Peapack-Gladstone Financial (PGC) 8-K Reports Strong Results for the Second Quarter of 2012

Contact:

Jeffrey J. Carfora, EVP and CFO

Peapack-Gladstone Financial Corporation

T: 908-719-4308

PEAPACK-GLADSTONE FINANCIAL CORPORATION

REPORTS STRONG RESULTS FOR THE SECOND QUARTER OF 2012

BEDMINSTER, N.J. – July 30, 2012 – For the quarter ended June 30, 2012, Peapack-Gladstone Financial Corporation(NASDAQ Global Select Market:PGC) (the Corporation) recorded net income available to common shareholders of $2.72 million and diluted earnings per share (EPS) of $0.31. This quarter’s EPS reflected growth of 40.9 percent when compared to diluted earnings per share of $0.22, for the quarter ended June 30, 2011. The current quarter’s EPS also reflected growth when compared to diluted earnings per share of $0.30 for the immediately preceding quarter ended March 31, 2012.

For the six months ended June 30, 2012, the Corporation recorded net income available to common shareholders of $5.33 million and diluted earnings per share of $0.61. EPS for the current six month period reflected growth of 52.5 percent when compared to $0.40, for the same six month period last year.

Frank A. Kissel, Chairman and CEO, stated, “This was another solid quarter for us, reflecting the strength of the Corporation and reinforcing our belief that the local economy continues to stabilize.”

Mr. Kissel also noted that this was the first quarter since the fourth quarter of 2008 that the Corporation was not required to pay a preferred dividend, as the preferred stock issued in January 2009 to the Treasury under its Capital Purchase Program (CPP) was fully redeemed early in the first quarter of 2012.

Net Interest Income and Margin

Net interest income, on a fully tax-equivalent basis, was $13.06 million for the second quarter of 2012, up from $12.34 million for the same quarter last year.

On a fully tax-equivalent basis, the net interest margin was 3.52 percent for the June 2012 quarter compared to 3.49 percent for the June 2011 quarter.

In comparing the June 2012 quarter to the June 2011 quarter, the positive effect of increased loans, funded by core deposit growth, reduced investment securities and a slight increase in overnight borrowings, was partially offset by the effect of lower Treasury yields, which compressed asset yields more than deposit costs.

Loans

Average loans totaled $1.10 billion for the second quarter of 2012 as compared to $968 million for the same 2011 quarter, an increase of $133 million.

The average residential mortgage loan portfolio for the second quarter of 2012 increased $92 million when compared to the same quarter of 2011. The increase is attributable to originations retained in the portfolio that have outpaced loan paydowns. During this period of lower interest rates, refinance activity has generally been robust. Many of these loans have been retained in portfolio. However, the Corporation does sell much of its longer-term, fixed rate loan production as a source of noninterest income and as part of its interest rate risk management strategy in the lower rate environment.

The average commercial mortgage and commercial loan portfolio for the second quarter of 2012 increased $45 million from the second quarter of 2011. The increase was attributable to commercial mortgage demand, principally from high quality borrowers looking to refinance multifamily and other commercial mortgages held by other institutions.

Mr. Kissel stated, “We continue to be successful in finding new solid lending opportunities. This has been the sixth quarter in a row where we have reflected growth in our loan portfolio.” Loan originations were $200 million for the first six months of 2012, up from $153 million for the same six month period of 2011. Included in the total were commercial mortgage/commercial loan originations of $73 million for the 2012 period. Mr. Kissel noted, “We still have room to continue to benefit from funding our loan production with cash flows from our investment portfolio. However, we will continue to conservatively underwrite our loans, as we have in the past.”

As of June 30, 2012, the residential first mortgage loan and the commercial mortgage/commercial loan pipelines (loans approved, but not closed and funded) stood at $47 million and $38 million, respectively, with many other lending opportunities in the discussion stage.

Deposits

Average total deposits (interest-bearing and noninterest-bearing) increased $59 million for the June 2012 quarter from the same quarter last year.

Average noninterest-bearing checking balances grew $55 million for the second quarter of 2012 when compared to the second quarter of 2011. Average interest-bearing checking balances for the quarter ended June 30, 2012 grew $18 million from the same quarter in 2011. Average savings accounts increased $14 million from the second quarter of 2011 to the second quarter of 2012.

Overall checking and savings growth continues to be attributable to the Corporation’s relationship orientation. The Corporation has successfully focused on:

- Business and personal core deposit generation, particularly checking;

- Establishing municipal relationships within its market territory; and

- Growth in deposits associated with its commercial mortgage/commercial loan growth.

Average certificates of deposit (CDs) declined $16 million for the June 2012 quarter from the June 2011 quarter. These higher-cost CDs were basically replaced with lower cost, more stable core deposits.

From December 31, 2011 to June 30, 2012, total deposits declined $21 million, as various municipalities utilized funds that were held on deposit at year end.

Mr. Kissel commented, “The Corporation’s deposit mix continues to consist primarily of lower-cost, more stable core deposits (checking, savings and money markets), which benefits our cost of funds and our franchise value.”

PGB Trust and Investments

PGB Trust and Investments generated $3.26 million in fee income in the second quarter of 2012 compared to $2.83 million for the second quarter of 2011, reflecting 15.2 percent growth. The market value of the assets under administration of the Trust Division stood at $2.06 billion at June 30, 2012, up from $1.96 billion reported at December 31, 2011 and up from $2.01 billion reported at June 30, 2011.

Craig C. Spengeman, President of PGB Trust & Investments commented, “We continue to see growth in new relationships engaging our services and advice, as a result of our success in guiding clients through these challenging and volatile markets. Mr. Spengeman further noted, “Recent key additions to staff enhance our ability to both grow and service our valued client base.”

Other Noninterest Income

Other noninterest income, exclusive of Trust fees, totaled $1.41 million in the June 2012 quarter compared to $1.50 million in the same quarter a year ago. Compared to the second quarter of 2011, the 2012 quarter included: reduced gains from the strategic sales of securities; reduced service charges, as customers have been more diligent in managing their accounts; and a $26 thousand net loss on disposition of REO. The effect of these was almost fully offset by increased fee income from sale of longer term, fixed rate residential mortgage loans, due to higher origination levels, as well as a decision to retain less fixed rate loans in portfolio.

Operating Expenses

The Corporation’s total operating expenses were $11.70 million in the June 2012 quarter compared to $11.04 million in the June 2011 quarter. The 2012 expense levels included: costs for the Corporation to keep up with the increased regulatory burden on financial institutions; costs associated with key additions to staff in PGB Trust & Investments, to enhance their ability to grow and service their client base; increased commissions related to increased loan originations; and normal salary increases. The net effect of those additional costs were partially offset by various operational efficiencies.

Provision for Loan Losses / Asset Quality

The Corporation’s provision for loan losses for the quarter ended June 30, 2012 was $1.50 million, lower than the $2.00 million provision recorded in the June 2011 quarter.

At June 30, 2012, nonperforming assets totaled $22.1 million or 1.40 percent of total assets, compared to $26.3 million or 1.65 percent of assets at December 31, 2011 and $18.4 million or 1.21 percent of assets at June 30, 2011. Mr. Kissel commented, “We have continued to make progress in resolving problem assets, and we believe that progress will continue. In fact, we expect that several more problem loan/property workouts are on the immediate horizon.”

Capital / Dividends

As noted last quarter, the preferred stock issued in January 2009 under Treasury’s Capital Purchase Program (CPP) was fully redeemed early in the first quarter of 2012. At June 30, 2012, including the effect from this redemption, the Corporation’s leverage ratio, tier 1 and total risk based capital ratios were 7.15 percent, 11.27 percent and 12.52 percent, respectively. The Corporation’s ratios are all above the levels necessary to be considered well capitalized under regulatory guidelines applicable to Banks. Additionally, the Corporation’s common equity ratio (common equity to total assets) at June 30, 2012 was 7.24 percent of total assets, reflecting growth from 6.81 percent of total assets at December 31, 2011.

As previously announced, on July 19, 2012, the Board of Directors declared a regular cash dividend of $0.05 per share payable on August 16, 2012 to shareholders of record on August 2, 2012.

ABOUT THE CORPORATION

Peapack-Gladstone Financial Corporation is a bank holding company with total assets of $1.58 billion as of June 30, 2012. Peapack-Gladstone Bank, its wholly owned community bank, was established in 1921, and has 23 branches in Somerset, Hunterdon, Morris, Middlesex and Union Counties. The Bank’s Trust Division, PGB Trust and Investments, operates at the Bank’s 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 website 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;

· inability to successfully grow our business;

· inability 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 Reform and Consumer Protection Act and related regulations) subject us to additional regulatory oversight which may result in increased compliance costs;

· successful cyber attacks against our IT infrastructure and that of our IT providers;

· higher than expected FDIC insurance premiums;

· lack of liquidity to funds our various cash obligations;

· reduction in our lower-cost funding sources;

· our inability to adapt to technological changes;

· 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, 2011 and our subsequent Quarterly Reports on Form 10-Q. 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,
	2012		2012		2011		2011		2011
ASSETS
Cash and due from banks	$	5,639	$	5,146	$	7,097	$	8,135	$	8,678
Federal funds sold		100		100		100		100		100
Interest-earning deposits		29,024		28,144		35,856		66,424		51,606
Total cash and cash equivalents		34,763		33,390		43,053		74,659		60,384
Securities held to maturity		84,779		88,667		100,719		121,241		140,572
Securities available for sale		257,318		281,770		319,520		311,927		249,837
FHLB and FRB Stock, at cost		4,818		5,594		4,569		4,699		4,704
Loans held for sale, at fair value		2,259		3,214		2,841		722		1,813
Residential mortgage		526,726		518,111		498,482		438,828		432,735
Commercial mortgage		384,289		358,822		330,559		317,066		316,197
Commercial loans		116,493		119,351		123,845		129,039		128,839
Construction loans		6,804		12,517		13,713		14,893		15,385
Consumer loans		20,885		19,769		19,439		20,345		20,184
Home equity lines of credit		49,057		47,831		50,291		51,458		48,805
Other loans		2,128		1,504		2,016		1,564		3,612
Total loans		1,106,382		1,077,905		1,038,345		973,193		965,757
Less:  Allowance for loan losses		13,686		13,496		13,223		13,843		14,056
Net loans		1,092,696		1,064,409		1,025,122		959,350		951,701
Premises and equipment		30,979		31,482		31,941		32,497		33,098
Other real estate owned		3,073		3,391		7,137		3,264		3,000
Accrued interest receivable		3,447		3,842		4,078		3,788		4,391
Bank owned life insurance		30,688		30,490		27,296		27,767		27,537
Deferred tax assets, net		26,430		26,767		26,731		27,543		24,689
Other assets		7,355		6,524		7,328		7,831		9,014
TOTAL ASSETS	$	1,578,605	$	1,579,540	$	1,600,335	$	1,575,288	$	1,510,740
LIABILITIES
Deposits:
Noninterest-bearing
demand deposits	$	304,651	$	288,130	$	297,459	$	254,646	$	238,788
Interest-bearing deposits
Checking		323,813		318,239		341,180		337,900		322,801
Savings		104,631		98,743		92,322		89,527		86,828
Money market accounts		495,929		512,464		516,920		511,059		507,159
CD’s $100,000 and over		78,268		73,927		71,783		76,100		73,186
CD’s less than $100,000		115,793		120,140		124,228		127,778		132,949
Total deposits		1,423,085		1,411,643		1,443,892		1,397,010		1,361,711
Overnight borrowings		—		22,900		—		—		—
Federal home loan bank advances		16,451		17,566		17,680		20,793		20,905
Capital lease obligation		9,076		9,127		9,178		6,396		6,426
Other Liabilities		15,758		7,170		6,614		30,406		6,489
TOTAL LIABILITIES		1,464,370		1,468,406		1,477,364		1,454,605		1,395,531
Shareholders’ equity		114,235		111,134		122,971		120,683		115,209
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY	$	1,578,605	$	1,579,540	$	1,600,335	$	1,575,288	$	1,510,740
Trust division assets under
administration (market value,
not included above)	$	2,062,798	$	2,063,729	$	1,957,146	$	1,857,527	$	2,005,859

PEAPACK-GLADSTONE FINANCIAL CORPORATION

SELECTED BALANCE SHEET DATA

(Dollars in Thousands)

(Unaudited)

	As of
	June 30,			March 31,			December 31,			September 30,			June 30,
	2012			2012			2011			2011			2011
Asset Quality:
Loans past due over 90 days
and still accruing	$	—		$	—		$	345		$	836		$	412
Nonaccrual loans		19,011			18,598			18,865			22,103			14,943
Other real estate owned		3,073			3,391			7,137			3,264			3,000
Total nonperforming assets	$	22,084		$	21,989		$	26,347		$	26,203		$	18,355
Nonperforming loans to
total loans		1.72	%		1.73	%		1.85	%		2.36	%		1.59	%
Nonperforming assets to
total assets		1.40	%		1.39	%		1.65	%		1.66	%		1.21	%
Accruing TDR’s (A)	$	7,647		$	7,842		$	7,281		$	5,519		$	8,171
Loans past due 30 through 89
days and still accruing	$	2,836		$	7,619		$	11,632		$	9,706		$	8,200
Classified loans	$	47,102		$	48,546		$	49,101		$	52,031		$	51,586
Impaired loans	$	26,658		$	26,568		$	26,212		$	27,529		$	23,115
Allowance for loan losses:
Beginning of period	$	13,496		$	13,223		$	13,843		$	14,056		$	14,386
Provision for loan losses		1,500			1,500			1,750			1,500			2,000
Charge-offs, net		(1,310	)		(1,227	)		(2,370	)		(1,713	)		(2,330	)
End of period	$	13,686		$	13,496		$	13,223		$	13,843		$	14,056
ALLL to nonperforming loans		71.99	%		72.57	%		68.83	%		60.35	%		91.54	%
ALLL to total loans		1.24	%		1.25	%		1.27	%		1.42	%		1.46	%
Capital Adequacy:
Tier I leverage		7.15	%		7.00	%		7.73	%		7.86	%		7.63	%
Tier I capital to risk-weighted assets		11.27	%		11.21	%		12.51	%		12.73	%		12.67	%
Tier I & II capital to
risk-weighted assets		12.52	%		12.46	%		13.76	%		13.98	%		13.92	%
Common equity to total assets		7.24	%		7.04	%		6.81	%		6.78	%		6.71	%
Book value per common share	$	13.02		$	12.70		$	12.47		$	12.09		$	11.48

(A)  Does not include $6.1 million at June 30, 2012, $6.0 million at March 31, 2012, $3.8 million at December 31, 2011, $3.9 million at September 30, 2011 and $1.3 million at June 30, 2011 of TDR’s included in nonaccrual loans.

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,
	2012			2012			2011			2011			2011
Income Statement Data:
Interest income	$	14,102		$	14,214		$	14,101		$	13,594		$	14,099
Interest expense		1,199			1,323			1,485			1,699			1,916
Net interest income		12,903			12,891			12,616			11,895			12,183
Provision for loan losses		1,500			1,500			1,750			1,500			2,000
Net interest income after
provision for loan losses		11,403			11,391			10,866			10,395			10,183
Trust fees		3,259			3,176			2,584			2,555			2,829
Other income		1,305			1,157			1,350			1,170			1,218
Securities gains/(losses), net		107			390			316			248			277
Total other income		4,671			4,723			4,250			3,973			4,324
Salaries and employee benefits		6,408			6,113			5,651			5,789			5,817
Premises and equipment		2,413			2,331			2,313			2,322			2,386
FDIC insurance expense		290			352			278			253			397
Other expenses		2,593			2,284			3,306			2,209			2,435
Total operating expenses		11,704			11,080			11,548			10,573			11,035
Income before income taxes		4,370			5,034			3,568			3,795			3,472
Income tax expense/(benefit)		1,647			1,951			1,041			(1,537	)(A)		1,304
Net income		2,723			3,083			2,527			5,332	(B)		2,168
Dividends and accretion
on preferred stock		—			474			220			219			219
Net income available to
common shareholders	$	2,723		$	2,609		$	2,307		$	5,113	(B)	$	1,949
Per Common Share Data:
Earnings per share (basic)	$	0.31		$	0.30		$	0.26		$	0.58	(C)	$	0.22
Earnings per share (diluted)		0.31			0.30			0.26			0.58	(C)		0.22
Performance Ratios:
Return on average assets		0.69	%		0.78	%		0.64	%		1.39	%(D)		0.57	%
Return on average common
equity		9.65	%		9.47	%		8.61	%		19.87	%(E)		7.82	%
Net interest margin
(Taxable equivalent basis)		3.52	%		3.54	%		3.46	%		3.37	%		3.49	%

(A)	Income taxes for the third quarter includes a one-time state tax benefit of $2.988 million related to the reversal of a previously recorded valuation allowance against net state tax benefits related to security impairment charges recorded in the year ended December 31, 2008.  Circumstances and projections now indicate that this deferred tax asset can be utilized when it is realized in future periods.
(B)	Net income and net income available to common shareholders, excluding the one-time state tax benefit of $2.988 million would be $2.344 million and $2.125 million, respectively for the third quarter.
(C)	EPS excluding the one-time state tax benefit of $2.988 million is $0.24 for the third quarter.  See page 14, for more information on this non-GAAP measure.
(D)	ROA excluding the one-time state tax benefit of $2.988 million is 0.61% for the third quarter.  See page 14, for more information on this non-GAAP measure.
(E)	ROE excluding the one-time state tax benefit of $2.988 million is 8.26% for the third quarter.  See page 14, for more information on this non-GAAP measure.

PEAPACK-GLADSTONE FINANCIAL CORPORATION

SELECTED CONSOLIDATED FINANCIAL DATA

(Dollars in thousands, except share data)

(Unaudited)

	For the
	Six Months Ended
	June 30,
	2012			2011
Income Statement Data:
Interest income	$	28,316		$	28,356
Interest expense		2,522			3,952
Net interest income		25,794			24,404
Provision for loan losses		3,000			4,000
Net interest income after
provision for loan losses		22,794			20,404
Trust fees		6,435			5,547
Other income		2,462			2,473
Securities gains/(losses), net		497			473
Total other income		9,394			8,493
Salaries and employee benefits		12,521			11,790
Premises and equipment		4,744			4,736
FDIC insurance expense		642			1,001
Other expenses		4,877			4,751
Total operating expenses		22,784			22,278
Income before income taxes		9,404			6,619
Income tax expense		3,598			2,310
Net income		5,806			4,309
Dividends and accretion
on preferred stock		474			789
Net income available to
common shareholders	$	5,332		$	3,520
Per Common Share Data:
Earnings per share (basic)	$	0.61		$	0.40
Earnings per share (diluted)		0.61			0.40
Performance Ratios:
Return on average assets		0.73	%		0.57	%
Return on average common equity		9.56	%		7.14	%
Net interest margin
(Tax equivalent basis)		3.53	%		3.51	%

PEAPACK-GLADSTONE FINANCIAL CORPORATION

NON-GAAP RECONCILIATION

(Dollars in thousands, except share data)

This press release contains certain supplemental financial information, described below, which has been determined by methods other that U.S. Generally Accepted Accounting Principles (“GAAP”) that management uses in its analysis of the Corporation’s performance. Management believes these non-GAAP financial measures provide information useful to investors in understanding the Corporation’s financial results. Management believes that the Corporation’s presentation and discussion, together with the accompanying reconciliation, provides a complete understanding of factors and trends affecting the Corporation’s business and allows investors to view performance in a manner similar to management. These non-GAAP measures should not be considered a substitute for GAAP basis measures and results and the Corporation strongly encourages investors to review it consolidated financial statements in their entirety and not to rely on any single financial measure.

	For the Three
	Months Ended
	September 30, 2011
Net Income:
As reported	$	5,332
Less:  Valuation allowance reversal		2,988
Net income, excluding valuation allowance reversal		2,344
Net Income Available to Common Shareholders:
As reported	$	5,113
Less:  Valuation allowance reversal		2,988
Net income, excluding valuation allowance reversal		2,125
Per Common Share Data:
Earnings per share (basic):
As reported	$	0.58
Less:  Valuation allowance reversal		0.34
Earnings per share (basic),
excluding valuation allowance reversal		0.24
Earnings per share (diluted):
As reported	$	0.58
Less:  Valuation allowance reversal		0.34
Earnings per share (diluted),
excluding valuation allowance reversal		0.24
Performance Ratios:
Return on average assets:
As reported		1.39	%
Return on average assets,
excluding valuation allowance reversal		0.61	%
Return on average common equity:
As reported		19.87	%
Return on average common equity,
excluding valuation allowance reversal		8.26	%

PEAPACK-GLADSTONE FINANCIAL CORPORATION

AVERAGE BALANCE SHEET

UNAUDITED

THREE MONTHS ENDED

(Tax-Equivalent Basis, Dollars in Thousands)

	June 30, 2012								June 30, 2011
	Average			Income/					Average			Income/
	Balance			Expense		Yield			Balance			Expense		Yield
ASSETS:
Interest-Earning Assets:
Investments:
Taxable (1)	$	312,362		$	1,770		2.27	%	$	375,216		$	2,209		2.35	%
Tax-exempt (1) (2)		45,556			332		2.92			36,855			347		3.77
Loans held for sale		1,137			18		6.57			510			5		3.78
Loans (2) (3)		1,101,095			12,124		4.40			968,179			11,674		4.82
Federal funds sold		100			—		0.10			100			—		0.25
Interest-earning deposits		22,306			14		0.26			32,598			20		0.24
Total interest-earning
assets		1,482,556		$	14,258		3.85	%		1,413,458		$	14,255		4.03	%
Noninterest-Earning Assets:
Cash and due from banks		5,846								8,231
Allowance for loan losses		(13,990	)							(15,086	)
Premises and equipment		31,284								33,393
Other assets		76,469								71,868
Total noninterest-earning
assets		99,609								98,406
Total assets	$	1,582,165							$	1,511,864
LIABILITIES:
Interest-Bearing Deposits:
Checking	$	326,920		$	90		0.11	%	$	309,310		$	292		0.38	%
Money markets		505,532			257		0.20			516,739			577		0.45
Savings		99,958			13		0.05			86,150			56		0.26
Certificates of deposit		192,261			563		1.17			208,697			713		1.37
Total interest-bearing
deposits		1,124,671			923		0.33			1,120,896			1,638		0.58
Borrowings		36,586			168		1.84			26,242			198		3.02
Capital lease obligation		9,093			108		4.75			6,410			80		4.98
Total interest-bearing
liabilities		1,170,350			1,199		0.41			1,153,548			1,916		0.66
Noninterest –Bearing
Liabilities:
Demand deposits		292,459								237,651
Accrued expenses and
other liabilities		6,438								7,104
Total noninterest-bearing
liabilities		298,897								244,755
Shareholders’ equity		112,918								113,561
Total liabilities and
shareholders’ equity	$	1,582,165							$	1,511,864
Net interest income				$	13,059							$	12,339
Net interest spread							3.44	%							3.37	%
Net interest margin (4)							3.52	%							3.49	%

PEAPACK-GLADSTONE FINANCIAL CORPORATION

AVERAGE BALANCE SHEET

UNAUDITED

THREE MONTHS ENDED

(Tax-Equivalent Basis, Dollars in Thousands)

	June 30, 2012								March 31, 2012
	Average			Income/					Average			Income/
	Balance			Expense		Yield			Balance			Expense		Yield
ASSETS:
Interest-Earning Assets:
Investments:
Taxable (1)	$	312,362		$	1,770		2.27	%	$	350,306		$	2,052		2.34	%
Tax-exempt (1) (2)		45,556			332		2.92			49,843			381		3.06
Loans held for sale		1,137			18		6.57			1,602			23		5.60
Loans (2) (3)		1,101,095			12,124		4.40			1,052,960			11,917		4.53
Federal funds sold		100			—		0.10			100			—		0.10
Interest-earning deposits		22,306			14		0.26			21,988			17		0.30
Total interest-earning
assets		1,482,556		$	14,258		3.85	%		1,476,799		$	14,390		3.90	%
Noninterest-Earning Assets:
Cash and due from banks		5,846								7,687
Allowance for loan losses		(13,990	)							(13,753	)
Premises and equipment		31,284								31,751
Other assets		76,469								78,781
Total noninterest-earning
assets		99,609								104,466
Total assets	$	1,582,165							$	1,581,265
LIABILITIES:
Interest-Bearing Deposits:
Checking	$	326,920		$	90		0.11	%	$	336,541		$	113		0.13	%
Money markets		505,532			257		0.20			516,357			304		0.24
Savings		99,958			13		0.05			94,732			29		0.12
Certificates of deposit		192,261			563		1.17			193,992			596		1.23
Total interest-bearing
deposits		1,124,671			923		0.33			1,141,622			1,042		0.37
Borrowings		36,586			168		1.84			37,237			172		1.85
Capital lease obligation		9,093			108		4.75			9,145			109		4.77
Total interest-bearing
liabilities		1,170,350			1,199		0.41			1,188,004			1,323		0.45
Noninterest –Bearing
Liabilities:
Demand deposits		292,459								275,157
Accrued expenses and
other liabilities		6,438								6,407
Total noninterest-bearing
liabilities		298,897								281,564
Shareholders’ equity		112,918								111,697
Total liabilities and
shareholders’ equity	$	1,582,165							$	1,581,265
Net interest income				$	13,059							$	13,067
Net interest spread							3.44	%							3.45	%
Net interest margin (4)							3.52	%							3.54	%

PEAPACK-GLADSTONE FINANCIAL CORPORATION

AVERAGE BALANCE SHEET

UNAUDITED

SIX MONTHS ENDED

(Tax-Equivalent Basis, Dollars in Thousands)

	June 30, 2012									June 30, 2011
	Average			Income/						Average			Income/
	Balance			Expense			Yield			Balance			Expense		Yield
ASSETS:
Interest-Earning Assets:
Investments:
Taxable (1)	$	331,334		$	3,822			2.31	%	$	379,625		$	4,478		2.36	%
Tax-exempt (1) (2)		47,699			714			2.99			36,224			700		3.86
Loans held for sale		1,370			41			6.00			621			21		6.66
Loans (2) (3)		1,077,028			24,041			4.46			952,712			23,421		4.92
Federal funds sold		100			—			0.10			100			—		0.26
Interest-earning deposits		22,147			31			0.28			37,237			48		0.26
Total interest-earning
assets		1,479,678		$	28,649			3.87	%		1,406,519		$	28,668		4.08	%
Noninterest-Earning Assets:
Cash and due from banks		6,766									8,055
Allowance for loan losses		(13,872	)								(15,010	)
Premises and equipment		31,518									33,516
Other assets		77,369									71,457
Total noninterest-earning
assets		101,781									98,018
Total assets	$	1,581,459								$	1,504,537
LIABILITIES:
Interest-Bearing Deposits:
Checking	$	331,731		$	203			0.12	%	$	303,688		$	595		0.39	%
Money markets		510,944			561			0.22			519,590			1,200		0.46
Savings		97,345			42			0.09			84,170			109		0.26
Certificates of deposit		193,127			1,159	��		1.20			213,998			1,488		1.39
Total interest-bearing
deposits		1,133,147			1,965			0.35			1,121,446			3,392		0.60
Borrowings		36,912			340			1.84			25,445			401		3.15
Capital lease obligation		9,119			217			4.76			6,372			159		4.97
Total interest-bearing
liabilities		1,179,178			2,522			0.43			1,153,263			3,952		0.69
Noninterest –Bearing
Liabilities:
Demand deposits		283,808									230,075
Accrued expenses and
other liabilities		6,166									6,408
Total noninterest-bearing
liabilities		289,974									236,483
Shareholders’ equity		112,307									114,791
Total liabilities and
shareholders’ equity	$	1,581,459								$	1,504,537
Net interest income				$	26,127								$	24,716
Net interest spread								3.44	%							3.39	%
Net interest margin (4)								3.53	%							3.51	%

(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.