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, Quadrant and Lassus Wherley, 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 nine months ended September 30, 2018 and 2017.

	Three Months Ended September 30, 2018
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	27,032	$	1,110	$	28,142
Noninterest income		2,570		8,413		10,983
Total income		29,602		9,523		39,125

Provision for loan and lease losses		500		—		500
Compensation and benefits		11,257		4,768		16,025
Premises and equipment expense		2,967		432		3,399
FDIC expense		593		—		593
Other noninterest expense		2,202		2,065		4,267
Total noninterest expense		17,519		7,265		24,784
Income before income tax expense		12,083		2,258		14,341
Income tax expense		3,039		578		3,617
Net income	$	9,044	$	1,680	$	10,724

	Three Months Ended September 30, 2017
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	28,687	$	1,305	$	29,992
Noninterest income		2,928		5,903		8,831
Total income		31,615		7,208		38,823

Provision for loan and lease losses		400		—		400
Compensation and benefits		10,992		3,004		13,996
Premises and equipment expense		2,619		326		2,945
FDIC Expense		583		—		583
Other noninterest expense		2,584		1,853		4,437
Total noninterest expense		17,178		5,183		22,361
Income before income tax expense		14,437		2,025		16,462
Income tax expense		5,474		782		6,256
Net income	$	8,963	$	1,243	$	10,206

	Nine Months Ended September 30, 2018
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	81,833	$	3,945	$	85,778
Noninterest income		7,550		25,388		32,938
Total income		89,383		29,333		118,716

Provision for loan and lease losses		2,050		—		2,050
Compensation and benefits		33,520		12,910		46,430
Premises and equipment expense		8,788		1,287		10,075
FDIC expense		1,798		—		1,798
Other noninterest expense		7,860		6,399		14,259
Total noninterest expense		54,016		20,596		74,612
Income before income tax expense		35,367		8,737		44,104
Income tax expense		8,551		2,112		10,663
Net income	$	26,816	$	6,625	$	33,441

Total assets for period end	$	4,367,950	$	67,759	$	4,435,709

	Nine Months Ended September 30, 2017
			Wealth
			Management
(In thousands)	Banking		Division		Total
Net interest income	$	78,372	$	4,183	$	82,555
Noninterest income		7,975		16,046		24,021
Total income		86,347		20,229		106,576

Provision for loan and lease losses		4,200		—		4,200
Compensation and benefits		30,792		7,868		38,660
Premises and equipment expense		7,891		903		8,794
FDIC Expense		1,871		—		1,871
Other noninterest expense		6,688		5,347		12,035
Total noninterest expense		51,442		14,118		65,560
Income before income tax expense		34,905		6,111		41,016
Income tax expense		12,670		2,218		14,888
Net income	$	22,235	$	3,893	$	26,128

Total assets for period end	$	4,148,222	$	28,110	$	4,176,332