PEAPACK GLADSTONE FINANCIAL CORP

The Corporation holds assets, liabilities, and derivatives that are indexed to the various tenors of LIBOR including but not limited to the one-month LIBOR, three-month LIBOR, one-year LIBOR, and the ten-year constant maturing swap rate. The LIBOR yield curve is also utilized in the fair value calculation of many of these instruments. The reform of major interest benchmarks led to the announcement of the United Kingdom’s Financial Conduct Authority, the regulator of the LIBOR index, that LIBOR would not be supported in its current form after the end of 2021. The Corporation believes the U.S. financial sector will maintain an orderly and smooth transition to new interest rate benchmarks of which the Corporation will evaluate and adopt if appropriate. While in the U.S., the Alternative Rates Committee of the FRB and Federal Reserve Bank of New York have identified the SOFR as an alternative U.S. dollar reference interest rate, it is too early to predict the financial impact this rate index replacement may have, if at all.

In the course of our business, we may purchase real estate, or we may foreclose on and take title to real estate. As a result, we could be subject to environmental liabilities with respect to these properties. We may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination or may be required to investigate or clean up hazardous or toxic substances or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial. In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. Any significant environmental liabilities could cause a material adverse effect on our business, financial condition, results of operations and prospects.

The portion of the allowance for loan losses allocated to loans collectively evaluated for impairment, commonly referred to as general reserves, was $40.9 million at December 31, 2019 and $38.2 million at December 31, 2018. General reserves at December 31, 2019 represents 0.93 percent of loans collectively evaluated for impairment compared to 0.97 percent at December 31, 2018. The specific reserves on impaired loans were $2.8 million at December 31, 2019 compared to $262,000 at December 31, 2018.  Specific reserves were primarily attributable to a $1.5 million reserve associated with a casual dining commercial banking relationship totaling $5.9 million and a $1.0 million reserve on a senior living facility relationship totaling $14.5 million. The Company experienced growth in the loan portfolio of approximately $478.6 million, including loans held for sale.  Multifamily and residential loan classes comprised 40 percent of the loan portfolio as of December 31, 2019 compared to approximately 43 percent at December 31, 2018.  The decline in multifamily and residential loans is consistent with Management’s strategy to reduce these portfolios as a percentage of the overall loan portfolio as C&I loans and lease financings become a larger percentage of the overall loan portfolio.

Mr. Doyle joined the Bank in July 2015 as Senior Vice President and Chief Risk Officer.  Mr. Doyle was promoted to Executive Vice President and Chief Credit Officer in September 2019.  Mr. Doyle is responsible for directing the credit professionals and quality assurance teams to efficiently manage the growth of the Bank's loan originations and ensure continued high asset quality.  Mr. Doyle has over 30 years of financial services experience in risk management, as well as broad experience in transaction-intensive relationship banking, including structuring, execution, marketing and management.  Prior to joining Peapack-Gladstone Bank, Mr. Doyle served as Senior Vice President, Chief Credit Officer at Millennium bcp, Indus Bank and Crown Bank, where he specialized in credit and risk management.  Prior to that, he held credit and leadership responsibilities at Sovereign Bank, Summit Bank/Fleet National Bank and CIBC World Markets.  Mr. Doyle graduated with a Bachelor of Commerce with Honors and M.B.A. from the University of Windsor (Canada).  He is a member of the New Jersey Bankers Association, Commercial Lending Committee.