Edgar Filing: PEAPACK GLADSTONE FINANCIAL CORP

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the Fiscal Year Ended December 31, 2006 Commission File No. 000-23537
----------

PEAPACK-GLADSTONE FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)

New Jersey 22-2491488
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

158 Route 206
Peapack-Gladstone, New Jersey 07934
(Address of principal executive offices) (Zip Code)

Registrant's telephone number (908) 234-0700

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Name of Exchange on which Registered
------------------- ------------------------------------
Common Stock, No par value American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.

Yes |_| No |X|.

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.

Yes |_| No |X|.

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
requirements for the past 90 days. Yes |X| No |_|.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment of this
Form 10-K |X|.

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of "accelerated
filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act (Check
one):

Large accelerated filer |_| Accelerated filer |X| Non-accelerated filer |_|

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

The aggregate market value of the shares held by unaffiliated stockholders was
approximately $203,169,629 on June 30, 2006.

As of February 28, 2007, 8,273,335 shares of no par value Common Stock were
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Corporation's 2006 Annual Report (the "2006 Annual Report") and
Definitive Proxy Statement for the Corporation's 2007 Annual Meeting of
Shareholders (the "2007 Proxy Statement") are incorporated by reference into
Parts II and III.

FORM 10-K
PEAPACK-GLADSTONE FINANCIAL CORPORATION
For the Year Ended December 31, 2006

Table of Contents
-----------------

PART I

Item 1. Business ....................................................................................... 3

Item 1A. Risk Factors ................................................................................... 7

Item 1B. Unresolved Staff Comments ...................................................................... 9

Item 2. Properties ..................................................................................... 9

Item 3. Legal Proceedings .............................................................................. 10

Item 4. Submission of Matters to a Vote of Security Holders ............................................ 10

PART II

Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities ........................................................................... 10

Item 6. Selected Financial Data ........................................................................ 12

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations .......... 12

Item 7A. Quantitative and Qualitative Disclosure About Market Risk ...................................... 12

Item 8. Financial Statements and Supplementary Data .................................................... 12

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ........... 12

Item 9A. Controls and Procedures ........................................................................ 12

Item 9B. Other Information .............................................................................. 13

PART III

Item 10. Directors, Executive Officers and Corporate Governance ......................................... 13

Item 11. Executive Compensation ......................................................................... 13

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . 14

Item 13. Certain Relationships and Related Transactions, and Director Independence ...................... 14

Item 14. Principal Accountant Fees and Services ......................................................... 14

PART IV

Item 15. Exhibits, Financial Statements and Schedules ................................................... 15

Signatures ..................................................................................... 17

This Form 10-K contains certain forward-looking statements with respect to the
financial condition, results of operations and business of the Corporation. Such
statements are not historical facts and include expressions about the
Corporation's confidence, strategies and expectations about earnings, new and
existing programs and products, relationships, opportunities, technology and
market conditions. These statements may be identified by forward-looking
terminology such as "expect," "believe," or "anticipate," or expressions of
confidence like "strong," or "on-going," or similar statements or variations of
such terms. Factors that may cause actual results to differ materially from
those contemplated by such forward-looking statements include, among others, the
following possibilities:

o The success of the Corporation's balance sheet restructuring initiative.

o Unexpected decline in the direction of the economy in New Jersey.

o Unexpected changes in interest rates.

o Failure to grow business.

o Inability to manage growth.

o Unexpected loan prepayment volume.

o Exposure to credit risks.

o Insufficient allowance for loan losses.

o Competition from other financial institutions.

o Adverse effects of government regulation.

o Decline in the levels of loan quality and origination volume.

o Decline in the volume of increase in trust assets or deposits.

The Corporation assumes no responsibility to update such forward-looking
statements in the future.

PART I

Item 1. BUSINESS

The Corporation

Peapack-Gladstone Financial Corporation (the "Corporation") is a bank holding
company registered under the Bank Holding Company Act of 1956, as amended
("Holding Company Act"). The Corporation was organized under the laws of New
Jersey in August 1997, by the Board of Directors of Peapack-Gladstone Bank (the
"Bank"), its principal subsidiary, to become a holding company for the Bank. The
Bank is a state chartered commercial bank founded in 1921 under the laws of the
State of New Jersey. Deposits of the Bank are insured for up to $100,000 per
depositor by the Bank Insurance Fund administered by the FDIC. The Bank is a
member of the Federal Reserve System. The Bank offers financial services through
21 full-service banking offices, and one mini-branch. The Bank maintains nine
branches and one auxiliary office in Somerset County, eight in Morris County,
three in Hunterdon County and one in Union County.

The Bank is primarily dedicated to providing quality, personalized financial,
trust and investment services to individuals and small businesses.

Commercial loan customers of the Bank are business people, including merchants,
architects, doctors, dentists, attorneys and building contractors as well as
various service firms and other local retailers. Most forms of commercial
lending are offered, including working capital lines of credit, term loans for
fixed asset acquisitions, commercial mortgages and other forms of asset-based
financing.

In addition to commercial lending activities, the Bank offers a wide range of
consumer banking services, including: checking and savings accounts, money
market and interest-bearing checking accounts, certificates of deposit, and
individual retirement accounts held in certificates of deposit. The Bank also
offers residential and construction mortgages, home equity lines of credit and
other second mortgage loans. For children, the Bank offers a special pony club
savings account. New Jersey Consumer Checking Accounts are offered to low income
customers. In addition, the Bank provides foreign and domestic travelers'
checks, personal money orders, cashier's checks and wire transfers. Automated
teller machines are available at 22 locations. Via the automatic teller machine
access card issued by the Bank, customers may pay for commodities at
point-of-sale merchant locations. Internet banking is available to customers
including an on-line bill payment option. The Corporation has no foreign
operations.

The Bank has a Trust and Investment Department, PGB Trust and Investments, which
offers personal investment management services, personal trust administration
services, estate settlement, income tax services, custodial services and other
financial planning services. Since its inception in 1972, trust assets (market
value) have increased to $1.92 billion.

The Corporation makes its Annual Report on Form 10-K, Quarterly Reports on Form
10-Q and Current Reports on Form 8-K, and amendments to such reports, available
on its website at www.pgbank.com. Also available on the website are the
Corporation's Code of Business Conduct and Ethics, Corporate Governance
Principles and charters for the Corporation's Audit Committee, Compensation
Committee and Nominating Committee.

Employees

As of December 31, 2006, the Corporation employed 232 full-time equivalent
persons. Management considers relations with employees to be satisfactory.

Principal Market Areas

The Bank's principal market for its deposit gathering activities includes
Somerset, Morris, Hunterdon and Union Counties. The area is composed of
upper-income single-family homes, moderate-income properties, some low-income
housing and several large corporate campuses. There are numerous small retail
businesses in each of the towns as well as offices for various professionals,
i.e. attorneys, architects, interior decorators, physicians, etc. A portion of
the market area is bisected by Interstate Highways 287 and 78 where numerous
corporate offices have relocated over the past 25 years.

The Bank has expanded its service areas from one office in 1968 to the present
21 full-service banking locations and one mini-branch location by steadily
opening new branches. All of the communities that the Bank serves are
demographically similar and contiguous to the main office.

Competition

The market for banking and bank-related services is highly competitive. The Bank
competes with other providers of financial services such as other bank holding
companies, commercial and savings banks, savings and loan associations, credit
unions, money market and mutual funds, mortgage companies, and a growing list of
other local, regional and national institutions which offer financial services.
Mergers between financial institutions within New Jersey and in neighboring
states have added competitive pressure. The Bank competes by offering quality
products and convenient services at competitive prices. In order to maintain and
enhance its competitive position, the Bank regularly reviews its products,
locations and new branching prospects.

Governmental Policies and Legislation

The banking industry is highly regulated. Statutory and regulatory controls
increase a bank holding company's cost of doing business and limit the options
of its management to deploy assets and maximize income. Proposals to change the
laws and regulations governing the operations and taxation of banks, bank
holding companies and other financial institutions are frequently made in
Congress, in state legislatures and before various bank regulatory agencies. The
likelihood of any major changes and the impact such changes might have on the
Corporation or the Bank is impossible to predict. The following discussion is
not intended to be a complete list of all the activities regulated by the
banking laws or of the impact of such laws and regulations on the Bank. It is
intended only to briefly summarize some material provisions.

Capital Requirements

The Federal Reserve Board has adopted risk-based capital guidelines for banks
and bank holding companies. The minimum guideline for the ratio of total capital
to risk-weighted assets is 8%. At least half of the total capital is to be
comprised of common stock, retained earnings, minority interests in the equity
accounts of consolidated subsidiaries, noncumulative perpetual preferred stock
and a limited amount of qualifying cumulative perpetual preferred stock, less
goodwill and certain other intangibles ("Tier 1 Capital"). The remainder may
consist of other preferred stock, certain other instruments and a portion of the
loan loss allowance. At December 31, 2006, the Corporation's Tier 1 Capital and
Total Capital ratios were 15.33% and 16.31%, respectively.

In addition, the Federal Reserve Board has established minimum leverage ratio
guidelines for banks and bank holding companies. These guidelines provide for a
minimum ratio of Tier 1 Capital to average total assets of 3% for banks that
meet certain specified criteria, including having the highest regulatory rating.
All other banks and bank holding companies generally are required to maintain a
leverage ratio of at least 3% plus an additional cushion of 100 to 200 basis
points. The Corporation's leverage ratio at December 31, 2006 was 8.20%.

FDICIA

Pursuant to the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), each federal banking agency has promulgated regulations, specifying
the levels at which a financial institution would be considered "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized," and "critically undercapitalized," and to take certain
mandatory and discretionary supervisory actions based on the capital level of
the institution. The regulations implementing these provisions of FDICIA provide
that a bank is defined to be "well capitalized" if it maintains a leverage ratio
of at least 5%, a risk-adjusted Tier 1 capital ratio of at least 6% and a
risk-adjusted total capital ratio of at least 10% and is not otherwise in a
"troubled condition" as specified by its appropriate federal regulatory agency.
A bank is defined to be "adequately capitalized" if it meets other minimum
capital requirements. In addition, a depository institution will be considered
"undercapitalized" if it fails to meet any minimum required measure,
"significantly undercapitalized" if it is significantly below such measure and
"critically undercapitalized" if it fails to maintain a level of tangible equity
equal to not less than 2% of total assets. A depository institution may be
deemed to be in a capitalization category that is lower than is indicated by its
actual capital position if it receives an unsatisfactory examination rating.

Insurance Funds Legislation

The Corporation's wholly-owned subsidiary, the Peapack-Gladstone Bank, is a
member of the Bank Insurance Fund ("BIF") of the FDIC. The FDIC also maintains
another insurance fund, the Savings Association Insurance Fund ("SAIF"), which
primarily covers savings and loan association deposits but also covers deposits
that are acquired by a BIF-insured institution from a savings and loan
association.

Restrictions on the Payment of Dividends

The holders of the Corporation's common stock are entitled to receive dividends,
when, as and if declared by the Board of Directors of the Corporation out of
funds legally available. The only statutory limitation is that such dividends
may not be paid when the Corporation is insolvent. Since the principal source of
income for the Corporation will be dividends on Bank common stock paid to the
Corporation by the Bank, the Corporation's ability to pay dividends to its
shareholders will depend on whether the Bank pays dividends to it. As a
practical matter, restrictions on the ability of the Bank to pay dividends act
as restrictions on the amount of funds available for the payment of dividends by
the Corporation. As a New Jersey chartered commercial bank, the Bank is subject
to the restrictions on the payment of dividends contained in the New Jersey
Banking Act of 1948, as amended (the "Banking Act"). Under the Banking Act, the
Bank may pay dividends only out of retained earnings, and out of surplus to the
extent that surplus exceeds 50% of stated capital. Under the Financial
Institutions Supervisory Act, the FDIC has the authority to prohibit a
state-chartered bank from engaging in conduct that, in the FDIC's opinion,
constitutes an unsafe or unsound banking practice. Under certain circumstances,
the FDIC could claim that the payment of a dividend or other distribution by the
Bank to the Corporation constitutes an unsafe or unsound practice. The
Corporation is also subject to FRB policies, which may, in certain
circumstances, limit its ability to pay dividends. The FRB policies require,
among other things, that a bank holding company maintain a minimum capital base.
The FRB would most likely seek to prohibit any dividend payment that would
reduce a holding company's capital below these minimum amounts.

Holding Company Supervision

The Corporation is a bank holding company within the meaning of the Holding
Company Act. As a bank holding company, the Corporation is supervised by the FRB
and is required to file reports with the FRB and provide such additional
information as the FRB may require.

The Holding Company Act prohibits the Corporation, with certain exceptions, from
acquiring direct or indirect ownership or control of more than five percent of
the voting shares of any company which is not a bank and from engaging in any
business other than that of banking, managing and controlling banks or
furnishing services to subsidiary banks, except that it may, upon application,
engage in, and may own shares of companies engaged in, certain businesses found
by the FRB to be so closely related to banking "as to be a proper incident
thereto." The Holding Company Act requires prior approval by the FRB of the
acquisition by the Corporation of more than five percent of the voting stock of
any additional bank. Satisfactory capital ratios, Community Reinvestment Act
ratings and anti-money laundering policies are generally prerequisites to
obtaining federal regulatory approval to make acquisitions. The policy of the
FRB provides that a bank holding company is expected to act as a source of
financial strength to its subsidiary bank and to commit resources to support the
subsidiary bank in circumstances in which it might not do so absent that policy.
Acquisitions through the Bank require the approval of the FDIC and the New
Jersey Department of Banking and Insurance ("NJDOBI").

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley Act") added new legal
requirements for public companies affecting corporate governance, accounting and
corporate reporting.

The Sarbanes-Oxley Act provides for, among other things:

o a prohibition on personal loans made or arranged by the issuer to
its directors and executive officers (except for loans made by a
bank subject to Regulation O);

o independence requirements for audit committee members;

o independence requirements for company auditors;

o certification of financial statements within the Annual Report on
Form 10-K and Quarterly Reports on Form 10-Q by the chief executive
officer and the chief financial officer;

o the forfeiture by the chief executive officer and the chief
financial officer of bonuses or other incentive-based compensation
and profits from the sale of an issuer's securities by such officers
in the twelve month period following initial publication of any
financial statements that later require restatement due to corporate
misconduct;

o disclosure of off-balance sheet transactions;

o two-business day filing requirements for insiders filing on Form 4;

o disclosure of a code of ethics for financial officers and filing a
Current Report on Form 8-K for a change in or waiver of such code;

o the reporting of securities violations "up the ladder" by both
in-house and outside attorneys;

o restrictions on the use of non-GAAP financial measures in press
releases and SEC filings;

o the formation of a public accounting oversight board;

o various increased criminal penalties for violations of securities
laws;

o an assertion by management with respect to the effectiveness of
internal control over financial reporting; and

o a report by the company's external auditor on management's assertion
and the effectiveness of internal control over financial reporting.

Each of the national stock exchanges, including the American Stock Exchange
(AMEX) where the Corporation's securities are listed, have implemented new
corporate governance listing standards, including rules strengthening director
independence requirements for boards, and requiring the adoption of charters for
the nominating and audit committees.

USA PATRIOT Act

As part of the USA PATRIOT Act, Congress adopted the International Money
Laundering Abatement and Financial Anti-Terrorism Act of 2001 (the "Anti Money
Laundering Act"). The Anti Money Laundering Act authorizes the Secretary of the
Treasury, in consultation with the heads of other government agencies, to adopt
special measures applicable to financial institutions such as banks, bank
holding companies, broker-dealers and insurance companies. Among its other
provisions, the Anti Money Laundering Act requires each financial institution:
(i) to establish an anti-money laundering program; (ii) to establish due
diligence policies, procedures and controls that are reasonably designed to
detect and report instances of money laundering in United States private banking
accounts and correspondent accounts maintained for non-United States persons or
their representatives; and (iii) to avoid establishing, maintaining,
administering, or managing correspondent accounts in the United States for, or
on behalf of, a foreign shell bank that does not have a physical presence in any
country. In addition, the Anti Money Laundering Act expands the circumstances
under which funds in a bank account may be forfeited and requires covered
financial institutions to respond under certain circumstances to requests for
information from federal banking agencies within 120 hours.

Regulations implementing the due diligence requirements, require minimum
standards to verify customer identity and maintain accurate records, encourage
cooperation among financial institutions, federal banking agencies, and law
enforcement authorities regarding possible money laundering or terrorist
activities, prohibit the anonymous use of "concentration accounts," and requires
all covered financial institutions to have in place an anti-money laundering
compliance program. Federal and state banking agencies have strictly enforced
various anti-money laundering and suspicious activity reporting requirements
using formal and informal enforcement tools to cause banks to comply with these
provisions.

The Anti Money Laundering Act amended the Bank Holding Company Act and the Bank
Merger Act to require the federal banking agencies to consider the effectiveness
of any financial institution involved in a proposed merger transaction in
combating money laundering activities when reviewing an application under these
acts.

Gramm-Leach-Bliley Act

The Gramm-Leach-Bliley Financial Modernization Act of 1999 ("Modernization Act")
became effective in early 2000. The Modernization Act:

o allows bank holding companies meeting management, capital and
Community Reinvestment Act standards to engage in a substantially
broader range of non-banking activities than was previously
permissible, including insurance underwriting and making merchant
banking investments in commercial and financial companies;

o allows insurers and other financial services companies to acquire
banks;

o removes various restrictions that previously applied to bank holding
company ownership of securities firms and mutual fund advisory
companies; and

o establishes the overall regulatory structure applicable to bank
holding companies that also engage in insurance and securities
operations.

If a bank holding company elects to become a financial holding company, it files
a certification, effective in 30 days, and thereafter may engage in certain
financial activities without further approvals. The Corporation has not elected
to become a financial holding company.

The Modernization Act modified other financial laws, including laws related to
financial privacy and community reinvestment.

Item 1A. RISK FACTORS

The material risks and uncertainties that management believes affect the
Corporation are described below. These risks and uncertainties are not the only
ones affecting the Corporation. Additional risks and uncertainties that
management is not aware of or focused on or that management currently deems
immaterial may also impair the Corporation's business operations. This report is
qualified in its entirety by these risk factors. If any of the following risks
actually occur, the Corporation's financial condition and results of operations
could be materially and adversely affected.

Changes in interest rates may adversely affect our earnings and financial
condition.

Our net income depends primarily upon our net interest income. Net interest
income is the difference between interest income earned on loans, investments
and other interest-earning assets and the interest expense incurred on deposits
and borrowed funds.

Different types of assets and liabilities may react differently, and at
different times, to changes in market interest rates. We expect that we will
periodically experience "gaps" in the interest rate sensitivities of our assets
and liabilities. That means either our interest-bearing liabilities will be more
sensitive to changes in market interest rates than our interest-earning assets,
or vice versa. When interest-bearing liabilities mature or reprice more quickly
than interest-earning assets, an increase in market rates of interest could
reduce our net interest income. Likewise, when interest-earning assets mature or
reprice more quickly than interest-bearing liabilities, falling interest rates
could reduce our net interest income. We are unable to predict changes in market
interest rates, which are affected by many factors beyond our control, including
inflation, recession, unemployment, money supply, domestic and international
events and changes in the United States and other financial markets.

We may not be able to continue to grow our business, which may adversely impact
our results of operations.

Our business strategy calls for continued expansion. Our ability to continue to
grow depends, in part, upon our ability to open new branch locations,
successfully attract deposits to existing and new branches, and identify
favorable loan and investment opportunities. In the event that we do not
continue to grow, our results of operations could be adversely impacted.

We may not be able to manage our growth, which may adversely impact our
financial results.

As part of our expansion strategy, we plan to open new branches in our existing
and target markets. However, we may be unable to identify attractive locations
on terms favorable to us or to hire qualified management to operate the new
branches. In addition, the organizational and overhead costs may be greater than
we anticipated or we may not be able to obtain the regulatory approvals
necessary to open new branches. New branches may take longer than expected to
reach profitability, and we cannot assure that they will become profitable. The
additional costs of starting new branches may adversely impact our financial
results.

Our ability to manage growth successfully will depend on whether we can continue
to fund this growth while maintaining cost controls and asset quality, as well
as on factors beyond our control, such as national and regional economic
conditions and interest rate trends. If we are not able to control costs and
maintain asset quality, such growth could adversely impact our earnings and
financial condition.

The Corporation is required by Federal regulatory authorities to maintain
adequate levels of capital to support its operations. The Corporation may at
some point need to raise additional capital to support continued growth. The
Corporation's ability to raise additional capital, if needed, will depend on
conditions in the capital markets at that time, which are outside the
Corporation's control, and on its financial performance. Accordingly, the
Corporation cannot assure you of its ability to raise additional capital if
needed or on terms acceptable to the Corporation. If the Corporation cannot
raise additional capital when needed, the ability to further expand its
operations could be materially impaired.

Our exposure to credit risk could adversely affect our earnings and financial
condition.

There are certain risks inherent in making loans. These risks include interest
rate changes over the time period in which loans may be repaid, risks resulting
from changes in the economy, risks inherent in dealing with borrowers and, in
the case of a loan backed by collateral, risks resulting from uncertainties
about the future value of the collateral.

Adverse economic and business conditions in our market area may have an adverse
effect on our earnings.

Substantially all of our business is with customers located within Morris,
Somerset and Hunterdon Counties and contiguous counties. Generally, we make
loans to small to mid-sized businesses, most of whose success depends on the
regional economy. These businesses generally have fewer financial resources in
terms of capital or borrowing capacity than larger entities. Adverse economic
and business conditions in our market area could reduce our growth rate, affect
our borrowers' ability to repay their loans and, consequently, adversely affect
our financial condition and performance. Further, we place substantial reliance
on real estate as collateral for our loan portfolio. A sharp downturn in real
estate values in our market area could leave many of our loans under secured. If
we are required to liquidate the collateral to satisfy the debt securing a loan
during a period of reduced real estate values, our earnings could be adversely
affected.

If our allowance for loan losses were not sufficient to cover actual loan
losses, our earnings would decrease.

We maintain an allowance for loan losses based on, among other things, national
and regional economic conditions, and historical loss experience and delinquency
trends among loan types. However, we cannot predict loan losses with certainty
and we cannot assure you that charge-offs in future periods will not exceed the
allowance for loan losses. In addition, regulatory agencies, as an integral part
of their examination process, review our allowance for loan losses and may
require additions to the allowance based on their judgment about information
available to them at the time of their examination. Factors that require an
increase in our allowance for loan losses could reduce our earnings.

Competition from other financial institutions in originating loans and
attracting deposits may adversely affect our profitability.

We face substantial competition in originating loans. This competition comes
principally from other banks, savings institutions, mortgage banking companies
and other lenders. Many of our competitors enjoy advantages, including greater
financial resources and higher lending limits, a wider geographic presence, and
more accessible branch office locations.

In attracting deposits, we face substantial competition from other insured
depository institutions such as banks, savings institutions and credit unions,
as well as institutions offering uninsured investment alternatives, including
money market funds. Many of our competitors enjoy advantages, including greater
financial resources, more aggressive marketing campaigns, better brand
recognition and more branch locations. These competitors may offer higher
interest rates than we do, which could decrease the deposits that we attract or
require us to increase our rates to retain existing deposits or attract new
deposits. Increased deposit competition could adversely affect our ability to
generate the funds necessary for lending operations and increase our cost of
funds.

We also compete with non-bank providers of financial services, such as brokerage
firms, consumer finance companies, insurance companies and governmental
organizations, which may offer more favorable terms. Some of our non-bank
competitors are not subject to the same extensive regulations that govern our
operations. As a result, such non-bank competitors may have advantages over us
in providing certain products and services. This competition may reduce or limit
our margins on banking services, reduce our market share and adversely affect
our earnings and financial condition.

Government regulation significantly affects our business.

The banking industry is extensively regulated. Banking regulations are intended
primarily to protect depositors, and the FDIC deposit insurance funds, not the
shareholders of the Corporation. We are subject to regulation and supervision by
the New Jersey Department of Banking and Insurance and the Federal Reserve Bank.
Regulatory requirements affect our lending practices, capital structure,
investment practices, dividend policy and growth. The bank regulatory agencies
possess broad authority to prevent or remedy unsafe or unsound practices or
violations of law. We are subject to various regulatory capital requirements,
which involve both quantitative measures of our assets and liabilities and
qualitative judgments by regulators regarding risks and other factors. Failure
to meet minimum capital requirements or comply with other regulations could
result in actions by regulators that could adversely affect our ability to pay
dividends or otherwise adversely impact operations. In addition, changes in
laws, regulations and regulatory practices affecting the banking industry may
limit the manner in which we conduct our business. Such changes may adversely
affect us, including our ability to offer new products and services, obtain
financing, attract deposits, make loans and achieve satisfactory spreads and
impose additional costs on us.

The Bank is also subject to a number of Federal laws, which, among other things,
require it to lend to various sectors of the economy and population, and
establish and maintain comprehensive programs relating to anti-money laundering
and customer identification. The Bank's compliance with these laws will be
considered by the Federal banking regulators when reviewing bank merger and bank
holding company acquisitions or commence new activities or make new investment
in reliance on the Gramm-Leach-Bliley Act. As a public company, we are also
subject to the corporate governance standards set forth in the Sarbanes-Oxley
Act of 2002, as well as any rules or regulations promulgated by the SEC or the
American Stock Exchange.

Item 1B. UNRESOLVED STAFF COMMENTS

None.

Item 2. PROPERTIES

The Corporation owns nine branches and leases 13 branches. The Corporation also
owns two properties adjacent to the Main Office in Peapack-Gladstone. The
Corporation leases an administrative and operations office building in
Peapack-Gladstone and a data center in Bedminster Township.

Item 3. LEGAL PROCEEDINGS

In the normal course of its business, lawsuits and claims may be brought against
the Corporation and its subsidiaries. There is no currently pending or
threatened litigation or proceedings against the Corporation or its
subsidiaries, which assert claims that if adversely decided, would have a
material adverse effect on the Corporation.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

The Common Stock of Peapack-Gladstone Financial Corporation is traded on the
American Stock Exchange under the symbol of PGC. The following table sets forth,
for the periods indicated, the reported high and low sale prices on known trades
and cash dividends declared per share by the Corporation.

DIVIDEND
2006 HIGH LOW PER SHARE
-------- -------- ---------
1st QUARTER $ 29.50 $ 24.45 $ 0.14
2nd QUARTER 26.26 23.52 0.14
3rd QUARTER 27.40 24.15 0.15
4th QUARTER 28.10 24.00 0.15

DIVIDEND
2005 HIGH LOW PER SHARE
-------- -------- ---------
1st QUARTER $ 31.77 $ 25.94 $ 0.11
2nd QUARTER 30.50 25.50 0.11
3rd QUARTER 30.38 25.81 0.14
4th QUARTER 29.28 25.95 0.14

Future dividends payable by the Corporation will be determined by the Board of
Directors after consideration of earnings and financial condition of the
Corporation, need for capital and such other matters as the Board of Directors
deems appropriate. The payment of dividends is subject to certain restrictions,
see Part I, Item 1, "Description of Business - Restrictions on the Payment of
Dividends."

Total Return Performance

The following graph compares the cumulative total return on a hypothetical
$100 investment made on December 31, 2001 in (a) the Corporation's common stock;
(b) the Russell 3000 Stock Index, and (c) the Keefe, Bruyette & Woods KBW 50
Index (top 50 U.S. banks). The graph is calculated assuming that all dividends
are reinvested during the relevant periods. The graph shows how a $100
investment would increase or decrease in value over time, based on dividends
(stock or cash) and increases or decreases in the market price of the stock.

[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL]

Period Ending
------------------------------------------------------------------------------------------------------------------
Index 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06
------------------------------------------------------------------------------------------------------------------

Peapack-Gladstone Financial Corporation 100.00 188.10 189.61 215.09 193.67 199.47
Russell 3000 100.00 78.46 102.83 115.11 122.16 141.35
KBW 50 100.00 92.95 124.54 137.11 136.70 159.96

On December 31, 2006, the last reported sale price of the Common Stock was
$28.10. Also, on February 28, 2007, there were approximately 849 shareholders of
record.

Issuer Purchases of Equity Securities

The following table sets forth information for the three months ended December
31, 2006, with respect to repurchases of the Corporation's outstanding common
shares:

Issuer Purchases of Equity Securities
------------------------------------------------------------------------------------------------------------------------------------
Total Number of Shares Maximum Number of
Total Number Purchases as Part of Shares that may yet
Of Shares Average Price Publicly Announced Be Purchased Under the
Period Purchased Paid per Share Plans or Programs Plans or Programs
--------------------------- ----------------- ----------------- ------------------------- --------------------------

October 1-31, 2006 -- $ -- -- 89,100
November 1-30, 2006 -- -- -- 89,100
December 1-31, 2006 -- -- -- 89,100
----------------- ----------------- ------------------------
Total -- $ -- --
================= ================= ========================

On April 15, 2005, the Board of Directors of Peapack-Gladstone Financial
Corporation announced the authorization of a stock repurchase plan. The Board
authorized the purchase of up to 150,000 shares of outstanding common stock, to
be made from time to time, in the open market or in privately negotiated
transactions, at prices not exceeding prevailing market prices. On April 14,
2006, the Board of Directors authorized an extension of the stock buyback
program for an additional twelve months to April 15, 2007.

Item 6. SELECTED FINANCIAL DATA

The information set forth in the 2006 Annual Report under the heading "Selected
Consolidated Financial Data" is incorporated herein by reference.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The information set forth in the 2006 Annual Report under the heading
"Management's Discussion and Analysis" is incorporated herein by reference.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The information set forth in the 2006 Annual Report under the heading "Market
Risk Sensitive Instruments" is incorporated herein by reference.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements set forth in the 2006 Annual Report,
together with the report thereon by KPMG LLP and the Notes to the Consolidated
Financial Statements, are incorporated herein by reference.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

Item 9A. CONTROLS AND PROCEDURES

The Corporation's Chief Executive Officer and Chief Financial Officer, with the
assistance of other members of the Corporation's management, have evaluated the
effectiveness of the Corporation's disclosure controls and procedures as of the
end of the period covered by this Annual Report on Form 10-K. 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.

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 that has materially affected, or is reasonably
likely to materially affect, the Corporation's internal control over financial
reporting during the fourth quarter of 2006.

The Corporation's management, including the CEO and CFO, does not expect that
our disclosure controls and procedures or our internal controls will prevent all
error 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.

Management's Report on Internal Control over Financial Reporting is included in
the 2006 Annual Report and is incorporated herein by reference.

Item 9B. OTHER INFORMATION

None.

PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information set forth under the captions "Director Information," "Corporate
Governance" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the
2007 Proxy Statement is incorporated herein by reference.

Item 11. EXECUTIVE COMPENSATION

The information set forth under the captions "Executive Compensation," "Director
Compensation" and "Compensation Committee Interlocks and Insider Participation"
in the 2007 Proxy Statement is incorporated herein by reference.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The following table shows information at December 31, 2006 for all equity
compensation plans under which shares of our common stock may be issued:

NUMBER OF SECURITIES
REMAINING AVAILABLE
FOR FUTURE ISSUANCE
NUMBER OF SECURITIES UNDER EQUITY
TO BE ISSUED UPON WEIGHTED-AVERAGE COMPENSATION PLANS
EXERCISE OF EXERCISE PRICE OF (EXCLUDING SECURITIES
PLAN CATEGORY OUTSTANDING OPTIONS (a) OUTSTANDING OPTIONS (b) REFLECTED IN COLUMN (a) (c)
----------------------------------------------------------------------------------------------------------------

EQUITY
COMPENSATION
PLANS APPROVED
BY SECURITY
HOLDERS 603,469 $22.91 496,365
--------------------------------------------------------------------------------------

EQUITY
COMPENSATION
PLANS NOT
APPROVED BY
SECURITY HOLDERS N/A N/A N/A
--------------------------------------------------------------------------------------
TOTAL 603,469 $22.91 496,365
======================================================================================

The information set forth under the captions "Beneficial Ownership of Common
Stock" and "Stock Ownership of Directors and Executive Officers" in the 2007
Proxy Statement is incorporated herein by reference.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

The information set forth under the captions "Certain Relationships and Related
Transactions" and "Corporate Governance" in the 2007 Proxy Statement is
incorporated herein by reference.

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information set forth under the captions "Independent Registered Public
Accounting Firm" and "Audit Committee Pre-approval Procedures" in the 2007 Proxy
Statement is incorporated herein by reference.

PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES

(a) Financial Statements and Schedules:

Those portions of the 2006 Annual Report attached hereto as Exhibit 13
contain the financial statements incorporated herein by reference.

All financial statement schedules are omitted because they are either
inapplicable or not required, or because the required information is
included in the Consolidated Financial Statements or notes thereto
contained in the 2006 Annual Report.

(10) Exhibits

(3) Articles of Incorporation and By-Laws:

A. Restated Certificate of Incorporation as in effect on the date of
this filing is incorporated herein by reference to Exhibit 3.1 of
the Registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2003.

B. By-Laws of the Registrant as in effect on the date of this filing
are incorporated herein by reference to Exhibit 3.2 of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2003.

(10) Material Contracts:

A. "Amended and Restated Change in Control Agreements" dated as of
December 11, 2003 by and among the Corporation, the Bank and Frank
A. Kissel, Robert M. Rogers, Craig C. Spengeman, Arthur F.
Birmingham and Garrett P. Bromley are incorporated by reference to
Exhibit 10 (H) of the Registrant's Form 10-K Annual Report for the
year ended December 31, 2003.

B. "Split Dollar Plan for Senior Management" dated as of September 7,
2001 for Frank A. Kissel, Robert M. Rogers, Craig C. Spengeman,
Arthur F. Birmingham and Garrett P. Bromley is incorporated by
reference to Exhibit 10 (I) of the Registrant's Form 10-K Annual
Report for the year ended December 31, 2003.

C. "Directors' Retirement Plan" dated as of March 31, 2001 is
incorporated by reference to Exhibit 10 (J) of the Registrant's Form
10-K Annual Report for the year ended December 31, 2003.

D. "Directors' Deferral Plan" dated as of March 31, 2001 is
incorporated by reference to Exhibit 10 (K) of the Registrant's Form
10-K Annual Report for the year ended December 31, 2003.

E. Bonuses paid to executive officers under employment agreements,
incorporated herein by reference to the Registrant's Report on Form
8-K filed on December 20, 2006.

F. "Employment Agreements" dated as of January 1, 2007 by and among the
Corporation, the Bank and Frank A. Kissel, Craig C. Spengeman,
Robert M. Rogers, Arthur F. Birmingham and Garrett P. Bromley are
incorporated by reference to Exhibit 10.1, Exhibit 10.2, Exhibit
10.3, Exhibit 10.4 and Exhibit 10.5 of the Registrant's Report on
Form 8-K filed on December 20, 2006.

G. Peapack-Gladstone Financial Corporation Amended and Restated 1998
Stock Option Plan and Peapack-Gladstone Financial Corporation
Amended and Restated 2002 Stock Option Plan are incorporated by
reference to Exhibit 10.1 and Exhibit 10.2 of the Registrant's Form
8-K Current Report filed on January 13, 2006.

H. Peapack-Gladstone Financial Corporation 2006 Long-Term Stock
Incentive Plan are incorporated by reference to Exhibit 10 of the
Registrant's Form 10-Q Quarterly Report filed on May 10, 2006.

(13) Annual Report to Shareholders

(21) List of Subsidiaries:

(a) Subsidiaries of the Corporation:

Percentage of Voting
Jurisdiction Securities Owned by
Name of Incorporation the Parent
-----------------------------------------------------------------------------------

Peapack-Gladstone Bank New Jersey 100%

(b) Subsidiaries of the Bank:

Name
------------------------------------

Peapack-Gladstone Investment
Company, Inc. New Jersey 100%
Peapack-Gladstone Financial
Services, Inc. (Inactive) New Jersey 100%

Name
------------------------------------

Peapack-Gladstone Mortgage New Jersey 100%
Group, Inc.

(23) Consents of Experts:

Consent of KPMG LLP

(24) Power of Attorney

(31.1) Certification of Frank A. Kissel, Chief Executive Officer of
Peapack-Gladstone, pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.

(31.2) Certification of Arthur F. Birmingham, Chief Financial Officer of
Peapack-Gladstone, pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.

(32) Certification of Frank A. Kissel, Chief Executive Officer of
Peapack-Gladstone and Arthur F. Birmingham, Chief Financial
Officer of Peapack-Gladstone pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.

SIGNATURES

Pursuant to the requirements of section 13 or 15(d) 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

By: /s/ Frank A. Kissel
---------------------------------------
Frank A. Kissel
Chairman of the Board
and Chief Executive Officer

By: /s/ Arthur F. Birmingham
---------------------------------------
Arthur F. Birmingham
Executive Vice President
and Chief Financial Officer

Dated: March 12, 2007

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated.

Signature Title Date
------------------------------------------------- ----------------------------------------------------- ----------------------

/s/ Frank A. Kissel
------------------------------------------------- Chairman of the Board, Chief Executive Officer and March 12, 2007
Frank A. Kissel Director

/s/ Arthur F. Birmingham
------------------------------------------------- Executive Vice President and Chief Financial March 12, 2007
Arthur F. Birmingham Officer (Principal Financial Officer)

/s/ Anthony J. Consi II
------------------------------------------------- Director March 12, 2007
Anthony J. Consi II

/s/ Pamela Hill
------------------------------------------------- Director March 12, 2007
Pamela Hill

/s/ John D. Kissel
------------------------------------------------- Director March 12, 2007
John D. Kissel

/s/ James R. Lamb
------------------------------------------------- Director March 12, 2007
James R. Lamb

/s/ Edward A. Merton
------------------------------------------------- Director March 12, 2007
Edward A. Merton

/s/ F. Duffield Meyercord
------------------------------------------------- Director March 12, 2007
F. Duffield Meyercord

/s/ John R. Mulcahy
------------------------------------------------- Director March 12, 2007
John R. Mulcahy

/s/ Robert M. Rogers
------------------------------------------------- Director, President and Chief Operating Officer March 12, 2007
Robert M. Rogers

/s/ Philip W. Smith III
------------------------------------------------- Director March 12, 2007
Philip W. Smith III

/s/ Craig C. Spengeman
------------------------------------------------- Director, President of PGB Trust and Investments March 12, 2007
Craig C. Spengeman