Peapack-Gladstone Financial (PGC) 8-K Reports Third Quarter Results of Operations

Contact:

Jeffrey J. Carfora, EVP and CFO

Peapack-Gladstone Financial Corporation

T:  908-719-4308

PEAPACK-GLADSTONE FINANCIAL CORPORATION

REPORTS THIRD QUARTER RESULTS OF OPERATIONS

GLADSTONE, N.J.—(BUSINESS WIRE)—November 2, 2009 – Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market:PGC) (the Corporation) recorded net income for the nine months ended September 30, 2009 of $5.7 million compared to $10.6 million for the same nine month period of 2008.  For the nine months of 2009, diluted earnings per common share after effect of the preferred stock dividend were $0.53 as compared to diluted earnings per common share of $1.20 for the same nine months of 2008.

For the third quarter of 2009, the Corporation recorded net income of $1.3 million compared to $3.5 million for the 2008 quarter.  For the 2009 quarter, diluted earnings per common share after effect of the preferred stock dividend were $0.10 as compared to diluted earnings per common share of $0.40 for the same quarter of 2008.

The decrease in earnings per share for both the nine month and quarter periods was primarily due to an increase in the provision for loan losses, an increase in the provision for losses on OREO (Other Real Estate Owned), an increase in the industry-wide FDIC assessment and the dividends on preferred stock.

The Corporation recorded a provision for loan losses of $2.8 million in the third quarter of 2009 compared to $780 thousand for the same period in 2008.

Additionally, a provision for losses on OREO of $375 thousand, associated with a contract for sale, was recorded during the 2009 quarter - there was no such provision in the 2008 quarter. Due to a substantial increase in the FDIC assessment rates, total FDIC assessment expense of $724 thousand was recorded for the third quarter of 2009 as compared to $211 thousand for the same period in 2008.  Dividends and accretion on preferred stock totaled $430 thousand for the quarter ended September 30, 2009.  There was no such charge last year as the preferred stock was issued in January 2009 as a result of the Corporation’s participation in the U.S. Treasury’s Capital Purchase Program.

Frank A. Kissel, Chairman and CEO, stated, “We are pleased to have reported positive earnings and generate capital in excess of dividends this quarter, despite the significant impact the recession has had on financial institutions and their borrowers.” Mr. Kissel went on to say, “While our non-performing assets have increased, we have not seen the same significant deterioration as many other institutions because of our conservative underwriting and diligence in managing our loan portfolio. Further, we are pleased with the progress we have made in resolving certain problem assets over the quarter.”

Net Interest Income and Margin

In the third quarter of 2009, net interest income, on a fully tax-equivalent basis, was $12.5 million, an increase of $74 thousand or 0.60 percent from the same quarter last year.  The effect of growth in overall interest earning assets funding by growth in core deposits contributed to improved net interest income.

On a fully tax-equivalent basis, the net interest margin was 3.61 percent and 3.92 percent for the third quarters of 2009 and 2008, respectively. The effect of growth in lower yielding, but less risky and shorter duration interest-earning

cash deposits and investment securities coupled with declining loan balances, partially offset by the effect of growth in lower costing core deposits, contributed to the reduced margin.

Loans

Average loans totaled $1.01 billion for the third quarter of 2009 as compared to $1.02 billion for the same 2008 quarter, reflecting a decrease of $10.4 million or 1.0 percent. The average residential mortgage loan portfolio declined $31.9 million or 6.3 percent to $472.8 million, as the Corporation has opted to sell its longer-term, fixed-rate production as an interest rate risk management strategy in the lower rate environment, and loan payments have outpaced originations put into portfolio.

For the quarterly period ending September 30, 2009 compared to the same quarterly period in 2008, the average commercial mortgage portfolio grew $12.3 million or 4.7 percent to $273.0 million; the average commercial construction loan portfolio was $67.2 million, an increase of $13.4 million or 24.9 percent; and the average home equity loan portfolio rose $10.8 million or 42.5 percent to $36.2 million.  The Corporation focused on the origination of these higher-yielding, shorter-maturity loans and loan originations outpaced principal paydowns over the year.

In comparing balances at September 30, 2009 to balances at December 31, 2008, the decline in the Corporation’s loan portfolio has been in not only the residential mortgage loan portfolio for the same reasons described above, but also in the commercial and construction loan portfolios, as loan demand and quality borrowers on these fronts have been scarce during 2009.

Deposits

Average deposits grew 11.2 percent from $1.18 billion in the third quarter of 2008 to $1.31 billion in the third quarter of 2009.  Average interest-bearing checking balances totaled $216.6 million in the third quarter of 2009, rising $70.0 million or 47.7 percent from the same quarter in 2008 due to the Corporation’s focus on core deposit growth coupled with the introduction of the Ultimate Checking product, which provides customers with a low-cost checking product and a higher yield for larger balances.  Average money market accounts also rose from $397.8 million in the third quarter of 2008 to $445.8 million for the same quarter of 2009, an increase of $48.1 million or 12.1 percent, as certain customers tend to “park” funds in money market accounts in the lower interest rate environment.

In comparing balances at September 30, 2009 to balances at December 31, 2008, lower costing interest-bearing checking accounts and money market accounts have continued to increase, but higher costing certificates of deposit have declined.  The Corporation has opted not to pay higher rates on maturing certificates of deposit, as the Corporation has ample liquidity from core deposit growth and principal pay downs on loans.

Mr. Kissel commented, “Our core funding growth has reduced our overall cost of funds, contributed to our profitability and enhanced the value of our franchise.”

PGB Trust and Investments

PGB Trust and Investments generated $2.2 million in fee income in the third quarter of 2009, a decrease of $289 thousand or 11.6 percent over the same quarter of 2008.  The decrease reflects the lower market values on assets under management, due to the recession, on which investment management

fees are based, as well as reduction of certain fees earned on placement of funds in money market instruments, due to the reduced interest rate environment.

Other Income

For the third quarter of 2009, other income totaled $1.1 million as compared to $964 thousand for the same quarter of 2008, rising $173 thousand, or 18.0 percent.  Income earned on the sale of mortgage loans at origination increased $176 thousand to $200 thousand in the third quarter of 2009 from $24 thousand in the same 2008 period.  More customers have been interested in longer-term, fixed-rate mortgages in the current low rate environment.  These mortgages are sold rather than retained in portfolio for interest rate risk management purposes. Income from Bank-Owned Life Insurance, resulting from the increase in cash surrender value, declined $53 thousand or 18.1 percent to $240 thousand for the third quarter of 2009 as compared to the third quarter of 2008 due primarily to the lower interest rate environment.

Other Expenses

The Corporation’s other expenses were $10.9 million in the third quarter of 2009 compared to $9.6 million for the same quarter of 2008, an increase of $1.3 million or 14.1 percent.  A large portion of this increase was due to an increase in the industry-wide FDIC assessment.  Due to a substantial increase in the FDIC assessment rates, total FDIC assessment expense of $724 thousand was recorded for the third quarter of 2009 as compared to $211 thousand for the same period in 2008.  Salary and benefit expense in the third quarters of 2009 and 2008 was $5.6 million and $5.5 million, respectively, increasing by $113 thousand or 2.1 percent.  In addition to salary increases, the Corporation added

staff for several new branches/offices.  In addition, during the third quarter of 2009, the Corporation recorded a provision for losses on OREO of $375 thousand, associated with a contract for sale. There was no such provision in the 2008 quarter.

ASSET QUALITY

At September 30, 2009, non-performing assets totaled $14.9 million or 1.00 percent of total assets as compared to $6.6 million or 0.48 percent of total assets at December 31, 2008 and $5.0 million or 0.37 percent of total assets at September 30, 2008.  Non-performing loans have increased during the first nine months of 2009 primarily due to two construction loans to one borrower totaling $6.0 million and one large residential loan totaling $2.1 million.  Both borrowers were affected by the current economic downturn.  Although both borrowers continued to make interest payments on these loans through August 2009, they have been on non-accrual status and $868 thousand in charge-offs have been recorded in 2009 related to these loans.

As noted earlier in the release, Mr. Kissel indicated he was pleased with the progress made in resolving certain problem assets over the quarter. He went on to say, “During the quarter, the property securing a $2.1 million residential loan and the note related to a $600 thousand commercial mortgage loan, have both gone under contract for sale, with closings expected during the fourth quarter. Further, a $2.6 million loan relationship was upgraded with new ownership and management, as well as an injection of capital.”

Mr. Kissel went on to say, “We continue to proactively manage our loan portfolios in this economic environment in an effort to identify and stay ahead of potential problems.  We are well capitalized and we are ready to lend to well-

qualified individuals and businesses.  However, we remain committed to our conservative underwriting standards that have served us well and will continue to serve us well in the future.”

The allowance for loan losses was $12.9 million or 1.28 percent of total loans at September 30, 2009 as compared to $9.7 million or 0.92 percent of total loans at December 31, 2008 and $9.1 million or 0.88 percent of total loans at September 30, 2008.

The provision for loan losses for the third quarter of 2009 was $2.8 million as compared to $780 thousand for the same quarter of 2008.  Management has determined that a higher provision is warranted because of the increase in non-performing loans and the continued weakness in the housing markets and the overall economy.

CAPITAL

At September 30, 2009, the Corporation’s leverage ratio, tier 1 and total risk based capital ratios were 8.17 percent, 12.23 percent and 13.48 percent, respectively.  These capital ratios are well above the minimum levels to be considered well capitalized under applicable regulatory guidelines. Additionally, the Corporation’s common equity ratio (common equity to total assets) at September 30, 2009 stands at a healthy 6.17 percent.  Mr. Kissel noted, “Building capital and remaining well capitalized and paying back the funds from the Treasury’s Capital Purchase Program, continue to be important business objectives”.

As previously announced, on October 15, 2009 the Board of Directors declared a regular cash dividend of $0.05 per share payable on November 13, 2009 to shareholders of record on October 29, 2009.

ABOUT THE CORPORATION

Peapack-Gladstone Financial Corporation is a bank holding company with total assets of $1.49 billion as of September 30, 2009.  Peapack-Gladstone Bank, its wholly owned community bank, was established in 1921, and has 24 branches in Somerset, Hunterdon, Morris, Middlesex and Union Counties.  Its Trust Division, PGB Trust and Investments, operates at the Bank’s main office located at 190 Main Street in Gladstone and at four other locations in Clinton, Morristown and Summit, New Jersey and Bethlehem, Pennsylvania.  To learn more about Peapack-Gladstone Financial Corporation and its services please visit our web site at www.pgbank.com or call 908-234-0700.

The foregoing contains 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 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 such forward-looking statements include, but are not limited to, those risk factors set forth in the “Risk Factor” section of our Annual Report on Form 10-K for the year ended December 31, 2008 and subsequent Forms 10-Q. Peapack-Gladstone assumes no obligation for updating any such forward-looking statements at any time.

(Tables to Follow)

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CONDITION

(Dollars in thousands)

(Unaudited)

	As of
	September 30, 2009		June 30, 2009		March 31,2009		December 31, 2008		September 30, 2008
ASSETS
Cash and due from banks	$	9,343	$	50,921	$	20,525	$	25,686	$	28,108
Federal funds sold		200		200		201		200		125
Interest-earning deposits		46,876		513		59,063		1,003		3,265
Total cash and cash equivalents		56,419		51,634		79,789		26,889		31,498
Securities held to maturity		86,703		77,216		48,379		51,731		86,327
Securities available for sale		252,786		227,414		178,676		173,543		146,125
FHLB and FRB Stock, at cost		5,329		5,343		4,202		4,902		6,705
Residential mortgage		466,601		483,330		494,208		505,150		507,440
Commercial mortgage		279,336		275,915		275,675		274,640		267,002
Commercial loans		129,671		133,659		137,304		143,188		145,545
Construction loans		65,760		67,075		69,474		66,785		57,122
Consumer loans		26,571		27,302		27,959		29,789		31,092
Home equity loans		38,450		35,357		32,648		31,054		27,165
Other loans		1,592		1,079		1,958		2,376		1,013
Total loans		1,007,981		1,023,717		1,039,226		1,052,982		1,036,379
Less:  Allowance for loan losses		12,947		11,054		9,762		9,688		9,088
Net loans		995,034		1,012,663		1,029,464		1,043,294		1,027,291
Premises and equipment		28,011		27,189		26,740		26,936		26,439
Other real estate owned		680		700		965		1,211		1,211
Accrued interest receivable		5,359		4,652		4,635		4,117		4,884
Cash surrender value of life insurance		26,087		25,865		25,672		25,480		25,249
Deferred tax assets, net		22,154		23,653		22,927		23,143		10,975
Other assets		9,117		2,550		2,858		4,179		2,194
TOTAL ASSETS	$	1,487,679	$	1,458,879	$	1,424,307	$	1,385,425	$	1,368,898
LIABILITIES
Deposits:
Noninterest bearing demand deposits	$	199,804	$	194,888	$	195,175	$	210,030	$	200,976
Interest-bearing deposits
Checking		212,687		203,378		178,430		167,727		148,868
Savings		73,308		71,464		70,426		67,453		67,611
Money market accounts		470,123		418,208		400,692		364,628		379,719
CD’s $100,000 and over		159,942		187,516		192,708		195,826		156,272
CD’s less than $100,000		209,994		220,779		225,608		232,224		207,539
Total deposits		1,325,858		1,296,233		1,263,039		1,237,888		1,160,985
Borrowings		36,815		37,128		39,439		54,998		95,054
Other liabilities		5,862		9,844		7,654		8,645		7,007
TOTAL LIABILITIES		1,368,535		1,343,205		1,310,132		1,301,531		1,263,046
Shareholders’ Equity		119,144		115,674		114,175		83,894		105,852
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY	$	1,487,679	$	1,458,879	$	1,424,307	$	1,385,425	$	1,368,898
Trust division assets under management (market value, not included above)	$	1,803,862	$	1,702,782	$	1,602,752	$	1,804,629	$	1,861,763

PEAPACK-GLADSTONE FINANCIAL CORPORATION

SELECTED BALANCE SHEET DATA

(Dollars in thousands)

(Unaudited)

	As of
	September 30, 2009			June 30, 2009			March 31, 2009			December 31, 2008			September 30, 2008
Asset Quality:
Loans past due over 90 days and still accruing	$	1,118		$	104		$	-		$	-		$	-
Non-accrual loans		13,082			12,998			11,139			5,393			3,804
Other real estate owned		680			700			965			1,211			1,211
Total non-performing assets	$	14,880		$	13,802		$	12,104		$	6,604		$	5,015
Troubled debt restructured loans	$	18,671		$	7,766		$	-		$	-		$	-
Non-performing loans to total loans		1.41	%		1.28	%		1.07	%		0.51	%		0.37	%
Non-performing assets to total assets		1.00	%		0.95	%		0.85	%		0.48	%		0.37	%
Allowance for loan losses:
Beginning of period	$	11,054		$	9,762		$	9,688		$	9,088		$	8,295
Provision for loan losses		2,750			2,000			2,000			600			780
Charge-offs, net		(857	)		(708	)		(1,926	)		-			13
End of period	$	12,947		$	11,054		$	9,762		$	9,688		$	9,088
ALLL to non-performing loans		91.18	%		84.37	%		87.64	%		179.64	%		238.91	%
ALLL to total loans		1.28	%		1.08	%		0.94	%		0.92	%		0.88	%
Capital Adequacy:
Tier I leverage (5% minimum to be considered well capitalized)		8.17	%		8.25	%		8.21	%		6.15	%		8.76	%
Tier I capital to risk-weighted assets (6% minimum to be considered well capitalized)		12.23	%		12.30	%		11.73	%		9.11	%		12.41	%
Tier I & II capital to risk-weighted assets (10% minimum to be considered well capitalized)		13.48	%		13.44	%		12.73	%		10.05	%		13.36	%
Common equity to
Total assets		6.17	%		6.06	%		6.11	%		6.06	%		7.73	%
Book value per
Common share	$	10.54		$	10.15		$	9.99		$	9.64		$	12.16

PEAPACK-GLADSTONE FINANCIAL CORPORATION

SELECTED CONSOLIDATED FINANCIAL DATA

(Dollars in thousands, except share data)

(Unaudited)

	For The Three Months Ended
	September 30, 2009			June 30, 2009			March 31, 2009			December 31, 2008			September 30, 2008
Income Statement Data:
Interest income	$	16,379		$	16,709		$	16,795		$	18,048		$	17,912
Interest expense		4,129			4,543			4,987			5,812			5,759
Net interest income		12,250			12,166			11,808			12,236			12,153
Provision for loan losses		2,750			2,000			2,000			600			780
Net interest income after provision for loan losses		9,500			10,166			9,808			11,636			11,373
Trust fees		2,200			2,550			2,332			2,899			2,489
Other income		1,137			1,114			983			1,019			964
Securities gains, net		(2	)		108			5			-			104
Impairment charges		-			-			-			(56,146	)		-
Other expenses		10,940			11,195			9,524			9,956			9,591
Income before income taxes		1,895			2,743			3,604			(50,548	)		5,339
Income tax expense		583			813			1,122			(17,929	)		1,822
Net income		1,312			1,930			2,482			(32,619	)		3,517
Dividends and accretion on preferred stock		430			428			205			-			-
Net income available to
Common shareholders	$	882		$	1,502		$	2,277		$	(32,619	)	$	3,517
Per Common Share Data:
Earnings per share (basic)	$	0.10		$	0.17		$	0.26		$	(3.75	)	$	0.40
Earnings per share (diluted)		0.10			0.17			0.26			(3.70	)		0.40
Performance Ratios:
Return on Average Assets		0.36	%		0.54	%		0.71	%		(9.45	)%		1.04	%
Return on Average Common
Equity		3.89	%		6.75	%		10.45	%		(121.92	)%		13.46	%
Net Interest Margin
(Taxable Equivalent Basis)		3.61	%		3.71	%		3.70	%		3.84	%		3.92	%

Note:  Per share amounts have been restated for a 5% stock dividend declared on June 18, 2009, and payable on August 3, 2009 to shareholders of record on July 9, 2009.

PEAPACK-GLADSTONE FINANCIAL CORPORATION

SELECTED CONSOLIDATED FINANCIAL DATA

(Dollars in thousands, except share data)

(Unaudited)

	For The Nine Months Ended September 30,
	2009			2008
Income Statement Data:
Interest income	$	49,883		$	53,869
Interest expense		13,659			19,785
Net interest income		36,224			34,084
Provision for loan losses		6,750			1,800
Net interest income after provision for loan losses		29,474			32,284
Trust fees		7,082			7,640
Other income		3,234			2,824
Securities gains, net		111			483
Other expenses		31,658			27,329
Income before income taxes		8,243			15,902
Income tax expense		2,519			5,343
Net income		5,724			10,559
Dividends and accretion on preferred stock		1,063			-
Net income available to
Common shareholders	$	4,661		$	10,559
Per Common Share Data:
Earnings per share (basic)	$	0.53		$	1.21
Earnings per share (diluted)		0.53			1.20
Performance Ratios:
Return on Average Assets		0.53	%		1.04	%
Return on Average Common
Equity		6.98	%		13.26	%
Net Interest Margin
(Taxable Equivalent Basis)		3.64	%		3.63	%

Note:  Per share amounts have been restated for a 5% stock dividend declared on June 18, 2009, and payable on August 3, 2009 to shareholders of record on July 9, 2009.

PEAPACK-GLADSTONE FINANCIAL CORPORATION

AVERAGE BALANCE SHEET

UNAUDITED

THREE MONTHS ENDED

(Tax-Equivalent Basis, Dollars in Thousands)

	September 30, 2009								September 30, 2008
	Average Balance			Income/ Expense		Yield			Average Balance			Income/ Expense		Yield
ASSETS:
Interest-Earning Assets:
Investments:
Taxable (1)	$	275,325		$	2,462		3.58	%	$	202,248		$	2,632		5.21	%
Tax-Exempt (1) (2)		51,853			626		4.84			44,121			643		5.83
Loans (2) (3)		1,009,348			13,521		5.36			1,019,791			14,903		5.85
Federal Funds Sold		201			-		0.20			716			3		1.94
Interest-Earning Deposits		49,639			25		0.20			2,085			10		1.91
Total Interest-Earning
Assets		1,386,366		$	16,634		4.80	%		1,268,961		$	18,191		5.73	%
Noninterest-Earning Assets:
Cash and Due from Banks		8,301								20,586
Allowance for Loan
Losses		(11,140	)							(8,313	)
Premises and Equipment		27,705								26,507
Other Assets		58,157								41,338
Total Noninterest-Earning
Assets		83,023								80,118
Total Assets	$	1,469,389							$	1,349,079
LIABILITIES:
Interest-Bearing Deposits
Checking	$	216,646		$	405		0.75	%	$	146,673		$	309		0.84	%
Money Markets		445,839			1,108		0.99			397,778			1,896		1.91
Savings		72,126			85		0.47			66,586			102		0.61
Certificates of Deposit		374,548			2,195		2.34			372,465			2,991		3.21
Total Interest-Bearing
Deposits		1,109,159			3,793		1.37			983,502			5,298		2.15
Borrowings		36,923			336		3.64			58,076			461		3.18
Total Interest-Bearing
Liabilities		1,146,082			4,129		1.44			1,041,578			5,759		2.21
Noninterest Bearing
Liabilities
Demand Deposits		198,800								193,050
Accrued Expenses and
Other Liabilities		6,579								9,951
Total Noninterest-Bearing
Liabilities		205,379								203,001
Shareholders’ Equity		117,928								104,500
Total Liabilities and
Shareholders’ Equity	$	1,469,389							$	1,349,079
Net Interest Income				$	12,505							$	12,432
Net Interest Spread							3.36	%							3.52	%
Net Interest Margin (4)							3.61	%							3.92	%

PEAPACK-GLADSTONE FINANCIAL CORPORATION

AVERAGE BALANCE SHEET

UNAUDITED

THREE MONTHS ENDED

(Tax-Equivalent Basis, Dollars in Thousands)

	September 30, 2009								June 30, 2009
	Average Balance			Income/ Expense		Yield			Average Balance			Income/ Expense		Yield
ASSETS:
Interest-Earning Assets:
Investments:
Taxable (1)	$	275,325		$	2,462		3.58	%	$	229,392		$	2,287		3.99	%
Tax-Exempt (1) (2)		51,853			626		4.84			49,031			618		5.05
Loans (2) (3)		1,009,348			13,521		5.36			1,032,665			14,046		5.44
Federal Funds Sold		201			-		0.20			200			-		0.20
Interest-Earning Deposits		49,639			25		0.20			27,574			9		0.13
Total Interest-Earning
Assets		1,386,366		$	16,634		4.80	%		1,338,862		$	16,960		5.07	%
Noninterest-Earning Assets:
Cash and Due from Banks		8,301								31,381
Allowance for Loan
Losses		(11,140	)							(9,853	)
Premises and Equipment		27,705								26,890
Other Assets		58,157								55,486
Total Noninterest-Earning
Assets		83,023								103,904
Total Assets	$	1,469,389							$	1,442,766
LIABILITIES:
Interest-Bearing Deposits
Checking	$	216,646		$	405		0.75	%	$	193,245		$	349		0.72	%
Money Markets		445,839			1,108		0.99			414,082			1,127		1.09
Savings		72,126			85		0.47			70,802			81		0.46
Certificates of Deposit		374,548			2,195		2.34			406,518			2,638		2.60
Total Interest-Bearing
Deposits		1,109,159			3,793		1.37			1,084,647			4,195		1.55
Borrowings		36,923			336		3.64			38,925			348		3.58
Total Interest-Bearing
Liabilities		1,146,082			4,129		1.44			1,123,572			4,543		1.62
Noninterest Bearing
Liabilities
Demand Deposits		198,800								197,565
Accrued Expenses and
Other Liabilities		6,579								5,438
Total Noninterest-Bearing
Liabilities		205,379								203,003
Shareholders’ Equity		117,928								116,191
Total Liabilities and
Shareholders’ Equity	$	1,469,389							$	1,442,766
Net Interest Income				$	12,505							$	12,417
Net Interest Spread							3.36	%							3.45	%
Net Interest Margin (4)							3.61	%							3.71	%

PEAPACK-GLADSTONE FINANCIAL CORPORATION

AVERAGE BALANCE SHEET

UNAUDITED

NINE MONTHS ENDED

(Tax-Equivalent Basis, Dollars in Thousands)

	September 30, 2009								September 30, 2008
	Average Balance			Income/ Expense		Yield			Average Balance			Income/ Expense		Yield
ASSETS:
Interest-Earning Assets:
Investments:
Taxable (1)	$	228,359		$	6,887		4.02	%	$	220,120		$	8,317		5.04	%
Tax-Exempt (1) (2)		50,293			1,898		5.03			53,153			2,248		5.64
Loans (2) (3)		1,029,833			41,825		5.42			998,228			43,917		5.87
Federal Funds Sold		200			-		0.20			4,891			115		3.14
Interest-Earning Deposits		47,479			43		0.12			8,081			134		2.20
Total Interest-Earning
Assets		1,356,164		$	50,653		4.98	%		1,284,473			54,731		5.68	%
Noninterest-Earning Assets:
Cash and Due from Banks		7,441								20,708
Allowance for Loan
Losses		(10,207	)							(7,850	)
Premises and Equipment		27,153								26,488
Other Assets		56,173								31,954
Total Noninterest-Earning
Assets		80,560								71,300
Total Assets	$	1,436,724							$	1,355,773
LIABILITIES:
Interest-Bearing Deposits
Checking	$	192,822		$	1,050		0.73	%	$	139,945		$	733		0.70	%
Money Markets		414,054			3,407		1.10			399,367			6,392		2.13
Savings		70,353			244		0.46			65,780			301		0.61
Certificates of Deposit		402,500			7,923		2.62			391,047			11,137		3.80
Total Interest-Bearing
Deposits		1,079,729			12,624		1.56			996,139			18,563		2.48
Borrowings		39,147			1,035		3.52			48,390			1,222		3.37
Total Interest-Bearing
Liabilities		1,118,876			13,659		1.63			1,044,529			19,785		2.53
Noninterest Bearing
Liabilities
Demand Deposits		196,201								192,599
Accrued Expenses and
Other Liabilities		6,310								12,472
Total Noninterest-Bearing
Liabilities		202,511								205,071
Shareholders’ Equity		115,337								106,173
Total Liabilities and
Shareholders’ Equity	$	1,436,724							$	1,355,773
Net Interest Income				$	36,994							$	34,946
Net Interest Spread							3.35	%							3.15	%
Net Interest Margin (4)							3.64	%							3.63	%

(1) Average balances for available-for sale securities are based on amortized cost.

(2) Interest income is presented on a tax-equivalent basis using a 35 percent federal tax rate.

(3) Loans are stated net of unearned income and include non-accrual loans.

(4) Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.