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

Contact:

Jeffrey J. Carfora, EVP and CFO

Peapack-Gladstone Financial Corporation

T:  908-719-4308

PEAPACK-GLADSTONE FINANCIAL CORPORATION

REPORTS SECOND QUARTER RESULTS OF OPERATIONS

BEDMINSTER, N.J.—(BUSINESS WIRE)—August 2, 2010 – Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market:PGC) (the Corporation) recorded net income of $1.8 million and diluted earnings per share of $0.16, for the quarter ended June 30, 2010. This compared to diluted earnings per share of $0.17 for the quarter ended June 30, 2009 and diluted earnings per share of $0.16 for the quarter ended March 31, 2010.

When compared to the quarter ended June 30, 2009, the June 2010 quarter included increased net interest income and increased income from the PGB Trust and Investment business, the effects of which were offset by reduced gains from securities sales and an increased provision for loan losses.

Frank A. Kissel, Chairman and CEO, stated, “We are pleased to continue to report positive earnings and growth in capital during these challenging times. Our internal capital generation enabled us to redeem 25 percent of our preferred shares issued previously under the U.S. Treasury’s Capital Purchase Program (the “CPP”).this past January.  Building capital internally to redeem the Treasury’s CPP investment over time, while remaining well capitalized, continues to be an important business objective of the Corporation.”

The Corporation’s provision for loan losses for the quarter ended June 30, 2010 was $2.7 million. While this was lower than the highest recent quarterly level (which was in the fourth quarter of 2009), it was higher than the $2.0 million

provision in the second quarter of 2009. Mr. Kissel noted, “The level of the June 2010 quarterly provision was due principally to one commercial customer relationship with three construction loans being placed on non-accrual status. We continue to be extremely diligent and proactive in managing our loan portfolio and placed this entire relationship on non-accrual status and charged-off $2.4 million related to this relationship during the quarter, leaving a balance after charge-off of $6.7 million.”

Mr. Kissel went on to say “We continue to be pleased with the progress we have made throughout 2009 and into 2010 in resolving certain problem assets.”

Net Interest Income and Margin

In the second quarter of 2010, net interest income, on a fully tax-equivalent basis, was $12.7 million, reflecting an increase from $12.4 million for the second quarter of 2009, due principally to growth in the investment portfolio funded by growth in lower costing core deposits.

On a fully tax-equivalent basis, the net interest margin was 3.64 percent for the June 2010 quarter compared to 3.71 percent for the June 2009 quarter. In comparing the June 2010 quarter to the same quarter last year, the effect of growth in lower yielding, but less risky and shorter duration cash deposits and investment securities coupled with declining loan balances, contributed to a reduction in margin. This effect was partially offset by the growth of lower cost core deposits and the intentional run-off of higher cost certificates of deposit.

  Mr. Kissel stated, “Throughout 2009 and into 2010, we have built substantial liquidity into our balance sheet, so as to be better positioned in the future when we expect loan demand will increase and interest rates will rise.”

Loans

Average loans totaled $964.1 million for the second quarter of 2010 as compared to $1.03 billion for the same 2009 quarter, reflecting a decrease of $68.6 million or 6.6 percent. The average residential mortgage loan portfolio declined $53.2 million or 10.9 percent to $436.0 million in the second quarter of 2010 from the same quarter of 2009.  The Corporation has opted to sell its longer-term, fixed-rate loan production as an interest rate risk management strategy in the lower rate environment, and loan pay-downs have outpaced the originations retained in portfolio. The average commercial portfolio declined $18.2 million or 3.8 percent from the second quarter of 2009 to $462.5 million for the same quarter in 2010, as loan demand and quality borrowers on the commercial front have remained scarce.

The average home equity line portfolio rose $6.5 million or 18.9 percent to $40.8 million for the second quarter of 2010 compared to the same quarter in 2009.  The Corporation focused on the origination of these adjustable-rate loans.  Loan originations outpaced principal paydowns over the year.

Deposits

Average total deposits (interest-bearing and noninterest-bearing) grew $46.9 million or 3.7 percent from $1.28 billion in the second quarter of 2009 to $1.33 billion in the second quarter of 2010.  Average noninterest-bearing checking grew $16.6 million or 8.4 percent to $214.2 million in the second quarter of 2010 from the second quarter of 2009. Average interest-bearing checking balances totaled $254.0 million in the second quarter of 2010, rising $60.8 million or 31.4 percent from the same quarter in 2009.  Checking growth is attributable to the Corporation’s focus on core deposit growth, particularly checking, coupled

with growth in our 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 $414.1 million in the second quarter of 2009 to $510.6 million for the same quarter of 2010, an increase of $96.5 million or 23.3 percent.  The Corporation’s focus on core deposit growth, as well as certain customers tending to “park” funds in money market accounts in lower interest rate environments accounted for this growth.

Average certificates of deposit declined from $406.5 million in the June 2009 quarter to $274.2 million in the June 2010 quarter, a decline of $132.3 million or 32.5 percent. The Corporation allowed higher costing certificates of deposit to run-off and replaced those funds with lower costing, more stable core deposits.

Mr. Kissel commented, “Our reduced reliance on certificates of deposit and our core deposit growth continues to strengthen customer relationships, reduce the overall cost of funds, contribute to profitability and enhance franchise value.”

PGB Trust and Investments

PGB Trust and Investments generated $2.7 million in fee income in the second quarter of 2010, compared to $2.5 million in the second quarter of 2009, reflecting an increase of 5.3 percent. The market value of the assets under administration of the Trust Division increased from $1.70 billion at June 30, 2009 to $1.83 billion at June 30, 2010.

Craig C. Spengeman, President of PGB Trust & Investments commented, “We have a seen a nice increase in our managed asset business and related recurring fee income. Further, we are pleased with the recovery and performance

of our assets under administration throughout 2009 and into 2010. The financial markets continue to experience extreme volatility as we continue to manage through the most challenging period since the Great Depression. The recovery of the value of assets under administration and our performance reflect the sound financial management of our trust and investment professionals. Further, we continue to book new business as prospective clients continue to seek our professional advice during these challenging times.”

Other Income

Other income, excluding trust fee income and net security gains, totaled $1.1 million in each of the quarters ended June 30, 2010 and 2009.  Fee income earned on the sale of mortgage loans at origination decreased, as there were less mortgage originations in 2010.  This effect was partially offset by a greater targeted sale price for originations in 2010. The 2010 June quarter included increased income from overdraft and NSF charges, when compared to the 2009 June quarter.

Operating Expenses

The Corporation’s total operating expenses were $11.0 million in the June 2010 quarter compared to $11.2 million in the June 2009 quarter. The decrease for 2010, when compared to the year ago quarter, was principally due to decreased FDIC insurance expense, due to an industry wide special FDIC insurance premium assessed in the June 2009 quarter. This decrease in FDIC insurance expense in the 2010 quarter was partially offset by expenses associated with a new Trust office opened in June 2009, a new branch office opened in September 2009, a new corporate headquarters occupied in June 2010, and increased expenses related to problem loans and REO.

ASSET QUALITY

At June 30, 2010, nonperforming assets increased to $21.3 million or 1.44 percent of total assets as compared to $12.9 million or 0.87 percent of total assets at March 31, 2010. As noted earlier, one commercial customer consisting of three construction loans, was placed on non-accrual status in the quarter. That relationship totaled approximately $6.7 million, after charge-offs of $2.4 million in the quarter.

Mr. Kissel continued, “We have the capital and liquidity to lend to well-qualified individuals and businesses.  However, we do remain committed to our conservative underwriting standards that have served us well.”

The allowance for loan losses was $13.9 million or 1.44 percent of total loans at June 30, 2010 as compared to $13.2 million or 1.34 percent of total loans at December 31, 2009.

CAPITAL

At June 30, 2010, the Corporation’s leverage ratio, tier 1 and total risk based capital ratios were 7.85 percent, 12.28 percent and 13.53 percent, respectively.  All ratios include the $7.2 million reduction in regulatory capital due to the partial redemption in January 2010 of the preferred shares previously issued under the CPP.  All are above the levels necessary to be considered well capitalized under applicable regulatory guidelines.  Additionally, the Corporation’s common equity ratio (common equity to total assets) at June 30, 2010 is 6.45 percent compared to 6.09 percent at December 31, 2009.

As previously announced, on July 15, 2010 the Board of Directors declared a regular cash dividend of $0.05 per share payable on August 12, 2010 to shareholders of record on July 29, 2010.

ABOUT THE CORPORATION

Peapack-Gladstone Financial Corporation is a bank holding company with total assets of $1.48 billion as of June 30, 2010.  Peapack-Gladstone Bank, its wholly owned community bank, was established in 1921, and has 23 branches in Somerset, Hunterdon, Morris, Middlesex and Union Counties.  Its Trust Division, PGB Trust and Investments, operates at the Bank’s new corporate offices located at 500 Hills Drive in Bedminster 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

· a continued or unexpected decline in the economy, in particular in our New Jersey market area;

· declines in value in our investment portfolio;

· higher than expected increases in our allowance for loan losses;

· higher than expected increases in loan losses or in the level of nonperforming loans;

· unexpected changes in interest rates;

· we may be unable to successfully grow our business;

· we may be unable to manage our growth;

· a continued or unexpected decline in real estate values within our market areas;

· legislative and regulatory actions (including the impact of the Dodd-Frank Wall Street and Consumer Protection Act and the Electronic Fund transfer Act and related regulations) subject us to additional regulatory oversight which may result in increased compliance costs;

· higher than expected FDIC insurance premiums;

· lack of liquidity to fund our various cash obligations;

· repurchase of our preferred shares issued under the Treasury’s Capital Purchase Program which will impact net income available to our common shareholders and our earnings per share;

· further offerings of our equity securities may result in dilution of our common stock;

· reduction in our lower-cost funding sources;

· changes in accounting policies or accounting standards;

· we may be unable to adapt to technological changes;

· our internal controls and procedures may not be adequate to prevent losses;

· claims and litigation pertaining to fiduciary responsibility, environmental laws and other matters; and

· other unexpected material adverse changes in our operations or earnings.

A discussion of these and other factors that could affect our results is included in our SEC filings, including our Annual Report on Form 10-K for the year ended December 31, 2009.  We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in the Corporation’s expectations.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. 

(Tables to Follow)

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CONDITION

(Dollars in thousands)

(Unaudited)

	As of
	June 30,		March 31,		December 31,		September 30,		June 30,
	2010		2010		2009		2009		2009
ASSETS
Cash and due from banks	$	10,735	$	8,999	$	7,864	$	9,343	$	50,921
Federal funds sold		201		201		201		200		200
Interest-earning deposits		59,356		33,915		71,907		46,876		513
Total cash and cash equivalents		70,292		43,115		79,972		56,419		51,634
Securities held to maturity		101,603		105,258		89,459		86,703		77,216
Securities available for sale		252,646		278,052		272,484		252,786		227,414
FHLB and FRB Stock, at cost		4,807		5,305		5,315		5,329		5,343
Residential mortgage		430,021		443,085		452,641		466,601		483,330
Commercial mortgage		280,513		281,323		279,595		279,336		275,915
Commercial loans		133,881		133,288		120,554		129,671		133,659
Construction loans		46,286		48,044		64,816		65,760		67,075
Consumer loans		23,811		24,936		25,638		26,571		27,302
Home equity lines of credit		41,956		39,487		38,728		38,450		35,357
Other loans		2,788		902		1,565		1,592		1,079
Total loans		959,256		971,065		983,537		1,007,981		1,023,717
Less:  Allowance for loan losses		13,856		13,720		13,192		12,947		11,054
Net loans		945,400		957,345		970,345		995,034		1,012,663
Premises and equipment		34,626		27,942		27,911		28,011		27,189
Other real estate owned		210		40		360		680		700
Accrued interest receivable		4,533		5,112		4,444		5,359		4,652
Bank owned life insurance		26,672		26,473		26,292		26,087		25,865
Deferred tax assets, net		23,438		23,999		23,522		22,154		23,653
Other assets		13,036		10,670		12,249		9,117		2,550
TOTAL ASSETS	$	1,477,263	$	1,483,311	$	1,512,353	$	1,487,679	$	1,458,879
LIABILITIES
Deposits:
Noninterest bearing
demand deposits	$	216,314	$	223,184	$	216,127	$	199,804	$	194,888
Interest-bearing deposits
Checking		249,472		241,887		255,058		212,687		203,378
Savings		76,937		77,064		73,866		73,308		71,464
Money market accounts		503,829		502,548		458,303		470,123		418,208
CD’s $100,000 and over		101,034		109,347		147,138		159,942		187,516
CD’s less than $100,000		163,769		173,219		199,177		209,994		220,779
Total deposits		1,311,355		1,327,249		1,349,669		1,325,858		1,296,233
Borrowings		28,342		36,140		36,499		36,815		37,128
Capital lease obligation		6,148		-		-		-		-
Other liabilities		15,435		5,998		6,676		5,862		9,844
TOTAL LIABILITIES		1,361,280		1,369,387		1,392,844		1,368,535		1,343,205
Shareholders’ Equity		115,983		113,924		119,509		119,144		115,674
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY	$	1,477,263	$	1,483,311	$	1,512,353	$	1,487,679	$	1,458,879
Trust division assets under
management (market value,
not included above)	$	1,830,944	$	1,894,971	$	1,856,229	$	1,803,862	$	1,702,782

PEAPACK-GLADSTONE FINANCIAL CORPORATION

SELECTED BALANCE SHEET DATA

(Dollars in thousands)

(Unaudited)

	As of
	June 30,			March 31,			December 31,			September 30,			June 30,
	2010			2010			2009			2009			2009
Asset Quality:
Loans past due over 90 days
and still accruing	$	736		$	638		$	496		$	1,118		$	104
Nonaccrual loans		20,361			12,200			11,256			13,082			12,998
Other real estate owned		210			40			360			680			700
Total nonperforming assets	$	21,307		$	12,878		$	12,112		$	14,880		$	13,802
Nonperforming loans to
total loans		2.20	%		1.32	%		1.19	%		1.41	%		1.28	%
Nonperforming assets to
total assets		1.44	%		0.87	%		0.80	%		1.00	%		0.95	%
Troubled debt restructured loans	$	10,613		$	11,817		$	11,123		$	18,671		$	7,766
Loans past due 30 through 89
days and still accruing	$	9,444		$	10,056		$	6,015		$	7,362		$	5,524
Allowance for loan losses:
Beginning of period	$	13,720		$	13,192		$	12,947		$	11,054		$	9,762
Provision for loan losses		2,750			2,400			2,950			2,750			2,000
Charge-offs, net		(2,614	)		(1,872	)		(2,705	)		(857	)		(708	)
End of period	$	13,856		$	13,720		$	13,192		$	12,947		$	11,054
ALLL to nonperforming loans		65.68	%		106.87	%		112.25	%		91.18	%		84.37	%
ALLL to total loans		1.44	%		1.41	%		1.34	%		1.28	%		1.08	%
Capital Adequacy:
Tier I leverage
(5% minimum to be
considered well
capitalized)		7.85	%		7.80	%		7.93	%		8.17	%		8.25	%
Tier I capital to risk-
weighted assets
(6% minimum to be
considered well
capitalized)		12.28	%		12.01	%		12.45	%		12.23	%		12.30	%
Tier I & II capital to
risk-weighted assets
(10% minimum to be
considered well
capitalized)		13.53	%		13.27	%		13.71	%		13.48	%		13.44	%
Common equity to
Total assets		6.45	%		6.29	%		6.09	%		6.17	%		6.06	%
Book value per
Common share	$	10.85		$	10.70		$	10.57		$	10.54		$	10.15

PEAPACK-GLADSTONE FINANCIAL CORPORATION

SELECTED CONSOLIDATED FINANCIAL DATA

(Dollars in thousands, except share data)

(Unaudited)

	For The Three Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,
	2010			2010			2009			2009			2009
Income Statement Data:
Interest income	$	15,450		$	15,791		$	16,123		$	16,379		$	16,709
Interest expense		2,963			3,243			4,000			4,129			4,543
Net interest income		12,487			12,548			12,123			12,250			12,166
Provision for loan losses		2,750			2,400			2,950			2,750			2,000
Net interest income after
provision for loan losses		9,737			10,148			9,173			9,500			10,166
Trust fees		2,686			2,364			2,346			2,200			2,550
Other income		1,098			1,108			1,067			1,137			1,114
Securities gains, net		2			-			(42	)		(2	)		108
Salaries and employee benefits		5,704			5,709			5,291			5,622			5,430
Premises and equipment		2,588			2,372			2,358			2,185			2,171
FDIC insurance expense		552			586			834			724			1,378
Other expenses		2,161			1,863			2,124			2,409			2,216
Income before income taxes		2,518			3,090			1,937			1,895			2,743
Income tax expense		762			965			536			583			813
Net income		1,756			2,125			1,401			1,312			1,930
Dividends and accretion
on preferred stock		324			710			430			430			428
Net income available to
Common shareholders	$	1,432		$	1,415		$	971		$	882		$	1,502
Per Common Share Data:
Earnings per share (basic)	$	0.16		$	0.16		$	0.11		$	0.10		$	0.17
Earnings per share (diluted)		0.16			0.16			0.11			0.10			0.17
Performance Ratios:
Return on Average Assets		0.47	%		0.58	%		0.37	%		0.36	%		0.54	%
Return on Average Common
Equity		6.06	%		6.10	%		4.18	%		3.89	%		6.75	%
Net Interest Margin
(Taxable Equivalent Basis)		3.64	%		3.67	%		3.44	%		3.61	%		3.71	%
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
	Six Months Ended
	June 30,
	2010			2009
Income Statement Data:
Interest income	$	31,240		$	33,504
Interest expense		6,206			9,530
Net interest income		25,034			23,974
Provision for loan losses		5,150			4,000
Net interest income after
provision for loan losses		19,884			19,974
Trust fees		5,050			4,882
Other income		2,207			2,097
Securities gains, net		2			113
Salaries and employee benefits		11,413			10,964
Premises and equipment		4,960			4,260
FDIC insurance expense		1,138			1,750
Other expenses		4,024			3,745
Income before income taxes		5,608			6,347
Income tax expense		1,727			1,935
Net income		3,881			4,412
Dividends and accretion
on preferred stock		1,034			633
Net income available to
Common shareholders	$	2,847		$	3,779
Per Common Share Data:
Earnings per share (basic)	$	0.32		$	0.43
Earnings per share (diluted)		0.32			0.43
Performance Ratios:
Return on Average Assets		0.52	%		0.62	%
Return on Average Common
Equity		6.09	%		8.58	%
Net Interest Margin
(Taxable Equivalent Basis)		3.66	%		3.70	%
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)

	June 30, 2010								June 30, 2009
	Average			Income/					Average			Income/
	Balance			Expense		Yield			Balance			Expense		Yield
ASSETS:
Interest-Earning Assets:
Investments:
Taxable (1)	$	321,887		$	2,404		2.99	%	$	229,392		$	2,287		3.99	%
Tax-Exempt (1) (2)		35,111			420		4.78			49,031			618		5.05
Loans (2) (3)		964,070			12,774		5.30			1,032,665			14,046		5.44
Federal Funds Sold		201			-		0.22			200			-		0.20
Interest-Earning Deposits		69,245			28		0.16			27,574			9		0.13
Total Interest-Earning
Assets		1,390,514		$	15,626		4.50	%		1,338,862		$	16,960		5.07	%
Noninterest-Earning Assets:
Cash and Due from Banks		8,478								31,381
Allowance for Loan
Losses		(14,075	)							(9,853	)
Premises and Equipment		30,675								26,890
Other Assets		68,786								55,486
Total Noninterest-Earning
Assets		93,964								103,904
Total Assets	$	1,484,378							$	1,442,766
LIABILITIES:
Interest-Bearing Deposits
Checking	$	254,018		$	420		0.66	%	$	193,245		$	349		0.72	%
Money Markets		510,589			1,019		0.80			414,082			1,127		1.09
Savings		76,092			79		0.42			70,802			81		0.46
Certificates of Deposit		274,240			1,103		1.61			406,518			2,638		2.60
Total Interest-Bearing
Deposits		1,114,939			2,621		0.94			1,084,647			4,195		1.55
Borrowings		32,403			291		3.59			38,925			348		3.58
Capital Lease Obligation		2,019			51		10.09			-			-		-
Total Interest-Bearing
Liabilities		1,149,361			2,963		1.03			1,123,572			4,543		1.62
Noninterest Bearing
Liabilities
Demand Deposits		214,198								197,565
Accrued Expenses and
Other Liabilities		5,667								5,438
Total Noninterest-Bearing
Liabilities		219,865								203,003
Shareholders’ Equity		115,152								116,191
Total Liabilities and
Shareholders’ Equity	$	1,484,378							$	1,442,766
Net Interest Income				$	12,663							$	12,417
Net Interest Spread							3.47	%							3.45	%
Net Interest Margin (4)							3.64	%							3.71	%

PEAPACK-GLADSTONE FINANCIAL CORPORATION

AVERAGE BALANCE SHEET

UNAUDITED

THREE MONTHS ENDED

(Tax-Equivalent Basis, Dollars in Thousands)

	June 30, 2010								March 31, 2010
	Average			Income/					Average			Income/
	Balance			Expense		Yield			Balance			Expense		Yield
ASSETS:
Interest-Earning Assets:
Investments:
Taxable (1)	$	321,887		$	2,404		2.99	%	$	325,379		$	2,511		3.09	%
Tax-Exempt (1) (2)		35,111			420		4.78			37,800			450		4.76
Loans (2) (3)		964,070			12,774		5.30			978,470			12,994		5.31
Federal Funds Sold		201			-		0.22			201			-		0.20
Interest-Earning Deposits		69,245			28		0.16			44,591			24		0.21
Total Interest-Earning
Assets		1,390,514		$	15,626		4.50	%		1,386,441		$	15,979		4.61	%
Noninterest-Earning Assets:
Cash and Due from Banks		8,478								8,334
Allowance for Loan
Losses		(14,075	)							(13,773	)
Premises and Equipment		30,675								27,992
Other Assets		68,786								68,845
Total Noninterest-Earning
Assets		93,964								91,398
Total Assets	$	1,484,378							$	1,477,839
LIABILITIES:
Interest-Bearing Deposits
Checking	$	254,018		$	420		0.66	%	$	238,285		$	407		0.68	%
Money Markets		510,589			1,019		0.80			494,670			1,118		0.90
Savings		76,092			79		0.42			75,186			77		0.41
Certificates of Deposit		274,240			1,103		1.61			305,654			1,317		1.72
Total Interest-Bearing
Deposits		1,114,939			2,621		0.94			1,113,795			2,919		1.05
Borrowings		32,403			291		3.59			36,290			324		3.57
Capital Lease Obligation		2,019			51		10.09			-			-		-
Total Interest-Bearing
Liabilities		1,149,361			2,963		1.03			1,150,085			3,243		1.13
Noninterest Bearing
Liabilities
Demand Deposits		214,198								208,044
Accrued Expenses and
Other Liabilities		5,667								6,087
Total Noninterest-Bearing
Liabilities		219,865								214,131
Shareholders’ Equity		115,152								113,623
Total Liabilities and
Shareholders’ Equity	$	1,484,378							$	1,477,839
Net Interest Income				$	12,663							$	12,736
Net Interest Spread							3.47	%							3.48	%
Net Interest Margin (4)							3.64	%							3.67	%

PEAPACK-GLADSTONE FINANCIAL CORPORATION

AVERAGE BALANCE SHEET

UNAUDITED

SIX MONTHS ENDED

(Tax-Equivalent Basis, Dollars in Thousands)

	June 30, 2010								June 30, 2009
	Average			Income/					Average			Income/
	Balance			Expense		Yield			Balance			Expense		Yield
ASSETS:
Interest-Earning Assets:
Investments:
Taxable (1)	$	323,623		$	4,914		3.04	%	$	204,487		$	4,426		4.33	%
Tax-Exempt (1) (2)		36,448			869		4.77			49,501			1,272		5.14
Loans (2) (3)		971,231			25,768		5.31			1,040,246			28,304		5.44
Federal Funds Sold		201			-		0.21			200			-		0.20
Interest-Earning Deposits		56,986			52		0.18			27,813			18		0.13
Total Interest-Earning
Assets		1,388,489		$	31,603		4.55	%		1,322,247		$	34,020		5.15	%
Noninterest-Earning Assets:
Cash and Due from Banks		8,406								25,571
Allowance for Loan
Losses		(13,925	)							(9,733	)
Premises and Equipment		29,341								26,872
Other Assets		68,817								54,945
Total Noninterest-Earning
Assets		92,639								97,655
Total Assets	$	1,481,128							$	1,419,902
LIABILITIES:
Interest-Bearing Deposits
Checking	$	246,195		$	826		0.67	%	$	180,712		$	646		0.71	%
Money Markets		502,673			2,138		0.85			397,898			2,298		1.16
Savings		75,642			156		0.41			69,452			159		0.46
Certificates of Deposit		289,860			2,420		1.67			416,708			5,728		2.75
Total Interest-Bearing
Deposits		1,114,370			5,540		0.99			1,064,770			8,831		1.66
Borrowings		34,336			615		3.58			40,278			699		3.47
Capital Lease Obligation		1,015			51		10.03			-			-		-
Total Interest-Bearing
Liabilities		1,149,721			6,206		1.08			1,105,048			9,530		1.72
Noninterest Bearing
Liabilities
Demand Deposits		211,138								194,880
Accrued Expenses and
Other Liabilities		5,877								5,954
Total Noninterest-Bearing
Liabilities		217,015								200,834
Shareholders’ Equity		114,392								114,020
Total Liabilities and
Shareholders’ Equity	$	1,481,128							$	1,419,902
Net Interest Income				$	25,397							$	24,490
Net Interest Spread							3.47	%							3.43	%
Net Interest Margin (4)							3.66	%							3.70	%

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