10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended June 30, 2019

OR

☐ 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)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	PGC	The NASDAQ Stock Market, LLC

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 ☒ No ☐

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

Yes ☒ No ☐

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

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

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

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

Number of shares of Common Stock outstanding as of August 1, 2019:19,456,312

PEAPACK-GLADSTONE FINANCIAL CORPORATION

PART 1 FINANCIAL INFORMATION

Item 1	Financial Statements	3
	Consolidated Statements of Condition at June 30, 2019 and December 31, 2018	3
	Consolidated Statements of Income for the three and six months ended June 30, 2019 and 2018	4
	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2019 and 2018	5
	Consolidated Statement of Changes in Shareholders’ Equity for the three and six months ended June 30, 2019and 2018	6
	Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018	8
	Notes to Consolidated Financial Statements	9
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3	Quantitative and Qualitative Disclosures about Market Risk	60
Item 4	Controls and Procedures	62

PART 2 OTHER INFORMATION

Item 1	Legal Proceedings	63
Item 1A	Risk Factors	63
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	63
Item 3	Defaults Upon Senior Securities	63
Item 4	Mine Safety Disclosures	63
Item 5	Other Information	63
Item 6	Exhibits	64

2

Item 1. Financial Statements

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CONDITION

(Dollars in thousands, except share and per share data)

	(unaudited)			(audited)
	June 30,			December 31,
	2019			2018
ASSETS
Cash and due from banks	$	5,351		$	5,914
Federal funds sold		101			101
Interest-earning deposits		298,575			154,758
Total cash and cash equivalents		304,027			160,773
Securities available for sale		378,839			377,936
Equity security, at fair value		4,847			4,719
FHLB and FRB stock, at cost		18,338			18,533
Loans held for sale, at fair value		2,343			1,576
Loans held for sale, at lower of cost or fair value		926			3,542
Loans		4,029,339			3,927,931
Less: Allowance for loan and lease losses		39,791			38,504
Net loans		3,989,548			3,889,427
Premises and equipment		20,987			27,408
Accrued interest receivable		11,594			10,814
Bank owned life insurance		45,744			45,353
Goodwill		24,417			24,417
Other intangible assets		7,524			7,982
Finance lease right-of-use assets		5,452			—
Operating lease right-of-use assets		11,017			—
Other assets		45,631			45,378
TOTAL ASSETS	$	4,871,234		$	4,617,858
LIABILITIES
Deposits:
Noninterest-bearing demand deposits	$	544,431		$	463,926
Interest-bearing deposits:
Checking		1,388,821			1,247,305
Savings		112,438			114,674
Money market accounts		1,207,358			1,243,369
Certificates of deposit - retail		570,384			510,724
Certificates of deposit - listing service		58,541			79,195
Subtotal deposits		3,881,973			3,659,193
Interest-bearing demand - brokered		180,000			180,000
Certificates of deposit - brokered		33,682			56,147
Total deposits		4,095,655			3,895,340
Federal Home Loan Bank advances		105,000			108,000
Finance lease liabilities		7,985			8,362
Operating lease liabilities		11,269			—
Subordinated debt, net		83,305			83,193
Deferred tax liabilities, net		15,464			16,029
Accrued expenses and other liabilities		58,668			37,921
TOTAL LIABILITIES		4,377,346			4,148,845
SHAREHOLDERS’ EQUITY
Preferred stock (no par value; authorized 500,000 shares; liquidation preference of $1,000 per share)		—			—
Common stock (no par value; stated value $0.83 per share; authorized 42,000,000 shares; issued    shares, 19,864,490 at June 30, 2019 and 19,745,840 at December 31, 2018; outstanding    shares, 19,456,312 at June 30, 2019 and 19,337,662 at December 31, 2018		16,557			16,459
Surplus		311,428			309,088
Treasury stock at cost, 408,178 shares at both June 30, 2019 and December 31, 2018		(8,988	)		(8,988	)
Retained earnings		176,495			154,799
Accumulated other comprehensive loss, net of income tax		(1,604	)		(2,345	)
TOTAL SHAREHOLDERS’ EQUITY		493,888			469,013
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY	$	4,871,234		$	4,617,858

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					Six Months Ended
	June 30,					June 30,
	2019		2018			2019		2018
INTEREST INCOME
Interest and fees on loans	$	40,595	$	37,102		$	81,107	$	71,769
Interest on investments:
Taxable		2,639		2,072			5,323		3,997
Tax-exempt		91		99			184		208
Interest on loans held for sale		13		6			17		16
Interest on interest-earning deposits		1,265		395			2,535		752
Total interest income		44,603		39,674			89,166		76,742
INTEREST EXPENSE
Interest on savings and interest-bearing deposit accounts		8,554		4,416			16,615		8,135
Interest on certificates of deposit		3,461		2,330			6,695		4,479
Interest on borrowed funds		838		1,155			1,672		1,525
Interest on finance lease liability		97		106			196		213
Interest on subordinated debt		1,223		1,221			2,447		2,442
Subtotal - interest expense		14,173		9,228			27,625		16,794
Interest on interest-bearing demand - brokered		836		804			1,575		1,484
Interest on certificates of deposits - brokered		326		399			691		828
Total interest expense		15,335		10,431			29,891		19,106
NET INTEREST INCOME BEFORE PROVISION FOR LOAN AND    LEASE LOSSES		29,268		29,243			59,275		57,636
Provision for loan and lease losses		1,150		300			1,250		1,550
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND    LEASE LOSSES		28,118		28,943			58,025		56,086
OTHER INCOME
Wealth management fee income		9,568		8,126			18,742		16,493
Service charges and fees		897		873			1,713		1,704
Bank owned life insurance		326		345			664		681
Gains on loans held for sale at fair value (mortgage banking)		132		79			179		173
Fee income related to loan level, back-to-back swaps		721		900			991		1,152
Gain on sale of SBA loans		573		814			992		845
Other income		740		639			1,346		1,021
Securities gains/(losses), net		69		(36	)		128		(114	)
Total other income		13,026		11,740			24,755		21,955
OPERATING EXPENSES
Compensation and employee benefits		17,543		15,826			34,699		30,405
Premises and equipment		3,600		3,406			6,988		6,676
FDIC insurance expense		277		625			554		1,205
Other operating expense		4,753		5,084			9,647		9,992
Total operating expenses		26,173		24,941			51,888		48,278
INCOME BEFORE INCOME TAX EXPENSE		14,971		15,742			30,892		29,763
Income tax expense		3,421		3,832			7,917		7,046
NET INCOME	$	11,550	$	11,910		$	22,975	$	22,717
EARNINGS PER SHARE
Basic	$	0.59	$	0.63		$	1.18	$	1.21
Diluted	$	0.59	$	0.62		$	1.18	$	1.20
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic		19,447,155		18,930,893			19,399,071		18,770,492
Diluted		19,568,371		19,098,838			19,528,537		18,996,979

See accompanying notes to consolidated financial statements

4

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Net income	$	11,550		$	11,910		$	22,975		$	22,717
Comprehensive income:
Unrealized gains/(losses) on available for sale securities:
Unrealized holding gains/(losses) arising during the period		2,871			(653	)		5,159			(3,587	)
Tax effect		(695	)		159			(1,255	)		835
Net of tax		2,176			(494	)		3,904			(2,752	)
Unrealized gains on cash flow hedges:
Unrealized holding gains/(losses) arising during the period		(2,909	)		828			(4,456	)		1,569
Reclassification adjustment for amounts included in net    income		(31	)		(31	)		(62	)		(62	)
		(2,940	)		797			(4,518	)		1,507
Tax effect		889			(215	)		1,355			(424	)
Net of tax		(2,051	)		582			(3,163	)		1,083
Total other comprehensive income/(loss)		125			88			741			(1,669	)
Total comprehensive income	$	11,675		$	11,998		$	23,716		$	21,048

See accompanying notes to consolidated financial statements

5

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Dollars in thousands)

(Unaudited)

Three Months Ended June 30, 2019 and June 30, 2018

															Accumulated
															Other
(In thousands, except	Preferred		Common						Treasury			Retained			Comprehensive
per share data)	Stock		Stock			Surplus			Stock			Earnings			Loss			Total
Balance at April 1, 2019 19,445,363    common shares outstanding	$	—	$	16,549		$	309,722		$	(8,988	)	$	165,918		$	(1,729	)	$	481,472
Net income		—		—			—			—			11,550			—			11,550
Comprehensive income		—		—			—			—			—			125			125
Restricted stock units issued 1,779 shares		—		1			(1	)		—			—			—			—
Restricted stock units/awards repurchased on    vesting to pay taxes, (614) shares		—		—			(17	)		—			—			—			(17	)
Amortization of restricted stock awards/units		—		—			1,475			—			—			—			1,475
Cash dividends declared on common stock    ($0.05 per share)		—		—			—			—			(973	)		—			(973	)
Common stock options exercised, 1,220 shares		—		—			18			—			—			—			18
Issuance of shares for Employee Stock    Purchase Plan, 8,564 shares		—		7			231			—			—			—			238
Balance at June 30, 2019 19,456,312    common shares outstanding	$	—	$	16,557		$	311,428		$	(8,988	)	$	176,495		$	(1,604	)	$	493,888
															Accumulated
															Other
(In thousands, except	Preferred		Common						Treasury			Retained			Comprehensive
per share data)	Stock		Stock			Surplus			Stock			Earnings			Loss			Total
Balance at April 1, 2018 18,921,114    common shares outstanding	$	—	$	16,111		$	293,830		$	(8,988	)	$	124,295		$	(2,842	)	$	422,406
Net income		—		—			—			—			11,910			—			11,910
Comprehensive loss		—		—			—			—			—			88			88
Restricted stock units issued 1,583 shares		—		1			(1	)		—			—			—			—
Restricted stock awards forfeitures (1,267) shares		—		(1	)		1			—			—			—			—
Restricted stock units/awards repurchased on    vesting to pay taxes, (1,945) shares		—		(1	)		(65	)		—			—			—			(66	)
Amortization of restricted stock awards/units		—		—			1,154			—			—			—			1,154
Cash dividends declared on common stock    ($0.05 per share)		—		—			—			—			(945	)		—			(945	)
Common stock options exercised, 4,533, net of    833 used to exercise, 3,700 shares		—		4			46			—			—			—			50
Sales of shares (Dividend Reinvestment    Program), 75,000 shares		—		62			2,052			—			—			—			2,114
Issuance of shares for Employee Stock    Purchase Plan, 9,127 shares		—		7			301			—			—			—			308
Balance at June 30, 2018 19,007,312    common shares outstanding	$	—	$	16,183		$	297,318		$	(8,988	)	$	135,260		$	(2,754	)	$	437,019

6

Six Months Ended June 30, 2019 and June 30, 2018

															Accumulated
															Other
(In thousands, except	Preferred		Common						Treasury			Retained			Comprehensive
per share data)	Stock		Stock			Surplus			Stock			Earnings			Loss			Total
Balance at January 1, 2019 19,337,662    common shares outstanding	$	—	$	16,459		$	309,088		$	(8,988	)	$	154,799		$	(2,345	)	$	469,013
Net income		—		—			—			—			22,975			—			22,975
Comprehensive income		—		—			—			—			—			741			741
Cumulative adjustment for leases (ASC 842)		—		—			—			—			661			—			661
Restricted stock units issued 131,141 shares		—		109			(109	)		—			—			—			—
Restricted stock units/awards repurchased on    vesting to pay taxes, (35,949) shares		—		(30	)		(951	)		—			—			—			(981	)
Amortization of restricted stock awards/units		—		—			2,865			—			—			—			2,865
Cash dividends declared on common stock    ($0.10 per share)		—		—			—			—			(1,940	)		—			(1,940	)
Common stock options exercised, 1,520 shares		—		1			21			—			—			—			22
Exercise of warrants, 7,109 net of 4,218 shares    used to exercise, 2,891 shares		—		2			(2	)		—			—			—			—
Issuance of shares for Employee Stock    Purchase Plan, 18,740 shares		—		15			517			—			—			—			532
Issuance of common stock for acquisition 307    shares		—		1			(1	)		—			—			—			—
Balance at June 30, 2019 19,456,312    common shares outstanding	$	—	$	16,557		$	311,428		$	(8,988	)	$	176,495		$	(1,604	)	$	493,888
															Accumulated
															Other
(In thousands, except	Preferred		Common						Treasury			Retained			Comprehensive
per share data)	Stock		Stock			Surplus			Stock			Earnings			Loss			Total
Balance at January 1, 2018 18,619,634    common shares outstanding	$	—	$	15,858		$	283,552		$	(8,988	)	$	114,468		$	(1,212	)	$	403,678
Net income		—		—			—			—			22,717			—			22,717
Comprehensive loss		—		—			—			—			—			(1,669	)		(1,669	)
Cumulative adjustment for equity security    (ASU 2016-01)		—		—			—			—			(127	)		127			—
Restricted stock units issued 85,242 shares		—		71			(71	)		—			—			—			—
Restricted stock awards forfeitures (94,034) shares		—		(78	)		78			—			—			—			—
Restricted stock units/awards repurchased on    vesting to pay taxes, (40,457) shares		—		(33	)		(1,370	)		—			—			—			(1,403	)
Amortization of restricted stock awards/units		—		—			2,130			—			—			—			2,130
Cash dividends declared on common stock    ($0.10 per share)		—		—			—			—			(1,798	)		—			(1,798	)
Common stock options exercised, 10,683, net of    2,374 used to exercise, 8,309 shares		—		9			93			—			—			—			102
Sales of shares (Dividend Reinvestment    Program), 392,302 shares		—		326			12,407			—			—			—			12,733
Issuance of shares for Employee Stock    Purchase Plan, 15,490 shares		—		13			516			—			—			—			529
Issuance of common stock for acquisition    20,826 shares		—		17			(17	)		—			—			—			—
Balance at June 30, 2018 19,007,312    common shares outstanding	$	—	$	16,183		$	297,318		$	(8,988	)	$	135,260		$	(2,754	)	$	437,019

See accompanying notes to consolidated financial statements

7

PEAPACK-GLADSTONE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Six Months Ended June 30,
	2019			2018
OPERATING ACTIVITIES:
Net income	$	22,975		$	22,717
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,523			1,560
Amortization of premium and accretion of discount on securities, net		613			741
Amortization of restricted stock		2,865			2,130
Amortization of intangible assets		458			359
Amortization of subordinated debt costs		112			109
Provision for loan and lease losses		1,250			1,550
Provision for OREO losses		—			204
Deferred tax (benefit)/expense		(620	)		1,429
Stock-based compensation and employee stock purchase plan expense		75			112
Fair value adjustment for equity security		(128	)		114
Loans originated for sale (1)		(22,531	)		(25,418	)
Proceeds from sales of loans held for sale (1)		23,166			23,609
Gain on loans held for sale (1)		(1,171	)		(1,018	)
Gain on OREO sold		—			(26	)
Increase in cash surrender value of life insurance, net		(391	)		(394	)
(Increase)/decrease in accrued interest receivable		(780	)		2,250
Decrease in other assets		8,548			4,496
Increase/(decrease) in accrued expenses and other liabilities		8,044			(3,167	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		44,008			31,357
INVESTING ACTIVITIES:
Principal repayments, maturities and calls of securities available for sale		96,230			40,189
Redemptions of FHLB & FRB stock		279			49,068
Purchase of securities available for sale		(92,587	)		(68,547	)
Purchase of FHLB & FRB stock		(84	)		(57,223	)
Net increase in loans, net of participations sold		(98,986	)		(18,389	)
Sale of other real estate owned		—			304
Purchase of premises and equipment		(554	)		(488	)
NET CASH USED IN INVESTING ACTIVITIES		(95,702	)		(55,086	)
FINANCING ACTIVITIES:
Net increase/(decrease) in deposits		200,315			(175,441	)
Net increase in overnight borrowings		—			127,350
Proceeds from Federal Home Loan Bank advances		—			30,000
Repayments of Federal Home Loan Bank advances		(3,000	)		(15,000	)
Dividends paid on common stock		(1,940	)		(1,798	)
Exercise of Stock Options, net of stock swaps		22			102
Restricted stock repurchased on vesting to pay taxes		(981	)		(1,403	)
Sales of common shares (Dividend Reinvestment Program)		—			12,733
Issuance of shares for employee stock purchase plan		532			529
NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES		194,948			(22,928	)
Net increase/(decrease) in cash and cash equivalents		143,254			(46,657	)
Cash and cash equivalents at beginning of period		160,773			113,447
Cash and cash equivalents at end of period	$	304,027		$	66,790
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest	$	29,954		$	18,086
Income tax, net		843			964

(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

8

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 audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2018 for Peapack-Gladstone Financial Corporation (the “Corporation” or the “Company”). In the opinion of the management of the Corporation, the accompanying unaudited Consolidated Interim Financial Statements contain all adjustments (consisting solely of normal recurring accruals) necessary to present fairly the financial position as of June 30, 2019, the results of operations comprehensive income and shareholders’ equity for the three and six months ended June 30, 2019 and 2018, shareholders’ equity and cash flow statements for the six months ended June 30, 2019 and 2018. The results of operations for the three and six months ended June 30, 2019 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 financial statements also include the Bank’s wholly-owned subsidiaries, PGB Trust & Investments of Delaware, Peapack Capital Corporation (“PCC”) (formed in the second quarter of 2017), Murphy Capital Management (“MCM”) (acquired in the third quarter of 2017), Quadrant Capital Management (“Quadrant”) (acquired in the fourth quarter of 2017), Lassus Wherley & Associates (“Lassus Wherley”) (acquired in the third quarter of 2018), 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 and their subsidiaries, these footnotes primarily reflect the Bank’s and its subsidiaries’ activities. All significant intercompany balances and transactions have been eliminated from the accompanying consolidated financial statements.

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

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

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

Peapack-Gladstone Bank’s Private Wealth Management Division includes: investment management services for individuals and institutions; personal trust services, including services as executor, trustee, administrator, custodian and guardian; and other financial planning, tax preparation and advisory services. This segment also includes the activity from the Delaware subsidiary, PGB Trust and Investments of Delaware, MCM, Quadrant and Lassus Wherley.  Wealth management fees are primarily earned based upon AUM and are generally assessed on a monthly or quarterly basis on a tiered fee schedule based on the market value of AUM at the end of the period.

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.

9

Securities: All debt securities are classified as available for sale and are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income/(loss), net of tax, with the exception of the Company’s investment in a CRA investment fund, which is classified as an equity security.  In accordance with ASU 2016-01, “Financial Instruments” (adopted January 1, 2018), unrealized holding gains and losses on equity securities are marked to market through the income statement.

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

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

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

The Bank is also a member of the Federal Reserve Bank 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 on the income statement, are based on the difference between the selling price and the carrying value of the related loan sold.

U.S. Small Business Administration (SBA) loans originated with the intent to sell in the secondary market are carried at the lower of cost or fair value. SBA loans are generally sold with the servicing rights retained. Total SBA loans serviced totaled $43.8 million and $35.1 million as of June 30, 2019 and December 31, 2018, respectively.  SBA loans held for sale totaled $926 thousand and $1.2 million at June 30, 2019 and December 31, 2018, respectively.

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

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

Loans are considered past due when they are not paid within 30 days in accordance with contractual terms. The accrual of income on loans, including impaired loans, is discontinued if, in the opinion of Management, principal or interest is not likely to be paid in accordance with the terms of the loan agreement, or when principal or interest is past due 90 days unless the asset is both well secured and in the process of collection. All interest accrued but not received for loans placed on nonaccrual are reversed against interest income. Payments received on nonaccrual loans are recorded as principal payments. A nonaccrual loan is returned to accrual status only when interest and principal payments are brought current and future payments are reasonably assured, generally when the Bank receives contractual payments for a minimum of six consecutive months. Commercial loans are generally charged off 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

10

collectability is reasonably assured, loans may be returned to accrual status. Nonaccrual mortgage loans are generally charged off to the extent that the value of the underlying collateral does not cover the outstanding principal balance. The majority of the Company’s loans are secured by real estate in New Jersey 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 probable losses in the loan portfolio.  The process to determine reserves utilizes analytic tools and Management judgment and is reviewed on a quarterly basis. When Management is reasonably certain that a loan balance is not fully collectable, an impairment analysis is completed whereby a specific reserve may be established or a full or partial charge off is recorded against the allowance.  Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the size and composition of the portfolio, information about specific borrower situations, estimated collateral values, economic conditions and other factors. Allocations of the allowance may be made for specific loans via a specific reserve, but the entire allowance is available for any loan that, in Management’s judgment, should be charged off.

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

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

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

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 Company’s historical loss experience adjusted for current factors. The historical loss experience is determined by portfolio segment and is based on the actual loss history experience by the Company on a weighted average basis over the previous three years. This actual loss experience is adjusted by other qualitative factors based on the risks present for each portfolio segment. 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 staffing and experience; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations.  For loans that are graded as non-impaired, the Company allocates a higher general reserve percentage than pass-rated loans using a multiple that is calculated annually through a migration analysis.  At both June 30, 2019 and December 31, 2018, the multiple was 2.25 times for non-impaired special mention loans and 3.5 times for non-impaired substandard 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 values could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential loss exposure for the Bank.

11

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

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

Multifamily and Commercial Real Estate Loans.  The Bank provides mortgage loans for multifamily properties (i.e. buildings which have five or more residential units) and other commercial real estate that is either owner occupied or managed as an investment property (non-owner occupied) in the Tri-State area and Pennsylvania. Commercial real estate properties primarily include retail buildings/shopping centers, hotels, office/medical buildings and industrial/warehouse space. Some properties are considered “mixed use” as they are a combination of building types, such as a building with retail space on the ground floor and either residential apartments or office suites on the upper floors. Multifamily loans are expected to be repaid from the cash flows of the underlying property so the collective amount of rents must be sufficient to cover all operating expenses, property management and maintenance, taxes and debt service. Increases in vacancy rates, interest rates or other changes in general economic conditions can have an impact on the borrower and its ability to repay the loan. Commercial real estate loans are generally considered to have a higher degree of credit risk than multifamily loans as they may be dependent on the ongoing success and operating viability of a fewer number of tenants who are occupying the property and who may have a greater degree of exposure to economic conditions.

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

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

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

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

12

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

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

As the rate implicit in the lease is not readily determinable, the incremental collateralized borrowing rate is used to determine the present value of lease payments. This rate gives consideration to the applicable FHLB collateralized borrowing rates and is based on the information available at the commencement date. The Company has elected to apply the short-term lease measurement and recognition exemption to leases with an initial term of 12 months or less; therefore, these leases are not recorded on the Company’s statement of condition, but rather, lease expense is recognized over the lease term on a straight-line basis. The Company’s lease agreements may include options to extend or terminate the lease. The Company’s decision to exercise renewal options is based on an assessment of its current business needs and market factors at the time of the renewal.  The Company maintains certain property and equipment under direct financing and operating leases.  Substantially all of the leases in which the Company is the lessee are comprised of real estate property for branches and office space and are classified as operating leases. The Company has two existing finance leases (previously classified as a capital lease and included in premises and equipment on our statement of condition at December 31, 2018) for the Company’s administration building and one branch location.  Topic 842 did not materially impact the accounting for these capital leases.

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

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

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

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

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

13

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 authorized but unissued shares to satisfy option exercises.

Upon adoption of 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 six months ended June 30, 2019 were as follows:

						Weighted
				Weighted		Average	Aggregate
				Average		Remaining	Intrinsic
	Number of			Exercise		Contractual	Value
	Options			Price		Term	(In thousands)
Balance, January 1, 2019		91,310		$	13.63
Exercised during 2019		(1,520	)		14.28
Expired during 2019		(630	)		22.57
Forfeited during 2019		(20,000	)		13.07
Balance, June 30, 2019		69,160		$	13.69	2.33 years	$	998
Vested and expected to vest		69,160		$	13.69	2.33 years	$	998
Exercisable at June 30, 2019		69,160		$	13.69	2.33 years	$	998

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 second quarter of 2019 and the exercise price, multiplied by the number of in-the-money options). The Company’s closing stock price on June 30, 2019 was $28.12.

There were no stock options granted during the three or six months ended June 30, 2019.  

The Company has previously granted performance-based and service-based restricted stock awards/units. Service-based awards/units vest ratably over a three or five-year period.  There were 729 service-based restricted stock units granted in the second quarter of 2019 with a three-year vesting period and there were 27,925 service-based restricted stock units granted in the second quarter of 2019 with a five-year vesting period.

The performance-based awards are dependent upon the Company meeting certain performance criteria and, to the extent the performance criteria are met, will cliff vest at the end of the performance period which is generally three years.  There were no performance-based restricted stock units granted in the second quarter of 2019.  

Changes in non-vested shares dependent on performance criteria for the six months ended June 30, 2019 were as follows:

			Weighted
			Average
	Number of		Grant Date
	Shares		Fair Value
Balance, January 1, 2019		42,998	$	35.33
Granted during 2019		47,770		26.34
Balance, June 30, 2019		90,768	$	30.60

14

Changes in service-based restricted stock awards/units for the six months ended June 30, 2019 were as follows:

				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value
Balance, January 1, 2019		366,541		$	30.64
Granted during 2019		223,396			26.51
Vested during 2019		(140,178	)		27.44
Forfeited during 2019		(3,214	)		31.35
Balance, June 30, 2019		446,545		$	29.98

As of June 30, 2019, there was $46 thousand of total unrecognized compensation cost related to service-based awards.  That cost is expected to be recognized over a weighted average period of 0.34 years.  As of June 30, 2019, there was $12.8 million of total unrecognized compensation cost related to service-based and performance-based units.  That cost is expected to be recognized over a weighted average period of 1.31 years. Stock compensation expense recorded for the second quarters of 2019 and 2018 totaled $1.5 million and $1.3 million, respectively.  Stock compensation expense recorded for the six months ended June 30, 2019 and 2018 totaled $2.9 million and $2.4 million, respectively.

Employee Stock Purchase Plan (“ESPP”): In 2014, the shareholders of the Company approved the ESPP.  The ESPP provides for the granting of rights to purchase 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 Period”).  An amendment to the ESPP plan has changed the offering period to one twelve-month period to commence in the third quarter of 2019.  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 the 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 purchase right is determined using the Black-Scholes option pricing model.  

The Company recorded $30 thousand and $59 thousand of expense in salaries and employee benefits expense for the three months ended June 30, 2019 and 2018, respectively, related to the ESPP. Total shares issued under the ESPP during the second quarters of 2019 and 2018 were 8,564 and 9,127, respectively.

The Company recorded $75 thousand and $112 thousand of expense in salaries and employee benefits expense for the six months ended June 30, 2019 and 2018, respectively related to the ESPP.  Total shares issued under the ESPP for the six months ended June 30, 2019 and 2018 were 18,740 and 15,490, respectively.

Management believes the Company to be well capitalized and has more than enough capital for current and future operational needs.  Accordingly, Management has considered various capital management techniques to utilize the capital. Therefore, the Company has chosen to move share purchases for the ESPP from a quarterly basis to an annual basis, with the next purchase occurring in May 2020.

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.

15

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands, except per share data)	2019		2018		2019		2018
Net income available to common shareholders	$	11,550	$	11,910	$	22,975	$	22,717
Basic weighted-average shares outstanding		19,447,155		18,930,893		19,399,071		18,770,492
Plus: common stock equivalents		121,216		167,945		129,466		226,487
Diluted weighted-average shares outstanding		19,568,371		19,098,838		19,528,537		18,996,979
Net income per share
Basic	$	0.59	$	0.63	$	1.18	$	1.21
Diluted		0.59		0.62		1.18		1.20

For the three and six months ended June 30, 2019, stock options and restricted stock units totaling 128,634 and 297,828 were not included in the computation of diluted earnings per share because they were antidilutive.  For the three and six months ended June 30, 2018, all stock options and warrants were included in the computation of diluted earnings per share because they were all dilutive, meaning that the exercise price of the stock option was greater than the average market price for the period.  

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 2015 or by New Jersey tax authorities for years prior to 2014.  

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

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

Restrictions on Cash: A large portion of cash on hand or on deposit with the Federal Reserve Bank 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 acquiree (if any), over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.  Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized but tested for impairment at least annually or more frequently if events and circumstances exist that indicate that a goodwill impairment test should be performed. The Company has selected September 30 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 assembled workforce are the intangible assets with an indefinite life on our balance sheet.

16

Other intangible assets, which primarily consist of customer relationship intangible assets arising from acquisition, are amortized on an accelerated basis over their estimated useful lives, which range from 5 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 June 30, 2019 and December 31, 2018 follows:

	June 30, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
U.S. government-sponsored agencies	$	71,719	$	104	$	(32	)	$	71,791
Mortgage-backed securities –residential		282,924		1,972		(959	)		283,937
SBA pool securities		3,596		—		(9	)		3,587
State and political subdivisions		16,415		48		(20	)		16,443
Corporate bond		3,000		81		—			3,081
Total	$	377,654	$	2,205	$	(1,020	)	$	378,839

	December 31, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
U.S. government-sponsored agencies	$	102,915	$	82	$	(984	)	$	102,013
Mortgage-backed securities – residential		254,383		418		(3,439	)		251,362
SBA pool securities		3,883		—		(44	)		3,839
State and political subdivisions		17,729		27		(146	)		17,610
Corporate bond		3,000		112		—			3,112
Total	$	381,910	$	639	$	(4,613	)	$	377,936

The following tables present the Company’s available for sale securities in a continuous unrealized loss position and the approximate fair value of these investments as of June 30, 2019 and December 31, 2018.

	June 30, 2019
	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	$	4,496	$	(4	)	$	11,969	$	(28	)	$	16,465	$	(32	)
Mortgage-backed securities-residential		15,433		(23	)		103,844		(936	)		119,277		(959	)
SBA pool securities		—		—			3,587		(9	)		3,587		(9	)
State and political subdivisions		—		—			4,111		(20	)		4,111		(20	)
Total	$	19,929	$	(27	)	$	123,511	$	(993	)	$	143,440	$	(1,020	)

	December 31, 2018
	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	$	18,840	$	(103	)	$	33,600	$	(881	)	$	52,440	$	(984	)
Mortgage-backed securities-residential		51,697		(303	)		136,130		(3,136	)		187,827		(3,439	)
SBA pool securities		—		—			3,839		(44	)		3,839		(44	)
State and political subdivisions		421		(1	)		7,274		(145	)		7,695		(146	)
Total	$	70,958	$	(407	)	$	180,843	$	(4,206	)	$	251,801	$	(4,613	)

17

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 June 30, 2019, 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.

During the first quarter of 2018, the Company adopted ASU 2016-01 “Financial Instruments” which resulted in the reclassification of the Company’s investment in the CRA investment fund from available for sale to an equity security. This security had a gain of $69 thousand and $128 thousand for the three and six months ended June 30, 2019.  This amount is included in securities gains/(losses) on the Consolidated Statements of Income.

3.  LOANS AND LEASES

Loans outstanding, excluding those held for sale, by general ledger classification, as of June 30, 2019 and December 31, 2018, consisted of the following:

			% of					% of
	June 30,		Totals			December 31,		Total
(Dollars in thousands)	2019		Loans			2018		Loans
Residential mortgage	$	570,583		14.16	%	$	571,570		14.55	%
Multifamily mortgage		1,129,476		28.03			1,135,805		28.92
Commercial mortgage		694,674		17.24			702,165		17.88
Commercial loans (including equipment financing)		1,517,665		37.67			1,397,057		35.57
Home equity lines of credit		62,522		1.55			62,191		1.58
Consumer loans, including fixed rate home equity loans		53,995		1.34			58,678		1.49
Other loans		424		0.01			465		0.01
Total loans	$	4,029,339		100.00	%	$	3,927,931		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 June 30, 2019 and December 31, 2018:

			% of					% of
	June 30,		Totals			December 31,		Total
(Dollars in thousands)	2019		Loans			2018		Loans
Primary residential mortgage	$	599,450		14.89	%	$	600,891		15.31	%
Home equity lines of credit		62,522		1.55			62,191		1.58
Junior lien loan on residence		7,397		0.18			7,418		0.19
Multifamily property		1,129,476		28.06			1,135,805		28.94
Owner-occupied commercial real estate		249,421		6.20			261,193		6.65
Investment commercial real estate		1,017,505		25.28			1,001,918		25.53
Commercial and industrial		717,851		17.83			616,838		15.72
Lease financing		184,182		4.58			172,643		4.40
Farmland/agricultural production		143		—			149		0.01
Commercial construction loans		125		—			86		0.01
Consumer and other loans		57,415		1.43			65,180		1.66
Total loans	$	4,025,487		100.00	%	$	3,924,312		100.00	%
Net deferred costs		3,852					3,619
Total loans including net deferred costs	$	4,029,339				$	3,927,931

18

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 June 30, 2019 and December 31, 2018:

	June 30, 2019
	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	$	8,791	$	248	$	590,659	$	2,809	$	599,450	$	3,057
Home equity lines of credit		22		—		62,500		155		62,522		155
Junior lien loan on residence		29		—		7,368		15		7,397		15
Multifamily property		—		—		1,129,476		5,744		1,129,476		5,744
Owner-occupied commercial real estate		1,451		—		247,970		2,497		249,421		2,497
Investment commercial real estate		18,091		—		999,414		14,650		1,017,505		14,650
Commercial and industrial		6,557		1,000		711,294		10,463		717,851		11,463
Lease financing		—		—		184,182		1,888		184,182		1,888
Farmland/agricultural production		—		—		143		2		143		2
Commercial construction loans		—		—		125		1		125		1
Consumer and other loans		—		—		57,415		319		57,415		319
Total ALLL	$	34,941	$	1,248	$	3,990,546	$	38,543	$	4,025,487	$	39,791

	December 31, 2018
	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	$	9,518	$	262	$	591,373	$	3,244	$	600,891	$	3,506
Home equity lines of credit		255		—		61,936		164		62,191		164
Junior lien loan on residence		36		—		7,382		15		7,418		15
Multifamily property		1,262		—		1,134,543		5,959		1,135,805		5,959
Owner-occupied commercial real estate		1,574		—		259,619		2,614		261,193		2,614
Investment commercial real estate		18,655		—		983,263		14,248		1,001,918		14,248
Commercial and industrial		—		—		616,838		9,839		616,838		9,839
Lease financing		—		—		172,643		1,772		172,643		1,772
Farmland/agricultural production		—		—		149		2		149		2
Commercial construction loans		—		—		86		1		86		1
Consumer and other loans		—		—		65,180		384		65,180		384
Total ALLL	$	31,300	$	262	$	3,893,012	$	38,242	$	3,924,312	$	38,504

Impaired loans include nonaccrual loans of $31.2 million at June 30, 2019 and $25.7 million at December 31, 2018. Impaired loans also include performing TDR loans of $3.8 million at June 30, 2019 and $4.3 million at December 31, 2018.  At June 30, 2019, the allowance allocated to TDR loans totaled $248 thousand, of which $156 thousand was allocated to nonaccrual loans.  At December 31, 2018, the allowance allocated to TDR loans totaled $262 thousand of which $161 thousand was allocated to nonaccrual loans. All accruing TDR loans were paying in accordance with restructured terms as of June 30, 2019.  The Company has not committed to lend additional amounts as of June 30, 2019 to customers with outstanding loans that are classified as TDR loans.

19

The following tables present loans individually evaluated for impairment by class of loans as of June 30, 2019 and December 31, 2018 (The average impaired loans on the following tables represent year to date impaired loans.):

	June 30, 2019
	Unpaid						Average
	Principal		Recorded		Specific		Impaired
(In thousands)	Balance		Investment		Reserves		Loans
With no related allowance recorded:
Primary residential mortgage	$	9,111	$	7,797	$	—	$	8,002
Owner-occupied commercial real estate		2,684		1,451		—		1,593
Investment commercial real estate		20,041		18,091		—		16,829
Home equity lines of credit		25		22		—		151
Junior lien loan on residence		98		29		—		34
Total loans with no related allowance	$	31,959	$	27,390	$	—	$	26,609
With related allowance recorded:
Primary residential mortgage	$	994	$	994	$	248	$	1,047
Commercial and industrial		6,557		6,557		1,000		1,093
Total loans with related allowance	$	7,551	$	7,551	$	1,248	$	2,140
Total loans individually evaluated for Impairment	$	39,510	$	34,941	$	1,248	$	28,749

	December 31, 2018
	Unpaid						Average
	Principal		Recorded		Specific		Impaired
(In thousands)	Balance		Investment		Reserves		Loans
With no related allowance recorded:
Primary residential mortgage	$	9,789	$	8,502	$	—	$	8,042
Owner-occupied commercial real estate		2,741		1,574		—		2,025
Investment commercial real estate		20,179		18,655		—		13,999
Home equity lines of credit		257		255		—		123
Junior lien loan on residence		102		36		—		45
Multifamily property		1,262		1,262		—		105
Total loans with no related allowance	$	34,330	$	30,284	$	—	$	24,339
With related allowance recorded:
Primary residential mortgage	$	1,016	$	1,016	$	262	$	1,144
Total loans with related allowance	$	1,016	$	1,016	$	262	$	1,144
Total loans individually evaluated for impairment	$	35,346	$	31,300	$	262	$	25,483

Interest income recognized on impaired loans for the quarters ended June 30, 2019 and 2018 was not material.  The Company did not recognize any income on nonaccruing impaired loans for the three and six months ended June 30, 2019 and 2018.

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 June 30, 2019 and December 31, 2018:

	June 30, 2019
			Loans Past Due
			Over 90 Days
			And Still
(In thousands)	Nonaccrual		Accruing Interest
Primary residential mortgage	$	5,019	$	—
Home equity lines of credit		3		—
Junior lien loan on residence		29		—
Owner-occupied commercial real estate		1,451		—
Investment commercial real estate		18,091		—
Commercial and industrial		6,557		—
Total	$	31,150	$	—

20

	December 31, 2018
			Loans Past Due
			Over 90 Days
			And Still
(In thousands)	Nonaccrual		Accruing Interest
Primary residential mortgage	$	5,215	$	—
Home equity lines of credit		235		—
Junior lien loan on residence		36		—
Owner-occupied commercial real estate		1,574		—
Investment commercial real estate		18,655		—
Total	$	25,715	$	—

The following tables present the aging of the recorded investment in past due loans as of June 30, 2019 and December 31, 2018 by class of loans, excluding nonaccrual loans:

	June 30, 2019
	30-59		60-89		Greater Than
	Days		Days		90 Days		Total
(In thousands)	Past Due		Past Due		Past Due		Past Due
Primary residential mortgage	$	—	$	105	$	—	$	105
Owner-occupied commercial real estate		—		242		—		242
Commercial construction loans		85		—		—		85
Total	$	85	$	347	$	—	$	432

	December 31, 2018
	30-59		60-89		Greater Than
	Days		Days		90 Days		Total
(In thousands)	Past Due		Past Due		Past Due		Past Due
Primary residential mortgage	$	606	$	491	$	—	$	1,097
Consumer and other loans		2		—		—		2
Total	$	608	$	491	$	—	$	1,099

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, 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:

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

• All leveraged loans of $1,000,000 or greater;

• At least two borrowing relationships managed by each commercial banker;

• Any new Regulation “O” loan commitments over $1,000,000;

• No borrower with commitments of less than $250,000;

21

• 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 June 30, 2019, 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	$	589,731	$	870	$	8,849	$	—
Home equity lines of credit		62,500		—		22		—
Junior lien loan on residence		7,368		—		29		—
Multifamily property		1,127,545		1,586		345		—
Owner-occupied commercial real estate		242,929		-		6,492		—
Investment commercial real estate		966,813		18,024		32,668		—
Commercial and industrial		701,916		8,205		7,730		—
Lease financing		184,182		—		—		—
Farmland/agricultural production		143		—		—		—
Commercial construction loans		39		86		—		—
Consumer and other loans		57,415		—		—		—
Total	$	3,940,581	$	28,771	$	56,135	$	—

22

As of December 31, 2018, 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	$	590,372	$	943	$	9,576	$	—
Home equity lines of credit		61,936		—		255		—
Junior lien loan on residence		7,382		—		36		—
Multifamily property		1,130,926		3,263		1,616		—
Owner-occupied commercial real estate		255,417		249		5,527		—
Investment commercial real estate		948,300		20,756		32,862		—
Commercial and industrial		608,262		417		8,159		—
Lease financing		172,643		—		—		—
Farmland/agricultural production		149		—		—		—
Commercial construction loans		—		86		—		—
Consumer and other loans		64,946		—		234		—
Total	$	3,840,333	$	25,714	$	58,265	$	—

At June 30, 2019, $34.9 million of substandard loans were also considered impaired, compared to December 31, 2018, when $31.2 million of substandard loans were also impaired.

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

	April 1,										June 30,
	2019										2019
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	3,477	$	(80	)	$	9	$	(349	)	$	3,057
Home equity lines of credit		152		—			3		—			155
Junior lien loan on residence		15		—			—		—			15
Multifamily property		5,768		—			—		(24	)		5,744
Owner-occupied commercial real estate		2,534		—			64		(101	)		2,497
Investment commercial real estate		14,410		—			—		240			14,650
Commercial and industrial		10,185		—			5		1,273			11,463
Lease financing		1,803		—			—		85			1,888
Farmland/agricultural production		2		—			—		—			2
Commercial construction loans		1		—			—		—			1
Consumer and other loans		306		(14	)		1		26			319
Total ALLL	$	38,653	$	(94	)	$	82	$	1,150		$	39,791

23

The activity in the allowance for loan and lease losses for the three months ended June 30, 2018 is summarized below:

	April 1,										June 30,
	2018										2018
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	4,403	$	—		$	139	$	(160	)	$	4,382
Home equity lines of credit		192		—			2		(4	)		190
Junior lien loan on residence		16		—			46		(45	)		17
Multifamily property		9,140		—			—		(881	)		8,259
Owner-occupied commercial real estate		2,364		(64	)		—		225			2,525
Investment commercial real estate		12,367		—			—		1,292			13,659
Commercial and industrial		7,753		(46	)		6		(357	)		7,356
Lease financing		1,036		—			—		275			1,311
Farmland/agricultural production		2		—			—		—			2
Commercial construction loans		1		—			—		—			1
Consumer and other loans		422		(14	)		1		(45	)		364
Total ALLL	$	37,696	$	(124	)	$	194	$	300		$	38,066

The activity in the allowance for loan and lease losses for the six months ended June 30, 2019 is summarized below:

	January 1,										June 30,
	2019										2019
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	3,506	$	(80	)	$	51	$	(420	)	$	3,057
Home equity lines of credit		164		—			5		(14	)		155
Junior lien loan on residence		15		—			11		(11	)		15
Multifamily property		5,959		—			—		(215	)		5,744
Owner-occupied commercial real estate		2,614		—			64		(181	)		2,497
Investment commercial real estate		14,248		—			—		402			14,650
Commercial and industrial		9,839		—			9		1,615			11,463
Lease financing		1,772		—			—		116			1,888
Farmland/agricultural production		2		—			—		—			2
Commercial construction loans		1		—			—		—			1
Consumer and other loans		384		(25	)		2		(42	)		319
Total ALLL	$	38,504	$	(105	)	$	142	$	1,250		$	39,791

24

The activity in the allowance for loan and lease losses for the six months ended June 30, 2018 is summarized below:

	January 1,										June 30,
	2018										2018
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	4,085	$	(77	)	$	139	$	235		$	4,382
Home equity lines of credit		221		—			4		(35	)		190
Junior lien loan on residence		12		—			55		(50	)		17
Multifamily property		10,007		—			—		(1,748	)		8,259
Owner-occupied commercial real estate		2,385		(64	)		66		138			2,525
Investment commercial real estate		11,933		—			—		1,726			13,659
Commercial and industrial		6,563		(46	)		22		817			7,356
Lease financing		884		—			—		427			1,311
Farmland/agricultural production		—		—			—		2			2
Commercial construction loans		1		—			—		—			1
Consumer and other loans		349		(25	)		2		38			364
Total ALLL	$	36,440	$	(212	)	$	288	$	1,550		$	38,066

Troubled Debt Restructurings:

The Company has allocated $248 thousand and $262 thousand of specific reserves on TDRs to customers whose loan terms have been modified in TDRs as of June 30, 2019 and December 31, 2018, 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; the maturity date was extended; or some other modification or extension occurred which would not be readily available in the market.

There were no loans modified as TDRs during the three months and six months ended June 30, 2019.

The following table presents loans by class modified as TDRs during the three-month period ended June 30, 2018:

			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Contracts		Investment		Investment
Investment commercial real estate		1	$	15,351	$	15,351
Total		1	$	15,351	$	15,351

The following table presents loans by class modified as TDRs during the six-month period ended June 30, 2018:

			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Contracts		Investment		Investment
Investment commercial real estate		1	$	15,351	$	15,351
Total		1	$	15,351	$	15,351

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

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 six months ended June 30, 2019.

25

The following table presents loans by class modified as TDRs that failed to comply with the modified terms in the twelve months following modification and resulted in a payment default at June 30, 2018:

	Number of		Recorded
(Dollars in thousands)	Contracts		Investment
Primary residential mortgage		1	$	336
Total		1	$	336

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

4.  DEPOSITS

Certificates of deposit, excluding brokered certificates of deposit over $250,000, totaled $172.5 million and $160.3 million at June 30, 2019 and December 31, 2018, respectively.

The following table sets forth the details of total deposits as of June 30, 2019 and December 31, 2018:

	June 30,				December 31,
	2019				2018
(Dollars in thousands)
Noninterest-bearing demand deposits	$	544,431	13.29	%	$	463,926	11.91	%
Interest-bearing checking (1)		1,388,821	33.91			1,247,305	32.02
Savings		112,438	2.75			114,674	2.94
Money market		1,207,358	29.48			1,243,369	31.92
Certificates of deposit - retail		570,384	13.93			510,724	13.12
Certificates of deposit - listing service		58,541	1.43			79,195	2.03
Subtotal deposits		3,881,973	94.79			3,659,193	93.94
Interest-bearing demand - Brokered		180,000	4.39			180,000	4.62
Certificates of deposit - Brokered		33,682	0.82			56,147	1.44
Total deposits	$	4,095,655	100.00	%	$	3,895,340	100.00	%

26

(1) Interest-bearing checking includes $453.1 million at June 30, 2019 and $434.5 million at December 31, 2018 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 June 30, 2019 are as follows:

(In thousands)
2019	$	228,856
2020		270,032
2021		65,373
2022		36,185
2023		11,600
Over 5 Years		50,561
Total	$	662,607

5.  FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

Advances from the FHLB totaled $105.0 million with a weighted average interest rate of 3.20 percent and $108.0 million with a weighted average interest rate of 3.17 percent at June 30, 2019 and December 31, 2018, respectively.

At June 30, 2019, advances totaling $105.0 million with a weighted average interest rate of 3.20 percent had fixed maturity dates. The fixed maturity date advances at December 31, 2018 totaled $108.0 million with a weighted average interest rate of 3.17 percent.  The fixed rate advances are secured by blanket pledges of certain 1-4 family residential mortgages totaling $350.5 million, multifamily mortgages totaling $649.9 million and securities totaling $44.0 million at June 30, 2019, while at December 31, 2018, the fixed rate advances are secured by blanket pledges of certain 1-4 family residential mortgages totaling $496.1 million, multifamily mortgages totaling $1.0 billion and securities totaling $58.5 million.

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

(In thousands)
2021	$	60,000
2022		20,000
2023		25,000
Total	$	105,000

There were no overnight borrowings with the FHLB as of June 30, 2019 and December 31, 2018.  At June 30, 2019, unused short-term overnight borrowing commitments totaled $1.4 billion from FHLB, $22.0 million from correspondent banks and $1.4 billion at the Federal Reserve Bank of New York.

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

27

Private Wealth Management Division

Peapack-Gladstone Bank’s Private Wealth Management Division, including PGB Trust & Investments of Delaware, MCM, Quadrant and Lassus Wherley, includes investment management services provided for individuals and institutions; personal trust services, including services as executor, trustee, administrator, custodian and guardian, and other financial planning, tax preparation and advisory services.

The following tables present the statements of income and total assets for the Corporation’s reportable segments for the three and six months ended June 30, 2019 and 2018.

	Three Months Ended June 30, 2019
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	27,934	$	1,334	$	29,268
Noninterest income		3,151		9,875		13,026
Total income		31,085		11,209		42,294
Provision for loan and lease losses		1,150		—		1,150
Compensation and benefits		12,685		4,858		17,543
Premises and equipment expense		3,046		554		3,600
FDIC expense		277		—		277
Other noninterest expense		2,553		2,200		4,753
Total noninterest expense		19,711		7,612		27,323
Income before income tax expense		11,374		3,597		14,971
Income tax expense		2,581		840		3,421
Net income	$	8,793	$	2,757	$	11,550

	Three Months Ended June 30, 2018
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	27,953	$	1,290	$	29,243
Noninterest income		3,353		8,387		11,740
Total income		31,306		9,677		40,983
Provision for loan and lease losses		300		—		300
Compensation and benefits		11,932		3,894		15,826
Premises and equipment expense		2,982		424		3,406
FDIC Expense		625		—		625
Other noninterest expense		3,145		1,939		5,084
Total noninterest expense		18,984		6,257		25,241
Income before income tax expense		12,322		3,420		15,742
Income tax expense		2,997		835		3,832
Net income	$	9,325	$	2,585	$	11,910

28

	Six Months Ended June 30, 2019
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	56,500	$	2,775	$	59,275
Noninterest income		5,430		19,325		24,755
Total income		61,930		22,100		84,030
Provision for loan and lease losses		1,250		—		1,250
Compensation and benefits		24,682		10,017		34,699
Premises and equipment expense		5,971		1,017		6,988
FDIC expense		554		—		554
Other noninterest expense		5,311		4,336		9,647
Total noninterest expense		37,768		15,370		53,138
Income before income tax expense		24,162		6,730		30,892
Income tax expense		6,192		1,725		7,917
Net income	$	17,970	$	5,005	$	22,975
Total assets at period end	$	4,791,902	$	79,332	$	4,871,234

	Six Months Ended June 30, 2018
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	54,801	$	2,835	$	57,636
Noninterest income		4,980		16,975		21,955
Total income		59,781		19,810		79,591
Provision for loan and lease losses		1,550		—		1,550
Compensation and benefits		22,263		8,142		30,405
Premises and equipment expense		5,821		855		6,676
FDIC Expense		1,205		—		1,205
Other noninterest expense		5,952		4,040		9,992
Total noninterest expense		36,791		13,037		49,828
Income before income tax expense		22,990		6,773		29,763
Income tax expense		5,442		1,604		7,046
Net income	$	17,548	$	5,169	$	22,717
Total assets at period end	$	4,208,731	$	56,443	$	4,265,174

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.

29

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an 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 estimated costs to sell. Fair values are based on recent real estate appraisals. These appraisals may use a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by Management. Once received, a third party conducts a review of the appraisal for compliance with the Uniform Standards of Professional Appraisal Practice and appropriate analysis methods for the type of property. Subsequently, a member of the Credit Department reviews the assumptions and approaches utilized in the appraisal, as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. Appraisals on collateral dependent impaired loans and other real estate owned (consistent for all loan types) are obtained on an annual basis, unless a significant change in the market or other factors warrants a more frequent appraisal. On an annual basis, Management compares the actual selling price of any collateral that has been sold to the most recent appraised value to determine what additional adjustment should be made to the appraisal value to arrive at fair value for other properties. The most recent analysis performed indicated that a discount up to 15 percent should be applied to appraisals on properties. The discount is determined based on the nature of the underlying properties, aging of appraisals and other factors. For each collateral-dependent impaired loan, we consider other factors, such as certain indices or other market information, as well as property specific circumstances to determine if an adjustment to the appraised value is needed. In situations where there is evidence of change in value, the Bank will determine if there is a need for an adjustment to the specific reserve on the collateral dependent impaired loans. When the Bank applies an interim adjustment, it generally shows the adjustment as an incremental specific reserve against the loan until it has received the full updated appraisal. All collateral-dependent impaired loans and other real estate owned valuations were supported by an appraisal less than 12 months old or in the process of obtaining an appraisal as of June 30, 2019.

30

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		Significant
				Markets For		Other			Significant
				Identical		Observable			Unobservable
	June 30,			Assets		Inputs			Inputs
(In thousands)	2019			(Level 1)		(Level 2)			(Level 3)
Assets:
Available for sale:
U.S. government-sponsored agencies	$	71,791		$	—	$	71,791		$	—
Mortgage-backed securities-residential		283,937			—		283,937			—
SBA pool securities		3,587			—		3,587			—
State and political subdivisions		16,443			—		16,443			—
Corporate bond		3,081			—		3,081			—
CRA investment fund		4,847			4,847		—			—
Loans held for sale, at fair value		2,343			—		2,343			—
Derivatives:
Cash flow hedges		175			—		175			—
Loan level swaps		30,569			—		30,569			—
Total	$	416,773		$	4,847	$	411,926		$	—
Liabilities:
Derivatives:
Cash flow hedges	$	(4,074	)	$	—	$	(4,074	)	$	—
Loan level swaps		(30,569	)		—		(30,569	)		—
Total	$	(34,643	)	$	—	$	(34,643	)	$	—

31

Assets Measured on a Recurring Basis

				Fair Value Measurements Using
				Quoted
				Prices in
				Active		Significant
				Markets For		Other			Significant
				Identical		Observable			Unobservable
	December 31,			Assets		Inputs			Inputs
(In thousands)	2018			(Level 1)		(Level 2)			(Level 3)
Assets:
Securities available for sale:
U.S. government-sponsored agencies	$	102,013		$	—	$	102,013		$	—
Mortgage-backed securities-residential		251,362			—		251,362			—
SBA pool securities		3,839			—		3,839			—
State and political subdivisions		17,610			—		17,610			—
Corporate bond		3,112			—		3,112			—
CRA investment fund		4,719			4,719		—			—
Loans held for sale, at fair value		1,576			—		1,576			—
Derivatives:
Cash flow hedges		1,657			—		1,657			—
Loan level swaps		9,689			—		9,689			—
Total	$	395,577		$	4,719	$	390,858		$	—
Liabilities:
Derivatives:
Cash flow hedges	$	(849	)	$	—	$	(849	)	$	—
Loan level swaps		(9,689	)		—		(9,689	)		—
Total	$	(10,538	)	$	—	$	(10,538	)	$	—

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 June 30, 2019 and December 31, 2018.

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

(In thousands)	June 30, 2019		December 31, 2018
Residential loans contractual balance	$	2,306	$	1,552
Fair value adjustment		37		24
Total fair value of residential loans held for sale	$	2,343	$	1,576

There were no transfers between Level 1 and Level 2 during the three and six months ended June 30, 2019.

 There were no loans measured for impairment using the fair value of collateral as of June 30, 2019 and December 31, 2018.  

32

The carrying amounts and estimated fair values of financial instruments at June 30, 2019 are as follows:

			Fair Value Measurements at June 30, 2019 using
	Carrying
(In thousands)	Amount		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	304,027	$	304,027	$	—	$	—	$	304,027
Securities available for sale		378,839		—		378,839		—		378,839
CRA investment fund		4,847		4,847		—		—		4,847
FHLB and FRB stock		18,338		—		—		—	N/A
Loans held for sale, at fair value		2,343		—		2,343		—		2,343
Loans held for sale, at lower of cost or fair value		926		—		1,000		—		1,000
Loans, net of allowance for loan and lease losses		3,989,548		—		—		3,946,808		3,946,808
Accrued interest receivable		11,594		—		1,708		9,886		11,594
Cash flow hedges		175		—		175		—		175
Loan level swaps		30,569		—		30,569		—		30,569
Financial liabilities
Deposits	$	4,095,655	$	3,433,048	$	665,573	$	—	$	4,098,621
Federal home loan bank advances		105,000		—		108,401		—		108,401
Subordinated debt		83,305		—		—		84,400		84,400
Accrued interest payable		2,494		430		2,009		55		2,494
Cash flow hedges		4,074		—		4,074		—		4,074
Loan level swap		30,569		—		30,569		—		30,569

The carrying amounts and estimated fair values of financial instruments at December 31, 2018 are as follows:

			Fair Value Measurements at December 31, 2018 using
	Carrying
(In thousands)	Amount		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	160,773	$	160,773	$	—	$	—	$	160,773
Securities available for sale		377,936		—		377,936		—		377,936
CRA investment fund		4,719		4,719		—		—		4,719
FHLB and FRB stock		18,533		—		—		—	N/A
Loans held for sale, at fair value		1,576		—		1,576		—		1,576
Loans held for sale, at lower of cost or fair value		3,542		—		3,654		—		3,654
Loans, net of allowance for loan and lease losses		3,889,427		—		—		3,852,004		3,852,004
Accrued interest receivable		10,814		—		1,875		8,939		10,814
Cash flow Hedges		1,657		—		1,657		—		1,657
Loan level swaps		9,689		—		9,689		—		9,689
Financial liabilities
Deposits	$	3,895,340	$	3,249,274	$	640,997	$	—	$	3,890,271
Federal home loan bank advances		108,000		—		108,950		—		108,950
Subordinated debt		83,193		—		—		82,207		82,207
Accrued interest payable		2,868		331		2,482		55		2,868
Cash flow hedges		849		—		849		—		849
Loan level swaps		9,689		—		9,689		—		9,689

33

8.  REVENUE FROM CONTRACTS WITH CUSTOMERS

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

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

	For the Three Months Ended June 30,
(In thousands)	2019		2018
Service charges on deposits
Overdraft fees	$	164	$	183
Interchange income		322		326
Other		411		364
Wealth management fees (a)		9,568		8,126
Other (b)		2,561		2,741
Total noninterest other income	$	13,026	$	11,740

	For the Six Months Ended June 30,
(In thousands)	2019		2018
Service charges on deposits
Overdraft fees	$	324	$	364
Interchange income		586		616
Other		803		724
Wealth management fees (a)		18,742		16,493
Other (a)		4,300		3,758
Total noninterest other income	$	24,755	$	21,955

(a) Includes investment brokerage fees.

(b) All of the other category is outside the scope of ASC 606.

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

	For the Three Months Ended June 30,						For the Three Months Ended June 30,
	2019						2018
(In thousands)			Wealth						Wealth
Revenue by Operating Segment	Banking		Management		Total		Banking		Management		Total
Service charges on deposits
Overdraft fees	$	164	$	—	$	164	$	183	$	—	$	183
Interchange income		322		—		322		326		—		326
Other		411		—		411		364		—		364
Wealth management fees (a)		—		9,568		9,568		—		8,126		8,126
Other (b)		2,254		307		2,561		2,480		261		2,741
Total noninterest income	$	3,151	$	9,875	$	13,026	$	3,353	$	8,387	$	11,740

	For the Six Months Ended June 30,						For the Six Months Ended June 30,
(In thousands)	2019						2018
Revenue by Operating			Wealth						Wealth
Segment	Banking		Management		Total		Banking		Management		Total
Service charges on deposits
Overdraft fees	$	324	$	—	$	324	$	364	$	—	$	364
Interchange income		586		—		586		616		—		616
Other		803		—		803		724		—		724
Wealth management fees (a)		—		18,742		18,742		—		16,493		16,493
Other (a)		3,717		583		4,300		3,276		482		3,758
Total noninterest income	$	5,430	$	19,325	$	24,755	$	4,980	$	16,975	$	21,955

(a) Includes investment brokerage fees.

34

(b) All of the other category is outside the scope of ASC 606.

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

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

Interchange income:  The Company earns interchange fees from debit cardholder transactions conducted through the Visa payment network.  Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder.  Interchange income is presented gross of cardholder rewards.  Cardholder rewards are included in other expenses in the statement of income.  Cardholder rewards reduced interchange income by $36 thousand and $34 thousand for the second quarters of 2019 and 2018, respectively. Cardholder rewards reduced interchange income by $68 thousand and $63 thousand for the six months ended June 30, 2019 and 2018, respectively.  

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

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

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

Other:  All of the other income items are outside the scope of ASC 606.

9.  OTHER OPERATING EXPENSES

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2019		2018		2019		2018
Professional and legal fees		968		1,178		2,092		2,292
Telephone		377		271		657		555
Advertising		409		414		768		725
Amortization of intangible assets		229		180		458		359
Provision for ORE		—		204		—		204
Other operating expenses		2,770		2,837		5,672		5,857
Total other operating expenses	$	4,753	$	5,084	$	9,647	$	9,992

10.  ACCUMULATED OTHER COMPREHENSIVE (LOSS)/INCOME

35

The following is a summary of the accumulated other comprehensive income/(loss) balances, net of tax, for the three months ended June 30, 2019 and 2018:

							Amount			Other
							Reclassified			Comprehensive
				Other			From			Income/(Loss)
				Comprehensive			Accumulated			Three Months
	Balance at			Income/(Loss)			Other			Ended			Balance at
	April 1,			Before			Comprehensive			June 30,			June 30,
(In thousands)	2019			Reclassifications			Income/(Loss)			2019			2019
Net unrealized holding loss on securities    available for sale, net of tax	$	(1,278	)	$	2,176			—		$	2,176		$	898
Gain/(loss) on cash flow hedges		(451	)		(2,029	)		(22	)		(2,051	)		(2,502	)
Accumulated other comprehensive loss,    net of tax	$	(1,729	)	$	147		$	(22	)	$	125		$	(1,604	)

							Amount			Other
							Reclassified			Comprehensive
				Other			From			Income/(Loss)
				Comprehensive			Accumulated			Three Months
	Balance at			Income/(Loss)			Other			Ended			Balance at
	April 1,			Before			Comprehensive			June 30,			June 30,
(In thousands)	2018			Reclassifications			Income/(Loss)			2018			2018
Net unrealized holding loss on    securities available for sale, net of tax	$	(4,345	)	$	(494	)	$	—		$	(494	)	$	(4,839	)
Gain on cash flow hedges		1,503			605			(23	)		582			2,085
Accumulated other comprehensive    loss, net of tax	$	(2,842	)	$	111		$	(23	)	$	88		$	(2,754	)

The following represents the reclassifications out of accumulated other comprehensive income for the three months ended June 30, 2019 and 2018:

	Three Months Ended
	June 30,
(In thousands)	2019			2018			Affected Line Item in Income Statement
Unrealized gains on cash flow hedge    derivatives:
Reclassification adjustment for amounts    included in net income	$	(31	)	$	(31	)	Interest expense
Income tax expense		9			8		Income tax expense
Total reclassifications, net of tax	$	(22	)	$	(23	)

The following is a summary of the accumulated other comprehensive (loss)/income balances, net of tax, for the six months ended June 30, 2019 and 2018:

36

							Amount			Other
							Reclassified			Comprehensive
				Other			From			Income/(Loss)
				Comprehensive			Accumulated			Six Months
	Balance at			Income/(Loss)			Other			Ended			Balance at
	January 1,			Before			Comprehensive			June 30,			June 30,
(In thousands)	2019			Reclassifications			Income/(Loss)			2019			2019
Net unrealized holding gain/(loss) on    securities available for sale, net of tax	$	(3,006	)	$	3,904		$	—		$	3,904		$	898
Gain/(loss) on cash flow hedges		661			(3,120	)		(43	)		(3,163	)		(2,502	)
Accumulated other comprehensive    loss, net of tax	$	(2,345	)	$	784		$	(43	)	$	741		$	(1,604	)

									Amount			Other
									Reclassified			Comprehensive
				Cumulative		Other			From			Income/(Loss)
				Adjustment		Comprehensive			Accumulated			Six Months
	Balance at			For Equity		Income/(Loss)			Other			Ended			Balance at
	January 1,			Security		Before			Comprehensive			June 30,			June 30,
(In thousands)	2018			(ASU 2016-1)		Reclassifications			Income/(Loss)			2018			2018
Net unrealized holding loss on securities    available for sale, net of tax	$	(2,214	)	$	127	$	(2,752	)	$	—		$	(2,752	)	$	(4,839	)
Gain/(loss) on cash flow hedges		1,002			—		1,128			(45	)		1,083			2,085
Accumulated other comprehensive    loss, net of tax	$	(1,212	)	$	127	$	(1,624	)	$	(45	)	$	(1,669	)	$	(2,754	)

The following represents the reclassifications out of accumulated other comprehensive income for the six months ended June 30, 2019 and 2018:

	Six Months Ended
	June 30,
(In thousands)	2019			2018			Affected Line Item in Income
Unrealized gains on cash flow hedge    derivatives:
Reclassification adjustment for amounts    included in net income	$	(62	)	$	(62	)	Interest expense
Income tax expense		19			17		Income tax expense
Total reclassifications, net of tax	$	(43	)	$	(45	)

11.  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 $230.0 million as of June 30, 2019 and December 31, 2018 were designated as cash flow hedges of certain interest-bearing deposits. On a quarterly basis, the Company performs a qualitative hedge effectiveness assessment. This assessment takes into consideration any adverse developments related to the counterparty’s risk of default and any negative events or circumstances that affect the factors that originally enabled the Company to assess that it could reasonably support, qualitatively, an expectation that the hedging relationship was and will continue to be highly effective. As of June 30, 2019, there were no events or market conditions that would result in hedge ineffectiveness. The aggregate fair value of the swaps is recorded in other assets/liabilities with changes in fair value recorded in other comprehensive income. The amount included in accumulated other comprehensive income would be reclassified to current earnings should the hedges no longer be considered effective. The Company expects the hedges to remain fully effective during the remaining terms of the swaps.

37

The following table presents information about the interest rate swaps designated as cash flow hedges as of June 30, 2019 and December 31, 2018:

(Dollars in thousands)	June 30, 2019				December 31, 2018
Notional amount	$	230,000			$	230,000
Weighted average pay rate		2.04		%		2.04	%
Weighted average receive rate		2.48		%		2.33	%
Weighted average maturity		2.88		years		2.65	years
Unrealized (loss)/gain, net	$	(3,899	)		$	808
Number of contracts		11				11

Net interest income recorded on these swap transactions totaled $290 thousand and $625 thousand for the three and six months ended June 30, 2019, respectively, and is reported as a component of interest expense.  Net interest income recorded on these swap transactions totaled $33 thousand and $13 thousand for the three and six months ended June 30, 2018, 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 and six months ended June 30, 2019 and June 30, 2018:

	For the Three Months Ended June 30,
(In thousands)	2019			2018
Interest rate contracts
Amount of gain/(loss) recognized in OCI	$	(2,051	)	$	582
Amount of gain/(loss) reclassified from OCI to interest expense		22			23

	For the Six Months Ended June 30,
(In thousands)	2019			2018
Interest rate contracts
Amount of gain/(loss) recognized in OCI (effective portion)	$	(3,163	)	$	1,083
Amount of gain/(loss) reclassified from OCI to interest expense		43			45

During the first quarter of 2018, the Company recognized an unrealized after-tax gain of $220 thousand in accumulated other comprehensive income/(loss) related to the termination of two interest rate swaps designated as cash flow hedges.  The gain is being amortized into earnings over the remaining life of the terminated swaps.  The Company recognized pre-tax interest income of $31 thousand and $62 thousand for the three and six months ended June 30, 2019 related to the amortization of the gain on the terminated interest rate swaps designated as cash flow hedges.  During the second quarter of 2019, the Company recognized an unrealized after-tax gain of $189 thousand in accumulated other comprehensive income/(loss) related to the termination of four interest rate swaps designated as cash flow hedges.  The gain is being amortized into earnings over the remaining life of the terminated swaps.

	June 30, 2019
	Notional		Fair
(In thousands)	Amount		Value
Interest rate swaps related to interest-bearing deposits	$	230,000	$	(3,899	)
Total included in other assets		55,000		175
Total included in other liabilities		175,000		(4,074	)

38

	December 31, 2018
	Notional		Fair
(In thousands)	Amount		Value
Interest rate swaps related to interest-bearing deposits	$	230,000	$	808
Total included in other assets		130,000		1,657
Total included in other liabilities		100,000		(849	)

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)	June 30, 2019			December 31, 2018
Notional amount	$	539,092		$	558,690
Fair value	$	30,569		$	9,689
Weighted average pay rates		4.41	%		4.44	%
Weighted average receive rates		4.21	%		4.24	%
Weighted average maturity		7.4	years		7.1	years
Number of contracts		64			67

12.  SUBORDINATED DEBT

During June 2016, the Company issued $50.0 million in aggregate principal amount of fixed-to-floating subordinated notes (the “2016 Notes”) to certain institutional investors. The 2016 Notes are non-callable for five years, have a stated maturity of June 30, 2026, and bear interest at a fixed rate of 6.0% per year until June 30, 2021. From June 30, 2021 to the maturity date or early redemption date, the interest rate will reset quarterly to a level equal to the then current three-month LIBOR rate plus 485 basis points, payable quarterly in arrears. Debt issuance costs incurred totaled $1.3 million and are being amortized to maturity.  

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

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

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

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

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

13. LEASES

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

39

Company adopted the new lease guidance using the modified retrospective approach and elected the transition option issued under ASU 2018-11, Leases (Topic 842) Targeted Improvements, which allows entities to continue to apply the legacy guidance in ASC 840, Leases, to prior periods, including disclosure requirements. Accordingly, prior period financial results and disclosures have not been adjusted.

The Company maintains certain property and equipment under direct financing and operating leases. Upon adoption of the new lease guidance, on January 1, 2019, the Company recorded a ROU asset and corresponding lease liability of $7.9 million and $8.2 million, respectively, on the consolidated statement of condition. As of June 30, 2019, the Company's operating lease ROU asset and operating lease liability totaled $11.0 million and $11.3 million, respectively. A weighted average discount rate of 3.35% was used in the measurement of the ROU asset and lease liability as of June 30, 2019.

The Company's leases have remaining lease terms between one to 18 years, with a weighted average lease term of 6.06 years at June 30, 2019. The Company’s lease agreements may include options to extend or terminate the lease. The Company’s decision to exercise renewal options is based on an assessment of its current business needs and market factors at the time of the renewal.

Total operating lease costs were $757 thousand and $1.4 million for the three and six months ended June 30, 2019, respectively.  The variable lease costs were $82 thousand and $155 thousand for the three and six months ended June 30, 2019, respectively.

The following is a schedule of the Company's operating lease liabilities by contractual maturity as of June 30, 2019:

(In thousands)
2019	$	2,666
2020		2,506
2021		1,715
2022		1,459
2023		999
Thereafter		2,112
Total lease payments		11,457
Less: imputed interest		188
Total present value of lease payments		11,269

The following table shows the supplemental cash flow information related to the Company’s direct finance and operating leases for the six months ended June 30, 2019:

(In thousands)
Right-of-use asset obtained in exchange for lease obligation	$	7,862
Operating cash flows from operating leases		1,140
Operating cash flows from direct finance leases		196
Financing cash flows from direct finance leases		374

14. ACCOUNTING PRONOUNCEMENTS

   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.

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

40

adoption of the new lease guidance on January 1, 2019, the Company recorded a lease liability of approximately $8.2 million, a right-of-use-asset of approximately $7.9 million and a cumulative effect adjustment to retained earnings of $661 thousand.

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).  ASU 2016-13 is effective for annual periods 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 a material 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 loan and lease losses. The Company has evaluated and selected a third-party firm to assist in the development of a CECL program and in the calculation of the allowance for loan and lease losses in preparation for the change to the expected loss model. The Company continues to work towards implementing the accounting, reporting and governance processes required under the new standard and expect to complete the model implementation and validation by the end of the third quarter of 2019. The Company expects to recognize a one-time cumulative-effect adjustment to our allowance for loan and lease losses through retained earnings as of the beginning of the first reporting period in which the new standard is effective. The Company cannot yet determine the magnitude of any such one-time cumulative adjustment or of the overall impact of the new standard on our consolidated financial condition or results of operations.

In 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 amendments in this ASU did not have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The amendment modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The revised guidance is effective for all companies for fiscal years beginning after December 15, 2019, and interim periods within those years. Companies are permitted to early adopt any eliminated or modified disclosure requirements and delay adoption of the additional disclosure requirements until their effective date. The removed and modified disclosures will be adopted on a retrospective basis and the new disclosures will be adopted on a prospective basis. The revised guidance is not expected to impact our financial statement disclosures.

15. PENDING ACQUISITION

On July 3, 2019, the Company announced that it had entered into a definitive agreement to acquire Summit, NJ-based Point View Wealth Management, Inc. (“Point View”) with AUM/AUA over $325 million.  The transaction is expected to close in the third quarter of 2019 and will be a combination of cash and equity, subject to the receipt of regulatory approval and other customary closing conditions.  

41

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 confidence and strategies and Management’s expectations about new and existing programs and products, investments, relationships, opportunities and market conditions. These statements may be identified by such forward-looking terminology as “expect”, “look”, “believe”, “anticipate”, “may”, or similar statements or variations of such terms. Actual results may differ materially from such forward-looking statements. Factors that may cause results to differ materially from 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, 2018, in addition to/which include the following:

• our 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 2019 and beyond;

• our inability to successfully integrate wealth management firm acquisitions;

• our inability to manage our growth;

• our 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 interest rate environment and/or our highly competitive market;

• declines in values in our investment portfolio;

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

• higher than expected increases in the level of nonperforming loans;

• changes in interest rates;

• 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) that may result in increased compliance costs;

• successful cyberattacks against our IT infrastructure and that of our IT and third-party providers;

• higher than expected FDIC insurance premiums;

• adverse weather conditions;

• our inability to successfully generate new business in new geographic markets;

• our inability to execute upon new business initiatives;

• our 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;

• our ability to retain key employees;

• demands for loans and deposits in our market areas;

• adverse changes in securities markets;

• changes in accounting policies and practices;

• effects related to a prolonged shutdown of the federal government which could impact SBA and other government lending programs; 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.

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, 2018 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,

42

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 debt securities in accordance with “Accounting Standards Codification (“ASC”) 320, “Investments  - Debt Securities” and its equity security in accordance with ASC 321, “Investments – Equity Securities”. All securities are classified as available for sale and are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax with the exception of the Company’s investment in a CRA investment fund which is classified as an equity security.  In accordance with ASU 2016-01, “Financial Instruments” unrealized holding gains and losses are marked to market through the income statement.

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 for the six months ended June 30, 2019 and 2018.  

43

EXECUTIVE SUMMARY: The following table presents certain key aspects of our performance for the three months ended June 30, 2019 and 2018.

	For the Three Months Ended June 30,						Change
(Dollars in thousands, except per share data)	2019 (1)			2018			2019 vs 2018
Results of Operations:
Net interest income	$	29,268		$	29,243		$	25
Provision for loan and lease losses		1,150			300			850
Net interest income after provision for loan and lease losses		28,118			28,943			(825	)
Wealth management fee income		9,568			8,126			1,442
Other income		3,458			3,614			(156	)
Operating expense		26,173			24,941			1,232
Income before income tax expense		14,971			15,742			(771	)
Income tax expense		3,421			3,832			(411	)
Net income	$	11,550		$	11,910		$	(360	)
Total revenue (Net interest income plus wealth    management fee income and other income)	$	42,294		$	40,983		$	1,311
Diluted earnings per share	$	0.59		$	0.62		$	(0.03	)
Diluted average shares outstanding		19,568,371			19,098,838			469,533
Return on average assets annualized (ROAA)		0.99	%		1.11	%		(0.12	)%
Return on average equity annualized (ROAE)		9.49			11.11			(1.62	)

(1) The June 2019 quarter included results of operations of Lassus Wherley, acquired effective September 1, 2018.

The following table presents certain key aspects of our performance for the six months ended June 30, 2019 and 2018.

	For the Six Months Ended June 30,						Change
(Dollars in thousands, except per share data)	2019 (1)			2018			2019 vs 2018
Results of Operations:
Net interest income	$	59,275		$	57,636		$	1,639
Provision for loan and lease losses		1,250			1,550			(300	)
Net interest income after provision for loan and lease losses		58,025			56,086			1,939
Wealth management fee income		18,742			16,493			2,249
Other income		6,013			5,462			551
Operating expense		51,888			48,278			3,610
Income before income tax expense		30,892			29,763			1,129
Income tax expense		7,917			7,046			871
Net income	$	22,975		$	22,717		$	258
Total revenue (Net interest income plus wealth    management fee income and other income)	$	84,030		$	79,591		$	4,439
Diluted earnings per share	$	1.18		$	1.20		$	(0.02	)
Diluted average shares outstanding		19,528,537			18,996,979			531,558
Return on average assets annualized (ROAA)		0.99	%		1.06	%		(0.07	)%
Return on average equity annualized (ROAE)		9.57			10.83			(1.26	)

(1) The six months ended June 30, 2019 included results of operations of Lassus Wherley, acquired effective September 1, 2018.

44

	June 30,			December 31,			Change
	2019			2018			2019 vs 2018
Selected Balance Sheet Ratios:
Total capital (Tier I + II) to risk-weighted assets		15.14	%		15.03	%		0.11	%
Tier I leverage ratio		10.01			9.82			0.19
Loans to deposits		98.38			100.84			(2.46	)
Allowance for loan and lease losses to total loans		0.99			0.98			0.01
Allowancefor loan and lease losses to nonperforming loans		127.74			149.73			(21.99	)
Nonperforming loans to total loans		0.77			0.65			0.12

For the quarter ended June 30, 2019, the Company recorded net income of $11.6 million and diluted earnings per share of $0.59, compared to $11.9 million and diluted earnings per share of $0.62 for the same three-month period last year.

For the six months ended June 30, 2019, the Company recorded net income of $23.0 million and diluted earnings per share of $1.18, compared to $22.7 million and $1.20 for the same six-month period last year.

The three months ended June 30, 2019, when compared to the same period of 2018, reflected:  increased provision for loan and lease losses resulting from the higher level of loan growth and a specific reserve of $1.0 million in the second quarter of 2019 and higher operating expenses for the three months ended June 30, 2019 which included expense related to Lassus Wherley and an increase in salaries and benefits expense due to strategic hiring and normal salary increases, partially offset by greater wealth management fee income (partially due to the acquisition of Lassus Wherley in September 2018).

The six months ended June 30, 2019, when compared to the same period of 2018, reflected:  increased net interest income (due to increased loan balances and higher yields on loans partially offset by increased interest expense on our cost of funds); greater wealth management fee income (partially due to the acquisition of Lassus Wherley in September 2018); and a reduced provision for loan and lease losses.  These positive effects were partially offset by higher operating expenses for the six months ended June 30, 2019, which included expense related to Lassus Wherley and an increase in salaries and benefits expense due to strategic hiring and normal salary increases.

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, 2018 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, 2018 under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Off-Balance Sheet Arrangements.”

EARNINGS ANALYSIS

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

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

45

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

	Three Months Ended					Three Months Ended
	June 30, 2019					June 30, 2018
(Dollars in thousands)	NII		NIM			NII		NIM
NII/NIM excluding the below	$	28,938		2.69	%	$	28,186		2.72	%
Prepayment premiums received on loan paydowns		246		0.02	%		736		0.07	%
Effect of maintaining excess interest earning cash during 2019		84		-0.07	%		0		0.00	%
Material fees recognized on full paydowns of C&I loans		0		0.00	%		321		0.03	%
NII/NIM as reported	$	29,268		2.64	%	$	29,243		2.82	%

	Six Months Ended					Six Months Ended
	June 30, 2019					June 30, 2018
	NII		NIM			NII		NIM
NII/NIM excluding the below	$	58,467		2.73	%	$	56,146		2.73	%
Prepayment premiums received on loan paydowns		678		0.02	%		1,169		0.05	%
Effect of maintaining excess interest earning cash during 2019		130		-0.08	%		0		0.00	%
Material fees recognized on full paydowns of C&I loans		0		0.00	%		321		0.01	%
NII/NIM as reported	$	59,275		2.67	%	$	57,636		2.79	%

Net interest income, on a fully tax-equivalent basis, increased $282 thousand, or 1 percent, for the second quarter of 2019 to $29.9 million from net interest income of $29.6 million for the same quarter in 2018.  The net interest margin was 2.64 percent and 2.82 percent for the three months ended June 30, 2019 and 2018, respectively, a decrease of 18 basis points.  Net interest income, on a fully tax-equivalent basis, increased $2.1 million, or 4 percent, for the first six months ended June 30, 2019 to $60.5 million from net interest income of $58.4 million for the same period in 2018.  The net interest margin was 2.67 percent and 2.79 percent for the six months ended June 30, 2019 and 2018, respectively, a decrease of 12 basis points.  The growth in net interest income for both the three and six months ended June 30, 2019 was due to increases in the average balance and yield on the Company’s interest-earning assets, especially the average balance of C&I loans, which typically have higher yields.  The increase in interest income was partially offset by increases in interest-bearing liabilities and the Company’s cost of funds for those same periods.  The Company continues to be impacted by competitive pressures in attracting new loans and deposits, as well as retaining deposits.

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

	For the Three Months Ended
	June 30,		June 30,
(In thousands)	2019		2018
Residential mortgage loans originated for portfolio	$	21,998	$	22,217
Residential mortgage loans originated for sale		9,785		6,488
Total residential mortgage loans		31,783		28,705
Commercial real estate loans		34,204		20,780
Multifamily properties		58,604		4,743
C&I loans (A) (B)		143,944		137,805
Small business administration		3,740		10,740
Wealth Lines of Credit (A)		6,725		11,560
Total commercial loans		247,217		185,628
Installment loans		1,497		1,036
Home equity lines of credit (A)		3,626		5,091
Total loans closed	$	284,123	$	220,460

46

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

(B) Includes equipment finance leases and loans.

	For the Six Months Ended
	June 30,		June 30,
(In thousands)	2019		2018
Residential mortgage loans originated for portfolio	$	32,837	$	33,859
Residential mortgage loans originated for sale		12,875		14,160
Total residential mortgage loans		45,712		48,019
Commercial real estate loans		55,229		55,165
Multifamily properties		79,726		25,743
C&I loans (A) (B)		285,072		256,230
Small business administration		12,790		15,010
Wealth Lines of Credit (A)		14,105		30,798
Total commercial loans		446,922		382,946
Installment loans		2,055		2,386
Home equity lines of credit (A)		5,233		7,588
Total loans closed	$	499,922	$	440,939

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

(B) Includes equipment finance leases and loans.

The Company has managed its balance sheet such that multifamily and 1-4 family residential loans declined as a percentage of the overall loan portfolio and C&I loans became a larger percentage of the overall loan portfolio.

At June 30, 2019, December 31, 2018 and June 30, 2018, the Bank had a concentration in commercial real estate (“CRE”) loans as defined by applicable regulatory guidance.

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

	June 30,			December 31,			June 30,
	2019			2018			2018
Multifamily mortgage loans as a percent of    total regulatory capital of the Bank		197	%		209	%		254	%
Non-owner occupied commercial real estate loans    as a percent of total regulatory capital of the Bank		178			185			171
Total CRE concentration		375	%		394	%		425	%

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.

47

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

	June 30, 2019									June 30, 2018
	Average			Income/						Average			Income/
(Dollars in thousands)	Balance			Expense			Yield			Balance			Expense			Yield
ASSETS:
Interest-earning assets:
Investments:
Taxable (1)	$	392,079		$	2,639			2.69	%	$	361,537		$	2,072			2.29	%
Tax-exempt (1) (2)		16,913			206			4.87			20,647			181			3.51
Loans (2) (3):
Residential mortgages		568,020			4,835			3.40			562,460			4,708			3.35
Commercial mortgages		1,786,086			17,581			3.94			1,986,138			18,972			3.82
Commercial		1,417,112			17,303			4.88			1,047,299			12,397			4.73
Installment		54,565			585			4.29			71,933			635			3.53
Home equity		63,112			818			5.18			62,731			685			4.37
Other		375			10			10.67			450			11			9.78
Total loans		3,889,270			41,132			4.23			3,731,011			37,408			4.01
Federal funds sold		101			—			0.25			101			—			0.25
Interest-earning deposits		241,129			1,265			2.10			94,770			395			1.67
Total interest-earning assets		4,539,492			45,242			3.99	%		4,208,066			40,056			3.81	%
Noninterest-earning assets:
Cash and due from banks		5,280									4,660
Allowance for loan and lease losses		(39,138	)								(38,278	)
Premises and equipment		21,176									28,704
Other assets		127,798									100,385
Total noninterest-earning assets		115,116									95,471
Total assets	$	4,654,608								$	4,303,537
LIABILITIES:
Interest-bearing deposits:
Checking	$	1,266,909		$	4,123			1.30	%	$	1,073,108		$	1,967			0.73	%
Money markets		1,197,998			4,415			1.47			1,000,320			2,432			0.97
Savings		112,693			16			0.06			123,490			17			0.06
Certificates of deposit - retail		610,493			3,461			2.27			555,935			2,330			1.68
Subtotal interest-bearing deposits		3,188,093			12,015			1.51			2,752,853			6,746			0.98
Interest-bearing demand - brokered		180,000			836			1.86			180,000			804			1.79
Certificates of deposit - brokered		46,639			326			2.80			63,364			399			2.52
Total interest-bearing deposits		3,414,732			13,177			1.54			2,996,217			7,949			1.06
FHLB advances and borrowings		105,000			838			3.19			221,340			1,155			2.09
Finance lease liabilities		8,052			97			4.82			8,794			106			4.82
Subordinated debt		83,272			1,223			5.87			83,099			1,221			5.88
Total interest-bearing liabilities		3,611,056			15,335			1.70	%		3,309,450			10,431			1.26	%
Noninterest-bearing liabilities:
Demand deposits		497,853									536,306
Accrued expenses and other liabilities		58,721									29,035
Total noninterest-bearing liabilities		556,574									565,341
Shareholders’ equity		486,978									428,746
Total liabilities and shareholders’ equity	$	4,654,608								$	4,303,537
Net interest income (tax-equivalent basis)					29,907									29,625
Net interest spread								2.29	%								2.55	%
Net interest margin (4)								2.64	%								2.82	%
Tax equivalent adjustment					(639	)								(382	)
Net interest income				$	29,268								$	29,243

(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 21 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.

48

Average Balance Sheet

Unaudited

Six Months Ended

	June 30, 2019									June 30, 2018
	Average			Income/						Average			Income/
(Dollars in thousands)	Balance			Expense			Yield			Balance			Expense			Yield
ASSETS:
Interest-earning assets:
Investments:
Taxable (1)	$	389,835		$	5,323			2.73	%	$	350,608		$	3,997			2.28	%
Tax-exempt (1) (2)		17,128			416			4.86			22,465			379			3.37
Loans (2) (3):
Residential mortgages		569,818			9,730			3.42			568,397			9,439			3.32
Commercial mortgages		1,805,123			35,603			3.94			1,999,558			37,379			3.74
Commercial		1,398,452			34,053			4.87			1,008,613			22,884			4.54
Installment		54,889			1,162			4.23			76,820			1,305			3.40
Home equity		61,773			1,583			5.13			63,938			1,346			4.21
Other		394			21			10.66			453			22			9.71
Total loans		3,890,449			82,152			4.22			3,717,779			72,375			3.89
Federal funds sold		101			—			0.25			101			—			0.25
Interest-earning deposits		239,201			2,535			2.12			97,107			752			1.55
Total interest-earning assets		4,536,714			90,426			3.99	%		4,188,060			77,503			3.70	%
Noninterest-earning assets:
Cash and due from banks		5,339									4,673
Allowance for loan and lease losses		(39,044	)								(37,680	)
Premises and equipment		21,321									28,979
Other assets		124,965									99,567
Total noninterest-earning assets		112,581									95,539
Total assets	$	4,649,295								$	4,283,599
LIABILITIES:
Interest-bearing deposits:
Checking	$	1,275,711		$	7,833			1.23	%	$	1,107,936		$	3,724			0.67	%
Money markets		1,202,973			8,750			1.45			1,017,036			4,378			0.86
Savings		113,345			32			0.06			122,284			33			0.05
Certificates of deposit - retail		608,845			6,695			2.20			555,751			4,479			1.61
Subtotal interest-bearing deposits		3,200,874			23,310			1.46			2,803,007			12,614			0.90
Interest-bearing demand - brokered		180,000			1,575			1.75			180,000			1,484			1.65
Certificates of deposit - brokered		51,371			691			2.69			67,957			828			2.44
Total interest-bearing deposits		3,432,245			25,576			1.49			3,050,964			14,926			0.98
FHLB advances and borrowings		105,448			1,672			3.17			154,271			1,525			1.98
Finance lease liabilities		8,147			196			4.81			8,878			213			4.80
Subordinated debt		83,243			2,447			5.88			83,071			2,442			5.88
Total interest-bearing liabilities		3,629,083			29,891			1.65	%		3,297,184			19,106			1.16	%
Noninterest-bearing liabilities:
Demand deposits		484,632									538,084
Accrued expenses and other liabilities		55,274									28,799
Total noninterest-bearing liabilities		539,906									566,883
Shareholders’ equity		480,306									419,532
Total liabilities and shareholders’ equity	$	4,649,295								$	4,283,599
Net interest income (tax-equivalent basis)					60,535									58,397
Net interest spread								2.34	%								2.54	%
Net interest margin (4)								2.67	%								2.79	%
Tax equivalent adjustment					(1,260	)								(761	)
Net interest income				$	59,275								$	57,636

(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 21 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.

49

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

	For the Three Months Ended June 30, 2019
	Difference due to						Change In
	Change In:						Income/
(In Thousands):	Volume			Rate			Expense
ASSETS:
Investments	$	109		$	483		$	592
Loans		2,321			1,403			3,724
Interest-earning deposits		746			124			870
Total interest income	$	3,176		$	2,010		$	5,186
LIABILITIES:
Interest-bearing checking	$	533		$	1,623		$	2,156
Money market		693			1,290			1,983
Savings		(2	)		1			(1	)
Certificates of deposit - retail		250			881			1,131
Certificates of deposit - brokered		(113	)		40			(73	)
Interest bearing demand brokered		—			32			32
Borrowed funds		(412	)		95			(317	)
Capital lease obligation		(9	)		—			(9	)
Subordinated debt		2			—			2
Total interest expense	$	942		$	3,962		$	4,904
Net interest income	$	2,234		$	(1,952	)	$	282

	For the Six Months Ended June 30, 2019
	Difference due to						Change In
	Change In:						Income/
(In Thousands):	Volume			Rate			Expense
ASSETS:
Investments	$	352		$	1,011		$	1,363
Loans		5,073			4,704			9,777
Interest-earning deposits		1,425			358			1,783
Total interest income	$	6,850		$	6,073		$	12,923
LIABILITIES:
Interest-bearing checking	$	862		$	3,247		$	4,109
Money market		1,339			3,033			4,372
Savings		(7	)		6			(1	)
Certificates of deposit - retail		458			1,758			2,216
Certificates of deposit - brokered		(216	)		79			(137	)
Interest bearing demand brokered		—			91			91
Borrowed funds		(50	)		197			147
Capital lease obligation		(17	)		—			(17	)
Subordinated debt		5			—			5
Total interest expense	$	2,374		$	8,411		$	10,785
Net interest income	$	4,476		$	(2,338	)	$	2,138

Interest income on interest-earning assets, on a fully tax-equivalent basis, totaled $45.2 million for the second quarter of 2019 compared to $40.1 million for the same quarter of 2018, reflecting an increase of $5.2 million, or 13 percent.  Interest income on interest-earning assets, on a fully tax-equivalent basis, totaled $90.4 million for the six months ended June 30, 2019 compared to $77.5 million for the same quarter of 2018, reflecting an increase of $12.9 million, or 17 percent.  Average interest-earning assets totaled $4.54 billion for the second quarter of 2019, an increase of $331.4 million, or 8 percent, from the same period of 2018. The average balance of the C&I loan portfolio increased $369.8 million, or 35 percent, from the second quarter of 2018, to $1.42 billion for the same quarter of 2019. Average interest-earning assets totaled $4.54 billion for the six months ended June 30, 2019, an increase of $348.7 million, or 8 percent, from the same period of 2018. The average balance of the C&I loan portfolio

50

increased $389.8 million, or 39 percent, to $1.40 for the six months ended June 30, 2019 as compared to the same period in 2018.  The increase in this portfolio for both the three and six months ended June 30, 2019 was attributed to: the addition of seasoned bankers including a new EVP, Head of Commercial Banking, and an equipment finance team in 2017; a continued focus on client service and value-added aspects of the lending process; and a continued focus on markets outside of the immediate branch service area, including markets around the Teaneck and Princeton, New Jersey private banking offices.  These increases were partially offset by decreases in the average balance of the commercial mortgage portfolio (which includes multifamily mortgage loans) of $200.1 million, or 10 percent, and $194.4 million, or 10 percent to $1.79 billion and $1.80 billion for the three and six months ended June 30, 2019 when compared to the same periods in 2018. The Company continued to manage its balance sheet such that lower yielding, primarily fixed rate multifamily loans declined as a percentage of the overall loan portfolio and higher yielding, primarily floating rate or short duration C&I loans became a larger percentage of the overall loan portfolio. The average balance of investment securities totaled $409.0 million for the second quarter of 2019 compared to $382.2 million for the same quarter of 2018 reflecting an increase of $26.8 million, or 7 percent.  The average balance of investment securities totaled $407.0 million for the six months ended June 30, 2019 as compared to $373.1 million for the same period of 2018 reflecting an increase of $33.9 million, or 9 percent.  Interest-earning deposits totaled $241.1 million for the three months ended June 30, 2019 when compared to $94.8 million for the same period in 2018 reflecting an increase of $146.4 million or 154 percent.  Interest-earning deposits increased to $239.2 million for the six months ended June 30, 2019 when compared to $97.1 million for the same period in 2018 reflecting an increase of $142.1 million or 146 percent.  The increase for the three and six months ended June 30, 2019 was primarily due to certain loan originations and fundings shifting from the end of the second quarter of 2019 into the third quarter.

For the quarters ended June 30, 2019 and 2018, the average rates earned on interest-earning assets were 3.99 percent and 3.81 percent, respectively, an increase of 18 basis points.  The six months ended June 30, 2019 had an increase of 29 basis points on the average rates earned on interest-earning assets to 3.99 percent from 3.70 percent when compared to the same period of 2018.  The increase in average rates on loans for both periods was due to an increase in market rates and a shift from lower yielding commercial mortgages into higher yielding commercial loans (C&I and equipment financings) and a sale of $131.3 million of multifamily mortgage loans during the fourth quarter of 2018.

For the second quarter of 2019, the average balance of interest-bearing deposits was $3.41 billion, an increase of $418.5 million, or 14 percent, from the average balance for the same period of 2018. Interest-bearing deposits totaled $3.43 billion for the six months ended June 30, 2019 which is an increase of $381.3 million or 12 percent, from the same 2018 period.  The growth in customer deposits (excluding brokered CDs and brokered interest-bearing demand deposits, but including reciprocal funds discussed below) has come from an increase in retail deposits from our branch network; focus on providing high-touch client service; and a full array of treasury management products that support core deposit growth.  The growth is partially offset by a decline of $38.1 million of listing service deposits as the Company has chosen not to participate in going forward, so maturing listing service deposits are not replaced with new listing service deposits.

Average rates paid on total interest-bearing deposits were 1.54 percent and 1.06 percent for the second quarters of 2019 and 2018, respectively, an increase of 48 basis points.  Average rates paid on total interest-bearing deposits were 1.49 percent and 0.98 percent for the six months ended June 30, 2019 and 2018, respectively, an increase of 51 basis points.  The increase in the average rate paid on deposits was principally due to growth in higher costing certificates of deposit and money market accounts and competitive pressures in attracting new deposits.

For the second quarter of 2019, the average balance of borrowings was $105.0 million, a decrease of $116.3 million when compared to the same period in 2018.  For the six months ended June 30, 2019, the average balance of borrowings was $105.4 million, a decrease of $48.8 million when compared to the same period in 2018.

The Company is a participant in the Reich & Tang Demand Deposit Marketplace (“DDM”) program and the Promontory Program. The Company uses these deposit sweep services to place customer funds into interest-bearing demand (checking) accounts issued by other participating banks.  Customer funds are placed at one or more participating banks to ensure that each deposit customer is eligible for the full amount of FDIC insurance.  As a program participant, the Company receives reciprocal amounts of deposits from other participating banks. Such reciprocal deposit balances are included in the Company’s interest-bearing checking balances. The average balance of reciprocal deposits was $436.1 million and $434.9 million for the three and six months ended June 30, 2019 compared to $375.3 million and $373.8 million for the three and six months ended June 30, 2018.

The average balance of brokered interest-bearing demand deposits was $180.0 million for the three and six months ended June 30, 2019 and 2018, respectively, and are matched to the Company’s existing $180.0 million of interest rate swaps, transacted previously as part of the Company’s interest rate risk management program.

INVESTMENT SECURITIES AVAILABLE FOR SALE:  Investment securities available for sale are purchased, sold and/or maintained as a part of the Company’s overall balance sheet, liquidity and interest rate risk management strategies. These securities are carried at estimated fair value, and unrealized changes in fair value are recognized as a separate component of

51

shareholders’ equity, net of income taxes.  Realized gains and losses are recognized in income at the time the securities are sold.  Equity securities are carried at fair value with unrealized gains and losses recorded in non-interest income.

At June 30, 2019, the Company had investment securities available for sale with a fair value of $378.8 million compared with $377.9 million at December 31, 2018.  A net unrealized gain (net of income tax) of $898 thousand and a net unrealized loss (net of income tax) of $3.0 million were included in shareholders’ equity at June 30, 2019 and December 31, 2018, respectively.

The Company has one equity security (a CRA investment security) with a fair value of $4.8 million at June 30, 2019 compared with $4.7 million at December 31, 2018.  The Company recorded a $128 thousand unrealized gain on the Consolidated Statements of Income for the six months ended June 30, 2019 as compared to an unrealized loss of $114 thousand for the six months ended June 30, 2018.  Such security has been owned for years for CRA purposes, but under Accounting Standards Update (“ASU”) 2016-01, “Financial Instruments”, equity securities require a quarterly mark to market through the income statement effective January 1, 2018.

The carrying value of investment securities available for sale as of June 30, 2019 and December 31, 2018 are shown below:

	June 30,		December 31,
(In thousands)	2019		2018
U.S. treasury and U.S. government-sponsored agencies	$	71,791	$	102,013
Mortgage-backed securities-residential (principally    U.S. government-sponsored entities)		283,937		251,362
SBA pool securities		3,587		3,839
State and political subdivisions		16,443		17,610
Corporate bond		3,081		3,112
Total	$	378,839	$	377,936

The following table presents the contractual maturities and yields of debt securities available for sale, stated at fair value, as of June 30, 2019:

				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-sponsored agencies	$	4,500		$	40,221		$	27,070		$	—		$	71,791
		2.86	%		2.36	%		3.23	%		—			2.72	%
Mortgage-backed securities-residential (1)	$	985		$	1,244		$	22,799		$	258,909		$	283,937
		5.00	%		1.74	%		2.32	%		2.58	%		2.56	%
SBA pool securities	$	—		$	—		$	623		$	2,964		$	3,587
		—			—			2.64	%		2.67	%		2.67	%
State and political subdivisions (2)	$	4,248		$	8,898		$	1,745		$	1,552		$	16,443
		2.51	%		2.63	%		2.59	%		3.24	%		2.65	%
Corporate bond	$	—		$	—		$	3,081		$	—		$	3,081
		—			—			5.25	%		—			5.25	%
Total	$	9,733		$	50,363		$	55,318		$	263,425		$	378,839
		2.92	%		2.39	%		2.94	%		2.58	%		2.62	%

(1) Shown using stated final maturity.

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

Federal funds sold and interest-earning deposits are an additional part of the Company’s liquidity and interest rate risk management strategies.  The combined average balance of these investments during the six months ended June 30, 2019 was $239.3 million compared to $103.2 million for the year ended December 31, 2018. The increase represented excess cash as deposit growth exceeded loan growth.  

52

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

	For the Three Months Ended June 30,					Change
(In thousands)	2019		2018			2019 vs 2018
Service charges and fees	$	897	$	873		$	24
Bank owned life insurance		326		345			(19	)
Gain on sale of loans (mortgage banking)		132		79			53
Fee income related to loan level, back-to-back swaps		721		900			(179	)
Gain on sale of SBA loans		573		814			(241	)
Other income		740		639			101
Securities gains/(losses)		69		(36	)		105
Total other income	$	3,458	$	3,614		$	(156	)

	For the Six Months Ended June 30,					Change
(In thousands)	2019		2018			2019 vs 2018
Service charges and fees	$	1,713	$	1,704		$	9
Bank owned life insurance		664		681			(17	)
Gain on sale of loans (mortgage banking)		179		173			6
Fee income related to loan level, back-to-back swaps		991		1,152			(161	)
Gain on sale of SBA loans		992		845			147
Other income		1,346		1,021			325
Securities losses		128		(114	)		242
Total other income	$	6,013	$	5,462		$	551

For the quarter ended June 30, 2019, income from the sale of newly originated residential mortgage loans was $132 thousand compared to $79 thousand for the same period in 2018.  For the six months ended June 30, 2019 and 2018, income from the sale of newly originated residential mortgage loans was $179 thousand and $173 thousand, respectively.  Such income is a result of the volume of residential mortgage loans originated for sale in the respective periods.

The second quarter of 2019 included $721 thousand of loan level, back-to-back swap income compared to $900 thousand in the same quarter of 2018.  The six months ended June 30, 2019 included $991 thousand of loan level, back-to-back swap income compared to $1.2 million for the same period of 2018.  The program provides a borrower with a degree of interest rate protection on a variable rate loan, while still providing an adjustable rate to the Company, thus helping to manage the Company’s interest rate risk, while contributing to income.

The second quarter of 2019 included $573 thousand of income, on sales of $5.7 million, related to the Company’s SBA lending and sale program compared to $814 thousand of income, on sales of $8.1 million, for the same quarter in 2018. The six months ended June 30, 2019 included $992 thousand of income, on sales of $9.9 million, related to the Company’s SBA lending and sale program compared to $845 thousand of income, on sales of $8.4 million, for the same period in 2018.

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

The Company recorded a $69 thousand and $128 thousand mark to market gain on its equity security investment for the three and six months ended June 30, 2019, respectively, compared to a $36 thousand and $114 thousand mark to market loss on its equity security investment for the three and six months ended June 30, 2018, respectively, as a result of the adoption of Accounting Standards Update (“ASU”) 2016-01, “Financial Instruments” on January 1, 2018.  

Other income was $740 thousand for the quarter ended June 30, 2019 compared to $639 thousand for the same quarter in 2018.  The six months ended June 30, 2019 included $1.3 million in other income compared to $1.0 million for the same period of 2018.  The increase in other income was primarily due to increased fees associated with loans, as well as income related to our corporate advisory program for both the three and six months ended June 30, 2019.

53

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

	For the Three Months Ended June 30,				Change
(In thousands)	2019		2018		2019 vs 2018
Compensation and employee benefits	$	17,543	$	15,826	$	1,717
Premises and equipment		3,600		3,406		194
FDIC assessment		277		625		(348	)
Other Operating Expenses:
Professional and legal fees		968		1,178		(210	)
Telephone		377		271		106
Advertising		409		414		(5	)
Amortization of intangible assets		229		180		49
OREO		—		204		(204	)
Other		2,770		2,837		(67	)
Total operating expenses	$	26,173	$	24,941	$	1,232

	For the Six Months Ended June 30,				Change
(In thousands)	2019		2018		2019 vs 2018
Compensation and employee benefits	$	34,699	$	30,405	$	4,294
Premises and equipment		6,988		6,676		312
FDIC assessment		554		1,205		(651	)
Other Operating Expenses:
Professional and legal fees		2,092		2,292		(200	)
Telephone		657		555		102
Advertising		768		725		43
Amortization of intangible assets		458		359		99
OREO		-		204		(204	)
Other		5,672		5,857		(185	)
Total operating expenses	$	51,888	$	48,278	$	3,610

Increased operating expenses in the three-month and six-month periods ended June 30, 2019 were principally attributable to: an increase in compensation and employee benefits of $1.7 million to $17.5 million for the second quarter of 2019 and $4.3 million to $34.7 million for the six months ended June 30, 2019, which includes expense related to the Lassus Wherley acquisition completed on September 1, 2018; ongoing operating expenses including amortization of intangibles; hiring in line with the Company’s strategic plan; and normal salary increases.  These increases were partially offset by a decrease in FDIC expense, provision for OREO, and professional and legal fees.

PRIVATE WEALTH MANAGEMENT DIVISION:  This division includes: investment management services provided for individuals and institutions; personal trust services, including services as executor, trustee, administrator, custodian and guardian, and other financial planning, tax preparation and advisory services.  Officers from the Private Wealth Management Division are available to provide wealth management, trust and investment services at the Bank’s headquarters in Bedminster, at private banking locations in Morristown, Princeton and Teaneck, New Jersey and at the Bank’s subsidiaries, PGB Trust & Investments of Delaware in Greenville, Delaware, MCM, in Gladstone, New Jersey, Quadrant, in Fairfield, New Jersey and Lassus Wherley in New Providence, New Jersey and Bonita Springs, Florida.

54

The following table presents certain key aspects of the Bank’s Private Wealth Management Division performance for the three and six months ended June 30, 2019 and 2018.

	For
	Three Months Ended June 30,				Change
(In thousands)	2019		2018		2019 vs 2018
Total fee income	$	9,568	$	8,126	$	1,442
Compensation and benefits (included in Operating    Expenses above)		4,858		3,894		964
Other operating expense (included in Operating    Expenses above)		2,754		2,363		391

	For
	Six Months Ended June 30,				Change
(In thousands)	2019		2018		2019 vs 2018
Total fee income	$	18,742	$	16,493	$	2,249
Compensation and benefits (included in Operating    Expenses above)		10,017		8,142		1,875
Other operating expense (included in Operating    Expenses above)		5,353		4,895		458
Assets under management and/or administration    (market value in billions)	$	6.6	$	5.7

The market value of the assets under management and/or administration (“AUM”) of the Private Wealth Management Division was $6.6 billion at June 30, 2019, reflecting an increase of 16 percent from $5.7 billion at June 30, 2018.  The increase in AUM was due to the acquisition of one registered investment advisory firm (“RIA”) and organic growth. Effective September 1, 2018, the Bank acquired Lassus Wherley, an RIA, based in New Providence, NJ, which contributed approximately $550 million of AUM at the time of acquisition.  Organic growth, which includes equity market appreciation, contributed an additional $325 million in AUM.

In the June 2019 quarter, the Private Wealth Management Division generated $9.6 million in fee income compared to $8.1 million for the June 2018 quarter, reflecting an 18 percent increase.  For the six months ended June 30, 2019, the Private Wealth Management Division generated $18.7 million in fee income compared to $16.5 million for the same period in 2018, reflecting a 14 percent increase.  The growth in fee income was due to the acquisition noted above, as well as continued new business, 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 intends to continue to grow organically and through acquisition.

Operating expenses relative to the Private Wealth Management Division reflected increases due to the Lassus Wherley acquisition, overall growth in the business, new hires and select third party expenditures. Remaining expenses are in line with the Company’s Strategic Plan, particularly the hiring of key management and revenue-producing personnel.  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. Management believes that the Bank generates adequate liquidity to support the expenses of the Private Wealth Management Division should it be necessary.

55

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:

	As of
	June 30,			March 31,			December 31,			September 30,			June 30,
(Dollars in thousands)	2019			2019			2018			2018			2018
Loans past due over 90 days and still accruing	$	—		$	—		$	—		$	—		$	—
Nonaccrual loans		31,150			24,892			25,715			10,722			12,025
Other real estate owned		—			—			—			96			1,608
Total nonperforming assets	$	31,150		$	24,892		$	25,715		$	10,818		$	13,633
Performing TDRs	$	3,772		$	4,274		$	4,303		$	19,334		$	18,665
Loans past due 30 through 89 days and still accruing	$	432		$	2,492		$	3,484		$	2,528		$	3,539
Classified loans	$	56,135		$	51,306		$	58,265		$	51,783		$	51,216
Impaired loans	$	34,941		$	29,185		$	31,300		$	31,345		$	30,711
Nonperforming loans as a % of total loans (1)		0.77	%		0.64	%		0.65	%		0.28	%		0.32	%
Nonperforming assets as a % of total assets (1)		0.64	%		0.53	%		0.56	%		0.24	%		0.32	%
Nonperforming assets as a % of total loans    plus other real estate owned (1)		0.77	%		0.64	%		0.65	%		0.28	%		0.37	%

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

PROVISION FOR LOAN AND LEASE LOSSES:  The provision for loan and lease losses was $1.2 million and $300 thousand for the second quarters of 2019 and 2018, respectively.  For the six months ended June 30, 2019 and 2018, the provision for loan losses was $1.3 million and $1.6 million, respectively.  The increase in the provision for loan and lease losses was primarily due to the higher level of loan growth and a specific reserve of $1.0 million associated with a casual commercial dining relationship in the second quarter of 2019 as compared to the same period in 2018.  The loan portfolio grew by $131.9 million during the second quarter of 2019 as compared to $14.6 million for the second quarter of 2018.  The provision for loan and lease losses was lower for the six months ended June 30, 2019 due to a specific reserve of $1.3 million associated with a commercial real estate loan recorded during the first six months of 2018.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 adequacy of the allowance for loan and lease losses.

The allowance for loan and lease losses was $39.8 million as of June 30, 2019, compared to $38.5 million at December 31, 2018. As a percentage of loans, the allowance for loan and lease losses was 0.99 percent for June 30, 2019 and 0.98 percent for December 31, 2018. The specific reserves on impaired loans were $1.2 million at June 30, 2019 compared to $262 thousand as of December 31, 2018. Total impaired loans were $34.9 million and $31.3 million as of June 30, 2019 and December 31, 2018,

56

respectively. The general component of the allowance increased from $38.2 million at December 31, 2018 to $38.5 million at June 30, 2019.

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

	June 30,			March 31,			December 31,			September 30,			June 30,
(Dollars in thousands)	2019			2019			2018			2018			2018
Allowance for loan and lease losses:
Beginning of period	$	38,653		$	38,504		$	37,293		$	38,066		$	37,696
Provision for loan and lease losses		1,150			100			1,500			500			300
(Charge-offs)/recoveries, net		(12	)		49			(289	)		(1,273	)		70
End of period	$	39,791		$	38,653		$	38,504		$	37,293		$	38,066
Allowance for loan and lease losses as a % of    total loans		0.987	%		0.991	%		0.979	%		0.981	%		1.021	%
General allowance for loan and lease losses as    a % of total loans		0.956	%		0.984	%		0.972	%		0.961	%		0.978	%
Allowance for loan and lease losses as a % of    non-performing loans		127.74	%		155.28	%		149.73	%		347.82	%		316.56	%

INCOME TAXES:  Income tax expense for the three months ended June 30, 2019 was $3.4 million as compared to $3.8 million for the same period in 2018.  For the second quarters of 2019 and 2018, income tax expense as a percentage of pre-tax income was 22.9 percent and 24.3 percent, respectively.  Income tax expense for the six months ended June 30, 2019 was $7.9 million as compared to $7.0 million for the same period in 2018.  For the first six months of 2019 and 2018, income tax expense as a percentage of pre-tax income was 25.6 percent and 23.7 percent, respectively.  The increase in income tax expense and the effective rate in the six months ended 2019 was primarily due to the New Jersey surtax and combined reporting rules.

On July 1, 2018, the 2019 New Jersey Budget (“Budget”) was passed, which established a 2.5 percent surtax on businesses that have New Jersey allocated net income in excess of $1.0 million.  The surtax was effective as of January 1, 2018 and will continue through 2019. The surtax will adjust to 1.5 percent for 2020 and 2021. In addition, effective for taxable years beginning on or after January 1, 2019, banks will be required to file combined reports of taxable income including their parent holding company. New Jersey issued a tax bulletin in May 2019 for the 2019 calendar tax year which requires entities to report their real estate investment trust, registered investment company and investment company on a separate entity basis.  The Bank made an adjustment to income tax expense and deferred tax assets/liabilities in the third quarter of 2018 to reflect the new state tax rate, which became effective on January 1, 2018.  The Company’s effective tax rate increased by approximately 2% for the six months ended June 30, 2019 as a result of the New Jersey tax changes.  The Company’s effective tax rate for the six months ended June 30, 2018 was also affected by the adoption of ASU 2016-09.  The six months ended June 30, 2018 included a $416 thousand reduction in income taxes.

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

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

Capital for the six months ended June 30, 2019 was benefitted by net income of $23.0 million.

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 June 30, 2019 and December 31, 2018, 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.

57

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

As a result of the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies are required to develop a “Community Bank Leverage Ratio” (the ratio of a bank’s tangible equity capital to average total consolidated assets) for financial institutions with assets of less than $10 billion.  A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes.  The federal banking agencies may consider a financial institution’s risk profile when evaluating whether it qualifies as a community bank for purposes of the capital ratio requirement. The federal banking agencies must set the minimum capital for the new Community Bank Leverage Ratio at not less than 8 percent and not more than 10 percent.  A financial institution can elect to be subject to this new definition.  The Bank’s leverage ratio was 11.54 percent at June 30, 2019.

The Bank’s 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 June 30, 2019:
Total capital (to risk-weighted assets)	$	572,834		14.82	%	$	386,494		10.00	%	$	309,195		8.00	%	$	405,819		10.50	%
Tier I capital (to risk-weighted assets)		533,043		13.79			309,195		8.00			231,896		6.00			328,520		8.50
Common equity tier I (to risk-weighted assets)		533,041		13.79			251,221		6.50			173,922		4.50			270,546		7.00
Tier I capital (to average assets)		533,043		11.54			230,943		5.00			184,754		4.00			184,754		4.00
As of December 31, 2018:
Total capital (to risk-weighted assets)	$	543,008		14.59	%	$	372,186		10.00	%	$	297,749		8.00	%	$	367,533		9.88	%
Tier I capital (to risk-weighted assets)		504,504		13.56			297,749		8.00			223,311		6.00			293,096		7.88
Common equity tier I (to risk-weighted assets)		504,502		13.56			241,921		6.50			167,484		4.50			237,268		6.38
Tier I capital (to average assets)		504,504		11.32			222,912		5.00			178,330		4.00			178,330		4.00

(A) See footnote on following table

58

The Company’s 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 June 30, 2019:
Total capital (to risk-weighted assets)	$	585,771		15.14	%	N/A	N/A	$	309,541		8.00	%	$	406,272		10.50	%
Tier I capital (to risk-weighted assets)		462,675		11.96		N/A	N/A		232,155		6.00			328,887		8.50
Common equity tier I (to risk-weighted assets)		462,673		11.96		N/A	N/A		174,117		4.50			270,848		7.00
Tier I capital (to average assets)		462,675		10.01		N/A	N/A		184,915		4.00			184,915		4.00
As of December 31, 2018:
Total capital (to risk-weighted assets)	$	559,937		15.03	%	N/A	N/A	$	298,047		8.00	%	$	367,902		9.88	%
Tier I capital (to risk-weighted assets)		438,240		11.76		N/A	N/A		223,535		6.00			293,390		7.88
Common equity tier I (to risk-weighted assets)		438,238		11.76		N/A	N/A		167,652		4.50			237,506		6.38
Tier I capital (to average assets)		438,240		9.82		N/A	N/A		178,473		4.00			178,473		4.00

(A) As fully phased in on January 1, 2019, the Basel Rules 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 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 increased by 0.625% on each subsequent January 1, until it reached 2.5% on January 1, 2019.

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

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

The Dividend Reinvestment Plan of Peapack-Gladstone Financial Corporation, or the “Reinvestment Plan,” allows shareholders of the Company to purchase additional shares of common stock using cash dividends without payment of any brokerage commissions or other charges.  Shareholders may also make voluntary cash payments of up to $200 thousand per quarter to purchase additional shares of common stock, which up to January 30, 2019 were purchased at a 3 percent discount to market.  On January 30, 2019, the Company filed a Registration Statement on Form S-3 eliminating the feature in our “Reinvestment Plan” under which participants could purchase shares of our common stock through the Plan at a 3 percent discount to market price. Voluntary share purchases in the “Reinvestment Plan” can be filled from the Company’s authorized but unissued shares and/or in the open market, at the discretion of the Company.  During the three months ended June 30, 2019, 694 shares purchased for the “Reinvestment Plan” were purchased in the open market.

59

On July 25, 2019, the Board of Directors declared a regular cash dividend of $0.05 per share payable on August 22, 2019 to shareholders of record on August 8, 2019.

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

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

Management actively monitors and manages the Company’s liquidity position and believes it is sufficient to meet future needs. Cash and cash equivalents, including federal funds sold and interest-earning deposits, totaled $304.0 million at June 30, 2019. In addition, the Company had $378.8 million in securities designated as available for sale at June 30, 2019. 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 $338.2 million as of June 30, 2019 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 secured borrowing capacity. At June 30, 2019, unused borrowing commitments totaled $1.4 billion from the FHLB and $1.4 billion from the Federal Reserve Bank of New York.

Customer deposits and capital increased by $200.3 million and $24.9 million, respectively, during the first six months of 2019.  These increases funded an increase in loans of $101.4 million and the additional on-balance sheet liquidity of $687.7 million of cash, cash equivalents and investment securities at June 30, 2019 as compared to $543.4 million at December 31, 2018.

Brokered interest-bearing demand (“overnight”) deposits were $180.0 million at June 30, 2019. The interest rate paid on these deposits allows the Bank to fund at attractive rates and engage in interest rate swaps to hedge its asset-liability interest rate risk. The Company ensures ample available collateralized liquidity as a backup to these short-term brokered deposits.  As of June 30, 2019, the Company had transacted pay fixed, receive floating interest rate swaps totaling $230.0 million in notional amount.

The Company has a Board-approved Contingency Funding Plan in place. This plan provides a framework for managing adverse liquidity stress and contingent sources of liquidity. The Company conducts liquidity stress testing on a regular basis to ensure sufficient liquidity in a stressed environment.

The Company, on an unconsolidated basis, had liquid assets of $8.8 million at June 30, 2019.

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

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 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.

60

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

• Actively market C&I loans, which tend to have adjustable-rate features, and which generate customer relationships that can result in higher core deposit accounts;

• Actively market equipment finance leases and loans, which tend to have shorter terms and higher interest rates than real estate lending;

• Manage residential mortgage portfolio originations to adjustable-rate and/or shorter-term and/or “relationship” loans that result in core deposit and/or wealth management 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, especially longer-term residential 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 $230.0 million as of June 30, 2019.

In addition, the Company initiated a loan level / back-to-back swap program in support of its commercial lending business.  Pursuant to this program, the Company extends a floating rate loan and executes a floating to fixed swap with the borrower.  At the same time, the Company executes a third-party swap, the terms of which fully offset the fixed exposure and, result in a final floating rate exposure for the Company.  As of June 30, 2019, $539.1 million of notional value in swaps were executed and outstanding with borrowers under this program.

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 models are based on the actual maturity and repricing characteristics of rate sensitive assets and liabilities. The models incorporate certain prepayment and interest rate assumptions, which management believes to be reasonable as of June 30, 2019. The models assume changes in interest rates without any proactive change in the balance sheet by management. In the models, the forecasted shape of the yield curve remained static as of June 30, 2019.

In an immediate and sustained 200 basis point increase in market rates at June 30, 2019, net interest income for year 1 would increase approximately 7.6 percent, when compared to a flat interest rate scenario.  In year 2 net interest income would increase 14.5 percent, when compared to a flat interest rate scenario.

In an immediate and sustained 100 basis point decrease in market rates at June 30, 2019, net interest income would decline approximately 7.0 percent for year 1 and 14.7 percent for year 2, compared to a flat interest rate scenario.

61

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 June 30, 2019.

	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	$	634,727	$	38,706			6.49	%		13.51	%		121
+100		621,394		25,373			4.26			13.01			71
Flat interest rates		596,021		—			—			12.30			—
-100		555,851		(40,170	)		(6.74	)		11.33			(97	)

(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.

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 June 30, 2019 that have materially affected, or are reasonable likely to materially affect, the Corporation’s internal control over financial reporting.

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

62

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 Company’s risk factors during the six months ended June 30, 2019 from the risk factors disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

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

None.

ITEM 3.  Defaults Upon Senior Securities

None.

ITEM 4.  Mine Safety Disclosures

Not applicable.

ITEM 5.  Other Information

None.

63

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 3.2 of the Registrant’s Current Report on Form 8-K filed on December 20, 2017 (File No. 001-16197).
31.1	Certification of Douglas L. Kennedy, Chief Executive Officer of the Corporation, pursuant to Securities Exchange Act Rule 13a-14(a).
31.2	Certification of Jeffrey J. Carfora, Chief Financial Officer of the Corporation, pursuant to Securities Exchange Act Rule 13a-14(a).
32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Douglas L. Kennedy, Chief Executive Officer of the Corporation and Jeffrey J. Carfora, Chief Financial Officer of the Corporation.
101	Interactive Data File

64

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:  August 8, 2019	By:	/s/ Douglas L. Kennedy
		Douglas L. Kennedy
		President and Chief Executive Officer
DATE:  August 8, 2019	By:	/s/ Jeffrey J. Carfora
		Jeffrey J. Carfora
		Senior Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)
DATE:  August 8, 2019	By:	/s/ Francesco S. Rossi
		Francesco S. Rossi Chief Accounting Officer
		(Principal Accounting Officer)

65

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:  August 8, 2019	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:  August 8, 2019	By:  /s/ Jeffrey J. Carfora
	Name:  Jeffrey J. Carfora
	Title:   Senior Executive Vice President,             Chief Financial Officer

EX-32

Exhibit 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 June 30, 2019 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:	August 8, 2019

/s/ Jeffrey J. Carfora
Name:	Jeffrey J. Carfora
Title:	Senior Executive Vice President
	Chief Financial Officer
Date:	August 8, 2019

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Aug. 01, 2019
Document And Entity Information [Abstract]
Entity Registrant Name	PEAPACK GLADSTONE FINANCIAL CORP
Entity Central Index Key	0001050743
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		19,456,312
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2019
Trading Symbol	PGC
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity File Number	001-16197
Entity Tax Identification Number	223537895
Entity Address, Address Line One	500 Hills Drive
Entity Address, Address Line Two	Suite 300
Entity Address, City or Town	Bedminster
Entity Address, State or Province	New Jersey
Entity Address, Postal Zip Code	07921-0700
City Area Code	908
Local Phone Number	234-0700

XML

CONSOLIDATED STATEMENTS OF CONDITION - USD ($) $ in Thousands		Jun. 30, 2019	Dec. 31, 2018
ASSETS
Cash and due from banks		$ 5,351	$ 5,914
Federal funds sold		101	101
Interest-earning deposits		298,575	154,758
Total cash and cash equivalents		304,027	160,773
Securities available for sale		378,839	377,936
Equity security, at fair value		4,847	4,719
FHLB and FRB stock, at cost		18,338	18,533
Loans held for sale, at fair value		2,343	1,576
Loans held for sale, at lower of cost or fair value		926	3,542
Loans		4,029,339	3,927,931
Less: Allowance for loan and lease losses		39,791	38,504
Net loans		3,989,548	3,889,427
Premises and equipment		20,987	27,408
Accrued interest receivable		11,594	10,814
Bank owned life insurance		45,744	45,353
Goodwill		24,417	24,417
Other intangible assets		7,524	7,982
Finance lease right-of-use assets		5,452
Operating lease right-of-use assets		11,017
Other assets		45,631	45,378
TOTAL ASSETS		4,871,234	4,617,858
Deposits:
Noninterest-bearing demand deposits		544,431	463,926
Interest-bearing deposits:
Checking	[1]	1,388,821	1,247,305
Savings		112,438	114,674
Money market accounts		1,207,358	1,243,369
Certificates of deposit - retail		570,384	510,724
Certificates of deposit - listing service		58,541	79,195
Subtotal deposits		3,881,973	3,659,193
Interest-bearing demand - brokered		180,000	180,000
Certificates of deposit - brokered		33,682	56,147
Total deposits		4,095,655	3,895,340
Federal Home Loan Bank advances		105,000	108,000
Finance lease liabilities		7,985	8,362
Operating lease liabilities		11,269
Subordinated debt, net		83,305	83,193
Deferred tax liabilities, net		15,464	16,029
Accrued expenses and other liabilities		58,668	37,921
TOTAL LIABILITIES		4,377,346	4,148,845
SHAREHOLDERS’ EQUITY
Preferred stock (no par value; authorized 500,000 shares; liquidation preference of $1,000 per share)
Common stock (no par value; stated value $0.83 per share; authorized 42,000,000 shares; issued shares, 19,864,490 at June 30, 2019 and 19,745,840 at December 31, 2018; outstanding shares, 19,456,312 at June 30, 2019 and 19,337,662 at December 31, 2018		16,557	16,459
Surplus		311,428	309,088
Treasury stock at cost, 408,178 shares at both June 30, 2019 and December 31, 2018		(8,988)	(8,988)
Retained earnings		176,495	154,799
Accumulated other comprehensive loss, net of income tax		(1,604)	(2,345)
TOTAL SHAREHOLDERS’ EQUITY		493,888	469,013
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY		$ 4,871,234	$ 4,617,858

[1] Interest-bearing checking includes $453.1 million at June 30, 2019 and $434.5 million at December 31, 2018 of reciprocal balances in the Reich & Tang or Promontory Demand Deposit Marketplace program.

XML

CONSOLIDATED STATEMENTS OF CONDITION (Parenthetical) - $ / shares	Jun. 30, 2019	Dec. 31, 2018
Statement Of Financial Position [Abstract]
Preferred stock, par value	$ 0	$ 0
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	42,000,000	42,000,000
Common stock, shares issued	19,864,490	19,745,840
Common stock, shares outstanding	19,456,312	19,337,662
Treasury stock, shares	408,178	408,178

XML

CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
INTEREST INCOME
Interest and fees on loans	$ 40,595	$ 37,102	$ 81,107	$ 71,769
Interest on investments:
Taxable	2,639	2,072	5,323	3,997
Tax-exempt	91	99	184	208
Interest on loans held for sale	13	6	17	16
Interest on interest-earning deposits	1,265	395	2,535	752
Total interest income	44,603	39,674	89,166	76,742
INTEREST EXPENSE
Interest on savings and interest-bearing deposit accounts	8,554	4,416	16,615	8,135
Interest on certificates of deposit	3,461	2,330	6,695	4,479
Interest on borrowed funds	838	1,155	1,672	1,525
Interest on finance lease liability	97	106	196	213
Interest on subordinated debt	1,223	1,221	2,447	2,442
Subtotal - interest expense	14,173	9,228	27,625	16,794
Interest on interest-bearing demand - brokered	836	804	1,575	1,484
Interest on certificates of deposits - brokered	326	399	691	828
Total interest expense	15,335	10,431	29,891	19,106
NET INTEREST INCOME BEFORE PROVISION FOR LOAN AND LEASE LOSSES	29,268	29,243	59,275	57,636
Provision for loan and lease losses	1,150	300	1,250	1,550
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES	28,118	28,943	58,025	56,086
OTHER INCOME
Wealth management fee income	9,568	8,126	18,742	16,493
Service charges and fees	897	873	1,713	1,704
Bank owned life insurance	326	345	664	681
Gains on loans held for sale at fair value (mortgage banking)	132	79	179	173
Fee income related to loan level, back-to-back swaps	721	900	991	1,152
Gain on sale of SBA loans	573	814	992	845
Other income	740	639	1,346	1,021
Securities gains/(losses), net	69	(36)	128	(114)
Total other income	13,026	11,740	24,755	21,955
OPERATING EXPENSES
Compensation and employee benefits	17,543	15,826	34,699	30,405
Premises and equipment	3,600	3,406	6,988	6,676
FDIC insurance expense	277	625	554	1,205
Other operating expense	4,753	5,084	9,647	9,992
Total operating expenses	26,173	24,941	51,888	48,278
INCOME BEFORE INCOME TAX EXPENSE	14,971	15,742	30,892	29,763
Income tax expense	3,421	3,832	7,917	7,046
NET INCOME	$ 11,550	$ 11,910	$ 22,975	$ 22,717
EARNINGS PER SHARE
Basic	$ 0.59	$ 0.63	$ 1.18	$ 1.21
Diluted	$ 0.59	$ 0.62	$ 1.18	$ 1.20
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic	19,447,155	18,930,893	19,399,071	18,770,492
Diluted	19,568,371	19,098,838	19,528,537	18,996,979

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Statement Of Income And Comprehensive Income [Abstract]
Net income	$ 11,550	$ 11,910	$ 22,975	$ 22,717
Unrealized gains/(losses) on available for sale securities:
Unrealized holding gains/(losses) arising during the period	2,871	(653)	5,159	(3,587)
Tax effect	(695)	159	(1,255)	835
Net of tax	2,176	(494)	3,904	(2,752)
Unrealized gains on cash flow hedges:
Unrealized holding gains/(losses) arising during the period	(2,909)	828	(4,456)	1,569
Reclassification adjustment for amounts included in net income	(31)	(31)	(62)	(62)
Before tax	(2,940)	797	(4,518)	1,507
Tax effect	889	(215)	1,355	(424)
Net of tax	(2,051)	582	(3,163)	1,083
Total other comprehensive income/(loss)	125	88	741	(1,669)
Total comprehensive income	$ 11,675	$ 11,998	$ 23,716	$ 21,048

XML

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Stock [Member]	Surplus [Member]	Treasury Stock [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Loss [Member]
Balance at Dec. 31, 2017	$ 403,678	$ 15,858	$ 283,552	$ (8,988)	$ 114,468	$ (1,212)
Net income	22,717				22,717
Other comprehensive income (loss)	(1,669)					(1,669)
Cumulative adjustment for equity security(ASU 2016-01)					(127)	127
Restricted stock units issued		71	(71)
Restricted stock awards forfeitures		(78)	78
Restricted stock units/awards repurchased on vesting to pay taxes	(1,403)	(33)	(1,370)
Amortization of restricted stock awards/units	2,130		2,130
Cash dividends declared on common stock	(1,798)				(1,798)
Common stock options exercised	102	9	93
Sales of shares (Dividend Reinvestment Program)	12,733	326	12,407
Issuance of shares for Employee Stock Purchase Plan	529	13	516
Issuance of common stock for acquisition		17	(17)
Balance at Jun. 30, 2018	437,019	16,183	297,318	(8,988)	135,260	(2,754)
Balance at Mar. 31, 2018	422,406	16,111	293,830	(8,988)	124,295	(2,842)
Net income	11,910				11,910
Other comprehensive income (loss)	88					88
Restricted stock units issued		1	(1)
Restricted stock awards forfeitures		(1)	1
Restricted stock units/awards repurchased on vesting to pay taxes	(66)	(1)	(65)
Amortization of restricted stock awards/units	1,154		1,154
Cash dividends declared on common stock	(945)				(945)
Common stock options exercised	50	4	46
Sales of shares (Dividend Reinvestment Program)	2,114	62	2,052
Issuance of shares for Employee Stock Purchase Plan	308	7	301
Balance at Jun. 30, 2018	437,019	16,183	297,318	(8,988)	135,260	(2,754)
Balance at Dec. 31, 2018	469,013	16,459	309,088	(8,988)	154,799	(2,345)
Net income	22,975				22,975
Other comprehensive income (loss)	741					741
Cumulative adjustment for leases (ASC 842)	661				661
Restricted stock units issued		109	(109)
Restricted stock units/awards repurchased on vesting to pay taxes	(981)	(30)	(951)
Amortization of restricted stock awards/units	2,865		2,865
Cash dividends declared on common stock	(1,940)				(1,940)
Common stock options exercised	22	1	21
Exercise of warrants		2	(2)
Issuance of shares for Employee Stock Purchase Plan	532	15	517
Issuance of common stock for acquisition		1	(1)
Balance at Jun. 30, 2019	493,888	16,557	311,428	(8,988)	176,495	(1,604)
Balance at Mar. 31, 2019	481,472	16,549	309,722	(8,988)	165,918	(1,729)
Net income	11,550				11,550
Other comprehensive income (loss)	125					125
Restricted stock units issued		1	(1)
Restricted stock units/awards repurchased on vesting to pay taxes	(17)		(17)
Amortization of restricted stock awards/units	1,475		1,475
Cash dividends declared on common stock	(973)				(973)
Common stock options exercised	18		18
Issuance of shares for Employee Stock Purchase Plan	238	7	231
Balance at Jun. 30, 2019	$ 493,888	$ 16,557	$ 311,428	$ (8,988)	$ 176,495	$ (1,604)

XML

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Shares outstanding			19,337,662
Common stock options exercised, shares			1,520
Issuance of shares for Employee Stock Purchase Plan, shares	8,564	9,127	18,740	15,490
Shares outstanding	19,456,312		19,456,312
Common Stock [Member]
Shares outstanding	19,445,363	18,921,114	19,337,662	18,619,634
Restricted stock units issued, shares	1,779	1,583	131,141	85,242
Restricted stock awards forfeitures, shares		(1,267)		(94,034)
Restricted stock units/awards repurchased on vesting to pay taxes, shares	(614)	(1,945)	(35,949)	(40,457)
Cash dividends declared on common stock, per share	$ 0.05	$ 0.05	$ 0.10	$ 0.10
Common stock options exercised, shares	1,220	4,533	1,520	10,683
Common stock options exercised, used to exercise, shares		833		2,374
Common stock options exercised, net of shares used to exercise, shares		3,700		8,309
Exercise of warrants, shares			7,109
Exercise of warrants, used to exercise, shares			4,218
Exercise of warrants, net of shares used to exercise, shares			2,891
Sales of shares (Dividend Reinvestment Program), shares		75,000		392,302
Issuance of shares for Employee Stock Purchase Plan, shares	8,564	9,127	18,740	15,490
Issuance of common stock for acquisition, shares			307	20,826
Shares outstanding	19,456,312	19,007,312	19,456,312	19,007,312

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018
OPERATING ACTIVITIES:
Net income		$ 22,975	$ 22,717
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,523	1,560
Amortization of premium and accretion of discount on securities, net		613	741
Amortization of restricted stock		2,865	2,130
Amortization of intangible assets		458	359
Amortization of subordinated debt costs		112	109
Provision for loan and lease losses		1,250	1,550
Provision for OREO losses		0	204
Deferred tax (benefit)/expense		(620)	1,429
Stock-based compensation and employee stock purchase plan expense		75	112
Fair value adjustment for equity security		(128)	114
Loans originated for sale	[1]	(22,531)	(25,418)
Proceeds from sales of loans held for sale	[1]	23,166	23,609
Gain on loans held for sale	[1]	(1,171)	(1,018)
Gain on OREO sold		0	(26)
Increase in cash surrender value of life insurance, net		(391)	(394)
(Increase)/decrease in accrued interest receivable		(780)	2,250
Decrease in other assets		8,548	4,496
Increase/(decrease) in accrued expenses and other liabilities		8,044	(3,167)
NET CASH PROVIDED BY OPERATING ACTIVITIES		44,008	31,357
INVESTING ACTIVITIES:
Principal repayments, maturities and calls of securities available for sale		96,230	40,189
Redemptions of FHLB & FRB stock		279	49,068
Purchase of securities available for sale		(92,587)	(68,547)
Purchase of FHLB & FRB stock		(84)	(57,223)
Net increase in loans, net of participations sold		(98,986)	(18,389)
Sale of other real estate owned		0	304
Purchase of premises and equipment		(554)	(488)
NET CASH USED IN INVESTING ACTIVITIES		(95,702)	(55,086)
FINANCING ACTIVITIES:
Net increase/(decrease) in deposits		200,315	(175,441)
Net increase in overnight borrowings		0	127,350
Proceeds from Federal Home Loan Bank advances		0	30,000
Repayments of Federal Home Loan Bank advances		(3,000)	(15,000)
Dividends paid on common stock		(1,940)	(1,798)
Exercise of Stock Options, net of stock swaps		22	102
Restricted stock repurchased on vesting to pay taxes		(981)	(1,403)
Sales of common shares (Dividend Reinvestment Program)		0	12,733
Issuance of shares for employee stock purchase plan		532	529
NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES		194,948	(22,928)
Net increase/(decrease) in cash and cash equivalents		143,254	(46,657)
Cash and cash equivalents at beginning of period		160,773	113,447
Cash and cash equivalents at end of period		304,027	66,790
Cash paid during the year for:
Interest		29,954	18,086
Income tax, net		$ 843	$ 964

[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.

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2019

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 audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2018 for Peapack-Gladstone Financial Corporation (the “Corporation” or the “Company”). In the opinion of the management of the Corporation, the accompanying unaudited Consolidated Interim Financial Statements contain all adjustments (consisting solely of normal recurring accruals) necessary to present fairly the financial position as of June 30, 2019, the results of operations comprehensive income and shareholders’ equity for the three and six months ended June 30, 2019 and 2018, shareholders’ equity and cash flow statements for the six months ended June 30, 2019 and 2018. The results of operations for the three and six months ended June 30, 2019 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 financial statements also include the Bank’s wholly-owned subsidiaries, PGB Trust & Investments of Delaware, Peapack Capital Corporation (“PCC”) (formed in the second quarter of 2017), Murphy Capital Management (“MCM”) (acquired in the third quarter of 2017), Quadrant Capital Management (“Quadrant”) (acquired in the fourth quarter of 2017), Lassus Wherley & Associates (“Lassus Wherley”) (acquired in the third quarter of 2018), 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 and their subsidiaries, these footnotes primarily reflect the Bank’s and its subsidiaries’ activities. All significant intercompany balances and transactions have been eliminated from the accompanying consolidated financial statements.

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

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

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

Peapack-Gladstone Bank’s Private Wealth Management Division includes: investment management services for individuals and institutions; personal trust services, including services as executor, trustee, administrator, custodian and guardian; and other financial planning, tax preparation and advisory services. This segment also includes the activity from the Delaware subsidiary, PGB Trust and Investments of Delaware, MCM, Quadrant and Lassus Wherley.  Wealth management fees are primarily earned based upon AUM and are generally assessed on a monthly or quarterly basis on a tiered fee schedule based on the market value of AUM at the end of the period.

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 debt securities are classified as available for sale and are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income/(loss), net of tax, with the exception of the Company’s investment in a CRA investment fund, which is classified as an equity security.  In accordance with ASU 2016-01, “Financial Instruments” (adopted January 1, 2018), unrealized holding gains and losses on equity securities are marked to market through the income statement.

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

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

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

The Bank is also a member of the Federal Reserve Bank 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 on the income statement, are based on the difference between the selling price and the carrying value of the related loan sold.

U.S. Small Business Administration (SBA) loans originated with the intent to sell in the secondary market are carried at the lower of cost or fair value. SBA loans are generally sold with the servicing rights retained. Total SBA loans serviced totaled $43.8 million and $35.1 million as of June 30, 2019 and December 31, 2018, respectively.  SBA loans held for sale totaled $926 thousand and $1.2 million at June 30, 2019 and December 31, 2018, respectively.

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

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

Loans are considered past due when they are not paid within 30 days in accordance with contractual terms. The accrual of income on loans, including impaired loans, is discontinued if, in the opinion of Management, principal or interest is not likely to be paid in accordance with the terms of the loan agreement, or when principal or interest is past due 90 days unless the asset is both well secured and in the process of collection. All interest accrued but not received for loans placed on nonaccrual are reversed against interest income. Payments received on nonaccrual loans are recorded as principal payments. A nonaccrual loan is returned to accrual status only when interest and principal payments are brought current and future payments are reasonably assured, generally when the Bank receives contractual payments for a minimum of six consecutive months. Commercial loans are generally charged off 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 may be returned to accrual status. Nonaccrual mortgage loans are generally charged off to the extent that the value of the underlying collateral does not cover the outstanding principal balance. The majority of the Company’s loans are secured by real estate in New Jersey 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 probable losses in the loan portfolio.  The process to determine reserves utilizes analytic tools and Management judgment and is reviewed on a quarterly basis. When Management is reasonably certain that a loan balance is not fully collectable, an impairment analysis is completed whereby a specific reserve may be established or a full or partial charge off is recorded against the allowance.  Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the size and composition of the portfolio, information about specific borrower situations, estimated collateral values, economic conditions and other factors. Allocations of the allowance may be made for specific loans via a specific reserve, but the entire allowance is available for any loan that, in Management’s judgment, should be charged off.

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

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

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

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 Company’s historical loss experience adjusted for current factors. The historical loss experience is determined by portfolio segment and is based on the actual loss history experience by the Company on a weighted average basis over the previous three years. This actual loss experience is adjusted by other qualitative factors based on the risks present for each portfolio segment. 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 staffing and experience; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations.  For loans that are graded as non-impaired, the Company allocates a higher general reserve percentage than pass-rated loans using a multiple that is calculated annually through a migration analysis.  At both June 30, 2019 and December 31, 2018, the multiple was 2.25 times for non-impaired special mention loans and 3.5 times for non-impaired substandard 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 values could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential loss exposure for the Bank.

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

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

Multifamily and Commercial Real Estate Loans.  The Bank provides mortgage loans for multifamily properties (i.e. buildings which have five or more residential units) and other commercial real estate that is either owner occupied or managed as an investment property (non-owner occupied) in the Tri-State area and Pennsylvania. Commercial real estate properties primarily include retail buildings/shopping centers, hotels, office/medical buildings and industrial/warehouse space. Some properties are considered “mixed use” as they are a combination of building types, such as a building with retail space on the ground floor and either residential apartments or office suites on the upper floors. Multifamily loans are expected to be repaid from the cash flows of the underlying property so the collective amount of rents must be sufficient to cover all operating expenses, property management and maintenance, taxes and debt service. Increases in vacancy rates, interest rates or other changes in general economic conditions can have an impact on the borrower and its ability to repay the loan. Commercial real estate loans are generally considered to have a higher degree of credit risk than multifamily loans as they may be dependent on the ongoing success and operating viability of a fewer number of tenants who are occupying the property and who may have a greater degree of exposure to economic conditions.

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

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

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

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

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

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

As the rate implicit in the lease is not readily determinable, the incremental collateralized borrowing rate is used to determine the present value of lease payments. This rate gives consideration to the applicable FHLB collateralized borrowing rates and is based on the information available at the commencement date. The Company has elected to apply the short-term lease measurement and recognition exemption to leases with an initial term of 12 months or less; therefore, these leases are not recorded on the Company’s statement of condition, but rather, lease expense is recognized over the lease term on a straight-line basis. The Company’s lease agreements may include options to extend or terminate the lease. The Company’s decision to exercise renewal options is based on an assessment of its current business needs and market factors at the time of the renewal.  The Company maintains certain property and equipment under direct financing and operating leases.  Substantially all of the leases in which the Company is the lessee are comprised of real estate property for branches and office space and are classified as operating leases. The Company has two existing finance leases (previously classified as a capital lease and included in premises and equipment on our statement of condition at December 31, 2018) for the Company’s administration building and one branch location.  Topic 842 did not materially impact the accounting for these capital leases.

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

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

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

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

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

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

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 authorized but unissued shares to satisfy option exercises.

Upon adoption of 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 six months ended June 30, 2019 were as follows:

						Weighted
				Weighted		Average	Aggregate
				Average		Remaining	Intrinsic
	Number of			Exercise		Contractual	Value
	Options			Price		Term	(In thousands)
Balance, January 1, 2019		91,310		$	13.63
Exercised during 2019		(1,520	)		14.28
Expired during 2019		(630	)		22.57
Forfeited during 2019		(20,000	)		13.07
Balance, June 30, 2019		69,160		$	13.69	2.33 years	$	998
Vested and expected to vest		69,160		$	13.69	2.33 years	$	998
Exercisable at June 30, 2019		69,160		$	13.69	2.33 years	$	998

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 second quarter of 2019 and the exercise price, multiplied by the number of in-the-money options). The Company’s closing stock price on June 30, 2019 was $28.12.

There were no stock options granted during the three or six months ended June 30, 2019.  

The Company has previously granted performance-based and service-based restricted stock awards/units. Service-based awards/units vest ratably over a three or five-year period.  There were 729 service-based restricted stock units granted in the second quarter of 2019 with a three-year vesting period and there were 27,925 service-based restricted stock units granted in the second quarter of 2019 with a five-year vesting period.

The performance-based awards are dependent upon the Company meeting certain performance criteria and, to the extent the performance criteria are met, will cliff vest at the end of the performance period which is generally three years.  There were no performance-based restricted stock units granted in the second quarter of 2019.  

Changes in non-vested shares dependent on performance criteria for the six months ended June 30, 2019 were as follows:

			Weighted
			Average
	Number of		Grant Date
	Shares		Fair Value
Balance, January 1, 2019		42,998	$	35.33
Granted during 2019		47,770		26.34
Balance, June 30, 2019		90,768	$	30.60

Changes in service-based restricted stock awards/units for the six months ended June 30, 2019 were as follows:

				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value
Balance, January 1, 2019		366,541		$	30.64
Granted during 2019		223,396			26.51
Vested during 2019		(140,178	)		27.44
Forfeited during 2019		(3,214	)		31.35
Balance, June 30, 2019		446,545		$	29.98

As of June 30, 2019, there was $46 thousand of total unrecognized compensation cost related to service-based awards.  That cost is expected to be recognized over a weighted average period of 0.34 years.  As of June 30, 2019, there was $12.8 million of total unrecognized compensation cost related to service-based and performance-based units.  That cost is expected to be recognized over a weighted average period of 1.31 years. Stock compensation expense recorded for the second quarters of 2019 and 2018 totaled $1.5 million and $1.3 million, respectively.  Stock compensation expense recorded for the six months ended June 30, 2019 and 2018 totaled $2.9 million and $2.4 million, respectively.

Employee Stock Purchase Plan (“ESPP”): In 2014, the shareholders of the Company approved the ESPP.  The ESPP provides for the granting of rights to purchase 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 Period”).  An amendment to the ESPP plan has changed the offering period to one twelve-month period to commence in the third quarter of 2019.  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 the 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 purchase right is determined using the Black-Scholes option pricing model.  

The Company recorded $30 thousand and $59 thousand of expense in salaries and employee benefits expense for the three months ended June 30, 2019 and 2018, respectively, related to the ESPP.  Total shares issued under the ESPP during the second quarters of 2019 and 2018 were 8,564 and 9,127, respectively.

The Company recorded $75 thousand and $112 thousand of expense in salaries and employee benefits expense for the six months ended June 30, 2019 and 2018, respectively related to the ESPP.  Total shares issued under the ESPP for the six months ended June 30, 2019 and 2018 were 18,740 and 15,490, respectively.

Management believes the Company to be well capitalized and has more than enough capital for current and future operational needs.  Accordingly, Management has considered various capital management techniques to utilize the capital. Therefore, the Company has chosen to move share purchases for the ESPP from a quarterly basis to an annual basis, with the next purchase occurring in May 2020.

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				Six Months Ended
	June 30,				June 30,
(Dollars in thousands, except per share data)	2019		2018		2019		2018
Net income available to common shareholders	$	11,550	$	11,910	$	22,975	$	22,717
Basic weighted-average shares outstanding		19,447,155		18,930,893		19,399,071		18,770,492
Plus: common stock equivalents		121,216		167,945		129,466		226,487
Diluted weighted-average shares outstanding		19,568,371		19,098,838		19,528,537		18,996,979
Net income per share
Basic	$	0.59	$	0.63	$	1.18	$	1.21
Diluted		0.59		0.62		1.18		1.20

For the three and six months ended June 30, 2019, stock options and restricted stock units totaling 128,634 and 297,828 were not included in the computation of diluted earnings per share because they were antidilutive.  For the three and six months ended June 30, 2018, all stock options and warrants were included in the computation of diluted earnings per share because they were all dilutive, meaning that the exercise price of the stock option was greater than the average market price for the period.  

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 2015 or by New Jersey tax authorities for years prior to 2014.  

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

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

Restrictions on Cash: A large portion of cash on hand or on deposit with the Federal Reserve Bank 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 acquiree (if any), over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.  Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized but tested for impairment at least annually or more frequently if events and circumstances exist that indicate that a goodwill impairment test should be performed. The Company has selected September 30 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 assembled workforce are the intangible assets with an indefinite life on our balance sheet.

Other intangible assets, which primarily consist of customer relationship intangible assets arising from acquisition, are amortized on an accelerated basis over their estimated useful lives, which range from 5 to 15 years.

XML

INVESTMENT SECURITIES AVAILABLE FOR SALE

6 Months Ended

Jun. 30, 2019

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 June 30, 2019 and December 31, 2018 follows:

	June 30, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
U.S. government-sponsored agencies	$	71,719	$	104	$	(32	)	$	71,791
Mortgage-backed securities –residential		282,924		1,972		(959	)		283,937
SBA pool securities		3,596		—		(9	)		3,587
State and political subdivisions		16,415		48		(20	)		16,443
Corporate bond		3,000		81		—			3,081
Total	$	377,654	$	2,205	$	(1,020	)	$	378,839

	December 31, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
U.S. government-sponsored agencies	$	102,915	$	82	$	(984	)	$	102,013
Mortgage-backed securities – residential		254,383		418		(3,439	)		251,362
SBA pool securities		3,883		—		(44	)		3,839
State and political subdivisions		17,729		27		(146	)		17,610
Corporate bond		3,000		112		—			3,112
Total	$	381,910	$	639	$	(4,613	)	$	377,936

The following tables present the Company’s available for sale securities in a continuous unrealized loss position and the approximate fair value of these investments as of June 30, 2019 and December 31, 2018.

	June 30, 2019
	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	$	4,496	$	(4	)	$	11,969	$	(28	)	$	16,465	$	(32	)
Mortgage-backed securities-residential		15,433		(23	)		103,844		(936	)		119,277		(959	)
SBA pool securities		—		—			3,587		(9	)		3,587		(9	)
State and political subdivisions		—		—			4,111		(20	)		4,111		(20	)
Total	$	19,929	$	(27	)	$	123,511	$	(993	)	$	143,440	$	(1,020	)

	December 31, 2018
	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	$	18,840	$	(103	)	$	33,600	$	(881	)	$	52,440	$	(984	)
Mortgage-backed securities-residential		51,697		(303	)		136,130		(3,136	)		187,827		(3,439	)
SBA pool securities		—		—			3,839		(44	)		3,839		(44	)
State and political subdivisions		421		(1	)		7,274		(145	)		7,695		(146	)
Total	$	70,958	$	(407	)	$	180,843	$	(4,206	)	$	251,801	$	(4,613	)

Management believes that the unrealized losses on investment securities available for sale are temporary and are due to interest rate fluctuations and/or volatile market conditions rather than the credit worthiness of the issuers.  As of June 30, 2019, 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.

During the first quarter of 2018, the Company adopted ASU 2016-01 “Financial Instruments” which resulted in the reclassification of the Company’s investment in the CRA investment fund from available for sale to an equity security. This security had a gain of $69 thousand and $128 thousand for the three and six months ended June 30, 2019.  This amount is included in securities gains/(losses) on the Consolidated Statements of Income.

XML

LOANS AND LEASES

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

LOANS AND LEASES

3.  LOANS AND LEASES

Loans outstanding, excluding those held for sale, by general ledger classification, as of June 30, 2019 and December 31, 2018, consisted of the following:

			% of					% of
	June 30,		Totals			December 31,		Total
(Dollars in thousands)	2019		Loans			2018		Loans
Residential mortgage	$	570,583		14.16	%	$	571,570		14.55	%
Multifamily mortgage		1,129,476		28.03			1,135,805		28.92
Commercial mortgage		694,674		17.24			702,165		17.88
Commercial loans (including equipment financing)		1,517,665		37.67			1,397,057		35.57
Home equity lines of credit		62,522		1.55			62,191		1.58
Consumer loans, including fixed rate home equity loans		53,995		1.34			58,678		1.49
Other loans		424		0.01			465		0.01
Total loans	$	4,029,339		100.00	%	$	3,927,931		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 June 30, 2019 and December 31, 2018:

			% of					% of
	June 30,		Totals			December 31,		Total
(Dollars in thousands)	2019		Loans			2018		Loans
Primary residential mortgage	$	599,450		14.89	%	$	600,891		15.31	%
Home equity lines of credit		62,522		1.55			62,191		1.58
Junior lien loan on residence		7,397		0.18			7,418		0.19
Multifamily property		1,129,476		28.06			1,135,805		28.94
Owner-occupied commercial real estate		249,421		6.20			261,193		6.65
Investment commercial real estate		1,017,505		25.28			1,001,918		25.53
Commercial and industrial		717,851		17.83			616,838		15.72
Lease financing		184,182		4.58			172,643		4.40
Farmland/agricultural production		143		—			149		0.01
Commercial construction loans		125		—			86		0.01
Consumer and other loans		57,415		1.43			65,180		1.66
Total loans	$	4,025,487		100.00	%	$	3,924,312		100.00	%
Net deferred costs		3,852					3,619
Total loans including net deferred costs	$	4,029,339				$	3,927,931

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 June 30, 2019 and December 31, 2018:

	June 30, 2019
	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	$	8,791	$	248	$	590,659	$	2,809	$	599,450	$	3,057
Home equity lines of credit		22		—		62,500		155		62,522		155
Junior lien loan on residence		29		—		7,368		15		7,397		15
Multifamily property		—		—		1,129,476		5,744		1,129,476		5,744
Owner-occupied commercial real estate		1,451		—		247,970		2,497		249,421		2,497
Investment commercial real estate		18,091		—		999,414		14,650		1,017,505		14,650
Commercial and industrial		6,557		1,000		711,294		10,463		717,851		11,463
Lease financing		—		—		184,182		1,888		184,182		1,888
Farmland/agricultural production		—		—		143		2		143		2
Commercial construction loans		—		—		125		1		125		1
Consumer and other loans		—		—		57,415		319		57,415		319
Total ALLL	$	34,941	$	1,248	$	3,990,546	$	38,543	$	4,025,487	$	39,791

	December 31, 2018
	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	$	9,518	$	262	$	591,373	$	3,244	$	600,891	$	3,506
Home equity lines of credit		255		—		61,936		164		62,191		164
Junior lien loan on residence		36		—		7,382		15		7,418		15
Multifamily property		1,262		—		1,134,543		5,959		1,135,805		5,959
Owner-occupied commercial real estate		1,574		—		259,619		2,614		261,193		2,614
Investment commercial real estate		18,655		—		983,263		14,248		1,001,918		14,248
Commercial and industrial		—		—		616,838		9,839		616,838		9,839
Lease financing		—		—		172,643		1,772		172,643		1,772
Farmland/agricultural production		—		—		149		2		149		2
Commercial construction loans		—		—		86		1		86		1
Consumer and other loans		—		—		65,180		384		65,180		384
Total ALLL	$	31,300	$	262	$	3,893,012	$	38,242	$	3,924,312	$	38,504

Impaired loans include nonaccrual loans of $31.2 million at June 30, 2019 and $25.7 million at December 31, 2018. Impaired loans also include performing TDR loans of $3.8 million at June 30, 2019 and $4.3 million at December 31, 2018.  At June 30, 2019, the allowance allocated to TDR loans totaled $248 thousand, of which $156 thousand was allocated to nonaccrual loans.  At December 31, 2018, the allowance allocated to TDR loans totaled $262 thousand of which $161 thousand was allocated to nonaccrual loans.  All accruing TDR loans were paying in accordance with restructured terms as of June 30, 2019.  The Company has not committed to lend additional amounts as of June 30, 2019 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 June 30, 2019 and December 31, 2018 (The average impaired loans on the following tables represent year to date impaired loans.):

	June 30, 2019
	Unpaid						Average
	Principal		Recorded		Specific		Impaired
(In thousands)	Balance		Investment		Reserves		Loans
With no related allowance recorded:
Primary residential mortgage	$	9,111	$	7,797	$	—	$	8,002
Owner-occupied commercial real estate		2,684		1,451		—		1,593
Investment commercial real estate		20,041		18,091		—		16,829
Home equity lines of credit		25		22		—		151
Junior lien loan on residence		98		29		—		34
Total loans with no related allowance	$	31,959	$	27,390	$	—	$	26,609
With related allowance recorded:
Primary residential mortgage	$	994	$	994	$	248	$	1,047
Commercial and industrial		6,557		6,557		1,000		1,093
Total loans with related allowance	$	7,551	$	7,551	$	1,248	$	2,140
Total loans individually evaluated for Impairment	$	39,510	$	34,941	$	1,248	$	28,749

	December 31, 2018
	Unpaid						Average
	Principal		Recorded		Specific		Impaired
(In thousands)	Balance		Investment		Reserves		Loans
With no related allowance recorded:
Primary residential mortgage	$	9,789	$	8,502	$	—	$	8,042
Owner-occupied commercial real estate		2,741		1,574		—		2,025
Investment commercial real estate		20,179		18,655		—		13,999
Home equity lines of credit		257		255		—		123
Junior lien loan on residence		102		36		—		45
Multifamily property		1,262		1,262		—		105
Total loans with no related allowance	$	34,330	$	30,284	$	—	$	24,339
With related allowance recorded:
Primary residential mortgage	$	1,016	$	1,016	$	262	$	1,144
Total loans with related allowance	$	1,016	$	1,016	$	262	$	1,144
Total loans individually evaluated for impairment	$	35,346	$	31,300	$	262	$	25,483

Interest income recognized on impaired loans for the quarters ended June 30, 2019 and 2018 was not material.  The Company did not recognize any income on nonaccruing impaired loans for the three and six months ended June 30, 2019 and 2018.

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 June 30, 2019 and December 31, 2018:

	June 30, 2019
			Loans Past Due
			Over 90 Days
			And Still
(In thousands)	Nonaccrual		Accruing Interest
Primary residential mortgage	$	5,019	$	—
Home equity lines of credit		3		—
Junior lien loan on residence		29		—
Owner-occupied commercial real estate		1,451		—
Investment commercial real estate		18,091		—
Commercial and industrial		6,557		—
Total	$	31,150	$	—

	December 31, 2018
			Loans Past Due
			Over 90 Days
			And Still
(In thousands)	Nonaccrual		Accruing Interest
Primary residential mortgage	$	5,215	$	—
Home equity lines of credit		235		—
Junior lien loan on residence		36		—
Owner-occupied commercial real estate		1,574		—
Investment commercial real estate		18,655		—
Total	$	25,715	$	—

The following tables present the aging of the recorded investment in past due loans as of June 30, 2019 and December 31, 2018 by class of loans, excluding nonaccrual loans:

	June 30, 2019
	30-59		60-89		Greater Than
	Days		Days		90 Days		Total
(In thousands)	Past Due		Past Due		Past Due		Past Due
Primary residential mortgage	$	—	$	105	$	—	$	105
Owner-occupied commercial real estate		—		242		—		242
Commercial construction loans		85		—		—		85
Total	$	85	$	347	$	—	$	432

	December 31, 2018
	30-59		60-89		Greater Than
	Days		Days		90 Days		Total
(In thousands)	Past Due		Past Due		Past Due		Past Due
Primary residential mortgage	$	606	$	491	$	—	$	1,097
Consumer and other loans		2		—		—		2
Total	$	608	$	491	$	—	$	1,099

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, 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:

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

• All leveraged loans of $1,000,000 or greater;

• At least two borrowing relationships managed by each commercial banker;

• Any new Regulation “O” loan commitments over $1,000,000;

• No borrower with commitments of less than $250,000;

• 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 June 30, 2019, 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	$	589,731	$	870	$	8,849	$	—
Home equity lines of credit		62,500		—		22		—
Junior lien loan on residence		7,368		—		29		—
Multifamily property		1,127,545		1,586		345		—
Owner-occupied commercial real estate		242,929		-		6,492		—
Investment commercial real estate		966,813		18,024		32,668		—
Commercial and industrial		701,916		8,205		7,730		—
Lease financing		184,182		—		—		—
Farmland/agricultural production		143		—		—		—
Commercial construction loans		39		86		—		—
Consumer and other loans		57,415		—		—		—
Total	$	3,940,581	$	28,771	$	56,135	$	—

As of December 31, 2018, 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	$	590,372	$	943	$	9,576	$	—
Home equity lines of credit		61,936		—		255		—
Junior lien loan on residence		7,382		—		36		—
Multifamily property		1,130,926		3,263		1,616		—
Owner-occupied commercial real estate		255,417		249		5,527		—
Investment commercial real estate		948,300		20,756		32,862		—
Commercial and industrial		608,262		417		8,159		—
Lease financing		172,643		—		—		—
Farmland/agricultural production		149		—		—		—
Commercial construction loans		—		86		—		—
Consumer and other loans		64,946		—		234		—
Total	$	3,840,333	$	25,714	$	58,265	$	—

At June 30, 2019, $34.9 million of substandard loans were also considered impaired, compared to December 31, 2018, when $31.2 million of substandard loans were also impaired.

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

	April 1,										June 30,
	2019										2019
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	3,477	$	(80	)	$	9	$	(349	)	$	3,057
Home equity lines of credit		152		—			3		—			155
Junior lien loan on residence		15		—			—		—			15
Multifamily property		5,768		—			—		(24	)		5,744
Owner-occupied commercial real estate		2,534		—			64		(101	)		2,497
Investment commercial real estate		14,410		—			—		240			14,650
Commercial and industrial		10,185		—			5		1,273			11,463
Lease financing		1,803		—			—		85			1,888
Farmland/agricultural production		2		—			—		—			2
Commercial construction loans		1		—			—		—			1
Consumer and other loans		306		(14	)		1		26			319
Total ALLL	$	38,653	$	(94	)	$	82	$	1,150		$	39,791

The activity in the allowance for loan and lease losses for the three months ended June 30, 2018 is summarized below:

	April 1,										June 30,
	2018										2018
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	4,403	$	—		$	139	$	(160	)	$	4,382
Home equity lines of credit		192		—			2		(4	)		190
Junior lien loan on residence		16		—			46		(45	)		17
Multifamily property		9,140		—			—		(881	)		8,259
Owner-occupied commercial real estate		2,364		(64	)		—		225			2,525
Investment commercial real estate		12,367		—			—		1,292			13,659
Commercial and industrial		7,753		(46	)		6		(357	)		7,356
Lease financing		1,036		—			—		275			1,311
Farmland/agricultural production		2		—			—		—			2
Commercial construction loans		1		—			—		—			1
Consumer and other loans		422		(14	)		1		(45	)		364
Total ALLL	$	37,696	$	(124	)	$	194	$	300		$	38,066

The activity in the allowance for loan and lease losses for the six months ended June 30, 2019 is summarized below:

	January 1,										June 30,
	2019										2019
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	3,506	$	(80	)	$	51	$	(420	)	$	3,057
Home equity lines of credit		164		—			5		(14	)		155
Junior lien loan on residence		15		—			11		(11	)		15
Multifamily property		5,959		—			—		(215	)		5,744
Owner-occupied commercial real estate		2,614		—			64		(181	)		2,497
Investment commercial real estate		14,248		—			—		402			14,650
Commercial and industrial		9,839		—			9		1,615			11,463
Lease financing		1,772		—			—		116			1,888
Farmland/agricultural production		2		—			—		—			2
Commercial construction loans		1		—			—		—			1
Consumer and other loans		384		(25	)		2		(42	)		319
Total ALLL	$	38,504	$	(105	)	$	142	$	1,250		$	39,791

The activity in the allowance for loan and lease losses for the six months ended June 30, 2018 is summarized below:

	January 1,										June 30,
	2018										2018
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	4,085	$	(77	)	$	139	$	235		$	4,382
Home equity lines of credit		221		—			4		(35	)		190
Junior lien loan on residence		12		—			55		(50	)		17
Multifamily property		10,007		—			—		(1,748	)		8,259
Owner-occupied commercial real estate		2,385		(64	)		66		138			2,525
Investment commercial real estate		11,933		—			—		1,726			13,659
Commercial and industrial		6,563		(46	)		22		817			7,356
Lease financing		884		—			—		427			1,311
Farmland/agricultural production		—		—			—		2			2
Commercial construction loans		1		—			—		—			1
Consumer and other loans		349		(25	)		2		38			364
Total ALLL	$	36,440	$	(212	)	$	288	$	1,550		$	38,066

Troubled Debt Restructurings:

The Company has allocated $248 thousand and $262 thousand of specific reserves on TDRs to customers whose loan terms have been modified in TDRs as of June 30, 2019 and December 31, 2018, 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; the maturity date was extended; or some other modification or extension occurred which would not be readily available in the market.

There were no loans modified as TDRs during the three months and six months ended June 30, 2019.

The following table presents loans by class modified as TDRs during the three-month period ended June 30, 2018:

			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Contracts		Investment		Investment
Investment commercial real estate		1	$	15,351	$	15,351
Total		1	$	15,351	$	15,351

The following table presents loans by class modified as TDRs during the six-month period ended June 30, 2018:

			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Contracts		Investment		Investment
Investment commercial real estate		1	$	15,351	$	15,351
Total		1	$	15,351	$	15,351

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

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 six months ended June 30, 2019.

The following table presents loans by class modified as TDRs that failed to comply with the modified terms in the twelve months following modification and resulted in a payment default at June 30, 2018:

	Number of		Recorded
(Dollars in thousands)	Contracts		Investment
Primary residential mortgage		1	$	336
Total		1	$	336

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

XML

DEPOSITS

6 Months Ended

Jun. 30, 2019

Deposits [Abstract]

DEPOSITS

4.  DEPOSITS

Certificates of deposit, excluding brokered certificates of deposit over $250,000, totaled $172.5 million and $160.3 million at June 30, 2019 and December 31, 2018, respectively.

The following table sets forth the details of total deposits as of June 30, 2019 and December 31, 2018:

	June 30,				December 31,
	2019				2018
(Dollars in thousands)
Noninterest-bearing demand deposits	$	544,431	13.29	%	$	463,926	11.91	%
Interest-bearing checking (1)		1,388,821	33.91			1,247,305	32.02
Savings		112,438	2.75			114,674	2.94
Money market		1,207,358	29.48			1,243,369	31.92
Certificates of deposit - retail		570,384	13.93			510,724	13.12
Certificates of deposit - listing service		58,541	1.43			79,195	2.03
Subtotal deposits		3,881,973	94.79			3,659,193	93.94
Interest-bearing demand - Brokered		180,000	4.39			180,000	4.62
Certificates of deposit - Brokered		33,682	0.82			56,147	1.44
Total deposits	$	4,095,655	100.00	%	$	3,895,340	100.00	%

(1) Interest-bearing checking includes $453.1 million at June 30, 2019 and $434.5 million at December 31, 2018 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 June 30, 2019 are as follows:

(In thousands)
2019	$	228,856
2020		270,032
2021		65,373
2022		36,185
2023		11,600
Over 5 Years		50,561
Total	$	662,607

XML

FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

6 Months Ended

Jun. 30, 2019

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 $105.0 million with a weighted average interest rate of 3.20 percent and $108.0 million with a weighted average interest rate of 3.17 percent at June 30, 2019 and December 31, 2018, respectively.

At June 30, 2019, advances totaling $105.0 million with a weighted average interest rate of 3.20 percent had fixed maturity dates. The fixed maturity date advances at December 31, 2018 totaled $108.0 million with a weighted average interest rate of 3.17 percent.  The fixed rate advances are secured by blanket pledges of certain 1-4 family residential mortgages totaling $350.5 million, multifamily mortgages totaling $649.9 million and securities totaling $44.0 million at June 30, 2019, while at December 31, 2018, the fixed rate advances are secured by blanket pledges of certain 1-4 family residential mortgages totaling $496.1 million, multifamily mortgages totaling $1.0 billion and securities totaling $58.5 million.

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

(In thousands)
2021	$	60,000
2022		20,000
2023		25,000
Total	$	105,000

There were no overnight borrowings with the FHLB as of June 30, 2019 and December 31, 2018.  At June 30, 2019, unused short-term overnight borrowing commitments totaled $1.4 billion from FHLB, $22.0 million from correspondent banks and $1.4 billion at the Federal Reserve Bank of New York.

XML

BUSINESS SEGMENTS

6 Months Ended

Jun. 30, 2019

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

Private Wealth Management Division

Peapack-Gladstone Bank’s Private Wealth Management Division, including PGB Trust & Investments of Delaware, MCM, Quadrant and Lassus Wherley, includes investment management services provided for individuals and institutions; personal trust services, including services as executor, trustee, administrator, custodian and guardian, and other financial planning, tax preparation and advisory services.

The following tables present the statements of income and total assets for the Corporation’s reportable segments for the three and six months ended June 30, 2019 and 2018.

	Three Months Ended June 30, 2019
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	27,934	$	1,334	$	29,268
Noninterest income		3,151		9,875		13,026
Total income		31,085		11,209		42,294
Provision for loan and lease losses		1,150		—		1,150
Compensation and benefits		12,685		4,858		17,543
Premises and equipment expense		3,046		554		3,600
FDIC expense		277		—		277
Other noninterest expense		2,553		2,200		4,753
Total noninterest expense		19,711		7,612		27,323
Income before income tax expense		11,374		3,597		14,971
Income tax expense		2,581		840		3,421
Net income	$	8,793	$	2,757	$	11,550

	Three Months Ended June 30, 2018
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	27,953	$	1,290	$	29,243
Noninterest income		3,353		8,387		11,740
Total income		31,306		9,677		40,983
Provision for loan and lease losses		300		—		300
Compensation and benefits		11,932		3,894		15,826
Premises and equipment expense		2,982		424		3,406
FDIC Expense		625		—		625
Other noninterest expense		3,145		1,939		5,084
Total noninterest expense		18,984		6,257		25,241
Income before income tax expense		12,322		3,420		15,742
Income tax expense		2,997		835		3,832
Net income	$	9,325	$	2,585	$	11,910

	Six Months Ended June 30, 2019
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	56,500	$	2,775	$	59,275
Noninterest income		5,430		19,325		24,755
Total income		61,930		22,100		84,030
Provision for loan and lease losses		1,250		—		1,250
Compensation and benefits		24,682		10,017		34,699
Premises and equipment expense		5,971		1,017		6,988
FDIC expense		554		—		554
Other noninterest expense		5,311		4,336		9,647
Total noninterest expense		37,768		15,370		53,138
Income before income tax expense		24,162		6,730		30,892
Income tax expense		6,192		1,725		7,917
Net income	$	17,970	$	5,005	$	22,975
Total assets at period end	$	4,791,902	$	79,332	$	4,871,234

	Six Months Ended June 30, 2018
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	54,801	$	2,835	$	57,636
Noninterest income		4,980		16,975		21,955
Total income		59,781		19,810		79,591
Provision for loan and lease losses		1,550		—		1,550
Compensation and benefits		22,263		8,142		30,405
Premises and equipment expense		5,821		855		6,676
FDIC Expense		1,205		—		1,205
Other noninterest expense		5,952		4,040		9,992
Total noninterest expense		36,791		13,037		49,828
Income before income tax expense		22,990		6,773		29,763
Income tax expense		5,442		1,604		7,046
Net income	$	17,548	$	5,169	$	22,717
Total assets at period end	$	4,208,731	$	56,443	$	4,265,174

XML

FAIR VALUE

6 Months Ended

Jun. 30, 2019

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 an 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 estimated costs to sell. Fair values are based on recent real estate appraisals. These appraisals may use a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by Management. Once received, a third party conducts a review of the appraisal for compliance with the Uniform Standards of Professional Appraisal Practice and appropriate analysis methods for the type of property. Subsequently, a member of the Credit Department reviews the assumptions and approaches utilized in the appraisal, as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. Appraisals on collateral dependent impaired loans and other real estate owned (consistent for all loan types) are obtained on an annual basis, unless a significant change in the market or other factors warrants a more frequent appraisal. On an annual basis, Management compares the actual selling price of any collateral that has been sold to the most recent appraised value to determine what additional adjustment should be made to the appraisal value to arrive at fair value for other properties. The most recent analysis performed indicated that a discount up to 15 percent should be applied to appraisals on properties. The discount is determined based on the nature of the underlying properties, aging of appraisals and other factors. For each collateral-dependent impaired loan, we consider other factors, such as certain indices or other market information, as well as property specific circumstances to determine if an adjustment to the appraised value is needed. In situations where there is evidence of change in value, the Bank will determine if there is a need for an adjustment to the specific reserve on the collateral dependent impaired loans. When the Bank applies an interim adjustment, it generally shows the adjustment as an incremental specific reserve against the loan until it has received the full updated appraisal. All collateral-dependent impaired loans and other real estate owned valuations were supported by an appraisal less than 12 months old or in the process of obtaining an appraisal as of June 30, 2019.

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		Significant
				Markets For		Other			Significant
				Identical		Observable			Unobservable
	June 30,			Assets		Inputs			Inputs
(In thousands)	2019			(Level 1)		(Level 2)			(Level 3)
Assets:
Available for sale:
U.S. government-sponsored agencies	$	71,791		$	—	$	71,791		$	—
Mortgage-backed securities-residential		283,937			—		283,937			—
SBA pool securities		3,587			—		3,587			—
State and political subdivisions		16,443			—		16,443			—
Corporate bond		3,081			—		3,081			—
CRA investment fund		4,847			4,847		—			—
Loans held for sale, at fair value		2,343			—		2,343			—
Derivatives:
Cash flow hedges		175			—		175			—
Loan level swaps		30,569			—		30,569			—
Total	$	416,773		$	4,847	$	411,926		$	—
Liabilities:
Derivatives:
Cash flow hedges	$	(4,074	)	$	—	$	(4,074	)	$	—
Loan level swaps		(30,569	)		—		(30,569	)		—
Total	$	(34,643	)	$	—	$	(34,643	)	$	—

Assets Measured on a Recurring Basis

				Fair Value Measurements Using
				Quoted
				Prices in
				Active		Significant
				Markets For		Other			Significant
				Identical		Observable			Unobservable
	December 31,			Assets		Inputs			Inputs
(In thousands)	2018			(Level 1)		(Level 2)			(Level 3)
Assets:
Securities available for sale:
U.S. government-sponsored agencies	$	102,013		$	—	$	102,013		$	—
Mortgage-backed securities-residential		251,362			—		251,362			—
SBA pool securities		3,839			—		3,839			—
State and political subdivisions		17,610			—		17,610			—
Corporate bond		3,112			—		3,112			—
CRA investment fund		4,719			4,719		—			—
Loans held for sale, at fair value		1,576			—		1,576			—
Derivatives:
Cash flow hedges		1,657			—		1,657			—
Loan level swaps		9,689			—		9,689			—
Total	$	395,577		$	4,719	$	390,858		$	—
Liabilities:
Derivatives:
Cash flow hedges	$	(849	)	$	—	$	(849	)	$	—
Loan level swaps		(9,689	)		—		(9,689	)		—
Total	$	(10,538	)	$	—	$	(10,538	)	$	—

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 June 30, 2019 and December 31, 2018.

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

(In thousands)	June 30, 2019		December 31, 2018
Residential loans contractual balance	$	2,306	$	1,552
Fair value adjustment		37		24
Total fair value of residential loans held for sale	$	2,343	$	1,576

There were no transfers between Level 1 and Level 2 during the three and six months ended June 30, 2019.

 There were no loans measured for impairment using the fair value of collateral as of June 30, 2019 and December 31, 2018.  

The carrying amounts and estimated fair values of financial instruments at June 30, 2019 are as follows:

			Fair Value Measurements at June 30, 2019 using
	Carrying
(In thousands)	Amount		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	304,027	$	304,027	$	—	$	—	$	304,027
Securities available for sale		378,839		—		378,839		—		378,839
CRA investment fund		4,847		4,847		—		—		4,847
FHLB and FRB stock		18,338		—		—		—	N/A
Loans held for sale, at fair value		2,343		—		2,343		—		2,343
Loans held for sale, at lower of cost or fair value		926		—		1,000		—		1,000
Loans, net of allowance for loan and lease losses		3,989,548		—		—		3,946,808		3,946,808
Accrued interest receivable		11,594		—		1,708		9,886		11,594
Cash flow hedges		175		—		175		—		175
Loan level swaps		30,569		—		30,569		—		30,569
Financial liabilities
Deposits	$	4,095,655	$	3,433,048	$	665,573	$	—	$	4,098,621
Federal home loan bank advances		105,000		—		108,401		—		108,401
Subordinated debt		83,305		—		—		84,400		84,400
Accrued interest payable		2,494		430		2,009		55		2,494
Cash flow hedges		4,074		—		4,074		—		4,074
Loan level swap		30,569		—		30,569		—		30,569

The carrying amounts and estimated fair values of financial instruments at December 31, 2018 are as follows:

			Fair Value Measurements at December 31, 2018 using
	Carrying
(In thousands)	Amount		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	160,773	$	160,773	$	—	$	—	$	160,773
Securities available for sale		377,936		—		377,936		—		377,936
CRA investment fund		4,719		4,719		—		—		4,719
FHLB and FRB stock		18,533		—		—		—	N/A
Loans held for sale, at fair value		1,576		—		1,576		—		1,576
Loans held for sale, at lower of cost or fair value		3,542		—		3,654		—		3,654
Loans, net of allowance for loan and lease losses		3,889,427		—		—		3,852,004		3,852,004
Accrued interest receivable		10,814		—		1,875		8,939		10,814
Cash flow Hedges		1,657		—		1,657		—		1,657
Loan level swaps		9,689		—		9,689		—		9,689
Financial liabilities
Deposits	$	3,895,340	$	3,249,274	$	640,997	$	—	$	3,890,271
Federal home loan bank advances		108,000		—		108,950		—		108,950
Subordinated debt		83,193		—		—		82,207		82,207
Accrued interest payable		2,868		331		2,482		55		2,868
Cash flow hedges		849		—		849		—		849
Loan level swaps		9,689		—		9,689		—		9,689

XML

REVENUE FROM CONTRACTS WITH CUSTOMERS

6 Months Ended

Jun. 30, 2019

Revenue From Contract With Customer [Abstract]

REVENUE FROM CONTRACTS WITH CUSTOMERS

8.  REVENUE FROM CONTRACTS WITH CUSTOMERS

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

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

	For the Three Months Ended June 30,
(In thousands)	2019		2018
Service charges on deposits
Overdraft fees	$	164	$	183
Interchange income		322		326
Other		411		364
Wealth management fees (a)		9,568		8,126
Other (b)		2,561		2,741
Total noninterest other income	$	13,026	$	11,740

	For the Six Months Ended June 30,
(In thousands)	2019		2018
Service charges on deposits
Overdraft fees	$	324	$	364
Interchange income		586		616
Other		803		724
Wealth management fees (a)		18,742		16,493
Other (a)		4,300		3,758
Total noninterest other income	$	24,755	$	21,955

(a) Includes investment brokerage fees.

(b) All of the other category is outside the scope of ASC 606.

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

	For the Three Months Ended June 30,						For the Three Months Ended June 30,
	2019						2018
(In thousands)			Wealth						Wealth
Revenue by Operating Segment	Banking		Management		Total		Banking		Management		Total
Service charges on deposits
Overdraft fees	$	164	$	—	$	164	$	183	$	—	$	183
Interchange income		322		—		322		326		—		326
Other		411		—		411		364		—		364
Wealth management fees (a)		—		9,568		9,568		—		8,126		8,126
Other (b)		2,254		307		2,561		2,480		261		2,741
Total noninterest income	$	3,151	$	9,875	$	13,026	$	3,353	$	8,387	$	11,740

	For the Six Months Ended June 30,						For the Six Months Ended June 30,
(In thousands)	2019						2018
Revenue by Operating			Wealth						Wealth
Segment	Banking		Management		Total		Banking		Management		Total
Service charges on deposits
Overdraft fees	$	324	$	—	$	324	$	364	$	—	$	364
Interchange income		586		—		586		616		—		616
Other		803		—		803		724		—		724
Wealth management fees (a)		—		18,742		18,742		—		16,493		16,493
Other (a)		3,717		583		4,300		3,276		482		3,758
Total noninterest income	$	5,430	$	19,325	$	24,755	$	4,980	$	16,975	$	21,955

(a) Includes investment brokerage fees.

(b) All of the other category is outside the scope of ASC 606.

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

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

Interchange income:  The Company earns interchange fees from debit cardholder transactions conducted through the Visa payment network.  Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder.  Interchange income is presented gross of cardholder rewards.  Cardholder rewards are included in other expenses in the statement of income.  Cardholder rewards reduced interchange income by $36 thousand and $34 thousand for the second quarters of 2019 and 2018, respectively. Cardholder rewards reduced interchange income by $68 thousand and $63 thousand for the six months ended June 30, 2019 and 2018, respectively.  

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

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

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

Other:  All of the other income items are outside the scope of ASC 606.

XML

OTHER OPERATING EXPENSES

6 Months Ended

Jun. 30, 2019

Other Income And Expenses [Abstract]

OTHER OPERATING EXPENSES

9.  OTHER OPERATING EXPENSES

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2019		2018		2019		2018
Professional and legal fees		968		1,178		2,092		2,292
Telephone		377		271		657		555
Advertising		409		414		768		725
Amortization of intangible assets		229		180		458		359
Provision for ORE		—		204		—		204
Other operating expenses		2,770		2,837		5,672		5,857
Total other operating expenses	$	4,753	$	5,084	$	9,647	$	9,992

XML

ACCUMULATED OTHER COMPREHENSIVE (LOSS)/INCOME

6 Months Ended

Jun. 30, 2019

Stockholders Equity Note [Abstract]

ACCUMULATED OTHER COMPREHENSIVE (LOSS)/INCOME

10.  ACCUMULATED OTHER COMPREHENSIVE (LOSS)/INCOME

The following is a summary of the accumulated other comprehensive income/(loss) balances, net of tax, for the three months ended June 30, 2019 and 2018:

							Amount			Other
							Reclassified			Comprehensive
				Other			From			Income/(Loss)
				Comprehensive			Accumulated			Three Months
	Balance at			Income/(Loss)			Other			Ended			Balance at
	April 1,			Before			Comprehensive			June 30,			June 30,
(In thousands)	2019			Reclassifications			Income/(Loss)			2019			2019
Net unrealized holding loss on securities    available for sale, net of tax	$	(1,278	)	$	2,176			—		$	2,176		$	898
Gain/(loss) on cash flow hedges		(451	)		(2,029	)		(22	)		(2,051	)		(2,502	)
Accumulated other comprehensive loss,    net of tax	$	(1,729	)	$	147		$	(22	)	$	125		$	(1,604	)

							Amount			Other
							Reclassified			Comprehensive
				Other			From			Income/(Loss)
				Comprehensive			Accumulated			Three Months
	Balance at			Income/(Loss)			Other			Ended			Balance at
	April 1,			Before			Comprehensive			June 30,			June 30,
(In thousands)	2018			Reclassifications			Income/(Loss)			2018			2018
Net unrealized holding loss on    securities available for sale, net of tax	$	(4,345	)	$	(494	)	$	—		$	(494	)	$	(4,839	)
Gain on cash flow hedges		1,503			605			(23	)		582			2,085
Accumulated other comprehensive    loss, net of tax	$	(2,842	)	$	111		$	(23	)	$	88		$	(2,754	)

The following represents the reclassifications out of accumulated other comprehensive income for the three months ended June 30, 2019 and 2018:

	Three Months Ended
	June 30,
(In thousands)	2019			2018			Affected Line Item in Income Statement
Unrealized gains on cash flow hedge    derivatives:
Reclassification adjustment for amounts    included in net income	$	(31	)	$	(31	)	Interest expense
Income tax expense		9			8		Income tax expense
Total reclassifications, net of tax	$	(22	)	$	(23	)

The following is a summary of the accumulated other comprehensive (loss)/income balances, net of tax, for the six months ended June 30, 2019 and 2018:

							Amount			Other
							Reclassified			Comprehensive
				Other			From			Income/(Loss)
				Comprehensive			Accumulated			Six Months
	Balance at			Income/(Loss)			Other			Ended			Balance at
	January 1,			Before			Comprehensive			June 30,			June 30,
(In thousands)	2019			Reclassifications			Income/(Loss)			2019			2019
Net unrealized holding gain/(loss) on    securities available for sale, net of tax	$	(3,006	)	$	3,904		$	—		$	3,904		$	898
Gain/(loss) on cash flow hedges		661			(3,120	)		(43	)		(3,163	)		(2,502	)
Accumulated other comprehensive    loss, net of tax	$	(2,345	)	$	784		$	(43	)	$	741		$	(1,604	)

									Amount			Other
									Reclassified			Comprehensive
				Cumulative		Other			From			Income/(Loss)
				Adjustment		Comprehensive			Accumulated			Six Months
	Balance at			For Equity		Income/(Loss)			Other			Ended			Balance at
	January 1,			Security		Before			Comprehensive			June 30,			June 30,
(In thousands)	2018			(ASU 2016-1)		Reclassifications			Income/(Loss)			2018			2018
Net unrealized holding loss on securities    available for sale, net of tax	$	(2,214	)	$	127	$	(2,752	)	$	—		$	(2,752	)	$	(4,839	)
Gain/(loss) on cash flow hedges		1,002			—		1,128			(45	)		1,083			2,085
Accumulated other comprehensive    loss, net of tax	$	(1,212	)	$	127	$	(1,624	)	$	(45	)	$	(1,669	)	$	(2,754	)

The following represents the reclassifications out of accumulated other comprehensive income for the six months ended June 30, 2019 and 2018:

	Six Months Ended
	June 30,
(In thousands)	2019			2018			Affected Line Item in Income
Unrealized gains on cash flow hedge    derivatives:
Reclassification adjustment for amounts    included in net income	$	(62	)	$	(62	)	Interest expense
Income tax expense		19			17		Income tax expense
Total reclassifications, net of tax	$	(43	)	$	(45	)

XML

DERIVATIVES

6 Months Ended

Jun. 30, 2019

Derivative Instruments And Hedging Activities Disclosure [Abstract]

DERIVATIVES

11.  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 $230.0 million as of June 30, 2019 and December 31, 2018 were designated as cash flow hedges of certain interest-bearing deposits. On a quarterly basis, the Company performs a qualitative hedge effectiveness assessment. This assessment takes into consideration any adverse developments related to the counterparty’s risk of default and any negative events or circumstances that affect the factors that originally enabled the Company to assess that it could reasonably support, qualitatively, an expectation that the hedging relationship was and will continue to be highly effective. As of June 30, 2019, there were no events or market conditions that would result in hedge ineffectiveness. The aggregate fair value of the swaps is recorded in other assets/liabilities with changes in fair value recorded in other comprehensive income. The amount included in accumulated other comprehensive income would be reclassified to current earnings should the hedges no longer be considered effective. The Company expects the hedges to remain fully effective during the remaining terms of the swaps.

The following table presents information about the interest rate swaps designated as cash flow hedges as of June 30, 2019 and December 31, 2018:

(Dollars in thousands)	June 30, 2019				December 31, 2018
Notional amount	$	230,000			$	230,000
Weighted average pay rate		2.04		%		2.04	%
Weighted average receive rate		2.48		%		2.33	%
Weighted average maturity		2.88		years		2.65	years
Unrealized (loss)/gain, net	$	(3,899	)		$	808
Number of contracts		11				11

Net interest income recorded on these swap transactions totaled $290 thousand and $625 thousand for the three and six months ended June 30, 2019, respectively, and is reported as a component of interest expense.  Net interest income recorded on these swap transactions totaled $33 thousand and $13 thousand for the three and six months ended June 30, 2018, 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 and six months ended June 30, 2019 and June 30, 2018:

	For the Three Months Ended June 30,
(In thousands)	2019			2018
Interest rate contracts
Amount of gain/(loss) recognized in OCI	$	(2,051	)	$	582
Amount of gain/(loss) reclassified from OCI to interest expense		22			23

	For the Six Months Ended June 30,
(In thousands)	2019			2018
Interest rate contracts
Amount of gain/(loss) recognized in OCI (effective portion)	$	(3,163	)	$	1,083
Amount of gain/(loss) reclassified from OCI to interest expense		43			45

During the first quarter of 2018, the Company recognized an unrealized after-tax gain of $220 thousand in accumulated other comprehensive income/(loss) related to the termination of two interest rate swaps designated as cash flow hedges.  The gain is being amortized into earnings over the remaining life of the terminated swaps.  The Company recognized pre-tax interest income of $31 thousand and $62 thousand for the three and six months ended June 30, 2019 related to the amortization of the gain on the terminated interest rate swaps designated as cash flow hedges.  During the second quarter of 2019, the Company recognized an unrealized after-tax gain of $189 thousand in accumulated other comprehensive income/(loss) related to the termination of four interest rate swaps designated as cash flow hedges.  The gain is being amortized into earnings over the remaining life of the terminated swaps.

	June 30, 2019
	Notional		Fair
(In thousands)	Amount		Value
Interest rate swaps related to interest-bearing deposits	$	230,000	$	(3,899	)
Total included in other assets		55,000		175
Total included in other liabilities		175,000		(4,074	)

	December 31, 2018
	Notional		Fair
(In thousands)	Amount		Value
Interest rate swaps related to interest-bearing deposits	$	230,000	$	808
Total included in other assets		130,000		1,657
Total included in other liabilities		100,000		(849	)

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)	June 30, 2019			December 31, 2018
Notional amount	$	539,092		$	558,690
Fair value	$	30,569		$	9,689
Weighted average pay rates		4.41	%		4.44	%
Weighted average receive rates		4.21	%		4.24	%
Weighted average maturity		7.4	years		7.1	years
Number of contracts		64			67

XML

SUBORDINATED DEBT

6 Months Ended

Jun. 30, 2019

Subordinated Longterm Debt Current And Noncurrent [Abstract]

SUBORDINATED DEBT

12.  SUBORDINATED DEBT

During June 2016, the Company issued $50.0 million in aggregate principal amount of fixed-to-floating subordinated notes (the “2016 Notes”) to certain institutional investors. The 2016 Notes are non-callable for five years, have a stated maturity of June 30, 2026, and bear interest at a fixed rate of 6.0% per year until June 30, 2021. From June 30, 2021 to the maturity date or early redemption date, the interest rate will reset quarterly to a level equal to the then current three-month LIBOR rate plus 485 basis points, payable quarterly in arrears. Debt issuance costs incurred totaled $1.3 million and are being amortized to maturity.  

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

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

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

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

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

XML

LEASES

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

LEASES

13. LEASES

On January 1, 2019, the Company adopted FASB issued ASU No. 2016-02, “Leases” (Topic 842), which establishes a right of use model that requires a lessee to record a ROU asset and a lease liability for all leases with terms longer than 12 months. The Company adopted the new lease guidance using the modified retrospective approach and elected the transition option issued under ASU 2018-11, Leases (Topic 842) Targeted Improvements, which allows entities to continue to apply the legacy guidance in ASC 840, Leases, to prior periods, including disclosure requirements. Accordingly, prior period financial results and disclosures have not been adjusted.

The Company maintains certain property and equipment under direct financing and operating leases. Upon adoption of the new lease guidance, on January 1, 2019, the Company recorded a ROU asset and corresponding lease liability of $7.9 million and $8.2 million, respectively, on the consolidated statement of condition. As of June 30, 2019, the Company's operating lease ROU asset and operating lease liability totaled $11.0 million and $11.3 million, respectively. A weighted average discount rate of 3.35% was used in the measurement of the ROU asset and lease liability as of June 30, 2019.

The Company's leases have remaining lease terms between one to 18 years, with a weighted average lease term of 6.06 years at June 30, 2019. The Company’s lease agreements may include options to extend or terminate the lease. The Company’s decision to exercise renewal options is based on an assessment of its current business needs and market factors at the time of the renewal.

Total operating lease costs were $757 thousand and $1.4 million for the three and six months ended June 30, 2019, respectively.  The variable lease costs were $82 thousand and $155 thousand for the three and six months ended June 30, 2019, respectively.

The following is a schedule of the Company's operating lease liabilities by contractual maturity as of June 30, 2019:

(In thousands)
2019	$	2,666
2020		2,506
2021		1,715
2022		1,459
2023		999
Thereafter		2,112
Total lease payments		11,457
Less: imputed interest		188
Total present value of lease payments		11,269

The following table shows the supplemental cash flow information related to the Company’s direct finance and operating leases for the six months ended June 30, 2019:

(In thousands)
Right-of-use asset obtained in exchange for lease obligation	$	7,862
Operating cash flows from operating leases		1,140
Operating cash flows from direct finance leases		196
Financing cash flows from direct finance leases		374

XML

ACCOUNTING PRONOUNCEMENTS

6 Months Ended

Jun. 30, 2019

Accounting Changes And Error Corrections [Abstract]

ACCOUNTING PRONOUNCEMENTS

14. ACCOUNTING PRONOUNCEMENTS

   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.

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

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).  ASU 2016-13 is effective for annual periods 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 a material 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 loan and lease losses. The Company has evaluated and selected a third-party firm to assist in the development of a CECL program and in the calculation of the allowance for loan and lease losses in preparation for the change to the expected loss model. The Company continues to work towards implementing the accounting, reporting and governance processes required under the new standard and expect to complete the model implementation and validation by the end of the third quarter of 2019. The Company expects to recognize a one-time cumulative-effect adjustment to our allowance for loan and lease losses through retained earnings as of the beginning of the first reporting period in which the new standard is effective. The Company cannot yet determine the magnitude of any such one-time cumulative adjustment or of the overall impact of the new standard on our consolidated financial condition or results of operations.

In 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 amendments in this ASU did not have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The amendment modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The revised guidance is effective for all companies for fiscal years beginning after December 15, 2019, and interim periods within those years. Companies are permitted to early adopt any eliminated or modified disclosure requirements and delay adoption of the additional disclosure requirements until their effective date. The removed and modified disclosures will be adopted on a retrospective basis and the new disclosures will be adopted on a prospective basis. The revised guidance is not expected to impact our financial statement disclosures.

XML

PENDING ACQUISITION

6 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

PENDING ACQUISITION

15. PENDING ACQUISITION

On July 3, 2019, the Company announced that it had entered into a definitive agreement to acquire Summit, NJ-based Point View Wealth Management, Inc. (“Point View”) with AUM/AUA over $325 million.  The transaction is expected to close in the third quarter of 2019 and will be a combination of cash and equity, subject to the receipt of regulatory approval and other customary closing conditions.  

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2019

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 financial statements also include the Bank’s wholly-owned subsidiaries, PGB Trust & Investments of Delaware, Peapack Capital Corporation (“PCC”) (formed in the second quarter of 2017), Murphy Capital Management (“MCM”) (acquired in the third quarter of 2017), Quadrant Capital Management (“Quadrant”) (acquired in the fourth quarter of 2017), Lassus Wherley & Associates (“Lassus Wherley”) (acquired in the third quarter of 2018), 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 and their subsidiaries, these footnotes primarily reflect the Bank’s and its subsidiaries’ activities. All significant intercompany balances and transactions have been eliminated from the accompanying consolidated financial statements.

Basis of Financial Statement Presentation

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 two business segments: its banking subsidiary, which involves the delivery of loan and deposit products to customers, and the Private Wealth Management Division, which includes asset management services provided for individuals and institutions. Management uses certain methodologies to allocate income and expense to the business segments.

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

Peapack-Gladstone Bank’s Private Wealth Management Division includes: investment management services for individuals and institutions; personal trust services, including services as executor, trustee, administrator, custodian and guardian; and other financial planning, tax preparation and advisory services. This segment also includes the activity from the Delaware subsidiary, PGB Trust and Investments of Delaware, MCM, Quadrant and Lassus Wherley.  Wealth management fees are primarily earned based upon AUM and are generally assessed on a monthly or quarterly basis on a tiered fee schedule based on the market value of AUM at the end of the period.

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 debt securities are classified as available for sale and are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income/(loss), net of tax, with the exception of the Company’s investment in a CRA investment fund, which is classified as an equity security.  In accordance with ASU 2016-01, “Financial Instruments” (adopted January 1, 2018), unrealized holding gains and losses on equity securities are marked to market through the income statement.

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

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

Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) Stock

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 on the income statement, are based on the difference between the selling price and the carrying value of the related loan sold.

U.S. Small Business Administration (SBA) loans originated with the intent to sell in the secondary market are carried at the lower of cost or fair value. SBA loans are generally sold with the servicing rights retained. Total SBA loans serviced totaled $43.8 million and $35.1 million as of June 30, 2019 and December 31, 2018, respectively.  SBA loans held for sale totaled $926 thousand and $1.2 million at June 30, 2019 and December 31, 2018, respectively.

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 on a level-yield method, over the life of the loan as an adjustment to the loan’s yield. The definition of recorded investment in loans includes accrued interest receivable and deferred fees/cost, however, for the Company’s loan disclosures, accrued interest and deferred fees/cost were excluded as the impact was not material.

Loans are considered past due when they are not paid within 30 days in accordance with contractual terms. The accrual of income on loans, including impaired loans, is discontinued if, in the opinion of Management, principal or interest is not likely to be paid in accordance with the terms of the loan agreement, or when principal or interest is past due 90 days unless the asset is both well secured and in the process of collection. All interest accrued but not received for loans placed on nonaccrual are reversed against interest income. Payments received on nonaccrual loans are recorded as principal payments. A nonaccrual loan is returned to accrual status only when interest and principal payments are brought current and future payments are reasonably assured, generally when the Bank receives contractual payments for a minimum of six consecutive months. Commercial loans are generally charged off 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 may be returned to accrual status. Nonaccrual mortgage loans are generally charged off to the extent that the value of the underlying collateral does not cover the outstanding principal balance. The majority of the Company’s loans are secured by real estate in New Jersey 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 probable losses in the loan portfolio.  The process to determine reserves utilizes analytic tools and Management judgment and is reviewed on a quarterly basis. When Management is reasonably certain that a loan balance is not fully collectable, an impairment analysis is completed whereby a specific reserve may be established or a full or partial charge off is recorded against the allowance.  Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the size and composition of the portfolio, information about specific borrower situations, estimated collateral values, economic conditions and other factors. Allocations of the allowance may be made for specific loans via a specific reserve, but the entire allowance is available for any loan that, in Management’s judgment, should be charged off.

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

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

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

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 Company’s historical loss experience adjusted for current factors. The historical loss experience is determined by portfolio segment and is based on the actual loss history experience by the Company on a weighted average basis over the previous three years. This actual loss experience is adjusted by other qualitative factors based on the risks present for each portfolio segment. 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 staffing and experience; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations.  For loans that are graded as non-impaired, the Company allocates a higher general reserve percentage than pass-rated loans using a multiple that is calculated annually through a migration analysis.  At both June 30, 2019 and December 31, 2018, the multiple was 2.25 times for non-impaired special mention loans and 3.5 times for non-impaired substandard 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 values could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential loss exposure for the Bank.

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

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

Multifamily and Commercial Real Estate Loans.  The Bank provides mortgage loans for multifamily properties (i.e. buildings which have five or more residential units) and other commercial real estate that is either owner occupied or managed as an investment property (non-owner occupied) in the Tri-State area and Pennsylvania. Commercial real estate properties primarily include retail buildings/shopping centers, hotels, office/medical buildings and industrial/warehouse space. Some properties are considered “mixed use” as they are a combination of building types, such as a building with retail space on the ground floor and either residential apartments or office suites on the upper floors. Multifamily loans are expected to be repaid from the cash flows of the underlying property so the collective amount of rents must be sufficient to cover all operating expenses, property management and maintenance, taxes and debt service. Increases in vacancy rates, interest rates or other changes in general economic conditions can have an impact on the borrower and its ability to repay the loan. Commercial real estate loans are generally considered to have a higher degree of credit risk than multifamily loans as they may be dependent on the ongoing success and operating viability of a fewer number of tenants who are occupying the property and who may have a greater degree of exposure to economic conditions.

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

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

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

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

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

Leases

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

As the rate implicit in the lease is not readily determinable, the incremental collateralized borrowing rate is used to determine the present value of lease payments. This rate gives consideration to the applicable FHLB collateralized borrowing rates and is based on the information available at the commencement date. The Company has elected to apply the short-term lease measurement and recognition exemption to leases with an initial term of 12 months or less; therefore, these leases are not recorded on the Company’s statement of condition, but rather, lease expense is recognized over the lease term on a straight-line basis. The Company’s lease agreements may include options to extend or terminate the lease. The Company’s decision to exercise renewal options is based on an assessment of its current business needs and market factors at the time of the renewal.  The Company maintains certain property and equipment under direct financing and operating leases.  Substantially all of the leases in which the Company is the lessee are comprised of real estate property for branches and office space and are classified as operating leases. The Company has two existing finance leases (previously classified as a capital lease and included in premises and equipment on our statement of condition at December 31, 2018) for the Company’s administration building and one branch location.  Topic 842 did not materially impact the accounting for these capital leases.

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

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

Derivatives

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

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

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

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

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 authorized but unissued shares to satisfy option exercises.

Upon adoption of 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 six months ended June 30, 2019 were as follows:

						Weighted
				Weighted		Average	Aggregate
				Average		Remaining	Intrinsic
	Number of			Exercise		Contractual	Value
	Options			Price		Term	(In thousands)
Balance, January 1, 2019		91,310		$	13.63
Exercised during 2019		(1,520	)		14.28
Expired during 2019		(630	)		22.57
Forfeited during 2019		(20,000	)		13.07
Balance, June 30, 2019		69,160		$	13.69	2.33 years	$	998
Vested and expected to vest		69,160		$	13.69	2.33 years	$	998
Exercisable at June 30, 2019		69,160		$	13.69	2.33 years	$	998

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 second quarter of 2019 and the exercise price, multiplied by the number of in-the-money options). The Company’s closing stock price on June 30, 2019 was $28.12.

There were no stock options granted during the three or six months ended June 30, 2019.  

The Company has previously granted performance-based and service-based restricted stock awards/units. Service-based awards/units vest ratably over a three or five-year period.  There were 729 service-based restricted stock units granted in the second quarter of 2019 with a three-year vesting period and there were 27,925 service-based restricted stock units granted in the second quarter of 2019 with a five-year vesting period.

The performance-based awards are dependent upon the Company meeting certain performance criteria and, to the extent the performance criteria are met, will cliff vest at the end of the performance period which is generally three years.  There were no performance-based restricted stock units granted in the second quarter of 2019.  

Changes in non-vested shares dependent on performance criteria for the six months ended June 30, 2019 were as follows:

			Weighted
			Average
	Number of		Grant Date
	Shares		Fair Value
Balance, January 1, 2019		42,998	$	35.33
Granted during 2019		47,770		26.34
Balance, June 30, 2019		90,768	$	30.60

Changes in service-based restricted stock awards/units for the six months ended June 30, 2019 were as follows:

				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value
Balance, January 1, 2019		366,541		$	30.64
Granted during 2019		223,396			26.51
Vested during 2019		(140,178	)		27.44
Forfeited during 2019		(3,214	)		31.35
Balance, June 30, 2019		446,545		$	29.98

As of June 30, 2019, there was $46 thousand of total unrecognized compensation cost related to service-based awards.  That cost is expected to be recognized over a weighted average period of 0.34 years.  As of June 30, 2019, there was $12.8 million of total unrecognized compensation cost related to service-based and performance-based units.  That cost is expected to be recognized over a weighted average period of 1.31 years. Stock compensation expense recorded for the second quarters of 2019 and 2018 totaled $1.5 million and $1.3 million, respectively.  Stock compensation expense recorded for the six months ended June 30, 2019 and 2018 totaled $2.9 million and $2.4 million, respectively.

Employee Stock Purchase Plan

Employee Stock Purchase Plan (“ESPP”): In 2014, the shareholders of the Company approved the ESPP.  The ESPP provides for the granting of rights to purchase 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 Period”).  An amendment to the ESPP plan has changed the offering period to one twelve-month period to commence in the third quarter of 2019.  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 the 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 purchase right is determined using the Black-Scholes option pricing model.  

The Company recorded $30 thousand and $59 thousand of expense in salaries and employee benefits expense for the three months ended June 30, 2019 and 2018, respectively, related to the ESPP.  Total shares issued under the ESPP during the second quarters of 2019 and 2018 were 8,564 and 9,127, respectively.

The Company recorded $75 thousand and $112 thousand of expense in salaries and employee benefits expense for the six months ended June 30, 2019 and 2018, respectively related to the ESPP.  Total shares issued under the ESPP for the six months ended June 30, 2019 and 2018 were 18,740 and 15,490, respectively.

Management believes the Company to be well capitalized and has more than enough capital for current and future operational needs.  Accordingly, Management has considered various capital management techniques to utilize the capital. Therefore, the Company has chosen to move share purchases for the ESPP from a quarterly basis to an annual basis, with the next purchase occurring in May 2020.

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				Six Months Ended
	June 30,				June 30,
(Dollars in thousands, except per share data)	2019		2018		2019		2018
Net income available to common shareholders	$	11,550	$	11,910	$	22,975	$	22,717
Basic weighted-average shares outstanding		19,447,155		18,930,893		19,399,071		18,770,492
Plus: common stock equivalents		121,216		167,945		129,466		226,487
Diluted weighted-average shares outstanding		19,568,371		19,098,838		19,528,537		18,996,979
Net income per share
Basic	$	0.59	$	0.63	$	1.18	$	1.21
Diluted		0.59		0.62		1.18		1.20

For the three and six months ended June 30, 2019, stock options and restricted stock units totaling 128,634 and 297,828 were not included in the computation of diluted earnings per share because they were antidilutive.  For the three and six months ended June 30, 2018, all stock options and warrants were included in the computation of diluted earnings per share because they were all dilutive, meaning that the exercise price of the stock option was greater than the average market price for the period.  

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 2015 or by New Jersey tax authorities for years prior to 2014.  

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

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 reasonably 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: A large portion of cash on hand or on deposit with the Federal Reserve Bank 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 acquiree (if any), over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.  Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized but tested for impairment at least annually or more frequently if events and circumstances exist that indicate that a goodwill impairment test should be performed. The Company has selected September 30 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 assembled workforce are the intangible assets with an indefinite life on our balance sheet.

Other intangible assets, which primarily consist of customer relationship intangible assets arising from acquisition, are amortized on an accelerated basis over their estimated useful lives, which range from 5 to 15 years.

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Schedule of stock option plans, changes in options outstanding

For the Company’s stock option plans, changes in options outstanding during the six months ended June 30, 2019 were as follows:

						Weighted
				Weighted		Average	Aggregate
				Average		Remaining	Intrinsic
	Number of			Exercise		Contractual	Value
	Options			Price		Term	(In thousands)
Balance, January 1, 2019		91,310		$	13.63
Exercised during 2019		(1,520	)		14.28
Expired during 2019		(630	)		22.57
Forfeited during 2019		(20,000	)		13.07
Balance, June 30, 2019		69,160		$	13.69	2.33 years	$	998
Vested and expected to vest		69,160		$	13.69	2.33 years	$	998
Exercisable at June 30, 2019		69,160		$	13.69	2.33 years	$	998

Schedule of changes in nonvested performance-based shares

Changes in non-vested shares dependent on performance criteria for the six months ended June 30, 2019 were as follows:

			Weighted
			Average
	Number of		Grant Date
	Shares		Fair Value
Balance, January 1, 2019		42,998	$	35.33
Granted during 2019		47,770		26.34
Balance, June 30, 2019		90,768	$	30.60

Schedule of changes in nonvested shares

Changes in service-based restricted stock awards/units for the six months ended June 30, 2019 were as follows:

				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value
Balance, January 1, 2019		366,541		$	30.64
Granted during 2019		223,396			26.51
Vested during 2019		(140,178	)		27.44
Forfeited during 2019		(3,214	)		31.35
Balance, June 30, 2019		446,545		$	29.98

Schedule of calculation of basic and diluted earnings per share

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				Six Months Ended
	June 30,				June 30,
(Dollars in thousands, except per share data)	2019		2018		2019		2018
Net income available to common shareholders	$	11,550	$	11,910	$	22,975	$	22,717
Basic weighted-average shares outstanding		19,447,155		18,930,893		19,399,071		18,770,492
Plus: common stock equivalents		121,216		167,945		129,466		226,487
Diluted weighted-average shares outstanding		19,568,371		19,098,838		19,528,537		18,996,979
Net income per share
Basic	$	0.59	$	0.63	$	1.18	$	1.21
Diluted		0.59		0.62		1.18		1.20

XML

INVESTMENT SECURITIES AVAILABLE FOR SALE (Tables)

6 Months Ended

Jun. 30, 2019

Investment Securities Available For Sale [Abstract]

Schedule of Amortized Cost and Approximate Fair Value of 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 June 30, 2019 and December 31, 2018 follows:

	June 30, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
U.S. government-sponsored agencies	$	71,719	$	104	$	(32	)	$	71,791
Mortgage-backed securities –residential		282,924		1,972		(959	)		283,937
SBA pool securities		3,596		—		(9	)		3,587
State and political subdivisions		16,415		48		(20	)		16,443
Corporate bond		3,000		81		—			3,081
Total	$	377,654	$	2,205	$	(1,020	)	$	378,839

	December 31, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
U.S. government-sponsored agencies	$	102,915	$	82	$	(984	)	$	102,013
Mortgage-backed securities – residential		254,383		418		(3,439	)		251,362
SBA pool securities		3,883		—		(44	)		3,839
State and political subdivisions		17,729		27		(146	)		17,610
Corporate bond		3,000		112		—			3,112
Total	$	381,910	$	639	$	(4,613	)	$	377,936

Schedule of Continuous Unrealized Loss Position and the Approximate Fair Value of these Investments

The following tables present the Company’s available for sale securities in a continuous unrealized loss position and the approximate fair value of these investments as of June 30, 2019 and December 31, 2018.

	June 30, 2019
	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	$	4,496	$	(4	)	$	11,969	$	(28	)	$	16,465	$	(32	)
Mortgage-backed securities-residential		15,433		(23	)		103,844		(936	)		119,277		(959	)
SBA pool securities		—		—			3,587		(9	)		3,587		(9	)
State and political subdivisions		—		—			4,111		(20	)		4,111		(20	)
Total	$	19,929	$	(27	)	$	123,511	$	(993	)	$	143,440	$	(1,020	)

	December 31, 2018
	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	$	18,840	$	(103	)	$	33,600	$	(881	)	$	52,440	$	(984	)
Mortgage-backed securities-residential		51,697		(303	)		136,130		(3,136	)		187,827		(3,439	)
SBA pool securities		—		—			3,839		(44	)		3,839		(44	)
State and political subdivisions		421		(1	)		7,274		(145	)		7,695		(146	)
Total	$	70,958	$	(407	)	$	180,843	$	(4,206	)	$	251,801	$	(4,613	)

XML

LOANS AND LEASES (Tables)

6 Months Ended

Jun. 30, 2019

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 June 30, 2019 and December 31, 2018, consisted of the following:

			% of					% of
	June 30,		Totals			December 31,		Total
(Dollars in thousands)	2019		Loans			2018		Loans
Residential mortgage	$	570,583		14.16	%	$	571,570		14.55	%
Multifamily mortgage		1,129,476		28.03			1,135,805		28.92
Commercial mortgage		694,674		17.24			702,165		17.88
Commercial loans (including equipment financing)		1,517,665		37.67			1,397,057		35.57
Home equity lines of credit		62,522		1.55			62,191		1.58
Consumer loans, including fixed rate home equity loans		53,995		1.34			58,678		1.49
Other loans		424		0.01			465		0.01
Total loans	$	4,029,339		100.00	%	$	3,927,931		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 June 30, 2019 and December 31, 2018:

			% of					% of
	June 30,		Totals			December 31,		Total
(Dollars in thousands)	2019		Loans			2018		Loans
Primary residential mortgage	$	599,450		14.89	%	$	600,891		15.31	%
Home equity lines of credit		62,522		1.55			62,191		1.58
Junior lien loan on residence		7,397		0.18			7,418		0.19
Multifamily property		1,129,476		28.06			1,135,805		28.94
Owner-occupied commercial real estate		249,421		6.20			261,193		6.65
Investment commercial real estate		1,017,505		25.28			1,001,918		25.53
Commercial and industrial		717,851		17.83			616,838		15.72
Lease financing		184,182		4.58			172,643		4.40
Farmland/agricultural production		143		—			149		0.01
Commercial construction loans		125		—			86		0.01
Consumer and other loans		57,415		1.43			65,180		1.66
Total loans	$	4,025,487		100.00	%	$	3,924,312		100.00	%
Net deferred costs		3,852					3,619
Total loans including net deferred costs	$	4,029,339				$	3,927,931

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 June 30, 2019 and December 31, 2018:

	June 30, 2019
	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	$	8,791	$	248	$	590,659	$	2,809	$	599,450	$	3,057
Home equity lines of credit		22		—		62,500		155		62,522		155
Junior lien loan on residence		29		—		7,368		15		7,397		15
Multifamily property		—		—		1,129,476		5,744		1,129,476		5,744
Owner-occupied commercial real estate		1,451		—		247,970		2,497		249,421		2,497
Investment commercial real estate		18,091		—		999,414		14,650		1,017,505		14,650
Commercial and industrial		6,557		1,000		711,294		10,463		717,851		11,463
Lease financing		—		—		184,182		1,888		184,182		1,888
Farmland/agricultural production		—		—		143		2		143		2
Commercial construction loans		—		—		125		1		125		1
Consumer and other loans		—		—		57,415		319		57,415		319
Total ALLL	$	34,941	$	1,248	$	3,990,546	$	38,543	$	4,025,487	$	39,791

	December 31, 2018
	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	$	9,518	$	262	$	591,373	$	3,244	$	600,891	$	3,506
Home equity lines of credit		255		—		61,936		164		62,191		164
Junior lien loan on residence		36		—		7,382		15		7,418		15
Multifamily property		1,262		—		1,134,543		5,959		1,135,805		5,959
Owner-occupied commercial real estate		1,574		—		259,619		2,614		261,193		2,614
Investment commercial real estate		18,655		—		983,263		14,248		1,001,918		14,248
Commercial and industrial		—		—		616,838		9,839		616,838		9,839
Lease financing		—		—		172,643		1,772		172,643		1,772
Farmland/agricultural production		—		—		149		2		149		2
Commercial construction loans		—		—		86		1		86		1
Consumer and other loans		—		—		65,180		384		65,180		384
Total ALLL	$	31,300	$	262	$	3,893,012	$	38,242	$	3,924,312	$	38,504

Schedule of loans individually evaluated for impairment

The following tables present loans individually evaluated for impairment by class of loans as of June 30, 2019 and December 31, 2018 (The average impaired loans on the following tables represent year to date impaired loans.):

	June 30, 2019
	Unpaid						Average
	Principal		Recorded		Specific		Impaired
(In thousands)	Balance		Investment		Reserves		Loans
With no related allowance recorded:
Primary residential mortgage	$	9,111	$	7,797	$	—	$	8,002
Owner-occupied commercial real estate		2,684		1,451		—		1,593
Investment commercial real estate		20,041		18,091		—		16,829
Home equity lines of credit		25		22		—		151
Junior lien loan on residence		98		29		—		34
Total loans with no related allowance	$	31,959	$	27,390	$	—	$	26,609
With related allowance recorded:
Primary residential mortgage	$	994	$	994	$	248	$	1,047
Commercial and industrial		6,557		6,557		1,000		1,093
Total loans with related allowance	$	7,551	$	7,551	$	1,248	$	2,140
Total loans individually evaluated for Impairment	$	39,510	$	34,941	$	1,248	$	28,749

	December 31, 2018
	Unpaid						Average
	Principal		Recorded		Specific		Impaired
(In thousands)	Balance		Investment		Reserves		Loans
With no related allowance recorded:
Primary residential mortgage	$	9,789	$	8,502	$	—	$	8,042
Owner-occupied commercial real estate		2,741		1,574		—		2,025
Investment commercial real estate		20,179		18,655		—		13,999
Home equity lines of credit		257		255		—		123
Junior lien loan on residence		102		36		—		45
Multifamily property		1,262		1,262		—		105
Total loans with no related allowance	$	34,330	$	30,284	$	—	$	24,339
With related allowance recorded:
Primary residential mortgage	$	1,016	$	1,016	$	262	$	1,144
Total loans with related allowance	$	1,016	$	1,016	$	262	$	1,144
Total loans individually evaluated for impairment	$	35,346	$	31,300	$	262	$	25,483

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 June 30, 2019 and December 31, 2018:

	June 30, 2019
			Loans Past Due
			Over 90 Days
			And Still
(In thousands)	Nonaccrual		Accruing Interest
Primary residential mortgage	$	5,019	$	—
Home equity lines of credit		3		—
Junior lien loan on residence		29		—
Owner-occupied commercial real estate		1,451		—
Investment commercial real estate		18,091		—
Commercial and industrial		6,557		—
Total	$	31,150	$	—

	December 31, 2018
			Loans Past Due
			Over 90 Days
			And Still
(In thousands)	Nonaccrual		Accruing Interest
Primary residential mortgage	$	5,215	$	—
Home equity lines of credit		235		—
Junior lien loan on residence		36		—
Owner-occupied commercial real estate		1,574		—
Investment commercial real estate		18,655		—
Total	$	25,715	$	—

Schedule of aging of past due loans

The following tables present the aging of the recorded investment in past due loans as of June 30, 2019 and December 31, 2018 by class of loans, excluding nonaccrual loans:

	June 30, 2019
	30-59		60-89		Greater Than
	Days		Days		90 Days		Total
(In thousands)	Past Due		Past Due		Past Due		Past Due
Primary residential mortgage	$	—	$	105	$	—	$	105
Owner-occupied commercial real estate		—		242		—		242
Commercial construction loans		85		—		—		85
Total	$	85	$	347	$	—	$	432

	December 31, 2018
	30-59		60-89		Greater Than
	Days		Days		90 Days		Total
(In thousands)	Past Due		Past Due		Past Due		Past Due
Primary residential mortgage	$	606	$	491	$	—	$	1,097
Consumer and other loans		2		—		—		2
Total	$	608	$	491	$	—	$	1,099

Schedule of the risk category of loans by class of loans

As of June 30, 2019, 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	$	589,731	$	870	$	8,849	$	—
Home equity lines of credit		62,500		—		22		—
Junior lien loan on residence		7,368		—		29		—
Multifamily property		1,127,545		1,586		345		—
Owner-occupied commercial real estate		242,929		-		6,492		—
Investment commercial real estate		966,813		18,024		32,668		—
Commercial and industrial		701,916		8,205		7,730		—
Lease financing		184,182		—		—		—
Farmland/agricultural production		143		—		—		—
Commercial construction loans		39		86		—		—
Consumer and other loans		57,415		—		—		—
Total	$	3,940,581	$	28,771	$	56,135	$	—

As of December 31, 2018, 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	$	590,372	$	943	$	9,576	$	—
Home equity lines of credit		61,936		—		255		—
Junior lien loan on residence		7,382		—		36		—
Multifamily property		1,130,926		3,263		1,616		—
Owner-occupied commercial real estate		255,417		249		5,527		—
Investment commercial real estate		948,300		20,756		32,862		—
Commercial and industrial		608,262		417		8,159		—
Lease financing		172,643		—		—		—
Farmland/agricultural production		149		—		—		—
Commercial construction loans		—		86		—		—
Consumer and other loans		64,946		—		234		—
Total	$	3,840,333	$	25,714	$	58,265	$	—

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 June 30, 2019 is summarized below:

	April 1,										June 30,
	2019										2019
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	3,477	$	(80	)	$	9	$	(349	)	$	3,057
Home equity lines of credit		152		—			3		—			155
Junior lien loan on residence		15		—			—		—			15
Multifamily property		5,768		—			—		(24	)		5,744
Owner-occupied commercial real estate		2,534		—			64		(101	)		2,497
Investment commercial real estate		14,410		—			—		240			14,650
Commercial and industrial		10,185		—			5		1,273			11,463
Lease financing		1,803		—			—		85			1,888
Farmland/agricultural production		2		—			—		—			2
Commercial construction loans		1		—			—		—			1
Consumer and other loans		306		(14	)		1		26			319
Total ALLL	$	38,653	$	(94	)	$	82	$	1,150		$	39,791

The activity in the allowance for loan and lease losses for the three months ended June 30, 2018 is summarized below:

	April 1,										June 30,
	2018										2018
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	4,403	$	—		$	139	$	(160	)	$	4,382
Home equity lines of credit		192		—			2		(4	)		190
Junior lien loan on residence		16		—			46		(45	)		17
Multifamily property		9,140		—			—		(881	)		8,259
Owner-occupied commercial real estate		2,364		(64	)		—		225			2,525
Investment commercial real estate		12,367		—			—		1,292			13,659
Commercial and industrial		7,753		(46	)		6		(357	)		7,356
Lease financing		1,036		—			—		275			1,311
Farmland/agricultural production		2		—			—		—			2
Commercial construction loans		1		—			—		—			1
Consumer and other loans		422		(14	)		1		(45	)		364
Total ALLL	$	37,696	$	(124	)	$	194	$	300		$	38,066

The activity in the allowance for loan and lease losses for the six months ended June 30, 2019 is summarized below:

	January 1,										June 30,
	2019										2019
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	3,506	$	(80	)	$	51	$	(420	)	$	3,057
Home equity lines of credit		164		—			5		(14	)		155
Junior lien loan on residence		15		—			11		(11	)		15
Multifamily property		5,959		—			—		(215	)		5,744
Owner-occupied commercial real estate		2,614		—			64		(181	)		2,497
Investment commercial real estate		14,248		—			—		402			14,650
Commercial and industrial		9,839		—			9		1,615			11,463
Lease financing		1,772		—			—		116			1,888
Farmland/agricultural production		2		—			—		—			2
Commercial construction loans		1		—			—		—			1
Consumer and other loans		384		(25	)		2		(42	)		319
Total ALLL	$	38,504	$	(105	)	$	142	$	1,250		$	39,791

The activity in the allowance for loan and lease losses for the six months ended June 30, 2018 is summarized below:

	January 1,										June 30,
	2018										2018
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	4,085	$	(77	)	$	139	$	235		$	4,382
Home equity lines of credit		221		—			4		(35	)		190
Junior lien loan on residence		12		—			55		(50	)		17
Multifamily property		10,007		—			—		(1,748	)		8,259
Owner-occupied commercial real estate		2,385		(64	)		66		138			2,525
Investment commercial real estate		11,933		—			—		1,726			13,659
Commercial and industrial		6,563		(46	)		22		817			7,356
Lease financing		884		—			—		427			1,311
Farmland/agricultural production		—		—			—		2			2
Commercial construction loans		1		—			—		—			1
Consumer and other loans		349		(25	)		2		38			364
Total ALLL	$	36,440	$	(212	)	$	288	$	1,550		$	38,066

Schedule of loans modified as troubled debt restructurings

The following table presents loans by class modified as TDRs during the three-month period ended June 30, 2018:

			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Contracts		Investment		Investment
Investment commercial real estate		1	$	15,351	$	15,351
Total		1	$	15,351	$	15,351

The following table presents loans by class modified as TDRs during the six-month period ended June 30, 2018:

			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Contracts		Investment		Investment
Investment commercial real estate		1	$	15,351	$	15,351
Total		1	$	15,351	$	15,351

The following table presents loans by class modified as TDRs that failed to comply with the modified terms in the twelve months following modification and resulted in a payment default at June 30, 2018:

	Number of		Recorded
(Dollars in thousands)	Contracts		Investment
Primary residential mortgage		1	$	336
Total		1	$	336

XML

DEPOSITS (Tables)

6 Months Ended

Jun. 30, 2019

Deposits [Abstract]

Schedule of deposit liabilities

The following table sets forth the details of total deposits as of June 30, 2019 and December 31, 2018:

	June 30,				December 31,
	2019				2018
(Dollars in thousands)
Noninterest-bearing demand deposits	$	544,431	13.29	%	$	463,926	11.91	%
Interest-bearing checking (1)		1,388,821	33.91			1,247,305	32.02
Savings		112,438	2.75			114,674	2.94
Money market		1,207,358	29.48			1,243,369	31.92
Certificates of deposit - retail		570,384	13.93			510,724	13.12
Certificates of deposit - listing service		58,541	1.43			79,195	2.03
Subtotal deposits		3,881,973	94.79			3,659,193	93.94
Interest-bearing demand - Brokered		180,000	4.39			180,000	4.62
Certificates of deposit - Brokered		33,682	0.82			56,147	1.44
Total deposits	$	4,095,655	100.00	%	$	3,895,340	100.00	%

(1) Interest-bearing checking includes $453.1 million at June 30, 2019 and $434.5 million at December 31, 2018 of reciprocal balances in the Reich & Tang or Promontory Demand Deposit Marketplace program.

Schedule of maturities of time deposits

The scheduled maturities of certificates of deposit, including brokered certificates of deposit, as of June 30, 2019 are as follows:

(In thousands)
2019	$	228,856
2020		270,032
2021		65,373
2022		36,185
2023		11,600
Over 5 Years		50,561
Total	$	662,607

XML

FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Schedule of maturity dates of the advances and other borrowings

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

(In thousands)
2021	$	60,000
2022		20,000
2023		25,000
Total	$	105,000

XML

BUSINESS SEGMENTS (Tables)

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Schedule of Income and Total Assets for Reportable Segments

The following tables present the statements of income and total assets for the Corporation’s reportable segments for the three and six months ended June 30, 2019 and 2018.

	Three Months Ended June 30, 2019
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	27,934	$	1,334	$	29,268
Noninterest income		3,151		9,875		13,026
Total income		31,085		11,209		42,294
Provision for loan and lease losses		1,150		—		1,150
Compensation and benefits		12,685		4,858		17,543
Premises and equipment expense		3,046		554		3,600
FDIC expense		277		—		277
Other noninterest expense		2,553		2,200		4,753
Total noninterest expense		19,711		7,612		27,323
Income before income tax expense		11,374		3,597		14,971
Income tax expense		2,581		840		3,421
Net income	$	8,793	$	2,757	$	11,550

	Three Months Ended June 30, 2018
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	27,953	$	1,290	$	29,243
Noninterest income		3,353		8,387		11,740
Total income		31,306		9,677		40,983
Provision for loan and lease losses		300		—		300
Compensation and benefits		11,932		3,894		15,826
Premises and equipment expense		2,982		424		3,406
FDIC Expense		625		—		625
Other noninterest expense		3,145		1,939		5,084
Total noninterest expense		18,984		6,257		25,241
Income before income tax expense		12,322		3,420		15,742
Income tax expense		2,997		835		3,832
Net income	$	9,325	$	2,585	$	11,910

	Six Months Ended June 30, 2019
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	56,500	$	2,775	$	59,275
Noninterest income		5,430		19,325		24,755
Total income		61,930		22,100		84,030
Provision for loan and lease losses		1,250		—		1,250
Compensation and benefits		24,682		10,017		34,699
Premises and equipment expense		5,971		1,017		6,988
FDIC expense		554		—		554
Other noninterest expense		5,311		4,336		9,647
Total noninterest expense		37,768		15,370		53,138
Income before income tax expense		24,162		6,730		30,892
Income tax expense		6,192		1,725		7,917
Net income	$	17,970	$	5,005	$	22,975
Total assets at period end	$	4,791,902	$	79,332	$	4,871,234

	Six Months Ended June 30, 2018
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	54,801	$	2,835	$	57,636
Noninterest income		4,980		16,975		21,955
Total income		59,781		19,810		79,591
Provision for loan and lease losses		1,550		—		1,550
Compensation and benefits		22,263		8,142		30,405
Premises and equipment expense		5,821		855		6,676
FDIC Expense		1,205		—		1,205
Other noninterest expense		5,952		4,040		9,992
Total noninterest expense		36,791		13,037		49,828
Income before income tax expense		22,990		6,773		29,763
Income tax expense		5,442		1,604		7,046
Net income	$	17,548	$	5,169	$	22,717
Total assets at period end	$	4,208,731	$	56,443	$	4,265,174

XML

FAIR VALUE (Tables)

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Schedule of assets measured at fair value on a recurring basis

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		Significant
				Markets For		Other			Significant
				Identical		Observable			Unobservable
	June 30,			Assets		Inputs			Inputs
(In thousands)	2019			(Level 1)		(Level 2)			(Level 3)
Assets:
Available for sale:
U.S. government-sponsored agencies	$	71,791		$	—	$	71,791		$	—
Mortgage-backed securities-residential		283,937			—		283,937			—
SBA pool securities		3,587			—		3,587			—
State and political subdivisions		16,443			—		16,443			—
Corporate bond		3,081			—		3,081			—
CRA investment fund		4,847			4,847		—			—
Loans held for sale, at fair value		2,343			—		2,343			—
Derivatives:
Cash flow hedges		175			—		175			—
Loan level swaps		30,569			—		30,569			—
Total	$	416,773		$	4,847	$	411,926		$	—
Liabilities:
Derivatives:
Cash flow hedges	$	(4,074	)	$	—	$	(4,074	)	$	—
Loan level swaps		(30,569	)		—		(30,569	)		—
Total	$	(34,643	)	$	—	$	(34,643	)	$	—

Assets Measured on a Recurring Basis

				Fair Value Measurements Using
				Quoted
				Prices in
				Active		Significant
				Markets For		Other			Significant
				Identical		Observable			Unobservable
	December 31,			Assets		Inputs			Inputs
(In thousands)	2018			(Level 1)		(Level 2)			(Level 3)
Assets:
Securities available for sale:
U.S. government-sponsored agencies	$	102,013		$	—	$	102,013		$	—
Mortgage-backed securities-residential		251,362			—		251,362			—
SBA pool securities		3,839			—		3,839			—
State and political subdivisions		17,610			—		17,610			—
Corporate bond		3,112			—		3,112			—
CRA investment fund		4,719			4,719		—			—
Loans held for sale, at fair value		1,576			—		1,576			—
Derivatives:
Cash flow hedges		1,657			—		1,657			—
Loan level swaps		9,689			—		9,689			—
Total	$	395,577		$	4,719	$	390,858		$	—
Liabilities:
Derivatives:
Cash flow hedges	$	(849	)	$	—	$	(849	)	$	—
Loan level swaps		(9,689	)		—		(9,689	)		—
Total	$	(10,538	)	$	—	$	(10,538	)	$	—

Schedule of residential loans held for sale

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

(In thousands)	June 30, 2019		December 31, 2018
Residential loans contractual balance	$	2,306	$	1,552
Fair value adjustment		37		24
Total fair value of residential loans held for sale	$	2,343	$	1,576

Schedule of carrying amounts and estimated fair values of financial instruments

The carrying amounts and estimated fair values of financial instruments at June 30, 2019 are as follows:

			Fair Value Measurements at June 30, 2019 using
	Carrying
(In thousands)	Amount		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	304,027	$	304,027	$	—	$	—	$	304,027
Securities available for sale		378,839		—		378,839		—		378,839
CRA investment fund		4,847		4,847		—		—		4,847
FHLB and FRB stock		18,338		—		—		—	N/A
Loans held for sale, at fair value		2,343		—		2,343		—		2,343
Loans held for sale, at lower of cost or fair value		926		—		1,000		—		1,000
Loans, net of allowance for loan and lease losses		3,989,548		—		—		3,946,808		3,946,808
Accrued interest receivable		11,594		—		1,708		9,886		11,594
Cash flow hedges		175		—		175		—		175
Loan level swaps		30,569		—		30,569		—		30,569
Financial liabilities
Deposits	$	4,095,655	$	3,433,048	$	665,573	$	—	$	4,098,621
Federal home loan bank advances		105,000		—		108,401		—		108,401
Subordinated debt		83,305		—		—		84,400		84,400
Accrued interest payable		2,494		430		2,009		55		2,494
Cash flow hedges		4,074		—		4,074		—		4,074
Loan level swap		30,569		—		30,569		—		30,569

The carrying amounts and estimated fair values of financial instruments at December 31, 2018 are as follows:

			Fair Value Measurements at December 31, 2018 using
	Carrying
(In thousands)	Amount		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	160,773	$	160,773	$	—	$	—	$	160,773
Securities available for sale		377,936		—		377,936		—		377,936
CRA investment fund		4,719		4,719		—		—		4,719
FHLB and FRB stock		18,533		—		—		—	N/A
Loans held for sale, at fair value		1,576		—		1,576		—		1,576
Loans held for sale, at lower of cost or fair value		3,542		—		3,654		—		3,654
Loans, net of allowance for loan and lease losses		3,889,427		—		—		3,852,004		3,852,004
Accrued interest receivable		10,814		—		1,875		8,939		10,814
Cash flow Hedges		1,657		—		1,657		—		1,657
Loan level swaps		9,689		—		9,689		—		9,689
Financial liabilities
Deposits	$	3,895,340	$	3,249,274	$	640,997	$	—	$	3,890,271
Federal home loan bank advances		108,000		—		108,950		—		108,950
Subordinated debt		83,193		—		—		82,207		82,207
Accrued interest payable		2,868		331		2,482		55		2,868
Cash flow hedges		849		—		849		—		849
Loan level swaps		9,689		—		9,689		—		9,689

XML

REVENUE FROM CONTRACTS WITH CUSTOMERS (Tables)

6 Months Ended

Jun. 30, 2019

Revenue From Contract With Customer [Abstract]

Schedule of Noninterest Income

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

	For the Three Months Ended June 30,
(In thousands)	2019		2018
Service charges on deposits
Overdraft fees	$	164	$	183
Interchange income		322		326
Other		411		364
Wealth management fees (a)		9,568		8,126
Other (b)		2,561		2,741
Total noninterest other income	$	13,026	$	11,740

	For the Six Months Ended June 30,
(In thousands)	2019		2018
Service charges on deposits
Overdraft fees	$	324	$	364
Interchange income		586		616
Other		803		724
Wealth management fees (a)		18,742		16,493
Other (a)		4,300		3,758
Total noninterest other income	$	24,755	$	21,955

(a) Includes investment brokerage fees.

(b) All of the other category is outside the scope of ASC 606.

Schedule of Noninterest Income by Operating Segment

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

	For the Three Months Ended June 30,						For the Three Months Ended June 30,
	2019						2018
(In thousands)			Wealth						Wealth
Revenue by Operating Segment	Banking		Management		Total		Banking		Management		Total
Service charges on deposits
Overdraft fees	$	164	$	—	$	164	$	183	$	—	$	183
Interchange income		322		—		322		326		—		326
Other		411		—		411		364		—		364
Wealth management fees (a)		—		9,568		9,568		—		8,126		8,126
Other (b)		2,254		307		2,561		2,480		261		2,741
Total noninterest income	$	3,151	$	9,875	$	13,026	$	3,353	$	8,387	$	11,740

	For the Six Months Ended June 30,						For the Six Months Ended June 30,
(In thousands)	2019						2018
Revenue by Operating			Wealth						Wealth
Segment	Banking		Management		Total		Banking		Management		Total
Service charges on deposits
Overdraft fees	$	324	$	—	$	324	$	364	$	—	$	364
Interchange income		586		—		586		616		—		616
Other		803		—		803		724		—		724
Wealth management fees (a)		—		18,742		18,742		—		16,493		16,493
Other (a)		3,717		583		4,300		3,276		482		3,758
Total noninterest income	$	5,430	$	19,325	$	24,755	$	4,980	$	16,975	$	21,955

(a) Includes investment brokerage fees.

(b) All of the other category is outside the scope of ASC 606.

XML

OTHER OPERATING EXPENSES (Tables)

6 Months Ended

Jun. 30, 2019

Other Income And Expenses [Abstract]

Schedule of components of other operating expenses

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2019		2018		2019		2018
Professional and legal fees		968		1,178		2,092		2,292
Telephone		377		271		657		555
Advertising		409		414		768		725
Amortization of intangible assets		229		180		458		359
Provision for ORE		—		204		—		204
Other operating expenses		2,770		2,837		5,672		5,857
Total other operating expenses	$	4,753	$	5,084	$	9,647	$	9,992

XML

ACCUMULATED OTHER COMPREHENSIVE (LOSS)/INCOME (Tables)

6 Months Ended

Jun. 30, 2019

Stockholders Equity Note [Abstract]

Schedule of accumulated other comprehensive income balances, net of tax

The following is a summary of the accumulated other comprehensive income/(loss) balances, net of tax, for the three months ended June 30, 2019 and 2018:

							Amount			Other
							Reclassified			Comprehensive
				Other			From			Income/(Loss)
				Comprehensive			Accumulated			Three Months
	Balance at			Income/(Loss)			Other			Ended			Balance at
	April 1,			Before			Comprehensive			June 30,			June 30,
(In thousands)	2019			Reclassifications			Income/(Loss)			2019			2019
Net unrealized holding loss on securities    available for sale, net of tax	$	(1,278	)	$	2,176			—		$	2,176		$	898
Gain/(loss) on cash flow hedges		(451	)		(2,029	)		(22	)		(2,051	)		(2,502	)
Accumulated other comprehensive loss,    net of tax	$	(1,729	)	$	147		$	(22	)	$	125		$	(1,604	)

							Amount			Other
							Reclassified			Comprehensive
				Other			From			Income/(Loss)
				Comprehensive			Accumulated			Three Months
	Balance at			Income/(Loss)			Other			Ended			Balance at
	April 1,			Before			Comprehensive			June 30,			June 30,
(In thousands)	2018			Reclassifications			Income/(Loss)			2018			2018
Net unrealized holding loss on    securities available for sale, net of tax	$	(4,345	)	$	(494	)	$	—		$	(494	)	$	(4,839	)
Gain on cash flow hedges		1,503			605			(23	)		582			2,085
Accumulated other comprehensive    loss, net of tax	$	(2,842	)	$	111		$	(23	)	$	88		$	(2,754	)

The following is a summary of the accumulated other comprehensive (loss)/income balances, net of tax, for the six months ended June 30, 2019 and 2018:

							Amount			Other
							Reclassified			Comprehensive
				Other			From			Income/(Loss)
				Comprehensive			Accumulated			Six Months
	Balance at			Income/(Loss)			Other			Ended			Balance at
	January 1,			Before			Comprehensive			June 30,			June 30,
(In thousands)	2019			Reclassifications			Income/(Loss)			2019			2019
Net unrealized holding gain/(loss) on    securities available for sale, net of tax	$	(3,006	)	$	3,904		$	—		$	3,904		$	898
Gain/(loss) on cash flow hedges		661			(3,120	)		(43	)		(3,163	)		(2,502	)
Accumulated other comprehensive    loss, net of tax	$	(2,345	)	$	784		$	(43	)	$	741		$	(1,604	)

									Amount			Other
									Reclassified			Comprehensive
				Cumulative		Other			From			Income/(Loss)
				Adjustment		Comprehensive			Accumulated			Six Months
	Balance at			For Equity		Income/(Loss)			Other			Ended			Balance at
	January 1,			Security		Before			Comprehensive			June 30,			June 30,
(In thousands)	2018			(ASU 2016-1)		Reclassifications			Income/(Loss)			2018			2018
Net unrealized holding loss on securities    available for sale, net of tax	$	(2,214	)	$	127	$	(2,752	)	$	—		$	(2,752	)	$	(4,839	)
Gain/(loss) on cash flow hedges		1,002			—		1,128			(45	)		1,083			2,085
Accumulated other comprehensive    loss, net of tax	$	(1,212	)	$	127	$	(1,624	)	$	(45	)	$	(1,669	)	$	(2,754	)

Schedule of the reclassifications out of accumulated other comprehensive income

The following represents the reclassifications out of accumulated other comprehensive income for the three months ended June 30, 2019 and 2018:

	Three Months Ended
	June 30,
(In thousands)	2019			2018			Affected Line Item in Income Statement
Unrealized gains on cash flow hedge    derivatives:
Reclassification adjustment for amounts    included in net income	$	(31	)	$	(31	)	Interest expense
Income tax expense		9			8		Income tax expense
Total reclassifications, net of tax	$	(22	)	$	(23	)

The following represents the reclassifications out of accumulated other comprehensive income for the six months ended June 30, 2019 and 2018:

	Six Months Ended
	June 30,
(In thousands)	2019			2018			Affected Line Item in Income
Unrealized gains on cash flow hedge    derivatives:
Reclassification adjustment for amounts    included in net income	$	(62	)	$	(62	)	Interest expense
Income tax expense		19			17		Income tax expense
Total reclassifications, net of tax	$	(43	)	$	(45	)

XML

DERIVATIVES (Tables)

6 Months Ended

Jun. 30, 2019

Schedule of Information about Derivatives

The following table presents information about the interest rate swaps designated as cash flow hedges as of June 30, 2019 and December 31, 2018:

(Dollars in thousands)	June 30, 2019				December 31, 2018
Notional amount	$	230,000			$	230,000
Weighted average pay rate		2.04		%		2.04	%
Weighted average receive rate		2.48		%		2.33	%
Weighted average maturity		2.88		years		2.65	years
Unrealized (loss)/gain, net	$	(3,899	)		$	808
Number of contracts		11				11

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 and six months ended June 30, 2019 and June 30, 2018:

	For the Three Months Ended June 30,
(In thousands)	2019			2018
Interest rate contracts
Amount of gain/(loss) recognized in OCI	$	(2,051	)	$	582
Amount of gain/(loss) reclassified from OCI to interest expense		22			23

	For the Six Months Ended June 30,
(In thousands)	2019			2018
Interest rate contracts
Amount of gain/(loss) recognized in OCI (effective portion)	$	(3,163	)	$	1,083
Amount of gain/(loss) reclassified from OCI to interest expense		43			45

Schedule of Notional Amount and Fair Value

	June 30, 2019
	Notional		Fair
(In thousands)	Amount		Value
Interest rate swaps related to interest-bearing deposits	$	230,000	$	(3,899	)
Total included in other assets		55,000		175
Total included in other liabilities		175,000		(4,074	)

	December 31, 2018
	Notional		Fair
(In thousands)	Amount		Value
Interest rate swaps related to interest-bearing deposits	$	230,000	$	808
Total included in other assets		130,000		1,657
Total included in other liabilities		100,000		(849	)

Not Designated as Hedging Instrument [Member]

Schedule of Information about Derivatives

Information about these swaps is as follows:

(Dollars in thousands)	June 30, 2019			December 31, 2018
Notional amount	$	539,092		$	558,690
Fair value	$	30,569		$	9,689
Weighted average pay rates		4.41	%		4.44	%
Weighted average receive rates		4.21	%		4.24	%
Weighted average maturity		7.4	years		7.1	years
Number of contracts		64			67

XML

LEASES (Tables)

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Schedule of Operating Lease Liabilities by Contractual Maturity

The following is a schedule of the Company's operating lease liabilities by contractual maturity as of June 30, 2019:

(In thousands)
2019	$	2,666
2020		2,506
2021		1,715
2022		1,459
2023		999
Thereafter		2,112
Total lease payments		11,457
Less: imputed interest		188
Total present value of lease payments		11,269

Summary of Supplemental Cash Flow Information Related to Direct Finance and Operating Leases

The following table shows the supplemental cash flow information related to the Company’s direct finance and operating leases for the six months ended June 30, 2019:

(In thousands)
Right-of-use asset obtained in exchange for lease obligation	$	7,862
Operating cash flows from operating leases		1,140
Operating cash flows from direct finance leases		196
Financing cash flows from direct finance leases		374

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Narrative - Other) (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019 USD ($) shares	Jun. 30, 2018 USD ($) shares	Jun. 30, 2019 USD ($) segment Lease Location shares	Jun. 30, 2018 USD ($) shares	Dec. 31, 2018 USD ($)
Number of operating segments | segment			2
Federal funds sales periods			1 day
Interest-earning deposits maturities period			1 year
Servicing rights			$ 0
Amount of loans serviced	$ 43,800		$ 43,800		$ 35,100
Threshold period for loan			30 days
Threshold for determining nonaccrual status			90 days
Number of existing finance leases | Lease			2
Number of branch location | Location			1
Issuance of shares for Employee Stock Purchase Plan, shares | shares	8,564	9,127	18,740	15,490
Antidilutive securities | shares	128,634		297,828
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	$ 30	$ 59	$ 75	$ 112
Substandard [Member]
Loan reserve multiple	3.5		3.5		3.5
Special Mention [Member]
Loan reserve multiple	2.25		2.25		2.25
Consumer and Other [Member]
Threshold for determining nonaccrual status			120 days
Small Business Administration Loans [Member]
Loans held for sale	$ 926		$ 926		$ 1,200
Maximum [Member]
Cash equivalents original maturities period			90 days
Finite-Lived Intangible Asset, Useful Life			15 years
Maximum [Member] | Employee Stock [Member]
Percentage of compensation contributable			15.00%
Minimum [Member]
Finite-Lived Intangible Asset, Useful Life			5 years
Minimum [Member] | Employee Stock [Member]
Percentage of compensation contributable			1.00%

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Stock-Based Compensation Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Closing stock price of common stock	$ 28.12		$ 28.12
Stock options granted	0		0
Employee Stock Option [Member]
Option term			10 years
Vesting term			5 years
Restricted stock [Member]
Unrecognized compensation cost	$ 46		$ 46
Weighted average period, unrecognized compensation expected to be recognized (in years)			4 months 2 days
Total compensation cost	$ 1,500	$ 1,300	$ 2,900	$ 2,400
Restricted stock [Member] | Tranche One [Member]
Vesting term	3 years		3 years
Shares available for grant	729		729
Restricted stock [Member] | Tranche Two [Member]
Vesting term	5 years		5 years
Shares available for grant	27,925		27,925
Performance Shares [Member]
Shares available for grant	0		0
Restricted Stock Units [Member]
Unrecognized compensation cost	$ 12,800		$ 12,800
Weighted average period, unrecognized compensation expected to be recognized (in years)			1 year 3 months 21 days

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Schedule of Changes in Options Outstanding) (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2019
Number of Options
Balance	91,310
Exercised	(1,520)
Expired	(630)
Forfeited	(20,000)
Balance	69,160
Vested and expected to vest	69,160
Exercisable	69,160
Weighted Average Exercise Price
Balance	$ 13.63
Exercised	14.28
Expired	22.57
Forfeited	13.07
Balance	13.69
Vested and expected to vest	13.69
Exercisable	$ 13.69
Weighted Average Remaining Contractual Term
Balance	2 years 3 months 29 days
Vested and expected to vest	2 years 3 months 29 days
Exercisable	2 years 3 months 29 days
Aggregate Intrinsic Value
Balance	$ 998
Vested and expected to vest	998
Exercisable	$ 998

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Schedule of Changes in Restricted Common Shares) (Details)	6 Months Ended
	Jun. 30, 2019 $ / shares shares
Performance Shares [Member]
Number of Shares
Balance at Beginning | shares	42,998
Granted | shares	47,770
Balance at end | shares	90,768
Weighted Average Grant Date Fair Value
Balance at Beginning | $ / shares	$ 35.33
Granted | $ / shares	26.34
Balance at end | $ / shares	$ 30.60
Restricted stock [Member]
Number of Shares
Balance at Beginning | shares	366,541
Granted | shares	223,396
Vested | shares	(140,178)
Forfeited | shares	(3,214)
Balance at end | shares	446,545
Weighted Average Grant Date Fair Value
Balance at Beginning | $ / shares	$ 30.64
Granted | $ / shares	26.51
Vested | $ / shares	27.44
Forfeited | $ / shares	31.35
Balance at end | $ / shares	$ 29.98

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Schedule of Earnings per Common Share) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Accounting Policies [Abstract]
Net income available to common shareholders	$ 11,550	$ 11,910	$ 22,975	$ 22,717
Basic weighted-average shares outstanding	19,447,155	18,930,893	19,399,071	18,770,492
Plus: common stock equivalents	121,216	167,945	129,466	226,487
Diluted weighted-average shares outstanding	19,568,371	19,098,838	19,528,537	18,996,979
Net income per share
Basic	$ 0.59	$ 0.63	$ 1.18	$ 1.21
Diluted	$ 0.59	$ 0.62	$ 1.18	$ 1.20

XML

INVESTMENT SECURITIES AVAILABLE FOR SALE (Schedule of Amortized Cost and Approximate Fair Value) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	$ 377,654	$ 381,910
Gross Unrealized Gains	2,205	639
Gross Unrealized Losses	(1,020)	(4,613)
Fair Value	378,839	377,936
U.S. Government-Sponsored Entities [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	71,719	102,915
Gross Unrealized Gains	104	82
Gross Unrealized Losses	(32)	(984)
Fair Value	71,791	102,013
Mortgage-Backed Securities-Residential [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	282,924	254,383
Gross Unrealized Gains	1,972	418
Gross Unrealized Losses	(959)	(3,439)
Fair Value	283,937	251,362
SBA Pool Securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	3,596	3,883
Gross Unrealized Gains
Gross Unrealized Losses	(9)	(44)
Fair Value	3,587	3,839
State and Political Subdivisions [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	16,415	17,729
Gross Unrealized Gains	48	27
Gross Unrealized Losses	(20)	(146)
Fair Value	16,443	17,610
Corporate Bond [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	3,000	3,000
Gross Unrealized Gains	81	112
Gross Unrealized Losses
Fair Value	$ 3,081	$ 3,112

XML

INVESTMENT SECURITIES AVAILABLE FOR SALE (Schedule of Securities with Continuous Unrealized Loss Position) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Approximate Fair Value
Less Than 12 Months	$ 19,929	$ 70,958
12 Months or Longer	123,511	180,843
Total	143,440	251,801
Unrealized Losses
Less Than 12 Months	(27)	(407)
12 Months or Longer	(993)	(4,206)
Total	(1,020)	(4,613)
U.S. Government Sponsored Entities [Member]
Approximate Fair Value
Less Than 12 Months	4,496	18,840
12 Months or Longer	11,969	33,600
Total	16,465	52,440
Mortgage-Backed Securities-Residential [Member]
Approximate Fair Value
Less Than 12 Months	15,433	51,697
12 Months or Longer	103,844	136,130
Total	119,277	187,827
Unrealized Losses
Less Than 12 Months	(23)	(303)
12 Months or Longer	(936)	(3,136)
Total	(959)	(3,439)
SBA Pool Securities [Member]
Approximate Fair Value
Less Than 12 Months
12 Months or Longer	3,587	3,839
Total	3,587	3,839
Unrealized Losses
Less Than 12 Months
12 Months or Longer	(9)	(44)
Total	(9)	(44)
State and Political Subdivisions [Member]
Approximate Fair Value
Less Than 12 Months		421
12 Months or Longer	4,111	7,274
Total	4,111	7,695
Unrealized Losses
Less Than 12 Months		(1)
12 Months or Longer	(20)	(145)
Total	(20)	(146)
U.S. Government-Sponsored Entities [Member]
Unrealized Losses
Less Than 12 Months	(4)	(103)
12 Months or Longer	(28)	(881)
Total	$ (32)	$ (984)

XML

INVESTMENT SECURITIES AVAILABLE FOR SALE - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Schedule Of Available For Sale Securities [Line Items]
Securities gains/(losses), net	$ 69	$ (36)	$ 128	$ (114)
CRA Investment Fund [Member]
Schedule Of Available For Sale Securities [Line Items]
Securities gains/(losses), net	$ 69		$ 128

XML

LOANS AND LEASES (Schedule of Loans Outstanding, by Classification) (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Total loans	$ 4,029,339	$ 3,927,931
Loans and Finance Receivables, Gross [Member] | Credit Concentration Risk [Member]
Total loans (in percent)	100.00%	100.00%
Unallocated Financing Receivables [Member]
Total loans	$ 424	$ 465
Unallocated Financing Receivables [Member] | Loans and Finance Receivables, Gross [Member] | Credit Concentration Risk [Member]
Total loans (in percent)	0.01%	0.01%
Residential Mortgage [Member] | Residential Portfolio Segment [Member]
Total loans	$ 570,583	$ 571,570
Residential Mortgage [Member] | Residential Portfolio Segment [Member] | Loans and Finance Receivables, Gross [Member] | Credit Concentration Risk [Member]
Total loans (in percent)	14.16%	14.55%
Multifamily Property [Member] | Residential Portfolio Segment [Member]
Total loans	$ 1,129,476	$ 1,135,805
Multifamily Property [Member] | Residential Portfolio Segment [Member] | Loans and Finance Receivables, Gross [Member] | Credit Concentration Risk [Member]
Total loans (in percent)	28.03%	28.92%
Commercial Mortgage [Member] | Commercial Real Estate Portfolio Segment [Member]
Total loans	$ 694,674	$ 702,165
Commercial Mortgage [Member] | Commercial Real Estate Portfolio Segment [Member] | Loans and Finance Receivables, Gross [Member] | Credit Concentration Risk [Member]
Total loans (in percent)	17.24%	17.88%
Commercial Loans Including Equipment Financing [Member] | Commercial Real Estate Portfolio Segment [Member]
Total loans	$ 1,517,665	$ 1,397,057
Commercial Loans Including Equipment Financing [Member] | Commercial Real Estate Portfolio Segment [Member] | Loans and Finance Receivables, Gross [Member] | Credit Concentration Risk [Member]
Total loans (in percent)	37.67%	35.57%
Home Equity Lines of Credit [Member] | Residential Portfolio Segment [Member]
Total loans	$ 62,522	$ 62,191
Home Equity Lines of Credit [Member] | Residential Portfolio Segment [Member] | Loans and Finance Receivables, Gross [Member] | Credit Concentration Risk [Member]
Total loans (in percent)	1.55%	1.58%
Consumer Loans, Including Home Equity Loans [Member] | Consumer and Other Loans [Member]
Total loans	$ 53,995	$ 58,678
Consumer Loans, Including Home Equity Loans [Member] | Consumer and Other Loans [Member] | Loans and Finance Receivables, Gross [Member] | Credit Concentration Risk [Member]
Total loans (in percent)	1.34%	1.49%

XML

LOANS AND LEASES (Schedule of Loan Balances by Portfolio Class) (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Total loans	$ 4,025,487	$ 3,924,312
Net deferred costs	3,852	3,619
Total loans including net deferred costs	$ 4,029,339	$ 3,927,931
Customer Concentration Risk [Member] | Loans and Finance Receivables, Gross [Member]
Total loans (in percent)	100.00%	100.00%
Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member]
Total loans	$ 599,450	$ 600,891
Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member] | Customer Concentration Risk [Member] | Loans and Finance Receivables, Gross [Member]
Total loans (in percent)	14.89%	15.31%
Residential Portfolio Segment [Member] | Home Equity Lines of Credit [Member]
Total loans	$ 62,522	$ 62,191
Total loans including net deferred costs	$ 62,522	$ 62,191
Residential Portfolio Segment [Member] | Home Equity Lines of Credit [Member] | Customer Concentration Risk [Member] | Loans and Finance Receivables, Gross [Member]
Total loans (in percent)	1.55%	1.58%
Residential Portfolio Segment [Member] | Multifamily Property [Member]
Total loans	$ 1,129,476	$ 1,135,805
Total loans including net deferred costs	$ 1,129,476	$ 1,135,805
Residential Portfolio Segment [Member] | Multifamily Property [Member] | Customer Concentration Risk [Member] | Loans and Finance Receivables, Gross [Member]
Total loans (in percent)	28.06%	28.94%
Residential Portfolio Segment [Member] | Junior Lien [Member]
Total loans	$ 7,397	$ 7,418
Residential Portfolio Segment [Member] | Junior Lien [Member] | Customer Concentration Risk [Member] | Loans and Finance Receivables, Gross [Member]
Total loans (in percent)	0.18%	0.19%
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Property [Member]
Total loans	$ 249,421	$ 261,193
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Property [Member] | Customer Concentration Risk [Member] | Loans and Finance Receivables, Gross [Member]
Total loans (in percent)	6.20%	6.65%
Commercial Real Estate Portfolio Segment [Member] | Investment Property [Member]
Total loans	$ 1,017,505	$ 1,001,918
Commercial Real Estate Portfolio Segment [Member] | Investment Property [Member] | Customer Concentration Risk [Member] | Loans and Finance Receivables, Gross [Member]
Total loans (in percent)	25.28%	25.53%
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Total loans	$ 125	$ 86
Commercial Portfolio Segment [Member] | Construction Loans [Member] | Customer Concentration Risk [Member] | Loans and Finance Receivables, Gross [Member]
Total loans (in percent)		0.01%
Consumer and Other Loans [Member]
Total loans	$ 57,415	$ 65,180
Consumer and Other Loans [Member] | Customer Concentration Risk [Member] | Loans and Finance Receivables, Gross [Member]
Total loans (in percent)	1.43%	1.66%
Commercial and Industrial Sector [Member] | Commercial Portfolio Segment [Member]
Total loans	$ 717,851	$ 616,838
Commercial and Industrial Sector [Member] | Commercial Portfolio Segment [Member] | Customer Concentration Risk [Member] | Loans and Finance Receivables, Gross [Member]
Total loans (in percent)	17.83%	15.72%
Lease Financing [Member]
Total loans	$ 184,182	$ 172,643
Lease Financing [Member] | Commercial Portfolio Segment [Member] | Customer Concentration Risk [Member] | Loans and Finance Receivables, Gross [Member]
Total loans (in percent)	4.58%	4.40%
Agricultural Sector [Member]
Total loans	$ 143	$ 149
Agricultural Sector [Member] | Customer Concentration Risk [Member] | Loans and Finance Receivables, Gross [Member]
Total loans (in percent)		0.01%

XML

LOANS AND LEASES (Schedule of Balances by Portfolio Class, Based on Impairment Method) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Total Loans Individually Evaluated for Impairment	$ 34,941		$ 31,300
Ending ALLL Attributable to Loans Individually Evaluated for Impairment	1,248		262
Total Loans Collectively Evaluated for Impairment	3,990,546		3,893,012
Ending ALLL Attributable to Loans Collectively Evaluated for Impairment	38,543		38,242
Total Loans	4,025,487		3,924,312
Total Ending ALLL	39,791	$ 38,653	38,504	$ 38,066	$ 37,696	$ 36,440
Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member]
Total Loans Individually Evaluated for Impairment	8,791		9,518
Ending ALLL Attributable to Loans Individually Evaluated for Impairment	248		262
Total Loans Collectively Evaluated for Impairment	590,659		591,373
Ending ALLL Attributable to Loans Collectively Evaluated for Impairment	2,809		3,244
Total Loans	599,450		600,891
Total Ending ALLL	3,057	3,477	3,506	4,382	4,403	4,085
Residential Portfolio Segment [Member] | Home Equity Lines of Credit [Member]
Total Loans Individually Evaluated for Impairment	22		255
Ending ALLL Attributable to Loans Individually Evaluated for Impairment	0
Total Loans Collectively Evaluated for Impairment	62,500		61,936
Ending ALLL Attributable to Loans Collectively Evaluated for Impairment	155		164
Total Loans	62,522		62,191
Total Ending ALLL	155	152	164	190	192	221
Residential Portfolio Segment [Member] | Multifamily Property [Member]
Total Loans Individually Evaluated for Impairment	0		1,262
Ending ALLL Attributable to Loans Individually Evaluated for Impairment	0
Total Loans Collectively Evaluated for Impairment	1,129,476		1,134,543
Ending ALLL Attributable to Loans Collectively Evaluated for Impairment	5,744		5,959
Total Loans	1,129,476		1,135,805
Total Ending ALLL	5,744	5,768	5,959	8,259	9,140	10,007
Residential Portfolio Segment [Member] | Junior Lien [Member]
Total Loans Individually Evaluated for Impairment	29		36
Ending ALLL Attributable to Loans Individually Evaluated for Impairment	0
Total Loans Collectively Evaluated for Impairment	7,368		7,382
Ending ALLL Attributable to Loans Collectively Evaluated for Impairment	15		15
Total Loans	7,397		7,418
Total Ending ALLL	15	15	15	17	16	12
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Property [Member]
Total Loans Individually Evaluated for Impairment	1,451		1,574
Ending ALLL Attributable to Loans Individually Evaluated for Impairment	0
Total Loans Collectively Evaluated for Impairment	247,970		259,619
Ending ALLL Attributable to Loans Collectively Evaluated for Impairment	2,497		2,614
Total Loans	249,421		261,193
Total Ending ALLL	2,497	2,534	2,614	2,525	2,364	2,385
Commercial Real Estate Portfolio Segment [Member] | Investment Property [Member]
Total Loans Individually Evaluated for Impairment	18,091		18,655
Total Loans Collectively Evaluated for Impairment	999,414		983,263
Ending ALLL Attributable to Loans Collectively Evaluated for Impairment	14,650		14,248
Total Loans	1,017,505		1,001,918
Total Ending ALLL	14,650	14,410	14,248	13,659	12,367	11,933
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Total Loans Collectively Evaluated for Impairment	125		86
Ending ALLL Attributable to Loans Collectively Evaluated for Impairment	1		1
Total Loans	125		86
Total Ending ALLL	1	1	1	1	1	1
Consumer and Other Loans [Member]
Total Loans Collectively Evaluated for Impairment	57,415		65,180
Ending ALLL Attributable to Loans Collectively Evaluated for Impairment	319		384
Total Loans	57,415		65,180
Total Ending ALLL	319	306	384	364	422	349
Commercial and Industrial Sector [Member] | Commercial Portfolio Segment [Member]
Total Loans Individually Evaluated for Impairment	6,557
Ending ALLL Attributable to Loans Individually Evaluated for Impairment	1,000
Total Loans Collectively Evaluated for Impairment	711,294		616,838
Ending ALLL Attributable to Loans Collectively Evaluated for Impairment	10,463		9,839
Total Loans	717,851		616,838
Total Ending ALLL	11,463	10,185	9,839	7,356	7,753	$ 6,563
Lease Financing [Member]
Total Loans Individually Evaluated for Impairment	0
Ending ALLL Attributable to Loans Individually Evaluated for Impairment	0
Total Loans Collectively Evaluated for Impairment	184,182		172,643
Ending ALLL Attributable to Loans Collectively Evaluated for Impairment	1,888		1,772
Total Loans	184,182		172,643
Total Ending ALLL	1,888		1,772
Agricultural Sector [Member]
Total Loans Collectively Evaluated for Impairment	143		149
Ending ALLL Attributable to Loans Collectively Evaluated for Impairment	2		2
Total Loans	143		149
Total Ending ALLL	$ 2	$ 2	$ 2	$ 2	$ 2

XML

LOANS AND LEASES (Narrative) (Details)	3 Months Ended	6 Months Ended		12 Months Ended
	Jun. 30, 2019 USD ($) N	Jun. 30, 2019 USD ($) N	Jun. 30, 2018 N	Dec. 31, 2018 USD ($)
Financing Receivable Recorded Investment Past Due [Line Items]
Impaired non-accrual loans	$ 31,150,000	$ 31,150,000		$ 25,715,000
Impaired non-accrual loans performing troubled debt restructured	3,800,000	3,800,000		4,300,000
Allowance allocated to troubled debt restructured loans	248,000	248,000		262,000
Allowance allocated to non accrual loans	156,000	156,000		161,000
Loan receivable, validate risk ratings performed for new lending to existing relationships	1,000,000	1,000,000
Loan receivable, validate risk ratings performed for criticized and classified rated borrowers with relationship exposure, value	500,000	500,000
Loan receivable, validate risk ratings performed for random sample of borrowers with relationship, value	1,000,000	1,000,000
Loan receivable, validate risk ratings performed for new regulation "O" loan commitments, value	1,000,000	1,000,000
Loan receivable validate risk ratings performed for leveraged loans, value	1,000,000	1,000,000
Loan receivable validate risk ratings performed for no borrower with commitments, value	250,000	250,000
Troubled debt restructurings specific reserves to customers	$ 248,000	$ 248,000		262,000
Subsequent default number of contracts | N	0	0	1
Substandard [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Financing receivable impaired loan		$ 34,900,000		$ 31,200,000

XML

LOANS AND LEASES (Schedule of Loans Individually Evaluated for Impairment) (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Unpaid Principal Balance
With no related allowance recorded	$ 31,959	$ 34,330
With related allowance recorded	7,551
Total loans individually evaluated for Impairment	39,510	35,346
Recorded Investment
With no related allowance recorded	27,390	30,284
With related allowance recorded	7,551
Total loans individually evaluated for Impairment	34,941	31,300
Specific Reserves	1,248
Average Impaired Loans
With no related allowance recorded	26,609	24,339
With related allowance recorded	2,140
Total loans individually evaluated for Impairment	28,749	25,483
With no related allowance recorded	31,959	34,330
With no related allowance recorded	27,390	30,284
With no related allowance recorded	26,609	24,339
Multifamily Property [Member]
Recorded Investment
With no related allowance recorded		1,262
Average Impaired Loans
With no related allowance recorded		105
With no related allowance recorded		1,262
With no related allowance recorded		105
Residential Portfolio Segment [Member]
Unpaid Principal Balance
With related allowance recorded		1,016
Recorded Investment
With related allowance recorded		1,016
Specific Reserves		262
Average Impaired Loans
With related allowance recorded		1,144
Residential Portfolio Segment [Member] | Junior Lien [Member]
Unpaid Principal Balance
With no related allowance recorded	98	102
Recorded Investment
With no related allowance recorded	29	36
Average Impaired Loans
With no related allowance recorded	34	45
With no related allowance recorded	98	102
With no related allowance recorded	29	36
With no related allowance recorded	34	45
Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member]
Unpaid Principal Balance
With no related allowance recorded	9,111	9,789
With related allowance recorded	994	1,016
Recorded Investment
With no related allowance recorded	7,797	8,502
With related allowance recorded	994	1,016
Specific Reserves	248	262
Average Impaired Loans
With no related allowance recorded	8,002	8,042
With related allowance recorded	1,047	1,144
With no related allowance recorded	9,111	9,789
With no related allowance recorded	7,797	8,502
With no related allowance recorded	8,002	8,042
Residential Portfolio Segment [Member] | Home Equity Lines of Credit [Member]
Unpaid Principal Balance
With no related allowance recorded	25	257
Recorded Investment
With no related allowance recorded	22	255
Average Impaired Loans
With no related allowance recorded	151	123
With no related allowance recorded	25	257
With no related allowance recorded	22	255
With no related allowance recorded	151	123
Residential Portfolio Segment [Member] | Multifamily Property [Member]
Unpaid Principal Balance
With no related allowance recorded		1,262
Average Impaired Loans
With no related allowance recorded		1,262
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Property [Member]
Unpaid Principal Balance
With no related allowance recorded	2,684	2,741
Recorded Investment
With no related allowance recorded	1,451	1,574
Average Impaired Loans
With no related allowance recorded	1,593	2,025
With no related allowance recorded	2,684	2,741
With no related allowance recorded	1,451	1,574
With no related allowance recorded	1,593	2,025
Commercial Real Estate Portfolio Segment [Member] | Investment Property [Member]
Unpaid Principal Balance
With no related allowance recorded	20,041	20,179
Recorded Investment
With no related allowance recorded	18,091	18,655
Average Impaired Loans
With no related allowance recorded	16,829	13,999
With no related allowance recorded	20,041	20,179
With no related allowance recorded	18,091	18,655
With no related allowance recorded	16,829	$ 13,999
Commercial Portfolio Segment [Member] | Commercial and Industrial Sector [Member]
Unpaid Principal Balance
With related allowance recorded	6,557
Recorded Investment
With related allowance recorded	6,557
Specific Reserves	1,000
Average Impaired Loans
With related allowance recorded	$ 1,093

XML

LOANS AND LEASES (Schedule of Investment in Nonaccrual and Loans Past Due Over 90 Days) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Impaired non-accrual loans	$ 31,150	$ 25,715
Loans Past Due Over 90 Days And Still Accruing Interest	0	0
Residential Portfolio Segment [Member] | Junior Lien [Member]
Impaired non-accrual loans	29	36
Loans Past Due Over 90 Days And Still Accruing Interest	0	0
Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member]
Impaired non-accrual loans	5,019	5,215
Loans Past Due Over 90 Days And Still Accruing Interest	0	0
Residential Portfolio Segment [Member] | Home Equity Lines of Credit [Member]
Impaired non-accrual loans	3	235
Loans Past Due Over 90 Days And Still Accruing Interest	0	0
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Property [Member]
Impaired non-accrual loans	1,451	1,574
Loans Past Due Over 90 Days And Still Accruing Interest	0	0
Commercial Real Estate Portfolio Segment [Member] | Investment Property [Member]
Impaired non-accrual loans	18,091	18,655
Loans Past Due Over 90 Days And Still Accruing Interest	0	$ 0
Commercial Portfolio Segment [Member] | Commercial and Industrial Sector [Member]
Impaired non-accrual loans	6,557
Loans Past Due Over 90 Days And Still Accruing Interest	$ 0

XML

LOANS AND LEASES (Schedule of Aging of Past Due Loans) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Total Past Due	$ 432	$ 1,099
Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member]
Total Past Due	105	1,097
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Property [Member]
Total Past Due	242
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Total Past Due	85
Consumer and Other Loans [Member]
Total Past Due		2
30 to 59 Days Past Due [Member]
Total Past Due	85	608
30 to 59 Days Past Due [Member] | Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member]
Total Past Due	0	606
30 to 59 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Property [Member]
Total Past Due	0
30 to 59 Days Past Due [Member] | Commercial Portfolio Segment [Member] | Construction Loans [Member]
Total Past Due	85
30 to 59 Days Past Due [Member] | Consumer and Other Loans [Member]
Total Past Due		2
60 to 89 Days Past Due [Member]
Total Past Due	347	491
60 to 89 Days Past Due [Member] | Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member]
Total Past Due	105	491
60 to 89 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Property [Member]
Total Past Due	242
60 to 89 Days Past Due [Member] | Commercial Portfolio Segment [Member] | Construction Loans [Member]
Total Past Due	0
60 to 89 Days Past Due [Member] | Consumer and Other Loans [Member]
Total Past Due		0
Greater Than 90 Days [Member]
Total Past Due	0	0
Greater Than 90 Days [Member] | Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member]
Total Past Due	0	0
Greater Than 90 Days [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Property [Member]
Total Past Due	0
Greater Than 90 Days [Member] | Commercial Portfolio Segment [Member] | Construction Loans [Member]
Total Past Due	$ 0
Greater Than 90 Days [Member] | Consumer and Other Loans [Member]
Total Past Due		$ 0

XML

LOANS AND LEASES (Schedule of Risk Category of Loans by Class of Loans) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Total loans	$ 4,025,487	$ 3,924,312
Lease Financing [Member]
Total loans	184,182	172,643
Agricultural Sector [Member]
Total loans	143	149
Residential Portfolio Segment [Member] | Junior Lien [Member]
Total loans	7,397	7,418
Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member]
Total loans	599,450	600,891
Residential Portfolio Segment [Member] | Home Equity Lines of Credit [Member]
Total loans	62,522	62,191
Residential Portfolio Segment [Member] | Multifamily Property [Member]
Total loans	1,129,476	1,135,805
Commercial Real Estate Portfolio Segment [Member] | Investment Property [Member]
Total loans	1,017,505	1,001,918
Commercial Portfolio Segment [Member] | Commercial and Industrial Sector [Member]
Total loans	717,851	616,838
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Total loans	125	86
Consumer and Other Loans [Member]
Total loans	57,415	65,180
Pass [Member]
Total loans	3,940,581	3,840,333
Pass [Member] | Lease Financing [Member]
Total loans	184,182	172,643
Pass [Member] | Agricultural Sector [Member]
Total loans	143	149
Pass [Member] | Residential Portfolio Segment [Member] | Junior Lien [Member]
Total loans	7,368	7,382
Pass [Member] | Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member]
Total loans	589,731	590,372
Pass [Member] | Residential Portfolio Segment [Member] | Home Equity Lines of Credit [Member]
Total loans	62,500	61,936
Pass [Member] | Residential Portfolio Segment [Member] | Multifamily Property [Member]
Total loans	1,127,545	1,130,926
Pass [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Property [Member]
Total loans	242,929	255,417
Pass [Member] | Commercial Real Estate Portfolio Segment [Member] | Investment Property [Member]
Total loans	966,813	948,300
Pass [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial Sector [Member]
Total loans	701,916	608,262
Pass [Member] | Commercial Portfolio Segment [Member] | Construction Loans [Member]
Total loans	39	0
Pass [Member] | Consumer and Other Loans [Member]
Total loans	57,415	64,946
Special Mention [Member]
Total loans	28,771	25,714
Special Mention [Member] | Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member]
Total loans	870	943
Special Mention [Member] | Residential Portfolio Segment [Member] | Multifamily Property [Member]
Total loans	1,586	3,263
Special Mention [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Property [Member]
Total loans		249
Special Mention [Member] | Commercial Real Estate Portfolio Segment [Member] | Investment Property [Member]
Total loans	18,024	20,756
Special Mention [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial Sector [Member]
Total loans	8,205	417
Special Mention [Member] | Commercial Portfolio Segment [Member] | Construction Loans [Member]
Total loans	86	86
Substandard [Member]
Total loans	56,135	58,265
Substandard [Member] | Residential Portfolio Segment [Member] | Junior Lien [Member]
Total loans	29	36
Substandard [Member] | Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member]
Total loans	8,849	9,576
Substandard [Member] | Residential Portfolio Segment [Member] | Home Equity Lines of Credit [Member]
Total loans	22	255
Substandard [Member] | Residential Portfolio Segment [Member] | Multifamily Property [Member]
Total loans	345	1,616
Substandard [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Property [Member]
Total loans	6,492	5,527
Substandard [Member] | Commercial Real Estate Portfolio Segment [Member] | Investment Property [Member]
Total loans	32,668	32,862
Substandard [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial Sector [Member]
Total loans	$ 7,730	8,159
Substandard [Member] | Consumer and Other Loans [Member]
Total loans		$ 234

XML

LOANS AND LEASES (Schedule of Activity in Allowance for Loan Losses) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Allowance for loan losses
Beginning ALLL	$ 38,653	$ 37,696	$ 38,504	$ 36,440
Charge-Offs	(94)	(124)	(105)	(212)
Recoveries	82	194	142	288
Provision (Credit)	1,150	300	1,250	1,550
Ending ALLL	39,791	38,066	39,791	38,066
Agricultural Sector [Member]
Allowance for loan losses
Beginning ALLL	2	2	2
Provision (Credit)				2
Ending ALLL	2	2	2	2
Residential Portfolio Segment [Member] | Junior Lien [Member]
Allowance for loan losses
Beginning ALLL	15	16	15	12
Recoveries		46	11	55
Provision (Credit)		(45)	(11)	(50)
Ending ALLL	15	17	15	17
Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member]
Allowance for loan losses
Beginning ALLL	3,477	4,403	3,506	4,085
Charge-Offs	(80)		(80)	(77)
Recoveries	9	139	51	139
Provision (Credit)	(349)	(160)	(420)	235
Ending ALLL	3,057	4,382	3,057	4,382
Residential Portfolio Segment [Member] | Home Equity Lines of Credit [Member]
Allowance for loan losses
Beginning ALLL	152	192	164	221
Recoveries	3	2	5	4
Provision (Credit)		(4)	(14)	(35)
Ending ALLL	155	190	155	190
Residential Portfolio Segment [Member] | Multifamily Property [Member]
Allowance for loan losses
Beginning ALLL	5,768	9,140	5,959	10,007
Provision (Credit)	(24)	(881)	(215)	(1,748)
Ending ALLL	5,744	8,259	5,744	8,259
Commercial Real Estate Portfolio Segment [Member] | Owner Occupied Property [Member]
Allowance for loan losses
Beginning ALLL	2,534	2,364	2,614	2,385
Charge-Offs		(64)		(64)
Recoveries	64		64	66
Provision (Credit)	(101)	225	(181)	138
Ending ALLL	2,497	2,525	2,497	2,525
Commercial Real Estate Portfolio Segment [Member] | Investment Property [Member]
Allowance for loan losses
Beginning ALLL	14,410	12,367	14,248	11,933
Provision (Credit)	240	1,292	402	1,726
Ending ALLL	14,650	13,659	14,650	13,659
Commercial Portfolio Segment [Member] | Commercial and Industrial Sector [Member]
Allowance for loan losses
Beginning ALLL	10,185	7,753	9,839	6,563
Charge-Offs		(46)		(46)
Recoveries	5	6	9	22
Provision (Credit)	1,273	(357)	1,615	817
Ending ALLL	11,463	7,356	11,463	7,356
Commercial Portfolio Segment [Member] | Lease Financing [Member]
Allowance for loan losses
Beginning ALLL	1,803	1,036	1,772	884
Provision (Credit)	85	275	116	427
Ending ALLL	1,888	1,311	1,888	1,311
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Allowance for loan losses
Beginning ALLL	1	1	1	1
Ending ALLL	1	1	1	1
Consumer and Other Loans [Member]
Allowance for loan losses
Beginning ALLL	306	422	384	349
Charge-Offs	(14)	(14)	(25)	(25)
Recoveries	1	1	2	2
Provision (Credit)	26	(45)	(42)	38
Ending ALLL	$ 319	$ 364	$ 319	$ 364

XML

LOANS AND LEASES (Schedule of Loans Modified as Troubled Debt Restructurings) (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2018 USD ($) N	Jun. 30, 2018 USD ($) N
Number of Contracts | N	1	1
Pre-Modification Outstanding Recorded Investment	$ 15,351	$ 15,351
Post-Modification Outstanding Recorded Investment	$ 15,351	$ 15,351
Commercial Real Estate Portfolio Segment [Member] | Investment Property [Member]
Number of Contracts | N	1	1
Pre-Modification Outstanding Recorded Investment	$ 15,351	$ 15,351
Post-Modification Outstanding Recorded Investment	$ 15,351	$ 15,351

XML

LOANS AND LEASES (Schedule of Modified as Troubled Debt Restructurings Subsequently Defaulted) (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019 N	Jun. 30, 2019 N	Jun. 30, 2018 USD ($) N
Number of Subsequently Defaulted Contracts | N	0	0	1
Subsequently Defaulted Recorded Investment | $			$ 336
Residential Portfolio Segment [Member] | Primary Residential Mortgages [Member]
Number of Subsequently Defaulted Contracts | N			1
Subsequently Defaulted Recorded Investment | $			$ 336

XML

DEPOSITS (Details of Total Deposits) (Details) - USD ($) $ in Thousands		Jun. 30, 2019	Dec. 31, 2018
Deposits [Abstract]
Time deposits over $250,000		$ 172,000	$ 160,300
Deposits:
Noninterest-bearing demand deposits		544,431	463,926
Interest-bearing checking	[1]	1,388,821	1,247,305
Savings		112,438	114,674
Money market		1,207,358	1,243,369
Certificates of deposit - retail		570,384	510,724
Certificates of deposit - listing service		58,541	79,195
Subtotal deposits		3,881,973	3,659,193
Interest-bearing demand - Brokered		180,000	180,000
Certificates of deposit - Brokered		33,682	56,147
Total deposits		4,095,655	3,895,340
Reciprocal balances		$ 453,100	$ 434,500
%
Noninterest-bearing demand deposits		13.29%	11.91%
Interest-bearing checking	[1]	33.91%	32.02%
Savings		2.75%	2.94%
Money market		29.48%	31.92%
Certificates of deposit - retail		13.93%	13.12%
Certificates of deposit - listing service		1.43%	2.03%
Subtotal deposits		94.79%	93.94%
Interest-bearing demand - Brokered		4.39%	4.62%
Certificates of deposit - Brokered		0.82%	1.44%
Total deposits		100.00%	100.00%

[1] Interest-bearing checking includes $453.1 million at June 30, 2019 and $434.5 million at December 31, 2018 of reciprocal balances in the Reich & Tang or Promontory Demand Deposit Marketplace program.

XML

DEPOSITS (Scheduled Maturities of Time Deposits) (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Scheduled maturities of time deposits
2019	$ 228,856
2020	270,032
2021	65,373
2022	36,185
2023	11,600
Over 5 Years	50,561
Total	$ 662,607

XML

FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS (Narrative) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Debt Disclosure [Abstract]
Advances from Federal Home Loan Banks	$ 105,000	$ 108,000
FHLB interest rate	3.20%	3.17%
Advances with fixed maturity dates	$ 105,000	$ 108,000
Weighted average interest rate on fixed maturity advances	3.20%	3.17%
Residential mortgages pledged as collateral for advances	$ 350,500	$ 496,100
Multifamily mortgage loans pledged as collateral for advances	649,900	1,000,000
Investment pledges against advances	44,000	58,500
Overnight borrowings with FHLB	0	$ 0
Unused commitments from FHLB	1,400,000
Unused short-term or overnight borrowings from correspondent banks	22,000
Unused short-term or overnight borrowings from FRB	$ 1,400,000

XML

FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS (Schedule of Maturities) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Federal Home Loan Bank Advances Maturities Summary
2021	$ 60,000
2022	20,000
2023	25,000
Total	$ 105,000	$ 108,000

XML

BUSINESS SEGMENTS - Additional Information (Details)	6 Months Ended
	Jun. 30, 2019 segment
Segment Reporting [Abstract]
Number of Operating Segments	2

XML

BUSINESS SEGMENTS - Schedule of Income and Total Assets for Reportable Segments (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Net interest income	$ 29,268	$ 29,243	$ 59,275	$ 57,636
Noninterest income	13,026	11,740	24,755	21,955
Total income	42,294	40,983	84,030	79,591
Provision for loan and lease losses	1,150	300	1,250	1,550
Compensation and benefits	17,543	15,826	34,699	30,405
Premises and equipment expense	3,600	3,406	6,988	6,676
FDIC expense	277	625	554	1,205
Other noninterest expense	4,753	5,084	9,647	9,992
Total noninterest expense	27,323	25,241	53,138	49,828
Income before income tax expense	14,971	15,742	30,892	29,763
Income tax expense	3,421	3,832	7,917	7,046
NET INCOME	11,550	11,910	22,975	22,717
Total assets at period end	4,871,234	4,265,174	4,871,234	4,265,174	$ 4,617,858
Banking [Member]
Net interest income	27,934	27,953	56,500	54,801
Noninterest income	3,151	3,353	5,430	4,980
Total income	31,085	31,306	61,930	59,781
Provision for loan and lease losses	1,150	300	1,250	1,550
Compensation and benefits	12,685	11,932	24,682	22,263
Premises and equipment expense	3,046	2,982	5,971	5,821
FDIC expense	277	625	554	1,205
Other noninterest expense	2,553	3,145	5,311	5,952
Total noninterest expense	19,711	18,984	37,768	36,791
Income before income tax expense	11,374	12,322	24,162	22,990
Income tax expense	2,581	2,997	6,192	5,442
NET INCOME	8,793	9,325	17,970	17,548
Total assets at period end	4,791,902	4,208,731	4,791,902	4,208,731
Wealth Management Division [Member]
Net interest income	1,334	1,290	2,775	2,835
Noninterest income	9,875	8,387	19,325	16,975
Total income	11,209	9,677	22,100	19,810
Provision for loan and lease losses	0	0	0	0
Compensation and benefits	4,858	3,894	10,017	8,142
Premises and equipment expense	554	424	1,017	855
FDIC expense	0	0	0	0
Other noninterest expense	2,200	1,939	4,336	4,040
Total noninterest expense	7,612	6,257	15,370	13,037
Income before income tax expense	3,597	3,420	6,730	6,773
Income tax expense	840	835	1,725	1,604
NET INCOME	2,757	2,585	5,005	5,169
Total assets at period end	$ 79,332	$ 56,443	$ 79,332	$ 56,443

XML

FAIR VALUE (Narrative) (Details)	6 Months Ended
	Jun. 30, 2019 USD ($)
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Fair value transfers between level 1 and level 2	$ 0
Loans Receivable [Member] | Property A [Member]
Fair Value Measurement Inputs and Valuation Techniques [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	Jun. 30, 2019	Dec. 31, 2018
Securities available for sale	$ 378,839	$ 377,936
Loans held for sale, at fair value	2,343	1,576
Recurring Basis [Member]
Loans held for sale, at fair value	2,343	1,576
Total	416,773	395,577
Derivatives	(34,643)	(10,538)
Recurring Basis [Member] | Designated as Hedging Instrument [Member]
Derivatives	175	1,657
Derivatives	(4,074)	(849)
Recurring Basis [Member] | Not Designated as Hedging Instrument [Member]
Derivatives	30,569	9,689
Derivatives	(30,569)	(9,689)
Recurring Basis [Member] | Quoted Prices in Active Market For Identical Assets (Level 1) [Member]
Total	4,847	4,719
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member]
Loans held for sale, at fair value	2,343	1,576
Total	411,926	390,858
Derivatives	(34,643)	(10,538)
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Designated as Hedging Instrument [Member]
Derivatives	175	1,657
Derivatives	(4,074)	(849)
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Not Designated as Hedging Instrument [Member]
Derivatives	30,569	9,689
Derivatives	(30,569)	(9,689)
U.S. Government-Sponsored Entities [Member]
Securities available for sale	71,791	102,013
U.S. Government-Sponsored Entities [Member] | Recurring Basis [Member]
Securities available for sale	71,791	102,013
U.S. Government-Sponsored Entities [Member] | Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member]
Securities available for sale	71,791	102,013
Mortgage-Backed Securities-Residential [Member]
Securities available for sale	283,937	251,362
Mortgage-Backed Securities-Residential [Member] | Recurring Basis [Member]
Securities available for sale	283,937	251,362
Mortgage-Backed Securities-Residential [Member] | Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member]
Securities available for sale	283,937	251,362
SBA Pool Securities [Member]
Securities available for sale	3,587	3,839
SBA Pool Securities [Member] | Recurring Basis [Member]
Securities available for sale	3,587	3,839
SBA Pool Securities [Member] | Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member]
Securities available for sale	3,587	3,839
State and Political Subdivisions [Member]
Securities available for sale	16,443	17,610
State and Political Subdivisions [Member] | Recurring Basis [Member]
Securities available for sale	16,443	17,610
State and Political Subdivisions [Member] | Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member]
Securities available for sale	16,443	17,610
Corporate Bond [Member]
Securities available for sale	3,081	3,112
Corporate Bond [Member] | Recurring Basis [Member]
Securities available for sale	3,081	3,112
Corporate Bond [Member] | Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member]
Securities available for sale	3,081	3,112
CRA Investment Fund [Member] | Recurring Basis [Member]
Securities available for sale	4,847	4,719
CRA Investment Fund [Member] | Recurring Basis [Member] | Quoted Prices in Active Market For Identical Assets (Level 1) [Member]
Securities available for sale	$ 4,847	$ 4,719

XML

FAIR VALUE (Schedule of Residential Loans Held for Sale, at Fair Value) (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Fair Value Disclosures [Abstract]
Residential loans contractual balance	$ 2,306	$ 1,552
Fair value adjustment	37	24
Total fair value of residential loans held for sale	$ 2,343	$ 1,576

XML

FAIR VALUE (Schedule of Financial Instruments) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Financial Assets:
Securities available for sale	$ 378,839	$ 377,936
FHLB and FRB stock	18,338	18,533
Loans held for sale, at fair value	2,343	1,576
Loans held for sale, at lower of cost or fair value	926	3,542
Accrued interest receivable	11,594	10,814
Financial Liabilities:
Federal home loan bank advances	105,000	108,000
Carrying Value [Member]
Financial Assets:
Cash and cash equivalents	304,027	160,773
Securities available for sale	378,839	377,936
CRA investment fund	4,847	4,719
FHLB and FRB stock	18,338	18,533
Loans held for sale, at fair value	2,343	1,576
Loans held for sale, at lower of cost or fair value	926	3,542
Loans, net of allowance for loan and lease losses	3,989,548	3,889,427
Accrued interest receivable	11,594	10,814
Financial Liabilities:
Deposits	4,095,655	3,895,340
Federal home loan bank advances	105,000	108,000
Subordinated debt	83,305	83,193
Accrued interest payable	2,494	2,868
Carrying Value [Member] | Designated as Hedging Instrument [Member]
Financial Assets:
Derivatives	175	1,657
Financial Liabilities:
Derivatives	4,074	849
Carrying Value [Member] | Not Designated as Hedging Instrument [Member]
Financial Assets:
Derivatives	30,569	9,689
Financial Liabilities:
Derivatives	30,569	9,689
Fair value [Member]
Financial Assets:
Cash and cash equivalents	304,027	160,773
Securities available for sale	378,839	377,936
CRA investment fund	4,847	4,719
Loans held for sale, at fair value	2,343	1,576
Loans held for sale, at lower of cost or fair value	1,000	3,654
Loans, net of allowance for loan and lease losses	3,946,808	3,852,004
Accrued interest receivable	11,594	10,814
Financial Liabilities:
Deposits	4,098,621	3,890,271
Federal home loan bank advances	108,401	108,950
Subordinated debt	84,400	82,207
Accrued interest payable	2,494	2,868
Fair value [Member] | Quoted Prices in Active Market For Identical Assets (Level 1) [Member]
Financial Assets:
Cash and cash equivalents	304,027	160,773
CRA investment fund	4,847	4,719
Financial Liabilities:
Deposits	3,433,048	3,249,274
Accrued interest payable	430	331
Fair value [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial Assets:
Securities available for sale	378,839	377,936
Loans held for sale, at fair value	2,343	1,576
Loans held for sale, at lower of cost or fair value	1,000	3,654
Accrued interest receivable	1,708	1,875
Financial Liabilities:
Deposits	665,573	640,997
Federal home loan bank advances	108,401	108,950
Accrued interest payable	2,009	2,482
Fair value [Member] | Significant Unobservable Inputs (Level 3) [Member]
Financial Assets:
Loans, net of allowance for loan and lease losses	3,946,808	3,852,004
Accrued interest receivable	9,886	8,939
Financial Liabilities:
Subordinated debt	84,400	82,207
Accrued interest payable	55	55
Fair value [Member] | Designated as Hedging Instrument [Member]
Financial Assets:
Derivatives	175	1,657
Financial Liabilities:
Derivatives	4,074	849
Fair value [Member] | Designated as Hedging Instrument [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial Assets:
Derivatives	175	1,657
Financial Liabilities:
Derivatives	4,074	849
Fair value [Member] | Not Designated as Hedging Instrument [Member]
Financial Assets:
Derivatives	30,569	9,689
Financial Liabilities:
Derivatives	30,569	9,689
Fair value [Member] | Not Designated as Hedging Instrument [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial Assets:
Derivatives	30,569	9,689
Financial Liabilities:
Derivatives	$ 30,569	$ 9,689

XML

REVENUE FROM CONTRACTS WITH CUSTOMERS (Schedule of Noninterest Income) (Details) - USD ($) $ in Thousands		3 Months Ended				6 Months Ended
		Jun. 30, 2019		Jun. 30, 2018		Jun. 30, 2019		Jun. 30, 2018
Service charges on deposits
Overdraft fees		$ 164		$ 183		$ 324		$ 364
Interchange income		322		326		586		616
Other		411		364		803		724
Wealth management fees	[1]	9,568		8,126		18,742		16,493
Other		2,561	[2]	2,741	[2]	4,300	[1]	3,758	[1]
Total other income		$ 13,026		$ 11,740		$ 24,755		$ 21,955

[1] Includes investment brokerage fees.

[2] All of the other category is outside the scope of ASC 606.

XML

REVENUE FROM CONTRACTS WITH CUSTOMERS (Schedule of Noninterest Income by Operating Segment) (Details) - USD ($) $ in Thousands		3 Months Ended				6 Months Ended
		Jun. 30, 2019		Jun. 30, 2018		Jun. 30, 2019		Jun. 30, 2018
Service charges on deposits
Overdraft fees		$ 164		$ 183		$ 324		$ 364
Interchange income		322		326		586		616
Other		411		364		803		724
Wealth management fees	[1]	9,568		8,126		18,742		16,493
Other		2,561	[2]	2,741	[2]	4,300	[1]	3,758	[1]
Total other income		13,026		11,740		24,755		21,955
Banking [Member]
Service charges on deposits
Overdraft fees		164		183		324		364
Interchange income		322		326		586		616
Other		411		364		803		724
Wealth management fees	[1]	0		0
Other		2,254	[2]	2,480	[2]	3,717	[1]	3,276	[1]
Total other income		3,151		3,353		5,430		4,980
Wealth Management Division [Member]
Service charges on deposits
Overdraft fees		0		0		0		0
Interchange income		0		0		0		0
Other		0		0		0		0
Wealth management fees	[1]	9,568		8,126		18,742		16,493
Other		307	[2]	261	[2]	583	[1]	482	[1]
Total other income		$ 9,875		$ 8,387		$ 19,325		$ 16,975

[1] Includes investment brokerage fees.

[2] All of the other category is outside the scope of ASC 606.

XML

REVENUE FROM CONTRACTS WITH CUSTOMERS - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Interchange income	$ 322	$ 326	$ 586	$ 616
Cardholder rewards [Member]
Interchange income	$ 36	$ 34	$ 68	$ 63

XML

OTHER OPERATING EXPENSES (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Other operating expenses
Professional and legal fees	$ 968	$ 1,178	$ 2,092	$ 2,292
Telephone	377	271	657	555
Advertising	409	414	768	725
Amortization of intangible assets	229	180	458	359
Provision for ORE		204	0	204
Other operating expenses	2,770	2,837	5,672	5,857
Total other operating expenses	$ 4,753	$ 5,084	$ 9,647	$ 9,992

XML

ACCUMULATED OTHER COMPREHENSIVE (LOSS)/INCOME (Schedule of Accumulated Other Comprehensive Income Balances, Net of Tax) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance	$ 481,472	$ 422,406	$ 469,013	$ 403,678
Total other comprehensive income/(loss)	125	88	741	(1,669)
Balance	493,888	437,019	493,888	437,019
Net Unrealized Holding Gain/(Loss) on Securities Available for Sale, Net of Tax [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance	(1,278)	(4,345)	(3,006)	(2,214)
Other Comprehensive Income/(Loss) Before Reclassifications	2,176	(494)	3,904	(2,752)
Total other comprehensive income/(loss)	2,176	(494)	3,904	(2,752)
Balance	898	(4,839)	898	(4,839)
Net Unrealized Holding Gain/(Loss) on Securities Available for Sale, Net of Tax [Member] | ASU 2016-01 [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Cumulative Adjustment For Equity Security				127
Gain/(Loss) on Cash Flow Hedge [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance	(451)	1,503	661	1,002
Other Comprehensive Income/(Loss) Before Reclassifications	(2,029)	605	(3,120)	1,128
Amount Reclassified From Accumulated Other Comprehensive Income/(Loss)	(22)	(23)	(43)	(45)
Total other comprehensive income/(loss)	(2,051)	582	(3,163)	1,083
Balance	(2,502)	2,085	(2,502)	2,085
Accumulated Other Comprehensive Loss, Net of Tax [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance	(1,729)	(2,842)	(2,345)	(1,212)
Other Comprehensive Income/(Loss) Before Reclassifications	147	111	784	(1,624)
Amount Reclassified From Accumulated Other Comprehensive Income/(Loss)	(22)	(23)	(43)	(45)
Total other comprehensive income/(loss)	125	88	741	(1,669)
Balance	$ (1,604)	$ (2,754)	$ (1,604)	(2,754)
Accumulated Other Comprehensive Loss, Net of Tax [Member] | ASU 2016-01 [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Cumulative Adjustment For Equity Security				$ 127

XML

ACCUMULATED OTHER COMPREHENSIVE (LOSS)/INCOME (Schedule of Reclassifications out of AOCI) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income tax expense	$ 3,421	$ 3,832	$ 7,917	$ 7,046
NET INCOME	11,550	11,910	22,975	22,717
Reclassification out of Accumulated Other Comprehensive Income | Gain/(Loss) on Cash Flow Hedge [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest expense	(31)	(31)	(62)	(62)
Income tax expense	9	8	19	17
NET INCOME	$ (22)	$ (23)	$ (43)	$ (45)

XML

DERIVATIVES-Additional Information (Details)	3 Months Ended			6 Months Ended
	Jun. 30, 2019 USD ($) N	Jun. 30, 2018 USD ($)	Mar. 31, 2018 USD ($) N	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Derivative [Line Items]
Net interest income	$ 29,268,000	$ 29,243,000		$ 59,275,000	$ 57,636,000
Interest Rate Swap [Member] | Designated as Hedging Instrument [Member]
Derivative [Line Items]
Notional Amount	230,000,000			230,000,000		$ 230,000,000
Net interest income	290,000	$ 33,000		625,000	$ 13,000
Unrealized after-tax gain of accumulated other comprehensive income loss	189,000		$ 220,000
Interest income	$ 31,000			$ 62,000
Derivative number of instruments terminated | N	4		2

XML

DERIVATIVES-(Schedule of Information about Derivatives) (Details) - Interest Rate Swap [Member] - Designated as Hedging Instrument [Member]	6 Months Ended	12 Months Ended
	Jun. 30, 2019 USD ($) N	Dec. 31, 2018 USD ($) N
Derivative [Line Items]
Notional Amount	$ 230,000,000	$ 230,000,000
Weighted average pay rate	2.04%	2.04%
Weighted average receive rate	2.48%	2.33%
Weighted average maturity	2 years 10 months 17 days	2 years 7 months 24 days
Unrealized (loss)/gain, net	$ (3,899,000)	$ 808,000
Number of contracts | N	11	11

XML

DERIVATIVES-(Schedule of Net Gains/(Losses)) (Details) - Interest Rate Swap [Member] - Designated as Hedging Instrument [Member] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Derivative [Line Items]
Amount of gain/(loss) recognized in OCI	$ (2,051)	$ 582	$ (3,163)	$ 1,083
Amount of gain/(loss) reclassified from OCI to interest expense	$ 22	$ 23	$ 43	$ 45

XML

DERIVATIVES-(Schedule of Notional Amount and Fair Value) (Details) - Designated as Hedging Instrument [Member] - Interest Rate Swap [Member] - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Derivative [Line Items]
Notional Amount	$ 230,000,000	$ 230,000,000
Fair Value	(3,899,000)	808,000
Other Assets [Member]
Derivative [Line Items]
Notional Amount	55,000,000	130,000,000
Fair Value	175,000	1,657,000
Other Liabilities [Member]
Derivative [Line Items]
Notional Amount	175,000,000	100,000,000
Fair Value	$ (4,074,000)	$ (849,000)

XML

DERIVATIVES-(Schedule of Information about Derivatives-Not Designated as Hedging Instrument) (Details) - Loan Level Swaps [Member] - Not Designated as Hedging Instrument [Member] $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2019 USD ($) N	Dec. 31, 2018 USD ($) N
Derivative [Line Items]
Notional Amount	$ 539,092	$ 558,690
Fair Value	$ 30,569	$ 9,689
Weighted average pay rate	4.41%	4.44%
Weighted average receive rate	4.21%	4.24%
Weighted average maturity	7 years 4 months 24 days	7 years 1 month 6 days
Number of contracts | N	64	67

XML

SUBORDINATED DEBT (Details) - USD ($) $ in Thousands	1 Months Ended
	Dec. 31, 2017	Jun. 30, 2016
Parent Company [Member]
Debt Instrument [Line Items]
Net proceeds used to contribute to the Bank	$ 29,100	$ 40,000
Proceeds from debt retained by parent	5,000	10,000
Subordinated Debt [Member]
Debt Instrument [Line Items]
Principal amount	$ 35,000	$ 50,000
Non-callable term	5 years	5 years
Notes maturity date	Dec. 15, 2027	Jun. 30, 2026
Fixed interest rate	4.75%	6.00%
LIBOR spread	2.54%	4.85%
Debt issuance costs	$ 875	$ 1,300

XML

LEASES - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Jan. 01, 2019
Lessee Lease Description [Line Items]
Operating lease right-of-use assets	$ 11,017	$ 11,017	$ 7,900
Operating lease liabilities	$ 11,269	$ 11,269	$ 8,200
Weighted average discount rate	3.35%	3.35%
Weighted average lease term	6 years 21 days	6 years 21 days
Lease cost	$ 757	$ 1,400
Variable lease costs	$ 82	$ 155
Minimum [Member]
Lessee Lease Description [Line Items]
Remaining lease term		1 year
Maximum [Member]
Lessee Lease Description [Line Items]
Remaining lease term		18 years

XML

LEASES (Schedule of Operating Lease Liabilities by Contractual Maturity) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jan. 01, 2019
Leases [Abstract]
2019	$ 2,666
2020	2,506
2021	1,715
2022	1,459
2023	999
Thereafter	2,112
Total lease payments	11,457
Less: imputed interest	188
Total present value of lease payments	$ 11,269	$ 8,200

XML

LEASES (Summary of Supplemental Cash Flow Information Related to Direct Finance and Operating Leases) (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Leases [Abstract]
Right-of-use asset obtained in exchange for lease obligation	$ 7,862
Operating cash flows from operating leases	1,140
Operating cash flows from direct finance leases	196
Financing cash flows from direct finance leases	$ 374

XML

ACCOUNTING PRONOUNCEMENTS (Details) - USD ($) $ in Thousands	Jan. 01, 2019	Jun. 30, 2019
Accounting Changes And Error Corrections [Abstract]
Lease liability	$ 8,200	$ 11,269
Right-of-use asset	7,900	$ 11,017
Cumulative effect adjustment to retained earnings	$ 661

XML

PENDING ACQUISITION - Additional Information (Details) - Subsequent Event [Member] - Point View [Member] $ in Millions	Jul. 03, 2019 USD ($)
Business Acquisition [Line Items]
Date of acquisition agreement	Jul. 03, 2019
Minimum [Member]
Business Acquisition [Line Items]
Purchase price, combination of cash and equity	$ 325