6. BUSINESS SEGMENTS

The Corporation assesses its results among two operating segments, Banking and Peapack-Gladstone Bank’s Private Wealth Management Division. Management uses certain methodologies to allocate income and expense to the business segments. A funds transfer pricing methodology is used to assign interest income and interest expense. Certain indirect expenses are allocated to segments. These include support unit expenses such as technology and operations and other support functions. Taxes are allocated to each segment based on the effective rate for the period shown.

Banking

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

Private Wealth Management Division

Peapack-Gladstone Bank’s Private Wealth Management Division, including PGB Trust & Investments of Delaware, MCM and Quadrant, includes asset management services provided for individuals and institutions; personal trust services, including services as executor, trustee, administrator, custodian and guardian; corporate trust services including services as trustee for pension and profit sharing plans; and other financial planning and advisory services.

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, 2018 and 2017.

	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		2,998		2,086		5,084
Total noninterest expense		18,837		6,404		25,241
Income before income tax expense		12,469		3,273		15,742
Income tax expense		3,033		799		3,832
Net income	$	9,436	$	2,474	$	11,910

	Three Months Ended June 30, 2017
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	25,654	$	1,318	$	26,972
Noninterest income		2,953		5,218		8,171
Total income		28,607		6,536		35,143

Provision for loan and lease losses		2,200		—		2,200
Compensation and benefits		10,486		2,265		12,751
Premises and equipment expense		2,735		298		3,033
FDIC Expense		602		—		602
Other noninterest expense		2,088		1,621		3,709
Total noninterest expense		18,111		4,184		22,295
Income before income tax expense		10,496		2,352		12,848
Income tax expense		4,023		885		4,908
Net income	$	6,473	$	1,467	$	7,940

	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		5,659		4,333		9,992
Total noninterest expense		36,498		13,330		49,828
Income before income tax expense		23,283		6,480		29,763
Income tax expense		5,512		1,534		7,046
Net income	$	17,771	$	4,946	$	22,717

Total assets for period end	$	4,208,731	$	56,443	$	4,265,174

	Six Months Ended June 30, 2017
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	49,685	$	2,878	$	52,563
Noninterest income		5,047		10,143		15,190
Total income		54,732		13,021		67,753

Provision for loan and lease losses		3,800		—		3,800
Compensation and benefits		19,800		4,864		24,664
Premises and equipment expense		5,272		577		5,849
FDIC Expense		1,288		—		1,288
Other noninterest expense		4,104		3,494		7,598
Total noninterest expense		34,264		8,935		43,199
Income before income tax expense		20,468		4,086		24,554
Income tax expense		7,196		1,436		8,632
Net income	$	13,272	$	2,650	$	15,922

Total assets for period end	$	4,138,639	$	27,040	$	4,165,679