10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 2017

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File No. 001-16197

PEAPACK-GLADSTONE FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)

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

500 Hills Drive, Suite 300
Bedminster, New Jersey 07921-0700
(Address of principal executive offices, including zip code)

(908)234-0700
(Registrant’s telephone number, including area code)

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.

Yes x No o.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 or 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 and post such files).
Yes x No o.

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

Large accelerated filer o	Accelerated filer x
Non-accelerated filer (do not check if a smaller reporting company) o	Smaller reporting company o
Emerging growth company o

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. o

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

Number of shares of Common Stock outstanding as of November 2, 2017:

18,259,577

1 

PEAPACK-GLADSTONE FINANCIAL CORPORATION

PART 1 FINANCIAL INFORMATION

Item 1	Financial Statements
	Consolidated Statements of Condition at September 30, 2017 and December 31, 2016	Page 3
	Consolidated Statements of Income for the three months and nine months ended September 30, 2017 and 2016	Page 4
	Consolidated Statements of Comprehensive Income for the three months and nine months ended September 30, 2017 and 2016	Page 5
	Consolidated Statement of Changes in Shareholders’ Equity for the nine months ended September 30, 2017	Page 6
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016	Page 7
	Notes to Consolidated Financial Statements	Page 8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	Page 47
Item 3	Quantitative and Qualitative Disclosures about Market Risk	Page 68
Item 4	Controls and Procedures	Page 70

PART 2 OTHER INFORMATION

Item 1	Legal Proceedings	Page 70
Item 1A	Risk Factors	Page 70
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	Page 71
Item 3	Defaults Upon Senior Securities	Page 71
Item 4	Mine Safety Disclosures	Page 71
Item 5	Other Information	Page 71
Item 6	Exhibits	Page 71

2 

Item 1. Financial Statements (Unaudited)

PEAPACK-GLADSTONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in thousands, except share and per share data)

	(unaudited)			(audited)
	September 30,			December 31,
	2017			2016
ASSETS
Cash and due from banks	$	4,446		$	24,580
Federal funds sold		101			101
Interest-earning deposits		88,793			138,010
Total cash and cash equivalents		93,340			162,691
Securities available for sale		315,112			305,388
FHLB and FRB stock, at cost		13,589			13,813
Loans held for sale, at fair value		2,240			1,200
Loans held for sale, at lower of cost or fair value		—			388
Loans		3,667,197			3,312,144
Less: Allowance for loan and lease losses		35,915			32,208
Net loans		3,631,282			3,279,936
Premises and equipment		29,832			30,371
Other real estate owned		137			534
Accrued interest receivable		6,803			8,153
Bank owned life insurance		44,380			43,806
Deferred tax assets, net		16,636			15,320
Goodwill and other intangible assets		15,064			3,157
Other assets		7,917			13,876
TOTAL ASSETS	$	4,176,332		$	3,878,633
LIABILITIES
Deposits:
Noninterest-bearing demand deposits	$	557,117		$	489,485
Interest-bearing deposits:
Interest-bearing deposits checking		1,144,714			1,023,081
Savings		121,830			120,056
Money market accounts		1,046,997			1,048,494
Certificates of deposit - Retail		528,251			457,000
Subtotal deposits		3,398,909			3,138,116
Interest-bearing demand – Brokered		180,000			180,000
Certificates of deposit - Brokered		83,788			93,721
Total deposits		3,662,697			3,411,837
Federal Home Loan Bank advances		49,898			61,795
Capital lease obligation		9,240			9,693
Subordinated debt, net		48,862			48,764
Accrued expenses and other liabilities		25,699			22,334
TOTAL LIABILITIES		3,796,396			3,554,423
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
21,000,000 shares; issued shares, 18,622,937 at September 30, 2017 and
17,666,173 at December 31, 2016; outstanding shares, 18,214,759 at
September 30, 2017 and 17,257,995 at December 31, 2016		15,521			14,717
Surplus		268,951			238,708
Treasury stock at cost, 408,178 shares at both September 30, 2017 and
December 31, 2016		(8,988	)		(8,988	)
Retained earnings		104,797			81,304
Accumulated other comprehensive loss, net of income tax		(345	)		(1,531	)
TOTAL SHAREHOLDERS’ EQUITY		379,936			324,210
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY	$	4,176,332		$	3,878,633

See accompanying notes to consolidated financial statements

3 

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except share data)

(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
INTEREST INCOME
Interest and fees on loans	$	35,511	$	28,225	$	96,640	$	82,713
Interest on securities available for sale:
Taxable		1,564		976		4,545		2,816
Tax-exempt		117		128		353		377
Interest on loans held for sale		23		384		34		577
Interest on interest-earning deposits		276		131		716		294
Total interest income		37,491		29,844		102,288		86,777
INTEREST EXPENSE
Interest on savings and interest-bearing deposit
accounts		3,083		1,399		7,215		3,785
Interest on certificates of deposit		1,864		1,615		5,084		4,649
Interest on borrowed funds		439		380		1,096		1,432
Interest on capital lease obligation		112		119		341		361
Interest on subordinated debt		783		799		2,349		938
Subtotal - interest expense		6,281		4,312		16,085		11,165
Interest on interest-bearing demand – brokered		737		762		2,183		2,263
Interest on certificates of deposits – brokered		481		501		1,465		1,494
Total Interest expense		7,499		5,575		19,733		14,922
NET INTEREST INCOME BEFORE
PROVISION FOR LOAN AND LEASE LOSSES		29,992		24,269		82,555		71,855
Provision for loan and lease losses		400		2,100		4,200		6,000
NET INTEREST INCOME AFTER
PROVISION FOR LOAN AND LEASE LOSSES		29,592		22,169		78,355		65,855
OTHER INCOME
Wealth management fee income		5,790		4,436		15,694		13,630
Service charges and fees		816		812		2,402		2,437
Bank owned life insurance		343		340		1,015		1,027
Gains on loans held for sale at fair value (mortgage
banking)		141		383		279		813
Gains on loans held for sale at lower of cost or
fair value		34		256		34		880
Fee income related to loan level, back-to-back swaps		888		670		2,635		764
Gain on sale of SBA loans		493		243		790		502
Other income		326		395		1,172		1,074
Securities gains, net		—		—		—		119
Total other income		8,831		7,535		24,021		21,246
OPERATING EXPENSES
Compensation and employee benefits		13,996		11,515		38,660		33,523
Premises and equipment		2,945		2,736		8,794		8,342
FDIC insurance expense		583		814		1,871		3,954
Other operating expense		4,437		3,101		12,035		10,328
Total operating expenses		21,961		18,166		61,360		56,147
INCOME BEFORE INCOME TAX EXPENSE		16,462		11,538		41,016		30,954
Income tax expense		6,256		4,422		14,888		11,785
NET INCOME	$	10,206	$	7,116	$	26,128	$	19,169
EARNINGS PER SHARE
Basic	$	0.57	$	0.43	$	1.49	$	1.19
Diluted	$	0.56	$	0.43	$	1.47	$	1.17
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
Basic		17,800,153		16,467,654		17,478,293		16,167,153
Diluted		18,123,268		16,673,596		17,753,731		16,347,255

See accompanying notes to consolidated financial statements

4 

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Net income	$	10,206		$	7,116		$	26,128		$	19,169
Comprehensive income:
Unrealized gains/(loss) on available for sale
securities:
Unrealized holding gains/(loss) arising
during the period		99			(350	)		934			1,081
Less: Reclassification adjustment for net gains
included in net income		—			—			—			119
		99			(350	)		934			962
Tax effect		(37	)		135			(353	)		(361	)
Net of tax		62			(215	)		581			601
Unrealized gains/(loss) on cash flow hedges:
Unrealized holding gains/(loss)		222			1,591			1,023			(3,380	)
		222			1,591			1,023			(3,380	)
Tax effect		(91	)		(650	)		(418	)		1,381
Net of tax		131			941			605			(1,999	)
Total other comprehensive income/(loss)		193			726			1,186			(1,398	)
Total comprehensive income	$	10,399		$	7,842		$	27,314		$	17,771

See accompanying notes to consolidated financial statements

5 

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Dollars in thousands)

(Unaudited)

Nine Months Ended September 30, 2017

													Accumulated
													Other
(In thousands, except	Common						Treasury			Retained			Comprehensive
per share data)	Stock			Surplus			Stock			Earnings			Loss			Total
Balance at January 1, 2017
17,257,995 common shares
outstanding	$	14,717		$	238,708		$	(8,988	)	$	81,304		$	(1,531	)	$	324,210
Net income		—			—			—			26,128			—			26,128
Comprehensive income		—			—			—			—			1,186			1,186
Restricted stock units issued
61,610 shares		51			(51	)		—			—			—			—
Restricted stock awards forfeitures,
(400) shares		(1	)		1			—			—			—			—
Restricted stock units/awards
repurchased on vesting to pay
taxes, (46,884) shares		(39	)		(1,376	)		—			—			—			(1,415	)
Amortization of restricted
awards/units		—			2,536			—			—			—			2,536
Cash dividends declared on
common stock ($0.15 per share)		—			—			—			(2,635	)		—			(2,635	)
Common stock option expense		—			6			—			—			—			6
Common stock options exercised,
33,862 net of 8,744 used to
exercise, 25,118 shares		28			307			—			—			—			335
Sales of shares (Dividend
Reinvestment Program),
867,377 shares		723			25,354			—			—			—			26,077
Issuance of shares for
Employee Stock Purchase
Plan, 19,820 shares		17			602			—			—			—			619
Issuance of shares for employee,
saving and investment plan
30,123 shares		25			864			—			—			—			889
Common stock to be issued in
wealth acquisition		—			2,000			—			—			—			2,000
Balance at September 30, 2017
18,214,759 common shares
outstanding	$	15,521		$	268,951		$	(8,988	)	$	104,797		$	(345	)	$	379,936

See accompanying notes to consolidated financial statements

6 

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2017			2016
OPERATING ACTIVITIES:
Net income	$	26,128		$	19,169
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		2,473			2,280
Amortization of premium and accretion of discount on securities, net		1,276			1,090
Amortization of restricted stock		2,536			2,154
Amortization of intangible		93			93
Amortization of subordinated debt costs		98			38
Provision of loan and lease losses		4,200			6,000
Deferred tax (benefit)/expense		(2,087	)		1,837
Stock-based compensation and employee stock purchase plan expense		—			128
Gains on securities, available for sale, net		—			(119	)
Loans originated for sale (1)		(27,925	)		(53,412	)
Proceeds from sales of loans held for sale (1)		28,342			52,770
Gain on loans held for sale (1)		(1,069	)		(813	)
Gain on loans held for sale at lower of cost or fair value		(34	)		(880	)
Gain on sale of other real estate owned		—			(5	)
Gain on death benefit		(62	)		—
Increase in cash surrender value of life insurance, net		(612	)		(656	)
Decrease in accrued interest receivable		1,350			437
Decrease/(increase) in other assets		8,816			(391	)
Increase in accrued expenses, capital lease obligations and other liabilities		1,084			2,732
NET CASH PROVIDED BY OPERATING ACTIVITIES		44,607			32,452
INVESTING ACTIVITIES:
Principal repayments, maturities and calls of securities available for sale		51,739			43,997
Redemptions for FHLB & FRB stock		31,568			61,155
Call of securities available for sale		—			10,035
Sales of securities available for sale		—			5,499
Purchase of securities available for sale		(61,805	)		(106,524	)
Purchase of FHLB & FRB stock		(31,344	)		(61,264	)
Proceeds from sales of loans held for sale at lower of cost or fair value		78,800			182,763
Net increase in loans, net of participations sold		(434,449	)		(451,101	)
Sales of other real estate owned		534			568
Purchase of premises and equipment		(1,934	)		(2,257	)
Proceeds from death benefit		100			—
Purchase of wealth management company		(10,000	)		—
NET CASH USED IN INVESTING ACTIVITIES		(376,791	)		(317,129	)
FINANCING ACTIVITIES:
Net increase in deposits		250,860			364,590
Net increase/(decrease) in overnight borrowings		—			(40,700	)
Repayments of Federal Home Loan Bank advances		(11,897	)		(11,897	)
Dividends paid on common stock		(2,635	)		(2,452	)
Exercise of Stock Options, net of stock swaps		335			246
Restricted stock repurchased on vesting to pay taxes		(1,415	)		(496	)
Proceeds from issuance of subordinated debt		—			48,693
Sales of common shares (Dividend Reinvestment Program)		26,077			15,532
Issuance of shares for employee saving and investment plan		889			—
Issuance of shares for employee stock purchase plan		619			556
NET CASH PROVIDED BY IN FINANCING ACTIVITIES		262,833			374,072
Net (decrease)/increase in cash and cash equivalents		(69,351	)		89,395
Cash and cash equivalents at beginning of period		162,691			70,160
Cash and cash equivalents at end of period	$	93,340		$	159,555
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest	$	18,501		$	13,492
Income tax, net		8,107			10,880
Transfer of loans to loans held for sale		—			159,804
Transfer of loans held for sale to loans		—			30,121
Transfer of loans to other real estate owned		137			534
Security purchases settled in subsequent period		—			7,003
Acquisition
Goodwill		12,000			—

(1) Includes mortgage loans originated with the intent to sell which are carried at fair value. In addition, this includes the guaranteed portion of SBA loans which are carried at the lower of cost or fair value.

See accompanying notes to consolidated financial statements

7 

PEAPACK-GLADSTONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the period ended December 31, 2016 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 of normal recurring accruals) necessary to present fairly the financial position as of September 30, 2017, the results of operations and comprehensive income for the three and nine months ended September 30, 2017 and 2016, shareholders’ equity for the nine months ended September 30, 2017 and cash flow statements for the nine months ended September 30, 2017 and 2016.The results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected 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 statements also include the Bank’s wholly-owned subsidiaries, PGB Trust & Investments of Delaware, Peapack Capital Corporation (formed in the second quarter of 2017), Murphy Capital Management (“MCM”) (acquired in the third quarter of 2017), and Peapack-Gladstone Mortgage Group, Inc. and Peapack-Gladstone Mortgage Group’s wholly-owned subsidiary, PG Investment Company of Delaware, Inc. and its wholly-owned subsidiary, Peapack-Gladstone Realty, Inc., a New Jersey Real Estate Investment Company. While the following footnotes include the collective results of the Company and the Bank, 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 that period. Actual results could differ from those estimates.

Segment Information: The Company’s business is conducted through its banking subsidiary and involves the delivery of loan and deposit products and wealth management services to customers. Management uses certain methodologies to allocate income and expense to the business segments.

The Banking segment includes commercial, commercial real estate, multifamily, residential and consumer lending activities; deposit generation; operation of ATMs; telephone and internet banking services; merchant credit card services and customer support services.

Peapack-Gladstone Bank’s Private Wealth Management Division includes asset management services provided for individuals and institutions; personal trust services, including services as executor, trustee, administrator, custodian and guardian; corporate trust services including services as trustee for pension and profit sharing plans; and other financial planning and advisory services. This segment also includes the activity from the Delaware subsidiary, PGB Trust and Investments of Delaware and MCM. Income is recognized as earned.

8 

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 overnight borrowings.

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 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.

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 will be 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. 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 must be 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. For equity securities, the entire amount of impairment is recognized through earnings.

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 System and required to own a certain amount of FRB stock. FRB stock is carried at cost and classified as a restricted security. Both cash and stock 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, no servicing rights are recorded. Gains and losses on sales of mortgage loans, shown as gain on sale of loans at fair value on the Statements of Income, are based on the difference between the selling price and the carrying value of the related loan sold.

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 $13.4 million and $5.8 million as of September 30, 2017 and December 31, 2016, respectively. There were no SBA loans held for sale at September 30, 2017. SBA Loans held for sale totaled $388 thousand as of December 31, 2016.

9 

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 over the life of the loan as an adjustment, on a level-yield method, 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 was excluded as the impact was not material.

Loans are considered past due when they are not paid 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 or more and collateral, if any, is insufficient to cover principal and interest. 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 months. Commercial loans are generally charged off after an analysis is completed which indicates that collectability of the full principal balance is in doubt. Consumer loans are generally charged off after they become 120 days past due. 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 are returned to accrual status. Nonaccrual mortgage loans are generally charged off when 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 the States of New Jersey and New York.

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 incurred losses in the loan portfolio. The process to determine reserves utilizes analytic tools and management judgement 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 nature and volume of the portfolio, information about specific borrower situations, estimated collateral values, 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 Company 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.

10 

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.

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.

The general component of the allowance covers non-impaired loans and is based primarily on the Bank’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. These qualitative factors include consideration of 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 staff; 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 September 30, 2017 and at December 31, 2016 the multiple was 4.0 times for non-impaired substandard loans and 2.0 times for non-impaired special mention loans.

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 value could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential 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, such as the Prime Rate, which could expose the borrower to higher debt service requirements in a rising interest rate environment. Further, real estate value could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential exposure for the Bank.

11 

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 value could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential 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 flow 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. In addition, these loans often include commercial real estate as collateral to strengthen the Bank’s position and further mitigate risk. Commercial and industrial loans are typically repaid first by the cash flow 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. Factors that may influence a business’s 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, the Bank will often require more frequent reporting requirements from the borrower in order to better monitor its business performance.

Leasing and Equipment Finance. Peapack Capital Corporation (“PCC”), a subsidiary of the Bank, 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.

Agricultural Production. These are loans to finance agricultural production and other loans to farmers. The Bank does not currently engage in this type of lending.

12 

Commercial Construction. The Bank has discontinued its commercial construction activity. Dollar amounts within this segment are immaterial.

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.

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 both types of 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.

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.

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 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 new shares to satisfy option exercises.

13 

For the three months ended September 30, 2017 and 2016, the Company recorded total compensation cost for stock options of less than $1 thousand and $11 thousand, respectively. There was no recognized tax benefit for the quarter ended September 30, 2017. There was a recognized tax benefit of $1 thousand for the quarter ended September 30, 2016. The Company recorded total compensation cost for stock options for the nine months ended September 30, 2017 and 2016 of $6 thousand and $45 thousand, respectively. There was no recognized tax benefit for the nine months ended September 30, 2017. There was a recognized tax benefit of $4 thousand for the nine months ended September 30, 2016. There was less than $1 thousand of compensation cost related to non-vested share-based compensation arrangements granted under the Company’s stock incentive plans at September 30, 2017. That cost is expected to be recognized over a weighted average period of 0.10 years.

Upon adoption of Accounting Standards Update (“ASU”) 2016-09, “Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting” the Company 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 months ended September 30, 2017 were as follows:

						Weighted
				Weighted		Average		Aggregate
				Average		Remaining		Intrinsic
	Number of			Exercise		Contractual		Value
	Options			Price		Term		(In thousands)
Balance, January 1, 2017		179,159		$	16.27
Granted during 2017		—			—
Exercised during 2017		(33,862	)		17.93
Expired during 2017		(7,722	)		26.90
Forfeited during 2017		(581	)		14.73
Balance, September 30, 2017		136,994			15.27		3.30 years	$	2,530
Vested and expected to vest		136,990			15.27		3.30 years	$	2,530
Exercisable at September 30, 2017		136,934			15.27		3.30 years	$	2,529

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 quarter of 2017 and the exercise price, multiplied by the number of in-the-money options). The Company’s closing stock price on September 30, 2017 was $33.74.

There were no stock options granted in the nine months ended September 30, 2017.

The Company has previously granted performance based and service based restricted stock awards/units. Service based awards/units vest ratably over a one, three or five-year period.  There were 3,900 restricted stock units granted in the third quarter of 2017.

The performance based awards that were granted in previous periods are dependent upon the Company meeting certain performance criteria and cliff vest at the end of the performance period.  Total unrecognized compensation expense for performance based awards was $1.7 million as of September 30, 2017.

Changes in nonvested shares dependent on performance criteria for the nine months ended September 30, 2017 were as follows:

14 

			Weighted
			Average
	Number of		Grant Date
	Shares		Fair Value
Balance, January 1, 2017		92,767	$	18.12
Granted during 2017		—		—
Vested during 2017		—		—
Forfeited during 2017		—		—
Balance, September 30, 2017		92,767	$	18.12

Changes in service based restricted stock awards/units for the nine months ended September 30, 2017 were as follows:

				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value
Balance, January 1, 2017		368,130		$	19.26
Granted during 2017		136,708			30.13
Vested during 2017		(148,619	)		18.52
Forfeited during 2017		(5,938	)		25.30
Balance, September 30, 2017		350,281		$	23.71

As of September 30, 2017, there was $1.2 million of total unrecognized compensation cost related to service based awards. That cost is expected to be recognized over a weighted average period of 0.59 years. As of September 30, 2017, there was $4.5 million of total unrecognized compensation cost related to service based units. That cost is expected to be recognized over a weighted average period of 1.27 years. Stock compensation expense recorded for the third quarters of 2017 and 2016 totaled $864 thousand and $725 thousand, respectively. For the nine months ended September 30, 2017 and 2016, the Company recorded total compensation cost of $2.5 million and $2.2 million, respectively.

Employee Stock Purchase Plan: On April 22, 2014, the shareholders of the Company approved the 2014 Employee Stock Purchase Plan (“ESPP”). The ESPP provides for the granting of purchase rights of up to 150,000 shares of Corporation common stock. Subject to certain eligibility requirements and restrictions, the ESPP allows employees to purchase shares during four three-month offering periods (“Offering Periods”). Each participant in the Offering Period is granted an option to purchase a number of shares and may contribute between 1% and 15% 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% of the closing market price of a share of Company common stock on the purchase date. Participation in the ESPP is entirely voluntary and employees can cancel their purchases at any time during the Offering period without penalty. The fair value of each share purchase right is determined using the Black-Scholes option pricing model.

The Company recorded $33 thousand and $19 thousand of expense in salaries and employee benefits expense for the three months ended September 30, 2017 and 2016, respectively, related to the ESPP. Total shares issued under the ESPP during the third quarter of 2017 and 2016 were 6,987 and 7,155, respectively.

The Company recorded $105 thousand and $83 thousand of expense in salaries and employee benefits expense for the nine months ended September 30, 2017 and 2016, respectively, related to the ESPP. Total shares issued under the ESPP for the nine months ended September 30, 2017 and 2016 were 19,820 and 26,913, respectively.

15 

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
	September 30,				September 30,
(Dollars in thousands, except per share data)	2017		2016		2017		2016
Net income to shareholders	$	10,206	$	7,116	$	26,128	$	19,169
Basic weighted-average shares outstanding		17,800,153		16,467,654		17,478,293		16,167,153
Plus: common stock equivalents		323,115		205,942		275,438		180,102
Diluted weighted-average shares outstanding		18,123,268		16,673,596		17,753,731		16,347,255
Net income per share
Basic	$	0.57	$	0.43	$	1.49	$	1.19
Diluted		0.56		0.43		1.47		1.17

For the three and nine months ended September 30, 2017 all stock options and warrants were included in the computation of diluted earnings per share because they were all dilutive. Stock options and warrants totaling 218,079 shares were not included in the computation of diluted earnings per share in the third quarter of 2016 because they were considered antidilutive. Stock options and warrants totaling 223,832 shares were not included in the computation of diluted earnings per share in the nine months ended September 30, 2016 because they were considered antidilutive. Antidilutive shares are common stock equivalents with weighted average exercise prices in excess of the weighted average market value for the period 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 2013 or by New Jersey tax authorities for years prior to 2012.

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

The Company’s effective rate was positively affected by the adoption of ASU 2016-09 which simplified certain aspects of accounting for share-based compensation.

16 

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 reasonable estimated. Management does not believe there are any such matters that will have a material effect on the financial statements.

Restrictions on Cash: Cash on hand or on deposit with the FRB was required to meet regulatory reserve and clearing requirements.

Comprehensive Income: Comprehensive income 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.

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 acquired company (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. The Company has selected December 31 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 and assembly 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, are amortized on an accelerated method over their estimated useful lives, which range up to 15 years.

2. INVESTMENT SECURITIES AVAILABLE FOR SALE

A summary of amortized cost and approximate fair value of investment securities available for sale included in the consolidated statements of condition as of September 30, 2017 and December 31, 2016 follows:

	September 30, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
U.S. government-sponsored agencies	$	36,988	$	—	$	(513	)	$	36,475
Mortgage-backed securities – residential		237,547		960		(1,126	)		237,381
SBA pool securities		6,002		—		(66	)		5,936
State and political subdivisions		24,400		156		(46	)		24,510
Corporate bond		3,000		94		—			3,094
Single-issuer trust preferred security		2,999		—		(142	)		2,857
CRA investment fund		5,000		—		(141	)		4,859
Total	$	315,936	$	1,210	$	(2,034	)	$	315,112

	December 31, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
U.S. government-sponsored agencies	$	21,991	$	—	$	(474	)	$	21,517
Mortgage-backed securities – residential		238,271		860		(1,514	)		237,617
SBA pool securities		6,778		—		(65	)		6,713
State and political subdivisions		29,107		160		(274	)		28,993
Corporate bond		3,000		113		—			3,113
Single-issuer trust preferred security		2,999		—		(389	)		2,610
CRA investment fund		5,000		—		(175	)		4,825
Total	$	307,146	$	1,133	$	(2,891	)	$	305,388

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The following tables present the Corporation’s available for sale securities with continuous unrealized losses and the approximate fair value of these investments as of September 30, 2017 and December 31, 2016.

	September 30, 2017
	Duration of Unrealized Loss
	Less Than 12 Months					12 Months or Longer					Total
	Approximate					Approximate					Approximate
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(In thousands)	Value		Losses			Value		Losses			Value		Losses
U.S. government-
sponsored agencies	$	31,662	$	(330	)	$	4,813	$	(183	)	$	36,475	$	(513	)
Mortgage-backed
securities-residential		97,456		(611	)		30,603		(515	)		128,059		(1,126	)
SBA pool securities		—		—			5,936		(66	)		5,936		(66	)
State and political
subdivisions		7,631		(40	)		993		(6	)		8,624		(46	)
Single-issuer trust
preferred security		—		—			2,858		(142	)		2,858		(142	)
CRA investment fund		—		—			4,859		(141	)		4,859		(141	)
Total	$	136,749	$	(981	)	$	50,062	$	(1,053	)	$	186,811	$	(2,034	)

	December 31, 2016
	Duration of Unrealized Loss
	Less Than 12 Months					12 Months or Longer					Total
	Approximate					Approximate					Approximate
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(In thousands)	Value		Losses			Value		Losses			Value		Losses
U.S. government-
sponsored agencies	$	21,517	$	(474	)	$	—	$	—		$	21,517	$	(474	)
Mortgage-backed
securities-residential		151,114		(1,472	)		5,147		(42	)		156,261		(1,514	)
SBA pool securities		—		—			6,713		(65	)		6,713		(65	)
State and political
subdivisions		9,412		(274	)		—		—			9,412		(274	)
Single-issuer trust
preferred security		—		—			2,610		(389	)		2,610		(389	)
CRA investment fund		1,930		(70	)		2,894		(105	)		4,824		(175	)
Total	$	183,973	$	(2,290	)	$	17,364	$	(601	)	$	201,337	$	(2,891	)

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 creditworthiness of the issuers. As of September 30, 2017, 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.

At September 30, 2017, the unrealized loss on the single-issuer trust preferred security of $142 thousand was related to a debt security issued by a large bank holding company. The security was downgraded to below investment grade by Moody’s and is currently rated Ba1. Management monitors the performance of the issuer on a quarterly basis to determine if there are any credit events that could result in deferral or default of the security. Management believes the depressed valuation is a result of the nature of the security, a trust preferred bond, and the bond’s very low yield. As Management does not intend to sell this security nor is it likely that it will be required to sell the security before its anticipated recovery, the security is not considered other-than-temporarily impaired at September 30, 2017.

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3. LOANS

Loans outstanding, excluding those held for sale, by general ledger classification, as of September 30, 2017 and December 31, 2016, consisted of the following:

			% of					% of
	September 30,		Totals			December 31,		Total
(In thousands)	2017		Loans			2016		Loans
Residential mortgage	$	602,775		16.44	%	$	527,370		15.92	%
Multifamily mortgage		1,441,852		39.32			1,459,594		44.07
Commercial mortgage		625,466		17.05			551,233		16.65
Commercial loans		845,831		23.06			636,714		19.23
Construction loans		—		—			1,405		0.04
Home equity lines of credit		68,787		1.88			65,682		1.98
Consumer loans, including fixed
rate home equity loans		81,671		2.23			69,654		2.10
Other loans		815		0.02			492		0.01
Total loans	$	3,667,197		100.00	%	$	3,312,144		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, 2017 and December 31, 2016:

			% of					% of
	September 30,		Totals			December 31,		Total
(In thousands)	2017		Loans			2016		Loans
Primary residential mortgage	$	631,632		17.23	%	$	557,970		16.86	%
Home equity lines of credit		68,787		1.88			65,683		1.98
Junior lien loan on residence		7,082		0.19			9,206		0.28
Multifamily property		1,441,852		39.34			1,459,594		44.09
Owner-occupied commercial real estate		253,605		6.92			176,123		5.32
Investment commercial real estate		876,282		23.91			752,258		22.73
Commercial and industrial		257,124		7.01			213,983		6.47
Lease Financing		36,184		0.99			—		—
Farmland/agricultural production		162		0.01			169		0.01
Commercial construction loans		93		0.01			1,497		0.04
Consumer and other loans		92,055		2.51			73,621		2.22
Total loans	$	3,664,858		100.00	%	$	3,310,104		100.00	%
Net deferred costs		2,339					2,040
Total loans including net deferred costs	$	3,667,197				$	3,312,144

19 

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, 2017 and December 31, 2016:

	September 30, 2017
	Total		Ending ALLL		Total		Ending ALLL
	Loans		Attributable		Loans		Attributable
	Individually		To Loans		Collectively		To Loans
	Evaluated		Individually		Evaluated		Collectively				Total
	For		Evaluated for		For		Evaluated for		Total		Ending
(In thousands)	Impairment		Impairment		Impairment		Impairment		Loans		ALL
Primary residential
mortgage	$	12,161	$	572	$	619,471	$	3,772	$	631,632	$	4,344
Home equity lines
of credit		27		—		68,760		229		68,787		229
Junior lien loan
on residence		98		—		6,984		13		7,082		13
Multifamily
property		—		—		1,441,852		11,246		1,441,852		11,246
Owner-occupied
commercial
real estate		1,576		—		252,029		2,270		253,605		2,270
Investment
commercial
real estate		11,130		205		865,152		11,752		876,282		11,957
Commercial and
industrial		54		54		257,070		5,181		257,124		5,235
Lease financing		—		—		36,184		275		36,184		275
Secured by
farmland and
agricultural
production		—		—		162		2		162		2
Commercial
construction		—		—		93		1		93		1
Consumer and
other		—		—		92,055		343		92,055		343
Total ALLL	$	25,046	$	831	$	3,639,812	$	35,084	$	3,664,858	$	35,915

	December 31, 2016
	Total		Ending ALLL		Total		Ending ALLL
	Loans		Attributable		Loans		Attributable
	Individually		To Loans		Collectively		To Loans
	Evaluated		Individually		Evaluated		Collectively				Total
	For		Evaluated for		For		Evaluated for		Total		Ending
(In thousands)	Impairment		Impairment		Impairment		Impairment		Loans		ALLL
Primary residential
mortgage	$	15,814	$	456	$	542,156	$	3,210	$	557,970	$	3,666
Home equity lines
of credit		53		—		65,630		233		65,683		233
Junior lien loan
on residence		229		—		8,977		16		9,206		16
Multifamily
Property		—		—		1,459,594		11,192		1,459,594		11,192
Owner-occupied
Commercial
real estate		1,486		—		174,637		1,774		176,123		1,774
Investment
commercial
real estate		11,335		214		740,923		10,695		752,258		10,909
Commercial and
Industrial		154		154		213,829		4,010		213,983		4,164
Secured by
farmland and
agricultural production
production		—		—		169		2		169		2
Commercial
construction		—		—		1,497		9		1,497		9
Consumer and
Other		—		—		73,621		243		73,621		243
Total ALLL	$	29,071	$	824	$	3,281,033	$	31,384	$	3,310,104	$	32,208

20 

Impaired loans include nonaccrual loans of $15.4 million at September 30, 2017 and $11.3 million at December 31, 2016. Impaired loans also include performing TDR loans of $9.7 million at September 30, 2017 and $17.8 million at December 31, 2016. At September 30, 2017, the allowance allocated to TDR loans totaled $439 thousand, of which $184 thousand was allocated to nonaccrual loans. At December 31, 2016, the allowance allocated to TDR loans totaled $550 thousand of which $314 thousand was allocated to nonaccrual loans. All accruing TDR loans were paying in accordance with restructured terms as of September 30, 2017. The Company has not committed to lend additional amounts as of September 30, 2017 to customers with outstanding loans that are classified as TDR loans.

The following tables present loans individually evaluated for impairment by class of loans as of September 30, 2017 and December 31, 2016 (The average impaired loans on the following tables represent year to date impaired loans.):

	September 30, 2017
	Unpaid						Average
	Principal		Recorded		Specific		Impaired
(In thousands)	Balance		Investment		Reserves		Loans
With no related allowance recorded:
Primary residential mortgage	$	9,998	$	8,820	$	—	$	11,329
Owner-occupied commercial real estate		1,756		1,576		—		1,467
Investment commercial real estate		9,601		9,537		—		10,035
Home equity lines of credit		29		27		—		42
Junior lien loan on residence		156		98		—		96
Total loans with no related allowance	$	21,541	$	20,058	$	—	$	22,969
With related allowance recorded:
Primary residential mortgage	$	4,159	$	3,341	$	572	$	1,296
Investment commercial real estate		1,609		1,593		205		1,202
Commercial and industrial		110		54		54		79
Total loans with related allowance	$	5,878	$	4,988	$	831	$	2,577
Total loans individually evaluated for
Impairment	$	27,419	$	25,046	$	831	$	25,546

	December 31, 2016
	Unpaid						Average
	Principal		Recorded		Specific		Impaired
(In thousands)	Balance		Investment		Reserves		Loans
With no related allowance recorded:
Primary residential mortgage	$	16,015	$	14,090	$	—	$	10,038
Owner-occupied commercial real estate		1,597		1,486		—		1,450
Investment commercial real estate		9,711		9,711		—		9,974
Home equity lines of credit		56		53		—		143
Junior lien loan on residence		280		229		—		339
Total loans with no related allowance	$	27,659	$	25,569	$	—	$	21,944
With related allowance recorded:
Primary residential mortgage	$	1,787	$	1,724	$	456	$	1,678
Investment commercial real estate		1,640		1,624		214		1,642
Commercial and industrial		204		154		154		145
Total loans with related allowance	$	3,631	$	3,502	$	824	$	3,465
Total loans individually evaluated for
impairment	$	31,290	$	29,071	$	824	$	25,409

Interest income recognized on impaired loans for the quarters ended September 30, 2017 and 2016 was not material. The Company did not recognize any income on nonaccruing impaired loans for the three and nine months ended September 30, 2017 and 2016.

21 

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, 2017 and December 31, 2016:

	September 30, 2017
			Loans Past Due
			Over 90 Days
			And Still
(In thousands)	Nonaccrual		Accruing Interest
Primary residential mortgage	$	8,318	$	—
Home equity lines of credit		6		—
Junior lien loan on residence		98		—
Owner-occupied commercial real estate		1,576		—
Investment commercial real estate		5,315		—
Commercial and industrial		54		—
Total	$	15,367	$	—

	December 31, 2016
			Loans Past Due
			Over 90 Days
			And Still
(In thousands)	Nonaccrual		Accruing Interest
Primary residential mortgage	$	9,071	$	—
Home equity lines of credit		30		—
Junior lien loan on residence		115		—
Owner-occupied commercial real estate		1,486		—
Investment commercial real estate		408		—
Commercial and industrial		154		—
Total	$	11,264	$	—

22 

The following tables present the aging of the recorded investment in past due loans as of September 30, 2017 and December 31, 2016 by class of loans, excluding nonaccrual loans:

	September 30, 2017
	30-59		60-89		Greater Than
	Days		Days		90 Days		Total
(In thousands)	Past Due		Past Due		Past Due		Past Due
Primary residential mortgage	$	589	$	—	$	—	$	589
Total	$	589	$	—	$	—	$	589

	December 31, 2016
	30-59		60-89		Greater Than
	Days		Days		90 Days		Total
(In thousands)	Past Due		Past Due		Past Due		Past Due
Primary residential mortgage	$	620	$	480	$	—	$	1,100
Junior lien loan on residence		—		25		—		25
Owner-occupied commercial real estate		209		—		—		209
Commercial and industrial		22		—		—		22
Total	$	851	$	505	$	—	$	1,356

Credit Quality Indicators:

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, debt service capacity, 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:

· All new relationships or new lending to existing relationships greater than $1,000,000;

· All criticized and classified rated borrowers with relationship exposure of more than $500,000;

· A large sample of borrowers with total relationship commitments in excess of $1,000,000;

· A random sample of borrowers with relationships less than $1,000,000;

· Any other credits requested by Bank senior management or a member of the Board of Directors and any borrower for which the reviewer determines a review is warranted based upon knowledge of the portfolio, local events, industry stresses etc.

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.

23 

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, 2017, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

			Special
(In thousands)	Pass		Mention		Substandard		Doubtful
Primary residential mortgage	$	618,544	$	795	$	12,293	$	—
Home equity lines of credit		68,760		—		27		—
Junior lien loan on residence		6,984		—		98		—
Multifamily property		1,424,637		15,381		1,834		—
Owner-occupied commercial real estate		248,504		—		5,101		—
Investment commercial real estate		847,966		6,233		22,083		—
Commercial and industrial		249,323		6,991		810		—
Lease financing		36,184		—		—		—
Farmland		162		—		—		—
Commercial construction		—		93		—		—
Consumer and other loans		90,131		—		1,924		—
Total	$	3,591,195	$	29,493	$	44,170	$	—

As of December 31, 2016, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

			Special
(In thousands)	Pass		Mention		Substandard		Doubtful
Primary residential mortgage	$	541,359	$	660	$	15,951	$	—
Home equity lines of credit		65,630		—		53		—
Junior lien loan on residence		8,977		—		229		—
Multifamily property		1,456,328		2,867		399		—
Owner-occupied commercial real estate		170,851		—		5,272		—
Investment commercial real estate		724,203		5,116		22,939		—
Commercial and industrial		208,617		4,411		955		—
Secured by farmland and agricultural		169		—		—		—
Commercial construction		1,400		97		—		—
Consumer and other loans		73,621		—		—		—
Total	$	3,251,155	$	13,151	$	45,798	$	—

At September 30, 2017, $23.9 million of substandard loans were also considered impaired compared to December 31, 2016, when $27.9 million of substandard loans were also impaired.

24 

The activity in the allowance for loan and lease losses for the three months ended September 30, 2017 is summarized below:

	July 1,										September 30,
	2017										2017
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	4,223	$	(261	)	$	59	$	323		$	4,344
Home equity lines of credit		211		—			2		16			229
Junior lien loan on residence		14		—			6		(7	)		13
Multifamily property		11,606		—			—		(360	)		11,246
Owner-occupied commercial real estate		2,147		(30	)		—		153			2,270
Investment commercial real estate		11,727		—			1		229			11,957
Commercial and industrial		5,333		—			9		(107	)		5,235
Lease financing		178		—			—		97			275
Secured by farmland and agricultural		2		—			—		—			2
Commercial construction		1		—			—		—			1
Consumer and other loans		309		(24	)		2		56			343
Total ALLL	$	35,751	$	(315	)	$	79	$	400		$	35,915

The activity in the allowance for loan and lease losses for the nine months ended September 30, 2017 is summarized below:

	January 1,										September 30,
	2017										2017
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	3,666	$	(591	)	$	128	$	1,141		$	4,344
Home equity lines of credit		233		(23	)		61		(42	)		229
Junior lien loan on residence		16		(57	)		19		35			13
Multifamily property		11,192		—			—		54			11,246
Owner-occupied commercial real estate		1,774		(30	)		—		526			2,270
Investment commercial real estate		10,909		—			23		1,025			11,957
Commercial and industrial		4,164		(25	)		61		1,035			5,235
Lease financing		—		—			—		275			275
Secured by farmland and agricultural		2		—			—		—			2
Commercial construction		9		—			—		(8	)		1
Consumer and other loans		243		(62	)		3		159			343
Total ALLL	$	32,208	$	(788	)	$	295	$	4,200		$	35,915

The activity in the allowance for loan and lease losses for the three months ended September 30, 2016 is summarized below:

	July 1,										September 30,
	2016										2016
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	2,783	$	(729	)	$	4	$	972		$	3,030
Home equity lines of credit		223		—			3		(2	)		224
Junior lien loan on residence		19		—			2		(3	)		18
Multifamily property		11,639		—			—		204			11,843
Owner-occupied commercial real estate		1,733		—			—		90			1,823
Investment commercial real estate		9,621		—			2		231			9,854
Commercial and industrial		2,951		(4	)		8		613			3,568
Secured by farmland and agricultural production		2		—			—		—			2
Commercial construction		1		—			—		3			4
Consumer and other loans		247		—			11		(8	)		250
Total ALLL	$	29,219	$	(733	)	$	30	$	2,100		$	30,616

25 

The activity in the allowance for loan and lease losses for the nine months ended September 30, 2016 is summarized below:

	January 1,										September 30,
	2016										2016
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	2,297	$	(1,027	)	$	25	$	1,735		$	3,030
Home equity lines of credit		86		(91	)		11		218			224
Junior lien loan on residence		66		—			72		(120	)		18
Multifamily property		11,813		—			—		30			11,843
Owner-occupied commercial real estate		1,679		—			—		144			1,823
Investment commercial real estate		7,590		(258	)		8		2,514			9,854
Commercial and industrial		2,209		(7	)		20		1,346			3,568
Secured by farmland and agricultural production		2		—			—		—			2
Commercial construction		2		—			—		2			4
Consumer and other loans		112		(5	)		12		131			250
Total ALLL	$	25,856	$	(1,388	)	$	148	$	6,000		$	30,616

Troubled Debt Restructurings:

The Company has allocated $439 thousand and $550 thousand of specific reserves on TDRs to customers whose loan terms have been modified in TDRs as of September 30, 2017 and December 31, 2016, respectively. There were no unfunded commitments to lend additional amounts to customers with outstanding loans that are classified as TDRs.

The terms of certain loans were modified as TDRs when one or a combination of the following occurred: a reduction of the stated interest rate of the loan; a deferral of scheduled payments with an extension of the maturity date; or some other modification or extension which would not be readily available in the market.

No loans were modified as TDRs during the three-month period ended September 30, 2017.

The following table presents loans by class modified as TDRs during the nine-month period ended September 30, 2017:

			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Contracts		Investment		Investment
Primary residential mortgage		5	$	1,148	$	1,148
Total		5	$	1,148	$	1,148

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 during the three-month period ended September 30, 2016:

			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Contracts		Investment		Investment
Primary residential mortgage		1	$	368	$	368
Total		1	$	368	$	368

The following table presents loans by class modified as TDRs during the nine-month period ended September 30, 2016:

26 

			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Contracts		Investment		Investment
Primary residential mortgage		7	$	4,924	$	4,924
Junior lien on residence		1		66		66
Investment commercial real estate		1		79		79
Total		9	$	5,069	$	5,069

There were no loans that were modified as TDRs for which there was a payment default, within twelve months of modification, during the three and nine months ended September 30, 2017 and 2016.

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 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.

4. DEPOSITS

Certificates of deposit, excluding brokered certificates of deposit over $250,000, totaled $158.9 million and $118.7 million at September 30, 2017 and December 31, 2016, respectively.

27 

The following table sets forth the details of total deposits as of September 30, 2017 and December 31, 2016:

	September 30,					December 31,
	2017					2016
(In thousands)	$		%			$		%
Noninterest-bearing demand deposits	$	557,117		15.21	%	$	489,485		14.35	%
Interest-bearing checking (1)		1,144,714		31.25			1,023,081		29.99
Savings		121,830		3.33			120,056		3.52
Money market		1,046,997		28.59			1,048,494		30.73
Certificates of deposit		528,251		14.42			457,000		13.39
Subtotal deposits		3,398,909		92.80			3,138,116		91.98
Interest-bearing demand - Brokered		180,000		4.91			180,000		5.27
Certificates of deposit - Brokered		83,788		2.29			93,721		2.75
Total deposits	$	3,662,697		100.00	%	$	3,411,837		100.00	%

(1) Interest-bearing checking includes $373.7 million at September 30, 2017 and $393.0 million at December 31, 2016 of reciprocal balances in the Reich & Tang or Promontory Demand Deposit Marketplace program.

The scheduled maturities of certificates of deposit, including brokered certificates of deposit, as of September 30,2017 are as follows:

(In thousands)
2017	$	56,898
2018		316,436
2019		102,167
2020		39,510
2021		13,858
Over 5 Years		83,710
Total	$	612,039

5. FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

Advances from the FHLB totaled $49.9 million with a weighted average interest rate of 2.14 percent and $61.8 million with a weighted average interest rate of 2.02 percent at September 30, 2017 and December 31, 2016, respectively.

At September 30, 2017, advances totaling $37.9 million with a weighted average interest rate of 1.87 percent had fixed maturity dates. The fixed maturity date advances at December 31, 2016 totaled $49.8 million with a weighted average interest rate of 1.78 percent. The fixed rate advances are secured by blanket pledges of certain 1-4 family residential mortgages totaling $509.0 million and multifamily mortgages totaling $939.8 million at September 30, 2017, while at December 31, 2016 the fixed rate advances are secured by blanket pledges of certain 1-4 family residential mortgages totaling $468.3 million and multifamily mortgages totaling $1.2 billion.

At both September 30, 2017 and at December 31, 2016, the Company had $12.0 million in variable rate advances, with a weighted average interest rate of 3.01 percent, that are noncallable for two or three years and then callable quarterly with final maturities of ten years from the original date of the advance. All of these advances are beyond their initial noncallable periods. These advances are secured by pledges of investment securities totaling $12.9 million at September 30, 2017.

28 

The final maturity dates of the FHLB advances are scheduled as follows:

(In thousands)
2017	$	12,000
2018		34,898
2019		3,000
2020		—
2021		—
Over 5 years		—
Total	$	49,898

There were no overnight borrowings as of September 30, 2017 or December 31, 2016. At September 30, 2017, unused short-term overnight borrowing commitments totaled $1.2 billion from FHLB, $22.0 million from correspondent banks and $728.2 million at the FRB.

6. BUSINESS SEGMENTS

The Corporation assesses its results among two operating segments, Banking and Peapack-Gladstone Bank’s Private Wealth Management Division. 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.

Banking

The Banking segment includes commercial, commercial real estate, multifamily, residential and consumer lending activities; deposit generation; operation of ATMs; telephone and internet banking services; merchant credit card services and customer support and sales.

Private Wealth Management Division

Peapack-Gladstone Bank’s Private Wealth Management Division includes asset management services provided for individuals and institutions; personal trust services, including services as executor, trustee, administrator, custodian and guardian; and other financial planning and advisory services.

29 

The following tables present the statements of income and total assets for the Corporation’s reportable segments for the three and nine months ended September 30, 2017 and 2016.

	Three Months Ended September 30, 2017
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	28,687	$	1,305	$	29,992
Noninterest income		2,928		5,903		8,831
Total income		31,615		7,208		38,823
Provision for loan and lease losses		400		—		400
Compensation and benefits		10,992		3,004		13,996
Premises and equipment expense		2,619		326		2,945
Other noninterest expense		3,167		1,853		5,020
Total noninterest expense		17,178		5,183		22,361
Income before income tax expense		14,437		2,025		16,462
Income tax expense		5,474		782		6,256
Net income	$	8,963	$	1,243	$	10,206

	Three Months Ended September 30, 2016
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	23,194	$	1,075	$	24,269
Noninterest income		2,974		4,561		7,535
Total income		26,168		5,636		31,804
Provision for loan and lease losses		2,100		—		2,100
Compensation and benefits		9,138		2,377		11,515
Premises and equipment expense		2,484		252		2,736
Other noninterest expense		2,688		1,227		3,915
Total noninterest expense		16,410		3,856		20,266
Income before income tax expense		9,758		1,780		11,538
Income tax expense		3,738		684		4,422
Net income	$	6,020	$	1,096	$	7,116

	Nine Months Ended September 30, 2017
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	78,372	$	4,183	$	82,555
Noninterest income		7,975		16,046		24,021
Total income		86,347		20,229		106,576
Provision for loan and lease losses		4,200		—		4,200
Compensation and benefits		30,792		7,868		38,660
Premises and equipment expense		7,891		903		8,794
Other noninterest expense		8,559		5,347		13,906
Total noninterest expense		51,442		14,118		65,560
Income before income tax expense		34,905		6,111		41,016
Income tax expense		12,670		2,218		14,888
Net income	$	22,235	$	3,893	$	26,128
Total assets for period end	$	4,148,222	$	28,110	$	4,176,332

30 

	Nine Months Ended September 30, 2016
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	67,962	$	3,893	$	71,855
Noninterest income		7,286		13,960		21,246
Total income		75,248		17,853		93,101
Provision for loan and lease losses		6,000		—		6,000
Compensation and benefits		26,744		6,779		33,523
Premises and equipment expense		7,583		759		8,342
Other noninterest expense		10,047		4,235		14,282
Total noninterest expense		50,374		11,773		62,147
Income before income tax expense		24,874		6,080		30,954
Income tax expense		9,470		2,315		11,785
Net income	$	15,404	$	3,765	$	19,169
Total assets for period end	$	3,729,004	$	45,379	$	3,774,383

7. FAIR VALUE

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:

Level 1:	Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2:	Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3:	Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing as asset or liability.

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.

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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 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, 2017.

32 

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

Assets Measured on a Recurring Basis    

				Fair Value Measurements Using
				Quoted
				Prices in
				Active
				Markets		Significant
				For		Other			Significant
				Identical		Observable			Unobservable
	September 30,			Assets		Inputs			Inputs
(In thousands)	2017			(Level 1)		(Level 2)			(Level 3)
Assets:
Available for sale:
U.S. government-sponsored
agencies	$	36,475		$	—	$	36,475		$	—
Mortgage-backed securities-
residential		237,381			—		237,381			—
SBA pool securities		5,936			—		5,936			—
State and political subdivisions		24,510			—		24,510			—
Corporate bond		3,094			—		3,094			—
Single-issuer trust preferred security		2,857			—		2,857			—
CRA investment fund		4,859			4,859		—			—
Loans held for sale, at fair value		2,240			—		2,240			—
Derivatives:
Cash flow hedges		383			—		383			—
Loan level swaps		4,136			—		4,136			—
Total	$	321,871		$	4,859	$	317,012		$	—
Liabilities:
Derivatives:
Cash flow hedges	$	(104	)	$	—	$	(104	)	$	—
Loan level swaps		(4,136	)		—		(4,136	)		—
Total	$	(4,240	)	$	—	$	(4,240	)	$	—

33 

Assets Measured on a Recurring Basis    

				Fair Value Measurements Using
				Quoted
				Prices in
				Active
				Markets		Significant
				For		Other			Significant
				Identical		Observable			Unobservable
	December 31,			Assets		Inputs			Inputs
(In thousands)	2016			(Level 1)		(Level 2)			(Level 3)
Assets:
Securities available for sale:
U.S. government-sponsored agencies	$	21,517		$	—	$	21,517		$	—
Mortgage-backed securities-residential		237,617			—		237,617			—
SBA pool securities		6,713			—		6,713			—
State and political subdivisions		28,993			—		28,993			—
Corporate bond		3,113			—		3,113			—
Single-issuer trust preferred security		2,610			—		2,610			—
CRA investment fund		4,825			4,825		—			—
Loans held for sale, at fair value		1,200			—		1,200			—
Derivatives:
Cash flow hedges		123			—		123			—
Loan level swaps		1,543			—		1,543			—
Total	$	308,254		$	4,825	$	303,429		$	—
Liabilities:
Derivatives:
Cash flow hedges	$	(867	)		—		(867	)		—
Loan level swaps		(1,543	)		—		(1,543	)		—
Total	$	(2,410	)	$	—	$	(2,410	)	$	—

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, 2017 and December 31, 2016.

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

(In thousands)	September 30, 2017		December 31, 2016
Residential loans contractual balance	$	2,214	$	1,181
Fair value adjustment		26		19
Total fair value of residential loans held for sale	$	2,240	$	1,200

There were no transfers between Level 1 and Level 2 during the three or nine months ended September 30, 2017.

34 

The following table summarizes, for the periods indicated, assets measured at fair value on a non-recurring basis (Quantitative disclosures for non-recurring Level 3 assets have been omitted due to immateriality):

Assets Measured on a Non-Recurring Basis

			Fair Value Measurements Using
			Quoted
			Prices in
			Active
			Markets		Significant
			For		Other		Significant observable
			Identical		Observable		Unobservable
	September 30,		Assets		Inputs		Inputs
(In thousands)	2017		(Level 1)		(Level 2)		(Level 3)
Assets:
Impaired loans:
Primary residential mortgage	$	1,828	$	—	$	—	$	1,828
Investment commercial real estate		239		—		—		239
	December 31,
(In thousands)	2016
Assets:
Impaired loans:
Investment commercial real estate	$	245	$	—	$	—	$	245

Impaired loans that are measured for impairment using the fair value of the collateral for collateral dependent loans had a recorded investment of $2.6 million, with a valuation allowance of $523 thousand at September 30, 2017 and $408 thousand, with a valuation allowance of $163 thousand, at December 31, 2016.

The carrying amounts and estimated fair values of financial instruments at September 30, 2017 are as follows:

			Fair Value Measurements at September 30, 2017 using
	Carrying
(In thousands)	Amount		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	93,340	$	93,340	$	—	$	—	$	93,340
Securities available for sale		315,112		4,859		310,253		—		315,112
FHLB and FRB stock		13,589		—		—		—		N/A
Loans held for sale, at fair value		2,240		—		2,240		—		2,240
Loans, net of allowance for loan and lease losses		3,631,282		—		—		3,613,704		3,613,704
Accrued interest receivable		6,803		—		1,106		5,697		6,803
Cash flow hedges		383		—		383		—		383
Loan level swaps		4,136		—		4,136		—		4,136
Financial liabilities
Deposits	$	3,662,697	$	3,050,658	$	611,881	$	—	$	3,662,539
Federal home loan bank advances		49,898		—		50,044		—		50,044
Subordinated debt		48,862		—		—		48,862		48,862
Accrued interest payable		2,019		151		1,118		750		2,019
Cash flow hedge		104		—		104		—		104
Loan level swap		4,136		—		4,136		—		4,136

35 

The carrying amounts and estimated fair values of financial instruments at December 31, 2016 are as follows:

			Fair Value Measurements at December 31, 2016 using
	Carrying
(In thousands)	Amount		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	162,691	$	162,691	$	—	$	—	$	162,691
Securities available for sale		305,388		4,825		300,563		—		305,388
FHLB and FRB stock		13,813		—		—		—		N/A
Loans held for sale, at fair value		1,200		—		1,200		—		1,200
Loans held for sale, at lower of cost
or fair value		388		—		428		—		428
Loans, net of allowance for loan and lease losses		3,279,936		—		—		3,256,837		3,256,837
Accrued interest receivable		8,153		—		899		7,254		8,153
Cash flow Hedges		123		—		123		—		123
Loan level swaps		1,543		—		1,543		—		1,543
Financial liabilities
Deposits	$	3,411,837	$	2,861,116	$	549,332	$	—	$	3,410,448
Federal home loan bank advances		61,795		—		62,286		—		62,286
Subordinated debt		48,764		—		—		48,768		48,768
Accrued interest payable		1,127		161		966		—		1,127
Cash flow hedges		867		—		867		—		867
Loan level swaps		1,543		—		1,543		—		1,543

The methods and assumptions, not previously presented, used to estimate fair values are described as follows:

Cash and cash equivalents: The carrying amounts of cash and short-term instruments approximate fair values and are classified as either Level 1 or Level 2. Cash and due from banks is classified as Level 1. Certificates of deposit are classified as Level 2.

FHLB and FRB stock: The fair value of FHLB or FRB stock is their cost basis due to restrictions placed on its transferability.

Loans held for sale, at lower of cost or 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. Loans held for sale are classified as Level 2.

Loans: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

Deposits: The fair values disclosed for demand deposits (e.g., interest and noninterest checking, savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date, (i.e., the carrying amount) resulting in a Level 1 classification. The carrying amounts of certificates of deposit approximate the fair values at the reporting date resulting in Level 2 classification. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

Overnight borrowings: The carrying amounts of overnight borrowings approximate fair values and are classified as Level 2.

36 

Federal Home Loan Bank advances: The fair values of the Corporation’s long-term borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

Subordinated debentures: The fair values of the Corporation’s subordinated debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.

Accrued interest receivable/payable: The carrying amounts of accrued interest approximate fair value resulting in a Level 2 or Level 3 classification. Accrued interest on deposits and securities are included in Level 2. Accrued interest on loans is included in Level 3.

Off-balance sheet instruments: Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of commitments is not material.

8. OTHER OPERATING EXPENSES

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2017		2016		2017		2016
Wealth management division
other expense	$	533	$	490	$	1,865	$	1,593
Professional and legal fees		1,452		801		3,100		2,544
Other operating expenses		2,452		1,810		7,070		6,191
Total other operating expenses	$	4,437	$	3,101	$	12,035	$	10,328

9. ACCUMULATED OTHER COMPREHENSIVE (LOSS)/INCOME

The following is a summary of the accumulated other comprehensive (loss)/income balances, net of tax, for the three months ended September 30, 2017 and 2016:

						Amount		Other
						Reclassified		Comprehensive
				Other		From		Income
				Comprehensive		Accumulated		Three Months
	Balance at			Income		Other		Ended		Balance at
	July 1,			Before		Comprehensive		September 30,		September 30,
(In thousands)	2017			Reclassifications		Income		2017		2017
Net unrealized holding (loss)
on securities available for sale,
net of tax	$	(572	)	$	62	$	—	$	62	$	(510	)
Gains on cash flow hedges		34			131		—		131		165
Accumulated other
comprehensive loss,
net of tax	$	(538	)	$	193	$	—	$	193	$	(345	)

37 

							Amount		Other
							Reclassified		Comprehensive
				Other			From		Income/(Loss)
				Comprehensive			Accumulated		Three Months
	Balance at			Income/(Loss)			Other		Ended			Balance at
	July 1,			Before			Comprehensive		September 30,			September 30,
(In thousands)	2016			Reclassifications			Loss		2016			2016
Net unrealized holding gain
on securities available for sale,
net of tax	$	1,224		$	(215	)	$	—	$	(215	)	$	1,009
Losses on cash flow hedges		(3,727	)		941			—		941			(2,786	)
Accumulated other
comprehensive loss,
net of tax	$	(2,503	)	$	726		$	—	$	726		$	(1,777	)

The following represents the reclassifications out of accumulated other comprehensive income for the three months ended September 30, 2017 and 2016:

	Three Months Ended
	September 30,
(In thousands)	2017		2016		Affected Line Item in Income
Unrealized gains on
securities available for sale:
Realized net gain on securities sales	$	—	$	—	Securities gains, net
Income tax expense		—		—	Income tax expense
Total reclassifications, net of tax	$	—	$	—

The following is a summary of the accumulated other comprehensive (loss)/income balances, net of tax, for the nine months ended September 30, 2017 and 2016:

						Amount		Other
						Reclassified		Comprehensive
				Other		From		Income
				Comprehensive		Accumulated		Nine Months
	Balance at			Income		Other		Ended		Balance at
	January 1,			Before		Comprehensive		September 30,		September 30,
(In thousands)	2017			Reclassifications		Income		2017		2017
Net unrealized holding (loss)
on securities available for sale,
net of tax	$	(1,091	)	$	581	$	—	$	581	$	(510	)
Gains on cash flow hedges		(440	)		605		—		605		165
Accumulated other
comprehensive loss,
net of tax	$	(1,531	)	$	1,186	$	—	$	1,186	$	(345	)

38 

							Amount			Other
							Reclassified			Comprehensive
				Other			From			Income/(Loss)
				Comprehensive			Accumulated			Nine Months
	Balance at			Income/(Loss)			Other			Ended			Balance at
	January 1,			Before			Comprehensive			September 30,			September 30,
(In thousands)	2016			Reclassifications			Loss			2016			2016
Net unrealized holding gain
on securities available for sale,
net of tax	$	408		$	676		$	(75	)	$	601		$	1,009
Losses on cash flow hedges		(787	)		(1,999	)		—			(1,999	)		(2,786	)
Accumulated other
comprehensive loss,
net of tax	$	(379	)	$	(1,323	)	$	(75	)	$	(1,398	)	$	(1,777	)

The following represents the reclassifications out of accumulated other comprehensive income for the nine months ended September 30, 2017 and 2016:

	Nine Months Ended
	September 30,
(In thousands)	2017		2016			Affected Line Item in Income
Unrealized gains on
securities available for sale:
Realized net gain on securities sales	$	—	$	119		Securities gains, net
Income tax expense		—		(44	)	Income tax expense
Total reclassifications, net of tax	$	—	$	75

10. DERIVATIVES

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 $180.0 million as of September 30, 2017 and December 31, 2016 were designated as cash flow hedges of certain interest-bearing demand brokered deposits and were determined to be fully effective during the three and nine months ended September 30, 2017. As such, no amount of ineffectiveness has been included in net income during the three and nine months ended September 30, 2017. Therefore, 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.

39 

The following information about the interest rate swaps designated as cash flow hedges as of September 30, 2017 and December 31, 2016 is presented in the following table:

(Dollars in thousands)	September 30, 2017			December 31, 2016
Notional amount	$	180,000		$	180,000
Weighted average pay rate		1.64	%		1.64	%
Weighted average receive rate		1.30	%		0.58	%
Weighted average maturity		2.50	years		3.25	years
Unrealized gain/(loss), net	$	279		$	(744	)
Number of contracts		9			9

Net interest expense recorded on these swap transactions totaled $150 thousand and $763 thousand for the three and nine months ended September 30, 2017, respectively, and is reported as a component of interest expense. Net interest expense recorded on these swap transactions totaled $494 thousand and $1.5 million for the three and nine months ended September 30, 2016, respectively, and is reported as a component of interest expense.

Cash Flow Hedges

The following table presents the net gain recorded in accumulated other comprehensive (loss)/income and the consolidated financial statements relating to the cash flow derivative instruments for the three months ended September 30, 2017 (after tax):

					Amount of
	Amount of		Amount of		Gain/(Loss)
	Gain/(Loss)		Gain/(Loss)		Recognized in
	Recognized		Reclassified		Other Non-Interest
	In OCI		From OCI to		Expense
(In thousands)	(Effective Portion)		Interest Expense		(Ineffective Portion)
Interest rate contracts	$	131	$	—	$	—

The following table presents the net gain recorded in accumulated other comprehensive (loss)/income and the consolidated financial statements relating to the cash flow derivative instruments for the three months ended September 30, 2016 (after tax):

					Amount of
	Amount of		Amount of		Gain/(Loss)
	Gain/(Loss)		Gain/(Loss)		Recognized in
	Recognized		Reclassified		Other Non-Interest
	In OCI		From OCI to		Expense
(In thousands)	(Effective Portion)		Interest Expense		(Ineffective Portion)
Interest rate contracts	$	941	$	—	$	—

40 

The following table presents the net gain recorded in accumulated other comprehensive (loss)/income and the consolidated financial statements relating to the cash flow derivative instruments for the nine months ended September 30, 2017 (after tax):

					Amount of
	Amount of		Amount of		Gain/(Loss)
	Gain/(Loss)		Gain/(Loss)		Recognized in
	Recognized		Reclassified		Other Non-Interest
	In OCI		From OCI to		Expense
(In thousands)	(Effective Portion)		Interest Expense		(Ineffective Portion)
Interest rate contracts	$	605	$	—	$	—

The following table presents the net loss recorded in accumulated other comprehensive (loss)/income and the consolidated financial statements relating to the cash flow derivative instruments for the nine months ended September 30, 2016 (after tax):

						Amount of
	Amount of			Amount of		Gain/(Loss)
	Gain/(Loss)			Gain/(Loss)		Recognized in
	Recognized			Reclassified		Other Non-Interest
	In OCI			From OCI to		Expense
(In thousands)	(Effective Portion)			Interest Expense		(Ineffective Portion)
Interest rate contracts	$	(1,999	)	$	—	$	—

The following tables reflect the cash flow hedges included in the financial statements as of September 30, 2017 and December 31, 2016:

	September 30, 2017
	Notional		Fair
(In thousands)	Amount		Value
Interest rate swaps related to interest-bearing
demand brokered deposits	$	180,000	$	279
Total included in other assets	$	110,000	$	383
Total included in other liabilities	$	70,000	$	(104	)

	December 31, 2016
	Notional		Fair
(In thousands)	Amount		Value
Interest rate swaps related to interest-bearing
demand brokered deposits	$	180,000	$	(744	)
Total included in other assets	$	30,000	$	123
Total included in other liabilities	$	150,000	$	(867	)

Derivatives Not Designated as Accounting Hedges: The Company 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.

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Information about these swaps is as follows:

(Dollars in thousands)	September 30, 2017			December 31, 2016
Notional amount	$	315,689		$	126,810
Fair value	$	4,136		$	1,543
Weighted average pay rates		4.10	%		3.75	%
Weighted average receive rates		3.27	%		2.65	%
Weighted average maturity		7.7	years		9.4	years
Number of contracts		41			14

11. SUBORDINATED DEBT

During June 2016, the Company issued $50.0 million in aggregate principal amount of fixed-to-floating subordinated notes (the “Notes”) to certain institutional investors. The 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% 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.  Subordinated debt is presented net of issuance cost on the Consolidated Statements of Condition.

The subordinated debt issuance benefited the Company’s regulatory total capital amount and ratio. Approximately $40.0 million of the net proceeds from the sale of the Notes were used by the Company to contribute capital to the Bank in the second quarter of 2016. The remaining funds (approximately $9 million) were retained by the Company and are intended to cover future subordinated debt interest payments.

In connection with the issuance of the Notes, the Company obtained ratings from Kroll Bond Rating Agency (“KBRA”). KBRA assigned investment grade rating of BBB- for the Company’s subordinated debt. KBRA reaffirmed such rating in June 2017.

12. RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)” implements a common revenue standard that clarifies the principles for recognizing revenue. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. In July 2015, FASB deferred the effective date of the ASU by one year which means ASU 2014-09 will be effective for the Company on January 1, 2018.  In March 2016, FASB issued ASU 2016-08 which amended illustrative examples to clarify how to apply the implementation guidance on principal versus agent considerations. The Company completed its initial assessment of revenue streams and determined that, in accordance with the standard, interest income, income from bank owned life insurance, gains on sales of loans and securities and derivatives income are all out of scope of the ASU.  We reviewed contracts potentially affected by the ASU including wealth management fee income, service charges and fees, and other income. Based on the initial assessment, the Company does not expect the guidance will have a material impact on its financial statements. However, the Company is reviewing at a contract level in order to finalize the evaluation.

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In January 2016, the FASB issued ASU 2016-01, “Financial Instruments”. This guidance amends existing guidance to improve accounting standards for financial instruments including clarification and simplification of accounting and disclosure requirements and the requirement for public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. The Company expects to record a cumulative effect adjustment for its sole equity instrument to the balance sheet as of the beginning of the fiscal year of adoption. These amendments are effective for public business entities for annual periods and interim periods within those annual periods beginning after December 15, 2017. The Company does not expect the guidance will have a material impact on its consolidated financial statements.

In February 2016, the FASB issued 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. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. The Company continues to evaluate the effect that ASU 2016-02 will have on its financial position, results of operations, and its financial statement disclosures. The adoption of ASU 2016-02 is expected to result in leased assets and related lease liabilities to be included on its balance sheet, along with the related leasehold amortization and interest expense included in its statement of income.

In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting”. Under the ASU, an entity recognizes all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement. This change eliminates the notion of the additional paid in capital (“APIC”) pool and reduces the complexity and cost of accounting for excess tax benefits and tax deficiencies. Excess tax benefits and tax deficiencies are considered discrete items in the reporting period they occur and are not included in the estimate of an entity’s annual effective tax rate. Additionally, this update permits an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur. This accounting guidance is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption is permitted. The Company adopted the provisions of this standard during the quarter ended March 31, 2017. Upon adoption, excess tax benefits and tax deficiencies are recognized in the provision for income taxes on the consolidated statement of operations and are presented within operating activities on the consolidated statement of cash flows for the nine months ended September 30, 2017. The adoption of ASU 2016-09 resulted in an income tax benefit of $792 thousand and a reduction in our effective tax rate for the nine months ended September 30, 2017.

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On June 16, 2016, the FASB issued Accounting Standards Update No. 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.   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 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 an impact on its financial statements as it relates to the Company’s securities portfolio. The Company is also currently evaluating the impact the CECL model will have on our accounting and allowance for loans losses. The Company is in the process of evaluating third party firms to assist in the development of a CECL program, and has selected an in-house software model to assist in the calculation of the allowance for loan and lease losses in preparation for the change to the expected loss model. The Company expects to recognize a one-time cumulative-effect adjustment to our allowance for loan and lease losses as of the beginning of the first reporting period in which the new standard is effective, consistent with regulatory expectations set forth in interagency guidance issued at the end of 2016. 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 financial condition or results of operations.

On August 26, 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments)”. This ASU addresses the following eight specific cash flow issues: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (COLIs) (including bank-owned life insurance policies (BOLIs)); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. This amendment is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. There is no material impact on our statement of cash flows as a result of this ASU.

In January 2017, the FASB issued ASU 2017-04: “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”.  This accounting standard updated simplifies the subsequent measurement of goodwill, by eliminating Step 2 from the goodwill impairment test.  In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.  An entity should apply the amendments in this update on a prospective basis.  A public business entity that is a SEC filer should adopt the amendments in this update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.  Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.  The adoption of this ASU will not have a material impact to the consolidated financial statements at this time.

In March 2017, the FASB issued ASU 2017-08: “Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities”. This Accounting Standards update amends guidance on the amortization period of premiums on certain purchased callable debt securities. Specifically, the amendments shorten the amortization period of premiums on certain purchased callable debt securities to the earliest call date. The amendments affect all entities that hold investments in callable debt securities that have an amortized cost basis in excess of the amount that is repayable by the issuer at the earliest call date. For public business entities, the amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.  The Company does not currently hold any callable debt securities with a premium.  As a result, the adoption of this ASU will not have a material impact to the consolidated financial statements.

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Also in March 2017, the FASB issued ASU 2017-07: “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”. This ASU requires an entity to present net periodic pension cost and net periodic postretirement benefit cost as a net amount that may be capitalized as part of an asset where appropriate. Generally, the service cost component is analyzed differently from the other components of net periodic pension cost and net periodic postretirement benefit cost. To improve consistency, transparency, and usefulness of financial information, the amendments in this update require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The amendments in this update are effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods.  The Company’s current accounting treatment and presentation of net periodic postretirement benefit cost is consistent with the provisions in ASU-2017.  As a result, the adoption of this ASU will not have a material impact to the consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09: “Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting”. The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless all the following are met: 1.) The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification. 2.) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified. 3.) The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in this update. The amendments in this update are effective for public business entities for annual periods beginning after December 15, 2018, including interim periods within those annual periods.  The Company does not anticipate a material impact to the consolidated financial statements at this time.

In August 2017, the FASB issued ASU 2017-12: “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities”. The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. ASU 2017-12 is effective for public business entities for fiscal years beginning after December 15, 2018, with early adoption, including adoption in an interim period, permitted. The Company plans to adopt ASU 2017-12 on January 1, 2019. ASU 2017-12 requires a modified retrospective transition method in which the Company will recognize the cumulative effect of the change on the opening balance of each affected component of equity in the statement of financial position as of the date of adoption. While the Company continues to assess all potential impacts of the standard, the Company does not anticipate a material impact to the consolidated financial statements at this time.

13. ACQUISITION

Effective August 1, 2017 the Company closed the previously announced acquisition of MCM. The acquisition is consistent with the Company’s strategy to grow its wealth management business both organically and through strategic acquisitions.  The purchase price included equity of $2 million as well as cash. The Company is still in the process of evaluating the final purchase accounting allocation. Any adjustment resulting from the evaluation is not expected to be material. In accordance with FASB ASC 805-10 (Subtopic 25-15), the Company has up to one year from date of acquisition to complete this assessment. The increase in the Company’s goodwill and other intangible assets during the quarter ended September 30, 2017 was due to this acquisition.

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14. DEFINITIVE AGREEMENT

On September 14, 2017, the Company announced that it had entered into a definitive agreement to acquire Fairfield, NJ-based Quadrant Capital Management, LLC. (“Quadrant”). The transaction closed on October 31, 2017. The purchase price includes equity of $3.1 million as well as cash. The Company is still in the process of evaluating the final purchase accounting allocation. Any adjustment resulting from the evaluation is not expected to be material. In accordance with FASB ASC 805-10 (Subtopic 25-15), the Company has up to one year from date of acquisition to complete this assessment.

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Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

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 view of future financial condition and results of operations, Management’s confidence and strategies and Management’s expectations about new and existing programs and products, relationships, opportunities and market conditions. These statements may be identified by such forward-looking terminology as “expect”, “look”, “believe”, “anticipate”, “may”, “will”, or similar statements or variations of such terms. Actual results may differ materially from such forward-looking statements. Factors that may cause actual 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, 2016, in addition to/which include the following:

· inability to successfully grow our business and implement our strategic plan, including an inability to generate revenues to offset the increased personnel and other costs related to the strategic plan;

· the impact of anticipated higher operating expenses in 2017 and beyond;

· inability to successfully integrate wealth acquisitions;

· inability to manage our growth;

· inability to successfully integrate our expanded employee base;

· an unexpected decline in the economy, in particular in our New Jersey and New York market areas;

· declines in our net interest margin caused by the low interest rate environment and highly competitive market;

· declines in value in our investment portfolio;

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

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

· unexpected changes in interest rates;

· an 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, Basel III and related regulations) subject us to additional regulatory oversight, which may result in increased compliance costs;

· successful cyberattacks against our IT infrastructure and that of our IT providers;

· higher than expected FDIC insurance premiums;

· adverse weather conditions;

· inability to successfully generate new business in new geographic markets;

· inability to execute upon new business initiatives;

· lack of liquidity to fund 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.

Except as required by law, the Company assumes no responsibility to update such forward-looking statements in the future. 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.

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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, 2016 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, 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 securities in accordance with “Accounting for Certain Investments in Debt and Equity Securities,” which was codified into Accounting Standards Codification (“ASC”) 320. 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, net of tax.

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. 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 must be 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. No impairment charges were recognized in the three or nine months ended September 30, 2017 and 2016. For equity securities, the entire amount of impairment is recognized through earnings.

48 

EXECUTIVE SUMMARY: The following table presents certain key aspects of our performance for the three months ended September 30, 2017 and 2016.

	Three Months Ended September 30,						Change
(Dollars in thousands, except share and per share data)	2017			2016			2017 vs 2016
Results of Operations:
Net interest income	$	29,992		$	24,269		$	5,723
Provision for loan and lease losses		400			2,100			(1,700	)
Net interest income after provision
for loan and lease losses		29,592			22,169			7,423
Wealth management fee income		5,790			4,436			1,354
Other income		3,041			3,099			(58	)
Operating expense		21,961			18,166			3,795
Income before income tax expense		16,462			11,538			4,924
Income tax expense		6,256			4,422			1,834
Net income	$	10,206		$	7,116		$	3,090
Total revenue (Net interest income plus wealth
management fee income and other income)	$	38,823		$	31,804		$	7,019
Diluted earnings per share	$	0.56		$	0.43		$	0.13
Diluted average shares outstanding		18,123,268			16,673,596			1,449,672
Return on average assets annualized (ROAA)		0.97	%		0.77	%		0.20	%
Return on average equity
annualized (ROAE)		11.09			9.44			1.65

The following table presents certain key aspects of our performance for the nine months ended September 30, 2017 and 2016.

	Nine Months Ended September 30,						Change
(Dollars in thousands, except share and per share data)	2017			2016			2017 vs 2016
Results of Operations:
Net interest income	$	82,555		$	71,855		$	10,700
Provision for loan and lease losses		4,200			6,000			(1,800	)
Net interest income after provision
for loan and lease losses		78,355			65,855			12,500
Wealth management fee income		15,694			13,630			2,064
Other income		8,327			7,616			711
Operating expense		61,360			56,147			5,213
Income before income tax expense		41,016			30,954			10,062
Income tax expense		14,888			11,785			3,103
Net income	$	26,128		$	19,169		$	6,959
Total revenue (Net interest income plus wealth
management fee income and other income)	$	106,576		$	93,101		$	13,475
Diluted earnings per share	$	1.47		$	1.17		$	0.30
Diluted average shares outstanding		17,753,731			16,347,255			1,406,476
Return on average assets annualized (ROAA)		0.86	%		0.71	%		0.15	%
Return on average equity
annualized (ROAE)		9.94			8.79			1.15

	September 30,			December 31,			Change
	2017			2016			2017 vs 2016
Selected Balance Sheet Ratios:
Total capital (Tier I + II) to risk-weighted assets		13.28	%		13.25	%		.03	%
Tier I leverage ratio		8.75			8.35			.40
Loans to deposits		100.12			97.08			3.04
Allowance for loan and lease losses to total
loans		0.98			0.97			0.01
Allowance for loan and lease losses to
nonperforming loans		233.72			285.94			(52.22	)
Nonperforming loans to total loans		0.42			0.34			0.08

For the third quarter of 2017, the Company recorded net income of $10.2 million compared to $7.1 million for the same quarter of 2016. For the three months ended September 30, 2017 and 2016, diluted earnings per share were $0.56 and $0.43, respectively. Annualized return on average assets was 0.97 percent and annualized return on average equity was 11.09 percent for the third quarter of 2017, compared to 0.77 percent and 9.44 percent, respectively, for the same quarter of 2016.

The third quarter of 2017, when compared to the third quarter of 2016, reflected: increased net interest income (partially due to $1.2 million of recognition of deferred fees and prepayment income on two commercial loans); greater wealth management fee income (partially due to two months of fee income related to the recently acquired MCM); and a reduced provision for loan and lease losses (due to low charge-off levels and $79 million of loan sales). These positive effects were partially offset by higher operating expenses in the 2017 third quarter (partially due to two months of expenses related to MCM, as well as a full quarter of expenses related to Peapack Capital, the Bank’s Equipment Finance subsidiary, which began operations in May 2017).

For the nine months ended September 30, 2017, the Company recorded net income of $26.1 million compared to $19.2 million for the same period of 2016. Diluted earnings per common share were $1.47 and $1.17 for the first nine months of 2017 and 2016, respectively. Annualized return on average assets was 0.86 percent and annualized return on average common equity was 9.94 percent for the first nine months of 2017, compared to 0.71 percent and 8.79 percent, respectively, for the nine months ending September 30, 2016.

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, 2016 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, 2016 under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Off-Balance Sheet Arrangements.”

EARNINGS ANALYSIS

NET INTEREST INCOME/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 to individuals and businesses, 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 yields earned on earning assets and the rates paid on interest-bearing liabilities (“net interest spread”) and the relative amounts of earning assets and interest-bearing liabilities. The Company’s net interest spread is 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 summarizes the Company’s net interest income and related spread and margin, on a fully tax-equivalent basis, for the periods indicated:

	Three Months Ended September 30,
(Dollars in thousands)	2017			2016
Net interest income	$	30,277		$	24,510
Interest rate spread		2.76	%		2.59	%
Net interest margin		2.95			2.74

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	Nine Months Ended September 30,
(Dollars in thousands)	2017			2016
Net interest income	$	83,348		$	72,534
Interest rate spread		2.63	%		2.64	%
Net interest margin		2.81			2.78

Net interest income, on a fully tax-equivalent basis for the three months ended September 30, 2017 grew $5.8 million, or 24 percent, from the three months ended September 30, 2016. Net interest income on a fully tax equivalent basis for the nine months ended September 30, 2017 increased $10.8 million, or 15 percent, when compared to the same period in 2016. The growth in net interest income for both the three and nine month periods was due to increases in the average balance and yield on the Company’s interest-earning assets, especially commercial and industrial (C&I) loans, which typically have higher yields. This increase was partially offset by increases in interest-bearing liabilities and the Company’s cost of funds. Net interest income and margin for the third quarter of 2017 benefitted from $1.2 million of recognition of deferred fees and prepayment premiums on two commercial loans and from loan growth during 2016 and into 2017, as well as benefitting slightly from the recent Federal Reserve rate hikes. The September 2017 quarter also included approximately $1.2 million of prepayment premiums received on the prepayment of certain multifamily loans, reflecting an increase from $507 thousand for the September 2016 quarter.

50 

The following table summarizes the Company’s loans closed for the periods indicated:

	For the Three Months Ended
	September 30,		September 30,
(In thousands)	2017		2016
Residential mortgage loans originated for portfolio	$	22,322	$	43,284
Residential mortgage loans originated for sale		10,596		25,128
Total residential mortgage loans		32,918		68,412
Commercial real estate loans		24,870		56,799
Multifamily properties		85,488		74,450
Commercial and industrial (C&I) loans (A) (B)		131,321		59,698
Small business association		4,560		3,025
Wealth Lines of Credit (A)		15,200		1,200
Total commercial loans		261,439		195,172
Installment loans		1,967		1,591
Home equity lines of credit (A)		6,879		7,064
Total loans closed	$	303,203	$	272,239

(A)	Includes loans and lines of credit that closed in the period, but were not necessarily funded.
(B)	Includes equipment lease finance.

	For the Nine Months Ended
	September 30,		September 30,
(In thousands)	2017		2016
Residential mortgage loans originated for portfolio	$	141,986	$	93,543
Residential mortgage loans originated for sale		20,202		53,412
Total residential mortgage loans		162,188		146,955
Commercial real estate loans		105,017		102,692
Multifamily properties		211,437		333,194
Commercial and industrial (C&I) loans (A) (B)		417,927		188,495
Small business association		10,160		6,365
Wealth Lines of Credit (A)		37,305		3,785
Total commercial loans		781,846		634,531
Installment loans		6,188		3,154
Home equity lines of credit (A)		19,296		25,103
Total loans closed	$	969,518	$	809,743

(A) Includes loans and lines of credit that closed in the period, but were not necessarily funded.

(B) Includes equipment lease finance.

The Company has managed its balance sheet such that multifamily loans decline as a percentage of the overall loan portfolio and C&I loans become a larger percentage of the overall loan portfolio.

51 

At September 30, 2017, December 31, 2016 and September 30, 2016, the Bank had a concentration in commercial real estate (“CRE”) loans as defined by applicable regulatory guidance.

The following table presents such concentration levels for the following periods:

	September 30,			December 31,			September 30,
	2017			2016			2016
Multifamily mortgage loans as a percent of
total regulatory capital of the Bank		329	%		372	%		432	%
Non-owner occupied commercial real estate loans
as a percent of total regulatory capital of the Bank		200			192			178
Total CRE concentration		529	%		564	%		610	%

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.

To supplement its C&I lending programs, the Company announced that during April 2017 it had hired a team of experienced bankers to focus on equipment financing. The Company generally expects that revenue and profitability related to this new group will lag expenses by several quarters.

52 

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

 Average Balance Sheet

 Unaudited

 Three Months Ended

	September 30, 2017									September 30, 2016
	Average			Income/						Average			Income/
(Dollars in thousands)	Balance			Expense			Yield			Balance			Expense			Yield
ASSETS:
Interest-earning assets:
Investments:
Taxable (1)	$	302,669		$	1,564			2.07	%	$	193,902		$	976			2.01	%
Tax-exempt (1) (2)		27,099			194			2.86			27,516			212			3.08
Loans (2) (3):
Residential mortgages		612,904			4,934			3.22			486,909			3,983			3.27
Commercial mortgages		2,120,360			19,879			3.75			2,048,877			17,977			3.51
Commercial		795,063			9,654			4.86			573,211			5,826			4.07
Commercial construction		—			—			—			454			5			4.41
Installment		77,616			611			3.15			67,175			443			2.64
Home equity		67,251			653			3.88			62,560			519			3.32
Other		563			11			7.82			465			13			11.18
Total loans		3,673,757			35,742			3.89			3,239,651			28,766			3.55
Federal funds sold		101			—			0.25			101			—			0.25
Interest-earning deposits		103,103			276			1.07			111,204			131			0.47
Total interest-earning assets		4,106,729			37,776			3.68	%		3,572,374			30,085			3.37	%
Noninterest-earning assets:
Cash and due from banks		4,732									17,292
Allowance for loan and lease losses		(36,547	)								(30,022	)
Premises and equipment		29,996									29,460
Other assets		86,493									88,721
Total noninterest-earning assets		84,674									105,451
Total assets	$	4,191,403								$	3,677,825
LIABILITIES:
Interest-bearing deposits:
Checking	$	1,128,112		$	1,487			0.53	%	$	924,970		$	645			0.28	%
Money markets		1,084,009			1,580			0.58			915,139			737			0.32
Savings		120,893			16			0.05			119,986			17			0.06
Certificates of deposit - retail		502,637			1,864			1.48			466,967			1,615			1.38
Subtotal interest-bearing deposits		2,835,651			4,947			0.70			2,427,062			3,014			0.50
Interest-bearing demand - brokered		180,000			737			1.64			200,000			762			1.52
Certificates of deposit - brokered		87,095			481			2.21			93,674			501			2.14
Total interest-bearing deposits		3,102,746			6,165			0.79			2,720,736			4,277			0.63
FHLB advances and borrowings		98,114			439			1.79			87,258			380			1.74
Capital lease obligation		9,303			112			4.82			9,874			119			4.82
Subordinated debt		48,841			783			6.41			48,711			799			6.56
Total interest-bearing liabilities		3,259,004			7,499			0.92	%		2,866,579			5,575			0.78	%
Noninterest-bearing liabilities:
Demand deposits		538,484									479,659
Accrued expenses and
other liabilities		25,807									30,070
Total noninterest-bearing liabilities		564,291									509,729
Shareholders’ equity		368,108									301,517
Total liabilities and
shareholders’ equity	$	4,191,403								$	3,677,825
Net interest income
(tax-equivalent basis)					30,277									24,510
Net interest spread								2.76	%								2.59	%
Net interest margin (4)								2.95	%								2.74	%
Tax equivalent adjustment					(285	)								(241	)
Net interest income				$	29,992								$	24,269

(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.

53 

  Average Balance Sheet

  Unaudited

  Nine Months Ended

	September 30, 2017									September 30, 2016
	Average			Income/						Average			Income/
(Dollars in thousands)	Balance			Expense			Yield			Balance			Expense			Yield
ASSETS:
Interest-earning assets:
Investments:
Taxable (1)	$	295,348		$	4,545			2.05	%	$	198,080		$	2,816			1.90	%
Tax-exempt (1) (2)		26,453			583			2.94			26,234			623			3.17
Loans (2) (3):
Residential mortgages		582,785			14,145			3.24			475,607			11,728			3.29
Commercial mortgages		2,080,740			56,265			3.61			2,018,820			52,977			3.50
Commercial		719,354			23,301			4.32			550,770			16,319			3.95
Commercial construction		128			4			4.17			1,045			32			4.08
Installment		72,829			1,666			3.05			58,445			1,198			2.73
Home equity		67,061			1,822			3.62			57,938			1,434			3.30
Other		520			34			8.72			471			35			9.91
Total loans		3,523,417			97,237			3.68			3,163,096			83,723			3.53
Federal funds sold		101			—			0.25			101			—			0.24
Interest-earning deposits		112,221			716			0.85			89,536			294			0.44
Total interest-earning assets		3,957,540			103,081			3.47	%		3,477,047			87,456			3.35	%
Noninterest-earning assets:
Cash and due from banks		10,297									16,342
Allowance for loan and lease losses		(34,655	)								(28,227	)
Premises and equipment		30,139									29,637
Other assets		78,938									86,960
Total noninterest-earning assets		84,719									104,712
Total assets	$	4,042,259								$	3,581,759
LIABILITIES:
Interest-bearing deposits:
Checking	$	1,078,015		$	3,448			0.43	%	$	904,767		$	1,823			0.27	%
Money markets		1,067,942			3,718			0.46			851,370			1,912			0.30
Savings		120,939			49			0.05			118,884			50			0.06
Certificates of deposit - retail		469,867			5,084			1.44			453,451			4,649			1.37
Subtotal interest-bearing deposits		2,736,763			12,299			0.60			2,328,472			8,434			0.48
Interest-bearing demand - brokered		180,000			2,183			1.62			200,000			2,263			1.51
Certificates of deposit - brokered		91,158			1,465			2.14			93,663			1,494			2.13
Total interest-bearing deposits		3,007,921			15,947			0.71			2,622,135			12,191			0.62
FHLB advances and borrowings		78,704			1,096			1.86			154,819			1,432			1.23
Capital lease obligation		9,456			341			4.81			10,007			361			4.81
Subordinated debt		48,809			2,349			6.42			19,270			938			6.49
Total interest-bearing liabilities		3,144,890			19,733			0.84	%		2,806,231			14,922			0.71	%
Noninterest-bearing liabilities:
Demand deposits		524,805									459,907
Accrued expenses and
other liabilities		22,262									24,958
Total noninterest-bearing liabilities		547,067									484,865
Shareholders’ equity		350,302									290,663
Total liabilities and
shareholders’ equity	$	4,042,259								$	3,581,759
Net interest income
(tax-equivalent basis)					83,348									72,534
Net interest spread								2.63	%								2.64	%
Net interest margin (4)								2.81	%								2.78	%
Tax equivalent adjustment					(793	)								(679	)
Net interest income				$	82,555								$	71,855

(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.

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

54 

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

	Three Months Ended September 30, 2017
	Difference due to						Change In
	Change In:						Income/
(In Thousands):	Volume			Rate			Expense
ASSETS:
Investments	$	520		$	50		$	570
Loans		4,319			2,657			6,976
Federal funds sold		—			—			—
Interest-earning deposits		(11	)		156			145
Total interest income	$	4,828		$	2,863		$	7,691
LIABILITIES:
Interest-bearing checking	$	69		$	773		$	842
Money market		218			625			843
Savings		—			(1	)		(1	)
Certificates of deposit - retail		134			115			249
Certificates of deposit - brokered		(85	)		60			(25	)
Interest bearing demand brokered		(36	)		16			(20	)
Borrowed funds		(12	)		71			59
Capital lease obligation		(7	)		—			(7	)
Subordinated debt		1			(17	)		(16	)
Total interest expense	$	282		$	1,642		$	1,924
Net interest income	$	4,546		$	1,221		$	5,767

	Nine Months Ended September 30, 2017
	Difference due to						Change In
	Change In:						Income/
(In Thousands):	Volume			Rate			Expense
ASSETS:
Investments	$	1,353		$	336		$	1,689
Loans		10,101			3,413			13,514
Federal funds sold		—			—			—
Interest-earning deposits		90			332			422
Total interest income	$	11,544		$	4,081		$	15,625
LIABILITIES:
Interest-bearing checking	$	128		$	1,497		$	1,625
Money market		729			1,077			1,806
Savings		8			(9	)		(1	)
Certificates of deposit - retail		181			254			435
Certificates of deposit - brokered		(237	)		157			(80	)
Interest bearing demand brokered		(42	)		13			(29	)
Borrowed funds		(691	)		355			(336	)
Capital lease obligation		(20	)		—			(20	)
Subordinated debt		1,421			(10	)		1,411
Total interest expense	$	1,477		$	3,334		$	4,811
Net interest income	$	10,067		$	747		$	10,814

Interest income on interest-earning assets, on a fully tax-equivalent basis, totaled $37.8 million for the third quarter of 2017 compared to $30.1 million for the same quarter of 2016, reflecting an increase of $7.7 million, or 26 percent. Average interest-earning assets totaled $4.11 billion for the third quarter of 2017, an increase of $534.4 million, or 15 percent, from the same period of 2016. The average commercial loan portfolio increased $221.9 million, or 39 percent, from the third quarter of 2016, to $795.1 million for the third quarter of 2017. The increase in this portfolio was attributed to the addition of seasoned banking professionals over the course of 2016; 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 private banking offices. Additionally, the average commercial mortgage portfolio (which includes multifamily mortgage loans) increased $71.5 million, or 3 percent, to $2.12 billion for the third quarter of 2017 when compared to the same period in 2016. While the Company has managed its multifamily portfolio to limit growth, it has been focused on the origination of strong commercial real estate credits. In addition, the Company has continued its focus on relationship based residential mortgage lending, and that portfolio has grown from an average balance of $486.9 million in the September 2016 quarter to an average balance of $612.9 million in the September 2017 quarter. Average investments totaled $329.8 million for the third quarter of 2017 compared to $221.4 million for the same 2016 quarter reflecting an increase of $108.4 million, or 49 percent. This increase coincides with the Company’s desire to increase liquid portfolios.

55 

For the quarters ended September 30, 2017 and 2016, the average rates earned on interest-earning assets were 3.68 percent and 3.37 percent, respectively, an increase of 31 basis points. The increase in the overall yield was principally due to the benefit from the increased market rates on adjustable rate assets in the 2017 period partially offset by the maintenance of higher liquidity (investment securities and interest earning deposits) in the 2017 period when compared to 2016, which carry lower rates of interest.

For the third quarter of 2017, total interest-bearing deposits averaged $3.10 billion, an increase of $382.0 million, or 14 percent, from the average balance for the same period of 2016. The growth in customer deposits (excluding brokered CDs and brokered interest-bearing demand, but including reciprocal funds discussed below) has come from the addition of seasoned banking professionals in 2016 and 2017; focus on providing high-touch client service; and a full array of treasury management products that support core deposit growth.  

Average rates paid on total interest-bearing deposits were 79 basis points and 63 basis points for the third quarters of 2017 and 2016, respectively, an increase of 16 basis points. The increase in the average rate paid on deposits was principally due to growth in interest-bearing money market, retail certificates of deposit and checking accounts at higher rates, commensurate with higher market rates and to ensure generation of new deposits in volumes sufficient to appropriately fund asset growth.

For the third quarters of 2017 and 2016, average borrowings totaled $98.1 million and $87.3 million, respectively, an increase of $10.9 million during the third quarter of 2017 when compared to the same period of 2016. The increase was principally due to funding of loans offset by scheduled maturities of FHLB advances.

The Company is a participant in the Reich & Tang Demand Deposit Marketplace (“DDM”) program and Promontory. 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. The DDM program is considered to be a source of brokered deposits for bank regulatory purposes. However, the Company considers these reciprocal deposit balances to be in-market customer deposits as distinguished from traditional out-of-market brokered deposits. Such reciprocal deposit balances are included in the Company’s interest-bearing checking balances. Reciprocal balances averaged $386.9 million for the quarter ended September 30, 2017 and $411.9 million for the quarter ended September 30, 2016.

For the third quarter of 2017 total interest-bearing demand – brokered deposits decreased by $20.0 million when compared to the same quarter of 2016. This decrease reduced such brokered deposits to the minimum level required to support the Company’s existing $180.0 million of interest rate swaps, transacted previously as part of the Company’s interest rate risk management program.

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 first five years, and thereafter at an adjustable rate and until maturity in June 2026 or earlier redemption. For the third quarter of 2017, the subordinated debt balance averaged $48.8 million compared to $48.7 million from the same period in 2016.

56 

Interest income on interest-earning assets, on a fully tax-equivalent basis increased by $15.6 million, or 18 percent, for the first nine months of 2017 compared to the same period in 2016. For the nine months ended September 30, 2017, the average balance of interest-earning assets increased $480.5 million from $3.48 billion for the same period in 2016. For the nine months ended September 30, 2017 the average commercial portfolio increased $168.6 million, or 31 percent, from the same period in 2016. This increase was due to the addition of highly regarded bankers with industry and capital markets expertise in 2016 and in the first nine months of 2017. For the nine months ended September 30, 2017 the average commercial mortgage portfolio (which includes multifamily mortgage loans) increased $61.9 million to $2.08 billion from the same period in 2016. While the Company has managed its multifamily portfolio to limit growth, it has been focused on the origination of strong commercial real estate credits. In addition, the Company has continued its focus on relationship based residential mortgage lending, and that portfolio has grown $107.2 million to an average balance of $582.8 million for the nine months ended September 30, 2017 when compared to an average balance of $475.6 million from the same period in 2016.

For the nine months ended September 30, 2017 and 2016, the average rates earned on interest-earning assets was 3.47 percent and 3.35 percent, respectively, an increase of 12 basis points. The increase in average rates on loans was due to an increase in market rates during the first nine months of 2017. This increase was partially offset by the maintenance of higher liquidity (investment securities and interest-earning deposits) for the first nine months of 2017 when compared to the comparable 2016 period, which carry lower rates of interest.

For the nine months ended September 30, 2017 total interest-bearing deposits averaged $3.01 billion, increasing $385.8 million, or 15 percent, from the average balance for the same 2016 period. The growth in customer deposits (excluding brokered CDs and brokered interest-bearing demand, but including reciprocal funds) was $408.3 million for the first nine months of 2017 when compared to the same period in 2016. This growth has come from the addition of seasoned banking professionals in 2016 and continued into the first nine months of 2017; an intense focus on providing high-touch client service; and a full array of treasury management products that support core deposit growth.  Reciprocal deposit balances are included in the Company’s interest-bearing checking balances. Reciprocal balances averaged $393.2 million for the nine months ended September 30, 2017 and $421.4 million for the same 2016 period.

Average rates paid on interest-bearing deposits for the nine months ended September 30, 2017 were 71 basis points compared to 62 basis points for the same period in 2016, reflecting an increase of 9 basis points. The increase in the average rate paid on deposits was principally due to competitive pressures in attracting new deposits in volumes sufficient to appropriately fund asset growth.

Average borrowings decreased by $76.1 million to $78.7 million for the nine months ended September 30, 2017 when compared to the same 2016 period. The decrease was due to maturities of existing FHLB borrowings as significant deposit growth was sufficient to fund the Company’s loan growth.

As previously stated 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 first five years, and thereafter at an adjustable rate and until maturity in June 2026 or earlier redemption. For the first nine months of 2017, the subordinated debt balance averaged $48.8 million compared to $19.3 million from the same period in 2016.

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 management including liquidity and interest rate risk management strategies, and in response to changes in interest rates, liquidity needs, prepayment speeds and/or other factors. 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.

57 

At September 30, 2017, the Company had investment securities available for sale with a fair value of $315.1 million compared with $305.4 million at December 31, 2016. Net unrealized losses (net of income tax) of $511 thousand and $1.1 million were included in shareholders’ equity at September 30, 2017 and December 31, 2016, respectively.

The carrying value of investment securities available for sale as of September 30, 2017 and December 31, 2016 are shown below:

	September 30,		December 31,
(In thousands)	2017		2016
U.S. treasury and U.S. government-
sponsored agencies	$	36,475	$	21,517
Mortgage-backed securities-residential
(principally U.S. government-sponsored
entities)		237,381		237,617
SBA pool securities		5,936		6,713
State and political subdivisions		24,510		28,993
Corporate bond		3,094		3,113
Single-issuer trust preferred security		2,857		2,610
CRA investment fund		4,859		4,825
Total	$	315,112	$	305,388

The following table presents the contractual maturities and yields of debt securities available for sale, stated at fair value, as of September 30, 2017:

				After 1			After 5
				But			But			After
	Within			Within			Within			10
(Dollars in thousands)	1 Year			5 Years			10 Years			Years			Total
U.S. treasury and U.S. government-	$	—		$	9,968		$	26,507		$	—		$	36,475
sponsored agencies		—	%		1.25	%		2.20	%		—	%		1.94	%
Mortgage-backed securities-	$	234		$	16,253		$	19,233		$	201,661		$	237,381
residential (1)		3.89	%		2.08	%		1.86	%		2.04	%		2.03	%
SBA pool securities	$	—		$	—		$	—		$	5,936		$	5,936
		—	%		—	%		—	%		1.46	%		1.46	%
State and political subdivisions (2)	$	7,501		$	10,347		$	3,271		$	3,391		$	24,510
		1.88	%		3.09	%		2.89	%		3.02	%		2.68	%
Corporate bond	$	—		$	—		$	3,094		$	—		$	3,094
		—	%		—	%		5.25	%		—	%		5.25	%
Single-issuer trust preferred security (1)	$	—		$	—		$	2,857		$	—		$	2,857
		—	%		—	%		2.11	%		—	%		2.11	%
Total	$	7,735		$	36,568		$	54,962		$	210,988		$	310,253
		1.94	%		2.14	%		2.41	%		2.04	%		2.11	%

(1) Shown using stated final maturity.

(2) Yields presented on a fully tax-equivalent basis.

58 

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

	Three Months Ended September 30,				Change
(In thousands)	2017		2016		2017 vs 2016
Service charges and fees	$	816	$	812	$	4
Gain on sale of loans (mortgage banking)		141		383		(242	)
Gain on sale of loans, at lower of
cost or fair value		34		256		(222	)
Bank owned life insurance		343		340		3
Fee income related to loan level,
back-to-back swaps		888		670		218
Gain on sale of SBA loans		493		243		250
Securities gains		—		—		—
Other income		326		395		(69	)
Total other income	$	3,041	$	3,099	$	(58	)

	Nine Months Ended September 30,				Change
(In thousands)	2017		2016		2017 vs 2016
Service charges and fees	$	2,401	$	2,437	$	(36	)
Gain on sale of loans (mortgage banking)		279		813		(534	)
Gain on sale of loans, at lower of
cost or fair value		34		880		(846	)
Bank owned life insurance		1,015		1,027		(11	)
Fee income related to loan level,
back-to-back swaps		2,635		764		1,871
Gain on sale of SBA loans		790		502		288
Securities gains		—		119		(119	)
Other income		1,172		1,074		98
Total other income	$	8,328	$	7,616	$	712

For the quarter ended September 30, 2017, income from the sale of newly originated residential mortgage loans was $141 thousand compared to $383 thousand for the same period in 2016. For the nine months ended September 30, 2017 and 2016 income from the sale of newly originated residential mortgage loans was $279 thousand and $813 thousand, respectively. These decreases were a result of lower volume of residential mortgage loans originated for sale in the three and nine months ended September 30, 2017 periods compared to the three and nine months ended September 30, 2016, as a result of reduced refinance activity due principally to the higher market rate environment.

There were no securities gains in the three or nine months ended September 30, 2017 compared to none and $119 thousand for the three and nine months ended September 30, 2016, respectively. Sales of securities have been generally employed to benefit interest rate risk, prepayment risk, and/or liquidity risk. Given the shorter duration of our investment portfolio and the interest rate environment, such sales will continue to be a very small component of the Company’s operations.

Gains on the sale of loans held for sale at the lower of cost or fair value were $34 thousand for both the three and nine month periods ended September 30, 2017 as compared to $256 thousand and $880 thousand for the same periods in 2016. During the first quarter of 2016, the Company began selling whole multifamily loans in addition to multifamily loan participations. The Company manages its balance sheet such that multifamily loans decline as a percentage of the overall loan portfolio while commercial loans become a larger percentage of the overall loan portfolio. In addition to multifamily loan sales, the Company sold residential mortgages from its portfolio during the third quarter of 2017. The residential loan sales assisted in interest-rate risk management as the Company reduced longer term assets. Overall, the reduced level of multifamily loan sales during the first nine months of 2017 was due to lower market demand as a result of the regulatory environment surrounding commercial real estate lending.

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The third quarter of 2017 included $493 thousand of income related to the Company’s SBA lending and sale program compared to $243 thousand in the same quarter in 2016. The nine months ended September 30, 2017 included $790 thousand of income related to the Company’s SBA lending and sale program compared to the $502 thousand for the same period in 2016. The SBA program was fully implemented during the quarter ended March 31, 2016 and activity has grown since that period. This program is part of the Company’s normal ongoing operations.

The third quarter of 2017 included $888 thousand of loan level, back-to-back swap income compared to $670 thousand in the same quarter of 2016. The nine months ended September 30, 2017 included $2.6 million of loan level, back-to-back swap income compared to $764 thousand for the same period in 2016. The increase was due to several factors, including increased customer awareness of the possibility of rising market interest rates, as well as increased loan opportunities for the Company. The program utilizes mirror interest rate swaps, one directly with the customer and one directly with a well-established counterparty. This enables a customer to benefit from a fixed rate loan, while the Company records a floating rate loan. The program provides enhanced interest rate risk management, as well as the potential for fee income for the Company.

Other income was $326 thousand for the quarter ended September 30, 2017 quarter compared to $395 thousand for the same quarter in 2016. For the nine months ended September 30, 2017 other income was $1.2 million compared to $1.1 million for the same 2016 period. The nine months ended September 30, 2017 included increases in letter of credit fees and unused line of credit fees associated with the commercial lending business when compared to the same 2016 period. The quarter ended September 30, 2017 had decreases in fees associated with loans.

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

	Three Months Ended September 30,				Change
(In thousands)	2017		2016		2017 vs 2016
Compensation and employee benefits	$	13,996	$	11,515	$	2,481
Premises and equipment		2,945		2,736		209
FDIC assessment		583		814		(231	)
Other Operating Expenses:
Wealth management division
other expense		533		490		43
Professional and legal fees		1,452		801		651
Loan expense		108		141		(33	)
Telephone		247		231		16
Advertising		347		141		206
Postage		88		77		11
Other		1,662		1,220		442
Total operating expenses	$	21,961	$	18,166	$	3,795

	Nine Months Ended September 30,				Change
(In thousands)	2017		2016		2017 vs 2016
Compensation and employee benefits	$	38,660	$	33,523	$	5,137
Premises and equipment		8,794		8,342		452
FDIC assessment		1,871		3,954		(2,083	)
Other Operating Expenses:
Wealth management division
other expense		1,865		1,593		272
Professional and legal fees		3,100		2,544		556
Loan expense		366		374		(8	)
Telephone		747		704		43
Advertising		865		511		354
Postage		283		246		37
Other		4,809		4,356		453
Total operating expenses	$	61,360	$	56,147	$	5,213

The Company’s total operating expenses were $22.0 million for the quarter ended September 30, 2017 compared to $18.2 million in the same 2016 quarter, reflecting a net increase of $3.8 million, or 21 percent. Total operating expense grew by $5.2 million to $61.4 million for the nine months ended September 30, 2017 when compared to the same period in 2016, reflecting an increase of 9 percent.

Compensation and benefits expense increased to $14.0 million in the third quarter of 2017 from $11.5 million in the same period in 2016, an increase of $2.5 million, or 22 percent. For the nine months ended September 30, 2017 compensation and benefits expense increased to $38.7 million from $33.5 million for the same period in 2016. Both period increases were due to strategic hiring, normal salary increases and increased bonus/incentive accruals associated with the Company’s growth. In addition, the Equipment Finance Team joined the Company during the second quarter of 2017 and the Company completed the acquisition of MCM in August 2017 further increasing compensation and employee benefits.

For the three months ended September 30, 2017, premises and equipment expense was $2.9 million compared to $2.7 million for the three months ended September 30, 2016, an increase of $209 thousand. For the nine months ended September 30, 2017, premises and equipment expense was $8.8 million compared to $8.3 million for the nine months ended September 30, 2016, an increase of $452 thousand. The increase over the same periods in 2016 was due to the Company’s growth as well as upgrades at the Company’s headquarters.

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For the three and nine months ended September 30, 2017 professional and legal fees increased $651 thousand and $556 thousand, respectively from the same 2016 periods. This increase was primarily due the wealth acquisition costs associated with the MCM acquisition.

For the three months ended September 30, 2017, FDIC insurance expense was $583 thousand compared to $814 thousand for the three months ended September 30, 2016, a decrease of $231 thousand. For the nine months ended September 30, 2017, FDIC insurance expense decreased $2.1 million to $1.9 million when compared to the same period in 2016. Beginning July 1, 2016, the FDIC assessment system was revised. Revisions for “small institutions” (under $10 billion in assets) resulted in, among other things, the elimination of risk categories and utilization of a financial ratios method to determine assessment rates. The changes significantly reduced the Company’s assessment rate. The three and nine months ended September 30, 2017 included increased advertising and marketing expense related to various target marketing campaigns, when compared to the 2016 periods.

PRIVATE WEALTH MANAGEMENT DIVISION: This division has served in the roles of executor and trustee while providing investment management, custodial, tax, retirement and financial services to its growing client base. Officers from the Private Wealth Management Division provide trust and investment services at the Bank’s corporate headquarters in Bedminster, at private banking locations in Bedminster, Morristown, Princeton and Teaneck, New Jersey and at the Bank’s subsidiaries, PGB Trust & Investments of Delaware, in Greenville, Delaware and MCM, in Gladstone, New Jersey.

The following table presents certain key aspects of the Bank’s Private Wealth Management Division performance for the quarters ended September 30, 2017 and 2016.

	For the
	Three Months Ended September 30,				Change
(In thousands)	2017		2016		2017 v 2016
Total fee income	$	5,790	$	4,436	$	1,354
Compensation and benefits (included
in Operating Expenses above)		3,004		2,377		627
Other operating expense (included)
in Operating Expenses above)		2,179		1,479		700

	At or For
	Nine Months Ended September 30,				Change
(In thousands)	2017		2016		2017 v 2016
Total fee income	$	15,694	$	13,630	$	2,064
Compensation and benefits (included
in Operating Expenses above)		7,868		6,779		1,089
Other operating expense (included)
in Operating Expenses above)		6,250		4,994		1,256
Assets under administration
(market value in billions)	$	4.8	$	3.5

The market value of the assets under administration (“AUA”) of the Private Wealth Management Division was $4.8 billion at September 30, 2017, reflecting an increase of 37 percent from $3.5 billion at September 30, 2016.

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In the September 2017 quarter, the Private Wealth Management Division generated $5.8 million in fee income compared to $4.4 million for the September 2016 quarter, reflecting a 31 percent increase. For the nine months ended September 30, 2017, the Private Wealth Management Division generated $15.7 million in fee income compared to $13.6 million for the same period in 2016, reflecting a 15 percent increase. The growth in fee income and AUA was due to the combination of the acquisition of MCM in August 2017, as well as new business and market appreciation. This was partially offset by normal levels of disbursements and outflows.

The Company continues to incorporate wealth management into conversations it has with the Company’s clients, across all business lines. The Company has expanded its wealth management team and will continue to grow its team and expand its products, services, and advice delivered to clients.

Operating expenses relative to the Private Wealth Management Division reflected increases due to the MCM acquisition, overall growth in the business, new hires and select third party expenditures incurred in the 2017 periods. Generally, revenue and profitability related to the new personnel will lag expenses by several quarters.

The Private Wealth Management Division currently generates adequate revenue to support the salaries, benefits and other expenses of the Division; however, Management believes that the Bank generates adequate liquidity to support the expenses of the 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.

The following table sets forth asset quality data on the dates indicated (dollars in thousands):

	As of
	September 30,			June 30,			March 31,			December 31,			September 30,
	2017			2017			2017			2016			2016
Loans past due over 90 days
and still accruing	$	—		$	—		$	—		$	—		$	—
Nonaccrual loans		15,367			15,643			11,494			11,264			10,840
Other real estate owned		137			373			671			534			534
Total nonperforming assets	$	15,504		$	16,016		$	12,165		$	11,798		$	11,374
Performing TDRs	$	9,658		$	9,725		$	15,030		$	17,784		$	18,078
Loans past due 30 through 89
days and still accruing	$	589		$	1,232		$	622		$	1,356		$	8,238
Classified loans	$	44,170		$	43,608		$	43,002		$	45,798		$	49,627
Impaired loans	$	25,046		$	25,294		$	26,546		$	29,071		$	28,951
Nonperforming loans as a % of
total loans (1)		0.42	%		0.43	%		0.33	%		0.34	%		0.34	%
Nonperforming assets as a % of
total assets (1)		0.37	%		0.38	%		0.31	%		0.30	%		0.30	%
Nonperforming assets as a % of
total loans plus other real
estate owned (1)		0.42	%		0.44	%		0.35	%		0.36	%		0.35	%

(1) Nonperforming loans/assets do not include performing TDRs.

The Company does not hold and has not made or invested in subprime loans or “Alt-A” type mortgages.

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PROVISION FOR LOAN AND LEASE LOSSES: The provision for loan and lease losses was $400 thousand and $2.1 million for the third quarters of 2017 and 2016, respectively. For the nine months ended September 30, 2017 and 2016 the provision for loan and lease losses was $4.2 million and $6.0 million, respectively. The amount of the loan loss provision and the level of the allowance for loan and lease losses are based upon several factors including Management’s evaluation of probable losses inherent in the portfolio, after consideration of appraised collateral values, financial condition and past credit history of the borrowers, as well as prevailing economic conditions. Commercial credits generally carry a higher risk profile compared to some of the other credits, which is reflected in Management’s determination of the proper level of the allowance for loan and lease losses.

The decrease in the provision for loan and lease losses to $400 thousand in the third quarter of 2017 was principally due to slower loan growth as well as loan sales of $78.8 million. The Company also shifted some of its growth to equipment financing which has a lower general reserve allocation than commercial mortgages and C&I loans.

The overall allowance for loan and lease losses was $35.9 million as of September 30, 2017, compared to $32.2 million at December 31, 2016. As a percentage of loans, the allowance for loan and lease losses was 0.98 percent as of September 30, 2017, and 0.97 percent as of December 31, 2016. The specific reserves on impaired loans were $831 thousand at September 30, 2017 compared to $824 thousand as of December 31, 2016. Total impaired loans were $25.0 million and $29.1 million as of September 30, 2017 and December 31, 2016, respectively. The general component of the allowance increased from $31.4 million at December 31, 2016 to $35.1 million at September 30, 2017, due principally to loan growth.

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, 30,
(In thousands)	2017			2017			2017			2016			2016
Allowance for loan and lease losses:
Beginning of period	$	35,751		$	33,610		$	32,208		$	30,616		$	29,219
Provision for loan and lease losses		400			2,200			1,600			1,500			2,100
Charge-offs, net		(236	)		(59	)		(198	)		92			(703	)
End of period	$	35,915		$	35,751		$	33,610		$	32,208		$	30,616
Allowance for loan and lease losses as a % of total loans		0.98	%		0.98	%		0.98	%		0.97	%		0.95	%
Allowance for loan and lease losses as a % of non-performing loans		233.72	%		228.54	%		292.41	%		285.94	%		282.44	%

INCOME TAXES: For the third quarter of 2017 and 2016 income tax expense as a percentage of pre-tax income was 38.0 percent and 38.3 percent, respectively. For the nine months ended September 30, 2017 and 2016 income tax expense as a percentage of pre-tax income was 36.3 percent and 38.1 percent, respectively. During the nine months ended September 30, 2017, the Company adopted ASU 2016-9, “Compensation – Stock Compensation, Improvements to Employee Share-Based Payment Accounting”. As a result of this adoption, the Company recorded an income tax benefit of $662 thousand in the first quarter of 2017. The reduction in our effective tax rate for the nine months ended September 30, 2017 was primarily due to the adoption of ASU 2016-9.

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 businesses, even in stressed environments. Quarterly stress testing is integral to the Company’s capital management process.

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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 for the nine months ended September 30, 2017 was benefitted by net income of $26.1 million and by $26.1 million of voluntary share purchases by our shareholders under the Dividend Reinvestment Plan.

Quantitative measures established by regulation to ensure capital adequacy require 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, 2017 and December 31, 2016, 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.

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.

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

						To Be Well											For Capital
						Capitalized Under					For Capital						Adequacy Purposes
						Prompt Corrective					Adequacy						Including Capital
	Actual					Action Provisions					Purposes						Conservation Buffer (A)
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio				Amount		Ratio
As of September 30, 2017:
Total capital
(to risk-weighted assets)	$	437,903		12.92	%	$	338,856		10.00	%	$	271,085		8.00	%	$		313,442		9.250	%
Tier I capital
(to risk-weighted assets)		401,987		11.86			271,085		8.00			203,313		6.00				245,670		7.250
Common equity tier I
(to risk-weighted assets)		401,985		11.86			220,256		6.50			152,485		4.50				194,842		5.750
Tier I capital
(to average assets)		401,987		9.63			208,819		5.00			167,055		4.00				167,055		4.00
As of December 31, 2016:
Total capital
(to risk-weighted assets)	$	392,305		12.87	%	$	304,758		10.00	%	$	243,806		8.00	%			262,854		8.625	%
Tier I capital
(to risk-weighted assets)		360,097		11.82			243,806		8.00			182,855		6.00				201,902		6.625
Common equity tier I
(to risk-weighted assets)		360,094		11.82			198,093		6.50			137,141		4.50				156,188		5.125
Tier I capital
(to average assets)		360,097		9.31			193,430		5.00			154,744		4.00				154,744		4.00

(A) See footnote on following table

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

							To Be Well									For Capital
							Capitalized Under				For Capital					Adequacy Purposes
							Prompt Corrective				Adequacy					Including Capital
	Actual						Action Provisions				Purposes					Conservation Buffer (A)
(Dollars in thousands)	Amount		Ratio				Amount	Ratio			Amount		Ratio			Amount		Ratio
As of September 30, 2017:
Total capital
(to risk-weighted assets)	$	450,077		13.28	%	$	N/A		N/A	%	$	271,085		8.00	%	$	313,442		9.250	%
Tier I capital
(to risk-weighted assets)		365,299		10.78			N/A		N/A			203,314		6.00			245,671		7.250
Common equity tier I
(to risk-weighted assets)		365,297		10.78			N/A		N/A			152,485		4.50			194,842		5.750
Tier I capital
(to average assets)		365,299		8.75			N/A		N/A			167,076		4.00			167,076		4.00
As of December 31, 2016:
Total capital
(to risk-weighted assets)	$	404,017		13.25	%	$	N/A		N/A	%	$	243,910		8.00	%		262,966		8.625	%
Tier I capital
(to risk-weighted assets)		323,045		10.60			N/A		N/A			182,933		6.00			201,988		6.625
Common equity tier I
(to risk-weighted assets)		323,042		10.60			N/A		N/A			137,200		4.50			156,255		5.125
Tier I capital
(to average assets)		323,045		8.35			N/A		N/A			154,788		4.00			154,788		4.00

(A) When fully phased in on January 1, 2019, the Basel Rules will require the Company and the Bank to maintain a 2.5% “capital conservation buffer” on top of the minimum risk-weighted asset ratios. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of (i) CET1 to risk-weighted assets, (ii) Tier 1 capital to risk-weighted assets or (iii) total capital to risk-weighted assets above the respective minimum but below the capital conservation buffer will face constraints on dividends, equity repurchases and discretionary bonus payments to executive officers based on the amount of the shortfall. The implementation of the capital conservation buffer began on January 1, 2016 at the 0.625% level and will increase by 0.625% on each subsequent January 1, until it reaches 2.5% on January 1, 2019.  

The Company’s regulatory total risk based capital ratio beginning June 30, 2016 was benefitted by the $49 million (net) subordinated debt issuance that closed in June 2016. At that time, the Company down-streamed approximately $40 million of those proceeds to the Bank as capital, benefitting all the Bank’s regulatory capital ratios.

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. The Reinvestment Plan provided $26.1 million of capital to the Company in the first nine months of 2017 and we anticipate this program will provide a continuing source of capital.

The Company filed a shelf registration statement with the SEC in December 2016 that allows the Company to periodically offer and sell in one or more offerings, individually or in any combination, common stock, preferred stock and other non-equity securities not to exceed $100.0 million. The shelf registration provides the Company with flexibility in issuing capital instruments and more readily accessing the capital markets as needed to pursue future growth opportunities and ensure continued compliance with regulatory capital requirements.

As previously announced, on October 26, 2017, the Board of Directors declared a regular cash dividend of $0.05 per share payable on November 24, 2017 to shareholders of record on November 9, 2017.

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Management believes the Company’s capital position and capital ratios are adequate. Further, Management believes the Company has sufficient common equity to support its planned growth and expansion 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 and securities 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 $93.3 million at September 30, 2017. In addition, the Company had $315.1 million in securities designated as available for sale at September 30, 2017. 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 $177.3 million as of September 30, 2017 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.

A further source of liquidity is borrowing capacity. At September 30, 2017, unused borrowing commitments totaled $1.2 billion from the FHLB and $732 million from the FRB.

During the September 2017 quarter loans increased $2.7 million. Customer deposits grew $86.4 million, net (principally interest-bearing checking) capital increased $23.1 million, cash and cash equivalents were flat, and other borrowings declined $95.9 million.

Brokered interest-bearing demand (“overnight”) deposits were $180.0 million at September 30, 2017 and June 30, 2017. 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.

From a liquidity/funding perspective, such brokered deposits are generally a more cost-effective alternative than other borrowings and do not require use of pledged collateral, as secured wholesale borrowings do. From a balance sheet management perspective, the rate paid on these short-term brokered deposits is used as the basis to transact longer term interest rate swaps, basically extending repricing generally to five years for asset matching / interest rate risk management purposes. As of September 30, 2017, the Company has transacted pay fixed, receive floating interest rate swaps totaling $180.0 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.

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

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ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

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 have the ability to 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 liabilities.

The following strategies are among those used to manage interest rate risk:

· Actively market commercial type loan originations that tend to have adjustable rate features or shorter terms, and/or that generate customer relationships that can result in higher core deposit accounts;

· Manage residential mortgage portfolio originations to adjustable-rate and/or shorter-term and/or “relationship” loans that result in core deposit relationships;

· Actively market core deposit relationships, which are generally longer duration liabilities;

· Utilize medium to longer term certificates of deposit and/or wholesale borrowings to extend liability duration;

· Utilize interest rate swaps to extend liability duration;

· Utilize a loan level / back to back interest rate swap program, which converts a borrower’s fixed rate loan to adjustable rate for the Company;

· Closely monitor and actively manage the investment portfolio, including management of duration, prepayment and interest rate risk;

· Maintain adequate levels of capital; and

· Utilize loan sales and/or loan participations.

The interest rate swap program is administered by 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 $180.0 million as of September 30, 2017.

In addition, during the third quarter of 2015, 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, 2017, $315.7 million of notional value in swaps were executed and outstanding with borrowers under this program.

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As noted above, 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 model is based on the actual maturity and repricing characteristics of rate sensitive assets and liabilities. The model incorporates certain loan prepayment, deposit beta and decay, and interest rate assumptions, which management believes to be reasonable as of September 30, 2017. The model assumes changes in interest rates without any proactive change in the balance sheet by management. In the model, the forecasted shape of the yield curve remained static as of September 30, 2017.

In an immediate and sustained 200 basis point increase in market rates at September 30, 2017, net interest income for year 1 would increase approximately 4.4 percent, when compared to a flat interest rate scenario. In year 2 this sensitivity improves to an increase of 7.5 percent, when compared to a flat interest rate scenario.

In an immediate and sustained 100 basis point decrease in market rates at September 30, 2017, net interest income would decline approximately 5.9 percent for year 1 and 7.8 percent for year 2, 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, 2017.

	Estimated Increase/								EVPE as a Percentage of
(Dollars in thousands)	Decrease in EVPE								Present Value of Assets (2)
Change In
Interest
Rates	Estimated								EVPE		Increase/(Decrease)
(Basis Points)	EVPE (1)		Amount			Percent			Ratio (3)		(basis points)
+200	$523,471		$3,397			0.65%			13.17%		64
+100		528,914		8,840			1.70			13.01		48
Flat interest rates		520,074		—			—			12.53		—
-100		496,355		(23,719	)		(4.56	)		11.74		(79	)

(1)	EVPE is the discounted present value of expected cash flows from assets and liabilities.
(2)	Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.
(3)	EVPE ratio represents EVPE divided by the present value of assets.

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.

Model simulation results indicate the Company is slightly asset sensitive, which indicates the Company’s net interest income should improve slightly in a rising rate environment. Management believes the Company’s interest rate risk position is reasonable.

69 

ITEM 4. Controls and Procedures

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, 2017 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 CEO and CFO, 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.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

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.

ITEM 1A. Risk Factors

There were no material changes in the Corporation’s risk factors during the three months ended September 30, 2017 from the risk factors disclosed in Part I, Item 1A of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2016.

70 

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no repurchases or unregistered sales of the Corporation’s stock during the quarter.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

None.

ITEM 6. Exhibits

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 3.1 of the Registrant’s Current Report on Form 8-K filed on January 26, 2015 (File No. 001-16197).
10.	Material Contracts:
	A.   “Deferred Compensation Retention Award Plan” dated August 4, 2017, by and between Peapack-Gladstone Bank and Douglas L. Kennedy, filed herewith.
	B.   “Deferred Compensation Retention Award Plan” dated August 4, 2017, by and between Peapack-Gladstone Bank and Finn M.W. Caspersen, Jr., filed herewith.
	C.   “Deferred Compensation Retention Award Plan” dated August 4, 2017, by and between Peapack-Gladstone Bank and John P. Babcock, filed herewith.
	D.   “Deferred Compensation Retention Award Plan” dated August 4, 2017, by and between Peapack-Gladstone Bank and Jeffrey J. Carfora, filed herewith
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	Interactive Data File

71 

SIGNATURES

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.

	PEAPACK-GLADSTONE FINANCIAL CORPORATION
	(Registrant)
DATE:  November 8, 2017	By:  /s/ Douglas L. Kennedy
	Douglas L. Kennedy
	President and Chief Executive Officer
DATE:  November 8, 2017	By:  /s/ Jeffrey J. Carfora
	Jeffrey J. Carfora
	Senior Executive Vice President, Chief Financial Officer
	(Principal Financial Officer)
DATE:  November 8, 2017	By:  /s/ Francesco S. Rossi
	Francesco S. Rossi, Chief Accounting Officer
	(Principal Accounting Officer)

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EX-10.A

Exhibit (A)

DEFERRED COMPENSATION AGREEMENT

THIS DEFERRED COMPENSATION AGREEMENT (this “Agreement”), adopted this 4^th day of August, 2017, by and between Peapack-Gladstone Bank located in Bedminster, New Jersey (the “Employer”), and Douglas L. Kennedy (the “Executive”), formalizes the agreements and understanding between the Employer and the Executive.

WITNESSETH:

WHEREAS, the Executive is employed by the Employer;

WHEREAS, the Employer recognizes the valuable services the Executive has performed for the Employer and wishes to further encourage the Executive’s retention and continued employment;

WHEREAS, the Employer and the Executive intend this Agreement shall at all times be administered and interpreted in compliance with Code Section 409A; and

WHEREAS, the Employer intends this Agreement shall at all times be administered and interpreted in such a manner as to constitute an unfunded nonqualified deferred compensation arrangement, maintained primarily to provide supplemental benefits for the Executive, in order to encourage retention and continued employment of said Executive;

WHEREAS, the Employer wishes to provide the terms and conditions upon which the Employer shall pay additional benefits to the Executive, to encourage retention and continued employment; NOW THEREFORE, in consideration of the premises and of the mutual promises herein contained, the Employer and the Executive agree as follows:

ARTICLE 1

DEFINITIONS

For the purpose of this Agreement, the following phrases or terms shall have the indicated meanings:

1.1        “Administrator” means the Board or its designee.

1.2       “Affiliate” means any business entity with whom the Employer would be considered a single employer under Section 414(b) and 414(c) of the Code. Such term shall be interpreted in a manner consistent with the definition of “service recipient” contained in Code Section 409A.

1.3       “Beneficiary” means the person or persons designated in writing by the Executive to receive benefits hereunder in the event of the Executive’s death.

1.4        “Board” means the Board of Directors of the Employer.

1.5       “Cause” means any of the following acts or circumstances: gross negligence or gross neglect of duties to the Employer; conviction of a felony or of a gross misdemeanor involving moral turpitude in connection with the Executive’s employment with the Employer; or fraud, disloyalty, dishonesty or willful violation of any law or significant Employer policy committed in connection with the Executive's employment and resulting in a material adverse effect on the Employer.

1.6       “Change in Control” means a change in the ownership or effective control of the Employer, or in the ownership of a substantial portion of the assets of the Employer, as such change is defined in Code Section 409A and regulations thereunder.

1.7       “Claimant” means a person who believes that he or she is being denied a benefit to which he or she is entitled hereunder.

1.8       “Code” means the Internal Revenue Code of 1986, as amended.

1.9       “Contribution” means the amount the Employer credits to the Deferral Account according to the provisions of Article 2.

1.10       “Crediting Rate” means the average Wall Street Journal prime rate on the last day of the prior quarter (March 31 prime rate for the June 30 quarter), provided that such rate shall not be more than seven and one-half percent (7.5%).

1.11       “Disability” means a condition of the Executive whereby the Executive either: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer. The Administrator will determine whether the Executive has incurred a Disability based on its own good faith determination and may require the Executive to submit to reasonable physical and mental examinations for this purpose. The Executive will also be deemed to have incurred a Disability if determined to be totally disabled by the Social Security Administration or in accordance with a disability insurance program, provided that the definition of disability applied under such disability insurance program complies with the initial sentence of this Section.

1.12        “Early Involuntary Termination” means a Separation from Service prior to Normal Benefit Date which (i) is a Termination for Good Reason or (ii) occurs other than at the Executive’s request and for reasons other than Cause or Disability or (iii) occurs more than twenty-four (24) months following a Change in Control.

1.13       “Early Voluntary Termination” means that the Executive, prior to Normal Benefit Date, experiences a Separation from Service for reasons other than Cause, Disability or Early Involuntary Termination, or following a Change in Control.

1.14       “Effective Date” means August 4, 2017.

1.15       “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

1.16       “Holding Company” means Peapack-Gladstone Financial Corporation, the Employer’s parent company.

1.17       “Normal Benefit Date” means June 30, 2022.

1.18       “Separation from Service” means a termination of the Executive’s employment with the Employer and its Affiliates for reasons other than death or Disability. A Separation from Service may occur as of a specified date for purposes of the Agreement even if the Executive continues to provide some services for the Employer or its Affiliates after that date, provided that the facts and circumstances indicate that the Employer and the Executive reasonably anticipated at that date that either no further services would be performed after that date, or that the level of bona fide services the Executive would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed over the immediately preceding thirty-six (36) month period (or the full period during which the Executive performed services for the Employer, if that is less than thirty-six (36) months). A Separation from Service will not be deemed to have occurred while the Executive is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six (6) months or, if longer, the period for which a statute or contract provides the Executive with the right to reemployment with the Employer. If the Executive’s leave exceeds six (6) months but the Executive is not entitled to reemployment under a statute or contract, the Executive incurs a Separation of Service on the next day following the expiration of such six (6) month period. In determining whether a Separation of Service occurs the Administrator shall take into account, among other things, the definition of “service recipient” and “employer” set forth in Treasury regulation §1.409A-1(h)(3). The Administrator shall have full and final authority, to determine conclusively whether a Separation from Service occurs, and the date of such Separation from Service.

1.19       “Specified Employee” means an individual that satisfies the definition of a “key employee” of the Employer as such term is defined in Code §416(i) (without regard to Code §416(i)(5)), provided that the stock of the Employer is publicly traded on an established securities market or otherwise, as defined in Code §1.897-1(m). If the Executive is a key employee at any time during the twelve (12) months ending on December 31, the Executive is a Specified Employee for the twelve (12) month period commencing on the first day of the following April.

1.20       “Termination for Good Reason” means Separation from Service after the occurrence of one or more of the following circumstances without the Executive’s consent:

(i)        a material reduction in the Executive’s base compensation;

(ii)        an involuntary relocation of the Executive’s principal place of business to a location that is more than 50 miles from the Executive’s workplace as of the date hereof;

(iii)       the assignment of the Executive to any duties which are fundamentally and significantly inconsistent with the Executive’s duties with the Employer as of the date hereof or a fundamental and substantial reduction of the Executive’s duties or responsibilities;

provided, however, that prior to any Termination for Good Reason, the Executive must first provide written notice to the Employer within sixty (60) days of the initial existence of the condition, describing the existence of such condition, and the Employer shall thereafter have the right to remedy the condition within thirty (30) days of the date the Employer received the written notice from the Executive. If the Employer remedies the condition within such thirty (30) day cure period, then no good reason shall be deemed to exist with respect to such condition. If the Employer does not remedy the condition within such thirty (30) day cure period, then the Executive may deliver a notice of Termination for Good Reason at any time within sixty (60) days following the expiration of such cure period.

Article 2

CONTRIBUTIONS

The Employer has targeted annual Contributions of Two Hundred Thousand Dollars ($200,000) on the Executive’s behalf for five (5) years. The Employer intends to make quarterly Contributions of Fifty Thousand Dollars ($50,000) toward this annual total as of the first day of each calendar quarter (except that the first quarterly payment will commence on the Effective Date), provided that the Executive is employed on such date and the Employer generated a minimum earnings per share equal to at least sixty percent (60%) of budgeted earnings per share (to be adjusted for any stock dividends or splits) for the previous publicly reported 12 month period (i.e. 12 months ended March 31, 2017 for the July 1, 2017 contribution).

Article 3

dEFERRAL ACCOUNT

3.1       Establishing and Crediting of Deferral Account. The Employer shall establish a Deferral Account on its books for the Executive and shall credit to the Deferral Account the following amounts:

(a)       Any Contributions under Article 2 hereof; and

(b)       Interest as follows:

(i)       on the last day of each quarter until the earliest of Separation from Service, Disability or the Executive’s death, interest shall be credited on the Deferral Account balance at an annual rate equal to the Crediting Rate.

(ii)       on the last day of each quarter after Separation from Service, Disability or the Executive’s death, interest shall be credited on the Deferral Account balance at an annual rate equal to the Crediting Rate.

3.2       Recordkeeping Device Only. The Deferral Account is solely a device for measuring amounts to be paid under this Agreement and is not a trust fund of any kind.

ARTICLE 4

VESTING

Executive will vest in his Deferral Account balance one-third each year over the first three years based on a quarterly vesting of 8.3325% at each quarter end beginning September 30, 2017 until fully vested(i.e. on September 30, 2017 Executive would be 8.3325% vested in the accumulated account balance (including interest) and on September 30, 2018 Executive would be 33 1/3 percent vested in the accumulated account balance (including interest)).

ARTICLE 5

PAYMENT OF BENEFITS

5.1       Normal Benefit. Upon Separation from Service after Normal Benefit Date, the Employer shall pay the Executive the Deferral Account balance calculated at Separation from Service. This benefit shall be paid in quarterly installments between 2 years and 10 years, at the selection of the Executive, and shall commence the first day of the immediately subsequent quarter following Separation from Service. During the payment period, interest shall be credited on the unpaid portion of the Deferral Account balance as described in Section 3.1(b)(ii). The quarterly payments shall be amortized in such a way so as to produce equal payments over the remaining payment period.  This will require quarterly reamortization for changes in the Crediting Rate.

5.2       Early Voluntary Termination Benefit. If Early Voluntary Termination occurs, the Employer shall pay the Executive the vested portion of the Deferral Account balance. This benefit shall be paid in quarterly installments between 2 years and 10 years, at the selection of the Executive, and shall commence the first day of the immediately subsequent quarter following Separation from Service. During the payment period, interest shall be credited on the unpaid portion of the Deferral Account balance as described in Section 3.1(b)(ii). The quarterly payments shall be amortized in such a way so as to produce equal payments over the remaining payment period.  This will require quarterly reamortization for changes in the Crediting Rate.

5.3       Early Involuntary Termination Benefit. If Early Involuntary Termination occurs, the Employer shall pay the Executive the Deferral Account balance at Separation from Service, plus an additional amount equal to the Contributions remaining to be made in accordance with Article 2. This benefit shall be paid in quarterly installments between 2 years and 10 years, at the selection of the Executive, and shall commence the first day of the immediately subsequent quarter following Separation from Service. During the

payment period, interest shall be credited on the unpaid portion of the benefit as described in Section 3.1(b)(ii). The quarterly payments shall be amortized in such a way so as to produce equal payments over the remaining payment period.  This will require quarterly reamortization for changes in the Crediting Rate.

5.4       Disability Benefit. If the Executive experiences a Disability prior to Separation from Service and Normal Benefit Date, the Employer shall pay the Executive the Deferral Account balance at Disability, plus an additional amount equal to the Contributions remaining to be made in accordance with Article 2. This benefit shall be paid in quarterly installments between 2 years and 10 years, at the selection of the Executive, and shall commence the first day of the immediately subsequent quarter following Disability. During the payment period, interest shall be credited on the unpaid portion of the benefit as described in Section 3.1(b)(ii). The quarterly payments shall be amortized in such a way so as to produce equal payments over the remaining payment period.  This will require quarterly reamortization for changes in the Crediting Rate.

5.5       Change in Control Benefit. If a Change in Control occurs, followed within twenty-four (24) months by a Separation from Service prior to Normal Benefit Date, the Employer shall pay the Executive the Deferral Account balance at Separation from Service, plus an additional amount equal to the Contributions remaining to be made in accordance with Article 2 provided, however, that no earnings per share requirement shall apply. This benefit shall be paid in a lump sum or in quarterly installments up to 10 years, at the selection of the Executive, and shall commence the first day of the immediately subsequent quarter following Separation from Service. During the payment period, interest shall be credited on the unpaid portion of the benefit as described in Section 3.1(b)(ii). The quarterly payments shall be amortized in such a way so as to produce equal payments over the remaining payment period.  This will require quarterly reamortization for changes in the Crediting Rate.

5.6       Death Prior to Separation from Service and Disability. In the event the Executive dies prior to Separation from Service and Disability, the Employer shall pay the Beneficiary the Deferral Account balance as of the date of the Executive’s death, plus an additional amount equal to the Contributions remaining to be made in accordance with Article 2. This benefit shall be paid in a lump sum or in quarterly installments up to 10 years, at the selection of the Executive, and shall commence the first day of the immediately subsequent quarter following the Executive’s death. During the payment period, interest shall be credited on the unpaid portion of the benefit as described in Section 3.1(b)(ii). The quarterly payments shall be amortized in such a way so as to produce equal payments over the remaining payment period.  This will require quarterly reamortization for changes in the Crediting Rate.

5.7       One Benefit Only. The Executive and Beneficiary are entitled to a benefit under only one of Sections 4.1 through 4.6 of this Agreement, which shall be determined by the first event to occur that causes a benefit to be paid under this Agreement. The subsequent occurrence of other events shall not entitle the Executive or Beneficiary to other or additional benefits hereunder.

5.8       Death Subsequent to Commencement of Benefit Payments. In the event the Executive dies while receiving payments, but prior to receiving all payments due and owing hereunder, the Employer shall pay the Beneficiary the same amounts at the same times as the Employer would have paid the Executive, had the Executive survived.

5.9       Termination for Cause. If the Employer terminates the Executive’s employment for Cause or if the Executive takes any of the actions described in Section 9.10(i), (ii), (iii), (iv) or (v), then the Executive shall forfeit all unpaid benefits hereunder.

5.10       Restriction on Commencement of Distributions.  Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a Specified Employee at the time of Separation from Service, the provisions of this Section shall govern all distributions hereunder. Distributions which would otherwise be made to the Executive due to Separation from Service shall not be made during the first six (6) months following Separation from Service. Rather, any distribution which would otherwise be paid to the Executive during such period shall be accumulated and paid to the Executive in a lump sum on the first day of the seventh month following Separation from Service, or if earlier, upon the Executive’s death. All subsequent distributions shall be paid as they would have had this Section not applied.

5.11       Acceleration of Payments. Except as specifically permitted herein, no acceleration of the time or schedule of any payment may be made hereunder. Notwithstanding the foregoing, payments may be accelerated, in accordance with the provisions of Treasury Regulation §1.409A-3(j)(4) in the following circumstances: (i) as a result of certain domestic relations orders; (ii) in compliance with ethics agreements with the federal government; (iii) in compliance with the ethics laws or conflicts of interest laws; (iv) in limited cashouts (but not in excess of the limit under Code §402(g)(1)(B)); (v) to pay employment-related taxes; or (vi) to pay any taxes that may become due at any time that the Agreement fails to meet the requirements of Code Section 409A.

5.12       Delays in Payment by Employer. A payment may be delayed to a date after the designated payment date under any of the circumstances described below, and the provision will not fail to meet the requirements of establishing a permissible payment event. The delay in the payment will not constitute a subsequent deferral election, so long as the Employer treats all payments to similarly situated Participants on a reasonably consistent basis.

(a)       Payments subject to Code Section 162(m). If the Employer reasonably anticipates that the Employer’s deduction with respect to any distribution under this Agreement would be limited or eliminated by application of Code Section 162(m), then to the extent deemed necessary by the Employer to ensure that the entire amount of any distribution from this Agreement is deductible, the Employer may delay payment of any amount that would otherwise be distributed under this Agreement. The delayed amounts shall be distributed to the Executive (or the Beneficiary in the event of the Executive’s death) at the earliest date the Employer reasonably anticipates that the deduction of the payment of the amount will not be limited or eliminated by application of Code Section 162(m).

(b)       Payments that would violate Federal securities laws or other applicable law. A payment may be delayed where the Employer reasonably anticipates that the making of the payment will violate Federal securities laws or other applicable law provided that the payment is made at the earliest date at which the Employer reasonably anticipates that the making of the payment will not cause such violation. The making of a payment that would cause inclusion in gross income or the application of any penalty provision of the Internal Revenue Code is not treated as a violation of law.

(c)       Solvency. Notwithstanding the above, a payment may be delayed where the payment would jeopardize the ability of the Employer to continue as a going concern.

5.13       Treatment of Payment as Made on Designated Payment Date. Solely for purposes of determining compliance with Code Section 409A, any payment under this Agreement made after the required payment date shall be deemed made on the required payment date provided that such payment is made by the latest of: (i) the end of the calendar year in which the payment is due; (ii) the 15^th day of the third calendar month following the payment due date; (iii) if Employer cannot calculate the payment amount on account of administrative impracticality which is beyond the Executive’s control, the end of the first calendar year which payment calculation is practicable; and (iv) if Employer does not have sufficient funds to make the payment without jeopardizing the Employer’s solvency, in the first calendar year in which the Employer’s funds are sufficient to make the payment.

5.14       Facility of Payment. If a distribution is to be made to a minor, or to a person who is otherwise incompetent, then the Administrator may make such distribution: (i) to the legal guardian, or if none, to a parent of a minor payee with whom the payee maintains his or her residence; or (ii) to the conservator or administrator or, if none, to the person having custody of an incompetent payee. Any such distribution shall fully discharge the Employer and the Administrator from further liability on account thereof.

5.15       Excise Tax Limitation. Notwithstanding any provision of this Agreement to the contrary, if any benefit payment hereunder would be treated as an “excess parachute payment” under Code Section 280G, the Employer shall reduce such benefit payment to the extent necessary to avoid treating such benefit payment as an excess parachute payment. The Executive shall be entitled to only the reduced benefit and shall forfeit any amount over and above the reduced amount.

5.16       Changes in Form or Timing of Benefit Payments. The Employer and the Executive may, subject to the terms hereof, amend this Agreement to delay the timing or change the form of payments. Any such amendment:

(a)       must take effect not less than twelve (12) months after the amendment is made;

(b)       must, for benefits distributable due solely to the arrival of a specified date, or on account of Separation from Service or Change in Control, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made;

(c)       must, for benefits distributable due solely to the arrival of a specified date, be made not less than twelve (12) months before distribution is scheduled to begin; and

(d)       may not accelerate the time or schedule of any distribution.

Article 6

Beneficiaries

6.1       Designation of Beneficiaries. The Executive may designate any person to receive any benefits payable under the Agreement upon the Executive’s death, and the designation may be changed from time to time by the Executive by filing a new designation. Each designation will revoke all prior designations by the Executive, shall be in the form prescribed by the Administrator and shall be effective only when filed in writing with the Administrator during the Executive’s lifetime. If the Executive names someone other than the Executive’s spouse as a Beneficiary, the Administrator may, in its sole discretion, determine that spousal consent is required to be provided in a form designated by the Administrator, executed by the Executive’s spouse and returned to the Administrator. The Executive’s beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage is subsequently dissolved.

6.2       Absence of Beneficiary Designation. In the absence of a valid Beneficiary designation, or if, at the time any benefit payment is due to a Beneficiary, there is no living Beneficiary validly named by the Executive, the Employer shall pay the benefit payment to the Executive’s spouse. If the spouse is not living then the Employer shall pay the benefit payment to the Executive’s living descendants per stirpes, and if there are no living descendants, to the Executive’s estate. In determining the existence or identity of anyone entitled to a benefit payment, the Employer may rely conclusively upon information supplied by the Executive’s personal representative, executor, or administrator.

Article 7

ADMINISTRATION

7.1       Administrator Duties. The Administrator shall be responsible for the management, operation, and administration of the Agreement. When making a determination or calculation, the Administrator shall be entitled to rely on information furnished by the Employer, Executive or Beneficiary. No provision of this Agreement shall be construed as imposing on the Administrator any fiduciary duty under ERISA or other law, or any duty similar to any fiduciary duty under ERISA or other law.

7.2       Administrator Authority. The Administrator shall enforce this Agreement in accordance with its terms, shall be charged with the general administration of this Agreement, and shall have all powers necessary to accomplish its purposes.

7.3       Binding Effect of Decision. The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation or application of this Agreement and the rules and regulations promulgated hereunder shall be final, conclusive and binding upon all persons having any interest in this Agreement.

7.4       Compensation, Expenses and Indemnity. The Administrator shall serve without compensation for services rendered hereunder. The Administrator is authorized at the expense of the Employer to employ such legal counsel and recordkeeper as it may deem advisable to assist in the performance of its duties hereunder. Expense and fees in connection with the administration of this Agreement shall be paid by the Employer.

7.5       Employer Information. The Employer shall supply full and timely information to the Administrator on all matters relating to the Executive’s compensation, death, Disability or Separation from Service, and such other information as the Administrator reasonably requires.

7.6       Termination of Participation. If the Administrator determines in good faith that the Executive no longer qualifies as a member of a select group of management or highly compensated employees, as determined in accordance with ERISA, the Administrator shall have the right, in its sole discretion, to prohibit any further crediting to the Deferral Account.

7.7       Compliance with Code Section 409A. The Employer and the Executive intend that the Agreement comply with the provisions of Code Section 409A to prevent the inclusion in gross income of any amounts deferred hereunder in a taxable year prior to the year in which amounts are actually paid to the Executive or Beneficiary. This Agreement shall be construed, administered and governed in a manner that affects such intent, and the Administrator shall not take any action that would be inconsistent therewith.

Article 8

Claims and Review Procedures

8.1       Claims Procedure. A Claimant who has not received benefits under this Agreement that he or she believes should be distributed shall make a claim for such benefits as follows.

(a)       Initiation – Written Claim. The Claimant initiates a claim by submitting to the Administrator a written claim for the benefits. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant. All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant.

(b)       Timing of Administrator Response. The Administrator shall respond to such Claimant within ninety (90) days after receiving the claim. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional ninety (90) days by notifying the Claimant in writing, prior to the end of the initial ninety (90) day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision.

(c)       Notice of Decision. If the Administrator denies part or all of the claim, the Administrator shall notify the Claimant in writing of such denial. The Administrator shall write the notification in a manner calculated to be understood by the Claimant. The notification shall set forth: (i) the specific reasons for the denial; (ii) a reference to the specific provisions of this Agreement on which the denial is based; (iii) a description of any additional information or material necessary for the Claimant to perfect the claim and an explanation of why it is needed; (iv) an explanation of this Agreement’s review procedures and the time limits applicable to such procedures; and (v) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

8.2       Review Procedure. If the Administrator denies part or all of the claim, the Claimant shall have the opportunity for a full and fair review by the Administrator of the denial as follows.

(a)       Initiation – Written Request. To initiate the review, the Claimant, within sixty (60) days after receiving the Administrator’s notice of denial, must file with the Administrator a written request for review.

(b)       Additional Submissions – Information Access. The Claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Administrator shall also provide the Claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits.

(c)       Considerations on Review. In considering the review, the Administrator shall take into account all materials and information the Claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

(d)       Timing of Administrator Response. The Administrator shall respond in writing to such Claimant within sixty (60) days after receiving the request for review. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional sixty (60) days by notifying the Claimant in writing, prior to the end of the initial sixty (60) day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision.

(e)       Notice of Decision. The Administrator shall notify the Claimant in writing of its decision on review. The Administrator shall write the notification in a manner calculated to be understood by the Claimant. The notification shall set forth: (a) the specific reasons for the denial; (b) a reference to the specific provisions of this Agreement on which the denial is based; (c) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits; and (d) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a).

ARTICLE 9

AMENDMENT AND TERMINATION

9.1       Agreement Amendment Generally. Except as provided in Section 8.2, this Agreement may be amended only by a written agreement signed by both the Employer and the Executive.

9.2       Amendment to Insure Proper Characterization of Agreement. Notwithstanding anything in this Agreement to the contrary, the Agreement may be amended by the Employer at any time, if found necessary in the opinion of the Employer, i) to ensure that the Agreement is characterized as plan of deferred compensation maintained for a select group of management or highly compensated employees as described under ERISA, ii) to conform the Agreement to the requirements of any applicable law or iii) to comply with the written instructions of the Employer’s auditors or banking regulators.

9.3       Agreement Termination Generally. Except as provided in Section 8.4, this Agreement may be terminated only by a written agreement signed by the Employer and the Executive. Such termination shall not cause a distribution of benefits under this Agreement. Rather, upon such termination benefit distributions will be made at the earliest distribution event permitted under Article 5.

9.4       Effect of Complete Termination. Notwithstanding anything to the contrary in Section 8.3, and subject to the requirements of Code Section 409A and Treasury Regulations §1.409A-3(j)(4)(ix), the Employer may completely terminate and liquidate the Agreement in accordance with subsections (a), (b) or (c) below. In the event of such a complete termination in accordance with subsection (a), the Employer shall pay the Executive the Deferral Account balance. In the event of such a complete termination in accordance with subsection (b) or (c), the Employer shall pay the Executive the Deferral Account balance, plus an additional amount equal to the Contributions remaining to be made in accordance with Article 2 provided, however, that no earnings per share requirement shall apply. In any event, such complete termination of the Agreement shall occur only under the following circumstances and conditions.

(a)       Corporate Dissolution or Bankruptcy. The Employer may terminate and liquidate this Agreement within twelve (12) months of a corporate dissolution taxed under Code Section 331, or with the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that all benefits paid under the Agreement are included in the Executive’s gross income in the latest of: (i) the calendar year which the termination occurs; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the payment is administratively practicable.

(b)       Change in Control. The Employer may terminate and liquidate this Agreement by taking irrevocable action to terminate and liquidate within the thirty (30) days preceding or the twelve (12) months following a Change in Control. This Agreement will then be treated as terminated only if all substantially similar arrangements sponsored by the Employer which are treated as deferred under a single plan under Treasury Regulations §1.409A-1(c)(2) are terminated and liquidated with respect to each participant who experienced the Change in Control so that the Executive and any participants in any such similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date the Employer takes the irrevocable action to terminate the arrangements.

(c)       Discretionary Termination. The Employer may terminate and liquidate this Agreement provided that: (i) the termination does not occur proximate to a downturn in the financial health of the Employer; (ii) all arrangements sponsored by the Employer and Affiliates that would be aggregated with any terminated arrangements under Treasury Regulations §1.409A-1(c) are terminated; (iii) no payments, other than payments that would be payable under the terms of this Agreement if the termination had not occurred, are made within twelve (12) months of the date the Employer takes the irrevocable action to terminate this Agreement; (iv) all payments are made within twenty-four (24) months following the date the Employer takes the irrevocable action to terminate and liquidate this Agreement; and (v) neither the Employer nor any of its Affiliates adopt a new arrangement that would be aggregated with any terminated arrangement under Treasury Regulations §1.409A-1(c) if the Executive participated in both arrangements, at any time within three (3) years following the date the Employer takes the irrevocable action to terminate this Agreement.

Article 10

MISCELLANEOUS

10.1       No Effect on Other Rights. This Agreement constitutes the entire agreement between the Employer and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein. Nothing contained herein will confer upon the Executive the right to be retained in the service of the Employer nor limit the right of the Employer to discharge or otherwise deal with the Executive without regard to the existence hereof.

10.2       State Law. This Agreement and all rights hereunder shall be governed by and construed according to the laws of the State of New Jersey except to the extent preempted by the laws of the United States of America.

10.3       Validity. In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal or invalid provision had never been inserted herein.

10.4       Nonassignability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

10.5       Unsecured General Creditor Status. Payment to the Executive or any Beneficiary hereunder shall be made from assets which shall continue, for all purposes, to be part of the general, unrestricted assets of the Employer and no person shall have any interest in any such asset by virtue of any provision of this Agreement. The Employer’s obligation hereunder shall be an unfunded and unsecured promise to pay money in the future. In the event that the Employer purchases an insurance policy insuring the life of the Executive to recover the cost of providing benefits hereunder, neither the Executive nor the Beneficiary shall have any rights whatsoever in said policy or the proceeds therefrom.

10.6       Life Insurance. If the Employer chooses to obtain insurance on the life of the Executive in connection with its obligations under this Agreement, the Executive hereby agrees to take such physical examinations and to truthfully and completely supply such information as may be required by the Employer or the insurance company designated by the Employer.

10.7       Unclaimed Benefits. The Executive shall keep the Employer informed of the Executive’s current address and the current address of the Beneficiary. If the location of the Executive is not made known to the Employer within three years after the date upon which any payment of any benefits may first be made, the Employer shall delay payment of the Executive’s benefit payment(s) until the location of the Executive is made known to the Employer; however, the Employer shall only be obligated to hold such benefit payment(s) for the Executive until the expiration of three (3) years. Upon expiration of the three (3) year period, the Employer may discharge its obligation by payment to the Beneficiary. If the location of the Beneficiary is not made known to the Employer by the end of an additional two (2) month period following expiration of the three (3) year period, the Employer may discharge its obligation by payment to the Executive’s estate. If there is no estate in existence at such time or if such fact cannot be determined by the Employer, the Executive and Beneficiary shall thereupon forfeit all rights to any benefits provided under this Agreement.

10.8       Suicide or Misstatement. The Executive shall forfeit any non-distributed amounts in the Deferral Account if the Executive commits suicide within two (2) years after the Effective Date, or if an insurance company which issued a life insurance policy covering the Executive and owned by the Employer denies coverage (i) for material misstatements of fact made by the Executive on an application for life insurance, or (ii) for any other reason.

10.9       Regulatory Restrictions.

a)       Removal. If the Executive is removed from office or permanently prohibited from participating in the Employer’s affairs by an order issued under section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1), the Executive shall forfeit any non-distributed amounts in the Deferral Account.

b)       Default. If the Employer is in “default” or “in danger of default” as those terms are defined in section 3(x) of the Federal Deposit Insurance Act, 12 U.S.C. 1813(x) the Executive shall forfeit any non-distributed amounts in the Deferral Account.

c)       FDIC Open-Bank Assistance. If the Federal Deposit Insurance Corporation enters into an agreement to provide assistance to or on behalf of the Employer under the authority contained in Federal Deposit Insurance Act section 13(c), 12 U.S.C. 1823(c) the Executive shall forfeit any non-distributed amounts in the Deferral Account.

10.10       Forfeiture Provision. The Executive shall forfeit any unpaid benefit hereunder, if the Executive, directly or indirectly, either as an individual or as a proprietor, stockholder, partner, officer, director, employee, agent, consultant or independent contractor of any individual, partnership, corporation or other entity (excluding an ownership interest of three percent (3%) or less in the stock of a publicly-traded company):

(i)       becomes employed by, participates in, or becomes connected in any manner with the ownership, management, operation or control of any bank, savings and loan or other similar financial institution if the Executive’s responsibilities will include providing banking or other financial services within fifty (50) miles of the Employer’s main office location;

(ii)       participates in any way in hiring or otherwise engaging, or assisting any other person or entity in hiring or otherwise engaging, on a temporary, part-time or permanent basis, any individual who was employed by the Employer as of the date of termination of the Executive’s employment;

(iii)       assists, advises, or serves in any capacity, representative or otherwise, any third party in any action against the Employer or transaction involving the Employer;

(iv)       sells, offers to sell, provides banking or other financial services, assists any other person in selling or providing banking or other financial services, or solicits or otherwise competes for, either directly or indirectly, any orders, contract, or accounts for services of a kind or nature like or substantially similar to the financial services performed or financial products sold by the Employer (the preceding hereinafter referred to as “Services”), to or from any person or entity from whom the Executive or the Employer, to the knowledge of the Executive provided banking or other financial services, sold, offered to sell or solicited orders, contracts or accounts for Services during the three (3) year period immediately prior to the termination of the Executive’s employment;

(v)       divulges, discloses, or communicates to others in any manner whatsoever, any confidential information of the Employer, to the knowledge of the Executive, including, but not limited to, the names and addresses of customers or prospective customers, of the Employer, as they may have existed from time to time, of work performed or services rendered for any customer, any method and/or procedures relating to projects or other work developed for the Employer, earnings or other information concerning the Employer. The restrictions contained in this subparagraph (v) apply to all information regarding the Employer, regardless of the source who provided or compiled such information. Notwithstanding anything to the contrary, all information referred to herein shall not be disclosed unless and until it becomes known to the general public from sources other than the Executive.

The forfeiture provision detailed in this Section 9.10 shall not apply following a Change in Control or following Early Involuntary Termination.

10.11       Notice. Any notice, consent or demand required or permitted to be given to the Employer or Administrator under this Agreement shall be sufficient if in writing and hand-delivered or sent by registered or certified mail to the Employer’s principal business office. Any notice or filing required or permitted to be given to the Executive or Beneficiary under this Agreement shall be sufficient if in writing and hand-delivered or sent by mail to the last known address of the Executive or Beneficiary, as appropriate. Any notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or on the receipt for registration or certification.

10.12       Headings and Interpretation. Headings and sub-headings in this Agreement are inserted for reference and convenience only and shall not be deemed part of this Agreement. Wherever the fulfillment of the intent and purpose of this Agreement requires and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.

10.13 Alternative Action. In the event it becomes impossible for the Employer or the Administrator to perform any act required by this Agreement due to regulatory or other constraints, the Employer or Administrator may perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Employer, provided that such alternative act does not violate Code Section 409A.

10.14       Coordination with Other Benefits. The benefits provided for the Executive or the Beneficiary under this Agreement are in addition to any other benefits available to the Executive under any other plan or program for employees of the Employer. This Agreement shall supplement and shall not supersede, modify, or amend any other such plan or program except as may otherwise be expressly provided herein.

10.15       Inurement. This Agreement shall be binding upon and shall inure to the benefit of the Employer, its successor and assigns, and the Executive, the Executive’s successors, heirs, executors, administrators, and the Beneficiary.

10.16       Tax Withholding. The Employer may make such provisions and take such action as it deems necessary or appropriate for the withholding of any taxes which the Employer is required by any law or regulation to withhold in connection with any benefits under the Agreement. The Executive shall be responsible for the payment of all individual tax liabilities relating to any benefits paid hereunder.

10.17       Aggregation of Agreement. If the Employer offers other non-qualified deferred compensation plans in addition to this Agreement, this Agreement and those plans shall be treated as a single plan to the extent required under Code Section 409A.

IN WITNESS WHEREOF, the Executive and a representative of the Employer have executed this Agreement document as indicated below:

Executive:	Employer:
/s/ Douglas L. Kennedy	By:	/s/ Finn M.W. Caspersen, Jr.
	Its:	Senior Executive Vice President, Chief Strategy Officer

DEFERRED COMPENSATION AGREEMENT

Distribution Election Form

Form and Timing of Distributions

Benefit	Distribution of Benefit (Indicate number of years between 2 and 10)
§ 5.1 - Normal Benefit	Quarterly installments for _____ years
§ 5.2 - Early Voluntary Termination Benefit * § 5.3 - Early Involuntary Termination Benefit*	Quarterly installments for _____ years
§ 5.4 - Disability Benefit	Quarterly installments for _____ years
§ 5.5 – Change in Control Benefit	_____ Lump sum or _____ Quarterly installments for _____ years (Initial either lump sum or installments.)
§ 5.6 - Death Benefit	_____ Lump Sum or _____ Quarterly installments for _____ years (Initial either lump sum or installments.)

*Per 409A, the form and timing for these two triggering events must be the same.

Name:

Signature:

Date:

Received by the Administrator this _____ day of ____________________, 20___

By:

Title:

DEFERRED COMPENSATION AGREEMENT

Beneficiary Designation

I, Douglas L. Kennedy, designate the following as Beneficiary under this Agreement:

Primary
	%
	%
Contingent
	%
	%

I understand that I may change this beneficiary designation by delivering a new written designation to the Administrator, which shall be effective only upon receipt by the Administrator prior to my death. I further understand that the designation will be automatically revoked if the Beneficiary predeceases me or if I have named my spouse as Beneficiary and our marriage is subsequently dissolved.

Signature:          __________________________                    Date: _______

SPOUSAL CONSENT (Required only if Administrator requests and someone other than spouse is named Beneficiary)

I consent to the beneficiary designation above. I also acknowledge that if I am named Beneficiary and my marriage is subsequently dissolved, the beneficiary designation will be automatically revoked.

Spouse Name:          ___________________________________

Signature:          __________________________          Date: _______

Received by the Administrator this ________ day of ___________________, 20__

By:

Title:

EX-10.B

Exhibit (B)

DEFERRED COMPENSATION AGREEMENT

THIS DEFERRED COMPENSATION AGREEMENT (this “Agreement”), adopted this 4^th day of August, 2017, by and between Peapack-Gladstone Bank located in Bedminster, New Jersey (the “Employer”), and Finn M. W. Caspersen, Jr. (the “Executive”), formalizes the agreements and understanding between the Employer and the Executive.

WITNESSETH:

WHEREAS, the Executive is employed by the Employer;

WHEREAS, the Employer recognizes the valuable services the Executive has performed for the Employer and wishes to further encourage the Executive’s retention and continued employment;

WHEREAS, the Employer and the Executive intend this Agreement shall at all times be administered and interpreted in compliance with Code Section 409A; and

WHEREAS, the Employer intends this Agreement shall at all times be administered and interpreted in such a manner as to constitute an unfunded nonqualified deferred compensation arrangement, maintained primarily to provide supplemental benefits for the Executive, in order to encourage retention and continued employment of said Executive;

WHEREAS, the Employer wishes to provide the terms and conditions upon which the Employer shall pay additional benefits to the Executive, to encourage retention and continued employment; NOW THEREFORE, in consideration of the premises and of the mutual promises herein contained, the Employer and the Executive agree as follows:

ARTICLE 1

DEFINITIONS

For the purpose of this Agreement, the following phrases or terms shall have the indicated meanings:

1.1        “Administrator” means the Board or its designee.

1.2       “Affiliate” means any business entity with whom the Employer would be considered a single employer under Section 414(b) and 414(c) of the Code. Such term shall be interpreted in a manner consistent with the definition of “service recipient” contained in Code Section 409A.

1.3       “Beneficiary” means the person or persons designated in writing by the Executive to receive benefits hereunder in the event of the Executive’s death.

1.4      “Board” means the Board of Directors of the Employer.

1.5       “Cause” means any of the following acts or circumstances: gross negligence or gross neglect of duties to the Employer; conviction of a felony or of a gross misdemeanor involving moral turpitude in connection with the Executive’s employment with the Employer; or fraud, disloyalty, dishonesty or willful violation of any law or significant Employer policy committed in connection with the Executive's employment and resulting in a material adverse effect on the Employer.

1.6       “Change in Control” means a change in the ownership or effective control of the Employer, or in the ownership of a substantial portion of the assets of the Employer, as such change is defined in Code Section 409A and regulations thereunder.

1.7       “Claimant” means a person who believes that he or she is being denied a benefit to which he or she is entitled hereunder.

1.8       “Code” means the Internal Revenue Code of 1986, as amended.

1.9       “Contribution” means the amount the Employer credits to the Deferral Account according to the provisions of Article 2.

1.10       “Crediting Rate” means the average Wall Street Journal prime rate on the last day of the prior quarter (March 31 prime rate for the June 30 quarter), provided that such rate shall not be more than seven and one-half percent (7.5%).

1.11       “Disability” means a condition of the Executive whereby the Executive either: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer. The Administrator will determine whether the Executive has incurred a Disability based on its own good faith determination and may require the Executive to submit to reasonable physical and mental examinations for this purpose. The Executive will also be deemed to have incurred a Disability if determined to be totally disabled by the Social Security Administration or in accordance with a disability insurance program, provided that the definition of disability applied under such disability insurance program complies with the initial sentence of this Section.

1.12        “Early Involuntary Termination” means a Separation from Service prior to Normal Benefit Date which (i) is a Termination for Good Reason or (ii) occurs other than at the Executive’s request and for reasons other than Cause or Disability or (iii) occurs more than twenty-four (24) months following a Change in Control.

1.13       “Early Voluntary Termination” means that the Executive, prior to Normal Benefit Date, experiences a Separation from Service for reasons other than Cause, Disability or Early Involuntary Termination, or following a Change in Control.

1.14       “Effective Date” means August 4, 2017.

1.15       “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

1.16       “Holding Company” means Peapack-Gladstone Financial Corporation, the Employer’s parent company.

1.17       “Normal Benefit Date” means June 30, 2022.

1.18       “Separation from Service” means a termination of the Executive’s employment with the Employer and its Affiliates for reasons other than death or Disability. A Separation from Service may occur as of a specified date for purposes of the Agreement even if the Executive continues to provide some services for the Employer or its Affiliates after that date, provided that the facts and circumstances indicate that the Employer and the Executive reasonably anticipated at that date that either no further services would be performed after that date, or that the level of bona fide services the Executive would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed over the immediately preceding thirty-six (36) month period (or the full period during which the Executive performed services for the Employer, if that is less than thirty-six (36) months). A Separation from Service will not be deemed to have occurred while the Executive is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six (6) months or, if longer, the period for which a statute or contract provides the Executive with the right to reemployment with the Employer. If the Executive’s leave exceeds six (6) months but the Executive is not entitled to reemployment under a statute or contract, the Executive incurs a Separation of Service on the next day following the expiration of such six (6) month period. In determining whether a Separation of Service occurs the Administrator shall take into account, among other things, the definition of “service recipient” and “employer” set forth in Treasury regulation §1.409A-1(h)(3). The Administrator shall have full and final authority, to determine conclusively whether a Separation from Service occurs, and the date of such Separation from Service.

1.19       “Specified Employee” means an individual that satisfies the definition of a “key employee” of the Employer as such term is defined in Code §416(i) (without regard to Code §416(i)(5)), provided that the stock of the Employer is publicly traded on an established securities market or otherwise, as defined in Code §1.897-1(m). If the Executive is a key employee at any time during the twelve (12) months ending on December 31, the Executive is a Specified Employee for the twelve (12) month period commencing on the first day of the following April.

1.20       “Termination for Good Reason” means Separation from Service after the occurrence of one or more of the following circumstances without the Executive’s consent:

(i)        a material reduction in the Executive’s base compensation;

(ii)        an involuntary relocation of the Executive’s principal place of business to a location that is more than 50 miles from the Executive’s workplace as of the date hereof;

(iii)       the assignment of the Executive to any duties which are fundamentally and significantly inconsistent with the Executive’s duties with the Employer as of the date hereof or a fundamental and substantial reduction of the Executive’s duties or responsibilities;

provided, however, that prior to any Termination for Good Reason, the Executive must first provide written notice to the Employer within sixty (60) days of the initial existence of the condition, describing the existence of such condition, and the Employer shall thereafter have the right to remedy the condition within thirty (30) days of the date the Employer received the written notice from the Executive. If the Employer remedies the condition within such thirty (30) day cure period, then no good reason shall be deemed to exist with respect to such condition. If the Employer does not remedy the condition within such thirty (30) day cure period, then the Executive may deliver a notice of Termination for Good Reason at any time within sixty (60) days following the expiration of such cure period.

Article 2

CONTRIBUTIONS

The Employer has targeted annual Contributions of One Hundred Thousand Dollars ($100,000) on the Executive’s behalf for five (5) years. The Employer intends to make quarterly Contributions of Twenty Five Thousand Dollars ($25,000) toward this annual total as of the first day of each calendar quarter (except that the first quarterly payment will commence on the Effective Date), provided that the Executive is employed on such date and the Employer generated a minimum earnings per share equal to at least sixty percent (60%) of budgeted earnings per share (to be adjusted for any stock dividends or splits) for the previous publicly reported 12 month period (i.e. 12 months ended March 31, 2017 for the July 1, 2017 contribution).

Article 3

dEFERRAL ACCOUNT

3.1       Establishing and Crediting of Deferral Account. The Employer shall establish a Deferral Account on its books for the Executive and shall credit to the Deferral Account the following amounts:

(a)       Any Contributions under Article 2 hereof; and

(b)       Interest as follows:

(i)       on the last day of each quarter until the earliest of Separation from Service, Disability or the Executive’s death, interest shall be credited on the Deferral Account balance at an annual rate equal to the Crediting Rate.

(ii)       on the last day of each quarter after Separation from Service, Disability or the Executive’s death, interest shall be credited on the Deferral Account balance at an annual rate equal to the Crediting Rate.

3.2       Recordkeeping Device Only. The Deferral Account is solely a device for measuring amounts to be paid under this Agreement and is not a trust fund of any kind.

ARTICLE 4

VESTING

Executive will vest in his Deferral Account balance one-third each year over the first three years based on a quarterly vesting of 8.3325% at each quarter end beginning September 30, 2017 until fully vested(i.e. on September 30, 2017 Executive would be 8.3325% vested in the accumulated account balance (including interest) and on September 30, 2018 Executive would be 33 1/3 percent vested in the accumulated account balance (including interest)).

ARTICLE 5

PAYMENT OF BENEFITS

5.1       Normal Benefit. Upon Separation from Service after Normal Benefit Date, the Employer shall pay the Executive the Deferral Account balance calculated at Separation from Service. This benefit shall be paid in quarterly installments between 2 years and 10 years, at the selection of the Executive, and shall commence the first day of the immediately subsequent quarter following Separation from Service. During the payment period, interest shall be credited on the unpaid portion of the Deferral Account balance as described in Section 3.1(b)(ii). The quarterly payments shall be amortized in such a way so as to produce equal payments over the remaining payment period.  This will require quarterly reamortization for changes in the Crediting Rate.

5.2       Early Voluntary Termination Benefit. If Early Voluntary Termination occurs, the Employer shall pay the Executive the vested portion of the Deferral Account balance. This benefit shall be paid in quarterly installments between 2 years and 10 years, at the selection of the Executive, and shall commence the first day of the immediately subsequent quarter following Separation from Service. During the payment period, interest shall be credited on the unpaid portion of the Deferral Account balance as described in Section 3.1(b)(ii). The quarterly payments shall be amortized in such a way so as to produce equal payments over the remaining payment period.  This will require quarterly reamortization for changes in the Crediting Rate.

5.3       Early Involuntary Termination Benefit. If Early Involuntary Termination occurs, the Employer shall pay the Executive the Deferral Account balance at Separation from Service, plus an additional amount equal to the Contributions remaining to be made in accordance with Article 2. This benefit shall be paid in quarterly installments between 2 years and 10 years, at the selection of the Executive, and shall commence the first day of the immediately subsequent quarter following Separation from Service. During the

payment period, interest shall be credited on the unpaid portion of the benefit as described in Section 3.1(b)(ii). The quarterly payments shall be amortized in such a way so as to produce equal payments over the remaining payment period.  This will require quarterly reamortization for changes in the Crediting Rate.

5.4       Disability Benefit. If the Executive experiences a Disability prior to Separation from Service and Normal Benefit Date, the Employer shall pay the Executive the Deferral Account balance at Disability, plus an additional amount equal to the Contributions remaining to be made in accordance with Article 2. This benefit shall be paid in quarterly installments between 2 years and 10 years, at the selection of the Executive, and shall commence the first day of the immediately subsequent quarter following Disability. During the payment period, interest shall be credited on the unpaid portion of the benefit as described in Section 3.1(b)(ii). The quarterly payments shall be amortized in such a way so as to produce equal payments over the remaining payment period.  This will require quarterly reamortization for changes in the Crediting Rate.

5.5       Change in Control Benefit. If a Change in Control occurs, followed within twenty-four (24) months by a Separation from Service prior to Normal Benefit Date, the Employer shall pay the Executive the Deferral Account balance at Separation from Service, plus an additional amount equal to the Contributions remaining to be made in accordance with Article 2 provided, however, that no earnings per share requirement shall apply. This benefit shall be paid in a lump sum or in quarterly installments up to 10 years, at the selection of the Executive, and shall commence the first day of the immediately subsequent quarter following Separation from Service. During the payment period, interest shall be credited on the unpaid portion of the benefit as described in Section 3.1(b)(ii). The quarterly payments shall be amortized in such a way so as to produce equal payments over the remaining payment period.  This will require quarterly reamortization for changes in the Crediting Rate.

5.6       Death Prior to Separation from Service and Disability. In the event the Executive dies prior to Separation from Service and Disability, the Employer shall pay the Beneficiary the Deferral Account balance as of the date of the Executive’s death, plus an additional amount equal to the Contributions remaining to be made in accordance with Article 2. This benefit shall be paid in a lump sum or in quarterly installments up to 10 years, at the selection of the Executive, and shall commence the first day of the immediately subsequent quarter following the Executive’s death. During the payment period, interest shall be credited on the unpaid portion of the benefit as described in Section 3.1(b)(ii). The quarterly payments shall be amortized in such a way so as to produce equal payments over the remaining payment period.  This will require quarterly reamortization for changes in the Crediting Rate.

5.7       One Benefit Only. The Executive and Beneficiary are entitled to a benefit under only one of Sections 4.1 through 4.6 of this Agreement, which shall be determined by the first event to occur that causes a benefit to be paid under this Agreement. The subsequent occurrence of other events shall not entitle the Executive or Beneficiary to other or additional benefits hereunder.

5.8       Death Subsequent to Commencement of Benefit Payments. In the event the Executive dies while receiving payments, but prior to receiving all payments due and owing hereunder, the Employer shall pay the Beneficiary the same amounts at the same times as the Employer would have paid the Executive, had the Executive survived.

5.9       Termination for Cause. If the Employer terminates the Executive’s employment for Cause or if the Executive takes any of the actions described in Section 9.10(i), (ii), (iii), (iv) or (v), then the Executive shall forfeit all unpaid benefits hereunder.

5.10       Restriction on Commencement of Distributions.  Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a Specified Employee at the time of Separation from Service, the provisions of this Section shall govern all distributions hereunder. Distributions which would otherwise be made to the Executive due to Separation from Service shall not be made during the first six (6) months following Separation from Service. Rather, any distribution which would otherwise be paid to the Executive during such period shall be accumulated and paid to the Executive in a lump sum on the first day of the seventh month following Separation from Service, or if earlier, upon the Executive’s death. All subsequent distributions shall be paid as they would have had this Section not applied.

5.11       Acceleration of Payments. Except as specifically permitted herein, no acceleration of the time or schedule of any payment may be made hereunder. Notwithstanding the foregoing, payments may be accelerated, in accordance with the provisions of Treasury Regulation §1.409A-3(j)(4) in the following circumstances: (i) as a result of certain domestic relations orders; (ii) in compliance with ethics agreements with the federal government; (iii) in compliance with the ethics laws or conflicts of interest laws; (iv) in limited cashouts (but not in excess of the limit under Code §402(g)(1)(B)); (v) to pay employment-related taxes; or (vi) to pay any taxes that may become due at any time that the Agreement fails to meet the requirements of Code Section 409A.

5.12       Delays in Payment by Employer. A payment may be delayed to a date after the designated payment date under any of the circumstances described below, and the provision will not fail to meet the requirements of establishing a permissible payment event. The delay in the payment will not constitute a subsequent deferral election, so long as the Employer treats all payments to similarly situated Participants on a reasonably consistent basis.

(a)       Payments subject to Code Section 162(m). If the Employer reasonably anticipates that the Employer’s deduction with respect to any distribution under this Agreement would be limited or eliminated by application of Code Section 162(m), then to the extent deemed necessary by the Employer to ensure that the entire amount of any distribution from this Agreement is deductible, the Employer may delay payment of any amount that would otherwise be distributed under this Agreement. The delayed amounts shall be distributed to the Executive (or the Beneficiary in the event of the Executive’s death) at the earliest date the Employer reasonably anticipates that the deduction of the payment of the amount will not be limited or eliminated by application of Code Section 162(m).

(b)       Payments that would violate Federal securities laws or other applicable law. A payment may be delayed where the Employer reasonably anticipates that the making of the payment will violate Federal securities laws or other applicable law provided that the payment is made at the earliest date at which the Employer reasonably anticipates that the making of the payment will not cause such violation. The making of a payment that would cause inclusion in gross income or the application of any penalty provision of the Internal Revenue Code is not treated as a violation of law.

(c)       Solvency. Notwithstanding the above, a payment may be delayed where the payment would jeopardize the ability of the Employer to continue as a going concern.

5.13       Treatment of Payment as Made on Designated Payment Date. Solely for purposes of determining compliance with Code Section 409A, any payment under this Agreement made after the required payment date shall be deemed made on the required payment date provided that such payment is made by the latest of: (i) the end of the calendar year in which the payment is due; (ii) the 15^th day of the third calendar month following the payment due date; (iii) if Employer cannot calculate the payment amount on account of administrative impracticality which is beyond the Executive’s control, the end of the first calendar year which payment calculation is practicable; and (iv) if Employer does not have sufficient funds to make the payment without jeopardizing the Employer’s solvency, in the first calendar year in which the Employer’s funds are sufficient to make the payment.

5.14       Facility of Payment. If a distribution is to be made to a minor, or to a person who is otherwise incompetent, then the Administrator may make such distribution: (i) to the legal guardian, or if none, to a parent of a minor payee with whom the payee maintains his or her residence; or (ii) to the conservator or administrator or, if none, to the person having custody of an incompetent payee. Any such distribution shall fully discharge the Employer and the Administrator from further liability on account thereof.

5.15       Excise Tax Limitation. Notwithstanding any provision of this Agreement to the contrary, if any benefit payment hereunder would be treated as an “excess parachute payment” under Code Section 280G, the Employer shall reduce such benefit payment to the extent necessary to avoid treating such benefit payment as an excess parachute payment. The Executive shall be entitled to only the reduced benefit and shall forfeit any amount over and above the reduced amount.

5.16       Changes in Form or Timing of Benefit Payments. The Employer and the Executive may, subject to the terms hereof, amend this Agreement to delay the timing or change the form of payments. Any such amendment:

(a)       must take effect not less than twelve (12) months after the amendment is made;

(b)       must, for benefits distributable due solely to the arrival of a specified date, or on account of Separation from Service or Change in Control, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made;

(c)       must, for benefits distributable due solely to the arrival of a specified date, be made not less than twelve (12) months before distribution is scheduled to begin; and

(d)       may not accelerate the time or schedule of any distribution.

Article 6

Beneficiaries

6.1       Designation of Beneficiaries. The Executive may designate any person to receive any benefits payable under the Agreement upon the Executive’s death, and the designation may be changed from time to time by the Executive by filing a new designation. Each designation will revoke all prior designations by the Executive, shall be in the form prescribed by the Administrator and shall be effective only when filed in writing with the Administrator during the Executive’s lifetime. If the Executive names someone other than the Executive’s spouse as a Beneficiary, the Administrator may, in its sole discretion, determine that spousal consent is required to be provided in a form designated by the Administrator, executed by the Executive’s spouse and returned to the Administrator. The Executive’s beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage is subsequently dissolved.

6.2       Absence of Beneficiary Designation. In the absence of a valid Beneficiary designation, or if, at the time any benefit payment is due to a Beneficiary, there is no living Beneficiary validly named by the Executive, the Employer shall pay the benefit payment to the Executive’s spouse. If the spouse is not living then the Employer shall pay the benefit payment to the Executive’s living descendants per stirpes, and if there are no living descendants, to the Executive’s estate. In determining the existence or identity of anyone entitled to a benefit payment, the Employer may rely conclusively upon information supplied by the Executive’s personal representative, executor, or administrator.

Article 7

ADMINISTRATION

7.1       Administrator Duties. The Administrator shall be responsible for the management, operation, and administration of the Agreement. When making a determination or calculation, the Administrator shall be entitled to rely on information furnished by the Employer, Executive or Beneficiary. No provision of this Agreement shall be construed as imposing on the Administrator any fiduciary duty under ERISA or other law, or any duty similar to any fiduciary duty under ERISA or other law.

7.2       Administrator Authority. The Administrator shall enforce this Agreement in accordance with its terms, shall be charged with the general administration of this Agreement, and shall have all powers necessary to accomplish its purposes.

7.3       Binding Effect of Decision. The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation or application of this Agreement and the rules and regulations promulgated hereunder shall be final, conclusive and binding upon all persons having any interest in this Agreement.

7.4       Compensation, Expenses and Indemnity. The Administrator shall serve without compensation for services rendered hereunder. The Administrator is authorized at the expense of the Employer to employ such legal counsel and recordkeeper as it may deem advisable to assist in the performance of its duties hereunder. Expense and fees in connection with the administration of this Agreement shall be paid by the Employer.

7.5       Employer Information. The Employer shall supply full and timely information to the Administrator on all matters relating to the Executive’s compensation, death, Disability or Separation from Service, and such other information as the Administrator reasonably requires.

7.6       Termination of Participation. If the Administrator determines in good faith that the Executive no longer qualifies as a member of a select group of management or highly compensated employees, as determined in accordance with ERISA, the Administrator shall have the right, in its sole discretion, to prohibit any further crediting to the Deferral Account.

7.7       Compliance with Code Section 409A. The Employer and the Executive intend that the Agreement comply with the provisions of Code Section 409A to prevent the inclusion in gross income of any amounts deferred hereunder in a taxable year prior to the year in which amounts are actually paid to the Executive or Beneficiary. This Agreement shall be construed, administered and governed in a manner that affects such intent, and the Administrator shall not take any action that would be inconsistent therewith.

Article 8

Claims and Review Procedures

8.1       Claims Procedure. A Claimant who has not received benefits under this Agreement that he or she believes should be distributed shall make a claim for such benefits as follows.

(a)       Initiation – Written Claim. The Claimant initiates a claim by submitting to the Administrator a written claim for the benefits. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant. All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant.

(b)       Timing of Administrator Response. The Administrator shall respond to such Claimant within ninety (90) days after receiving the claim. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional ninety (90) days by notifying the Claimant in writing, prior to the end of the initial ninety (90) day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision.

(c)       Notice of Decision. If the Administrator denies part or all of the claim, the Administrator shall notify the Claimant in writing of such denial. The Administrator shall write the notification in a manner calculated to be understood by the Claimant. The notification shall set forth: (i) the specific reasons for the denial; (ii) a reference to the specific provisions of this Agreement on which the denial is based; (iii) a description of any additional information or material necessary for the Claimant to perfect the claim and an explanation of why it is needed; (iv) an explanation of this Agreement’s review procedures and the time limits applicable to such procedures; and (v) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

8.2       Review Procedure. If the Administrator denies part or all of the claim, the Claimant shall have the opportunity for a full and fair review by the Administrator of the denial as follows.

(a)       Initiation – Written Request. To initiate the review, the Claimant, within sixty (60) days after receiving the Administrator’s notice of denial, must file with the Administrator a written request for review.

(b)       Additional Submissions – Information Access. The Claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Administrator shall also provide the Claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits.

(c)       Considerations on Review. In considering the review, the Administrator shall take into account all materials and information the Claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

(d)       Timing of Administrator Response. The Administrator shall respond in writing to such Claimant within sixty (60) days after receiving the request for review. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional sixty (60) days by notifying the Claimant in writing, prior to the end of the initial sixty (60) day period, that an additional period is required. The

notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision.

(e)       Notice of Decision. The Administrator shall notify the Claimant in writing of its decision on review. The Administrator shall write the notification in a manner calculated to be understood by the Claimant. The notification shall set forth: (a) the specific reasons for the denial; (b) a reference to the specific provisions of this Agreement on which the denial is based; (c) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits; and (d) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a).

ARTICLE 9

AMENDMENT AND TERMINATION

9.1       Agreement Amendment Generally. Except as provided in Section 8.2, this Agreement may be amended only by a written agreement signed by both the Employer and the Executive.

9.2 Amendment to Insure Proper Characterization of Agreement. Notwithstanding anything in this Agreement to the contrary, the Agreement may be amended by the Employer at any time, if found necessary in the opinion of the Employer, i) to ensure that the Agreement is characterized as plan of deferred compensation maintained for a select group of management or highly compensated employees as described under ERISA, ii) to conform the Agreement to the requirements of any applicable law or iii) to comply with the written instructions of the Employer’s auditors or banking regulators.

9.3       Agreement Termination Generally. Except as provided in Section 8.4, this Agreement may be terminated only by a written agreement signed by the Employer and the Executive. Such termination shall not cause a distribution of benefits under this Agreement. Rather, upon such termination benefit distributions will be made at the earliest distribution event permitted under Article 5.

9.4       Effect of Complete Termination. Notwithstanding anything to the contrary in Section 8.3, and subject to the requirements of Code Section 409A and Treasury Regulations §1.409A-3(j)(4)(ix), the Employer may completely terminate and liquidate the Agreement in accordance with subsections (a), (b) or (c) below. In the event of such a complete termination in accordance with subsection (a), the Employer shall pay the Executive the Deferral Account balance. In the event of such a complete termination in accordance with subsection (b) or (c), the Employer shall pay the Executive the Deferral Account balance, plus an additional amount equal to the Contributions remaining to be made in accordance with Article 2 provided, however, that no earnings per share requirement shall apply. In any event, such complete termination of the Agreement shall occur only under the following circumstances and conditions.

(a)       Corporate Dissolution or Bankruptcy. The Employer may terminate and liquidate this Agreement within twelve (12) months of a corporate dissolution taxed under Code Section 331, or with the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that all benefits paid under the Agreement are included in the Executive’s gross income in the latest of: (i) the calendar year which the termination occurs; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the payment is administratively practicable.

(b)       Change in Control. The Employer may terminate and liquidate this Agreement by taking irrevocable action to terminate and liquidate within the thirty (30) days preceding or the twelve (12) months following a Change in Control. This Agreement will then be treated as terminated only if all substantially similar arrangements sponsored by the Employer which are treated as deferred under a single plan under Treasury Regulations §1.409A-1(c)(2) are terminated and liquidated with respect to each participant who experienced the Change in Control so that the Executive and any participants in any such similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date the Employer takes the irrevocable action to terminate the arrangements.

(c)       Discretionary Termination. The Employer may terminate and liquidate this Agreement provided that: (i) the termination does not occur proximate to a downturn in the financial health of the Employer; (ii) all arrangements sponsored by the Employer and Affiliates that would be aggregated with any terminated arrangements under Treasury Regulations §1.409A-1(c) are terminated; (iii) no payments, other than payments that would be payable under the terms of this Agreement if the termination had not occurred, are made within twelve (12) months of the date the Employer takes the irrevocable action to terminate this Agreement; (iv) all payments are made within twenty-four (24) months following the date the Employer takes the irrevocable action to terminate and liquidate this Agreement; and (v) neither the Employer nor any of its Affiliates adopt a new arrangement that would be aggregated with any terminated arrangement under Treasury Regulations §1.409A-1(c) if the Executive participated in both arrangements, at any time within three (3) years following the date the Employer takes the irrevocable action to terminate this Agreement.

Article 10

MISCELLANEOUS

10.1       No Effect on Other Rights. This Agreement constitutes the entire agreement between the Employer and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein. Nothing contained herein will confer upon the Executive the right to be retained in the service of the Employer nor limit the right of the Employer to discharge or otherwise deal with the Executive without regard to the existence hereof.

10.2       State Law. This Agreement and all rights hereunder shall be governed by and construed according to the laws of the State of New Jersey except to the extent preempted by the laws of the United States of America.

10.3       Validity. In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal or invalid provision had never been inserted herein.

10.4       Nonassignability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

10.5       Unsecured General Creditor Status. Payment to the Executive or any Beneficiary hereunder shall be made from assets which shall continue, for all purposes, to be part of the general, unrestricted assets of the Employer and no person shall have any interest in any such asset by virtue of any provision of this Agreement. The Employer’s obligation hereunder shall be an unfunded and unsecured promise to pay money in the future. In the event that the Employer purchases an insurance policy insuring the life of the Executive to recover the cost of providing benefits hereunder, neither the Executive nor the Beneficiary shall have any rights whatsoever in said policy or the proceeds therefrom.

10.6       Life Insurance. If the Employer chooses to obtain insurance on the life of the Executive in connection with its obligations under this Agreement, the Executive hereby agrees to take such physical examinations and to truthfully and completely supply such information as may be required by the Employer or the insurance company designated by the Employer.

10.7       Unclaimed Benefits. The Executive shall keep the Employer informed of the Executive’s current address and the current address of the Beneficiary. If the location of the Executive is not made known to the Employer within three years after the date upon which any payment of any benefits may first be made, the Employer shall delay payment of the Executive’s benefit payment(s) until the location of the Executive is made known to the Employer; however, the Employer shall only be obligated to hold such benefit payment(s) for the Executive until the expiration of three (3) years. Upon expiration of the three (3) year period, the Employer may discharge its obligation by payment to the Beneficiary. If the location of the Beneficiary is not made known to the Employer by the end of an additional two (2) month period following expiration of the three (3) year period, the Employer may discharge its obligation by payment to the Executive’s estate. If there is no estate in existence at such time or if such fact cannot be determined by the Employer, the Executive and Beneficiary shall thereupon forfeit all rights to any benefits provided under this Agreement.

10.8       Suicide or Misstatement. The Executive shall forfeit any non-distributed amounts in the Deferral Account if the Executive commits suicide within two (2) years after the Effective Date, or if an insurance company which issued a life insurance policy covering the Executive and owned by the Employer denies coverage (i) for material misstatements of fact made by the Executive on an application for life insurance, or (ii) for any other reason.

10.9       Regulatory Restrictions.

a)       Removal. If the Executive is removed from office or permanently prohibited from participating in the Employer’s affairs by an order issued under section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1), the Executive shall forfeit any non-distributed amounts in the Deferral Account.

b)       Default. If the Employer is in “default” or “in danger of default” as those terms are defined in section 3(x) of the Federal Deposit Insurance Act, 12 U.S.C. 1813(x) the Executive shall forfeit any non-distributed amounts in the Deferral Account.

c)       FDIC Open-Bank Assistance. If the Federal Deposit Insurance Corporation enters into an agreement to provide assistance to or on behalf of the Employer under the authority contained in Federal Deposit Insurance Act section 13(c), 12 U.S.C. 1823(c) the Executive shall forfeit any non-distributed amounts in the Deferral Account.

10.10       Forfeiture Provision. The Executive shall forfeit any unpaid benefit hereunder, if the Executive, directly or indirectly, either as an individual or as a proprietor, stockholder, partner, officer, director, employee, agent, consultant or independent contractor of any individual, partnership, corporation or other entity (excluding an ownership interest of three percent (3%) or less in the stock of a publicly-traded company):

(i)       becomes employed by, participates in, or becomes connected in any manner with the ownership, management, operation or control of any bank, savings and loan or other similar financial institution if the Executive’s responsibilities will include providing banking or other financial services within fifty (50) miles of the Employer’s main office location;

(ii)       participates in any way in hiring or otherwise engaging, or assisting any other person or entity in hiring or otherwise engaging, on a temporary, part-time or permanent basis, any individual who was employed by the Employer as of the date of termination of the Executive’s employment;

(iii)       assists, advises, or serves in any capacity, representative or otherwise, any third party in any action against the Employer or transaction involving the Employer;

(iv)       sells, offers to sell, provides banking or other financial services, assists any other person in selling or providing banking or other financial services, or solicits or otherwise competes for, either directly or indirectly, any orders, contract, or accounts for services of a kind or nature like or substantially similar to the financial services performed or financial products sold by the Employer (the preceding hereinafter referred to as “Services”), to or from any person or entity from whom the Executive or the Employer, to the knowledge of the Executive provided banking or other financial services, sold, offered to sell or solicited orders, contracts or accounts for Services during the three (3) year period immediately prior to the termination of the Executive’s employment;

(v)       divulges, discloses, or communicates to others in any manner whatsoever, any confidential information of the Employer, to the knowledge of the Executive, including, but not limited to, the names and addresses of customers or prospective customers, of the Employer, as they may have existed from time to time, of work performed or services rendered for any customer, any method and/or procedures relating to projects or other work developed for the Employer, earnings or other information concerning the Employer. The restrictions contained in this subparagraph (v) apply to all information regarding the Employer, regardless of the source who provided or compiled such information. Notwithstanding anything to the contrary, all information referred to herein shall not be disclosed unless and until it becomes known to the general public from sources other than the Executive.

The forfeiture provision detailed in this Section 9.10 shall not apply following a Change in Control or following Early Involuntary Termination.

10.11       Notice. Any notice, consent or demand required or permitted to be given to the Employer or Administrator under this Agreement shall be sufficient if in writing and hand-delivered or sent by registered or certified mail to the Employer’s principal business office. Any notice or filing required or permitted to be given to the Executive or Beneficiary under this Agreement shall be sufficient if in writing and hand-delivered or sent by mail to the last known address of the Executive or Beneficiary, as appropriate. Any notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or on the receipt for registration or certification.

10.12       Headings and Interpretation. Headings and sub-headings in this Agreement are inserted for reference and convenience only and shall not be deemed part of this Agreement. Wherever the fulfillment of the intent and purpose of this Agreement requires and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.

10.13 Alternative Action. In the event it becomes impossible for the Employer or the Administrator to perform any act required by this Agreement due to regulatory or other constraints, the Employer or Administrator may perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Employer, provided that such alternative act does not violate Code Section 409A.

10.14       Coordination with Other Benefits. The benefits provided for the Executive or the Beneficiary under this Agreement are in addition to any other benefits available to the Executive under any other plan or program for employees of the Employer. This Agreement shall supplement and shall not supersede, modify, or amend any other such plan or program except as may otherwise be expressly provided herein.

10.15       Inurement. This Agreement shall be binding upon and shall inure to the benefit of the Employer, its successor and assigns, and the Executive, the Executive’s successors, heirs, executors, administrators, and the Beneficiary.

10.16       Tax Withholding. The Employer may make such provisions and take such action as it deems necessary or appropriate for the withholding of any taxes which the Employer is required by any law or regulation to withhold in connection with any benefits under the Agreement. The Executive shall be responsible for the payment of all individual tax liabilities relating to any benefits paid hereunder.

10.17       Aggregation of Agreement. If the Employer offers other non-qualified deferred compensation plans in addition to this Agreement, this Agreement and those plans shall be treated as a single plan to the extent required under Code Section 409A.

IN WITNESS WHEREOF, the Executive and a representative of the Employer have executed this Agreement document as indicated below:

Executive:	Employer:
/s/ Finn M.W. Caspersen, Jr.	By:	/s/ Douglas L. Kennedy
	Its:	President and Chief Executive Officer

DEFERRED COMPENSATION AGREEMENT

Distribution Election Form

Form and Timing of Distributions

Benefit	Distribution of Benefit (Indicate number of years between 2 and 10)
§ 5.1 - Normal Benefit	Quarterly installments for _____ years
§ 5.2 - Early Voluntary Termination Benefit * § 5.3 - Early Involuntary Termination Benefit*	Quarterly installments for _____ years
§ 5.4 - Disability Benefit	Quarterly installments for _____ years
§ 5.5 – Change in Control Benefit	_____ Lump sum or _____ Quarterly installments for _____ years (Initial either lump sum or installments.)
§ 5.6 - Death Benefit	_____ Lump Sum or _____ Quarterly installments for _____ years (Initial either lump sum or installments.)

*Per 409A, the form and timing for these two triggering events must be the same.

Name:

Signature:

Date:

Received by the Administrator this _____ day of ____________________, 20___

By:

Title:

DEFERRED COMPENSATION AGREEMENT

Beneficiary Designation

I, Finn M. W. Caspersen, Jr., designate the following as Beneficiary under this Agreement:

Primary
	%
	%
Contingent
	%
	%

I understand that I may change this beneficiary designation by delivering a new written designation to the Administrator, which shall be effective only upon receipt by the Administrator prior to my death. I further understand that the designation will be automatically revoked if the Beneficiary predeceases me or if I have named my spouse as Beneficiary and our marriage is subsequently dissolved.

Signature:          __________________________                    Date: _______

SPOUSAL CONSENT (Required only if Administrator requests and someone other than spouse is named Beneficiary)

I consent to the beneficiary designation above. I also acknowledge that if I am named Beneficiary and my marriage is subsequently dissolved, the beneficiary designation will be automatically revoked.

Spouse Name:          ___________________________________

Signature:          __________________________          Date: _______

Received by the Administrator this ________ day of ___________________, 20__

By:

Title:

EX-10.C

Exhibit (C)

DEFERRED COMPENSATION AGREEMENT

THIS DEFERRED COMPENSATION AGREEMENT (this “Agreement”), adopted this 4^th day of August, 2017, by and between Peapack-Gladstone Bank located in Bedminster, New Jersey (the “Employer”), and John P. Babcock (the “Executive”), formalizes the agreements and understanding between the Employer and the Executive.

WITNESSETH:

WHEREAS, the Executive is employed by the Employer;

WHEREAS, the Employer recognizes the valuable services the Executive has performed for the Employer and wishes to further encourage the Executive’s retention and continued employment;

WHEREAS, the Employer and the Executive intend this Agreement shall at all times be administered and interpreted in compliance with Code Section 409A; and

WHEREAS, the Employer intends this Agreement shall at all times be administered and interpreted in such a manner as to constitute an unfunded nonqualified deferred compensation arrangement, maintained primarily to provide supplemental benefits for the Executive, in order to encourage retention and continued employment of said Executive;

WHEREAS, the Employer wishes to provide the terms and conditions upon which the Employer shall pay additional benefits to the Executive, to encourage retention and continued employment; NOW THEREFORE, in consideration of the premises and of the mutual promises herein contained, the Employer and the Executive agree as follows:

ARTICLE 1

DEFINITIONS

For the purpose of this Agreement, the following phrases or terms shall have the indicated meanings:

1.1        “Administrator” means the Board or its designee.

1.2       “Affiliate” means any business entity with whom the Employer would be considered a single employer under Section 414(b) and 414(c) of the Code. Such term shall be interpreted in a manner consistent with the definition of “service recipient” contained in Code Section 409A.

1.3       “Beneficiary” means the person or persons designated in writing by the Executive to receive benefits hereunder in the event of the Executive’s death.

1.4       “Board” means the Board of Directors of the Employer.

1.5       “Cause” means any of the following acts or circumstances: gross negligence or gross neglect of duties to the Employer; conviction of a felony or of a gross misdemeanor involving moral turpitude in connection with the Executive’s employment with the Employer; or fraud, disloyalty, dishonesty or willful violation of any law or significant Employer policy committed in connection with the Executive's employment and resulting in a material adverse effect on the Employer.

1.6       “Change in Control” means a change in the ownership or effective control of the Employer, or in the ownership of a substantial portion of the assets of the Employer, as such change is defined in Code Section 409A and regulations thereunder.

1.7       “Claimant” means a person who believes that he or she is being denied a benefit to which he or she is entitled hereunder.

1.8       “Code” means the Internal Revenue Code of 1986, as amended.

1.9       “Contribution” means the amount the Employer credits to the Deferral Account according to the provisions of Article 2.

1.10       “Crediting Rate” means the average Wall Street Journal prime rate on the last day of the prior quarter (March 31 prime rate for the June 30 quarter), provided that such rate shall not be more than seven and one-half percent (7.5%).

1.11       “Disability” means a condition of the Executive whereby the Executive either: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer. The Administrator will determine whether the Executive has incurred a Disability based on its own good faith determination and may require the Executive to submit to reasonable physical and mental examinations for this purpose. The Executive will also be deemed to have incurred a Disability if determined to be totally disabled by the Social Security Administration or in accordance with a disability insurance program, provided that the definition of disability applied under such disability insurance program complies with the initial sentence of this Section.

1.12        “Early Involuntary Termination” means a Separation from Service prior to Normal Benefit Date which (i) is a Termination for Good Reason or (ii) occurs other than at the Executive’s request and for reasons other than Cause or Disability or (iii) occurs more than twenty-four (24) months following a Change in Control.

1.13       “Early Voluntary Termination” means that the Executive, prior to Normal Benefit Date, experiences a Separation from Service for reasons other than Cause, Disability or Early Involuntary Termination, or following a Change in Control.

1.14       “Effective Date” means August 4, 2017.

1.15       “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

1.16       “Holding Company” means Peapack-Gladstone Financial Corporation, the Employer’s parent company.

1.17       “Normal Benefit Date” means June 30, 2022.

1.18       “Separation from Service” means a termination of the Executive’s employment with the Employer and its Affiliates for reasons other than death or Disability. A Separation from Service may occur as of a specified date for purposes of the Agreement even if the Executive continues to provide some services for the Employer or its Affiliates after that date, provided that the facts and circumstances indicate that the Employer and the Executive reasonably anticipated at that date that either no further services would be performed after that date, or that the level of bona fide services the Executive would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed over the immediately preceding thirty-six (36) month period (or the full period during which the Executive performed services for the Employer, if that is less than thirty-six (36) months). A Separation from Service will not be deemed to have occurred while the Executive is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six (6) months or, if longer, the period for which a statute or contract provides the Executive with the right to reemployment with the Employer. If the Executive’s leave exceeds six (6) months but the Executive is not entitled to reemployment under a statute or contract, the Executive incurs a Separation of Service on the next day following the expiration of such six (6) month period. In determining whether a Separation of Service occurs the Administrator shall take into account, among other things, the definition of “service recipient” and “employer” set forth in Treasury regulation §1.409A-1(h)(3). The Administrator shall have full and final authority, to determine conclusively whether a Separation from Service occurs, and the date of such Separation from Service.

1.19       “Specified Employee” means an individual that satisfies the definition of a “key employee” of the Employer as such term is defined in Code §416(i) (without regard to Code §416(i)(5)), provided that the stock of the Employer is publicly traded on an established securities market or otherwise, as defined in Code §1.897-1(m). If the Executive is a key employee at any time during the twelve (12) months ending on December 31, the Executive is a Specified Employee for the twelve (12) month period commencing on the first day of the following April.

1.20       “Termination for Good Reason” means Separation from Service after the occurrence of one or more of the following circumstances without the Executive’s consent:

(i)        a material reduction in the Executive’s base compensation;

(ii)        an involuntary relocation of the Executive’s principal place of business to a location that is more than 50 miles from the Executive’s workplace as of the date hereof;

(iii)       the assignment of the Executive to any duties which are fundamentally and significantly inconsistent with the Executive’s duties with the Employer as of the date hereof or a fundamental and substantial reduction of the Executive’s duties or responsibilities;

provided, however, that prior to any Termination for Good Reason, the Executive must first provide written notice to the Employer within sixty (60) days of the initial existence of the condition, describing the existence of such condition, and the Employer shall thereafter have the right to remedy the condition within thirty (30) days of the date the Employer received the written notice from the Executive. If the Employer remedies the condition within such thirty (30) day cure period, then no good reason shall be deemed to exist with respect to such condition. If the Employer does not remedy the condition within such thirty (30) day cure period, then the Executive may deliver a notice of Termination for Good Reason at any time within sixty (60) days following the expiration of such cure period.

Article 2

CONTRIBUTIONS

The Employer has targeted annual Contributions of One Hundred Thousand Dollars ($100,000) on the Executive’s behalf for five (5) years. The Employer intends to make quarterly Contributions of Twenty Five Thousand Dollars ($25,000) toward this annual total as of the first day of each calendar quarter (except that the first quarterly payment will commence on the Effective Date), provided that the Executive is employed on such date and the Employer generated a minimum earnings per share equal to at least sixty percent (60%) of budgeted earnings per share (to be adjusted for any stock dividends or splits) for the previous publicly reported 12 month period (i.e. 12 months ended March 31, 2017 for the July 1, 2017 contribution).

Article 3

dEFERRAL ACCOUNT

3.1       Establishing and Crediting of Deferral Account. The Employer shall establish a Deferral Account on its books for the Executive and shall credit to the Deferral Account the following amounts:

(a)       Any Contributions under Article 2 hereof; and

(b)       Interest as follows:

(i)       on the last day of each quarter until the earliest of Separation from Service, Disability or the Executive’s death, interest shall be credited on the Deferral Account balance at an annual rate equal to the Crediting Rate.

(ii)       on the last day of each quarter after Separation from Service, Disability or the Executive’s death, interest shall be credited on the Deferral Account balance at an annual rate equal to the Crediting Rate.

3.2       Recordkeeping Device Only. The Deferral Account is solely a device for measuring amounts to be paid under this Agreement and is not a trust fund of any kind.

ARTICLE 4

VESTING

Executive will vest in his Deferral Account balance one-third each year over the first three years based on a quarterly vesting of 8.3325% at each quarter end beginning September 30, 2017 until fully vested(i.e. on September 30, 2017 Executive would be 8.3325% vested in the accumulated account balance (including interest) and on September 30, 2018 Executive would be 33 1/3 percent vested in the accumulated account balance (including interest)).

ARTICLE 5

PAYMENT OF BENEFITS

5.1       Normal Benefit. Upon Separation from Service after Normal Benefit Date, the Employer shall pay the Executive the Deferral Account balance calculated at Separation from Service. This benefit shall be paid in quarterly installments between 2 years and 10 years, at the selection of the Executive, and shall commence the first day of the immediately subsequent quarter following Separation from Service. During the payment period, interest shall be credited on the unpaid portion of the Deferral Account balance as described in Section 3.1(b)(ii). The quarterly payments shall be amortized in such a way so as to produce equal payments over the remaining payment period.  This will require quarterly reamortization for changes in the Crediting Rate.

5.2       Early Voluntary Termination Benefit. If Early Voluntary Termination occurs, the Employer shall pay the Executive the vested portion of the Deferral Account balance. This benefit shall be paid in quarterly installments between 2 years and 10 years, at the selection of the Executive, and shall commence the first day of the immediately subsequent quarter following Separation from Service. During the payment period, interest shall be credited on the unpaid portion of the Deferral Account balance as described in Section 3.1(b)(ii). The quarterly payments shall be amortized in such a way so as to produce equal payments over the remaining payment period.  This will require quarterly reamortization for changes in the Crediting Rate.

5.3       Early Involuntary Termination Benefit. If Early Involuntary Termination occurs, the Employer shall pay the Executive the Deferral Account balance at Separation from Service, plus an additional amount equal to the Contributions remaining to be made in accordance with Article 2. This benefit shall be paid in quarterly installments between 2 years and 10 years, at the selection of the Executive, and shall commence the first day of the immediately subsequent quarter following Separation from Service. During the payment period, interest shall be credited on the unpaid portion of the benefit as described in Section 3.1(b)(ii). The quarterly payments shall be amortized in such a way so as to produce equal payments over the remaining payment period.  This will require quarterly reamortization for changes in the Crediting Rate.

5.4       Disability Benefit. If the Executive experiences a Disability prior to Separation from Service and Normal Benefit Date, the Employer shall pay the Executive the Deferral Account balance at Disability, plus an additional amount equal to the Contributions remaining to be made in accordance with Article 2. This benefit shall be paid in quarterly installments between 2 years and 10 years, at the selection of the Executive, and shall commence the first day of the immediately subsequent quarter following Disability. During the payment period, interest shall be credited on the unpaid portion of the benefit as described in Section 3.1(b)(ii). The quarterly payments shall be amortized in such a way so as to produce equal payments over the remaining payment period.  This will require quarterly reamortization for changes in the Crediting Rate.

5.5       Change in Control Benefit. If a Change in Control occurs, followed within twenty-four (24) months by a Separation from Service prior to Normal Benefit Date, the Employer shall pay the Executive the Deferral Account balance at Separation from Service, plus an additional amount equal to the Contributions remaining to be made in accordance with Article 2 provided, however, that no earnings per share requirement shall apply. This benefit shall be paid in a lump sum or in quarterly installments up to 10 years, at the selection of the Executive, and shall commence the first day of the immediately subsequent quarter following Separation from Service. During the payment period, interest shall be credited on the unpaid portion of the benefit as described in Section 3.1(b)(ii). The quarterly payments shall be amortized in such a way so as to produce equal payments over the remaining payment period.  This will require quarterly reamortization for changes in the Crediting Rate.

5.6       Death Prior to Separation from Service and Disability. In the event the Executive dies prior to Separation from Service and Disability, the Employer shall pay the Beneficiary the Deferral Account balance as of the date of the Executive’s death, plus an additional amount equal to the Contributions remaining to be made in accordance with Article 2. This benefit shall be paid in a lump sum or in quarterly installments up to 10 years, at the selection of the Executive, and shall commence the first day of the immediately subsequent quarter following the Executive’s death. During the payment period, interest shall be credited on the unpaid portion of the benefit as described in Section 3.1(b)(ii). The quarterly payments shall be amortized in such a way so as to produce equal payments over the remaining payment period.  This will require quarterly reamortization for changes in the Crediting Rate.

5.7       One Benefit Only. The Executive and Beneficiary are entitled to a benefit under only one of Sections 4.1 through 4.6 of this Agreement, which shall be determined by the first event to occur that causes a benefit to be paid under this Agreement. The subsequent occurrence of other events shall not entitle the Executive or Beneficiary to other or additional benefits hereunder.

5.8       Death Subsequent to Commencement of Benefit Payments. In the event the Executive dies while receiving payments, but prior to receiving all payments due and owing hereunder, the Employer shall pay the Beneficiary the same amounts at the same times as the Employer would have paid the Executive, had the Executive survived.

5.9       Termination for Cause. If the Employer terminates the Executive’s employment for Cause or if the Executive takes any of the actions described in Section 9.10(i), (ii), (iii), (iv) or (v), then the Executive shall forfeit all unpaid benefits hereunder.

5.10       Restriction on Commencement of Distributions.  Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a Specified Employee at the time of Separation from Service, the provisions of this Section shall govern all distributions hereunder. Distributions which would otherwise be made to the Executive due to Separation from Service shall not be made during the first six (6) months following Separation from Service. Rather, any distribution which would otherwise be paid to the Executive during such period shall be accumulated and paid to the Executive in a lump sum on the first day of the seventh month following Separation from Service, or if earlier, upon the Executive’s death. All subsequent distributions shall be paid as they would have had this Section not applied.

5.11       Acceleration of Payments. Except as specifically permitted herein, no acceleration of the time or schedule of any payment may be made hereunder. Notwithstanding the foregoing, payments may be accelerated, in accordance with the provisions of Treasury Regulation §1.409A-3(j)(4) in the following circumstances: (i) as a result of certain domestic relations orders; (ii) in compliance with ethics agreements with the federal government; (iii) in compliance with the ethics laws or conflicts of interest laws; (iv) in limited cashouts (but not in excess of the limit under Code §402(g)(1)(B)); (v) to pay employment-related taxes; or (vi) to pay any taxes that may become due at any time that the Agreement fails to meet the requirements of Code Section 409A.

5.12       Delays in Payment by Employer. A payment may be delayed to a date after the designated payment date under any of the circumstances described below, and the provision will not fail to meet the requirements of establishing a permissible payment event. The delay in the payment will not constitute a subsequent deferral election, so long as the Employer treats all payments to similarly situated Participants on a reasonably consistent basis.

(a)       Payments subject to Code Section 162(m). If the Employer reasonably anticipates that the Employer’s deduction with respect to any distribution under this Agreement would be limited or eliminated by application of Code Section 162(m), then to the extent deemed necessary by the Employer to ensure that the entire amount of any distribution from this Agreement is deductible, the Employer may delay payment of any amount that would otherwise be distributed under this Agreement. The delayed amounts shall be distributed to the Executive (or the Beneficiary in the event of the Executive’s death) at the earliest date the Employer reasonably anticipates that the deduction of the payment of the amount will not be limited or eliminated by application of Code Section 162(m).

(b)       Payments that would violate Federal securities laws or other applicable law. A payment may be delayed where the Employer reasonably anticipates that the making of the payment will violate Federal securities laws or other applicable law provided that the payment is made at the earliest date at which the Employer reasonably anticipates that the making of the payment will not cause such violation. The making of a payment that would cause inclusion in gross income or the application of any penalty provision of the Internal Revenue Code is not treated as a violation of law.

(c)       Solvency. Notwithstanding the above, a payment may be delayed where the payment would jeopardize the ability of the Employer to continue as a going concern.

5.13       Treatment of Payment as Made on Designated Payment Date. Solely for purposes of determining compliance with Code Section 409A, any payment under this Agreement made after the required payment date shall be deemed made on the required payment date provided that such payment is made by the latest of: (i) the end of the calendar year in which the payment is due; (ii) the 15^th day of the third calendar month following the payment due date; (iii) if Employer cannot calculate the payment amount on account of administrative impracticality which is beyond the Executive’s control, the end of the first calendar year which payment calculation is practicable; and (iv) if Employer does not have sufficient funds to make the payment without jeopardizing the Employer’s solvency, in the first calendar year in which the Employer’s funds are sufficient to make the payment.

5.14       Facility of Payment. If a distribution is to be made to a minor, or to a person who is otherwise incompetent, then the Administrator may make such distribution: (i) to the legal guardian, or if none, to a parent of a minor payee with whom the payee maintains his or her residence; or (ii) to the conservator or administrator or, if none, to the person having custody of an incompetent payee. Any such distribution shall fully discharge the Employer and the Administrator from further liability on account thereof.

5.15       Excise Tax Limitation. Notwithstanding any provision of this Agreement to the contrary, if any benefit payment hereunder would be treated as an “excess parachute payment” under Code Section 280G, the Employer shall reduce such benefit payment to the extent necessary to avoid treating such benefit payment as an excess parachute payment. The Executive shall be entitled to only the reduced benefit and shall forfeit any amount over and above the reduced amount.

5.16       Changes in Form or Timing of Benefit Payments. The Employer and the Executive may, subject to the terms hereof, amend this Agreement to delay the timing or change the form of payments. Any such amendment:

(a)       must take effect not less than twelve (12) months after the amendment is made;

(b)       must, for benefits distributable due solely to the arrival of a specified date, or on account of Separation from Service or Change in Control, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made;

(c)       must, for benefits distributable due solely to the arrival of a specified date, be made not less than twelve (12) months before distribution is scheduled to begin; and

(d)       may not accelerate the time or schedule of any distribution.

Article 6

Beneficiaries

6.1       Designation of Beneficiaries. The Executive may designate any person to receive any benefits payable under the Agreement upon the Executive’s death, and the designation may be changed from time to time by the Executive by filing a new designation. Each designation will revoke all prior designations by the Executive, shall be in the form prescribed by the Administrator and shall be effective only when filed in writing with the Administrator during the Executive’s lifetime. If the Executive names someone other than the Executive’s spouse as a Beneficiary, the Administrator may, in its sole discretion, determine that spousal consent is required to be provided in a form designated by the Administrator, executed by the Executive’s spouse and returned to the Administrator. The Executive’s beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage is subsequently dissolved.

6.2       Absence of Beneficiary Designation. In the absence of a valid Beneficiary designation, or if, at the time any benefit payment is due to a Beneficiary, there is no living Beneficiary validly named by the Executive, the Employer shall pay the benefit payment to the Executive’s spouse. If the spouse is not living then the Employer shall pay the benefit payment to the Executive’s living descendants per stirpes, and if there are no living descendants, to the Executive’s estate. In determining the existence or identity of anyone entitled to a benefit payment, the Employer may rely conclusively upon information supplied by the Executive’s personal representative, executor, or administrator.

Article 7

ADMINISTRATION

7.1       Administrator Duties. The Administrator shall be responsible for the management, operation, and administration of the Agreement. When making a determination or calculation, the Administrator shall be entitled to rely on information furnished by the Employer, Executive or Beneficiary. No provision of this Agreement shall be construed as imposing on the Administrator any fiduciary duty under ERISA or other law, or any duty similar to any fiduciary duty under ERISA or other law.

7.2       Administrator Authority. The Administrator shall enforce this Agreement in accordance with its terms, shall be charged with the general administration of this Agreement, and shall have all powers necessary to accomplish its purposes.

7.3       Binding Effect of Decision. The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation or application of this Agreement and the rules and regulations promulgated hereunder shall be final, conclusive and binding upon all persons having any interest in this Agreement.

7.4       Compensation, Expenses and Indemnity. The Administrator shall serve without compensation for services rendered hereunder. The Administrator is authorized at the expense of the Employer to employ such legal counsel and recordkeeper as it may deem advisable to assist in the performance of its duties hereunder. Expense and fees in connection with the administration of this Agreement shall be paid by the Employer.

7.5       Employer Information. The Employer shall supply full and timely information to the Administrator on all matters relating to the Executive’s compensation, death, Disability or Separation from Service, and such other information as the Administrator reasonably requires.

7.6       Termination of Participation. If the Administrator determines in good faith that the Executive no longer qualifies as a member of a select group of management or highly compensated employees, as determined in accordance with ERISA, the Administrator shall have the right, in its sole discretion, to prohibit any further crediting to the Deferral Account.

7.7       Compliance with Code Section 409A. The Employer and the Executive intend that the Agreement comply with the provisions of Code Section 409A to prevent the inclusion in gross income of any amounts deferred hereunder in a taxable year prior to the year in which amounts are actually paid to the Executive or Beneficiary. This Agreement shall be construed, administered and governed in a manner that affects such intent, and the Administrator shall not take any action that would be inconsistent therewith.

Article 8

Claims and Review Procedures

8.1       Claims Procedure. A Claimant who has not received benefits under this Agreement that he or she believes should be distributed shall make a claim for such benefits as follows.

(a)       Initiation – Written Claim. The Claimant initiates a claim by submitting to the Administrator a written claim for the benefits. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant. All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant.

(b)       Timing of Administrator Response. The Administrator shall respond to such Claimant within ninety (90) days after receiving the claim. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional ninety (90) days by notifying the Claimant in writing, prior to the end of the initial ninety (90) day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision.

(c)       Notice of Decision. If the Administrator denies part or all of the claim, the Administrator shall notify the Claimant in writing of such denial. The Administrator shall write the notification in a manner calculated to be understood by the Claimant. The notification shall set forth: (i) the specific reasons for the denial; (ii) a reference to the specific provisions of this Agreement on which the denial is based; (iii) a description of any additional information or material necessary for the Claimant to perfect the claim and an explanation of why it is needed; (iv) an explanation of this Agreement’s review procedures and the time limits applicable to such procedures; and (v) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

8.2       Review Procedure. If the Administrator denies part or all of the claim, the Claimant shall have the opportunity for a full and fair review by the Administrator of the denial as follows.

(a)       Initiation – Written Request. To initiate the review, the Claimant, within sixty (60) days after receiving the Administrator’s notice of denial, must file with the Administrator a written request for review.

(b)       Additional Submissions – Information Access. The Claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Administrator shall also provide the Claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits.

(c)       Considerations on Review. In considering the review, the Administrator shall take into account all materials and information the Claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

(d)       Timing of Administrator Response. The Administrator shall respond in writing to such Claimant within sixty (60) days after receiving the request for review. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional sixty (60) days by notifying the Claimant in writing, prior to the end of the initial sixty (60) day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision.

(e)       Notice of Decision. The Administrator shall notify the Claimant in writing of its decision on review. The Administrator shall write the notification in a manner calculated to be understood by the Claimant. The notification shall set forth: (a) the specific reasons for the denial; (b) a reference to the specific provisions of this Agreement on which the denial is based; (c) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits; and (d) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a).

ARTICLE 9

AMENDMENT AND TERMINATION

9.1       Agreement Amendment Generally. Except as provided in Section 8.2, this Agreement may be amended only by a written agreement signed by both the Employer and the Executive.

9.2       Amendment to Insure Proper Characterization of Agreement. Notwithstanding anything in this Agreement to the contrary, the Agreement may be amended by the Employer at any time, if found necessary in the opinion of the Employer, i) to ensure that the Agreement is characterized as plan of deferred compensation maintained for a select group of management or highly compensated employees as described under ERISA, ii) to conform the Agreement to the requirements of any applicable law or iii) to comply with the written instructions of the Employer’s auditors or banking regulators.

9.3       Agreement Termination Generally. Except as provided in Section 8.4, this Agreement may be terminated only by a written agreement signed by the Employer and the Executive. Such termination shall not cause a distribution of benefits under this Agreement. Rather, upon such termination benefit distributions will be made at the earliest distribution event permitted under Article 5.

9.4       Effect of Complete Termination. Notwithstanding anything to the contrary in Section 8.3, and subject to the requirements of Code Section 409A and Treasury Regulations §1.409A-3(j)(4)(ix), the Employer may completely terminate and liquidate the Agreement in accordance with subsections (a), (b) or (c) below. In the event of such a complete termination in accordance with subsection (a), the Employer shall pay the Executive the Deferral Account balance. In the event of such a complete termination in accordance with subsection (b) or (c), the Employer shall pay the Executive the Deferral Account balance, plus an additional amount equal to the Contributions remaining to be made in accordance with Article 2 provided, however, that no earnings per share requirement shall apply. In any event, such complete termination of the Agreement shall occur only under the following circumstances and conditions.

(a)       Corporate Dissolution or Bankruptcy. The Employer may terminate and liquidate this Agreement within twelve (12) months of a corporate dissolution taxed under Code Section 331, or with the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that all benefits paid under the Agreement are included in the Executive’s gross income in the latest of: (i) the calendar year which the termination occurs; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the payment is administratively practicable.

(b)       Change in Control. The Employer may terminate and liquidate this Agreement by taking irrevocable action to terminate and liquidate within the thirty (30) days preceding or the twelve (12) months following a Change in Control. This Agreement will then be treated as terminated only if all substantially similar arrangements sponsored by the Employer which are treated as deferred under a single plan under Treasury Regulations §1.409A-1(c)(2) are terminated and liquidated with respect to each participant who experienced the Change in Control so that the Executive and any participants in any such similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date the Employer takes the irrevocable action to terminate the arrangements.

(c)       Discretionary Termination. The Employer may terminate and liquidate this Agreement provided that: (i) the termination does not occur proximate to a downturn in the financial health of the Employer; (ii) all arrangements sponsored by the Employer and Affiliates that would be aggregated with any terminated arrangements under Treasury Regulations §1.409A-1(c) are terminated; (iii) no payments, other than payments that would be payable under the terms of this Agreement if the termination had not occurred, are made within twelve (12) months of the date the Employer takes the irrevocable action to terminate this Agreement; (iv) all payments are made within twenty-four (24) months following the date the Employer takes the irrevocable action to terminate and liquidate this Agreement; and (v) neither the Employer nor any of its Affiliates adopt a new arrangement that would be aggregated with any terminated arrangement under Treasury Regulations §1.409A-1(c) if the Executive participated in both arrangements, at any time within three (3) years following the date the Employer takes the irrevocable action to terminate this Agreement.

Article 10

MISCELLANEOUS

10.1       No Effect on Other Rights. This Agreement constitutes the entire agreement between the Employer and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein. Nothing contained herein will confer upon the Executive the right to be retained in the service of the Employer nor limit the right of the Employer to discharge or otherwise deal with the Executive without regard to the existence hereof.

10.2       State Law. This Agreement and all rights hereunder shall be governed by and construed according to the laws of the State of New Jersey except to the extent preempted by the laws of the United States of America.

10.3       Validity. In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal or invalid provision had never been inserted herein.

10.4       Nonassignability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

10.5       Unsecured General Creditor Status. Payment to the Executive or any Beneficiary hereunder shall be made from assets which shall continue, for all purposes, to be part of the general, unrestricted assets of the Employer and no person shall have any interest in any such asset by virtue of any provision of this Agreement. The Employer’s obligation hereunder shall be an unfunded and unsecured promise to pay money in the future. In the event that the Employer purchases an insurance policy insuring the life of the Executive to recover the cost of providing benefits hereunder, neither the Executive nor the Beneficiary shall have any rights whatsoever in said policy or the proceeds therefrom.

10.6       Life Insurance. If the Employer chooses to obtain insurance on the life of the Executive in connection with its obligations under this Agreement, the Executive hereby agrees to take such physical examinations and to truthfully and completely supply such information as may be required by the Employer or the insurance company designated by the Employer.

10.7       Unclaimed Benefits. The Executive shall keep the Employer informed of the Executive’s current address and the current address of the Beneficiary. If the location of the Executive is not made known to the Employer within three years after the date upon which any payment of any benefits may first be made, the Employer shall delay payment of the Executive’s benefit payment(s) until the location of the Executive is made known to the Employer; however, the Employer shall only be obligated to hold such benefit payment(s) for the Executive until the expiration of three (3) years. Upon expiration of the three (3) year period, the Employer may discharge its obligation by payment to the Beneficiary. If the location of the Beneficiary is not made known to the Employer by the end of an additional two (2) month period following expiration of the three (3) year period, the Employer may discharge its obligation by payment to the Executive’s estate. If there is no estate in existence at such time or if such fact cannot be determined by the Employer, the Executive and Beneficiary shall thereupon forfeit all rights to any benefits provided under this Agreement.

10.8       Suicide or Misstatement. The Executive shall forfeit any non-distributed amounts in the Deferral Account if the Executive commits suicide within two (2) years after the Effective Date, or if an insurance company which issued a life insurance policy covering the Executive and owned by the Employer denies coverage (i) for material misstatements of fact made by the Executive on an application for life insurance, or (ii) for any other reason.

10.9       Regulatory Restrictions.

a)       Removal. If the Executive is removed from office or permanently prohibited from participating in the Employer’s affairs by an order issued under section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1), the Executive shall forfeit any non-distributed amounts in the Deferral Account.

b)       Default. If the Employer is in “default” or “in danger of default” as those terms are defined in section 3(x) of the Federal Deposit Insurance Act, 12 U.S.C. 1813(x) the Executive shall forfeit any non-distributed amounts in the Deferral Account.

c)       FDIC Open-Bank Assistance. If the Federal Deposit Insurance Corporation enters into an agreement to provide assistance to or on behalf of the Employer under the authority contained in Federal Deposit Insurance Act section 13(c), 12 U.S.C. 1823(c) the Executive shall forfeit any non-distributed amounts in the Deferral Account.

10.10       Forfeiture Provision. The Executive shall forfeit any unpaid benefit hereunder, if the Executive, directly or indirectly, either as an individual or as a proprietor, stockholder, partner, officer, director, employee, agent, consultant or independent contractor of any individual, partnership, corporation or other entity (excluding an ownership interest of three percent (3%) or less in the stock of a publicly-traded company):

(i)       becomes employed by, participates in, or becomes connected in any manner with the ownership, management, operation or control of any bank, savings and loan or other similar financial institution if the Executive’s responsibilities will include providing banking or other financial services within fifty (50) miles of the Employer’s main office location;

(ii)       participates in any way in hiring or otherwise engaging, or assisting any other person or entity in hiring or otherwise engaging, on a temporary, part-time or permanent basis, any individual who was employed by the Employer as of the date of termination of the Executive’s employment;

(iii)       assists, advises, or serves in any capacity, representative or otherwise, any third party in any action against the Employer or transaction involving the Employer;

(iv)       sells, offers to sell, provides banking or other financial services, assists any other person in selling or providing banking or other financial services, or solicits or otherwise competes for, either directly or indirectly, any orders, contract, or accounts for services of a kind or nature like or substantially similar to the financial services performed or financial products sold by the Employer (the preceding hereinafter referred to as “Services”), to or from any person or entity from whom the Executive or the Employer, to the knowledge of the Executive provided banking or other financial services, sold, offered to sell or solicited orders, contracts or accounts for Services during the three (3) year period immediately prior to the termination of the Executive’s employment;

(v)       divulges, discloses, or communicates to others in any manner whatsoever, any confidential information of the Employer, to the knowledge of the Executive, including, but not limited to, the names and addresses of customers or prospective customers, of the Employer, as they may have existed from time to time, of work performed or services rendered for any customer, any method and/or procedures relating to projects or other work developed for the Employer, earnings or other information concerning the Employer. The restrictions contained in this subparagraph (v) apply to all information regarding the Employer, regardless of the source who provided or compiled such information. Notwithstanding anything to the contrary, all information referred to herein shall not be disclosed unless and until it becomes known to the general public from sources other than the Executive.

The forfeiture provision detailed in this Section 9.10 shall not apply following a Change in Control or following Early Involuntary Termination.

10.11       Notice. Any notice, consent or demand required or permitted to be given to the Employer or Administrator under this Agreement shall be sufficient if in writing and hand-delivered or sent by registered or certified mail to the Employer’s principal business office. Any notice or filing required or permitted to be given to the Executive or Beneficiary under this Agreement shall be sufficient if in writing and hand-delivered or sent by mail to the last known address of the Executive or Beneficiary, as appropriate. Any notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or on the receipt for registration or certification.

10.12       Headings and Interpretation. Headings and sub-headings in this Agreement are inserted for reference and convenience only and shall not be deemed part of this Agreement. Wherever the fulfillment of the intent and purpose of this Agreement requires and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.

10.13       Alternative Action. In the event it becomes impossible for the Employer or the Administrator to perform any act required by this Agreement due to regulatory or other constraints, the Employer or Administrator may perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Employer, provided that such alternative act does not violate Code Section 409A.

10.14       Coordination with Other Benefits. The benefits provided for the Executive or the Beneficiary under this Agreement are in addition to any other benefits available to the Executive under any other plan or program for employees of the Employer. This Agreement shall supplement and shall not supersede, modify, or amend any other such plan or program except as may otherwise be expressly provided herein.

10.15       Inurement. This Agreement shall be binding upon and shall inure to the benefit of the Employer, its successor and assigns, and the Executive, the Executive’s successors, heirs, executors, administrators, and the Beneficiary.

10.16       Tax Withholding. The Employer may make such provisions and take such action as it deems necessary or appropriate for the withholding of any taxes which the Employer is required by any law or regulation to withhold in connection with any benefits under the Agreement. The Executive shall be responsible for the payment of all individual tax liabilities relating to any benefits paid hereunder.

10.17       Aggregation of Agreement. If the Employer offers other non-qualified deferred compensation plans in addition to this Agreement, this Agreement and those plans shall be treated as a single plan to the extent required under Code Section 409A.

IN WITNESS WHEREOF, the Executive and a representative of the Employer have executed this Agreement document as indicated below:

Executive:	Employer:
/s/ John P. Babcock	By:	/s/ Douglas L. Kennedy
	Its:	President and Chief Executive Officer

DEFERRED COMPENSATION AGREEMENT

Distribution Election Form

Form and Timing of Distributions

Benefit	Distribution of Benefit (Indicate number of years between 2 and 10)
§ 5.1 - Normal Benefit	Quarterly installments for _____ years
§ 5.2 - Early Voluntary Termination Benefit * § 5.3 - Early Involuntary Termination Benefit*	Quarterly installments for _____ years
§ 5.4 - Disability Benefit	Quarterly installments for _____ years
§ 5.5 – Change in Control Benefit	_____ Lump sum or _____ Quarterly installments for _____ years (Initial either lump sum or installments.)
§ 5.6 - Death Benefit	_____ Lump Sum or _____ Quarterly installments for _____ years (Initial either lump sum or installments.)

*Per 409A, the form and timing for these two triggering events must be the same.

Name:

Signature:

Date:

Received by the Administrator this _____ day of ____________________, 20___

By:

Title:

DEFERRED COMPENSATION AGREEMENT

Beneficiary Designation

I, John P. Babcock, designate the following as Beneficiary under this Agreement:

Primary
	%
	%
Contingent
	%
	%

I understand that I may change this beneficiary designation by delivering a new written designation to the Administrator, which shall be effective only upon receipt by the Administrator prior to my death. I further understand that the designation will be automatically revoked if the Beneficiary predeceases me or if I have named my spouse as Beneficiary and our marriage is subsequently dissolved.

Signature:          __________________________                    Date: _______

SPOUSAL CONSENT (Required only if Administrator requests and someone other than spouse is named Beneficiary)

I consent to the beneficiary designation above. I also acknowledge that if I am named Beneficiary and my marriage is subsequently dissolved, the beneficiary designation will be automatically revoked.

Spouse Name:          ___________________________________

Signature:          __________________________          Date: _______

Received by the Administrator this ________ day of ___________________, 20__

By:

Title:

EX-10.D

Exhibit (D)

DEFERRED COMPENSATION AGREEMENT

THIS DEFERRED COMPENSATION AGREEMENT (this “Agreement”), adopted this 4^th day of August, 2017, by and between Peapack-Gladstone Bank located in Bedminster, New Jersey (the “Employer”), and Jeffrey J. Carfora (the “Executive”), formalizes the agreements and understanding between the Employer and the Executive.

WITNESSETH:

WHEREAS, the Executive is employed by the Employer;

WHEREAS, the Employer recognizes the valuable services the Executive has performed for the Employer and wishes to further encourage the Executive’s retention and continued employment;

WHEREAS, the Employer and the Executive intend this Agreement shall at all times be administered and interpreted in compliance with Code Section 409A; and

WHEREAS, the Employer intends this Agreement shall at all times be administered and interpreted in such a manner as to constitute an unfunded nonqualified deferred compensation arrangement, maintained primarily to provide supplemental benefits for the Executive, in order to encourage retention and continued employment of said Executive;

WHEREAS, the Employer wishes to provide the terms and conditions upon which the Employer shall pay additional benefits to the Executive, to encourage retention and continued employment; NOW THEREFORE, in consideration of the premises and of the mutual promises herein contained, the Employer and the Executive agree as follows:

ARTICLE 1

DEFINITIONS

For the purpose of this Agreement, the following phrases or terms shall have the indicated meanings:

1.1        “Administrator” means the Board or its designee.

1.2       “Affiliate” means any business entity with whom the Employer would be considered a single employer under Section 414(b) and 414(c) of the Code. Such term shall be interpreted in a manner consistent with the definition of “service recipient” contained in Code Section 409A.

1.3       “Beneficiary” means the person or persons designated in writing by the Executive to receive benefits hereunder in the event of the Executive’s death.

1.4       “Board” means the Board of Directors of the Employer.

1.5       “Cause” means any of the following acts or circumstances: gross negligence or gross neglect of duties to the Employer; conviction of a felony or of a gross misdemeanor involving moral turpitude in connection with the Executive’s employment with the Employer; or fraud, disloyalty, dishonesty or willful violation of any law or significant Employer policy committed in connection with the Executive's employment and resulting in a material adverse effect on the Employer.

1.6       “Change in Control” means a change in the ownership or effective control of the Employer, or in the ownership of a substantial portion of the assets of the Employer, as such change is defined in Code Section 409A and regulations thereunder.

1.7       “Claimant” means a person who believes that he or she is being denied a benefit to which he or she is entitled hereunder.

1.8       “Code” means the Internal Revenue Code of 1986, as amended.

1.9       “Contribution” means the amount the Employer credits to the Deferral Account according to the provisions of Article 2.

1.10       “Crediting Rate” means the average Wall Street Journal prime rate on the last day of the prior quarter (March 31 prime rate for the June 30 quarter), provided that such rate shall not be more than seven and one-half percent (7.5%).

1.11       “Disability” means a condition of the Executive whereby the Executive either: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer. The Administrator will determine whether the Executive has incurred a Disability based on its own good faith determination and may require the Executive to submit to reasonable physical and mental examinations for this purpose. The Executive will also be deemed to have incurred a Disability if determined to be totally disabled by the Social Security Administration or in accordance with a disability insurance program, provided that the definition of disability applied under such disability insurance program complies with the initial sentence of this Section.

1.12        “Early Involuntary Termination” means a Separation from Service prior to Normal Benefit Date which (i) is a Termination for Good Reason or (ii) occurs other than at the Executive’s request and for reasons other than Cause or Disability or (iii) occurs more than twenty-four (24) months following a Change in Control.

1.13       “Early Voluntary Termination” means that the Executive, prior to Normal Benefit Date, experiences a Separation from Service for reasons other than Cause, Disability or Early Involuntary Termination, or following a Change in Control.

1.14       “Effective Date” means August 4, 2017.

1.15       “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

1.16       “Holding Company” means Peapack-Gladstone Financial Corporation, the Employer’s parent company.

1.17       “Normal Benefit Date” means June 30, 2022.

1.18       “Separation from Service” means a termination of the Executive’s employment with the Employer and its Affiliates for reasons other than death or Disability. A Separation from Service may occur as of a specified date for purposes of the Agreement even if the Executive continues to provide some services for the Employer or its Affiliates after that date, provided that the facts and circumstances indicate that the Employer and the Executive reasonably anticipated at that date that either no further services would be performed after that date, or that the level of bona fide services the Executive would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed over the immediately preceding thirty-six (36) month period (or the full period during which the Executive performed services for the Employer, if that is less than thirty-six (36) months). A Separation from Service will not be deemed to have occurred while the Executive is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six (6) months or, if longer, the period for which a statute or contract provides the Executive with the right to reemployment with the Employer. If the Executive’s leave exceeds six (6) months but the Executive is not entitled to reemployment under a statute or contract, the Executive incurs a Separation of Service on the next day following the expiration of such six (6) month period. In determining whether a Separation of Service occurs the Administrator shall take into account, among other things, the definition of “service recipient” and “employer” set forth in Treasury regulation §1.409A-1(h)(3). The Administrator shall have full and final authority, to determine conclusively whether a Separation from Service occurs, and the date of such Separation from Service.

1.19       “Specified Employee” means an individual that satisfies the definition of a “key employee” of the Employer as such term is defined in Code §416(i) (without regard to Code §416(i)(5)), provided that the stock of the Employer is publicly traded on an established securities market or otherwise, as defined in Code §1.897-1(m). If the Executive is a key employee at any time during the twelve (12) months ending on December 31, the Executive is a Specified Employee for the twelve (12) month period commencing on the first day of the following April.

1.20       “Termination for Good Reason” means Separation from Service after the occurrence of one or more of the following circumstances without the Executive’s consent:

(i)        a material reduction in the Executive’s base compensation;

(ii)        an involuntary relocation of the Executive’s principal place of business to a location that is more than 50 miles from the Executive’s workplace as of the date hereof;

(iii)       the assignment of the Executive to any duties which are fundamentally and significantly inconsistent with the Executive’s duties with the Employer as of the date hereof or a fundamental and substantial reduction of the Executive’s duties or responsibilities;

provided, however, that prior to any Termination for Good Reason, the Executive must first provide written notice to the Employer within sixty (60) days of the initial existence of the condition, describing the existence of such condition, and the Employer shall thereafter have the right to remedy the condition within thirty (30) days of the date the Employer received the written notice from the Executive. If the Employer remedies the condition within such thirty (30) day cure period, then no good reason shall be deemed to exist with respect to such condition. If the Employer does not remedy the condition within such thirty (30) day cure period, then the Executive may deliver a notice of Termination for Good Reason at any time within sixty (60) days following the expiration of such cure period.

Article 2

CONTRIBUTIONS

The Employer has targeted annual Contributions of One Hundred Thousand Dollars ($100,000) on the Executive’s behalf for five (5) years. The Employer intends to make quarterly Contributions of Twenty Five Thousand Dollars ($25,000) toward this annual total as of the first day of each calendar quarter (except that the first quarterly payment will commence on the Effective Date), provided that the Executive is employed on such date and the Employer generated a minimum earnings per share equal to at least sixty percent (60%) of budgeted earnings per share (to be adjusted for any stock dividends or splits) for the previous publicly reported 12 month period (i.e. 12 months ended March 31, 2017 for the July 1, 2017 contribution).

Article 3

dEFERRAL ACCOUNT

3.1       Establishing and Crediting of Deferral Account. The Employer shall establish a Deferral Account on its books for the Executive and shall credit to the Deferral Account the following amounts:

(a)       Any Contributions under Article 2 hereof; and

(b)       Interest as follows:

(i)       on the last day of each quarter until the earliest of Separation from Service, Disability or the Executive’s death, interest shall be credited on the Deferral Account balance at an annual rate equal to the Crediting Rate.

(ii)       on the last day of each quarter after Separation from Service, Disability or the Executive’s death, interest shall be credited on the Deferral Account balance at an annual rate equal to the Crediting Rate.

3.2       Recordkeeping Device Only. The Deferral Account is solely a device for measuring amounts to be paid under this Agreement and is not a trust fund of any kind.

ARTICLE 4

VESTING

Executive will vest in his Deferral Account balance one-third each year over the first three years based on a quarterly vesting of 8.3325% at each quarter end beginning September 30, 2017 until fully vested(i.e. on September 30, 2017 Executive would be 8.3325% vested in the accumulated account balance (including interest) and on September 30, 2018 Executive would be 33 1/3 percent vested in the accumulated account balance (including interest)).

ARTICLE 5

PAYMENT OF BENEFITS

5.1       Normal Benefit. Upon Separation from Service after Normal Benefit Date, the Employer shall pay the Executive the Deferral Account balance calculated at Separation from Service. This benefit shall be paid in quarterly installments between 2 years and 10 years, at the selection of the Executive, and shall commence the first day of the immediately subsequent quarter following Separation from Service. During the payment period, interest shall be credited on the unpaid portion of the Deferral Account balance as described in Section 3.1(b)(ii). The quarterly payments shall be amortized in such a way so as to produce equal payments over the remaining payment period.  This will require quarterly reamortization for changes in the Crediting Rate.

5.2       Early Voluntary Termination Benefit. If Early Voluntary Termination occurs, the Employer shall pay the Executive the vested portion of the Deferral Account balance. This benefit shall be paid in quarterly installments between 2 years and 10 years, at the selection of the Executive, and shall commence the first day of the immediately subsequent quarter following Separation from Service. During the payment period, interest shall be credited on the unpaid portion of the Deferral Account balance as described in Section 3.1(b)(ii). The quarterly payments shall be amortized in such a way so as to produce equal payments over the remaining payment period.  This will require quarterly reamortization for changes in the Crediting Rate.

5.3       Early Involuntary Termination Benefit. If Early Involuntary Termination occurs, the Employer shall pay the Executive the Deferral Account balance at Separation from Service, plus an additional amount equal to the Contributions remaining to be made in accordance with Article 2. This benefit shall be paid in quarterly installments between 2 years and 10 years, at the selection of the Executive, and shall commence the first day of the immediately subsequent quarter following Separation from Service. During the payment period, interest shall be credited on the unpaid portion of the benefit as described in Section 3.1(b)(ii). The quarterly payments shall be amortized in such a way so as to produce equal payments over the remaining payment period.  This will require quarterly reamortization for changes in the Crediting Rate.

5.4       Disability Benefit. If the Executive experiences a Disability prior to Separation from Service and Normal Benefit Date, the Employer shall pay the Executive the Deferral Account balance at Disability, plus an additional amount equal to the Contributions remaining to be made in accordance with Article 2. This benefit shall be paid in quarterly installments between 2 years and 10 years, at the selection of the Executive, and shall commence the first day of the immediately subsequent quarter following Disability. During the payment period, interest shall be credited on the unpaid portion of the benefit as described in Section 3.1(b)(ii). The quarterly payments shall be amortized in such a way so as to produce equal payments over the remaining payment period.  This will require quarterly reamortization for changes in the Crediting Rate.

5.5       Change in Control Benefit. If a Change in Control occurs, followed within twenty-four (24) months by a Separation from Service prior to Normal Benefit Date, the Employer shall pay the Executive the Deferral Account balance at Separation from Service, plus an additional amount equal to the Contributions remaining to be made in accordance with Article 2 provided, however, that no earnings per share requirement shall apply. This benefit shall be paid in a lump sum or in quarterly installments up to 10 years, at the selection of the Executive, and shall commence the first day of the immediately subsequent quarter following Separation from Service. During the payment period, interest shall be credited on the unpaid portion of the benefit as described in Section 3.1(b)(ii). The quarterly payments shall be amortized in such a way so as to produce equal payments over the remaining payment period.  This will require quarterly reamortization for changes in the Crediting Rate.

5.6       Death Prior to Separation from Service and Disability. In the event the Executive dies prior to Separation from Service and Disability, the Employer shall pay the Beneficiary the Deferral Account balance as of the date of the Executive’s death, plus an additional amount equal to the Contributions remaining to be made in accordance with Article 2. This benefit shall be paid in a lump sum or in quarterly installments up to 10 years, at the selection of the Executive, and shall commence the first day of the immediately subsequent quarter following the Executive’s death. During the payment period, interest shall be credited on the unpaid portion of the benefit as described in Section 3.1(b)(ii). The quarterly payments shall be amortized in such a way so as to produce equal payments over the remaining payment period.  This will require quarterly reamortization for changes in the Crediting Rate.

5.7       One Benefit Only. The Executive and Beneficiary are entitled to a benefit under only one of Sections 4.1 through 4.6 of this Agreement, which shall be determined by the first event to occur that causes a benefit to be paid under this Agreement. The subsequent occurrence of other events shall not entitle the Executive or Beneficiary to other or additional benefits hereunder.

5.8       Death Subsequent to Commencement of Benefit Payments. In the event the Executive dies while receiving payments, but prior to receiving all payments due and owing hereunder, the Employer shall pay the Beneficiary the same amounts at the same times as the Employer would have paid the Executive, had the Executive survived.

5.9       Termination for Cause. If the Employer terminates the Executive’s employment for Cause or if the Executive takes any of the actions described in Section 9.10(i), (ii), (iii), (iv) or (v), then the Executive shall forfeit all unpaid benefits hereunder.

5.10       Restriction on Commencement of Distributions.  Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a Specified Employee at the time of Separation from Service, the provisions of this Section shall govern all distributions hereunder. Distributions which would otherwise be made to the Executive due to Separation from Service shall not be made during the first six (6) months following Separation from Service. Rather, any distribution which would otherwise be paid to the Executive during such period shall be accumulated and paid to the Executive in a lump sum on the first day of the seventh month following Separation from Service, or if earlier, upon the Executive’s death. All subsequent distributions shall be paid as they would have had this Section not applied.

5.11       Acceleration of Payments. Except as specifically permitted herein, no acceleration of the time or schedule of any payment may be made hereunder. Notwithstanding the foregoing, payments may be accelerated, in accordance with the provisions of Treasury Regulation §1.409A-3(j)(4) in the following circumstances: (i) as a result of certain domestic relations orders; (ii) in compliance with ethics agreements with the federal government; (iii) in compliance with the ethics laws or conflicts of interest laws; (iv) in limited cashouts (but not in excess of the limit under Code §402(g)(1)(B)); (v) to pay employment-related taxes; or (vi) to pay any taxes that may become due at any time that the Agreement fails to meet the requirements of Code Section 409A.

5.12       Delays in Payment by Employer. A payment may be delayed to a date after the designated payment date under any of the circumstances described below, and the provision will not fail to meet the requirements of establishing a permissible payment event. The delay in the payment will not constitute a subsequent deferral election, so long as the Employer treats all payments to similarly situated Participants on a reasonably consistent basis.

(a)       Payments subject to Code Section 162(m). If the Employer reasonably anticipates that the Employer’s deduction with respect to any distribution under this Agreement would be limited or eliminated by application of Code Section 162(m), then to the extent deemed necessary by the Employer to ensure that the entire amount of any distribution from this Agreement is deductible, the Employer may delay payment of any amount that would otherwise be distributed under this Agreement. The delayed amounts shall be distributed to the Executive (or the Beneficiary in the event of the Executive’s death) at the earliest date the Employer reasonably anticipates that the deduction of the payment of the amount will not be limited or eliminated by application of Code Section 162(m).

(b)       Payments that would violate Federal securities laws or other applicable law. A payment may be delayed where the Employer reasonably anticipates that the making of the payment will violate Federal securities laws or other applicable law provided that the payment is made at the earliest date at which the Employer reasonably anticipates that the making of the payment will not cause such violation. The making of a payment that would cause inclusion in gross income or the application of any penalty provision of the Internal Revenue Code is not treated as a violation of law.

(c)       Solvency. Notwithstanding the above, a payment may be delayed where the payment would jeopardize the ability of the Employer to continue as a going concern.

5.13       Treatment of Payment as Made on Designated Payment Date. Solely for purposes of determining compliance with Code Section 409A, any payment under this Agreement made after the required payment date shall be deemed made on the required payment date provided that such payment is made by the latest of: (i) the end of the calendar year in which the payment is due; (ii) the 15^th day of the third calendar month following the payment due date; (iii) if Employer cannot calculate the payment amount on account of administrative impracticality which is beyond the Executive’s control, the end of the first calendar year which payment calculation is practicable; and (iv) if Employer does not have sufficient funds to make the payment without jeopardizing the Employer’s solvency, in the first calendar year in which the Employer’s funds are sufficient to make the payment.

5.14       Facility of Payment. If a distribution is to be made to a minor, or to a person who is otherwise incompetent, then the Administrator may make such distribution: (i) to the legal guardian, or if none, to a parent of a minor payee with whom the payee maintains his or her residence; or (ii) to the conservator or administrator or, if none, to the person having custody of an incompetent payee. Any such distribution shall fully discharge the Employer and the Administrator from further liability on account thereof.

5.15       Excise Tax Limitation. Notwithstanding any provision of this Agreement to the contrary, if any benefit payment hereunder would be treated as an “excess parachute payment” under Code Section 280G, the Employer shall reduce such benefit payment to the extent necessary to avoid treating such benefit payment as an excess parachute payment. The Executive shall be entitled to only the reduced benefit and shall forfeit any amount over and above the reduced amount.

5.16       Changes in Form or Timing of Benefit Payments. The Employer and the Executive may, subject to the terms hereof, amend this Agreement to delay the timing or change the form of payments. Any such amendment:

(a)       must take effect not less than twelve (12) months after the amendment is made;

(b)       must, for benefits distributable due solely to the arrival of a specified date, or on account of Separation from Service or Change in Control, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made;

(c)       must, for benefits distributable due solely to the arrival of a specified date, be made not less than twelve (12) months before distribution is scheduled to begin; and

(d)       may not accelerate the time or schedule of any distribution.

Article 6

Beneficiaries

6.1       Designation of Beneficiaries. The Executive may designate any person to receive any benefits payable under the Agreement upon the Executive’s death, and the designation may be changed from time to time by the Executive by filing a new designation. Each designation will revoke all prior designations by the Executive, shall be in the form prescribed by the Administrator and shall be effective only when filed in writing with the Administrator during the Executive’s lifetime. If the Executive names someone other than the Executive’s spouse as a Beneficiary, the Administrator may, in its sole discretion, determine that spousal consent is required to be provided in a form designated by the Administrator, executed by the Executive’s spouse and returned to the Administrator. The Executive’s beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage is subsequently dissolved.

6.2       Absence of Beneficiary Designation. In the absence of a valid Beneficiary designation, or if, at the time any benefit payment is due to a Beneficiary, there is no living Beneficiary validly named by the Executive, the Employer shall pay the benefit payment to the Executive’s spouse. If the spouse is not living then the Employer shall pay the benefit payment to the Executive’s living descendants per stirpes, and if there are no living descendants, to the Executive’s estate. In determining the existence or identity of anyone entitled to a benefit payment, the Employer may rely conclusively upon information supplied by the Executive’s personal representative, executor, or administrator.

Article 7

ADMINISTRATION

7.1       Administrator Duties. The Administrator shall be responsible for the management, operation, and administration of the Agreement. When making a determination or calculation, the Administrator shall be entitled to rely on information furnished by the Employer, Executive or Beneficiary. No provision of this Agreement shall be construed as imposing on the Administrator any fiduciary duty under ERISA or other law, or any duty similar to any fiduciary duty under ERISA or other law.

7.2       Administrator Authority. The Administrator shall enforce this Agreement in accordance with its terms, shall be charged with the general administration of this Agreement, and shall have all powers necessary to accomplish its purposes.

7.3       Binding Effect of Decision. The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation or application of this Agreement and the rules and regulations promulgated hereunder shall be final, conclusive and binding upon all persons having any interest in this Agreement.

7.4       Compensation, Expenses and Indemnity. The Administrator shall serve without compensation for services rendered hereunder. The Administrator is authorized at the expense of the Employer to employ such legal counsel and recordkeeper as it may deem advisable to assist in the performance of its duties hereunder. Expense and fees in connection with the administration of this Agreement shall be paid by the Employer.

7.5       Employer Information. The Employer shall supply full and timely information to the Administrator on all matters relating to the Executive’s compensation, death, Disability or Separation from Service, and such other information as the Administrator reasonably requires.

7.6       Termination of Participation. If the Administrator determines in good faith that the Executive no longer qualifies as a member of a select group of management or highly compensated employees, as determined in accordance with ERISA, the Administrator shall have the right, in its sole discretion, to prohibit any further crediting to the Deferral Account.

7.7       Compliance with Code Section 409A. The Employer and the Executive intend that the Agreement comply with the provisions of Code Section 409A to prevent the inclusion in gross income of any amounts deferred hereunder in a taxable year prior to the year in which amounts are actually paid to the Executive or Beneficiary. This Agreement shall be construed, administered and governed in a manner that affects such intent, and the Administrator shall not take any action that would be inconsistent therewith.

Article 8

Claims and Review Procedures

8.1       Claims Procedure. A Claimant who has not received benefits under this Agreement that he or she believes should be distributed shall make a claim for such benefits as follows.

(a)       Initiation – Written Claim. The Claimant initiates a claim by submitting to the Administrator a written claim for the benefits. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant. All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant.

(b)       Timing of Administrator Response. The Administrator shall respond to such Claimant within ninety (90) days after receiving the claim. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional ninety (90) days by notifying the Claimant in writing, prior to the end of the initial ninety (90) day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision.

(c)       Notice of Decision. If the Administrator denies part or all of the claim, the Administrator shall notify the Claimant in writing of such denial. The Administrator shall write the notification in a manner calculated to be understood by the Claimant. The notification shall set forth: (i) the specific reasons for the denial; (ii) a reference to the specific provisions of this Agreement on which the denial is based; (iii) a description of any additional information or material necessary for the Claimant to perfect the claim and an explanation of why it is needed; (iv) an explanation of this Agreement’s review procedures and the time limits applicable to such procedures; and (v) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

8.2       Review Procedure. If the Administrator denies part or all of the claim, the Claimant shall have the opportunity for a full and fair review by the Administrator of the denial as follows.

(a)       Initiation – Written Request. To initiate the review, the Claimant, within sixty (60) days after receiving the Administrator’s notice of denial, must file with the Administrator a written request for review.

(b)       Additional Submissions – Information Access. The Claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Administrator shall also provide the Claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits.

(c)       Considerations on Review. In considering the review, the Administrator shall take into account all materials and information the Claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

(d)       Timing of Administrator Response. The Administrator shall respond in writing to such Claimant within sixty (60) days after receiving the request for review. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional sixty (60) days by notifying the Claimant in writing, prior to the end of the initial sixty (60) day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision.

(e)       Notice of Decision. The Administrator shall notify the Claimant in writing of its decision on review. The Administrator shall write the notification in a manner calculated to be understood by the Claimant. The notification shall set forth: (a) the specific reasons for the denial; (b) a reference to the specific provisions of this Agreement on which the denial is based; (c) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits; and (d) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a).

ARTICLE 9

AMENDMENT AND TERMINATION

9.1       Agreement Amendment Generally. Except as provided in Section 8.2, this Agreement may be amended only by a written agreement signed by both the Employer and the Executive.

9.2       Amendment to Insure Proper Characterization of Agreement. Notwithstanding anything in this Agreement to the contrary, the Agreement may be amended by the Employer at any time, if found necessary in the opinion of the Employer, i) to ensure that the Agreement is characterized as plan of deferred compensation maintained for a select group of management or highly compensated employees as described under ERISA, ii) to conform the Agreement to the requirements of any applicable law or iii) to comply with the written instructions of the Employer’s auditors or banking regulators.

9.3       Agreement Termination Generally. Except as provided in Section 8.4, this Agreement may be terminated only by a written agreement signed by the Employer and the Executive. Such termination shall not cause a distribution of benefits under this Agreement. Rather, upon such termination benefit distributions will be made at the earliest distribution event permitted under Article 5.

9.4       Effect of Complete Termination. Notwithstanding anything to the contrary in Section 8.3, and subject to the requirements of Code Section 409A and Treasury Regulations §1.409A-3(j)(4)(ix), the Employer may completely terminate and liquidate the Agreement in accordance with subsections (a), (b) or (c) below. In the event of such a complete termination in accordance with subsection (a), the Employer shall pay the Executive the Deferral Account balance. In the event of such a complete termination in accordance with subsection (b) or (c), the Employer shall pay the Executive the Deferral Account balance, plus an additional amount equal to the Contributions remaining to be made in accordance with Article 2 provided, however, that no earnings per share requirement shall apply. In any event, such complete termination of the Agreement shall occur only under the following circumstances and conditions.

(a)       Corporate Dissolution or Bankruptcy. The Employer may terminate and liquidate this Agreement within twelve (12) months of a corporate dissolution taxed under Code Section 331, or with the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that all benefits paid under the Agreement are included in the Executive’s gross income in the latest of: (i) the calendar year which the termination occurs; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the payment is administratively practicable.

(b)       Change in Control. The Employer may terminate and liquidate this Agreement by taking irrevocable action to terminate and liquidate within the thirty (30) days preceding or the twelve (12) months following a Change in Control. This Agreement will then be treated as terminated only if all substantially similar arrangements sponsored by the Employer which are treated as deferred under a single plan under Treasury Regulations §1.409A-1(c)(2) are terminated and liquidated with respect to each participant who experienced the Change in Control so that the Executive and any participants in any such similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date the Employer takes the irrevocable action to terminate the arrangements.

(c)       Discretionary Termination. The Employer may terminate and liquidate this Agreement provided that: (i) the termination does not occur proximate to a downturn in the financial health of the Employer; (ii) all arrangements sponsored by the Employer and Affiliates that would be aggregated with any terminated arrangements under Treasury Regulations §1.409A-1(c) are terminated; (iii) no payments, other than payments that would be payable under the terms of this Agreement if the termination had not occurred, are made within twelve (12) months of the date the Employer takes the irrevocable action to terminate this Agreement; (iv) all payments are made within twenty-four (24) months following the date the Employer takes the irrevocable action to terminate and liquidate this Agreement; and (v) neither the Employer nor any of its Affiliates adopt a new arrangement that would be aggregated with any terminated arrangement under Treasury Regulations §1.409A-1(c) if the Executive participated in both arrangements, at any time within three (3) years following the date the Employer takes the irrevocable action to terminate this Agreement.

Article 10

MISCELLANEOUS

10.1       No Effect on Other Rights. This Agreement constitutes the entire agreement between the Employer and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein. Nothing contained herein will confer upon the Executive the right to be retained in the service of the Employer nor limit the right of the Employer to discharge or otherwise deal with the Executive without regard to the existence hereof.

10.2       State Law. This Agreement and all rights hereunder shall be governed by and construed according to the laws of the State of New Jersey except to the extent preempted by the laws of the United States of America.

10.3       Validity. In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal or invalid provision had never been inserted herein.

10.4       Nonassignability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

10.5       Unsecured General Creditor Status. Payment to the Executive or any Beneficiary hereunder shall be made from assets which shall continue, for all purposes, to be part of the general, unrestricted assets of the Employer and no person shall have any interest in any such asset by virtue of any provision of this Agreement. The Employer’s obligation hereunder shall be an unfunded and unsecured promise to pay money in the future. In the event that the Employer purchases an insurance policy insuring the life of the Executive to recover the cost of providing benefits hereunder, neither the Executive nor the Beneficiary shall have any rights whatsoever in said policy or the proceeds therefrom.

10.6       Life Insurance. If the Employer chooses to obtain insurance on the life of the Executive in connection with its obligations under this Agreement, the Executive hereby agrees to take such physical examinations and to truthfully and completely supply such information as may be required by the Employer or the insurance company designated by the Employer.

10.7       Unclaimed Benefits. The Executive shall keep the Employer informed of the Executive’s current address and the current address of the Beneficiary. If the location of the Executive is not made known to the Employer within three years after the date upon which any payment of any benefits may first be made, the Employer shall delay payment of the Executive’s benefit payment(s) until the location of the Executive is made known to the Employer; however, the Employer shall only be obligated to hold such benefit payment(s) for the Executive until the expiration of three (3) years. Upon expiration of the three (3) year period, the Employer may discharge its obligation by payment to the Beneficiary. If the location of the Beneficiary is not made known to the Employer by the end of an additional two (2) month period following expiration of the three (3) year period, the Employer may discharge its obligation by payment to the Executive’s estate. If there is no estate in existence at such time or if such fact cannot be determined by the Employer, the Executive and Beneficiary shall thereupon forfeit all rights to any benefits provided under this Agreement.

10.8       Suicide or Misstatement. The Executive shall forfeit any non-distributed amounts in the Deferral Account if the Executive commits suicide within two (2) years after the Effective Date, or if an insurance company which issued a life insurance policy covering the Executive and owned by the Employer denies coverage (i) for material misstatements of fact made by the Executive on an application for life insurance, or (ii) for any other reason.

10.9       Regulatory Restrictions.

a)       Removal. If the Executive is removed from office or permanently prohibited from participating in the Employer’s affairs by an order issued under section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1), the Executive shall forfeit any non-distributed amounts in the Deferral Account.

b)       Default. If the Employer is in “default” or “in danger of default” as those terms are defined in section 3(x) of the Federal Deposit Insurance Act, 12 U.S.C. 1813(x) the Executive shall forfeit any non-distributed amounts in the Deferral Account.

c)       FDIC Open-Bank Assistance. If the Federal Deposit Insurance Corporation enters into an agreement to provide assistance to or on behalf of the Employer under the authority contained in Federal Deposit Insurance Act section 13(c), 12 U.S.C. 1823(c) the Executive shall forfeit any non-distributed amounts in the Deferral Account.

10.10       Forfeiture Provision. The Executive shall forfeit any unpaid benefit hereunder, if the Executive, directly or indirectly, either as an individual or as a proprietor, stockholder, partner, officer, director, employee, agent, consultant or independent contractor of any individual, partnership, corporation or other entity (excluding an ownership interest of three percent (3%) or less in the stock of a publicly-traded company):

(i)       becomes employed by, participates in, or becomes connected in any manner with the ownership, management, operation or control of any bank, savings and loan or other similar financial institution if the Executive’s responsibilities will include providing banking or other financial services within fifty (50) miles of the Employer’s main office location;

(ii)       participates in any way in hiring or otherwise engaging, or assisting any other person or entity in hiring or otherwise engaging, on a temporary, part-time or permanent basis, any individual who was employed by the Employer as of the date of termination of the Executive’s employment;

(iii)       assists, advises, or serves in any capacity, representative or otherwise, any third party in any action against the Employer or transaction involving the Employer;

(iv)       sells, offers to sell, provides banking or other financial services, assists any other person in selling or providing banking or other financial services, or solicits or otherwise competes for, either directly or indirectly, any orders, contract, or accounts for services of a kind or nature like or substantially similar to the financial services performed or financial products sold by the Employer (the preceding hereinafter referred to as “Services”), to or from any person or entity from whom the Executive or the Employer, to the knowledge of the Executive provided banking or other financial services, sold, offered to sell or solicited orders, contracts or accounts for Services during the three (3) year period immediately prior to the termination of the Executive’s employment;

(v)       divulges, discloses, or communicates to others in any manner whatsoever, any confidential information of the Employer, to the knowledge of the Executive, including, but not limited to, the names and addresses of customers or prospective customers, of the Employer, as they may have existed from time to time, of work performed or services rendered for any customer, any method and/or procedures relating to projects or other work developed for the Employer, earnings or other information concerning the Employer. The restrictions contained in this subparagraph (v) apply to all information regarding the Employer, regardless of the source who provided or compiled such information. Notwithstanding anything to the contrary, all information referred to herein shall not be disclosed unless and until it becomes known to the general public from sources other than the Executive.

The forfeiture provision detailed in this Section 9.10 shall not apply following a Change in Control or following Early Involuntary Termination.

10.11       Notice. Any notice, consent or demand required or permitted to be given to the Employer or Administrator under this Agreement shall be sufficient if in writing and hand-delivered or sent by registered or certified mail to the Employer’s principal business office. Any notice or filing required or permitted to be given to the Executive or Beneficiary under this Agreement shall be sufficient if in writing and hand-delivered or sent by mail to the last known address of the Executive or Beneficiary, as appropriate. Any notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or on the receipt for registration or certification.

10.12       Headings and Interpretation. Headings and sub-headings in this Agreement are inserted for reference and convenience only and shall not be deemed part of this Agreement. Wherever the fulfillment of the intent and purpose of this Agreement requires and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.

10.13 Alternative Action. In the event it becomes impossible for the Employer or the Administrator to perform any act required by this Agreement due to regulatory or other constraints, the Employer or Administrator may perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Employer, provided that such alternative act does not violate Code Section 409A.

10.14       Coordination with Other Benefits. The benefits provided for the Executive or the Beneficiary under this Agreement are in addition to any other benefits available to the Executive under any other plan or program for employees of the Employer. This Agreement shall supplement and shall not supersede, modify, or amend any other such plan or program except as may otherwise be expressly provided herein.

10.15       Inurement. This Agreement shall be binding upon and shall inure to the benefit of the Employer, its successor and assigns, and the Executive, the Executive’s successors, heirs, executors, administrators, and the Beneficiary.

10.16       Tax Withholding. The Employer may make such provisions and take such action as it deems necessary or appropriate for the withholding of any taxes which the Employer is required by any law or regulation to withhold in connection with any benefits under the Agreement. The Executive shall be responsible for the payment of all individual tax liabilities relating to any benefits paid hereunder.

10.17       Aggregation of Agreement. If the Employer offers other non-qualified deferred compensation plans in addition to this Agreement, this Agreement and those plans shall be treated as a single plan to the extent required under Code Section 409A.

IN WITNESS WHEREOF, the Executive and a representative of the Employer have executed this Agreement document as indicated below:

Executive:	Employer:
/s/ Jeffrey J. Carfora	By:	/s/ Douglas L. Kennedy
	Its:	President and Chief Executive Officer

DEFERRED COMPENSATION AGREEMENT

Distribution Election Form

Form and Timing of Distributions

Benefit	Distribution of Benefit (Indicate number of years between 2 and 10)
§ 5.1 - Normal Benefit	Quarterly installments for _____ years
§ 5.2 - Early Voluntary Termination Benefit * § 5.3 - Early Involuntary Termination Benefit*	Quarterly installments for _____ years
§ 5.4 - Disability Benefit	Quarterly installments for _____ years
§ 5.5 – Change in Control Benefit	_____ Lump sum or _____ Quarterly installments for _____ years (Initial either lump sum or installments.)
§ 5.6 - Death Benefit	_____ Lump Sum or _____ Quarterly installments for _____ years (Initial either lump sum or installments.)

*Per 409A, the form and timing for these two triggering events must be the same.

Name:

Signature:

Date:

Received by the Administrator this _____ day of ____________________, 20___

By:

Title:

DEFERRED COMPENSATION AGREEMENT

Beneficiary Designation

I, Jeffrey J. Carfora, designate the following as Beneficiary under this Agreement:

Primary
	%
	%
Contingent
	%
	%

I understand that I may change this beneficiary designation by delivering a new written designation to the Administrator, which shall be effective only upon receipt by the Administrator prior to my death. I further understand that the designation will be automatically revoked if the Beneficiary predeceases me or if I have named my spouse as Beneficiary and our marriage is subsequently dissolved.

Signature:          __________________________                    Date: _______

SPOUSAL CONSENT (Required only if Administrator requests and someone other than spouse is named Beneficiary)

I consent to the beneficiary designation above. I also acknowledge that if I am named Beneficiary and my marriage is subsequently dissolved, the beneficiary designation will be automatically revoked.

Spouse Name:          ___________________________________

Signature:          __________________________          Date: _______

Received by the Administrator this ________ day of ___________________, 20__

By:

Title:

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Douglas L. Kennedy, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Peapack-Gladstone Financial Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves Management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 8, 2017	By:  /s/ Douglas L. Kennedy
	Name:  Douglas L. Kennedy
	Title:   President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Jeffrey J. Carfora, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Peapack-Gladstone Financial Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves Management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 8, 2017	By:  /s/ Jeffrey J. Carfora
	Name:  Jeffrey J. Carfora
	Title:   Senior Executive Vice President,
	Chief Financial Officer

EX-32

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Peapack-Gladstone Financial Corporation (the “Corporation”), for the quarterly period ended September 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Douglas L. Kennedy, as Chief Executive Officer of the Corporation, and Jeffrey J. Carfora, as Chief Financial Officer of the Corporation, each hereby certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

/s/ Douglas L. Kennedy

Name:  Douglas L. Kennedy

Title:     President and Chief Executive Officer

Date:    November 8, 2017

/s/ Jeffrey J. Carfora

Name:  Jeffrey J. Carfora

Title:     Senior Executive Vice President

            Chief Financial Officer

Date:    November 8, 2017

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 02, 2017
Document And Entity Information
Entity Registrant Name	PEAPACK GLADSTONE FINANCIAL CORP
Entity Central Index Key	0001050743
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		18,259,577
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2017
Trading Symbol	PGC

XML

CONSOLIDATED STATEMENTS OF CONDITION - USD ($) $ in Thousands		Sep. 30, 2017	Dec. 31, 2016
ASSETS
Cash and due from banks		$ 4,446	$ 24,580
Federal funds sold		101	101
Interest-earning deposits		88,793	138,010
Total cash and cash equivalents		93,340	162,691
Securities available for sale		315,112	305,388
FHLB and FRB stock, at cost		13,589	13,813
Loans held for sale, at fair value		2,240	1,200
Loans held for sale, at lower of cost or fair value			388
Loans		3,667,197	3,312,144
Less: Allowance for loan and lease losses		35,915	32,208
Net loans		3,631,282	3,279,936
Premises and equipment		29,832	30,371
Other real estate owned		137	534
Accrued interest receivable		6,803	8,153
Bank owned life insurance		44,380	43,806
Deferred tax assets, net		16,636	15,320
Goodwill and other intangible assets		15,064	3,157
Other assets		7,917	13,876
TOTAL ASSETS		4,176,332	3,878,633
Deposits:
Noninterest-bearing demand deposits		557,117	489,485
Interest-bearing deposits:
Interest-bearing deposits checking	[1]	1,144,714	1,023,081
Savings		121,830	120,056
Money market accounts		1,046,997	1,048,494
Certificates of deposit - Retail		528,251	457,000
Subtotal deposits		3,398,909	3,138,116
Interest-bearing demand - Brokered		180,000	180,000
Certificates of deposit - Brokered		83,788	93,721
Total deposits		3,662,697	3,411,837
Federal Home Loan Bank advances		49,898	61,795
Capital lease obligation		9,240	9,693
Subordinated debt, net		48,862	48,764
Accrued expenses and other liabilities		25,699	22,334
TOTAL LIABILITIES		3,796,396	3,554,423
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 21,000,000 shares; issued shares, 18,622,937 at September 30, 2017 and 17,666,173 at December 31, 2016; outstanding shares, 18,214,759 at September 30, 2017 and 17,257,995 at December 31, 2016		15,521	14,717
Surplus		268,951	238,708
Treasury stock at cost, 408,178 shares at both September 30, 2017 and December 31, 2016		(8,988)	(8,988)
Retained earnings		104,797	81,304
Accumulated other comprehensive loss, net of income tax		(345)	(1,531)
TOTAL SHAREHOLDERS' EQUITY		379,936	324,210
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY		$ 4,176,332	$ 3,878,633

[1] Interest-bearing checking includes $373.7 million at September 30, 2017 and $393.0 million at December 31, 2016 of reciprocal balances in the Reich & Tang or Promontory Demand Deposit Marketplace program.

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CONSOLIDATED STATEMENTS OF CONDITION (Parenthetical) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Preferred stock, par value
Preferred stock, shares authorized	500,000	500,000
Preferred stock, liquidation preference per share	$ 1,000	$ 1,000
Common stock, stated value	$ 0.83	$ 0.83
Common stock, shares authorized	21,000,000	21,000,000
Common stock, shares issued	18,622,937	17,666,173
Common stock, shares outstanding	18,214,759	17,257,995
Treasury stock, shares	408,178	408,178

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CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
INTEREST INCOME
Interest and fees on loans	$ 35,511	$ 28,225	$ 96,640	$ 82,713
Interest on securities available for sale:
Taxable	1,564	976	4,545	2,816
Tax-exempt	117	128	353	377
Interest on loans held for sale	23	384	34	577
Interest on interest-earning deposits	276	131	716	294
Total interest income	37,491	29,844	102,288	86,777
INTEREST EXPENSE
Interest on savings and interest-bearing deposit accounts	3,083	1,399	7,215	3,785
Interest on certificates of deposit	1,864	1,615	5,084	4,649
Interest on borrowed funds	439	380	1,096	1,432
Interest on capital lease obligation	112	119	341	361
Interest on subordinated debt	783	799	2,349	938
Subtotal - interest expense	6,281	4,312	16,085	11,165
Interest on interest-bearing demand - brokered	737	762	2,183	2,263
Interest on certificates of deposits - brokered	481	501	1,465	1,494
Total Interest expense	7,499	5,575	19,733	14,922
NET INTEREST INCOME BEFORE PROVISION FOR LOAN AND LEASE LOSSES	29,992	24,269	82,555	71,855
Provision for loan and lease losses	400	2,100	4,200	6,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES	29,592	22,169	78,355	65,855
OTHER INCOME
Wealth management fee income	5,790	4,436	15,694	13,630
Service charges and fees	816	812	2,402	2,437
Bank owned life insurance	343	340	1,015	1,027
Gains on loans held for sale at fair value (mortgage banking)	141	383	279	813
Gains on loans held for sale at lower of cost or fair value	34	256	34	880
Fee income related to loan level, back-to-back swaps	888	670	2,635	764
Gain on sale of SBA loans	493	243	790	502
Other income	326	395	1,172	1,074
Securities gains, net				119
Total other income	8,831	7,535	24,021	21,246
OPERATING EXPENSES
Compensation and employee benefits	13,996	11,515	38,660	33,523
Premises and equipment	2,945	2,736	8,794	8,342
FDIC insurance expense	583	814	1,871	3,954
Other operating expense	4,437	3,101	12,035	10,328
Total operating expenses	21,961	18,166	61,360	56,147
INCOME BEFORE INCOME TAX EXPENSE	16,462	11,538	41,016	30,954
Income tax expense	6,256	4,422	14,888	11,785
NET INCOME	$ 10,206	$ 7,116	$ 26,128	$ 19,169
EARNINGS PER SHARE
Basic	$ 0.57	$ 0.43	$ 1.49	$ 1.19
Diluted	$ 0.56	$ 0.43	$ 1.47	$ 1.17
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic	17,800,153	16,467,654	17,478,293	16,167,153
Diluted	18,123,268	16,673,596	17,753,731	16,347,255

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Statement of Comprehensive Income [Abstract]
Net income	$ 10,206	$ 7,116	$ 26,128	$ 19,169
Unrealized gains/(loss) on available for sale securities:
Unrealized holding gains/(loss) arising during the period	99	(350)	934	1,081
Less: Reclassification adjustment for net gains included in net income				119
Before tax	99	(350)	934	962
Tax effect	(37)	135	(353)	(361)
Net of tax	62	(215)	581	601
Unrealized gains/(loss) on cash flow hedges:
Unrealized holding gains/(loss)	222	1,591	1,023	(3,380)
Before tax	222	1,591	1,023	(3,380)
Tax effect	(91)	(650)	(418)	1,381
Net of tax	131	941	605	(1,999)
Total other comprehensive income/(loss)	193	726	1,186	(1,398)
Total comprehensive income	$ 10,399	$ 7,842	$ 27,314	$ 17,771

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Surplus [Member]	Treasury Stock [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income/(Loss), Net of Tax [Member]	Total
Balance at Dec. 31, 2015					$ (379)
Net income						$ 19,169
Comprehensive income					(1,398)	(1,398)
Balance at Sep. 30, 2016					(1,777)
Balance at Jun. 30, 2016					(2,503)
Net income						7,116
Comprehensive income					726	726
Balance at Sep. 30, 2016					(1,777)
Balance at Dec. 31, 2016	$ 14,717	$ 238,708	$ (8,988)	$ 81,304	(1,531)	$ 324,210
Shares outstanding at Dec. 31, 2016	17,257,995					17,257,995
Net income				26,128		$ 26,128
Comprehensive income					1,186	1,186
Restricted stock units issued 61610 shares	$ 51	(51)
Restricted stock units issued 61610 shares, shares	61,610
Restricted stock awards forfeitures, (400) shares	$ (1)	1
Restricted stock awards forfeitures (400) shares, shares	(400)
Restricted stock units/awards repurchased on vesting to pay taxes, (46,884) shares	$ (39)	(1,376)				(1,415)
Restricted stock units/awards repurchased on vesting to pay taxes, (46,884) shares, shares	(46,884)
Amortization of restricted awards/units		2,536				2,536
Cash dividends declared on common stock (0.15 per share)				(2,635)		(2,635)
Common stock option expense		6				6
Common stock options exercised, 33,862 net of 8,744 used to exercise, 25,118 shares	$ 28	307				335
Common stock options exercised, 33,862 net of 8,744 used to exercise, 25,118 shares, shares	25,118
Sales of shares (Dividend Reinvestment Program), 867,377 shares	$ 723	25,354				26,077
Sales of shares (Dividend Reinvestment Program), 867,377 shares, shares	867,377
Issuance of shares for Employee Stock Purchase Plan, 19,820 shares	$ 17	602				619
Issuance of shares for Employee Stock Purchase Plan, 19,820 shares, shares	19,820
Issuance of shares for employee, saving and investment plan 30,123 shares	$ 25	864				889
Issuance of shares for employee, saving and investment plan 30,123 shares, shares	30,123
Common stock to be issued in wealth acquisition		2,000				2,000
Balance at Sep. 30, 2017	$ 15,521	268,951	(8,988)	104,797	(345)	$ 379,936
Shares outstanding at Sep. 30, 2017	18,214,759					18,214,759
Balance at Jun. 30, 2017					(538)
Net income						$ 10,206
Comprehensive income					193	193
Balance at Sep. 30, 2017	$ 15,521	$ 268,951	$ (8,988)	$ 104,797	$ (345)	$ 379,936
Shares outstanding at Sep. 30, 2017	18,214,759					18,214,759

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) (Parenthetical)	9 Months Ended
	Sep. 30, 2017 $ / shares
Statement of Stockholders' Equity [Abstract]
Cash dividends declared on common stock, per share	$ 0.15

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands		9 Months Ended
		Sep. 30, 2017	Sep. 30, 2016
OPERATING ACTIVITIES:
Net income		$ 26,128	$ 19,169
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		2,473	2,280
Amortization of premium and accretion of discount on securities, net		1,276	1,090
Amortization of restricted stock		2,536	2,154
Amortization of intangible		93	93
Amortization of subordinated debt costs		98	38
Provision of loan and lease losses		4,200	6,000
Deferred tax (benefit)/expense		(2,087)	1,837
Stock-based compensation and employee stock purchase plan expense			128
Gains on securities, available for sale, net			(119)
Loans originated for sale	[1]	(27,925)	(53,412)
Proceeds from sales of loans held for sale	[1]	28,342	52,770
Gain on loans held for sale	[1]	(1,069)	(813)
Gain on loans held for sale at lower of cost or fair value		(34)	(880)
Gain on sale of other real estate owned			(5)
Gain on death benefit		(62)
Increase in cash surrender value of life insurance, net		(612)	(656)
Decrease in accrued interest receivable		1,350	437
Decrease/(increase) in other assets		8,816	(391)
Increase in accrued expenses, capital lease obligations and other liabilities		1,084	2,732
NET CASH PROVIDED BY OPERATING ACTIVITIES		44,607	32,452
INVESTING ACTIVITIES:
Principal repayments, maturities and calls of securities available for sale		51,739	43,997
Redemptions for FHLB & FRB stock		31,568	61,155
Call of securities available for sale			10,035
Sales of securities available for sale			5,499
Purchase of securities available for sale		(61,805)	(106,524)
Purchase of FHLB & FRB stock		(31,344)	(61,264)
Proceeds from sales of loans held for sale at lower of cost or fair value		78,800	182,763
Net increase in loans, net of participations sold		(434,449)	(451,101)
Sales of other real estate owned		534	568
Purchase of premises and equipment		(1,934)	(2,257)
Proceeds from death benefit		100
Purchase of wealth management company		(10,000)
NET CASH USED IN INVESTING ACTIVITIES		(376,791)	(317,129)
FINANCING ACTIVITIES:
Net increase in deposits		250,860	364,590
Net increase/(decrease) in overnight borrowings			(40,700)
Repayments of Federal Home Loan Bank advances		(11,897)	(11,897)
Dividends paid on common stock		(2,635)	(2,452)
Exercise of Stock Options, net of stock swaps		335	246
Restricted stock repurchased on vesting to pay taxes		(1,415)	(496)
Proceeds from issuance of subordinated debt			48,693
Sales of common shares (Dividend Reinvestment Program)		26,077	15,532
Issuance of shares for employee saving and investment plan		889
Issuance of shares for employee stock purchase plan		619	556
NET CASH PROVIDED BY IN FINANCING ACTIVITIES		262,833	374,072
Net (decrease)/increase in cash and cash equivalents		(69,351)	89,395
Cash and cash equivalents at beginning of period		162,691	70,160
Cash and cash equivalents at end of period		93,340	159,555
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest		18,501	13,492
Income tax, net		8,107	10,880
Transfer of loans to loans held for sale			159,804
Transfer of loans held for sale to loans			30,121
Transfer of loans to other real estate owned		137	534
Security purchases settled in subsequent period			7,003
Acquisition
Goodwill		$ 12,000

[1] Includes mortgage loans originated with the intent to sell which are carried at fair value. In addition, this includes the guaranteed portion of SBA loans which are carried at the lower of cost or fair value.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the period ended December 31, 2016 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 of normal recurring accruals) necessary to present fairly the financial position as of September 30, 2017, the results of operations and comprehensive income for the three and nine months ended September 30, 2017 and 2016, shareholders’ equity for the nine months ended September 30, 2017 and cash flow statements for the nine months ended September 30, 2017 and 2016.The results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected 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 statements also include the Bank’s wholly-owned subsidiaries, PGB Trust & Investments of Delaware, Peapack Capital Corporation (formed in the second quarter of 2017), Murphy Capital Management (“MCM”) (acquired in the third quarter of 2017), and Peapack-Gladstone Mortgage Group, Inc. and Peapack-Gladstone Mortgage Group’s wholly-owned subsidiary, PG Investment Company of Delaware, Inc. and its wholly-owned subsidiary, Peapack-Gladstone Realty, Inc., a New Jersey Real Estate Investment Company. While the following footnotes include the collective results of the Company and the Bank, 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 that period. Actual results could differ from those estimates.

Segment Information: The Company’s business is conducted through its banking subsidiary and involves the delivery of loan and deposit products and wealth management services to customers. Management uses certain methodologies to allocate income and expense to the business segments.

The Banking segment includes commercial, commercial real estate, multifamily, residential and consumer lending activities; deposit generation; operation of ATMs; telephone and internet banking services; merchant credit card services and customer support services.

Peapack-Gladstone Bank’s Private Wealth Management Division includes asset management services provided for individuals and institutions; personal trust services, including services as executor, trustee, administrator, custodian and guardian; corporate trust services including services as trustee for pension and profit sharing plans; and other financial planning and advisory services. This segment also includes the activity from the Delaware subsidiary, PGB Trust and Investments of Delaware and MCM. Income is recognized as earned.

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 overnight borrowings.

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 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.

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 will be 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. 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 must be 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. For equity securities, the entire amount of impairment is recognized through earnings.

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 System and required to own a certain amount of FRB stock. FRB stock is carried at cost and classified as a restricted security. Both cash and stock 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, no servicing rights are recorded. Gains and losses on sales of mortgage loans, shown as gain on sale of loans at fair value on the Statements of Income, are based on the difference between the selling price and the carrying value of the related loan sold.

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 $13.4 million and $5.8 million as of September 30, 2017 and December 31, 2016, respectively. There were no SBA loans held for sale at September 30, 2017. SBA Loans held for sale totaled $388 thousand as of December 31, 2016.

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 over the life of the loan as an adjustment, on a level-yield method, 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 was excluded as the impact was not material.

Loans are considered past due when they are not paid 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 or more and collateral, if any, is insufficient to cover principal and interest. 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 months. Commercial loans are generally charged off after an analysis is completed which indicates that collectability of the full principal balance is in doubt. Consumer loans are generally charged off after they become 120 days past due. 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 are returned to accrual status. Nonaccrual mortgage loans are generally charged off when 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 the States of New Jersey and New York.

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 incurred losses in the loan portfolio. The process to determine reserves utilizes analytic tools and management judgement 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 nature and volume of the portfolio, information about specific borrower situations, estimated collateral values, 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 Company 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.

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.

The general component of the allowance covers non-impaired loans and is based primarily on the Bank’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. These qualitative factors include consideration of 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 staff; 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 September 30, 2017 and at December 31, 2016 the multiple was 4.0 times for non-impaired substandard loans and 2.0 times for non-impaired special mention loans.

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 value could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential 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, such as the Prime Rate, which could expose the borrower to higher debt service requirements in a rising interest rate environment. Further, real estate value could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential 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 value could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential 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 flow 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. In addition, these loans often include commercial real estate as collateral to strengthen the Bank’s position and further mitigate risk. Commercial and industrial loans are typically repaid first by the cash flow 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. Factors that may influence a business’s 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, the Bank will often require more frequent reporting requirements from the borrower in order to better monitor its business performance.

Leasing and Equipment Finance. Peapack Capital Corporation (“PCC”), a subsidiary of the Bank, 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.

Agricultural Production. These are loans to finance agricultural production and other loans to farmers. The Bank does not currently engage in this type of lending.

Commercial Construction. The Bank has discontinued its commercial construction activity. Dollar amounts within this segment are immaterial.

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.

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 both types of 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.

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.

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 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 new shares to satisfy option exercises.

For the three months ended September 30, 2017 and 2016, the Company recorded total compensation cost for stock options of less than $1 thousand and $11 thousand, respectively. There was no recognized tax benefit for the quarter ended September 30, 2017. There was a recognized tax benefit of $1 thousand for the quarter ended September 30, 2016. The Company recorded total compensation cost for stock options for the nine months ended September 30, 2017 and 2016 of $6 thousand and $45 thousand, respectively. There was no recognized tax benefit for the nine months ended September 30, 2017. There was a recognized tax benefit of $4 thousand for the nine months ended September 30, 2016. There was less than $1 thousand of compensation cost related to non-vested share-based compensation arrangements granted under the Company’s stock incentive plans at September 30, 2017. That cost is expected to be recognized over a weighted average period of 0.10 years.

Upon adoption of Accounting Standards Update (“ASU”) 2016-09, “Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting” the Company 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 months ended September 30, 2017 were as follows:

						Weighted
				Weighted		Average		Aggregate
				Average		Remaining		Intrinsic
	Number of			Exercise		Contractual		Value
	Options			Price		Term		(In thousands)
Balance, January 1, 2017		179,159		$	16.27
Granted during 2017		—			—
Exercised during 2017		(33,862	)		17.93
Expired during 2017		(7,722	)		26.90
Forfeited during 2017		(581	)		14.73
Balance, September 30, 2017		136,994			15.27		3.30 years	$	2,530
Vested and expected to vest		136,990			15.27		3.30 years	$	2,530
Exercisable at September 30, 2017		136,934			15.27		3.30 years	$	2,529

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 quarter of 2017 and the exercise price, multiplied by the number of in-the-money options). The Company’s closing stock price on September 30, 2017 was $33.74.

There were no stock options granted in the nine months ended September 30, 2017.

The Company has previously granted performance based and service based restricted stock awards/units. Service based awards/units vest ratably over a one, three or five-year period.  There were 3,900 restricted stock units granted in the third quarter of 2017.

The performance based awards that were granted in previous periods are dependent upon the Company meeting certain performance criteria and cliff vest at the end of the performance period.  Total unrecognized compensation expense for performance based awards was $1.7 million as of September 30, 2017.

Changes in nonvested shares dependent on performance criteria for the nine months ended September 30, 2017 were as follows:

			Weighted
			Average
	Number of		Grant Date
	Shares		Fair Value
Balance, January 1, 2017		92,767	$	18.12
Granted during 2017		—		—
Vested during 2017		—		—
Forfeited during 2017		—		—
Balance, September 30, 2017		92,767	$	18.12

Changes in service based restricted stock awards/units for the nine months ended September 30, 2017 were as follows:

				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value
Balance, January 1, 2017		368,130		$	19.26
Granted during 2017		136,708			30.13
Vested during 2017		(148,619	)		18.52
Forfeited during 2017		(5,938	)		25.30
Balance, September 30, 2017		350,281		$	23.71

As of September 30, 2017, there was $1.2 million of total unrecognized compensation cost related to service based awards. That cost is expected to be recognized over a weighted average period of 0.59 years. As of September 30, 2017, there was $4.5 million of total unrecognized compensation cost related to service based units. That cost is expected to be recognized over a weighted average period of 1.27 years. Stock compensation expense recorded for the third quarters of 2017 and 2016 totaled $864 thousand and $725 thousand, respectively. For the nine months ended September 30, 2017 and 2016, the Company recorded total compensation cost of $2.5 million and $2.2 million, respectively.

Employee Stock Purchase Plan: On April 22, 2014, the shareholders of the Company approved the 2014 Employee Stock Purchase Plan (“ESPP”). The ESPP provides for the granting of purchase rights of up to 150,000 shares of Corporation common stock. Subject to certain eligibility requirements and restrictions, the ESPP allows employees to purchase shares during four three-month offering periods (“Offering Periods”). Each participant in the Offering Period is granted an option to purchase a number of shares and may contribute between 1% and 15% 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% of the closing market price of a share of Company common stock on the purchase date. Participation in the ESPP is entirely voluntary and employees can cancel their purchases at any time during the Offering period without penalty. The fair value of each share purchase right is determined using the Black-Scholes option pricing model.

The Company recorded $33 thousand and $19 thousand of expense in salaries and employee benefits expense for the three months ended September 30, 2017 and 2016, respectively, related to the ESPP. Total shares issued under the ESPP during the third quarter of 2017 and 2016 were 6,987 and 7,155, respectively.

The Company recorded $105 thousand and $83 thousand of expense in salaries and employee benefits expense for the nine months ended September 30, 2017 and 2016, respectively, related to the ESPP. Total shares issued under the ESPP for the nine months ended September 30, 2017 and 2016 were 19,820 and 26,913, 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
	September 30,				September 30,
(Dollars in thousands, except per share data)	2017		2016		2017		2016
Net income to shareholders	$	10,206	$	7,116	$	26,128	$	19,169
Basic weighted-average shares outstanding		17,800,153		16,467,654		17,478,293		16,167,153
Plus: common stock equivalents		323,115		205,942		275,438		180,102
Diluted weighted-average shares outstanding		18,123,268		16,673,596		17,753,731		16,347,255
Net income per share
Basic	$	0.57	$	0.43	$	1.49	$	1.19
Diluted		0.56		0.43		1.47		1.17

For the three and nine months ended September 30, 2017 all stock options and warrants were included in the computation of diluted earnings per share because they were all dilutive. Stock options and warrants totaling 218,079 shares were not included in the computation of diluted earnings per share in the third quarter of 2016 because they were considered antidilutive. Stock options and warrants totaling 223,832 shares were not included in the computation of diluted earnings per share in the nine months ended September 30, 2016 because they were considered antidilutive. Antidilutive shares are common stock equivalents with weighted average exercise prices in excess of the weighted average market value for the period 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 2013 or by New Jersey tax authorities for years prior to 2012.

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

The Company’s effective rate was positively affected by the adoption of ASU 2016-09 which simplified certain aspects of accounting for share-based compensation.

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 reasonable estimated. Management does not believe there are any such matters that will have a material effect on the financial statements.

Restrictions on Cash: Cash on hand or on deposit with the FRB was required to meet regulatory reserve and clearing requirements.

Comprehensive Income: Comprehensive income 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.

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 acquired company (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. The Company has selected December 31 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 and assembly 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, are amortized on an accelerated method over their estimated useful lives, which range up to 15 years.

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INVESTMENT SECURITIES AVAILABLE FOR SALE

9 Months Ended

Sep. 30, 2017

INVESTMENT SECURITIES AVAILABLE FOR SALE [Abstract]

INVESTMENT SECURITIES AVAILABLE FOR SALE

2. INVESTMENT SECURITIES AVAILABLE FOR SALE

A summary of amortized cost and approximate fair value of investment securities available for sale included in the consolidated statements of condition as of September 30, 2017 and December 31, 2016 follows:

	September 30, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
U.S. government-sponsored agencies	$	36,988	$	—	$	(513	)	$	36,475
Mortgage-backed securities – residential		237,547		960		(1,126	)		237,381
SBA pool securities		6,002		—		(66	)		5,936
State and political subdivisions		24,400		156		(46	)		24,510
Corporate bond		3,000		94		—			3,094
Single-issuer trust preferred security		2,999		—		(142	)		2,857
CRA investment fund		5,000		—		(141	)		4,859
Total	$	315,936	$	1,210	$	(2,034	)	$	315,112

	December 31, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
U.S. government-sponsored agencies	$	21,991	$	—	$	(474	)	$	21,517
Mortgage-backed securities – residential		238,271		860		(1,514	)		237,617
SBA pool securities		6,778		—		(65	)		6,713
State and political subdivisions		29,107		160		(274	)		28,993
Corporate bond		3,000		113		—			3,113
Single-issuer trust preferred security		2,999		—		(389	)		2,610
CRA investment fund		5,000		—		(175	)		4,825
Total	$	307,146	$	1,133	$	(2,891	)	$	305,388

The following tables present the Corporation’s available for sale securities with continuous unrealized losses and the approximate fair value of these investments as of September 30, 2017 and December 31, 2016.

	September 30, 2017
	Duration of Unrealized Loss
	Less Than 12 Months					12 Months or Longer					Total
	Approximate					Approximate					Approximate
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(In thousands)	Value		Losses			Value		Losses			Value		Losses
U.S. government-
sponsored agencies	$	31,662	$	(330	)	$	4,813	$	(183	)	$	36,475	$	(513	)
Mortgage-backed
securities-residential		97,456		(611	)		30,603		(515	)		128,059		(1,126	)
SBA pool securities		—		—			5,936		(66	)		5,936		(66	)
State and political
subdivisions		7,631		(40	)		993		(6	)		8,624		(46	)
Single-issuer trust
preferred security		—		—			2,858		(142	)		2,858		(142	)
CRA investment fund		—		—			4,859		(141	)		4,859		(141	)
Total	$	136,749	$	(981	)	$	50,062	$	(1,053	)	$	186,811	$	(2,034	)

	December 31, 2016
	Duration of Unrealized Loss
	Less Than 12 Months					12 Months or Longer					Total
	Approximate					Approximate					Approximate
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(In thousands)	Value		Losses			Value		Losses			Value		Losses
U.S. government-
sponsored agencies	$	21,517	$	(474	)	$	—	$	—		$	21,517	$	(474	)
Mortgage-backed
securities-residential		151,114		(1,472	)		5,147		(42	)		156,261		(1,514	)
SBA pool securities		—		—			6,713		(65	)		6,713		(65	)
State and political
subdivisions		9,412		(274	)		—		—			9,412		(274	)
Single-issuer trust
preferred security		—		—			2,610		(389	)		2,610		(389	)
CRA investment fund		1,930		(70	)		2,894		(105	)		4,824		(175	)
Total	$	183,973	$	(2,290	)	$	17,364	$	(601	)	$	201,337	$	(2,891	)

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 creditworthiness of the issuers. As of September 30, 2017, 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.

At September 30, 2017, the unrealized loss on the single-issuer trust preferred security of $142 thousand was related to a debt security issued by a large bank holding company. The security was downgraded to below investment grade by Moody’s and is currently rated Ba1. Management monitors the performance of the issuer on a quarterly basis to determine if there are any credit events that could result in deferral or default of the security. Management believes the depressed valuation is a result of the nature of the security, a trust preferred bond, and the bond’s very low yield. As Management does not intend to sell this security nor is it likely that it will be required to sell the security before its anticipated recovery, the security is not considered other-than-temporarily impaired at September 30, 2017.

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LOANS

9 Months Ended

Sep. 30, 2017

Receivables [Abstract]

LOANS

3. LOANS

Loans outstanding, excluding those held for sale, by general ledger classification, as of September 30, 2017 and December 31, 2016, consisted of the following:

			% of					% of
	September 30,		Totals			December 31,		Total
(In thousands)	2017		Loans			2016		Loans
Residential mortgage	$	602,775		16.44	%	$	527,370		15.92	%
Multifamily mortgage		1,441,852		39.32			1,459,594		44.07
Commercial mortgage		625,466		17.05			551,233		16.65
Commercial loans		845,831		23.06			636,714		19.23
Construction loans		—		—			1,405		0.04
Home equity lines of credit		68,787		1.88			65,682		1.98
Consumer loans, including fixed
rate home equity loans		81,671		2.23			69,654		2.10
Other loans		815		0.02			492		0.01
Total loans	$	3,667,197		100.00	%	$	3,312,144		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, 2017 and December 31, 2016:

			% of					% of
	September 30,		Totals			December 31,		Total
(In thousands)	2017		Loans			2016		Loans
Primary residential mortgage	$	631,632		17.23	%	$	557,970		16.86	%
Home equity lines of credit		68,787		1.88			65,683		1.98
Junior lien loan on residence		7,082		0.19			9,206		0.28
Multifamily property		1,441,852		39.34			1,459,594		44.09
Owner-occupied commercial real estate		253,605		6.92			176,123		5.32
Investment commercial real estate		876,282		23.91			752,258		22.73
Commercial and industrial		257,124		7.01			213,983		6.47
Lease Financing		36,184		0.99			—		—
Farmland/agricultural production		162		0.01			169		0.01
Commercial construction loans		93		0.01			1,497		0.04
Consumer and other loans		92,055		2.51			73,621		2.22
Total loans	$	3,664,858		100.00	%	$	3,310,104		100.00	%
Net deferred costs		2,339					2,040
Total loans including net deferred costs	$	3,667,197				$	3,312,144

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, 2017 and December 31, 2016:

	September 30, 2017
	Total		Ending ALLL		Total		Ending ALLL
	Loans		Attributable		Loans		Attributable
	Individually		To Loans		Collectively		To Loans
	Evaluated		Individually		Evaluated		Collectively				Total
	For		Evaluated for		For		Evaluated for		Total		Ending
(In thousands)	Impairment		Impairment		Impairment		Impairment		Loans		ALL
Primary residential
mortgage	$	12,161	$	572	$	619,471	$	3,772	$	631,632	$	4,344
Home equity lines
of credit		27		—		68,760		229		68,787		229
Junior lien loan
on residence		98		—		6,984		13		7,082		13
Multifamily
property		—		—		1,441,852		11,246		1,441,852		11,246
Owner-occupied
commercial
real estate		1,576		—		252,029		2,270		253,605		2,270
Investment
commercial
real estate		11,130		205		865,152		11,752		876,282		11,957
Commercial and
industrial		54		54		257,070		5,181		257,124		5,235
Lease financing		—		—		36,184		275		36,184		275
Secured by
farmland and
agricultural
production		—		—		162		2		162		2
Commercial
construction		—		—		93		1		93		1
Consumer and
other		—		—		92,055		343		92,055		343
Total ALLL	$	25,046	$	831	$	3,639,812	$	35,084	$	3,664,858	$	35,915

	December 31, 2016
	Total		Ending ALLL		Total		Ending ALLL
	Loans		Attributable		Loans		Attributable
	Individually		To Loans		Collectively		To Loans
	Evaluated		Individually		Evaluated		Collectively				Total
	For		Evaluated for		For		Evaluated for		Total		Ending
(In thousands)	Impairment		Impairment		Impairment		Impairment		Loans		ALLL
Primary residential
mortgage	$	15,814	$	456	$	542,156	$	3,210	$	557,970	$	3,666
Home equity lines
of credit		53		—		65,630		233		65,683		233
Junior lien loan
on residence		229		—		8,977		16		9,206		16
Multifamily
Property		—		—		1,459,594		11,192		1,459,594		11,192
Owner-occupied
Commercial
real estate		1,486		—		174,637		1,774		176,123		1,774
Investment
commercial
real estate		11,335		214		740,923		10,695		752,258		10,909
Commercial and
Industrial		154		154		213,829		4,010		213,983		4,164
Secured by
farmland and
agricultural production
production		—		—		169		2		169		2
Commercial
construction		—		—		1,497		9		1,497		9
Consumer and
Other		—		—		73,621		243		73,621		243
Total ALLL	$	29,071	$	824	$	3,281,033	$	31,384	$	3,310,104	$	32,208

Impaired loans include nonaccrual loans of $15.4 million at September 30, 2017 and $11.3 million at December 31, 2016. Impaired loans also include performing TDR loans of $9.7 million at September 30, 2017 and $17.8 million at December 31, 2016. At September 30, 2017, the allowance allocated to TDR loans totaled $439 thousand, of which $184 thousand was allocated to nonaccrual loans. At December 31, 2016, the allowance allocated to TDR loans totaled $550 thousand of which $314 thousand was allocated to nonaccrual loans. All accruing TDR loans were paying in accordance with restructured terms as of September 30, 2017. The Company has not committed to lend additional amounts as of September 30, 2017 to customers with outstanding loans that are classified as TDR loans.

The following tables present loans individually evaluated for impairment by class of loans as of September 30, 2017 and December 31, 2016 (The average impaired loans on the following tables represent year to date impaired loans.):

	September 30, 2017
	Unpaid						Average
	Principal		Recorded		Specific		Impaired
(In thousands)	Balance		Investment		Reserves		Loans
With no related allowance recorded:
Primary residential mortgage	$	9,998	$	8,820	$	—	$	11,329
Owner-occupied commercial real estate		1,756		1,576		—		1,467
Investment commercial real estate		9,601		9,537		—		10,035
Home equity lines of credit		29		27		—		42
Junior lien loan on residence		156		98		—		96
Total loans with no related allowance	$	21,541	$	20,058	$	—	$	22,969
With related allowance recorded:
Primary residential mortgage	$	4,159	$	3,341	$	572	$	1,296
Investment commercial real estate		1,609		1,593		205		1,202
Commercial and industrial		110		54		54		79
Total loans with related allowance	$	5,878	$	4,988	$	831	$	2,577
Total loans individually evaluated for
Impairment	$	27,419	$	25,046	$	831	$	25,546

	December 31, 2016
	Unpaid						Average
	Principal		Recorded		Specific		Impaired
(In thousands)	Balance		Investment		Reserves		Loans
With no related allowance recorded:
Primary residential mortgage	$	16,015	$	14,090	$	—	$	10,038
Owner-occupied commercial real estate		1,597		1,486		—		1,450
Investment commercial real estate		9,711		9,711		—		9,974
Home equity lines of credit		56		53		—		143
Junior lien loan on residence		280		229		—		339
Total loans with no related allowance	$	27,659	$	25,569	$	—	$	21,944
With related allowance recorded:
Primary residential mortgage	$	1,787	$	1,724	$	456	$	1,678
Investment commercial real estate		1,640		1,624		214		1,642
Commercial and industrial		204		154		154		145
Total loans with related allowance	$	3,631	$	3,502	$	824	$	3,465
Total loans individually evaluated for
impairment	$	31,290	$	29,071	$	824	$	25,409

Interest income recognized on impaired loans for the quarters ended September 30, 2017 and 2016 was not material. The Company did not recognize any income on nonaccruing impaired loans for the three and nine months ended September 30, 2017 and 2016.

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, 2017 and December 31, 2016:

	September 30, 2017
			Loans Past Due
			Over 90 Days
			And Still
(In thousands)	Nonaccrual		Accruing Interest
Primary residential mortgage	$	8,318	$	—
Home equity lines of credit		6		—
Junior lien loan on residence		98		—
Owner-occupied commercial real estate		1,576		—
Investment commercial real estate		5,315		—
Commercial and industrial		54		—
Total	$	15,367	$	—

	December 31, 2016
			Loans Past Due
			Over 90 Days
			And Still
(In thousands)	Nonaccrual		Accruing Interest
Primary residential mortgage	$	9,071	$	—
Home equity lines of credit		30		—
Junior lien loan on residence		115		—
Owner-occupied commercial real estate		1,486		—
Investment commercial real estate		408		—
Commercial and industrial		154		—
Total	$	11,264	$	—

The following tables present the aging of the recorded investment in past due loans as of September 30, 2017 and December 31, 2016 by class of loans, excluding nonaccrual loans:

	September 30, 2017
	30-59		60-89		Greater Than
	Days		Days		90 Days		Total
(In thousands)	Past Due		Past Due		Past Due		Past Due
Primary residential mortgage	$	589	$	—	$	—	$	589
Total	$	589	$	—	$	—	$	589

	December 31, 2016
	30-59		60-89		Greater Than
	Days		Days		90 Days		Total
(In thousands)	Past Due		Past Due		Past Due		Past Due
Primary residential mortgage	$	620	$	480	$	—	$	1,100
Junior lien loan on residence		—		25		—		25
Owner-occupied commercial real estate		209		—		—		209
Commercial and industrial		22		—		—		22
Total	$	851	$	505	$	—	$	1,356

Credit Quality Indicators:

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, debt service capacity, 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:

· All new relationships or new lending to existing relationships greater than $1,000,000;

· All criticized and classified rated borrowers with relationship exposure of more than $500,000;

· A large sample of borrowers with total relationship commitments in excess of $1,000,000;

· A random sample of borrowers with relationships less than $1,000,000;

· Any other credits requested by Bank senior management or a member of the Board of Directors and any borrower for which the reviewer determines a review is warranted based upon knowledge of the portfolio, local events, industry stresses etc.

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, 2017, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

			Special
(In thousands)	Pass		Mention		Substandard		Doubtful
Primary residential mortgage	$	618,544	$	795	$	12,293	$	—
Home equity lines of credit		68,760		—		27		—
Junior lien loan on residence		6,984		—		98		—
Multifamily property		1,424,637		15,381		1,834		—
Owner-occupied commercial real estate		248,504		—		5,101		—
Investment commercial real estate		847,966		6,233		22,083		—
Commercial and industrial		249,323		6,991		810		—
Lease financing		36,184		—		—		—
Farmland		162		—		—		—
Commercial construction		—		93		—		—
Consumer and other loans		90,131		—		1,924		—
Total	$	3,591,195	$	29,493	$	44,170	$	—

As of December 31, 2016, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

			Special
(In thousands)	Pass		Mention		Substandard		Doubtful
Primary residential mortgage	$	541,359	$	660	$	15,951	$	—
Home equity lines of credit		65,630		—		53		—
Junior lien loan on residence		8,977		—		229		—
Multifamily property		1,456,328		2,867		399		—
Owner-occupied commercial real estate		170,851		—		5,272		—
Investment commercial real estate		724,203		5,116		22,939		—
Commercial and industrial		208,617		4,411		955		—
Secured by farmland and agricultural		169		—		—		—
Commercial construction		1,400		97		—		—
Consumer and other loans		73,621		—		—		—
Total	$	3,251,155	$	13,151	$	45,798	$	—

At September 30, 2017, $23.9 million of substandard loans were also considered impaired compared to December 31, 2016, when $27.9 million of substandard loans were also impaired.

The activity in the allowance for loan and lease losses for the three months ended September 30, 2017 is summarized below:

	July 1,										September 30,
	2017										2017
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	4,223	$	(261	)	$	59	$	323		$	4,344
Home equity lines of credit		211		—			2		16			229
Junior lien loan on residence		14		—			6		(7	)		13
Multifamily property		11,606		—			—		(360	)		11,246
Owner-occupied commercial real estate		2,147		(30	)		—		153			2,270
Investment commercial real estate		11,727		—			1		229			11,957
Commercial and industrial		5,333		—			9		(107	)		5,235
Lease financing		178		—			—		97			275
Secured by farmland and agricultural		2		—			—		—			2
Commercial construction		1		—			—		—			1
Consumer and other loans		309		(24	)		2		56			343
Total ALLL	$	35,751	$	(315	)	$	79	$	400		$	35,915

The activity in the allowance for loan and lease losses for the nine months ended September 30, 2017 is summarized below:

	January 1,										September 30,
	2017										2017
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	3,666	$	(591	)	$	128	$	1,141		$	4,344
Home equity lines of credit		233		(23	)		61		(42	)		229
Junior lien loan on residence		16		(57	)		19		35			13
Multifamily property		11,192		—			—		54			11,246
Owner-occupied commercial real estate		1,774		(30	)		—		526			2,270
Investment commercial real estate		10,909		—			23		1,025			11,957
Commercial and industrial		4,164		(25	)		61		1,035			5,235
Lease financing		—		—			—		275			275
Secured by farmland and agricultural		2		—			—		—			2
Commercial construction		9		—			—		(8	)		1
Consumer and other loans		243		(62	)		3		159			343
Total ALLL	$	32,208	$	(788	)	$	295	$	4,200		$	35,915

The activity in the allowance for loan and lease losses for the three months ended September 30, 2016 is summarized below:

	July 1,										September 30,
	2016										2016
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	2,783	$	(729	)	$	4	$	972		$	3,030
Home equity lines of credit		223		—			3		(2	)		224
Junior lien loan on residence		19		—			2		(3	)		18
Multifamily property		11,639		—			—		204			11,843
Owner-occupied commercial real estate		1,733		—			—		90			1,823
Investment commercial real estate		9,621		—			2		231			9,854
Commercial and industrial		2,951		(4	)		8		613			3,568
Secured by farmland and agricultural production		2		—			—		—			2
Commercial construction		1		—			—		3			4
Consumer and other loans		247		—			11		(8	)		250
Total ALLL	$	29,219	$	(733	)	$	30	$	2,100		$	30,616

The activity in the allowance for loan and lease losses for the nine months ended September 30, 2016 is summarized below:

	January 1,										September 30,
	2016										2016
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	2,297	$	(1,027	)	$	25	$	1,735		$	3,030
Home equity lines of credit		86		(91	)		11		218			224
Junior lien loan on residence		66		—			72		(120	)		18
Multifamily property		11,813		—			—		30			11,843
Owner-occupied commercial real estate		1,679		—			—		144			1,823
Investment commercial real estate		7,590		(258	)		8		2,514			9,854
Commercial and industrial		2,209		(7	)		20		1,346			3,568
Secured by farmland and agricultural production		2		—			—		—			2
Commercial construction		2		—			—		2			4
Consumer and other loans		112		(5	)		12		131			250
Total ALLL	$	25,856	$	(1,388	)	$	148	$	6,000		$	30,616

Troubled Debt Restructurings:

The Company has allocated $439 thousand and $550 thousand of specific reserves on TDRs to customers whose loan terms have been modified in TDRs as of September 30, 2017 and December 31, 2016, respectively. There were no unfunded commitments to lend additional amounts to customers with outstanding loans that are classified as TDRs.

The terms of certain loans were modified as TDRs when one or a combination of the following occurred: a reduction of the stated interest rate of the loan; a deferral of scheduled payments with an extension of the maturity date; or some other modification or extension which would not be readily available in the market.

No loans were modified as TDRs during the three-month period ended September 30, 2017.

The following table presents loans by class modified as TDRs during the nine-month period ended September 30, 2017:

			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Contracts		Investment		Investment
Primary residential mortgage		5	$	1,148	$	1,148
Total		5	$	1,148	$	1,148

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 during the three-month period ended September 30, 2016:

			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Contracts		Investment		Investment
Primary residential mortgage		1	$	368	$	368
Total		1	$	368	$	368

The following table presents loans by class modified as TDRs during the nine-month period ended September 30, 2016:

			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Contracts		Investment		Investment
Primary residential mortgage		7	$	4,924	$	4,924
Junior lien on residence		1		66		66
Investment commercial real estate		1		79		79
Total		9	$	5,069	$	5,069

There were no loans that were modified as TDRs for which there was a payment default, within twelve months of modification, during the three and nine months ended September 30, 2017 and 2016.

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 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.

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DEPOSITS

9 Months Ended

Sep. 30, 2017

Deposits:

DEPOSITS

4. DEPOSITS

Certificates of deposit, excluding brokered certificates of deposit over $250,000, totaled $158.9 million and $118.7 million at September 30, 2017 and December 31, 2016, respectively.

The following table sets forth the details of total deposits as of September 30, 2017 and December 31, 2016:

	September 30,					December 31,
	2017					2016
(In thousands)	$		%			$		%
Noninterest-bearing demand deposits	$	557,117		15.21	%	$	489,485		14.35	%
Interest-bearing checking (1)		1,144,714		31.25			1,023,081		29.99
Savings		121,830		3.33			120,056		3.52
Money market		1,046,997		28.59			1,048,494		30.73
Certificates of deposit		528,251		14.42			457,000		13.39
Subtotal deposits		3,398,909		92.80			3,138,116		91.98
Interest-bearing demand - Brokered		180,000		4.91			180,000		5.27
Certificates of deposit - Brokered		83,788		2.29			93,721		2.75
Total deposits	$	3,662,697		100.00	%	$	3,411,837		100.00	%

(1) Interest-bearing checking includes $373.7 million at September 30, 2017 and $393.0 million at December 31, 2016 of reciprocal balances in the Reich & Tang or Promontory Demand Deposit Marketplace program.

The scheduled maturities of certificates of deposit, including brokered certificates of deposit, as of September 30,2017 are as follows:

(In thousands)
2017	$	56,898
2018		316,436
2019		102,167
2020		39,510
2021		13,858
Over 5 Years		83,710
Total	$	612,039

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FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

5. FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

Advances from the FHLB totaled $49.9 million with a weighted average interest rate of 2.14 percent and $61.8 million with a weighted average interest rate of 2.02 percent at September 30, 2017 and December 31, 2016, respectively.

At September 30, 2017, advances totaling $37.9 million with a weighted average interest rate of 1.87 percent had fixed maturity dates. The fixed maturity date advances at December 31, 2016 totaled $49.8 million with a weighted average interest rate of 1.78 percent. The fixed rate advances are secured by blanket pledges of certain 1-4 family residential mortgages totaling $509.0 million and multifamily mortgages totaling $939.8 million at September 30, 2017, while at December 31, 2016 the fixed rate advances are secured by blanket pledges of certain 1-4 family residential mortgages totaling $468.3 million and multifamily mortgages totaling $1.2 billion.

At both September 30, 2017 and at December 31, 2016, the Company had $12.0 million in variable rate advances, with a weighted average interest rate of 3.01 percent, that are noncallable for two or three years and then callable quarterly with final maturities of ten years from the original date of the advance. All of these advances are beyond their initial noncallable periods. These advances are secured by pledges of investment securities totaling $12.9 million at September 30, 2017.

The final maturity dates of the FHLB advances are scheduled as follows:

(In thousands)
2017	$	12,000
2018		34,898
2019		3,000
2020		—
2021		—
Over 5 years		—
Total	$	49,898

There were no overnight borrowings as of September 30, 2017 or December 31, 2016. At September 30, 2017, unused short-term overnight borrowing commitments totaled $1.2 billion from FHLB, $22.0 million from correspondent banks and $728.2 million at the FRB.

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BUSINESS SEGMENTS

9 Months Ended

Sep. 30, 2017

Segment Reporting [Abstract]

BUSINESS SEGMENTS

6. BUSINESS SEGMENTS

The Corporation assesses its results among two operating segments, Banking and Peapack-Gladstone Bank’s Private Wealth Management Division. 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.

Banking

The Banking segment includes commercial, commercial real estate, multifamily, residential and consumer lending activities; deposit generation; operation of ATMs; telephone and internet banking services; merchant credit card services and customer support and sales.

Private Wealth Management Division

Peapack-Gladstone Bank’s Private Wealth Management Division includes asset management services provided for individuals and institutions; personal trust services, including services as executor, trustee, administrator, custodian and guardian; and other financial planning and advisory services.

The following tables present the statements of income and total assets for the Corporation’s reportable segments for the three and nine months ended September 30, 2017 and 2016.

	Three Months Ended September 30, 2017
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	28,687	$	1,305	$	29,992
Noninterest income		2,928		5,903		8,831
Total income		31,615		7,208		38,823
Provision for loan and lease losses		400		—		400
Compensation and benefits		10,992		3,004		13,996
Premises and equipment expense		2,619		326		2,945
Other noninterest expense		3,167		1,853		5,020
Total noninterest expense		17,178		5,183		22,361
Income before income tax expense		14,437		2,025		16,462
Income tax expense		5,474		782		6,256
Net income	$	8,963	$	1,243	$	10,206

	Three Months Ended September 30, 2016
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	23,194	$	1,075	$	24,269
Noninterest income		2,974		4,561		7,535
Total income		26,168		5,636		31,804
Provision for loan and lease losses		2,100		—		2,100
Compensation and benefits		9,138		2,377		11,515
Premises and equipment expense		2,484		252		2,736
Other noninterest expense		2,688		1,227		3,915
Total noninterest expense		16,410		3,856		20,266
Income before income tax expense		9,758		1,780		11,538
Income tax expense		3,738		684		4,422
Net income	$	6,020	$	1,096	$	7,116

	Nine Months Ended September 30, 2017
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	78,372	$	4,183	$	82,555
Noninterest income		7,975		16,046		24,021
Total income		86,347		20,229		106,576
Provision for loan and lease losses		4,200		—		4,200
Compensation and benefits		30,792		7,868		38,660
Premises and equipment expense		7,891		903		8,794
Other noninterest expense		8,559		5,347		13,906
Total noninterest expense		51,442		14,118		65,560
Income before income tax expense		34,905		6,111		41,016
Income tax expense		12,670		2,218		14,888
Net income	$	22,235	$	3,893	$	26,128
Total assets for period end	$	4,148,222	$	28,110	$	4,176,332

	Nine Months Ended September 30, 2016
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	67,962	$	3,893	$	71,855
Noninterest income		7,286		13,960		21,246
Total income		75,248		17,853		93,101
Provision for loan and lease losses		6,000		—		6,000
Compensation and benefits		26,744		6,779		33,523
Premises and equipment expense		7,583		759		8,342
Other noninterest expense		10,047		4,235		14,282
Total noninterest expense		50,374		11,773		62,147
Income before income tax expense		24,874		6,080		30,954
Income tax expense		9,470		2,315		11,785
Net income	$	15,404	$	3,765	$	19,169
Total assets for period end	$	3,729,004	$	45,379	$	3,774,383

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FAIR VALUE

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

FAIR VALUE

7. FAIR VALUE

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:

Level 1:	Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2:	Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3:	Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing as asset or liability.

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 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, 2017.

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

Assets Measured on a Recurring Basis    

				Fair Value Measurements Using
				Quoted
				Prices in
				Active
				Markets		Significant
				For		Other			Significant
				Identical		Observable			Unobservable
	September 30,			Assets		Inputs			Inputs
(In thousands)	2017			(Level 1)		(Level 2)			(Level 3)
Assets:
Available for sale:
U.S. government-sponsored
agencies	$	36,475		$	—	$	36,475		$	—
Mortgage-backed securities-
residential		237,381			—		237,381			—
SBA pool securities		5,936			—		5,936			—
State and political subdivisions		24,510			—		24,510			—
Corporate bond		3,094			—		3,094			—
Single-issuer trust preferred security		2,857			—		2,857			—
CRA investment fund		4,859			4,859		—			—
Loans held for sale, at fair value		2,240			—		2,240			—
Derivatives:
Cash flow hedges		383			—		383			—
Loan level swaps		4,136			—		4,136			—
Total	$	321,871		$	4,859	$	317,012		$	—
Liabilities:
Derivatives:
Cash flow hedges	$	(104	)	$	—	$	(104	)	$	—
Loan level swaps		(4,136	)		—		(4,136	)		—
Total	$	(4,240	)	$	—	$	(4,240	)	$	—

Assets Measured on a Recurring Basis    

				Fair Value Measurements Using
				Quoted
				Prices in
				Active
				Markets		Significant
				For		Other			Significant
				Identical		Observable			Unobservable
	December 31,			Assets		Inputs			Inputs
(In thousands)	2016			(Level 1)		(Level 2)			(Level 3)
Assets:
Securities available for sale:
U.S. government-sponsored agencies	$	21,517		$	—	$	21,517		$	—
Mortgage-backed securities-residential		237,617			—		237,617			—
SBA pool securities		6,713			—		6,713			—
State and political subdivisions		28,993			—		28,993			—
Corporate bond		3,113			—		3,113			—
Single-issuer trust preferred security		2,610			—		2,610			—
CRA investment fund		4,825			4,825		—			—
Loans held for sale, at fair value		1,200			—		1,200			—
Derivatives:
Cash flow hedges		123			—		123			—
Loan level swaps		1,543			—		1,543			—
Total	$	308,254		$	4,825	$	303,429		$	—
Liabilities:
Derivatives:
Cash flow hedges	$	(867	)		—		(867	)		—
Loan level swaps		(1,543	)		—		(1,543	)		—
Total	$	(2,410	)	$	—	$	(2,410	)	$	—

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, 2017 and December 31, 2016.

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

(In thousands)	September 30, 2017		December 31, 2016
Residential loans contractual balance	$	2,214	$	1,181
Fair value adjustment		26		19
Total fair value of residential loans held for sale	$	2,240	$	1,200

There were no transfers between Level 1 and Level 2 during the three or nine months ended September 30, 2017.

The following table summarizes, for the periods indicated, assets measured at fair value on a non-recurring basis (Quantitative disclosures for non-recurring Level 3 assets have been omitted due to immateriality):

Assets Measured on a Non-Recurring Basis

			Fair Value Measurements Using
			Quoted
			Prices in
			Active
			Markets		Significant
			For		Other		Significant observable
			Identical		Observable		Unobservable
	September 30,		Assets		Inputs		Inputs
(In thousands)	2017		(Level 1)		(Level 2)		(Level 3)
Assets:
Impaired loans:
Primary residential mortgage	$	1,828	$	—	$	—	$	1,828
Investment commercial real estate		239		—		—		239
	December 31,
(In thousands)	2016
Assets:
Impaired loans:
Investment commercial real estate	$	245	$	—	$	—	$	245

Impaired loans that are measured for impairment using the fair value of the collateral for collateral dependent loans had a recorded investment of $2.6 million, with a valuation allowance of $523 thousand at September 30, 2017 and $408 thousand, with a valuation allowance of $163 thousand, at December 31, 2016.

The carrying amounts and estimated fair values of financial instruments at September 30, 2017 are as follows:

			Fair Value Measurements at September 30, 2017 using
	Carrying
(In thousands)	Amount		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	93,340	$	93,340	$	—	$	—	$	93,340
Securities available for sale		315,112		4,859		310,253		—		315,112
FHLB and FRB stock		13,589		—		—		—		N/A
Loans held for sale, at fair value		2,240		—		2,240		—		2,240
Loans, net of allowance for loan and lease losses		3,631,282		—		—		3,613,704		3,613,704
Accrued interest receivable		6,803		—		1,106		5,697		6,803
Cash flow hedges		383		—		383		—		383
Loan level swaps		4,136		—		4,136		—		4,136
Financial liabilities
Deposits	$	3,662,697	$	3,050,658	$	611,881	$	—	$	3,662,539
Federal home loan bank advances		49,898		—		50,044		—		50,044
Subordinated debt		48,862		—		—		48,862		48,862
Accrued interest payable		2,019		151		1,118		750		2,019
Cash flow hedge		104		—		104		—		104
Loan level swap		4,136		—		4,136		—		4,136

The carrying amounts and estimated fair values of financial instruments at December 31, 2016 are as follows:

			Fair Value Measurements at December 31, 2016 using
	Carrying
(In thousands)	Amount		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	162,691	$	162,691	$	—	$	—	$	162,691
Securities available for sale		305,388		4,825		300,563		—		305,388
FHLB and FRB stock		13,813		—		—		—		N/A
Loans held for sale, at fair value		1,200		—		1,200		—		1,200
Loans held for sale, at lower of cost
or fair value		388		—		428		—		428
Loans, net of allowance for loan and lease losses		3,279,936		—		—		3,256,837		3,256,837
Accrued interest receivable		8,153		—		899		7,254		8,153
Cash flow Hedges		123		—		123		—		123
Loan level swaps		1,543		—		1,543		—		1,543
Financial liabilities
Deposits	$	3,411,837	$	2,861,116	$	549,332	$	—	$	3,410,448
Federal home loan bank advances		61,795		—		62,286		—		62,286
Subordinated debt		48,764		—		—		48,768		48,768
Accrued interest payable		1,127		161		966		—		1,127
Cash flow hedges		867		—		867		—		867
Loan level swaps		1,543		—		1,543		—		1,543

The methods and assumptions, not previously presented, used to estimate fair values are described as follows:

Cash and cash equivalents: The carrying amounts of cash and short-term instruments approximate fair values and are classified as either Level 1 or Level 2. Cash and due from banks is classified as Level 1. Certificates of deposit are classified as Level 2.

FHLB and FRB stock: The fair value of FHLB or FRB stock is their cost basis due to restrictions placed on its transferability.

Loans held for sale, at lower of cost or 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. Loans held for sale are classified as Level 2.

Loans: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

Deposits: The fair values disclosed for demand deposits (e.g., interest and noninterest checking, savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date, (i.e., the carrying amount) resulting in a Level 1 classification. The carrying amounts of certificates of deposit approximate the fair values at the reporting date resulting in Level 2 classification. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

Overnight borrowings: The carrying amounts of overnight borrowings approximate fair values and are classified as Level 2.

Federal Home Loan Bank advances: The fair values of the Corporation’s long-term borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

Subordinated debentures: The fair values of the Corporation’s subordinated debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.

Accrued interest receivable/payable: The carrying amounts of accrued interest approximate fair value resulting in a Level 2 or Level 3 classification. Accrued interest on deposits and securities are included in Level 2. Accrued interest on loans is included in Level 3.

Off-balance sheet instruments: Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of commitments is not material.

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OTHER OPERATING EXPENSES

9 Months Ended

Sep. 30, 2017

Other Income and Expenses [Abstract]

OTHER OPERATING EXPENSES

8. OTHER OPERATING EXPENSES

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2017		2016		2017		2016
Wealth management division
other expense	$	533	$	490	$	1,865	$	1,593
Professional and legal fees		1,452		801		3,100		2,544
Other operating expenses		2,452		1,810		7,070		6,191
Total other operating expenses	$	4,437	$	3,101	$	12,035	$	10,328

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ACCUMULATED OTHER COMPREHENSIVE (LOSS)/INCOME

9 Months Ended

Sep. 30, 2017

Stockholders' Equity Note [Abstract]

ACCUMULATED OTHER COMPREHENSIVE (LOSS)/INCOME

9. ACCUMULATED OTHER COMPREHENSIVE (LOSS)/INCOME

The following is a summary of the accumulated other comprehensive (loss)/income balances, net of tax, for the three months ended September 30, 2017 and 2016:

						Amount		Other
						Reclassified		Comprehensive
				Other		From		Income
				Comprehensive		Accumulated		Three Months
	Balance at			Income		Other		Ended		Balance at
	July 1,			Before		Comprehensive		September 30,		September 30,
(In thousands)	2017			Reclassifications		Income		2017		2017
Net unrealized holding (loss)
on securities available for sale,
net of tax	$	(572	)	$	62	$	—	$	62	$	(510	)
Gains on cash flow hedges		34			131		—		131		165
Accumulated other
comprehensive loss,
net of tax	$	(538	)	$	193	$	—	$	193	$	(345	)

							Amount		Other
							Reclassified		Comprehensive
				Other			From		Income/(Loss)
				Comprehensive			Accumulated		Three Months
	Balance at			Income/(Loss)			Other		Ended			Balance at
	July 1,			Before			Comprehensive		September 30,			September 30,
(In thousands)	2016			Reclassifications			Loss		2016			2016
Net unrealized holding gain
on securities available for sale,
net of tax	$	1,224		$	(215	)	$	—	$	(215	)	$	1,009
Losses on cash flow hedges		(3,727	)		941			—		941			(2,786	)
Accumulated other
comprehensive loss,
net of tax	$	(2,503	)	$	726		$	—	$	726		$	(1,777	)

The following represents the reclassifications out of accumulated other comprehensive income for the three months ended September 30, 2017 and 2016:

	Three Months Ended
	September 30,
(In thousands)	2017		2016		Affected Line Item in Income
Unrealized gains on
securities available for sale:
Realized net gain on securities sales	$	—	$	—	Securities gains, net
Income tax expense		—		—	Income tax expense
Total reclassifications, net of tax	$	—	$	—

The following is a summary of the accumulated other comprehensive (loss)/income balances, net of tax, for the nine months ended September 30, 2017 and 2016:

						Amount		Other
						Reclassified		Comprehensive
				Other		From		Income
				Comprehensive		Accumulated		Nine Months
	Balance at			Income		Other		Ended		Balance at
	January 1,			Before		Comprehensive		September 30,		September 30,
(In thousands)	2017			Reclassifications		Income		2017		2017
Net unrealized holding (loss)
on securities available for sale,
net of tax	$	(1,091	)	$	581	$	—	$	581	$	(510	)
Gains on cash flow hedges		(440	)		605		—		605		165
Accumulated other
comprehensive loss,
net of tax	$	(1,531	)	$	1,186	$	—	$	1,186	$	(345	)

							Amount			Other
							Reclassified			Comprehensive
				Other			From			Income/(Loss)
				Comprehensive			Accumulated			Nine Months
	Balance at			Income/(Loss)			Other			Ended			Balance at
	January 1,			Before			Comprehensive			September 30,			September 30,
(In thousands)	2016			Reclassifications			Loss			2016			2016
Net unrealized holding gain
on securities available for sale,
net of tax	$	408		$	676		$	(75	)	$	601		$	1,009
Losses on cash flow hedges		(787	)		(1,999	)		—			(1,999	)		(2,786	)
Accumulated other
comprehensive loss,
net of tax	$	(379	)	$	(1,323	)	$	(75	)	$	(1,398	)	$	(1,777	)

The following represents the reclassifications out of accumulated other comprehensive income for the nine months ended September 30, 2017 and 2016:

	Nine Months Ended
	September 30,
(In thousands)	2017		2016			Affected Line Item in Income
Unrealized gains on
securities available for sale:
Realized net gain on securities sales	$	—	$	119		Securities gains, net
Income tax expense		—		(44	)	Income tax expense
Total reclassifications, net of tax	$	—	$	75

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DERIVATIVES

9 Months Ended

Sep. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVES

10. DERIVATIVES

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 $180.0 million as of September 30, 2017 and December 31, 2016 were designated as cash flow hedges of certain interest-bearing demand brokered deposits and were determined to be fully effective during the three and nine months ended September 30, 2017. As such, no amount of ineffectiveness has been included in net income during the three and nine months ended September 30, 2017. Therefore, 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 information about the interest rate swaps designated as cash flow hedges as of September 30, 2017 and December 31, 2016 is presented in the following table:

(Dollars in thousands)	September 30, 2017			December 31, 2016
Notional amount	$	180,000		$	180,000
Weighted average pay rate		1.64	%		1.64	%
Weighted average receive rate		1.30	%		0.58	%
Weighted average maturity		2.50	years		3.25	years
Unrealized gain/(loss), net	$	279		$	(744	)
Number of contracts		9			9

Net interest expense recorded on these swap transactions totaled $150 thousand and $763 thousand for the three and nine months ended September 30, 2017, respectively, and is reported as a component of interest expense. Net interest expense recorded on these swap transactions totaled $494 thousand and $1.5 million for the three and nine months ended September 30, 2016, respectively, and is reported as a component of interest expense.

Cash Flow Hedges

The following table presents the net gain recorded in accumulated other comprehensive (loss)/income and the consolidated financial statements relating to the cash flow derivative instruments for the three months ended September 30, 2017 (after tax):

					Amount of
	Amount of		Amount of		Gain/(Loss)
	Gain/(Loss)		Gain/(Loss)		Recognized in
	Recognized		Reclassified		Other Non-Interest
	In OCI		From OCI to		Expense
(In thousands)	(Effective Portion)		Interest Expense		(Ineffective Portion)
Interest rate contracts	$	131	$	—	$	—

The following table presents the net gain recorded in accumulated other comprehensive (loss)/income and the consolidated financial statements relating to the cash flow derivative instruments for the three months ended September 30, 2016 (after tax):

					Amount of
	Amount of		Amount of		Gain/(Loss)
	Gain/(Loss)		Gain/(Loss)		Recognized in
	Recognized		Reclassified		Other Non-Interest
	In OCI		From OCI to		Expense
(In thousands)	(Effective Portion)		Interest Expense		(Ineffective Portion)
Interest rate contracts	$	941	$	—	$	—

The following table presents the net gain recorded in accumulated other comprehensive (loss)/income and the consolidated financial statements relating to the cash flow derivative instruments for the nine months ended September 30, 2017 (after tax):

					Amount of
	Amount of		Amount of		Gain/(Loss)
	Gain/(Loss)		Gain/(Loss)		Recognized in
	Recognized		Reclassified		Other Non-Interest
	In OCI		From OCI to		Expense
(In thousands)	(Effective Portion)		Interest Expense		(Ineffective Portion)
Interest rate contracts	$	605	$	—	$	—

The following table presents the net loss recorded in accumulated other comprehensive (loss)/income and the consolidated financial statements relating to the cash flow derivative instruments for the nine months ended September 30, 2016 (after tax):

						Amount of
	Amount of			Amount of		Gain/(Loss)
	Gain/(Loss)			Gain/(Loss)		Recognized in
	Recognized			Reclassified		Other Non-Interest
	In OCI			From OCI to		Expense
(In thousands)	(Effective Portion)			Interest Expense		(Ineffective Portion)
Interest rate contracts	$	(1,999	)	$	—	$	—

The following tables reflect the cash flow hedges included in the financial statements as of September 30, 2017 and December 31, 2016:

	September 30, 2017
	Notional		Fair
(In thousands)	Amount		Value
Interest rate swaps related to interest-bearing
demand brokered deposits	$	180,000	$	279
Total included in other assets	$	110,000	$	383
Total included in other liabilities	$	70,000	$	(104	)

	December 31, 2016
	Notional		Fair
(In thousands)	Amount		Value
Interest rate swaps related to interest-bearing
demand brokered deposits	$	180,000	$	(744	)
Total included in other assets	$	30,000	$	123
Total included in other liabilities	$	150,000	$	(867	)

Derivatives Not Designated as Accounting Hedges: The Company 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.

Information about these swaps is as follows:

(Dollars in thousands)	September 30, 2017			December 31, 2016
Notional amount	$	315,689		$	126,810
Fair value	$	4,136		$	1,543
Weighted average pay rates		4.10	%		3.75	%
Weighted average receive rates		3.27	%		2.65	%
Weighted average maturity		7.7	years		9.4	years
Number of contracts		41			14

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SUBORDINATED DEBT

9 Months Ended

Sep. 30, 2017

Subordinated Debt [Abstract]

SUBORDINATED DEBT

11. SUBORDINATED DEBT

During June 2016, the Company issued $50.0 million in aggregate principal amount of fixed-to-floating subordinated notes (the “Notes”) to certain institutional investors. The 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% 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.  Subordinated debt is presented net of issuance cost on the Consolidated Statements of Condition.

The subordinated debt issuance benefited the Company’s regulatory total capital amount and ratio. Approximately $40.0 million of the net proceeds from the sale of the Notes were used by the Company to contribute capital to the Bank in the second quarter of 2016. The remaining funds (approximately $9 million) were retained by the Company and are intended to cover future subordinated debt interest payments.

In connection with the issuance of the Notes, the Company obtained ratings from Kroll Bond Rating Agency (“KBRA”). KBRA assigned investment grade rating of BBB- for the Company’s subordinated debt. KBRA reaffirmed such rating in June 2017.

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RECENT ACCOUNTING PRONOUNCEMENTS

9 Months Ended

Sep. 30, 2017

Accounting Changes and Error Corrections [Abstract]

RECENT ACCOUNTING PRONOUNCEMENTS

12. RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)” implements a common revenue standard that clarifies the principles for recognizing revenue. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. In July 2015, FASB deferred the effective date of the ASU by one year which means ASU 2014-09 will be effective for the Company on January 1, 2018.  In March 2016, FASB issued ASU 2016-08 which amended illustrative examples to clarify how to apply the implementation guidance on principal versus agent considerations. The Company completed its initial assessment of revenue streams and determined that, in accordance with the standard, interest income, income from bank owned life insurance, gains on sales of loans and securities and derivatives income are all out of scope of the ASU.  We reviewed contracts potentially affected by the ASU including wealth management fee income, service charges and fees, and other income. Based on the initial assessment, the Company does not expect the guidance will have a material impact on its financial statements. However, the Company is reviewing at a contract level in order to finalize the evaluation.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments”. This guidance amends existing guidance to improve accounting standards for financial instruments including clarification and simplification of accounting and disclosure requirements and the requirement for public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. The Company expects to record a cumulative effect adjustment for its sole equity instrument to the balance sheet as of the beginning of the fiscal year of adoption. These amendments are effective for public business entities for annual periods and interim periods within those annual periods beginning after December 15, 2017. The Company does not expect the guidance will have a material impact on its consolidated financial statements.

In February 2016, the FASB issued 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. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. The Company continues to evaluate the effect that ASU 2016-02 will have on its financial position, results of operations, and its financial statement disclosures. The adoption of ASU 2016-02 is expected to result in leased assets and related lease liabilities to be included on its balance sheet, along with the related leasehold amortization and interest expense included in its statement of income.

In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting”. Under the ASU, an entity recognizes all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement. This change eliminates the notion of the additional paid in capital (“APIC”) pool and reduces the complexity and cost of accounting for excess tax benefits and tax deficiencies. Excess tax benefits and tax deficiencies are considered discrete items in the reporting period they occur and are not included in the estimate of an entity’s annual effective tax rate. Additionally, this update permits an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur. This accounting guidance is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption is permitted. The Company adopted the provisions of this standard during the quarter ended March 31, 2017. Upon adoption, excess tax benefits and tax deficiencies are recognized in the provision for income taxes on the consolidated statement of operations and are presented within operating activities on the consolidated statement of cash flows for the nine months ended September 30, 2017. The adoption of ASU 2016-09 resulted in an income tax benefit of $792 thousand and a reduction in our effective tax rate for the nine months ended September 30, 2017.

On June 16, 2016, the FASB issued Accounting Standards Update No. 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.   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 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 an impact on its financial statements as it relates to the Company’s securities portfolio. The Company is also currently evaluating the impact the CECL model will have on our accounting and allowance for loans losses. The Company is in the process of evaluating third party firms to assist in the development of a CECL program, and has selected an in-house software model to assist in the calculation of the allowance for loan and lease losses in preparation for the change to the expected loss model. The Company expects to recognize a one-time cumulative-effect adjustment to our allowance for loan and lease losses as of the beginning of the first reporting period in which the new standard is effective, consistent with regulatory expectations set forth in interagency guidance issued at the end of 2016. 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 financial condition or results of operations.

On August 26, 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments)”. This ASU addresses the following eight specific cash flow issues: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (COLIs) (including bank-owned life insurance policies (BOLIs)); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. This amendment is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. There is no material impact on our statement of cash flows as a result of this ASU.

In January 2017, the FASB issued ASU 2017-04: “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”.  This accounting standard updated simplifies the subsequent measurement of goodwill, by eliminating Step 2 from the goodwill impairment test.  In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.  An entity should apply the amendments in this update on a prospective basis.  A public business entity that is a SEC filer should adopt the amendments in this update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.  Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.  The adoption of this ASU will not have a material impact to the consolidated financial statements at this time.

In March 2017, the FASB issued ASU 2017-08: “Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities”. This Accounting Standards update amends guidance on the amortization period of premiums on certain purchased callable debt securities. Specifically, the amendments shorten the amortization period of premiums on certain purchased callable debt securities to the earliest call date. The amendments affect all entities that hold investments in callable debt securities that have an amortized cost basis in excess of the amount that is repayable by the issuer at the earliest call date. For public business entities, the amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.  The Company does not currently hold any callable debt securities with a premium.  As a result, the adoption of this ASU will not have a material impact to the consolidated financial statements.

Also in March 2017, the FASB issued ASU 2017-07: “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”. This ASU requires an entity to present net periodic pension cost and net periodic postretirement benefit cost as a net amount that may be capitalized as part of an asset where appropriate. Generally, the service cost component is analyzed differently from the other components of net periodic pension cost and net periodic postretirement benefit cost. To improve consistency, transparency, and usefulness of financial information, the amendments in this update require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The amendments in this update are effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods.  The Company’s current accounting treatment and presentation of net periodic postretirement benefit cost is consistent with the provisions in ASU-2017.  As a result, the adoption of this ASU will not have a material impact to the consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09: “Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting”. The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless all the following are met: 1.) The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification. 2.) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified. 3.) The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in this update. The amendments in this update are effective for public business entities for annual periods beginning after December 15, 2018, including interim periods within those annual periods.  The Company does not anticipate a material impact to the consolidated financial statements at this time.

In August 2017, the FASB issued ASU 2017-12: “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities”. The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. ASU 2017-12 is effective for public business entities for fiscal years beginning after December 15, 2018, with early adoption, including adoption in an interim period, permitted. The Company plans to adopt ASU 2017-12 on January 1, 2019. ASU 2017-12 requires a modified retrospective transition method in which the Company will recognize the cumulative effect of the change on the opening balance of each affected component of equity in the statement of financial position as of the date of adoption. While the Company continues to assess all potential impacts of the standard, the Company does not anticipate a material impact to the consolidated financial statements at this time.

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ACQUISITION

9 Months Ended

Sep. 30, 2017

Business Combinations [Abstract]

ACQUISITION

13. ACQUISITION

Effective August 1, 2017 the Company closed the previously announced acquisition of MCM. The acquisition is consistent with the Company’s strategy to grow its wealth management business both organically and through strategic acquisitions.  The purchase price included equity of $2 million as well as cash. The Company is still in the process of evaluating the final purchase accounting allocation. Any adjustment resulting from the evaluation is not expected to be material. In accordance with FASB ASC 805-10 (Subtopic 25-15), the Company has up to one year from date of acquisition to complete this assessment. The increase in the Company’s goodwill and other intangible assets during the quarter ended September 30, 2017 was due to this acquisition.

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DEFINITIVE AGREEMENT

9 Months Ended

Sep. 30, 2017

Definitive Agreement

DEFINITIVE AGREEMENT

14. DEFINITIVE AGREEMENT

On September 14, 2017, the Company announced that it had entered into a definitive agreement to acquire Fairfield, NJ-based Quadrant Capital Management, LLC. (“Quadrant”). The transaction closed on October 31, 2017. The purchase price includes equity of $3.1 million as well as cash. The Company is still in the process of evaluating the final purchase accounting allocation. Any adjustment resulting from the evaluation is not expected to be material. In accordance with FASB ASC 805-10 (Subtopic 25-15), the Company has up to one year from date of acquisition to complete this assessment.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Principles of Consolidation and Organization

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 statements also include the Bank’s wholly-owned subsidiaries, PGB Trust & Investments of Delaware, Peapack Capital Corporation (formed in the second quarter of 2017), Murphy Capital Management (“MCM”) (acquired in the third quarter of 2017), and Peapack-Gladstone Mortgage Group, Inc. and Peapack-Gladstone Mortgage Group’s wholly-owned subsidiary, PG Investment Company of Delaware, Inc. and its wholly-owned subsidiary, Peapack-Gladstone Realty, Inc., a New Jersey Real Estate Investment Company. While the following footnotes include the collective results of the Company and the Bank, 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 Presentation

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 that period. Actual results could differ from those estimates.

Segment Information

Segment Information: The Company’s business is conducted through its banking subsidiary and involves the delivery of loan and deposit products and wealth management services to customers. Management uses certain methodologies to allocate income and expense to the business segments.

The Banking segment includes commercial, commercial real estate, multifamily, residential and consumer lending activities; deposit generation; operation of ATMs; telephone and internet banking services; merchant credit card services and customer support services.

Peapack-Gladstone Bank’s Private Wealth Management Division includes asset management services provided for individuals and institutions; personal trust services, including services as executor, trustee, administrator, custodian and guardian; corporate trust services including services as trustee for pension and profit sharing plans; and other financial planning and advisory services. This segment also includes the activity from the Delaware subsidiary, PGB Trust and Investments of Delaware and MCM. Income is recognized as earned.

Cash and Cash Equivalents

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 overnight borrowings.

Interest-Earning Deposits in Other Financial Institutions

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

Securities

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, net of tax.

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 will be 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. 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 must be 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. For equity securities, the entire amount of impairment is recognized through earnings.

Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) Stock

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 System and required to own a certain amount of FRB stock. FRB stock is carried at cost and classified as a restricted security. Both cash and stock dividends are reported as income.

Loans Held for Sale

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, no servicing rights are recorded. Gains and losses on sales of mortgage loans, shown as gain on sale of loans at fair value on the Statements of Income, are based on the difference between the selling price and the carrying value of the related loan sold.

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 $13.4 million and $5.8 million as of September 30, 2017 and December 31, 2016, respectively. There were no SBA loans held for sale at September 30, 2017. SBA Loans held for sale totaled $388 thousand as of December 31, 2016.

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: 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 over the life of the loan as an adjustment, on a level-yield method, 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 was excluded as the impact was not material.

Loans are considered past due when they are not paid 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 or more and collateral, if any, is insufficient to cover principal and interest. 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 months. Commercial loans are generally charged off after an analysis is completed which indicates that collectability of the full principal balance is in doubt. Consumer loans are generally charged off after they become 120 days past due. 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 are returned to accrual status. Nonaccrual mortgage loans are generally charged off when 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 the States of New Jersey and New York.

Allowance for Loan and Lease Losses

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 incurred losses in the loan portfolio. The process to determine reserves utilizes analytic tools and management judgement 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 nature and volume of the portfolio, information about specific borrower situations, estimated collateral values, 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 Company 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.

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.

The general component of the allowance covers non-impaired loans and is based primarily on the Bank’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. These qualitative factors include consideration of 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 staff; 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 September 30, 2017 and at December 31, 2016 the multiple was 4.0 times for non-impaired substandard loans and 2.0 times for non-impaired special mention loans.

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 value could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential 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, such as the Prime Rate, which could expose the borrower to higher debt service requirements in a rising interest rate environment. Further, real estate value could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential 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 value could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential 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 flow 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. In addition, these loans often include commercial real estate as collateral to strengthen the Bank’s position and further mitigate risk. Commercial and industrial loans are typically repaid first by the cash flow 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. Factors that may influence a business’s 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, the Bank will often require more frequent reporting requirements from the borrower in order to better monitor its business performance.

Leasing and Equipment Finance. Peapack Capital Corporation (“PCC”), a subsidiary of the Bank, 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.

Agricultural Production. These are loans to finance agricultural production and other loans to farmers. The Bank does not currently engage in this type of lending.

Commercial Construction. The Bank has discontinued its commercial construction activity. Dollar amounts within this segment are immaterial.

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.

Derivatives

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 both types of 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.

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.

Stock-Based Compensation

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 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 new shares to satisfy option exercises.

For the three months ended September 30, 2017 and 2016, the Company recorded total compensation cost for stock options of less than $1 thousand and $11 thousand, respectively. There was no recognized tax benefit for the quarter ended September 30, 2017. There was a recognized tax benefit of $1 thousand for the quarter ended September 30, 2016. The Company recorded total compensation cost for stock options for the nine months ended September 30, 2017 and 2016 of $6 thousand and $45 thousand, respectively. There was no recognized tax benefit for the nine months ended September 30, 2017. There was a recognized tax benefit of $4 thousand for the nine months ended September 30, 2016. There was less than $1 thousand of compensation cost related to non-vested share-based compensation arrangements granted under the Company’s stock incentive plans at September 30, 2017. That cost is expected to be recognized over a weighted average period of 0.10 years.

Upon adoption of Accounting Standards Update (“ASU”) 2016-09, “Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting” the Company 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 months ended September 30, 2017 were as follows:

						Weighted
				Weighted		Average		Aggregate
				Average		Remaining		Intrinsic
	Number of			Exercise		Contractual		Value
	Options			Price		Term		(In thousands)
Balance, January 1, 2017		179,159		$	16.27
Granted during 2017		—			—
Exercised during 2017		(33,862	)		17.93
Expired during 2017		(7,722	)		26.90
Forfeited during 2017		(581	)		14.73
Balance, September 30, 2017		136,994			15.27		3.30 years	$	2,530
Vested and expected to vest		136,990			15.27		3.30 years	$	2,530
Exercisable at September 30, 2017		136,934			15.27		3.30 years	$	2,529

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 quarter of 2017 and the exercise price, multiplied by the number of in-the-money options). The Company’s closing stock price on September 30, 2017 was $33.74.

There were no stock options granted in the nine months ended September 30, 2017.

The Company has previously granted performance based and service based restricted stock awards/units. Service based awards/units vest ratably over a one, three or five-year period.  There were 3,900 restricted stock units granted in the third quarter of 2017.

The performance based awards that were granted in previous periods are dependent upon the Company meeting certain performance criteria and cliff vest at the end of the performance period.  Total unrecognized compensation expense for performance based awards was $1.7 million as of September 30, 2017.

Changes in nonvested shares dependent on performance criteria for the nine months ended September 30, 2017 were as follows:

			Weighted
			Average
	Number of		Grant Date
	Shares		Fair Value
Balance, January 1, 2017		92,767	$	18.12
Granted during 2017		—		—
Vested during 2017		—		—
Forfeited during 2017		—		—
Balance, September 30, 2017		92,767	$	18.12

Changes in service based restricted stock awards/units for the nine months ended September 30, 2017 were as follows:

				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value
Balance, January 1, 2017		368,130		$	19.26
Granted during 2017		136,708			30.13
Vested during 2017		(148,619	)		18.52
Forfeited during 2017		(5,938	)		25.30
Balance, September 30, 2017		350,281		$	23.71

As of September 30, 2017, there was $1.2 million of total unrecognized compensation cost related to service based awards. That cost is expected to be recognized over a weighted average period of 0.59 years. As of September 30, 2017, there was $4.5 million of total unrecognized compensation cost related to service based units. That cost is expected to be recognized over a weighted average period of 1.27 years. Stock compensation expense recorded for the third quarters of 2017 and 2016 totaled $864 thousand and $725 thousand, respectively. For the nine months ended September 30, 2017 and 2016, the Company recorded total compensation cost of $2.5 million and $2.2 million, respectively.

Employee Stock Purchase Plan

Employee Stock Purchase Plan: On April 22, 2014, the shareholders of the Company approved the 2014 Employee Stock Purchase Plan (“ESPP”). The ESPP provides for the granting of purchase rights of up to 150,000 shares of Corporation common stock. Subject to certain eligibility requirements and restrictions, the ESPP allows employees to purchase shares during four three-month offering periods (“Offering Periods”). Each participant in the Offering Period is granted an option to purchase a number of shares and may contribute between 1% and 15% 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% of the closing market price of a share of Company common stock on the purchase date. Participation in the ESPP is entirely voluntary and employees can cancel their purchases at any time during the Offering period without penalty. The fair value of each share purchase right is determined using the Black-Scholes option pricing model.

The Company recorded $33 thousand and $19 thousand of expense in salaries and employee benefits expense for the three months ended September 30, 2017 and 2016, respectively, related to the ESPP. Total shares issued under the ESPP during the third quarter of 2017 and 2016 were 6,987 and 7,155, respectively.

The Company recorded $105 thousand and $83 thousand of expense in salaries and employee benefits expense for the nine months ended September 30, 2017 and 2016, respectively, related to the ESPP. Total shares issued under the ESPP for the nine months ended September 30, 2017 and 2016 were 19,820 and 26,913, respectively.

Earnings per share - Basic and Diluted

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
	September 30,				September 30,
(Dollars in thousands, except per share data)	2017		2016		2017		2016
Net income to shareholders	$	10,206	$	7,116	$	26,128	$	19,169
Basic weighted-average shares outstanding		17,800,153		16,467,654		17,478,293		16,167,153
Plus: common stock equivalents		323,115		205,942		275,438		180,102
Diluted weighted-average shares outstanding		18,123,268		16,673,596		17,753,731		16,347,255
Net income per share
Basic	$	0.57	$	0.43	$	1.49	$	1.19
Diluted		0.56		0.43		1.47		1.17

For the three and nine months ended September 30, 2017 all stock options and warrants were included in the computation of diluted earnings per share because they were all dilutive. Stock options and warrants totaling 218,079 shares were not included in the computation of diluted earnings per share in the third quarter of 2016 because they were considered antidilutive. Stock options and warrants totaling 223,832 shares were not included in the computation of diluted earnings per share in the nine months ended September 30, 2016 because they were considered antidilutive. Antidilutive shares are common stock equivalents with weighted average exercise prices in excess of the weighted average market value for the period presented.

Income Taxes

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 2013 or by New Jersey tax authorities for years prior to 2012.

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

The Company’s effective rate was positively affected by the adoption of ASU 2016-09 which simplified certain aspects of accounting for share-based compensation.

Loss Contingencies

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 reasonable estimated. Management does not believe there are any such matters that will have a material effect on the financial statements.

Restrictions on cash

Restrictions on Cash: Cash on hand or on deposit with the FRB was required to meet regulatory reserve and clearing requirements.

Comprehensive Income

Comprehensive Income: Comprehensive income 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:  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.

Goodwill and Other Intangible Assets

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 acquired company (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. The Company has selected December 31 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 and assembly 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, are amortized on an accelerated method over their estimated useful lives, which range up to 15 years.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Schedule of stock option plans, changes in options outstanding

						Weighted
				Weighted		Average		Aggregate
				Average		Remaining		Intrinsic
	Number of			Exercise		Contractual		Value
	Options			Price		Term		(In thousands)
Balance, January 1, 2017		179,159		$	16.27
Granted during 2017		—			—
Exercised during 2017		(33,862	)		17.93
Expired during 2017		(7,722	)		26.90
Forfeited during 2017		(581	)		14.73
Balance, September 30, 2017		136,994			15.27		3.30 years	$	2,530
Vested and expected to vest		136,990			15.27		3.30 years	$	2,530
Exercisable at September 30, 2017		136,934			15.27		3.30 years	$	2,529

Schedule of changes in nonvested performance-based shares

			Weighted
			Average
	Number of		Grant Date
	Shares		Fair Value
Balance, January 1, 2017		92,767	$	18.12
Granted during 2017		—		—
Vested during 2017		—		—
Forfeited during 2017		—		—
Balance, September 30, 2017		92,767	$	18.12

Schedule of changes in nonvested shares

				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value
Balance, January 1, 2017		368,130		$	19.26
Granted during 2017		136,708			30.13
Vested during 2017		(148,619	)		18.52
Forfeited during 2017		(5,938	)		25.30
Balance, September 30, 2017		350,281		$	23.71

Schedule of calculation of basic and diluted earnings per share

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands, except per share data)	2017		2016		2017		2016
Net income to shareholders	$	10,206	$	7,116	$	26,128	$	19,169
Basic weighted-average shares outstanding		17,800,153		16,467,654		17,478,293		16,167,153
Plus: common stock equivalents		323,115		205,942		275,438		180,102
Diluted weighted-average shares outstanding		18,123,268		16,673,596		17,753,731		16,347,255
Net income per share
Basic	$	0.57	$	0.43	$	1.49	$	1.19
Diluted		0.56		0.43		1.47		1.17

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INVESTMENT SECURITIES AVAILABLE FOR SALE (Tables)

9 Months Ended

Sep. 30, 2017

INVESTMENT SECURITIES AVAILABLE FOR SALE [Abstract]

Schedule of Amortized Cost and Approximate Fair Value of Securities Available for Sale

	September 30, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
U.S. government-sponsored agencies	$	36,988	$	—	$	(513	)	$	36,475
Mortgage-backed securities – residential		237,547		960		(1,126	)		237,381
SBA pool securities		6,002		—		(66	)		5,936
State and political subdivisions		24,400		156		(46	)		24,510
Corporate bond		3,000		94		—			3,094
Single-issuer trust preferred security		2,999		—		(142	)		2,857
CRA investment fund		5,000		—		(141	)		4,859
Total	$	315,936	$	1,210	$	(2,034	)	$	315,112

	December 31, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
U.S. government-sponsored agencies	$	21,991	$	—	$	(474	)	$	21,517
Mortgage-backed securities – residential		238,271		860		(1,514	)		237,617
SBA pool securities		6,778		—		(65	)		6,713
State and political subdivisions		29,107		160		(274	)		28,993
Corporate bond		3,000		113		—			3,113
Single-issuer trust preferred security		2,999		—		(389	)		2,610
CRA investment fund		5,000		—		(175	)		4,825
Total	$	307,146	$	1,133	$	(2,891	)	$	305,388

Schedule of Continuous Unrealized Losses and the Approximate Fair Value of these Investments

	September 30, 2017
	Duration of Unrealized Loss
	Less Than 12 Months					12 Months or Longer					Total
	Approximate					Approximate					Approximate
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(In thousands)	Value		Losses			Value		Losses			Value		Losses
U.S. government-
sponsored agencies	$	31,662	$	(330	)	$	4,813	$	(183	)	$	36,475	$	(513	)
Mortgage-backed
securities-residential		97,456		(611	)		30,603		(515	)		128,059		(1,126	)
SBA pool securities		—		—			5,936		(66	)		5,936		(66	)
State and political
subdivisions		7,631		(40	)		993		(6	)		8,624		(46	)
Single-issuer trust
preferred security		—		—			2,858		(142	)		2,858		(142	)
CRA investment fund		—		—			4,859		(141	)		4,859		(141	)
Total	$	136,749	$	(981	)	$	50,062	$	(1,053	)	$	186,811	$	(2,034	)

	December 31, 2016
	Duration of Unrealized Loss
	Less Than 12 Months					12 Months or Longer					Total
	Approximate					Approximate					Approximate
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(In thousands)	Value		Losses			Value		Losses			Value		Losses
U.S. government-
sponsored agencies	$	21,517	$	(474	)	$	—	$	—		$	21,517	$	(474	)
Mortgage-backed
securities-residential		151,114		(1,472	)		5,147		(42	)		156,261		(1,514	)
SBA pool securities		—		—			6,713		(65	)		6,713		(65	)
State and political
subdivisions		9,412		(274	)		—		—			9,412		(274	)
Single-issuer trust
preferred security		—		—			2,610		(389	)		2,610		(389	)
CRA investment fund		1,930		(70	)		2,894		(105	)		4,824		(175	)
Total	$	183,973	$	(2,290	)	$	17,364	$	(601	)	$	201,337	$	(2,891	)

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LOANS (Tables)

9 Months Ended

Sep. 30, 2017

Receivables [Abstract]

Schedule of composition of loans categorized by the type of loan

Loans outstanding, excluding those held for sale, by general ledger classification, as of September 30, 2017 and December 31, 2016, consisted of the following:

			% of					% of
	September 30,		Totals			December 31,		Total
(In thousands)	2017		Loans			2016		Loans
Residential mortgage	$	602,775		16.44	%	$	527,370		15.92	%
Multifamily mortgage		1,441,852		39.32			1,459,594		44.07
Commercial mortgage		625,466		17.05			551,233		16.65
Commercial loans		845,831		23.06			636,714		19.23
Construction loans		—		—			1,405		0.04
Home equity lines of credit		68,787		1.88			65,682		1.98
Consumer loans, including fixed
rate home equity loans		81,671		2.23			69,654		2.10
Other loans		815		0.02			492		0.01
Total loans	$	3,667,197		100.00	%	$	3,312,144		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, 2017 and December 31, 2016:

			% of					% of
	September 30,		Totals			December 31,		Total
(In thousands)	2017		Loans			2016		Loans
Primary residential mortgage	$	631,632		17.23	%	$	557,970		16.86	%
Home equity lines of credit		68,787		1.88			65,683		1.98
Junior lien loan on residence		7,082		0.19			9,206		0.28
Multifamily property		1,441,852		39.34			1,459,594		44.09
Owner-occupied commercial real estate		253,605		6.92			176,123		5.32
Investment commercial real estate		876,282		23.91			752,258		22.73
Commercial and industrial		257,124		7.01			213,983		6.47
Lease Financing		36,184		0.99			—		—
Farmland/agricultural production		162		0.01			169		0.01
Commercial construction loans		93		0.01			1,497		0.04
Consumer and other loans		92,055		2.51			73,621		2.22
Total loans	$	3,664,858		100.00	%	$	3,310,104		100.00	%
Net deferred costs		2,339					2,040
Total loans including net deferred costs	$	3,667,197				$	3,312,144

Schedule of loan balances by portfolio segment, based on impairment method, and the corresponding balances in the allowance for loan losses

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, 2017 and December 31, 2016:

	September 30, 2017
	Total		Ending ALLL		Total		Ending ALLL
	Loans		Attributable		Loans		Attributable
	Individually		To Loans		Collectively		To Loans
	Evaluated		Individually		Evaluated		Collectively				Total
	For		Evaluated for		For		Evaluated for		Total		Ending
(In thousands)	Impairment		Impairment		Impairment		Impairment		Loans		ALL
Primary residential
mortgage	$	12,161	$	572	$	619,471	$	3,772	$	631,632	$	4,344
Home equity lines
of credit		27		—		68,760		229		68,787		229
Junior lien loan
on residence		98		—		6,984		13		7,082		13
Multifamily
property		—		—		1,441,852		11,246		1,441,852		11,246
Owner-occupied
commercial
real estate		1,576		—		252,029		2,270		253,605		2,270
Investment
commercial
real estate		11,130		205		865,152		11,752		876,282		11,957
Commercial and
industrial		54		54		257,070		5,181		257,124		5,235
Lease financing		—		—		36,184		275		36,184		275
Secured by
farmland and
agricultural
production		—		—		162		2		162		2
Commercial
construction		—		—		93		1		93		1
Consumer and
other		—		—		92,055		343		92,055		343
Total ALLL	$	25,046	$	831	$	3,639,812	$	35,084	$	3,664,858	$	35,915

	December 31, 2016
	Total		Ending ALLL		Total		Ending ALLL
	Loans		Attributable		Loans		Attributable
	Individually		To Loans		Collectively		To Loans
	Evaluated		Individually		Evaluated		Collectively				Total
	For		Evaluated for		For		Evaluated for		Total		Ending
(In thousands)	Impairment		Impairment		Impairment		Impairment		Loans		ALLL
Primary residential
mortgage	$	15,814	$	456	$	542,156	$	3,210	$	557,970	$	3,666
Home equity lines
of credit		53		—		65,630		233		65,683		233
Junior lien loan
on residence		229		—		8,977		16		9,206		16
Multifamily
Property		—		—		1,459,594		11,192		1,459,594		11,192
Owner-occupied
Commercial
real estate		1,486		—		174,637		1,774		176,123		1,774
Investment
commercial
real estate		11,335		214		740,923		10,695		752,258		10,909
Commercial and
Industrial		154		154		213,829		4,010		213,983		4,164
Secured by
farmland and
agricultural production
production		—		—		169		2		169		2
Commercial
construction		—		—		1,497		9		1,497		9
Consumer and
Other		—		—		73,621		243		73,621		243
Total ALLL	$	29,071	$	824	$	3,281,033	$	31,384	$	3,310,104	$	32,208

Schedule of loans individually evaluated for impairment

The following tables present loans individually evaluated for impairment by class of loans as of September 30, 2017 and December 31, 2016 (The average impaired loans on the following tables represent year to date impaired loans.):

	September 30, 2017
	Unpaid						Average
	Principal		Recorded		Specific		Impaired
(In thousands)	Balance		Investment		Reserves		Loans
With no related allowance recorded:
Primary residential mortgage	$	9,998	$	8,820	$	—	$	11,329
Owner-occupied commercial real estate		1,756		1,576		—		1,467
Investment commercial real estate		9,601		9,537		—		10,035
Home equity lines of credit		29		27		—		42
Junior lien loan on residence		156		98		—		96
Total loans with no related allowance	$	21,541	$	20,058	$	—	$	22,969
With related allowance recorded:
Primary residential mortgage	$	4,159	$	3,341	$	572	$	1,296
Investment commercial real estate		1,609		1,593		205		1,202
Commercial and industrial		110		54		54		79
Total loans with related allowance	$	5,878	$	4,988	$	831	$	2,577
Total loans individually evaluated for
Impairment	$	27,419	$	25,046	$	831	$	25,546

	December 31, 2016
	Unpaid						Average
	Principal		Recorded		Specific		Impaired
(In thousands)	Balance		Investment		Reserves		Loans
With no related allowance recorded:
Primary residential mortgage	$	16,015	$	14,090	$	—	$	10,038
Owner-occupied commercial real estate		1,597		1,486		—		1,450
Investment commercial real estate		9,711		9,711		—		9,974
Home equity lines of credit		56		53		—		143
Junior lien loan on residence		280		229		—		339
Total loans with no related allowance	$	27,659	$	25,569	$	—	$	21,944
With related allowance recorded:
Primary residential mortgage	$	1,787	$	1,724	$	456	$	1,678
Investment commercial real estate		1,640		1,624		214		1,642
Commercial and industrial		204		154		154		145
Total loans with related allowance	$	3,631	$	3,502	$	824	$	3,465
Total loans individually evaluated for
impairment	$	31,290	$	29,071	$	824	$	25,409

Schedule of recorded investment in nonaccrual and loans past due over 90 days still on accrual

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, 2017 and December 31, 2016:

	September 30, 2017
			Loans Past Due
			Over 90 Days
			And Still
(In thousands)	Nonaccrual		Accruing Interest
Primary residential mortgage	$	8,318	$	—
Home equity lines of credit		6		—
Junior lien loan on residence		98		—
Owner-occupied commercial real estate		1,576		—
Investment commercial real estate		5,315		—
Commercial and industrial		54		—
Total	$	15,367	$	—

	December 31, 2016
			Loans Past Due
			Over 90 Days
			And Still
(In thousands)	Nonaccrual		Accruing Interest
Primary residential mortgage	$	9,071	$	—
Home equity lines of credit		30		—
Junior lien loan on residence		115		—
Owner-occupied commercial real estate		1,486		—
Investment commercial real estate		408		—
Commercial and industrial		154		—
Total	$	11,264	$	—

Schedule of aging of past due loans

The following tables present the aging of the recorded investment in past due loans as of September 30, 2017 and December 31, 2016 by class of loans, excluding nonaccrual loans:

	September 30, 2017
	30-59		60-89		Greater Than
	Days		Days		90 Days		Total
(In thousands)	Past Due		Past Due		Past Due		Past Due
Primary residential mortgage	$	589	$	—	$	—	$	589
Total	$	589	$	—	$	—	$	589

	December 31, 2016
	30-59		60-89		Greater Than
	Days		Days		90 Days		Total
(In thousands)	Past Due		Past Due		Past Due		Past Due
Primary residential mortgage	$	620	$	480	$	—	$	1,100
Junior lien loan on residence		—		25		—		25
Owner-occupied commercial real estate		209		—		—		209
Commercial and industrial		22		—		—		22
Total	$	851	$	505	$	—	$	1,356

Schedule of the risk category of loans by class of loans

As of September 30, 2017, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

			Special
(In thousands)	Pass		Mention		Substandard		Doubtful
Primary residential mortgage	$	618,544	$	795	$	12,293	$	—
Home equity lines of credit		68,760		—		27		—
Junior lien loan on residence		6,984		—		98		—
Multifamily property		1,424,637		15,381		1,834		—
Owner-occupied commercial real estate		248,504		—		5,101		—
Investment commercial real estate		847,966		6,233		22,083		—
Commercial and industrial		249,323		6,991		810		—
Lease financing		36,184		—		—		—
Farmland		162		—		—		—
Commercial construction		—		93		—		—
Consumer and other loans		90,131		—		1,924		—
Total	$	3,591,195	$	29,493	$	44,170	$	—

As of December 31, 2016, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

			Special
(In thousands)	Pass		Mention		Substandard		Doubtful
Primary residential mortgage	$	541,359	$	660	$	15,951	$	—
Home equity lines of credit		65,630		—		53		—
Junior lien loan on residence		8,977		—		229		—
Multifamily property		1,456,328		2,867		399		—
Owner-occupied commercial real estate		170,851		—		5,272		—
Investment commercial real estate		724,203		5,116		22,939		—
Commercial and industrial		208,617		4,411		955		—
Secured by farmland and agricultural		169		—		—		—
Commercial construction		1,400		97		—		—
Consumer and other loans		73,621		—		—		—
Total	$	3,251,155	$	13,151	$	45,798	$	—

Schedule of Activity in Allowance for Loan and Lease Losses

The activity in the allowance for loan and lease losses for the three months ended September 30, 2017 is summarized below:

	July 1,										September 30,
	2017										2017
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	4,223	$	(261	)	$	59	$	323		$	4,344
Home equity lines of credit		211		—			2		16			229
Junior lien loan on residence		14		—			6		(7	)		13
Multifamily property		11,606		—			—		(360	)		11,246
Owner-occupied commercial real estate		2,147		(30	)		—		153			2,270
Investment commercial real estate		11,727		—			1		229			11,957
Commercial and industrial		5,333		—			9		(107	)		5,235
Lease financing		178		—			—		97			275
Secured by farmland and agricultural		2		—			—		—			2
Commercial construction		1		—			—		—			1
Consumer and other loans		309		(24	)		2		56			343
Total ALLL	$	35,751	$	(315	)	$	79	$	400		$	35,915

The activity in the allowance for loan and lease losses for the nine months ended September 30, 2017 is summarized below:

	January 1,										September 30,
	2017										2017
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	3,666	$	(591	)	$	128	$	1,141		$	4,344
Home equity lines of credit		233		(23	)		61		(42	)		229
Junior lien loan on residence		16		(57	)		19		35			13
Multifamily property		11,192		—			—		54			11,246
Owner-occupied commercial real estate		1,774		(30	)		—		526			2,270
Investment commercial real estate		10,909		—			23		1,025			11,957
Commercial and industrial		4,164		(25	)		61		1,035			5,235
Lease financing		—		—			—		275			275
Secured by farmland and agricultural		2		—			—		—			2
Commercial construction		9		—			—		(8	)		1
Consumer and other loans		243		(62	)		3		159			343
Total ALLL	$	32,208	$	(788	)	$	295	$	4,200		$	35,915

The activity in the allowance for loan and lease losses for the three months ended September 30, 2016 is summarized below:

	July 1,										September 30,
	2016										2016
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	2,783	$	(729	)	$	4	$	972		$	3,030
Home equity lines of credit		223		—			3		(2	)		224
Junior lien loan on residence		19		—			2		(3	)		18
Multifamily property		11,639		—			—		204			11,843
Owner-occupied commercial real estate		1,733		—			—		90			1,823
Investment commercial real estate		9,621		—			2		231			9,854
Commercial and industrial		2,951		(4	)		8		613			3,568
Secured by farmland and agricultural production		2		—			—		—			2
Commercial construction		1		—			—		3			4
Consumer and other loans		247		—			11		(8	)		250
Total ALLL	$	29,219	$	(733	)	$	30	$	2,100		$	30,616

The activity in the allowance for loan and lease losses for the nine months ended September 30, 2016 is summarized below:

	January 1,										September 30,
	2016										2016
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	2,297	$	(1,027	)	$	25	$	1,735		$	3,030
Home equity lines of credit		86		(91	)		11		218			224
Junior lien loan on residence		66		—			72		(120	)		18
Multifamily property		11,813		—			—		30			11,843
Owner-occupied commercial real estate		1,679		—			—		144			1,823
Investment commercial real estate		7,590		(258	)		8		2,514			9,854
Commercial and industrial		2,209		(7	)		20		1,346			3,568
Secured by farmland and agricultural production		2		—			—		—			2
Commercial construction		2		—			—		2			4
Consumer and other loans		112		(5	)		12		131			250
Total ALLL	$	25,856	$	(1,388	)	$	148	$	6,000		$	30,616

Schedule of loans modified as troubled debt restructurings

The following table presents loans by class modified as TDRs during the nine-month period ended September 30, 2017:

			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Contracts		Investment		Investment
Primary residential mortgage		5	$	1,148	$	1,148
Total		5	$	1,148	$	1,148

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 during the three-month period ended September 30, 2016:

			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Contracts		Investment		Investment
Primary residential mortgage		1	$	368	$	368
Total		1	$	368	$	368

The following table presents loans by class modified as TDRs during the nine-month period ended September 30, 2016:

			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Contracts		Investment		Investment
Primary residential mortgage		7	$	4,924	$	4,924
Junior lien on residence		1		66		66
Investment commercial real estate		1		79		79
Total		9	$	5,069	$	5,069

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DEPOSITS (Tables)

9 Months Ended

Sep. 30, 2017

Deposits:

Schedule of deposit liabilities

	September 30,					December 31,
	2017					2016
(In thousands)	$		%			$		%
Noninterest-bearing demand deposits	$	557,117		15.21	%	$	489,485		14.35	%
Interest-bearing checking (1)		1,144,714		31.25			1,023,081		29.99
Savings		121,830		3.33			120,056		3.52
Money market		1,046,997		28.59			1,048,494		30.73
Certificates of deposit		528,251		14.42			457,000		13.39
Subtotal deposits		3,398,909		92.80			3,138,116		91.98
Interest-bearing demand - Brokered		180,000		4.91			180,000		5.27
Certificates of deposit - Brokered		83,788		2.29			93,721		2.75
Total deposits	$	3,662,697		100.00	%	$	3,411,837		100.00	%

(1) Interest-bearing checking includes $373.7 million at September 30, 2017 and $393.0 million at December 31, 2016 of reciprocal balances in the Reich & Tang or Promontory Demand Deposit Marketplace program.

Schedule of maturities of time deposits

(In thousands)
2017	$	56,898
2018		316,436
2019		102,167
2020		39,510
2021		13,858
Over 5 Years		83,710
Total	$	612,039

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FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS (Tables)

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Schedule of maturity dates of the advances and other borrowings

(In thousands)
2017	$	12,000
2018		34,898
2019		3,000
2020		—
2021		—
Over 5 years		—
Total	$	49,898

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BUSINESS SEGMENTS (Tables)

9 Months Ended

Sep. 30, 2017

Segment Reporting [Abstract]

Schedule of income and total assets for reportable segments

	Three Months Ended September 30, 2017
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	28,687	$	1,305	$	29,992
Noninterest income		2,928		5,903		8,831
Total income		31,615		7,208		38,823
Provision for loan and lease losses		400		—		400
Compensation and benefits		10,992		3,004		13,996
Premises and equipment expense		2,619		326		2,945
Other noninterest expense		3,167		1,853		5,020
Total noninterest expense		17,178		5,183		22,361
Income before income tax expense		14,437		2,025		16,462
Income tax expense		5,474		782		6,256
Net income	$	8,963	$	1,243	$	10,206

	Three Months Ended September 30, 2016
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	23,194	$	1,075	$	24,269
Noninterest income		2,974		4,561		7,535
Total income		26,168		5,636		31,804
Provision for loan and lease losses		2,100		—		2,100
Compensation and benefits		9,138		2,377		11,515
Premises and equipment expense		2,484		252		2,736
Other noninterest expense		2,688		1,227		3,915
Total noninterest expense		16,410		3,856		20,266
Income before income tax expense		9,758		1,780		11,538
Income tax expense		3,738		684		4,422
Net income	$	6,020	$	1,096	$	7,116

	Nine Months Ended September 30, 2017
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	78,372	$	4,183	$	82,555
Noninterest income		7,975		16,046		24,021
Total income		86,347		20,229		106,576
Provision for loan and lease losses		4,200		—		4,200
Compensation and benefits		30,792		7,868		38,660
Premises and equipment expense		7,891		903		8,794
Other noninterest expense		8,559		5,347		13,906
Total noninterest expense		51,442		14,118		65,560
Income before income tax expense		34,905		6,111		41,016
Income tax expense		12,670		2,218		14,888
Net income	$	22,235	$	3,893	$	26,128
Total assets for period end	$	4,148,222	$	28,110	$	4,176,332

	Nine Months Ended September 30, 2016
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	67,962	$	3,893	$	71,855
Noninterest income		7,286		13,960		21,246
Total income		75,248		17,853		93,101
Provision for loan and lease losses		6,000		—		6,000
Compensation and benefits		26,744		6,779		33,523
Premises and equipment expense		7,583		759		8,342
Other noninterest expense		10,047		4,235		14,282
Total noninterest expense		50,374		11,773		62,147
Income before income tax expense		24,874		6,080		30,954
Income tax expense		9,470		2,315		11,785
Net income	$	15,404	$	3,765	$	19,169
Total assets for period end	$	3,729,004	$	45,379	$	3,774,383

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FAIR VALUE (Tables)

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Schedule of assets measured at fair value on a recurring basis

Assets Measured on a Recurring Basis    

				Fair Value Measurements Using
				Quoted
				Prices in
				Active
				Markets		Significant
				For		Other			Significant
				Identical		Observable			Unobservable
	September 30,			Assets		Inputs			Inputs
(In thousands)	2017			(Level 1)		(Level 2)			(Level 3)
Assets:
Available for sale:
U.S. government-sponsored
agencies	$	36,475		$	—	$	36,475		$	—
Mortgage-backed securities-
residential		237,381			—		237,381			—
SBA pool securities		5,936			—		5,936			—
State and political subdivisions		24,510			—		24,510			—
Corporate bond		3,094			—		3,094			—
Single-issuer trust preferred security		2,857			—		2,857			—
CRA investment fund		4,859			4,859		—			—
Loans held for sale, at fair value		2,240			—		2,240			—
Derivatives:
Cash flow hedges		383			—		383			—
Loan level swaps		4,136			—		4,136			—
Total	$	321,871		$	4,859	$	317,012		$	—
Liabilities:
Derivatives:
Cash flow hedges	$	(104	)	$	—	$	(104	)	$	—
Loan level swaps		(4,136	)		—		(4,136	)		—
Total	$	(4,240	)	$	—	$	(4,240	)	$	—

Assets Measured on a Recurring Basis    

				Fair Value Measurements Using
				Quoted
				Prices in
				Active
				Markets		Significant
				For		Other			Significant
				Identical		Observable			Unobservable
	December 31,			Assets		Inputs			Inputs
(In thousands)	2016			(Level 1)		(Level 2)			(Level 3)
Assets:
Securities available for sale:
U.S. government-sponsored agencies	$	21,517		$	—	$	21,517		$	—
Mortgage-backed securities-residential		237,617			—		237,617			—
SBA pool securities		6,713			—		6,713			—
State and political subdivisions		28,993			—		28,993			—
Corporate bond		3,113			—		3,113			—
Single-issuer trust preferred security		2,610			—		2,610			—
CRA investment fund		4,825			4,825		—			—
Loans held for sale, at fair value		1,200			—		1,200			—
Derivatives:
Cash flow hedges		123			—		123			—
Loan level swaps		1,543			—		1,543			—
Total	$	308,254		$	4,825	$	303,429		$	—
Liabilities:
Derivatives:
Cash flow hedges	$	(867	)		—		(867	)		—
Loan level swaps		(1,543	)		—		(1,543	)		—
Total	$	(2,410	)	$	—	$	(2,410	)	$	—

Schedule of residential loans held for sale

(In thousands)	September 30, 2017		December 31, 2016
Residential loans contractual balance	$	2,214	$	1,181
Fair value adjustment		26		19
Total fair value of residential loans held for sale	$	2,240	$	1,200

Schedule of assets measured at fair value on a non- recurring basis

Assets Measured on a Non-Recurring Basis

			Fair Value Measurements Using
			Quoted
			Prices in
			Active
			Markets		Significant
			For		Other		Significant observable
			Identical		Observable		Unobservable
	September 30,		Assets		Inputs		Inputs
(In thousands)	2017		(Level 1)		(Level 2)		(Level 3)
Assets:
Impaired loans:
Primary residential mortgage	$	1,828	$	—	$	—	$	1,828
Investment commercial real estate		239		—		—		239
	December 31,
(In thousands)	2016
Assets:
Impaired loans:
Investment commercial real estate	$	245	$	—	$	—	$	245

Schedule of carrying amounts and estimated fair values of financial instruments

The carrying amounts and estimated fair values of financial instruments at September 30, 2017 are as follows:

			Fair Value Measurements at September 30, 2017 using
	Carrying
(In thousands)	Amount		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	93,340	$	93,340	$	—	$	—	$	93,340
Securities available for sale		315,112		4,859		310,253		—		315,112
FHLB and FRB stock		13,589		—		—		—		N/A
Loans held for sale, at fair value		2,240		—		2,240		—		2,240
Loans, net of allowance for loan and lease losses		3,631,282		—		—		3,613,704		3,613,704
Accrued interest receivable		6,803		—		1,106		5,697		6,803
Cash flow hedges		383		—		383		—		383
Loan level swaps		4,136		—		4,136		—		4,136
Financial liabilities
Deposits	$	3,662,697	$	3,050,658	$	611,881	$	—	$	3,662,539
Federal home loan bank advances		49,898		—		50,044		—		50,044
Subordinated debt		48,862		—		—		48,862		48,862
Accrued interest payable		2,019		151		1,118		750		2,019
Cash flow hedge		104		—		104		—		104
Loan level swap		4,136		—		4,136		—		4,136

The carrying amounts and estimated fair values of financial instruments at December 31, 2016 are as follows:

			Fair Value Measurements at December 31, 2016 using
	Carrying
(In thousands)	Amount		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	162,691	$	162,691	$	—	$	—	$	162,691
Securities available for sale		305,388		4,825		300,563		—		305,388
FHLB and FRB stock		13,813		—		—		—		N/A
Loans held for sale, at fair value		1,200		—		1,200		—		1,200
Loans held for sale, at lower of cost
or fair value		388		—		428		—		428
Loans, net of allowance for loan and lease losses		3,279,936		—		—		3,256,837		3,256,837
Accrued interest receivable		8,153		—		899		7,254		8,153
Cash flow Hedges		123		—		123		—		123
Loan level swaps		1,543		—		1,543		—		1,543
Financial liabilities
Deposits	$	3,411,837	$	2,861,116	$	549,332	$	—	$	3,410,448
Federal home loan bank advances		61,795		—		62,286		—		62,286
Subordinated debt		48,764		—		—		48,768		48,768
Accrued interest payable		1,127		161		966		—		1,127
Cash flow hedges		867		—		867		—		867
Loan level swaps		1,543		—		1,543		—		1,543

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OTHER OPERATING EXPENSES (Tables)

9 Months Ended

Sep. 30, 2017

Other Income and Expenses [Abstract]

Schedule of components of other operating expenses

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2017		2016		2017		2016
Wealth management division
other expense	$	533	$	490	$	1,865	$	1,593
Professional and legal fees		1,452		801		3,100		2,544
Other operating expenses		2,452		1,810		7,070		6,191
Total other operating expenses	$	4,437	$	3,101	$	12,035	$	10,328

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ACCUMULATED OTHER COMPREHENSIVE (LOSS)/INCOME (Tables)

9 Months Ended

Sep. 30, 2017

Stockholders' Equity Note [Abstract]

Schedule of accumulated other comprehensive income balances, net of tax

The following is a summary of the accumulated other comprehensive (loss)/income balances, net of tax, for the three months ended September 30, 2017 and 2016:

						Amount		Other
						Reclassified		Comprehensive
				Other		From		Income
				Comprehensive		Accumulated		Three Months
	Balance at			Income		Other		Ended		Balance at
	July 1,			Before		Comprehensive		September 30,		September 30,
(In thousands)	2017			Reclassifications		Income		2017		2017
Net unrealized holding (loss)
on securities available for sale,
net of tax	$	(572	)	$	62	$	—	$	62	$	(510	)
Gains on cash flow hedges		34			131		—		131		165
Accumulated other
comprehensive loss,
net of tax	$	(538	)	$	193	$	—	$	193	$	(345	)

							Amount		Other
							Reclassified		Comprehensive
				Other			From		Income/(Loss)
				Comprehensive			Accumulated		Three Months
	Balance at			Income/(Loss)			Other		Ended			Balance at
	July 1,			Before			Comprehensive		September 30,			September 30,
(In thousands)	2016			Reclassifications			Loss		2016			2016
Net unrealized holding gain
on securities available for sale,
net of tax	$	1,224		$	(215	)	$	—	$	(215	)	$	1,009
Losses on cash flow hedges		(3,727	)		941			—		941			(2,786	)
Accumulated other
comprehensive loss,
net of tax	$	(2,503	)	$	726		$	—	$	726		$	(1,777	)

The following represents the reclassifications out of accumulated other comprehensive income for the three months ended September 30, 2017 and 2016:

	Three Months Ended
	September 30,
(In thousands)	2017		2016		Affected Line Item in Income
Unrealized gains on
securities available for sale:
Realized net gain on securities sales	$	—	$	—	Securities gains, net
Income tax expense		—		—	Income tax expense
Total reclassifications, net of tax	$	—	$	—

The following is a summary of the accumulated other comprehensive (loss)/income balances, net of tax, for the nine months ended September 30, 2017 and 2016:

						Amount		Other
						Reclassified		Comprehensive
				Other		From		Income
				Comprehensive		Accumulated		Nine Months
	Balance at			Income		Other		Ended		Balance at
	January 1,			Before		Comprehensive		September 30,		September 30,
(In thousands)	2017			Reclassifications		Income		2017		2017
Net unrealized holding (loss)
on securities available for sale,
net of tax	$	(1,091	)	$	581	$	—	$	581	$	(510	)
Gains on cash flow hedges		(440	)		605		—		605		165
Accumulated other
comprehensive loss,
net of tax	$	(1,531	)	$	1,186	$	—	$	1,186	$	(345	)

							Amount			Other
							Reclassified			Comprehensive
				Other			From			Income/(Loss)
				Comprehensive			Accumulated			Nine Months
	Balance at			Income/(Loss)			Other			Ended			Balance at
	January 1,			Before			Comprehensive			September 30,			September 30,
(In thousands)	2016			Reclassifications			Loss			2016			2016
Net unrealized holding gain
on securities available for sale,
net of tax	$	408		$	676		$	(75	)	$	601		$	1,009
Losses on cash flow hedges		(787	)		(1,999	)		—			(1,999	)		(2,786	)
Accumulated other
comprehensive loss,
net of tax	$	(379	)	$	(1,323	)	$	(75	)	$	(1,398	)	$	(1,777	)

Schedule of the reclassifications out of accumulated other comprehensive income

The following represents the reclassifications out of accumulated other comprehensive income for the nine months ended September 30, 2017 and 2016:

	Nine Months Ended
	September 30,
(In thousands)	2017		2016			Affected Line Item in Income
Unrealized gains on
securities available for sale:
Realized net gain on securities sales	$	—	$	119		Securities gains, net
Income tax expense		—		(44	)	Income tax expense
Total reclassifications, net of tax	$	—	$	75

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DERIVATIVES (Tables)

9 Months Ended

Sep. 30, 2017

Schedule of Information about Derivatives

(Dollars in thousands)	September 30, 2017			December 31, 2016
Notional amount	$	180,000		$	180,000
Weighted average pay rate		1.64	%		1.64	%
Weighted average receive rate		1.30	%		0.58	%
Weighted average maturity		2.50	years		3.25	years
Unrealized gain/(loss), net	$	279		$	(744	)
Number of contracts		9			9

Schedule of Net Gains/(Losses)

The following table presents the net gain recorded in accumulated other comprehensive (loss)/income and the consolidated financial statements relating to the cash flow derivative instruments for the three months ended September 30, 2017 (after tax):

					Amount of
	Amount of		Amount of		Gain/(Loss)
	Gain/(Loss)		Gain/(Loss)		Recognized in
	Recognized		Reclassified		Other Non-Interest
	In OCI		From OCI to		Expense
(In thousands)	(Effective Portion)		Interest Expense		(Ineffective Portion)
Interest rate contracts	$	131	$	—	$	—

The following table presents the net gain recorded in accumulated other comprehensive (loss)/income and the consolidated financial statements relating to the cash flow derivative instruments for the three months ended September 30, 2016 (after tax):

					Amount of
	Amount of		Amount of		Gain/(Loss)
	Gain/(Loss)		Gain/(Loss)		Recognized in
	Recognized		Reclassified		Other Non-Interest
	In OCI		From OCI to		Expense
(In thousands)	(Effective Portion)		Interest Expense		(Ineffective Portion)
Interest rate contracts	$	941	$	—	$	—

The following table presents the net gain recorded in accumulated other comprehensive (loss)/income and the consolidated financial statements relating to the cash flow derivative instruments for the nine months ended September 30, 2017 (after tax):

					Amount of
	Amount of		Amount of		Gain/(Loss)
	Gain/(Loss)		Gain/(Loss)		Recognized in
	Recognized		Reclassified		Other Non-Interest
	In OCI		From OCI to		Expense
(In thousands)	(Effective Portion)		Interest Expense		(Ineffective Portion)
Interest rate contracts	$	605	$	—	$	—

The following table presents the net loss recorded in accumulated other comprehensive (loss)/income and the consolidated financial statements relating to the cash flow derivative instruments for the nine months ended September 30, 2016 (after tax):

						Amount of
	Amount of			Amount of		Gain/(Loss)
	Gain/(Loss)			Gain/(Loss)		Recognized in
	Recognized			Reclassified		Other Non-Interest
	In OCI			From OCI to		Expense
(In thousands)	(Effective Portion)			Interest Expense		(Ineffective Portion)
Interest rate contracts	$	(1,999	)	$	—	$	—

Schedule of Notional Amount and Fair Value

	September 30, 2017
	Notional		Fair
(In thousands)	Amount		Value
Interest rate swaps related to interest-bearing
demand brokered deposits	$	180,000	$	279
Total included in other assets	$	110,000	$	383
Total included in other liabilities	$	70,000	$	(104	)

	December 31, 2016
	Notional		Fair
(In thousands)	Amount		Value
Interest rate swaps related to interest-bearing
demand brokered deposits	$	180,000	$	(744	)
Total included in other assets	$	30,000	$	123
Total included in other liabilities	$	150,000	$	(867	)

Not Designated as Hedging Instrument [Member]

Schedule of Information about Derivatives

(Dollars in thousands)	September 30, 2017			December 31, 2016
Notional amount	$	315,689		$	126,810
Fair value	$	4,136		$	1,543
Weighted average pay rates		4.10	%		3.75	%
Weighted average receive rates		3.27	%		2.65	%
Weighted average maturity		7.7	years		9.4	years
Number of contracts		41			14

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Narrative - Other) (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017 USD ($) shares	Sep. 30, 2016 USD ($) shares	Sep. 30, 2017 USD ($) shares	Sep. 30, 2016 USD ($) shares	Dec. 31, 2016 USD ($)
Amount of loans serviced | $	$ 13,400		$ 13,400		$ 5,800
Threshold for determining nonaccrual status			90 days
Antidilutive securities | shares		218,079		223,832
Finite-Lived Intangible Asset, Useful Life			15 years
Substandard [Member]
Loan reserve multiple	4.0		4.0		4.0
Special Mention [Member]
Loan reserve multiple	2.0		2.0		2.0
Consumer and Other [Member]
Threshold for determining nonaccrual status			120 days
Small Business Administration Loans [Member]
Loans held for sale | $					$ 388
Employee Stock [Member]
Number of share purchase rights authorized | shares	150,000		150,000
Percentage of closing market price on purchase date			85.00%
Compensation cost | $	$ 33	$ 19	$ 105	$ 83
Issuance of shares for Employee Stock Purchase Plan, shares | shares	6,987	7,155	19,820	26,913
Employee Stock [Member] | Minimum [Member]
Percentage of compensation contributable			1.00%
Employee Stock [Member] | Maximum [Member]
Percentage of compensation contributable			15.00%

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Stock-Based Compensation Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Closing stock price of common stock	$ 33.74		$ 33.74
Employee Stock Option [Member]
Option term			10 years
Vesting term			5 years
Unrecognized compensation cost	$ 1		$ 1
Weighted average period, unrecognized compensation expected to be recognized (in years)			1 month 6 days
Total compensation cost	1	$ 11	$ 6	$ 45
Recognized tax benefit		1		4
Restricted stock [Member]
Shares available for grant	3,900		3,900
Unrecognized compensation cost	$ 1,200		$ 1,200
Weighted average period, unrecognized compensation expected to be recognized (in years)			7 months 2 days
Total compensation cost	864	$ 725	$ 2,500	$ 2,200
Restricted stock [Member] | Share-based Compensation Award, Tranche One [Member]
Vesting term			1 year
Restricted stock [Member] | Share-based Compensation Award, Tranche Two [Member]
Vesting term			3 years
Restricted stock [Member] | Share-based Compensation Award, Tranche Three [Member]
Vesting term			5 years
Restricted Stock Units [Member]
Unrecognized compensation cost	4,500		$ 4,500
Weighted average period, unrecognized compensation expected to be recognized (in years)			1 year 3 months 8 days
Performance Shares [Member]
Unrecognized compensation cost	$ 2,500		$ 2,500

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Schedule of Changes in Options Outstanding) (Details) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($) $ / shares shares
Number of Options
Balance | shares	179,159
Granted | shares
Exercised | shares	(33,862)
Expired | shares	(7,722)
Forfeited | shares	(581)
Balance | shares	136,994
Vested and expected to vest | shares	136,990
Exercisable | shares	136,934
Weighted Average Exercise Price
Balance | $ / shares	$ 16.27
Granted | $ / shares
Exercised | $ / shares	17.93
Expired | $ / shares	26.9
Forfeited | $ / shares	14.73
Balance | $ / shares	15.27
Vested and expected to vest | $ / shares	15.27
Exercisable | $ / shares	$ 15.27
Weighted Average Remaining Contractual Term
Balance	3 years 3 months 19 days
Vested and Expected to Vest	3 years 3 months 19 days
Exercisable	3 years 3 months 19 days
Aggregate Intrinsic Value
Balance | $	$ 2,530
Vested and expected to vest | $	2,530
Exercisable | $	$ 2,529

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Schedule of Changes in Restricted Common Shares) (Details)	9 Months Ended
	Sep. 30, 2017 $ / shares shares
Performance Shares [Member]
Number of Shares
Balance at Beginning | shares	92,767
Granted | shares
Vested | shares
Forfeited | shares
Balance at end | shares	92,767
Weighted Average Grant Date Fair Value
Balance at Beginning | $ / shares	$ 18.12
Granted | $ / shares
Vested | $ / shares
Forfeited | $ / shares
Balance at end | $ / shares	$ 18.12
Restricted stock [Member]
Number of Shares
Balance at Beginning | shares	368,130
Granted | shares	136,708
Vested | shares	(148,619)
Forfeited | shares	(5,938)
Balance at end | shares	350,281
Weighted Average Grant Date Fair Value
Balance at Beginning | $ / shares	$ 19.26
Granted | $ / shares	30.13
Vested | $ / shares	18.52
Forfeited | $ / shares	25.3
Balance at end | $ / shares	$ 23.71

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Schedule of Earnings per Common Share) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Accounting Policies [Abstract]
Net income to shareholders	$ 10,206	$ 7,116	$ 26,128	$ 19,169
Basic weighted average common shares outstanding (in shares)	17,800,153	16,467,654	17,478,293	16,167,153
Plus: common stock equivalents	323,115	205,942	275,438	180,102
Diluted weighted-average common shares outstanding	18,123,268	16,673,596	17,753,731	16,347,255
Net Income Per Share
Basic	$ 0.57	$ 0.43	$ 1.49	$ 1.19
Diluted	$ 0.56	$ 0.43	$ 1.47	$ 1.17

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INVESTMENT SECURITIES AVAILABLE FOR SALE (Schedule of Amortized Cost and Approximate Fair Value) (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Amortized Cost	$ 315,936	$ 307,146
Gross Unrealized Gains	1,210	1,133
Gross Unrealized Losses	(2,034)	(2,891)
Fair Value	315,112	305,388
U.S. Government-Sponsored Entities [Member]
Amortized Cost	36,988	21,991
Gross Unrealized Gains
Gross Unrealized Losses	(513)	(474)
Fair Value	36,475	21,517
Mortgage-Backed Securities-Residential [Member]
Amortized Cost	237,547	238,271
Gross Unrealized Gains	960	860
Gross Unrealized Losses	(1,126)	(1,514)
Fair Value	237,381	237,617
SBA Pool Securities [Member]
Amortized Cost	6,002	6,778
Gross Unrealized Gains
Gross Unrealized Losses	(66)	(65)
Fair Value	5,936	6,713
State and Political Subdivisions [Member]
Amortized Cost	24,400	29,107
Gross Unrealized Gains	156	160
Gross Unrealized Losses	(46)	(274)
Fair Value	24,510	28,993
Corporate Bond [Member]
Amortized Cost	3,000	3,000
Gross Unrealized Gains	94	113
Gross Unrealized Losses
Fair Value	3,094	3,113
Single-Issuer Trust Preferred Security [Member]
Amortized Cost	2,999	2,999
Gross Unrealized Gains
Gross Unrealized Losses	(142)	(389)
Fair Value	2,857	2,610
CRA Investment Fund [Member]
Amortized Cost	5,000	5,000
Gross Unrealized Gains
Gross Unrealized Losses	(141)	(175)
Fair Value	$ 4,859	$ 4,825

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INVESTMENT SECURITIES AVAILABLE FOR SALE (Schedule of Securities with Continuous Unrealized Losses) (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Approximate Fair Value
Less Than 12 Months	$ 136,749	$ 183,973
12 Months or Longer	50,062	17,364
Total	186,811	201,337
Unrealized Losses
Less Than 12 Months	(981)	(2,290)
12 Months or Longer	(1,053)	(601)
Total	(2,034)	(2,891)
U.S. Government-Sponsored Entities [Member]
Approximate Fair Value
Less Than 12 Months	31,662	21,517
12 Months or Longer	4,813
Total	36,475	21,517
Unrealized Losses
Less Than 12 Months	(330)	(474)
12 Months or Longer	(183)
Total	(513)	(474)
Mortgage-Backed Securities-Residential [Member]
Approximate Fair Value
Less Than 12 Months	97,456	151,114
12 Months or Longer	30,603	5,147
Total	128,059	156,261
Unrealized Losses
Less Than 12 Months	(611)	(1,472)
12 Months or Longer	(515)	(42)
Total	(1,126)	(1,514)
SBA Pool Securities [Member]
Approximate Fair Value
Less Than 12 Months
12 Months or Longer	5,936	6,713
Total	5,936	6,713
Unrealized Losses
Less Than 12 Months
12 Months or Longer	(66)	(65)
Total	(66)	(65)
State and Political Subdivisions [Member]
Approximate Fair Value
Less Than 12 Months	7,631	9,412
12 Months or Longer	993
Total	8,624	9,412
Unrealized Losses
Less Than 12 Months	(40)	(274)
12 Months or Longer	(6)
Total	(46)	(274)
Single-Issuer Trust Preferred Security [Member]
Approximate Fair Value
Less Than 12 Months
12 Months or Longer	2,858	2,610
Total	2,858	2,610
Unrealized Losses
Less Than 12 Months
12 Months or Longer	(142)	(389)
Total	(142)	(389)
CRA Investment Fund [Member]
Approximate Fair Value
Less Than 12 Months		1,930
12 Months or Longer	4,859	2,894
Total	4,859	4,824
Unrealized Losses
Less Than 12 Months		(70)
12 Months or Longer	(141)	(105)
Total	$ (141)	$ (175)

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LOANS (Narrative) (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Receivables [Abstract]
Impaired non-accrual loans	$ 15,367	$ 11,264
Impaired non-accrual loans performing troubled debt restructured	9,700	17,800
Allowance allocated to troubled debt restructured loans	439	550
Allowance allocated to non accrual loans	184	314
Troubled debt restructurings specific reserves to customers	$ 439	$ 550

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LOANS (Schedule of Loans Outstanding, by Classification) (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Total loans	$ 3,667,197	$ 3,312,144
Construction Loans [Member]
Total loans		1,405
Residential Portfolio Segment [Member] | Residential Mortgage [Member]
Total loans	602,775	527,370
Residential Portfolio Segment [Member] | Multifamily Property [Member]
Total loans	1,441,852	1,459,594
Residential Portfolio Segment [Member] | Home Equity Lines of Credit [Member]
Total loans	68,787	65,682
Commercial Real Estate Portfolio Segment [Member] | Commercial Mortgage [Member]
Total loans	625,466	551,233
Commercial Portfolio Segment [Member] | Commercial Loans [Member]
Total loans	845,831	636,714
Consumer and Other [Member] | Consumer Loans, Including Home Equity Loans [Member]
Total loans	81,671	69,654
Unallocated Financing Receivables [Member]
Total loans	$ 815	$ 492
Loans and Finance Receivables [Member]
Total loans (in percent)	100.00%	100.00%
Loans and Finance Receivables [Member] | Construction Loans [Member]
Total loans (in percent)		0.04%
Loans and Finance Receivables [Member] | Residential Portfolio Segment [Member] | Residential Mortgage [Member]
Total loans (in percent)	16.44%	15.92%
Loans and Finance Receivables [Member] | Residential Portfolio Segment [Member] | Multifamily Property [Member]
Total loans (in percent)	39.32%	44.07%
Loans and Finance Receivables [Member] | Residential Portfolio Segment [Member] | Home Equity Lines of Credit [Member]
Total loans (in percent)	1.88%	1.98%
Loans and Finance Receivables [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Mortgage [Member]
Total loans (in percent)	17.05%	16.65%
Loans and Finance Receivables [Member] | Commercial Portfolio Segment [Member] | Commercial Loans [Member]
Total loans (in percent)	23.06%	19.23%
Loans and Finance Receivables [Member] | Consumer and Other [Member] | Consumer Loans, Including Home Equity Loans [Member]
Total loans (in percent)	2.23%	2.10%
Loans and Finance Receivables [Member] | Unallocated Financing Receivables [Member]
Total loans (in percent)	0.02%	0.01%

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LOANS (Schedule of Loan Balances by Portfolio Class) (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Total loans	$ 3,664,858	$ 3,310,104
Net deferred fees	2,339	2,040
Total loans including net deferred costs	3,667,197	3,312,144
Construction Loans [Member]
Total loans including net deferred costs		1,405
Residential Portfolio Segment [Member] | Junior Lien [Member]
Total loans	7,082	9,206
Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member]
Total loans	631,632	557,970
Residential Portfolio Segment [Member] | Home Equity Lines of Credit [Member]
Total loans	68,787	65,683
Total loans including net deferred costs	68,787	65,682
Residential Portfolio Segment [Member] | Multifamily Property [Member]
Total loans	1,441,852	1,459,594
Total loans including net deferred costs	1,441,852	1,459,594
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Property [Member]
Total loans	253,605	176,123
Commercial Real Estate Portfolio Segment [Member] | Investment Property [Member]
Total loans	876,282	752,258
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Total loans	93	1,497
Consumer and Other [Member]
Total loans	92,055	73,621
Commercial and Industrial Sector [Member] | Commercial Portfolio Segment [Member]
Total loans	257,124	213,983
Lease Financing [Member]
Total loans	36,184
Lease Financing [Member] | Commercial Portfolio Segment [Member]
Total loans	36,184
Agricultural Sector [Member]
Total loans	$ 162	$ 169
Loans and Finance Receivables, Gross [Member]
Total loans (in percent)	100.00%	100.00%
Loans and Finance Receivables, Gross [Member] | Residential Portfolio Segment [Member] | Junior Lien [Member]
Total loans (in percent)	0.19%	0.28%
Loans and Finance Receivables, Gross [Member] | Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member]
Total loans (in percent)	17.23%	16.86%
Loans and Finance Receivables, Gross [Member] | Residential Portfolio Segment [Member] | Home Equity Lines of Credit [Member]
Total loans (in percent)	1.88%	1.98%
Loans and Finance Receivables, Gross [Member] | Residential Portfolio Segment [Member] | Multifamily Property [Member]
Total loans (in percent)	39.34%	44.09%
Loans and Finance Receivables, Gross [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Property [Member]
Total loans (in percent)	6.92%	5.32%
Loans and Finance Receivables, Gross [Member] | Commercial Real Estate Portfolio Segment [Member] | Investment Property [Member]
Total loans (in percent)	23.91%	22.73%
Loans and Finance Receivables, Gross [Member] | Commercial Portfolio Segment [Member] | Construction Loans [Member]
Total loans (in percent)	0.01%	0.04%
Loans and Finance Receivables, Gross [Member] | Consumer and Other [Member]
Total loans (in percent)	2.51%	2.22%
Loans and Finance Receivables, Gross [Member] | Commercial and Industrial Sector [Member] | Commercial Portfolio Segment [Member]
Total loans (in percent)	7.01%	6.47%
Loans and Finance Receivables, Gross [Member] | Lease Financing [Member] | Commercial Portfolio Segment [Member]
Total loans (in percent)	0.99%
Loans and Finance Receivables, Gross [Member] | Agricultural Sector [Member]
Total loans (in percent)	0.01%	0.01%

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LOANS (Schedule of Balances by Portfolio Class, Based on Impairment Method) (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Jun. 30, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Dec. 31, 2015
Total Loans Individually Evaluated for Impairment	$ 25,046		$ 29,071
Ending ALLL Attributable to Loans Individually Evaluated for Impairment	831		824
Total Loans Collectively Evaluated for Impairment	3,639,812		3,281,033
Ending ALLL Attributable to Loans Collectively Evaluated for Impairment	35,084		31,384
Total Loans	3,664,858		3,310,104
Total Ending ALLL	35,915	$ 35,751	32,208	$ 30,616	$ 29,219	$ 25,856
Residential Portfolio Segment [Member] | Junior Lien [Member]
Total Loans Individually Evaluated for Impairment	98		229
Ending ALLL Attributable to Loans Individually Evaluated for Impairment
Total Loans Collectively Evaluated for Impairment	6,984		8,977
Ending ALLL Attributable to Loans Collectively Evaluated for Impairment	13		16
Total Loans	7,082		9,206
Total Ending ALLL	13	14	16	18	19	66
Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member]
Total Loans Individually Evaluated for Impairment	12,161		15,814
Ending ALLL Attributable to Loans Individually Evaluated for Impairment	572		456
Total Loans Collectively Evaluated for Impairment	619,471		542,156
Ending ALLL Attributable to Loans Collectively Evaluated for Impairment	3,772		3,210
Total Loans	631,632		557,970
Total Ending ALLL	4,344	4,223	3,666	3,030	2,783	2,297
Residential Portfolio Segment [Member] | Home Equity Lines of Credit [Member]
Total Loans Individually Evaluated for Impairment	27		53
Ending ALLL Attributable to Loans Individually Evaluated for Impairment
Total Loans Collectively Evaluated for Impairment	68,760		65,630
Ending ALLL Attributable to Loans Collectively Evaluated for Impairment	229		233
Total Loans	68,787		65,683
Total Ending ALLL	229	211	233	224	223	86
Residential Portfolio Segment [Member] | Multifamily Property [Member]
Total Loans Individually Evaluated for Impairment
Ending ALLL Attributable to Loans Individually Evaluated for Impairment
Total Loans Collectively Evaluated for Impairment	1,441,852		1,459,594
Ending ALLL Attributable to Loans Collectively Evaluated for Impairment	11,246		11,192
Total Loans	1,441,852		1,459,594
Total Ending ALLL	11,246	11,606	11,192	11,843	11,639	11,813
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Property [Member]
Total Loans Individually Evaluated for Impairment	1,576		1,486
Ending ALLL Attributable to Loans Individually Evaluated for Impairment
Total Loans Collectively Evaluated for Impairment	252,029		174,637
Ending ALLL Attributable to Loans Collectively Evaluated for Impairment	2,270		1,774
Total Loans	253,605		176,123
Total Ending ALLL	2,270	2,147	1,774	1,823	1,733	1,679
Commercial Real Estate Portfolio Segment [Member] | Investment Property [Member]
Total Loans Individually Evaluated for Impairment	11,130		11,335
Ending ALLL Attributable to Loans Individually Evaluated for Impairment	205		214
Total Loans Collectively Evaluated for Impairment	865,152		740,923
Ending ALLL Attributable to Loans Collectively Evaluated for Impairment	11,752		10,695
Total Loans	876,282		752,258
Total Ending ALLL	11,957	11,727	10,909	9,854	9,621	7,590
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Total Loans Individually Evaluated for Impairment
Ending ALLL Attributable to Loans Individually Evaluated for Impairment
Total Loans Collectively Evaluated for Impairment	93		1,497
Ending ALLL Attributable to Loans Collectively Evaluated for Impairment	1		9
Total Loans	93		1,497
Total Ending ALLL	1	1	9	4	1	2
Consumer and Other [Member]
Total Loans Individually Evaluated for Impairment
Ending ALLL Attributable to Loans Individually Evaluated for Impairment
Total Loans Collectively Evaluated for Impairment	92,055		73,621
Ending ALLL Attributable to Loans Collectively Evaluated for Impairment	343		243
Total Loans	92,055		73,621
Total Ending ALLL	343	309	243	250	247	112
Commercial and Industrial Sector [Member] | Commercial Portfolio Segment [Member]
Total Loans Individually Evaluated for Impairment	54		154
Ending ALLL Attributable to Loans Individually Evaluated for Impairment	54		154
Total Loans Collectively Evaluated for Impairment	257,070		213,829
Ending ALLL Attributable to Loans Collectively Evaluated for Impairment	5,181		4,010
Total Loans	257,124		213,983
Total Ending ALLL	5,235	$ 5,333	4,164	$ 3,568	$ 2,951	$ 2,209
Lease Financing [Member]
Total Loans Individually Evaluated for Impairment
Ending ALLL Attributable to Loans Individually Evaluated for Impairment
Total Loans Collectively Evaluated for Impairment	36,184
Ending ALLL Attributable to Loans Collectively Evaluated for Impairment	275
Total Loans	36,184
Total Ending ALLL	275
Lease Financing [Member] | Commercial Portfolio Segment [Member]
Total Loans	36,184
Agricultural Sector [Member]
Total Loans Individually Evaluated for Impairment
Ending ALLL Attributable to Loans Individually Evaluated for Impairment
Total Loans Collectively Evaluated for Impairment	162		169
Ending ALLL Attributable to Loans Collectively Evaluated for Impairment	2		2
Total Loans	162		169
Total Ending ALLL	$ 2		$ 2

XML

LOANS (Schedule of Schedule of Loans Individually Evaluated for Impairment) (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Unpaid Principal Balance
With no related allowance recorded	$ 21,541	$ 27,659
With related allowance recorded	5,878	3,631
Total loans individually evaluated impairment	27,419	31,290
Recorded Investment
With no related allowance recorded	20,058	25,569
With related allowance recorded	4,988	3,502
Total loans individually evaluated impairment	25,046	29,071
Specific Reserves	831	824
Average Impaired Loans
With no related allowance recorded	22,969	21,944
With related allowance recorded	2,577	3,465
Total loans individually evaluated impairment	25,546	25,409
Residential Portfolio Segment [Member] | Junior Lien [Member]
Unpaid Principal Balance
With no related allowance recorded	156	280
Recorded Investment
With no related allowance recorded	98	229
Average Impaired Loans
With no related allowance recorded	96	339
Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member]
Unpaid Principal Balance
With no related allowance recorded	9,998	16,015
With related allowance recorded	4,159	1,787
Recorded Investment
With no related allowance recorded	8,820	14,090
With related allowance recorded	3,341	1,724
Specific Reserves	572	456
Average Impaired Loans
With no related allowance recorded	11,329	10,038
With related allowance recorded	1,296	1,678
Residential Portfolio Segment [Member] | Home Equity Lines of Credit [Member]
Unpaid Principal Balance
With no related allowance recorded	29	56
Recorded Investment
With no related allowance recorded	27	53
Average Impaired Loans
With no related allowance recorded	42	143
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Property [Member]
Unpaid Principal Balance
With no related allowance recorded	1,756	1,597
Recorded Investment
With no related allowance recorded	1,576	1,486
Average Impaired Loans
With no related allowance recorded	1,467	1,450
Commercial Real Estate Portfolio Segment [Member] | Investment Property [Member]
Unpaid Principal Balance
With no related allowance recorded	9,601	9,711
With related allowance recorded	1,609	1,640
Recorded Investment
With no related allowance recorded	9,537	9,711
With related allowance recorded	1,593	1,624
Specific Reserves	205	214
Average Impaired Loans
With no related allowance recorded	10,035	9,974
With related allowance recorded	1,202	1,642
Commercial and Industrial Sector [Member] | Commercial Portfolio Segment [Member]
Unpaid Principal Balance
With related allowance recorded	110	204
Recorded Investment
With related allowance recorded	54	154
Specific Reserves	54	154
Average Impaired Loans
With related allowance recorded	$ 79	$ 145

XML

LOANS (Schedule of Investment in Nonaccrual and Loans Past Due Over 90 Days) (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Impaired non-accrual loans	$ 15,367	$ 11,264
Loans Past Due Over 90 Days And Still Accruing Interest
Residential Portfolio Segment [Member] | Junior Lien [Member]
Impaired non-accrual loans	98	115
Loans Past Due Over 90 Days And Still Accruing Interest
Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member]
Impaired non-accrual loans	8,318	9,071
Loans Past Due Over 90 Days And Still Accruing Interest
Residential Portfolio Segment [Member] | Home Equity Lines of Credit [Member]
Impaired non-accrual loans	6	30
Loans Past Due Over 90 Days And Still Accruing Interest
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Property [Member]
Impaired non-accrual loans	1,576	1,486
Loans Past Due Over 90 Days And Still Accruing Interest
Commercial Real Estate Portfolio Segment [Member] | Investment Property [Member]
Impaired non-accrual loans	5,315	408
Loans Past Due Over 90 Days And Still Accruing Interest
Commercial and Industrial Sector [Member] | Commercial Portfolio Segment [Member]
Impaired non-accrual loans	54	154
Loans Past Due Over 90 Days And Still Accruing Interest

XML

LOANS (Schedule of Schedule of Aging of Past Due Loans) (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Total Past Due	$ 589	$ 1,356
30 to 59 Days Past Due [Member]
Total Past Due	589	851
60 to 89 Days Past Due [Member]
Total Past Due		505
Greater Than 90 Days [Member]
Total Past Due
Residential Portfolio Segment [Member] | Junior Lien [Member]
Total Past Due		25
Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member]
Total Past Due	589	1,100
Residential Portfolio Segment [Member] | 30 to 59 Days Past Due [Member] | Junior Lien [Member]
Total Past Due
Residential Portfolio Segment [Member] | 30 to 59 Days Past Due [Member] | Primary Residential Mortgages [Member]
Total Past Due	589	620
Residential Portfolio Segment [Member] | 60 to 89 Days Past Due [Member] | Junior Lien [Member]
Total Past Due		25
Residential Portfolio Segment [Member] | 60 to 89 Days Past Due [Member] | Primary Residential Mortgages [Member]
Total Past Due		480
Residential Portfolio Segment [Member] | Greater Than 90 Days [Member] | Primary Residential Mortgages [Member]
Total Past Due
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Property [Member]
Total Past Due		209
Commercial Real Estate Portfolio Segment [Member] | 30 to 59 Days Past Due [Member] | Owner Occupied Property [Member]
Total Past Due		209
Commercial Real Estate Portfolio Segment [Member] | Greater Than 90 Days [Member] | Owner Occupied Property [Member]
Total Past Due
Commercial and Industrial Sector [Member] | Commercial Portfolio Segment [Member]
Total Past Due		22
Commercial and Industrial Sector [Member] | Commercial Portfolio Segment [Member] | 30 to 59 Days Past Due [Member]
Total Past Due		22
Commercial and Industrial Sector [Member] | Commercial Portfolio Segment [Member] | 60 to 89 Days Past Due [Member]
Total Past Due
Commercial and Industrial Sector [Member] | Commercial Portfolio Segment [Member] | Greater Than 90 Days [Member]
Total Past Due

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LOANS (Schedule of Schedule of Risk Category of Loans by Class of Loans) (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Total Loans	$ 3,664,858	$ 3,310,104
Impaired loans	27,419	31,290
Pass [Member]
Total Loans	3,591,195	3,251,155
Special Mention [Member]
Total Loans	29,493	13,151
Substandard [Member]
Total Loans	44,170	45,798
Impaired loans	23,900	27,900
Residential Portfolio Segment [Member] | Junior Lien [Member]
Total Loans	7,082	9,206
Residential Portfolio Segment [Member] | Pass [Member] | Junior Lien [Member]
Total Loans	6,984	8,977
Residential Portfolio Segment [Member] | Substandard [Member] | Junior Lien [Member]
Total Loans	98	229
Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member]
Total Loans	631,632	557,970
Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member] | Pass [Member]
Total Loans	618,544	541,359
Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member] | Special Mention [Member]
Total Loans	795	660
Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member] | Substandard [Member]
Total Loans	12,293	15,951
Residential Portfolio Segment [Member] | Home Equity Lines of Credit [Member]
Total Loans	68,787	65,683
Residential Portfolio Segment [Member] | Home Equity Lines of Credit [Member] | Pass [Member]
Total Loans	68,760	65,630
Residential Portfolio Segment [Member] | Home Equity Lines of Credit [Member] | Substandard [Member]
Total Loans	27	53
Residential Portfolio Segment [Member] | Multifamily Property [Member]
Total Loans	1,441,852	1,459,594
Residential Portfolio Segment [Member] | Multifamily Property [Member] | Pass [Member]
Total Loans	1,424,637	1,456,328
Residential Portfolio Segment [Member] | Multifamily Property [Member] | Special Mention [Member]
Total Loans	15,381	2,867
Residential Portfolio Segment [Member] | Multifamily Property [Member] | Substandard [Member]
Total Loans	1,834	399
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Property [Member]
Total Loans	253,605	176,123
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Property [Member] | Pass [Member]
Total Loans	248,504	170,851
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Property [Member] | Special Mention [Member]
Total Loans
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Property [Member] | Substandard [Member]
Total Loans	5,101	5,272
Commercial Real Estate Portfolio Segment [Member] | Investment Property [Member]
Total Loans	876,282	752,258
Commercial Real Estate Portfolio Segment [Member] | Investment Property [Member] | Pass [Member]
Total Loans	847,966	724,203
Commercial Real Estate Portfolio Segment [Member] | Investment Property [Member] | Special Mention [Member]
Total Loans	6,233	5,116
Commercial Real Estate Portfolio Segment [Member] | Investment Property [Member] | Substandard [Member]
Total Loans	22,083	22,939
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Total Loans	93	1,497
Commercial Portfolio Segment [Member] | Construction Loans [Member] | Pass [Member]
Total Loans		1,400
Commercial Portfolio Segment [Member] | Construction Loans [Member] | Special Mention [Member]
Total Loans	93	97
Consumer and Other [Member]
Total Loans	92,055	73,621
Consumer and Other [Member] | Pass [Member]
Total Loans	90,131	73,621
Consumer and Other [Member] | Substandard [Member]
Total Loans	1,924
Commercial and Industrial Sector [Member] | Commercial Portfolio Segment [Member]
Total Loans	257,124	213,983
Commercial and Industrial Sector [Member] | Commercial Portfolio Segment [Member] | Pass [Member]
Total Loans	249,323	208,617
Commercial and Industrial Sector [Member] | Commercial Portfolio Segment [Member] | Special Mention [Member]
Total Loans	6,991	4,411
Commercial and Industrial Sector [Member] | Commercial Portfolio Segment [Member] | Substandard [Member]
Total Loans	810	955
Lease Financing [Member]
Total Loans	36,184
Lease Financing [Member] | Pass [Member]
Total Loans	36,184
Lease Financing [Member] | Commercial Portfolio Segment [Member]
Total Loans	36,184
Agricultural Sector [Member]
Total Loans	162	169
Agricultural Sector [Member] | Pass [Member]
Total Loans	$ 162	$ 169

XML

LOANS (Schedule of Activity in Allowance for Loan Losses) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Allowance for loan losses
Beginning ALLL	$ 35,751	$ 29,219	$ 32,208	$ 25,856
Charge-Offs	(315)	(733)	(788)	(1,388)
Recoveries	79	30	295	148
Provision (Credit)	400	2,100	4,200	6,000
Ending ALLL	35,915	30,616	35,915	30,616
Residential Portfolio Segment [Member] | Junior Lien [Member]
Allowance for loan losses
Beginning ALLL	14	19	16	66
Charge-Offs			(57)
Recoveries	6	2	19	72
Provision (Credit)	(7)	(3)	35	(120)
Ending ALLL	13	18	13	18
Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member]
Allowance for loan losses
Beginning ALLL	4,223	2,783	3,666	2,297
Charge-Offs	(261)	(729)	(591)	(1,027)
Recoveries	59	4	128	25
Provision (Credit)	323	972	1,141	1,735
Ending ALLL	4,344	3,030	4,344	3,030
Residential Portfolio Segment [Member] | Home Equity Lines of Credit [Member]
Allowance for loan losses
Beginning ALLL	211	223	233	86
Charge-Offs			(23)	(91)
Recoveries	2	3	61	11
Provision (Credit)	16	(2)	(42)	218
Ending ALLL	229	224	229	224
Residential Portfolio Segment [Member] | Multifamily Property [Member]
Allowance for loan losses
Beginning ALLL	11,606	11,639	11,192	11,813
Charge-Offs
Recoveries
Provision (Credit)	(360)	204	54	30
Ending ALLL	11,246	11,843	11,246	11,843
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Property [Member]
Allowance for loan losses
Beginning ALLL	2,147	1,733	1,774	1,679
Charge-Offs	(30)		(30)
Recoveries
Provision (Credit)	153	90	526	144
Ending ALLL	2,270	1,823	2,270	1,823
Commercial Real Estate Portfolio Segment [Member] | Investment Property [Member]
Allowance for loan losses
Beginning ALLL	11,727	9,621	10,909	7,590
Charge-Offs				(258)
Recoveries	1	2	23	8
Provision (Credit)	229	231	1,025	2,514
Ending ALLL	11,957	9,854	11,957	9,854
Commercial Portfolio Segment [Member] | Lease Financing [Member]
Allowance for loan losses
Beginning ALLL	178
Charge-Offs
Recoveries
Provision (Credit)	97		275
Ending ALLL	275		275
Commercial Portfolio Segment [Member] | Agricultural Sector [Member]
Allowance for loan losses
Beginning ALLL	2	2	2	2
Charge-Offs
Recoveries
Provision (Credit)
Ending ALLL	2	2	2	2
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Allowance for loan losses
Beginning ALLL	1	1	9	2
Charge-Offs
Recoveries
Provision (Credit)		3	(8)	2
Ending ALLL	1	4	1	4
Consumer and Other [Member]
Allowance for loan losses
Beginning ALLL	309	247	243	112
Charge-Offs	(24)	(4)	(62)	(5)
Recoveries	2	11	3	12
Provision (Credit)	56	(8)	159	131
Ending ALLL	343	250	343	250
Commercial and Industrial Sector [Member] | Commercial Portfolio Segment [Member]
Allowance for loan losses
Beginning ALLL	5,333	2,951	4,164	2,209
Charge-Offs		(4)	(25)	(7)
Recoveries	9	8	61	20
Provision (Credit)	(107)	613	1,035	1,346
Ending ALLL	$ 5,235	$ 3,568	$ 5,235	$ 3,568

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LOANS (Schedule of Loans Modified as Troubled Debt Restructurings) (Details) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2016 USD ($) N	Sep. 30, 2017 USD ($) N	Sep. 30, 2016 USD ($) N
Number of Contracts | N	1	5	9
Pre-Modification Outstanding Recorded Investment	$ 368	$ 1,148	$ 5,069
Post-Modification Outstanding Recorded Investment	$ 368	$ 1,148	$ 5,069
Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member]
Number of Contracts | N	1	5	7
Pre-Modification Outstanding Recorded Investment	$ 368	$ 1,148	$ 4,924
Post-Modification Outstanding Recorded Investment	$ 368	$ 1,148	$ 4,924
Residential Portfolio Segment [Member] | Junior Lien on Residence [Member]
Number of Contracts | N			1
Pre-Modification Outstanding Recorded Investment			$ 66
Post-Modification Outstanding Recorded Investment			$ 66
Residential Portfolio Segment [Member] | Investment commercial real estate [Member]
Number of Contracts | N			1
Pre-Modification Outstanding Recorded Investment			$ 79
Post-Modification Outstanding Recorded Investment			$ 79

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DEPOSITS (Details of Total Deposits) (Details) - USD ($) $ in Thousands		Sep. 30, 2017	Dec. 31, 2016
Deposits:
Time deposits over $250,000		$ 158,900	$ 118,700
Deposits:
Noninterest-bearing demand deposits		557,117	489,485
Interest-bearing deposits checking	[1]	1,144,714	1,023,081
Savings		121,830	120,056
Money market		1,046,997	1,048,494
Certificates of deposit		528,251	457,000
Subtotal deposits		3,398,909	3,138,116
Interest-bearing demand - Brokered		180,000	180,000
Certificates of deposit - Brokered		83,788	93,721
Total deposits		3,662,697	3,411,837
Reciprocal balances		$ 373,700	$ 393,000
%
Noninterest-bearing demand deposits		15.21%	14.35%
Interest-bearing checking		31.25%	29.99%
Savings		3.33%	3.52%
Money market		28.59%	30.73%
Certificates of deposit		14.42%	13.39%
Subtotal deposits		92.80%	91.98%
Interest-bearing demand - Brokered		4.91%	5.27%
Certificates of deposit - Brokered		2.29%	2.75%
Total deposits		100.00%	100.00%

[1] Interest-bearing checking includes $373.7 million at September 30, 2017 and $393.0 million at December 31, 2016 of reciprocal balances in the Reich & Tang or Promontory Demand Deposit Marketplace program.

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DEPOSITS (Scheduled Maturities of Time Deposits) (Details) $ in Thousands	Sep. 30, 2017 USD ($)
Scheduled maturities of time deposits
2017	$ 56,898
2018	316,436
2019	102,167
2020	39,510
2021	13,858
Over 5 Years	83,710
Total	$ 612,039

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FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS (Narrative) (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Debt Disclosure [Abstract]
Advances from Federal Home Loan Banks	$ 49,898	$ 61,795
FHLB interest rate	2.14%	2.02%
Advances with fixed maturity dates	$ 37,900	$ 49,800
Weighted average interest rate on fixed maturity advances	1.87%	1.78%
Residential mortgages pledged as collateral for advances	$ 509,000	$ 468,300
Multifamily mortgage loans pledged as collateral for advances	939,800	1,200,000
Callable variable rate advances	$ 12,000	$ 12,000
Weighted average interest rate on variable advances (in percent)	3.01%	3.01%
Investment pledges against advances	$ 12,900
Unused commitments from FHLB	1,200,000
Unused short-term or overnight borrowings from correspondent banks	22,000
Unused short-term or overnight borrowings from FRB	$ 728,200

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FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS (Schedule of Maturities) (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Federal Home Loan Bank Advances Maturities Summary
2017	$ 12,000
2018	34,898
2019	3,000
2020
2021
Over 5 years
Total	$ 49,898	$ 61,795

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BUSINESS SEGMENTS (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($) segments	Sep. 30, 2016 USD ($)	Dec. 31, 2016 USD ($)
Number of Operating Segments | segments			2
Net interest income	$ 29,992	$ 24,269	$ 82,555	$ 71,855
Noninterest income	8,831	7,535	24,021	21,246
Total income	38,823	31,804	106,576	93,101
Provision for loan and lease losses	400	2,100	4,200	6,000
Compensation and benefits	13,996	11,515	38,660	33,523
Premises and equipment expense	2,945	2,736	8,794	8,342
Other noninterest expense	4,437	3,101	12,035	10,328
Total noninterest expense	22,361	20,266	65,560	62,147
INCOME BEFORE INCOME TAX EXPENSE	16,462	11,538	41,016	30,954
Income tax expense	6,256	4,422	14,888	11,785
NET INCOME	10,206	7,116	26,128	19,169
Total assets at period end	4,176,332	3,774,383	4,176,332	3,774,383	$ 3,878,633
Banking [Member]
Net interest income	28,687	23,194	78,372	67,962
Noninterest income	2,928	2,974	7,975	7,286
Total income	31,615	26,168	86,347	75,248
Provision for loan and lease losses	400	2,100	4,200	6,000
Compensation and benefits	10,992	9,138	30,792	26,744
Premises and equipment expense	2,619	2,484	7,891	7,583
Other noninterest expense	3,167	2,688	8,559	10,047
Total noninterest expense	17,178	16,410	51,442	50,374
INCOME BEFORE INCOME TAX EXPENSE	14,437	9,758	34,905	24,874
Income tax expense	5,474	3,738	12,670	9,470
NET INCOME	8,963	6,020	22,235	15,404
Total assets at period end	4,148,222	3,729,004	4,148,222	3,729,004
Wealth Management Division [Member]
Net interest income	1,305	1,075	4,183	3,893
Noninterest income	5,903	4,561	16,046	13,960
Total income	7,208	5,636	20,229	17,853
Provision for loan and lease losses
Compensation and benefits	3,004	2,377	7,868	6,779
Premises and equipment expense	326	252	903	759
Other noninterest expense	1,853	1,227	5,347	4,235
Total noninterest expense	5,183	3,856	14,118	11,773
INCOME BEFORE INCOME TAX EXPENSE	2,025	1,780	6,111	6,080
Income tax expense	782	684	2,218	2,315
NET INCOME	1,243	1,096	3,893	3,765
Total assets at period end	28,110	45,379	28,110	45,379
Segments [Member]
Other noninterest expense	$ 5,020	$ 3,915	$ 13,906	$ 14,282

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FAIR VALUE (Narrative) (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Impaired collateral loans recorded investment	$ 2,600	$ 408
Impaired collateral loans valuation allowance	$ 523	$ 163
Loans Receivable [Member] | Property A [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount rate	15.00%
Age of appraisal	12 months

XML

FAIR VALUE (Schedule of Assets Measured on a Recurring Basis) (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Securities available for sale	$ 315,112	$ 305,388
Loans held for sale, at fair value	2,240	1,200
U.S. Government-Sponsored Entities [Member]
Securities available for sale	36,475	21,517
Mortgage-Backed Securities-Residential [Member]
Securities available for sale	237,381	237,617
SBA Pool Securities [Member]
Securities available for sale	5,936	6,713
State and Political Subdivisions [Member]
Securities available for sale	24,510	28,993
Corporate Bond [Member]
Securities available for sale	3,094	3,113
Single-Issuer Trust Preferred Security [Member]
Securities available for sale	2,857	2,610
CRA Investment Fund [Member]
Securities available for sale	4,859	4,825
Recurring Basis [Member]
Loans held for sale, at fair value	2,240	1,200
Total	321,871	308,254
Derivatives	(4,240)	(2,410)
Recurring Basis [Member] | U.S. Government-Sponsored Entities [Member]
Securities available for sale	36,475	21,517
Recurring Basis [Member] | Mortgage-Backed Securities-Residential [Member]
Securities available for sale	237,381	237,617
Recurring Basis [Member] | SBA Pool Securities [Member]
Securities available for sale	5,936	6,713
Recurring Basis [Member] | State and Political Subdivisions [Member]
Securities available for sale	24,510	28,993
Recurring Basis [Member] | Corporate Bond [Member]
Securities available for sale	3,094	3,113
Recurring Basis [Member] | Single-Issuer Trust Preferred Security [Member]
Securities available for sale	2,857	2,610
Recurring Basis [Member] | CRA Investment Fund [Member]
Securities available for sale	4,859	4,825
Recurring Basis [Member] | Designated as Hedging Instrument [Member]
Derivatives	383	123
Derivatives	(104)	(867)
Recurring Basis [Member] | Not Designated as Hedging Instrument [Member]
Derivatives	4,136	1,543
Derivatives	(4,136)	(1,543)
Quoted Prices in Active Market For Identical Assets (Level 1) [Member] | Recurring Basis [Member]
Loans held for sale, at fair value
Total	4,859	4,825
Derivatives
Quoted Prices in Active Market For Identical Assets (Level 1) [Member] | Recurring Basis [Member] | CRA Investment Fund [Member]
Securities available for sale	4,859	4,825
Significant Other Observable Inputs (Level 2) [Member] | Recurring Basis [Member]
Loans held for sale, at fair value	2,240	1,200
Total	317,012	303,429
Derivatives	(4,240)	(2,410)
Significant Other Observable Inputs (Level 2) [Member] | Recurring Basis [Member] | U.S. Government-Sponsored Entities [Member]
Securities available for sale	36,475	21,517
Significant Other Observable Inputs (Level 2) [Member] | Recurring Basis [Member] | Mortgage-Backed Securities-Residential [Member]
Securities available for sale	237,381	237,617
Significant Other Observable Inputs (Level 2) [Member] | Recurring Basis [Member] | SBA Pool Securities [Member]
Securities available for sale	5,936	6,713
Significant Other Observable Inputs (Level 2) [Member] | Recurring Basis [Member] | State and Political Subdivisions [Member]
Securities available for sale	24,510	28,993
Significant Other Observable Inputs (Level 2) [Member] | Recurring Basis [Member] | Corporate Bond [Member]
Securities available for sale	3,094	3,113
Significant Other Observable Inputs (Level 2) [Member] | Recurring Basis [Member] | Single-Issuer Trust Preferred Security [Member]
Securities available for sale	2,857	2,610
Significant Other Observable Inputs (Level 2) [Member] | Recurring Basis [Member] | Designated as Hedging Instrument [Member]
Derivatives	383	123
Derivatives	(104)	(867)
Significant Other Observable Inputs (Level 2) [Member] | Recurring Basis [Member] | Not Designated as Hedging Instrument [Member]
Derivatives	4,136	1,543
Derivatives	$ (4,136)	$ (1,543)

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FAIR VALUE (Schedule of Residential Loans Held for Sale, at Fair Value) (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Fair Value Disclosures [Abstract]
Residential loans contractual balance	$ 2,214	$ 1,181
Fair value adjustment	26	19
Total fair value of residential loans held for sale	$ 2,240	$ 1,200

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FAIR VALUE (Schedule of Assets Measured on a Non-Recurring Basis) (Details) - Non-Recurring Basis [Member] - Commercial Real Estate Portfolio Segment [Member] - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Investment Property [Member]
Impaired loans	$ 239	$ 245
Primary Residential Mortgages [Member]
Impaired loans	1,828
Quoted Prices in Active Market For Identical Assets (Level 1) [Member] | Investment Property [Member]
Impaired loans
Quoted Prices in Active Market For Identical Assets (Level 1) [Member] | Primary Residential Mortgages [Member]
Impaired loans
Significant Other Observable Inputs (Level 2) [Member] | Investment Property [Member]
Impaired loans
Significant Other Observable Inputs (Level 2) [Member] | Primary Residential Mortgages [Member]
Impaired loans
Significant Unobservable Inputs (Level 3) [Member] | Investment Property [Member]
Impaired loans	239	$ 245
Significant Unobservable Inputs (Level 3) [Member] | Primary Residential Mortgages [Member]
Impaired loans	$ 1,828

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FAIR VALUE (Schedule of Financial Instruments) (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Financial Assets:
Securities available for sale	$ 315,112	$ 305,388
FHLB and FRB Stock	13,589	13,813
Loans held for sale, at fair value	2,240	1,200
Loans held for sale, at lower of cost or fair value		388
Accrued interest receivable	6,803	8,153
Financial Liabilities:
Federal home loan bank advances	49,898	61,795
Carrying Value [Member]
Financial Assets:
Cash and cash equivalents	93,340	162,691
Securities available for sale	315,112	305,388
FHLB and FRB Stock	13,589	13,813
Loans held for sale, at fair value	2,240	1,200
Loans held for sale, at lower of cost or fair value		388
Loans, net of allowance for loan and lease losses	3,631,282	3,279,936
Accrued interest receivable	6,803	8,153
Financial Liabilities:
Deposits	3,662,697	3,411,837
Federal home loan bank advances	49,898	61,795
Subordinated debt	48,862	48,764
Accrued interest payable	2,019	1,127
Carrying Value [Member] | Designated as Hedging Instrument [Member]
Financial Assets:
Derivatives	383	123
Financial Liabilities:
Derivatives	104	867
Carrying Value [Member] | Not Designated as Hedging Instrument [Member]
Financial Assets:
Derivatives	4,136	1,543
Financial Liabilities:
Derivatives	4,136	1,543
Fair value [Member]
Financial Assets:
Cash and cash equivalents	93,340	162,691
Securities available for sale	315,112	305,388
FHLB and FRB Stock
Loans held for sale, at fair value	2,240	1,200
Loans held for sale, at lower of cost or fair value		428
Loans, net of allowance for loan and lease losses	3,613,704	3,256,837
Accrued interest receivable	6,803	8,153
Financial Liabilities:
Deposits	3,662,539	3,410,448
Federal home loan bank advances	50,044	62,286
Subordinated debt	48,862	48,768
Accrued interest payable	2,019	1,127
Fair value [Member] | Designated as Hedging Instrument [Member]
Financial Assets:
Derivatives	383	123
Financial Liabilities:
Derivatives	104	867
Fair value [Member] | Not Designated as Hedging Instrument [Member]
Financial Assets:
Derivatives	4,136	1,543
Financial Liabilities:
Derivatives	4,136	1,543
Fair value [Member] | Quoted Prices in Active Market For Identical Assets (Level 1) [Member]
Financial Assets:
Cash and cash equivalents	93,340	162,691
Securities available for sale	4,859	4,825
FHLB and FRB Stock
Loans held for sale, at fair value
Loans held for sale, at lower of cost or fair value
Loans, net of allowance for loan and lease losses
Accrued interest receivable
Financial Liabilities:
Deposits	3,050,658	2,861,116
Federal home loan bank advances
Subordinated debt
Accrued interest payable	151	161
Fair value [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial Assets:
Cash and cash equivalents
Securities available for sale	310,253	300,563
FHLB and FRB Stock
Loans held for sale, at fair value	2,240	1,200
Loans held for sale, at lower of cost or fair value		428
Loans, net of allowance for loan and lease losses
Accrued interest receivable	1,106	899
Derivatives		123
Financial Liabilities:
Deposits	611,881	549,332
Federal home loan bank advances	50,044	62,286
Subordinated debt
Accrued interest payable	1,118	966
Fair value [Member] | Significant Other Observable Inputs (Level 2) [Member] | Designated as Hedging Instrument [Member]
Financial Assets:
Derivatives	383	123
Financial Liabilities:
Derivatives	104	867
Fair value [Member] | Significant Other Observable Inputs (Level 2) [Member] | Not Designated as Hedging Instrument [Member]
Financial Assets:
Derivatives	4,136	1,543
Financial Liabilities:
Derivatives	4,136	1,543
Fair value [Member] | Significant Unobservable Inputs (Level 3) [Member]
Financial Assets:
Cash and cash equivalents
Securities available for sale
FHLB and FRB Stock
Loans held for sale, at fair value
Loans held for sale, at lower of cost or fair value
Loans, net of allowance for loan and lease losses	3,613,704	3,256,837
Accrued interest receivable	5,697	7,254
Financial Liabilities:
Deposits
Federal home loan bank advances
Subordinated debt	48,862	48,768
Accrued interest payable	$ 750

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OTHER OPERATING EXPENSES (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Other operating expenses
Wealth management division other expense	$ 533	$ 490	$ 1,865	$ 1,593
Professional and legal fees	1,452	801	3,100	2,544
Other operating expenses	2,452	1,810	7,070	6,191
Total other operating expenses	$ 4,437	$ 3,101	$ 12,035	$ 10,328

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ACCUMULATED OTHER COMPREHENSIVE (LOSS)/INCOME (Schedule of Accumulated Other Comprehensive Income Balances, Net of Tax) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance			$ 324,210
Total other comprehensive income/(loss)	$ 193	$ 726	1,186	$ (1,398)
Balance	379,936		379,936
Net Unrealized Holding Gain/(Loss) on Securities Available for Sale, Net of Tax [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance	(572)	1,224	(1,091)	408
Other Comprehensive Income/(Loss) Before Reclassifications	62	(215)	581	676
Amount Reclassified From Accumulated Other Comprehensive Loss				(75)
Total other comprehensive income/(loss)	62	(215)	581	601
Balance	(510)	1,009	(510)	1,009
Gains/(Losses) on Cash Flow Hedge [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance	34	(3,727)	(440)	(787)
Other Comprehensive Income/(Loss) Before Reclassifications	131	941	605	(1,999)
Amount Reclassified From Accumulated Other Comprehensive Loss
Total other comprehensive income/(loss)	131	941	605	(1,999)
Balance	165	(2,786)	165	(2,786)
Accumulated Other Comprehensive Income/(Loss), Net of Tax [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance	(538)	(2,503)	(1,531)	(379)
Other Comprehensive Income/(Loss) Before Reclassifications	193	726	1,186	(1,323)
Amount Reclassified From Accumulated Other Comprehensive Loss				(75)
Total other comprehensive income/(loss)	193	726	1,186	(1,398)
Balance	$ (345)	$ (1,777)	$ (345)	$ (1,777)

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ACCUMULATED OTHER COMPREHENSIVE (LOSS)/INCOME (Schedule of Reclassifications out of AOCI) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Securities gains, net				$ 119
Income tax expense	(6,256)	$ (4,422)	(14,888)	(11,785)
Net income	10,206	7,116	26,128	19,169
Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income tax expense				(44)
Net income				75
Reclassification out of Accumulated Other Comprehensive Income [Member] | Net Unrealized Holding Gain/(Loss) on Securities Available for Sale, Net of Tax [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Securities gains, net				$ 119

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DERIVATIVES (Details) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2017 USD ($) N	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($) N	Sep. 30, 2016 USD ($)	Dec. 31, 2016 USD ($) N
Derivative [Line Items]
Interest expense	$ 7,499	$ 5,575	$ 19,733	$ 14,922
Interest Rate Swap [Member] | Designated as Hedging Instrument [Member]
Derivative [Line Items]
Notional Amount	$ 180,000		$ 180,000		$ 180,000
Weighted average pay rate	1.64%		1.64%		1.64%
Weighted average receive rate	1.30%		1.30%		0.58%
Weighted average maturity			2 years 6 months		3 years 3 months
Unrealized loss			$ 279		$ (744)
Number of contracts | N	9		9		9
Interest expense	$ 150	494	$ 763	1,500
Amount of Gain/(Loss) Recognized In OCI (Effective Portion)	131	941	605	(1,999)
Amount of Gain/(Loss) Reclassified From OCI to Interest Expense
Amount of Gain/(Loss) Recognized in Other Non-Interest Expense (Ineffective Portion)
Fair Value	279		279		$ (744)
Loan Level Swaps [Member] | Not Designated as Hedging Instrument [Member]
Derivative [Line Items]
Notional Amount	$ 315,689		$ 315,689		$ 126,810
Weighted average pay rate	4.10%		4.10%		3.75%
Weighted average receive rate	3.27%		3.27%		2.65%
Weighted average maturity			7 years 8 months 12 days		9 years 4 months 24 days
Number of contracts | N	41		41		14
Fair Value	$ 4,136		$ 4,136		$ 1,543
Other Assets [Member] | Interest Rate Swap [Member] | Designated as Hedging Instrument [Member]
Derivative [Line Items]
Notional Amount	110,000		110,000		30,000
Fair Value	383		383		123
Other Liabilities [Member] | Interest Rate Swap [Member] | Designated as Hedging Instrument [Member]
Derivative [Line Items]
Notional Amount	70,000		70,000		150,000
Fair Value	$ (104)		$ (104)		$ (867)

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SUBORDINATED DEBT (Details) $ in Millions	1 Months Ended
	Jun. 30, 2016 USD ($)
Subordinated Debt [Member]
Debt Instrument [Line Items]
Principal amount	$ 50.0
Non-callable term	5 years
Notes maturity date	Jun. 30, 2026
Fixed interest rate	6.00%
LIBOR spread	4.85%
Debt issuance costs	$ 1.3
Parent Company [Member]
Debt Instrument [Line Items]
Net proceeds used to contribute to the Bank	40.0
Proceeds from debt retained by parent	$ 9.0

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RECENT ACCOUNTING PRONOUNCEMENTS (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($)
Business Combinations [Abstract]
Income tax benefit	$ 792

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ACQUISITION (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($)
Business Combinations [Abstract]
Purchase price included cash and common stock	$ 2,000

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DEFINITIVE AGREEMENT (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($)
Gladstone [Member]
Business Acquisition [Line Items]
Proceeds from Issuance of common stock	$ 3,100