 billion of secured funding available from the Federal Home Loan Bank, of which ~~$120.0~~$15.0 million was drawn as of ~~September 30, 2020.~~March 31, 2021. Additionally, the Company ~~also~~ had ~~$1.0 billion~~$990 million of secured funding available from the Federal Reserve Discount Window, none of which was drawn.

Brokered interest-bearing demand (“overnight”) deposits were ~~$130.0~~$110.0 million at ~~September 30, 2020.~~March 31, 2021. The interest rate paid on these deposits allows the Bank to fund at attractive rates and engage in interest rate swaps to hedge its asset-liability interest rate risk. The Company ensures ample available collateralized liquidity as a backup to these short-term brokered deposits. As of ~~September 30, 2020,~~March 31, 2021, the Company had transacted pay fixed, receive floating interest rate swaps totaling $270.0 million in notional amount.

The Company has a Board-approved Contingency Funding Plan in place. This plan provides a framework for managing adverse liquidity stress and contingent sources of liquidity. The Company conducts liquidity stress testing on a regular basis to ensure sufficient liquidity in a stressed environment. The Company believes it has sufficient liquidity given the current environment created by the COVID-19 pandemic.

Management believes the Company’s liquidity position and sources are adequate.

ASSET/LIABILITY MANAGEMENT: The Company’s Asset/Liability Committee (“ALCO”) is responsible for developing, implementing and monitoring asset/liability management strategies and advising the Board of Directors on such strategies, as well as the related level of interest rate risk. In this regard, interest rate risk simulation models are prepared on a quarterly basis. These models demonstrate balance sheet gaps and predict changes to net interest income and economic/market value of portfolio equity under various interest rate scenarios. In addition, these models, as well as ALCO processes and reporting, are subject to annual independent third-party review.

ALCO is generally authorized to manage interest rate risk through the management of capital, cash flows and duration of assets and liabilities, including sales and purchases of assets, as well as additions of wholesale borrowings and other sources of medium/longer-term funding. ALCO is authorized to engage in interest rate swaps as a means of extending the duration of ~~shorter term~~shorter-term liabilities.

The interest rate swap program is administered by the ALCO and follows procedures and documentation in accordance with regulatory guidance and standards as set forth in ASC 815 for cash flow hedges. The program incorporates pre-purchase analysis, liability designation, sensitivity analysis, correlation analysis, daily mark-to-market analysis and collateral posting as required. The Board is advised of all swap activity. In all of these swaps, the Company is receiving floating and paying fixed interest rates with total notional value of $270.0 million as of ~~September 30, 2020.~~March 31, 2021.

In addition, the Company initiated a loan level / back-to-back swap program in support of its commercial lending business. Pursuant to this program, the Company extends a floating rate loan and executes a floating to fixed swap with the borrower. At the same time, the Company executes a third-party swap, the terms of which fully offset the fixed exposure and, result in a final floating rate exposure for the Company. As of ~~September 30, 2020, $853.5~~March 31, 2021, $789.7 million of notional value in swaps were executed and outstanding with borrowers under this program.

As noted above, the ALCO uses simulation modeling to analyze the Company’s net interest income sensitivity, as well as the Company’s economic value of portfolio equity under various interest rate scenarios. The models are based on the actual maturity and repricing characteristics of rate sensitive assets and liabilities. The models incorporate certain prepayment and interest rate assumptions, which management believes to be reasonable as of ~~September 30, 2020.~~March 31, 2021. The models assume changes in interest rates without any proactive change in the balance sheet by management. In the models, the forecasted shape of the yield curve remained static as of ~~September 30, 2020.~~March 31, 2021.

In an immediate and sustained 100 basis point increase in market rates at ~~September 30, 2020,~~March 31, 2021, net interest income would increase approximately ~~10.0~~6.3 percent for year 1 and ~~13.4~~10.2 percent for year 2, compared to a flat interest rate scenario.

In an immediate and sustained 200 basis point increase in market rates at ~~September 30, 2020,~~March 31, 2021, net interest income for year 1 would increase approximately ~~17.7~~11.6 percent, when compared to a flat interest rate scenario. In year 2 net interest income would increase ~~24.0~~18.9 percent, when compared to a flat interest rate scenario.

The table below shows the estimated changes in the Company’s economic value of portfolio equity (“EVPE”) that would result from an immediate parallel change in the market interest rates at ~~September 30, 2020.~~March 31, 2021.

	Estimated Increase/								EVPE as a Percentage of						Estimated Increase/								EVPE as a Percentage of
(Dollars in thousands)	Decrease in EVPE								Present Value of Assets (2)						Decrease in EVPE								Present Value of Assets (2)
Change In
Interest
Rates	Estimated								EVPE			Increase/(Decrease)			Estimated								EVPE			Increase/(Decrease)
(Basis Points)	EVPE (1)		Amount			Percent			Ratio (3)			(basis points)			EVPE (1)		Amount			Percent			Ratio (3)			(basis points)
+200	$	647,904	$	74,588			13.01	%		11.15	%		155		$	686,374	$	42,772			6.65	%		11.92	%		113
+100		615,359		42,043			7.33			10.44			84			667,117		23,515			3.65			11.39			60
Flat interest rates		573,316		—			—			9.60			—			643,602		—			—			10.79			—
-100		519,955		(53,361	)		(9.31	)		8.70			(90	)		604,662		(38,940	)		(6.05	)		10.05			(74	)

Certain shortcomings are inherent in the methodologies used in determining interest rate risk. Simulation modeling requires making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the modeling assumes that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the information provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our net interest income and will differ from actual results.

The Company’s interest rate sensitivity models indicate the Company is asset sensitive as of ~~September 30, 2020,~~March 31, 2021, and that net interest income would improve in a ~~both~~ rising rate environment ~~and~~but decline in a falling rate environment. ~~Over the past quarter, the Company has been managing its balance sheet to be closer to interest rate neutral.~~

The Corporation’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Corporation’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer have concluded that the Corporation’s disclosure controls and procedures are effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

The Corporation’s Chief Executive Officer and Chief Financial Officer have also concluded that there have not been any changes in the Corporation’s internal control over financial reporting during the quarter ended ~~September 30, 2020~~March 31, 2021 that have materially affected, or are reasonable likely to materially affect, the Corporation’s internal control over financial reporting.

The Corporation’s management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures of our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, provides reasonable, not absolute, assurance that the objectives of the control system are met. The design of a control system reflects resource constraints; the benefits of controls must be considered relative to their costs. Because there are inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Corporation have been or will be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns occur because of simple error or mistake. Controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all future conditions; over time, control may become inadequate because of changes in conditions or deterioration in the degree of compliance with the policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

In the normal course of its business, lawsuits and claims may be brought against the Company and its subsidiaries. There is no currently pending or threatened litigation or proceedings against the Company or its subsidiaries, which if adversely decided, we believe would have a material adverse effect on the Company.

There have been no material changes in risk factors applicable to the Company from those disclosed in “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 and Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2020.~~2021.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


New Jersey	22-3537895
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

Item 1	Financial Statements	3
	Consolidated Statements of Condition at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020	3
	Consolidated Statements of Income for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019~~2020	4
	Consolidated Statements of Comprehensive ~~Income~~Income/(Loss) for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019~~2020	5
	Consolidated Statement of Changes in Shareholders’ Equity for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019~~2020	6
	Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019~~2020	8
	Notes to Consolidated Financial Statements	9
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4441
Item 3	Quantitative and Qualitative Disclosures about Market Risk	6557
Item 4	Controls and Procedures	6759

Item 1	Legal Proceedings	6860
Item 1A	Risk Factors	6860
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	6860
Item 3	Defaults Upon Senior Securities	6860
Item 4	Mine Safety Disclosures	6860
Item 5	Other Information	6860
Item 6	Exhibits	6961

						Weighted
				Weighted		Average	Aggregate
				Average		Remaining	Intrinsic
	Number of			Exercise		Contractual	Value
	Options			Price		Term	(In thousands)
Balance, January 1, 2021		50,660		$	13.59
Exercised during 2021		(820	)		13.39
Expired during 2021		—			—
Forfeited during 2021		(2,380	)		13.53
Balance, March 31, 2021		47,460		$	13.60	1.44 years	$	820
Vested and expected to vest		47,460		$	13.60	1.44 years	$	820
Exercisable at March 31, 2021		47,460		$	13.60	1.44 years	$	820

			Weighted
			Average
	Number of		Grant Date
	Shares		Fair Value
Balance, January 1, 2020		90,768	$	30.60
Granted during 2020		130,832		13.44
Balance, September 30, 2020		221,600	$	20.47

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Loans		Investment		Investment
Primary residential mortgage		1	$	253	$	253
Commercial and industrial		1		48		48
Total		2	$	301	$	301

	Three Months Ended September 30, 2020
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	30,557	$	1,592	$	32,149
Noninterest income		9,451		10,760		20,211
Total income		40,008		12,352		52,360

Provision for loan and lease losses		5,150		0		5,150
Compensation and benefits		13,258		5,944		19,202
Premises and equipment expense		3,527		582		4,109
FDIC expense		605		0		605
Other noninterest expense		2,231		2,314		4,545
Total noninterest expense		24,771		8,840		33,611
Income before income tax expense		15,237		3,512		18,749
Income tax expense		4,254		948		5,202
Net income	$	10,983	$	2,564	$	13,547

	Nine Months Ended September 30, 2020
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	91,419	$	4,448	$	95,867
Noninterest income		16,036		31,318		47,354
Total income		107,455		35,766		143,221

Provision for loan and lease losses		30,050		0		30,050
Compensation and employee benefits		40,239		17,375		57,614
Premises and equipment expense		10,435		1,753		12,188
FDIC insurance expense		1,310		0		1,310
Other operating expense		7,889		6,709		14,598
Total operating expense		89,923		25,837		115,760
Income before income tax (benefit)/expense		17,532		9,929		27,461
Income tax (benefit)/expense		1,618		2,681		4,299
Net income/(loss)	$	15,914	$	7,248	$	23,162

Total assets at period end	$	5,878,481	$	79,626	$	5,958,107

	For the Nine Months Ended September 30, 2020
	Difference due to						Change In
	Change In:						Income/
(In Thousands):	Volume			Rate			Expense
ASSETS:
Investments	$	1,017		$	(2,273	)	$	(1,256	)
Loans		20,070			(24,227	)		(4,157	)
Interest-earning deposits		1,956			(5,033	)		(3,077	)
Total interest income	$	23,043		$	(31,533	)	$	(8,490	)
LIABILITIES:
Interest-bearing checking	$	2,379		$	(8,459	)	$	(6,080	)
Money market		52			(7,656	)		(7,604	)
Savings		8			(9	)		(1	)
Certificates of deposit - retail		783			(1,889	)		(1,106	)
Certificates of deposit - brokered		(267	)		103			(164	)
Interest bearing demand brokered		(384	)		167			(217	)
Borrowed funds		817			(15	)		802
Capital lease obligation		(29	)		—			(29	)
Subordinated debt		8			(12	)		(4	)
Total interest expense	$	3,367		$	(17,770	)	$	(14,403	)
Net interest income	$	19,676		$	(13,763	)	$	5,913

	For the Nine Months Ended Sept 30,				Change
(In thousands)	2020		2019		2020 vs 2019
Compensation and employee benefits	$	57,614	$	52,175	$	5,439
Premises and equipment		12,188		10,837		1,351
FDIC assessment		1,310		277		1,033
Other Operating Expenses:
Professional and legal fees		3,095		3,320		(225	)
Telephone		1,089		1,003		86
Advertising		1,294		1,105		189
Amortization of intangible assets		966		688		278
Branch restructure		278		—		278
Other		7,876		8,742		(866	)
Total operating expenses	$	85,710	$	78,147	$	7,563

				Percentage
(Dollars in thousands)				of Total Loans (A)
Allowance for loan and lease losses at July 1, 2020	$	66,065			1.36	%
Net charge-offs		(5,070	)
Provision for loan and lease losses:
Release of reserves associated with current criticized and classified credits		(4,234	)
Based on qualitative factors related to decreasing consumer confidence, approved loan payment deferrals, and other qualitative factors related to this environment		1,616
Based on Q3 loan originations and migration		7,768
Provision for loan and lease losses	$	5,150

Allowance for loan and lease losses at September 30, 2020	$	66,145			1.49	%

	Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs		Total Number of Shares Withheld (1)		Average Price Paid Per Share		Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans Or Programs (2)
January 1, 2021 -
January 31, 2021		—		—	$	—	$	30,000,000
February 1, 2021 -
February 28, 2021		107,737		6,114		27.03	$	27,090,691
March 1, 2021 -
March 31, 2021		50,296		58,359		30.36	$	25,620,887
Total		158,033		64,473		28.68


3	Articles of Incorporation and By-Laws:

	A. Certificate of Incorporation of the Registrant, as amended, incorporated herein by reference to Exhibit 3 of the Registrant’s Quarterly Report on Form 10-Q filed on November 9, 2009 (File No. 001-16197).

	B. By-Laws of the Registrant, incorporated herein by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K filed on December 20, 2017 (File No. 001-16197).

31.1	Certification of Douglas L. Kennedy, Chief Executive Officer of the Corporation, pursuant to Securities Exchange Act Rule 13a-14(a).

31.2	Certification of Jeffrey J. Carfora, Chief Financial Officer of the Corporation, pursuant to Securities Exchange Act Rule 13a-14(a).

32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Douglas L. Kennedy, Chief Executive Officer of the Corporation and Jeffrey J. Carfora, Chief Financial Officer of the Corporation.

101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because iXBRL tags are embedded within the Inline XBRL document.

101.SCH	Inline XBRL Taxonomy Extension Schema Document.

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

	PEAPACK-GLADSTONE FINANCIAL CORPORATION
	(Registrant)

DATE: ~~November 9, 2020~~May 10, 2021	By:	/s/ Douglas L. Kennedy
		Douglas L. Kennedy
		President and Chief Executive Officer
		(Principal Executive Officer)

DATE: ~~November 9, 2020~~May 10, 2021	By:	/s/ Jeffrey J. Carfora
		Jeffrey J. Carfora
		Senior Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

DATE: ~~November 9, 2020~~May 10, 2021	By:	/s/ Francesco S. Rossi
		Francesco S. Rossi
		Chief Accounting Officer
		(Principal Accounting Officer)