Peapack-Gladstone Financial Corporation Reports a Strong Third Quarter and Declares Its Quarterly Cash Dividend

BEDMINSTER, NJ--(Marketwired - Oct 27, 2017) - Peapack-Gladstone Financial Corporation (NASDAQ: PGC) (the "Company") reported record net income of $26.13 million and diluted earnings per share of $1.47 for the nine months ended September 30, 2017, compared to $19.17 million and $1.17, respectively, for the same nine month period last year, reflecting increases of $6.96 million, or 36 percent, and $0.30 per share, or 26 percent, respectively.

For the quarter ended September 30, 2017, the Company recorded net income of $10.21 million and diluted earnings per share of $0.56, compared to $7.12 million and $0.43 for the same three month period last year, reflecting increases of $3.09 million, or 43 percent, and $0.13 per share, or 30 percent, respectively.

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

The following table summarizes specified financial measures for the third quarters of 2017 and 2016, respectively.

(Dollars in millions, except per share data)		September 2017				September 2016				Increase/ (Decrease)
Net interest income		$	29.99			$	24.27			$	5.72			24	%
Provision for loan and lease losses		$	.40			$	2.10			$	(1.70	)		-81	%
Pretax income		$	16.46			$	11.54			$	4.92			43	%
Net income		$	10.21			$	7.12			$	3.09			43	%
Diluted EPS		$	0.56			$	0.43			$	0.13			30	%
Total revenue		$	38.82			$	31.80			$	7.02			22	%
Return on average assets			0.97	%			0.77	%			0.20
Return on average equity			11.09	%			9.44	%			1.65
Efficiency ratio (A)			56.62	%			57.58	%			(0.96	)
Book value per share		$	20.86			$	18.24			$	2.62			14	%
Tang book value per share (A)		$	20.03			$	18.05			$	1.98			11	%

(A)		See Non-GAAP financial measures reconciliation table beginning on page 24

Douglas L. Kennedy, President and CEO, said, "We had a very strong start to 2017, and that continued right through the third quarter of 2017. We continue to successfully execute on our strategic plan -- Expanding Our Reach."

Select third quarter highlights follow:

• Growth in diluted EPS for Q3 2017 when compared to Q3 2016 was $0.13 per share, or 30 percent.
• As previously announced, effective August 1, 2017, the Bank completed its acquisition of MCM, a registered investment advisory firm ("RIA"), based in Gladstone, NJ. 
• At September 30, 2017, the market value of assets under administration (AUA) at the Private Wealth Management Division of Peapack-Gladstone Bank (the "Bank") increased $1.3 billion to $4.8 billion from $3.5 billion at September 30, 2016, reflecting growth of 37 percent. The acquisition of MCM contributed approximately $900 million of AUA at September 30, 2017.
• Fee income from the Private Wealth Management Division totaled $5.8 million for the third quarter of 2017, compared to $4.4 million for the same quarter in 2016, reflecting growth of 31 percent. Wealth management fee income, comprising nearly 15 percent of the Company's total revenue, contributes significantly to the Company's diversified revenue sources.
• As previously announced on September 14, 2017, the Company announced its agreement to acquire Quadrant Capital Management, a RIA, headquartered in Fairfield, NJ which is expected to add approximately $400 million in AUA upon the closing expected in the fourth quarter of 2017. 
• During the third quarter of 2017, the Company employed loan sales as a balance sheet management strategy, while improving returns. The $79 million of lower-yielding multifamily and residential mortgage loan sales generally funded increases in commercial and other loans, resulting in planned minimal net loan growth during the quarter.
• Loans at September 30, 2017 totaled $3.67 billion. This reflected net growth of $404 million (12 percent) when compared to $3.27 billion of loans at September 30, 2016.
• Commercial & Industrial (C&I) loans at September 30, 2017 totaled $846 million. This reflected net growth of $45 million compared to the prior quarter (6 percent compared to the prior quarter or 22 percent on an annualized basis), and net growth of $248 million (41 percent) when compared to $598 million in C&I loans at September 30, 2016.
• Total "customer" deposit balances (defined as deposits excluding brokered CDs and brokered "overnight" interest-bearing demand deposits) totaled $3.40 billion at September 30, 2017. This reflected net growth of $86 million compared to the prior quarter (3 percent compared to the prior quarter or 10 percent on an annualized basis), and reflected growth of $393 million (13 percent) when compared to $3.01 billion of total "customer" deposit balances at September 30, 2016.
• Asset quality metrics continued to be strong at September 30, 2017. Nonperforming assets at September 30, 2017, declining slightly from the June 30, 2017 level, were just $15.5 million, or 0.37 percent of total assets. Total loans past due 30 through 89 days and still accruing were $589 thousand, or 0.02 percent of total loans at September 30, 2017.
• The Company's book value per share at September 30, 2017 of $20.86 reflected improvement when compared to $18.24 at September 30, 2016. Year over year growth in book value per share totaled $2.62 or 14 percent. 

Net Interest Income / Net Interest Margin

Net interest income and net interest margin were $29.99 million and 2.95 percent for the third quarter of 2017, compared to $26.97 million and 2.76 percent for the second quarter of 2017, and compared to $24.27 million and 2.74 percent for the same quarter last year, reflecting growth in net interest income of $5.72 million or 24 percent when compared to the same prior year period. Net interest income for the third quarter of 2017 benefitted from $1.2 million of recognition of deferred fees and prepayment premiums on two C&I credits and from loan growth during 2016 and into 2017, as well as benefitting slightly from the recent Federal Reserve rate hikes. The September 2017 quarter also included approximately $1.2 million of prepayment premiums received on the prepayment of certain multifamily loans, reflecting an increase from $780 thousand for the June 2017 quarter and $507 thousand for the September 2016 quarter.

Net interest margin for the third quarter of 2017 increased when compared to the second quarter of 2017, and the same quarter of 2016. The increase was due to the recognition of the deferred fees and increased prepayment premiums noted above, as well as the effect of the increased market rates on our adjustable rate assets, partially offset by the increased cost of deposits.

Net interest margin is also affected by the maintenance of liquid assets on the Company's balance sheet. Mr. Kennedy said, "In addition to approximately $400 million of cash, cash equivalents and investment securities on our balance sheet, we also have over $1.2 billion of secured funding available from the Federal Home Loan Bank, of which we only have $50 million drawn as of September 30, 2017."

The Company's interest rate sensitivity models indicate that the Company's net interest income and margin would continue to improve slightly in a rising interest rate environment, but such income and margin may also be impacted by competitive pressures in attracting new loans and deposits.

Wealth Management Business

In the September 2017 quarter, the Bank's wealth management business generated $5.79 million in fee income compared to $5.09 million for the June 2017 quarter, and $4.44 million for the September 2016 quarter.

The September 2017 quarter included approximately $900 thousand of income related to MCM, which was acquired effective August 1, 2017. The September 2017 quarter also included increased "recurring type" fee income (tied principally to asset management fees and custody fees), which was due to net inflows from new business, a healthy equity market which resulted in positive market action in client portfolios as well as additions to accounts from existing clients, all partially offset by normal levels of disbursements and outflows. Relative to the June 2017 quarter, the September 2017 quarter included reduced tax preparation fees, as such fees are seasonally high in the second quarter of each year.

The market value of the AUA of the wealth management division was $4.8 billion at September 30, 2017 an increase of $1.3 billion, or 37 percent, from $3.5 billion at September 30, 2016. The acquisition of MCM contributed approximately $900 million of AUA at September 30, 2017.

John P. Babcock, President of the PGB Private Wealth Management Division, said, "We were pleased to consummate the acquisition of MCM, as well as announce the agreement to acquire Quadrant Capital Management, with a planned closing in the fourth quarter of 2017. Our new business pipeline continues to be robust and we expect continued growth in our client base, the expansion of existing relationships and further pursuit of potential strategic acquisitions of wealth management firms."

Mr. Babcock went on to say, "Our differentiator continues to be our personalized, pro-active advice led approach, and the quality of our people. We combine investment, tax, financial, fiduciary, banking and lending capabilities into one integrated plan that helps our clients achieve their goals and objectives."

Loan Originations / Loans

During the third quarter of 2017, the Company employed loan sales as a balance sheet management strategy, while improving returns. The $79 million of lower-yielding multifamily and residential mortgage loan sales generally funded increases in commercial and other loans, resulting in planned minimal net loan growth during the third quarter of 2017. 

At September 30, 2017, loans totaled $3.67 billion, compared to $3.31 billion at December 31, 2016 and compared to $3.27 billion at September 30, 2016, representing net increases of $356 million compared to the December 2016 year end (11 percent or 14 percent on an annualized basis), and $404 million (12 percent) compared to a year ago at September 30, 2016.

Mr. Kennedy noted, "We actively managed our loan portfolio during this past quarter by selling off lower yielding loans, to fund higher yielding production. And we utilized our deposit growth to pay down wholesale borrowings. We continue to believe we have a very high quality loan portfolio, as evidenced by very strong asset quality metrics."

For the quarter ended September 30, 2017, residential mortgage loans decreased $6 million to $605 million when compared to the June 2017 quarter. During the September 2017 quarter, approximately $13 million of residential mortgage portfolio loans were sold with servicing retained. From September 30, 2016 to September 30, 2017, residential mortgage loans grew $105 million, or 21 percent.

For the September 2017 quarter, commercial real estate mortgage loans (not including multifamily loans) grew $16 million to $625 million when compared to the June 2017 quarter (3 percent or 10 percent on an annualized basis). From September 30, 2016 to September 30, 2017 commercial real estate mortgage loans grew $128 million, or 26 percent.

At September 30, 2017, the multifamily mortgage loan portfolio totaled $1.44 billion (or 39 percent of total loans), decreasing from $1.50 billion (or 41 percent of total loans) at June 30, 2017 and $1.54 billion (or 47 percent of total loans) at September 30, 2016. During the September 2017 quarter the Company sold $66 million of multifamily mortgage loans on a servicing retained basis. 

Mr. Kennedy said, "As I note each quarter, we have been actively managing our balance sheet such that multifamily loans decline as a percentage of the overall loan portfolio and C&I loans become a larger percentage of the overall loan portfolio. We have continued to make significant progress on this front."

For the quarter ended September 30, 2017, commercial loans grew $45 million to $846 million when compared to the June 2017 quarter. From September 30, 2016 to September 30, 2017 commercial loans grew $248 million, or 41 percent. At September 30, 2017 the commercial loan portfolio comprised 23 percent of the overall loan portfolio up from 22 percent at June 30, 2017, and up from 18 percent one year ago at September 30, 2016.

Mr. Kennedy said, "We have seen, and believe we will continue to see, our C&I client base and corresponding loan portfolio grow. Additionally, as announced in April 2017, we were successful in bringing on a team of very experienced bankers to focus on equipment financing, and $56 million of volume has been funded since inception. While this team has been successfully integrated and has begun producing somewhat quicker than previously assumed, we still generally expect that revenue and profitability related to this group will lag related expenses by several quarters."

Mr. Kennedy went on to say, "Our private banking business model of addressing the sophisticated needs and expectations of successful business owners and entrepreneurs is being well received. The ability to engage in high level strategic debt, capital and valuation analysis coupled with succession, estate and wealth planning strategies, enables us to provide a unique boutique level of service to business owners and middle market clients."

Eric H. Waser, Head of Commercial Banking, noted, "We are extremely pleased with how our 'Advice Led' approach is capturing the attention of the business community."

Deposits / Funding / Balance Sheet Management

During the September 2017 quarter, as noted previously, net loans were managed basically flat to the June 30, 2017 level, as $79 million of lower-yielding multifamily and residential mortgage loan sales generally funded increases in commercial and other loans, while customer deposit growth of $86 million, net (principally interest-bearing checking and retail certificates of deposit) and capital of $23 million funded the paydown of wholesale borrowings of $96 million, as well as funding the purchase price of MCM.

Brokered interest-bearing demand ("overnight") deposits totaled $180 million at September 30, 2017, and June 30, 2017 down $20 million from $200 million at September 30, 2016. The interest rate paid on these deposits provided an attractive funding source and allowed the Bank to engage in interest rate swaps as part of its asset-liability interest rate risk management. As of September 30, 2017, the Company had transacted pay fixed, receive floating interest rate swaps totaling $180 million in notional amount. The Company ensures ample available collateralized liquidity as a backup to these short term brokered deposits.

Mr. Kennedy noted, "The Company will continue to focus on providing high touch client service, a key element in growing its personal commercial core deposit base. We expect that our full array of treasury management capabilities, including our new Treasury Management platform and our new escrow management product software, as well as added treasury management sales professionals and private bankers, will help us grow commercial deposits."

Mr. Kennedy added, "Our overall balance sheet growth will be governed by our continued ability to generate economical core deposits. We will be intently focused on fully utilizing our enhanced in-house relationship-based loan profitability model to manage the origination of loans with competitive risk-adjusted returns."

Other Noninterest Income

The Company's total noninterest income for the September 2017 quarter totaled $8.83 million, or 23 percent of total revenue, compared to $8.17 million for the June 2017 quarter and to $7.54 million for the September 2016 quarter. Noninterest income, excluding wealth management fee income, totaled $3.04 million, $3.09 million, and $3.10 million for the September 2017, June 2017, and September 2016 quarters, respectively. 

The September 2017 quarter included $141 thousand of income from the sale of newly originated residential mortgage loans (mortgage banking), compared to $91 thousand for the June 2017 quarter, and $383 thousand for the September 2016 quarter. Originations of residential mortgage loans for sale were lower in the 2017 quarterly periods, compared to the prior year periods.

Gain on loans held for sale at lower of cost or fair value was $34 thousand for the third quarter of 2017. The Company did not sell any loans during the June 2017 quarter. The gain on sales of loans held for sale at lower of cost or fair value during the September 2016 quarter was $256 thousand. The Company sold loans in the September 2017 quarter, however the sales focused on lower-yielding loans, and with servicing retained, thus the gain on sale was lower in the 2017 period.

The third quarter of 2017 included $493 thousand of income related to the Company's SBA lending and sale program, compared to $142 thousand generated in the June 2017 quarter, and $243 thousand in the September 2016 quarter. 

The September 2017 quarter included $888 thousand of loan level, back-to-back swap income compared to $1.3 million in the June 2017 quarter and $670 thousand in the September 2016 quarter. This program provides a borrower with a fixed interest rate on a loan, while providing an adjustable rate to the Company, thus helping to manage the Company's interest rate risk, while contributing to income. 

Other income for the September 2017 quarter totaled $326 thousand, compared to $396 thousand for the June 2017 quarter and to $395 thousand for the September 2016 quarter. Letter of credit fees and unused line of credit fees make up a large portion of this line item. 

Operating Expenses

The Company's total operating expenses were $21.96 million for the quarter ended September 30, 2017, compared to $20.10 million for the June 2017 quarter and $18.17 million for the September 2016 quarter.

Compensation and employee benefits expense for the September 2017 quarter was $14.00 million compared to $12.75 million for the June 2017 quarter, and $11.52 million for the September 2016 quarter. The September 2017 quarter included a full quarter of expense related to the Equipment Finance team, and two months of expense related to MCM. Strategic hiring, normal salary increases and increased bonus/incentive accruals associated with the Company's growth, all contributed to the increases from the September 2016 quarter. 

Premises and equipment expense for the September 2017 quarter was $2.95 million compared to $3.03 million for the June 2017 quarter and $2.74 million for the September 2016 quarter. The previous quarter included approximately $150 thousand of fixed asset write-offs related to upgrades at the corporate headquarters.

Other expenses for the September 2017 quarter were $4.44 million compared to $3.71 million for the June 2017 quarter and $3.10 million for the September 2016 quarter. The September 2017 quarter included approximately $500 thousand of professional fees related to the MCM acquisition, a full quarter of other expenses related to the Equipment Finance business, and two months of other operating expense related to MCM. Further, when compared to the September 2016 quarter, the September 2017 quarter included increased advertising and marketing expenses relating to various target marketing campaigns.

Income Taxes

For the September 2017 quarter, the effective income tax rate was 38.0 percent, generally in line with the 38.2 percent for the June 2017 quarter and 38.3 percent for the September 2016 quarter. 

Provision for Loan and Lease Losses / Asset Quality

For the quarter ended September 30, 2017, the Company's provision for loan and lease losses was $400 thousand, compared to $2.20 million for the June 2017 quarter and $2.10 million for the September 2016 quarter. The Company's provision for loan and lease losses (and its allowance for loan and lease losses) reflect the Company's asset quality metrics and minimal net loan growth (in the September 2017 quarter due to the loan sales).

At September 30, 2017, the allowance for loan and lease losses of $35.92 million, held fairly steady at 234 percent of nonperforming loans and 0.98 percent of total loans, compared to $35.75 million at June 30, 2017, which was 229 percent of nonperforming loans and 0.98 percent of total loans, and compared to 282 percent of nonperforming loans and 0.95 percent of total loans at September 30, 2016.

Nonperforming assets at September 30, 2017 (which does not include troubled debt restructured loans that are performing in accordance with their terms) were $15.5 million, or 0.37 percent of total assets, compared to $16.0 million, or 0.38 percent of total assets, at June 30, 2017 and $11.4 million, or 0.30 percent of total assets, at September 30, 2016. Total loans past due 30 through 89 days and still accruing were $589 thousand at September 30, 2017, compared to $1.2 million at June 30, 2017 and $8.2 million at September 30, 2016. September 30, 2016 includes one commercial loan secured by real estate totaling $5.0 million that was 30 days past due. This loan was brought current in October 2016.

Capital / Dividends

The Company's capital position in the September 2017 quarter was benefitted by net income of $10.21 million and $9.60 million of voluntary share purchases under the Dividend Reinvestment Plan, which continues to be a source of capital for the Company.

At September 30, 2017, the Company's GAAP capital as a percent of total assets was 9.10 percent. The Company's regulatory leverage, common equity tier 1, tier 1 to risk weighted assets, and total risk based capital ratios were 8.75 percent, 10.78 percent, 10.78 percent and 13.28 percent, respectively. The Bank's regulatory leverage, common equity tier 1, tier 1 and total risk based capital ratios were 9.63 percent, 11.86 percent, 11.86 percent and 12.92 percent, respectively. The Bank's regulatory capital ratios are all above the ratios to be considered well capitalized under regulatory guidance.

On October 26, 2017, the Company's Board of Directors declared a regular cash dividend of $0.05 per share payable on November 23, 2017 to shareholders of record on November 9, 2017.

ABOUT THE COMPANY

Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $4.18 billion as of September 30, 2017. Founded in 1921, Peapack-Gladstone Bank is a commercial bank that provides innovative private banking services to businesses, non-profits and consumers, which help them to establish, maintain and expand their legacy. Through its private banking locations in Bedminster, Morristown, Princeton and Teaneck, its Private Wealth Management Division, and its branch network and online platforms, Peapack-Gladstone Bank offers an unparalleled commitment to client service.

The foregoing contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about management's confidence and strategies and management's expectations about new and existing programs and products, investments, relationships, opportunities and market conditions. These statements may be identified by such forward-looking terminology as "expect," "look," "believe," "anticipate," "may" or similar statements or variations of such terms. Actual results may differ materially from such forward-looking statements. Factors that may cause results to differ materially from such forward-looking statements include, but are not limited to

• inability to successfully grow our business and implement our strategic plan, including an inability to generate revenues to offset the increased personnel and other costs related to the strategic plan;
• the impact of anticipated higher operating expenses in 2017 and beyond;
• inability to manage our growth;
• inability to successfully integrate our expanded employee base;
• unexpected decline in the economy, in particular in our New Jersey and New York market areas;
• declines in our net interest margin caused by the low interest rate environment and highly competitive market;
• declines in value in our investment portfolio;
• higher than expected increases in our allowance for loan and lease losses;
• higher than expected increases in loan and lease losses or in the level of nonperforming loans;
• unexpected changes in interest rates;
• unexpected decline in real estate values within our market areas;
• legislative and regulatory actions (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Basel III and related regulations) subject us to additional regulatory oversight which may result in increased compliance costs;
• successful cyberattacks against our IT infrastructure and that of our IT providers;
• higher than expected FDIC insurance premiums;
• adverse weather conditions;
• inability to successfully generate new business in new geographic markets;
• inability to execute upon new business initiatives;
• lack of liquidity to fund our various cash obligations;
• reduction in our lower-cost funding sources;
• our inability to adapt to technological changes;
• claims and litigation pertaining to fiduciary responsibility, environmental laws and other matters; and
• other unexpected material adverse changes in our operations or earnings.

A discussion of these and other factors that could affect our results is included in our SEC filings, including our Annual Report on Form 10-K for the year ended December 31, 2016. We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.

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

(Tables to follow)

PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in Thousands, except share data)
(Unaudited)
			For the Three Months Ended
			Sept 30,				June 30,				March 31,				Dec 31,				Sept 30,
			2017				2017				2017				2016				2016
Income Statement Data:
Interest income			$	37,491			$	33,412			$	31,385			$	30,271			$	29,844
Interest expense				7,499				6,440				5,794				5,691				5,575
	Net interest income			29,992				26,972				25,591				24,580				24,269
Provision for loan and lease losses				400				2,200				1,600				1,500				2,100
	Net interest income after provision for loan and lease losses			29,592				24,772				23,991				23,080				22,169
Wealth management fee income				5,790				5,086				4,818				4,610				4,436
Service charges and fees				816				815				771				815				812
Bank owned life insurance				343				350				322				380				340
Gain on loans held for sale at fair value (Mortgage banking)				141				91				47				197				383
Gain on loans held for sale at lower of cost or fair value				34				-				-				353				256
Fee income related to loan level, back-to-back swaps				888				1,291				456				874				670
Gain on sale of SBA loans				493				142				155				121				243
Other income				326				396				450				322				395
Securities gains, net				-				-				-				-				-
	Total other income			8,831				8,171				7,019				7,672				7,535
Salaries and employee benefits				13,996				12,751				11,913				11,480				11,515
Premises and equipment				2,945				3,033				2,816				2,903				2,736
FDIC insurance expense				583				602				686				804				814
Other expenses				4,437				3,709				3,889				3,778				3,101
	Total operating expenses			21,961				20,095				19,304				18,965				18,166
Income before income taxes				16,462				12,848				11,706				11,787				11,538
Income tax expense				6,256				4,908				3,724				4,479				4,422
Net income			$	10,206			$	7,940			$	7,982			$	7,308			$	7,116
Total revenue (A)			$	38,823			$	35,143			$	32,610			$	32,252			$	31,804
Per Common Share Data:
Earnings per share (basic)			$	0.57			$	0.45			$	0.47			$	0.44			$	0.43
Earnings per share (diluted)				0.56				0.45				0.46				0.43				0.43
Weighted average number of common shares outstanding:
Basic				17,800,153				17,505,638				17,121,631				16,770,725				16,467,654
Diluted				18,123,268				17,756,390				17,438,907				17,070,473				16,673,596
Performance Ratios:
Return on average assets annualized (ROAA)				0.97	%			0.79	%			0.82	%			0.75	%			0.77	%
Return on average equity annualized (ROAE)				11.09	%			9.06	%			9.62	%			9.27	%			9.44	%
Net interest margin (taxable equivalent basis)				2.95	%			2.76	%			2.71	%			2.63	%			2.74	%
Efficiency ratio (B)				56.62	%			57.18	%			59.20	%			59.45	%			57.58	%
Operating expenses / average assets annualized				2.10	%			2.00	%			1.97	%			1.96	%			1.98	%

(A)		Total revenue includes net interest income plus total other income.
(B)		Calculated as (total operating expenses, excluding provision for losses on REO) as a percentage of (net interest income plus noninterest income less gain on securities and gain on loans held for sale at lower of cost or fair value). See Non-GAAP financial measures reconciliation included in these tables beginning on page 24.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in Thousands, except share data)
(Unaudited)
			For the
			Nine Months Ended
			September 30,								Change
			2017				2016				$				%
Income Statement Data:
Interest income			$	102,288			$	86,777			$	15,511			18	%
Interest expense				19,733				14,922				4,811			32	%
	Net interest income			82,555				71.855				10,700			15	%
Provision for loan and lease losses				4,200				6,000				(1,800	)		-30	%
	Net interest income after provision for loan and lease losses			78,355				65,855				12,500			19	%
Wealth management fee income				15,694				13,630				2,064			15	%
Service charges and fees				2,402				2.437				(35	)		-1	%
Bank owned life insurance				1,015				1,027				(12	)		-1	%
Gain on loans held for sale at fair value (Mortgage banking)				279				813				(534	)		-66	%
Gain on loans held for sale at lower of cost or fair value				34				880				(846	)		-96	%
Fee income related to loan level, back-to-back swaps				2,635				764				1,871			245	%
Gain on sale of SBA loans				790				502				288			57	%
Other income				1,172				1,074				98			9	%
Securities gains, net				-				119				(119	)		-100	%
	Total other income			24,021				21,246				2,775			13	%
Compensation and employee benefits				38,660				33,523				5,137			15	%
Premises and equipment				8,794				8,342				452			5	%
FDIC insurance expense (A)				1,871				3,954				(2,083	)		-53	%
Other expenses				12,035				10,328				1,707			17	%
	Total operating expenses			61,360				56,147				5,213			9	%
Income before income taxes				41,016				30,954				10,062			33	%
Income tax expense				14,888				11,785				3,103			26	%
Net income			$	26,128			$	19,169			$	6,959			36	%
Total revenue (B)			$	106,576			$	93,101			$	13,475			14	%
Per Common Share Data:
Earnings per share (basic)			$	1.49			$	1.19			$	0.30			25	%
Earnings per share (diluted)				1.47				1.17				0.30			26	%
Weighted average number of common shares outstanding:
Basic				17,478,293				16,167,153				1,311,140			8	%
Diluted				17,753,731				16,347,255				1,406,476			9	%
Performance Ratios:
Return on average assets annualized (ROAA)				0.86	%			0.71	%			0.15	%		21	%
Return on average equity annualized (ROAE)				9.94	%			8.79	%			1.15	%		13	%
Net interest margin (taxable equivalent basis)				2.81	%			2.78	%			0.03	%		1	%
Efficiency ratio (C)				57.59	%			60.96	%			-3.37	%		-6	%
Operating expenses / average assets annualized				2.02	%			2.09	%			-0.07	%		-3	%

(A)		Beginning July 1, 2016, the FDIC assessment system was revised resulting in a reduction of the Company's assessment rate. The revision was a result of an amendment to small institution pricing for deposit insurance by the FDIC effective the quarter after the FDIC reserve ratio reaches 1.15%. The reserve ratio reached 1.15% effective as of the quarter ended June 30, 2016.
(B)		Total revenue includes net interest income plus total other income.
(C)		Calculated as (total operating expenses, excluding provision for losses on REO) as a percentage of (net interest income plus noninterest income less gain on securities and gain on loans held for sale at lower of cost or fair value). See Non-GAAP financial measures reconciliation included in these tables beginning on page 24.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in Thousands)
(Unaudited)
			As of
			Sept 30,			June 30,			March 31,			Dec 31,			Sept 30,
			2017			2017			2017			2016			2016
ASSETS
Cash and due from banks			$	4,446		$	4,119		$	4,910		$	24,580		$	17,861
Federal funds sold				101			101			101			101			101
Interest-earning deposits				88,793			89,600			113,953			138,010			141,593
	Total cash and cash equivalents			93,340			93,820			118,964			162,691			159,555
Securities available for sale				315,112			315,224			300,232			305,388			249,616
FHLB and FRB stock, at cost				13,589			18,487			15,436			13,813			14,093
Residential mortgage (A)				605,015			611,316			571,496			528,570			499,748
Multifamily mortgage				1,441,851			1,504,581			1,468,890			1,459,594			1,537,834
Commercial mortgage				625,467			609,444			573,253			551,233			497,267
Commercial loans (A)				845,831			800,927			687,805			637,102			598,078
Construction loans				-			-			-			1,405			430
Consumer loans				81,671			72,943			69,802			69,654			69,222
Home equity lines of credit				68,787			67,051			68,055			65,682			62,872
Other loans				815			458			477			492			449
	Total loans			3,669,437			3,666,720			3,439,778			3,313,732			3,265,900
	Less: Allowances for loan and lease losses			35,915			35,751			33,610			32,208			30,616
	Net loans			3,633,522			3,630,969			3,406,168			3,281,524			3,235,284
Premises and equipment				29,832			29,806			30,113			30,371			30,223
Other real estate owned				137			373			671			534			534
Accrued interest receivable				6,803			6,776			6,823			8,153			6,383
Bank owned life insurance				44,380			44,172			43,992			43,806			43,541
Deferred tax assets, net				16,636			16,912			15,325			15,320			14,765
Goodwill and other intangible assets (B)				15,064			3,095			3,126			3,157			3,188
Other assets				7,917			6,045			6,712			13,876			17,201
	TOTAL ASSETS		$	4,176,332		$	4,165,679		$	3,947,562		$	3,878,633		$	3,774,383
LIABILITIES
Deposits:
	Noninterest-bearing demand deposits		$	557,117		$	548,427		$	528,554		$	489,485		$	494,204
	Interest-bearing demand deposits			1,144,714			1,085,805			1,015,178			1,023,081			928,941
	Savings			121,830			121,480			122,262			120,056			119,650
	Money market accounts			1,046,997			1,081,366			1,049,909			1,048,494			997,572
	Certificates of deposit - Retail			528,251			475,395			440,991			457,000			466,003
Subtotal "customer" deposits				3,398,909			3,312,473			3,156,894			3,138,116			3,006,370
	IB Demand - Brokered			180,000			180,000			180,000			180,000			200,000
	Certificates of deposit - Brokered			83,788			88,780			93,750			93,721			93,690
Total deposits				3,662,697			3,581,253			3,430,644			3,411,837			3,300,060
Overnight borrowings				-			87,000			34,550			-			-
Federal home loan bank advances				49,898			58,795			58,795			61,795			71,795
Capital lease obligation				9,240			9,407			9,556			9,693			9,828
Subordinated debt, net				48,862			48,829			48,796			48,764			48,731
Other liabilities				25,699			23,548			24,293			22,334			27,934
Due to brokers, securities settlements				-			-			-			-			7,003
	TOTAL LIABILITIES			3,796,396			3,808,832			3,606,634			3,554,423			3,465,351
Shareholders' equity				379,936			356,847			340,928			324,210			309,032
	TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	4,176,332		$	4,165,679		$	3,947,562		$	3,878,633		$	3,774,383
Assets under administration at Peapack-Gladstone Bank's Private Wealth Management Division (market value, not included above)			$	4.8		$	3.9		$	3.8		$	3.7		$	3.5

(A)		Includes loans held for sale at fair value and/or lower of cost or market.
(B)		Includes goodwill and intangibles from the MCM acquisition effective August 1, 2017.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED BALANCE SHEET DATA
(Dollars in Thousands)
(Unaudited)
			As of
			Sept 30,				June 30,				March 31,				Dec 31,				Sept 30,
			2017				2017				2017				2016				2016
Asset Quality:
Loans past due over 90 days and still accruing			$	-			$	-			$	-			$	-			$	-
Nonaccrual loans (A)				15,367				15,643				11,494				11,264				10,840
Other real estate owned				137				373				671				534				534
	Total nonperforming assets		$	15,504			$	16,016			$	12,165			$	11,798			$	11,374
Nonperforming loans to total loans				0.42	%			0.43	%			0.33	%			0.34	%			0.34	%
Nonperforming assets to total assets				0.37	%			0.38	%			0.31	%			0.30	%			0.30	%
Performing TDRs (B)(C)			$	9,658			$	9,725			$	15,030			$	17,784			$	18,078
Loans past due 30 through 89 days and still accruing (D)			$	589			$	1,232			$	622			$	1,356			$	8,238
Classified loans			$	44,170			$	43,608			$	43,002			$	45,798			$	49,627
Impaired loans			$	25,046			$	25,294			$	26,546			$	29,071			$	28,951
Allowance for loan and lease losses:
	Beginning of period		$	35,751			$	33,610			$	32,208			$	30,616			$	29,219
	Provision for loan and lease losses			400				2,200				1,600				1,500				2,100
	Charge-offs, net			(236	)			(59	)			(198	)			92				(703	)
	End of period		$	35,915			$	35,751			$	33,610			$	32,208			$	30,616
ALLL to nonperforming loans				233.72	%			228.54	%			292.41	%			285.94	%			282.44	%
ALLL to total loans				0.98	%			0.98	%			0.98	%			0.97	%			0.95	%

(A)		September 30, 2017 and June 30, 2017 includes one legacy commercial mortgage totaling $4.9 million. The loan was past maturity at June 30, 2017, however interest payments continued to be made. The loan is secured by real estate valued at $7.2 million as of September 2016.
(B)		Amounts reflect TDRs that are paying according to restructured terms.
(C)		Amount does not include $9.1 million at September 30, 2017, $9.6 million at June 30, 2017, $4.6 million at March 31, 2017, $4.5 million at December 31, 2016 and $4.4 million at September 30, 2016 of TDRs included in nonaccrual loans.
(D)		September 30, 2016 includes one commercial loan secured by real estate totaling $5.0 million that was 30 days past due at September 30, 2016 but brought current on October 4, 2016.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED BALANCE SHEET DATA
(Dollars in Thousands)
(Unaudited)
		Sept 30,				Dec 31,				Sept 30,
		2017				2016				2016
Capital Adequacy
Equity to total assets (A)			9.10	%			8.36	%			8.19	%
Tangible Equity to tangible assets (B)			8.77	%			8.28	%			8.11	%
Book value per share (C)		$	20.86			$	18.79			$	18.24
Tangible Book Value per share (D)		$	20.03			$	18.60			$	18.05

		Sept 30,						Dec 31,						Sept 30,
		2017						2016						2016
Regulatory Capital - Holding Company
Tier I leverage		$	365,300		8.75	%		$	323,045		8.35	%		$	308,250		8.39	%
Tier I capital to risk weighted assets			365,300		10.78				323,045		10.60				308,250		10.47
Common equity tier I capital ratio to risk-weighted assets			365,298		10.78				323,042		10.60				308,247		10.47
Tier I & II capital to risk-weighted assets			450,078		13.28				404,017		13.25				387,597		13.17
Regulatory Capital - Bank
Tier I leverage		$	401,988		9.63	%		$	360,097		9.31	%		$	345,604		9.41	%
Tier I capital to risk weighted assets			401,988		11.86				360,097		11.82				345,604		11.74
Common equity tier I capital ratio to risk-weighted assets			401,986		11.86				360,094		11.82				345,601		11.74
Tier I & II capital to risk-weighted assets			437,904		12.92				392,305		12.87				376,220		12.78

(A)		Equity to total assets is calculated as total shareholders' equity as a percentage of total assets at period end.
(B)		Tangible equity and tangible assets are calculated by excluding the balance of intangible assets from shareholders' equity and total assets, respectively. Tangible equity as a percentage of tangible assets at period end is calculated by dividing tangible equity by tangible assets at period end. See Non-GAAP financial measures reconciliation included in these tables beginning on page 24.
(C)		Book value per common share is calculated by dividing shareholders' equity by period end common shares outstanding.
(D)		Tangible book value per share is different than book value per share because it excludes intangible assets. Tangible book value per share is calculated by dividing tangible equity by period end common shares outstanding. See Non-GAAP financial measures reconciliation tables beginning on page 24.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
LOANS CLOSED
(Dollars in Thousands)
(Unaudited)
			For the Quarters Ended
			Sept 30,			June 30,			March 31,			Dec 31,			Sept 30,
			2017			2017			2017			2016			2016
Residential loans retained			$	22,322		$	54,833		$	64,831		$	53,324		$	43,284
Residential loans sold				10,596			6,491			3,115			11,429			25,128
	Total residential loans			32,918			61,324			67,946			64,753			68,412
Commercial real estate				24,870			46,931			33,216			56,793			56,799
Multifamily				85,488			78,824			47,125			26,300			74,450
Commercial (C&I) loans (A) (B)				131,321			158,476			128,130			78,038			59,698
SBA				4,560			3,900			1,700			2,050			3,025
Wealth lines of credit (A)				15,200			14,905			7,200			2,400			1,200
	Total commercial loans			261,439			303,036			217,371			165,581			195,172
Installment loans				1,967			2,075			2,146			1,826			1,591
Home equity lines of credit (A)				6,879			5,444			6,973			5,878			7,064
	Total loans closed		$	303,203		$	371,879		$	294,436		$	238,038		$	272,239

			For the Nine Months Ended
			Sept 30,			Sept 30,
			2017			2016
Residential loans retained			$	141,986		$	93,543
Residential loans sold				20,202			53,412
	Total residential loans			162,188			146,955
Commercial real estate				105,017			102,692
Multifamily				211,437			333,194
Commercial (C&I) loans (A) (B)				417,927			188,495
SBA				10,160			6,365
Wealth lines of credit (A)				37,305			3,785
	Total commercial loans			781,846			634,531
Installment loans				6,188			3,154
Home equity lines of credit (A)				19,296			25,103
	Total loans closed		$	969,518		$	809,743

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

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

(1)		Average balances for available for sale securities are based on amortized cost.
(2)		Interest income is presented on a tax-equivalent basis using a 35 percent federal tax rate.
(3)		Loans are stated net of unearned income and include nonaccrual loans.
(4)		Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
AVERAGE BALANCE SHEET
UNAUDITED
THREE MONTHS ENDED
(Tax-Equivalent Basis, Dollars in Thousands)
				Sept 30, 2017										June 30, 2017
				Average				Income/						Average				Income/
				Balance				Expense			Yield			Balance				Expense			Yield
ASSETS:
Interest-earning assets:
	Investments:
		Taxable (1)		$	302,669			$	1,564		2.07	%		$	293,990			$	1,477		2.01	%
		Tax-exempt (1) (2)			27,099				194		2.86				25,109				190		3.03
	Loans (2) (3):
		Mortgages			612,904				4,934		3.22				589,848				4,739		3.21
		Commercial mortgages			2,120,360				19,879		3.75				2,085,623				18,653		3.58
		Commercial			795,063				9,654		4.86				713,120				7,267		4.08
		Installment			77,616				611		3.15				71,364				554		3.11
		Home equity			67,251				653		3.88				67,611				613		3.63
		Other			563				11		7.82				481				11		9.15
		Total loans			3,673,757				35,742		3.89				3,528,047				31,837		3.61
	Federal funds sold				101				-		0.25				101				-		0.25
	Interest-earning deposits				103,103				276		1.07				96,350				176		0.73
		Total interest-earning assets			4,106,729				37,776		3.68	%			3,943,597				33,680		3.42	%
Noninterest-earning assets:
	Cash and due from banks				4,732										4,727
	Allowance for loan and lease losses				(36,547	)									(34,466	)
	Premises and equipment				29,996										30,144
	Other assets				86,493										76,747
		Total noninterest-earning assets			84,674										77,152
Total assets				$	4,191,403									$	4,020,749
LIABILITIES:
Interest-bearing deposits:
	Checking			$	1,128,112			$	1,487		0.53	%		$	1,075,832			$	1,100		0.41	%
	Money markets				1,084,009				1,580		0.58				1,051,095				1,204		0.46
	Savings				120,893				16		0.05				121,299				16		0.05
	Certificates of deposit - retail				502,637				1,864		1.48				457,528				1,650		1.44
		Subtotal interest-bearing deposits			2,835,651				4,947		0.70				2,705,754				3,970		0.59
	Interest-bearing demand - brokered				180,000				737		1.64				180,000				726		1.61
	Certificates of deposit - brokered				87,095				481		2.21				92,719				493		2.13
		Total interest-bearing deposits			3,102,746				6,165		0.79				2,978,473				5,189		0.70
	Borrowings				98,114				439		1.79				77,457				354		1.83
	Capital lease obligation				9,303				112		4.82				9,463				114		4.82
	Subordinated debt				48,841				783		6.41				48,808				783		6.42
	Total interest-bearing liabilities				3,259,004				7,499		0.92				3,114,201				6,440		0.83
Noninterest-bearing liabilities:
	Demand deposits				538,484										534,339
	Accrued expenses and other liabilities				25,807										21,787
	Total noninterest-bearing liabilities				564,291										556,126
Shareholders' equity					368,108										350,422
	Total liabilities and shareholders' equity			$	4,191,403									$	4,020,749
	Net interest income							$	30,277									$	27,240
		Net interest spread									2.76	%									2.59	%
		Net interest margin (4)									2.95	%									2.76	%

(1)		Average balances for available for sale securities are based on amortized cost.
(2)		Interest income is presented on a tax-equivalent basis using a 35 percent federal tax rate.
(3)		Loans are stated net of unearned income and include nonaccrual loans.
(4)		Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.

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

(1)		Average balances for available for sale securities are based on amortized cost.
(2)		Interest income is presented on a tax-equivalent basis using a 35 percent federal tax rate.
(3)		Loans are stated net of unearned income and include nonaccrual loans.
(4)		Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
NON-GAAP FINANCIAL MEASURES RECONCILIATION

Tangible book value per share and tangible equity as a percentage of tangible assets at period end are non-GAAP financial measures derived from GAAP-based amounts. We calculate tangible equity and tangible assets by excluding the balance of intangible assets from shareholders' equity and total assets, respectively. We calculate tangible book value per share by dividing tangible equity by period end common shares outstanding, as compared to book value per common share, which we calculate by dividing shareholders' equity by period end common shares outstanding. We calculate tangible equity as a percentage of tangible assets at period end by dividing tangible equity by tangible assets at period end. We believe that this is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of risk-based capital ratios.

The efficiency ratio is a non-GAAP measure of expense control relative to recurring revenue. We calculate the efficiency ratio by dividing total noninterest expenses, excluding ORE provision, as determined under GAAP, by net interest income and total noninterest income as determined under GAAP, but excluding net gains/(losses) on loans held for sale at lower of cost or fair value and excluding net gains on securities from this calculation, which we refer to below as recurring revenue. We believe that this provides one reasonable measure of core expenses relative to core revenue.

We believe that these non-GAAP financial measures provide information that is important to investors and that is useful in understanding our financial position, results and ratios. Our management internally assesses our performance based, in part, on these measures. However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures. As other companies may use different calculations for these measures, this presentation may not be comparable to other similarly titles measures reported by other companies. A reconciliation of the non-GAAP measures of tangible common equity, tangible book value per share and efficiency ratio to the underlying GAAP numbers is set forth below.

Non-GAAP Financial Reconciliation
(Dollars in thousands, except share data)
			Three Months Ended
			Sept 30,				June 30,				March 31,				Dec 31,				Sept 30,
Tangible Book Value Per Share			2017				2017				2017				2016				2016
Shareholders' equity			$	379,936			$	356,847			$	340,928			$	324,210			$	309,032
Less: Intangible assets, net				15,064				3,095				3,126				3,157				3,188
	Tangible equity			364,872				353,752				337,802				321,053				305,844
Period end shares outstanding				18,214,759				17,846,404				17,579,274				17,257,995				16,944,738
Tangible book value per share			$	20.03			$	19.82			$	19.22			$	18.60			$	18.05
Book value per share				20.86				20.00				19.39				18.79				18.24
Tangible Equity to Tangible Assets
Total assets			$	4,176,332			$	4,165,679			$	3,947,562			$	3,878,633			$	3,774,383
Less: Intangible assets, net				15,064				3,095				3,126				3,157				3,188
	Tangible assets			4,161,268				4,162,584				3,944,436				3,875,476				3,771,195
Tangible equity to tangible assets				8.77	%			8.50	%			8.56	%			8.28	%			8.11	%
Equity to assets				9.10	%			8.57	%			8.64	%			8.36	%			8.19	%

		Three Months Ended
			Sept 30,				June 30,				March 31,				Dec 31,				Sept 30,
Efficiency Ratio			2017				2017				2017				2016				2016
Net interest income		$	29,992			$	26,972			$	25,591			$	24,580			$	24,269
Total other income			8,831				8,171				7,019				7,672				7,535
Less: Gain on loans held for sale at lower of cost or fair value			34				-				-				353				256
Less: Securities gains, net			-				-				-				-				-
Total recurring revenue			38,789				35,143				32,610				31,899				31,548
Operating expenses			21,961				20,095				19,304				18,965				18,166
Total operating expense			21,961				20,095				19,304				18,965				18,166
Efficiency ratio			56.62	%			57.18	%			59.20	%			59.45	%			57.58	%

		Nine Months Ended
		Sept 30,				Sept 30,
Efficiency Ratio		2017				2016
Net interest income		$	82,555			$	71,855
Total other income			24,021				21,246
Less: Gain on loans held for sale at lower of cost or fair value			34				880
Less: Securities gains, net			-				119
Total recurring revenue			106,542				92,102
Operating expenses			61,360				56,147
Total operating expense			61,360				56,147
Efficiency ratio			57.59	%			60.96	%