-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JyN8gNDQDezE6D9C5sFnRFDr4Td+MY9j+QVFOdLZ5IkGAvoOyiPpIbwgGw69eNBs LexprN2eJwc/OQfENSE5Ew== 0000914317-03-003381.txt : 20031112 0000914317-03-003381.hdr.sgml : 20031111 20031112130542 ACCESSION NUMBER: 0000914317-03-003381 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEAPACK GLADSTONE FINANCIAL CORP CENTRAL INDEX KEY: 0001050743 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 223537895 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-16197 FILM NUMBER: 03992540 BUSINESS ADDRESS: STREET 1: 158 ROUTE 206 NORTH CITY: GLADSTONE STATE: NJ ZIP: 07934 BUSINESS PHONE: 9082340700 MAIL ADDRESS: STREET 1: 158 ROUTE 206 NORTH CITY: GLADSTONE STATE: NJ ZIP: 07934 10-Q 1 form10q-55466_pg.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended September 30, 2003 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001-16197 PEAPACK-GLADSTONE FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) New Jersey 22-3537895 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 158 Route 206 North, Gladstone, New Jersey 07934 (Address of principal executive offices, including zip code) (908) 234-0700 (Registrant's telephone number, including area code) 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 whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-d). Yes |X| No |_|. Number of shares of Common stock outstanding as of November 3, 2003: 7,386,892 1 PEAPACK-GLADSTONE FINANCIAL CORPORATION PART 1 FINANCIAL INFORMATION Item 1 Financial Statements (Unaudited): Consolidated Statements of Condition September 30, 2003 and December 31, 2002 Page 3 Consolidated Statements of Income for the three and nine months ended September 30, 2003 and 2002 Page 4 Consolidated Statements of Changes in Shareholders' Equity for the nine months ended September 30, 2003 and 2002 Page 5 Consolidated Statements of Cash Flows for the nine months ended September 30, 2003 and 2002 Page 6 Notes to the Consolidated Financial Statements Page 7 Item 2 Management Discussion and Analysis of Financial Condition and Results of Operations Page 8 Item 3 Quantitative and Qualitative Disclosures about Market Risk Page 13 Item 4 Controls and Procedures Page 13 PART 2 OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K Page 14 2 PEAPACK-GLADSTONE FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CONDITION (Dollars in thousands) (Unaudited)
September 30, December 31, 2003 2002 ------------- ------------ ASSETS Cash and due from banks $ 22,137 $ 17,920 Federal funds sold 1,951 20,400 ---------- ---------- Total cash and cash equivalents 24,088 38,320 Interest-earning deposits 503 549 Investment Securities:(approximate market value $108,843 in 2003 and $171,290 in 2002) 106,972 168,066 Securities Available for Sale 381,756 212,259 Loans: Loans secured by real estate 378,262 379,150 Other loans 28,162 30,610 ---------- ---------- Total loans 406,424 409,760 Less: Allowance for loan losses 5,277 4,798 ---------- ---------- Net loans 401,147 404,962 Premises and equipment, net 15,012 14,371 Accrued interest receivable 5,136 4,606 Cash surrender value of life insurance 16,350 15,747 Other assets 2,972 928 ---------- ---------- TOTAL ASSETS $ 953,936 $ 859,808 ========== ========== LIABILITIES Deposits: Noninterest-bearing demand deposits $ 152,152 $ 126,107 Interest-bearing deposits: Checking 128,226 136,956 Savings 102,552 94,142 Money market accounts 201,161 173,973 Certificates of deposit over $100,000 63,730 59,607 Certificates of deposit less than $100,000 167,609 178,903 ---------- ---------- Total deposits 815,430 769,688 Borrowed Funds 47,934 5,000 Accrued expenses and other liabilities 7,881 7,962 ---------- ---------- TOTAL LIABILITIES 871,245 782,650 ---------- ---------- SHAREHOLDERS' EQUITY Common stock (no par value; stated value $0.83 per share; authorized 20,000,000 shares; issued shares, 7,496,461 at September 30, 2003 and 7,480,045 at December 31, 2002; outstanding shares, 7,385,706 at September 30, 2003 and 7,372,776 at December 31, 2002) 6,242 5,661 Surplus 61,427 38,385 Treasury Stock at cost, 110,755 shares in 2003 and 107,269 shares in 2002 (2,120) (2,020) Retained Earnings 14,497 30,290 Accumulated other comprehensive income, net of income tax 2,645 4,842 ---------- ---------- TOTAL SHAREHOLDERS' EQUITY 82,691 77,158 ---------- ---------- TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 953,936 $ 859,808 ========== ==========
See accompanying notes to consolidated financial statements. 3 PEAPACK-GLADSTONE FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except share data) (Unaudited)
Three months ended Nine months ended September 30, September 30, 2003 2002 2003 2002 ----------- ----------- ----------- ----------- INTEREST INCOME Interest and fees on loans $ 6,093 $ 7,457 $ 18,990 $ 22,207 Interest on investment securities: Taxable 635 1,219 3,154 2,832 Tax-exempt 162 97 405 280 Interest on securities available for sale: Taxable 2,960 2,365 8,094 7,308 Tax-exempt 91 90 271 260 Interest-earning deposits 2 2 5 136 Interest on federal funds sold 4 25 60 96 ----------- ----------- ----------- ----------- Total interest income 9,947 11,255 30,979 33,119 INTEREST EXPENSE Interest on savings account deposits 794 1,125 2,639 3,185 Interest on certificates of deposit over $100,000 386 513 1,207 1,599 Interest on other time deposits 1,096 1,345 3,522 4,098 Interest on borrowed funds 322 76 580 181 ----------- ----------- ----------- ----------- Total interest expense 2,598 3,059 7,948 9,063 ----------- ----------- ----------- ----------- NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES 7,349 8,196 23,031 24,056 Provision for loan losses 150 199 450 599 ----------- ----------- ----------- ----------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 7,199 7,997 22,581 23,457 ----------- ----------- ----------- ----------- OTHER INCOME Service charges and fees for other services 415 424 1,251 1,249 Trust department income 1,358 1,172 4,422 3,577 Securities gains/(losses) 400 (7) 1,227 19 Bank owned life insurance 217 196 661 592 Other income 193 201 589 602 ----------- ----------- ----------- ----------- Total other income 2,583 1,986 8,150 6,039 OTHER EXPENSES Salaries and employee benefits 3,306 3,028 9,902 8,972 Premises and equipment 1,213 1,047 3,416 3,044 Other expense 1,071 1,315 3,503 3,841 ----------- ----------- ----------- ----------- Total other expenses 5,590 5,390 16,821 15,857 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAX EXPENSE 4,192 4,593 13,910 13,639 Income tax expense 1,308 1,530 4,483 4,460 ----------- ----------- ----------- ----------- NET INCOME $ 2,884 $ 3,063 $ 9,427 $ 9,179 =========== =========== =========== =========== EARNINGS PER SHARE Basic $ 0.39 $ 0.42 $ 1.28 $ 1.25 Diluted $ 0.38 $ 0.40 $ 1.24 $ 1.22 Average basic shares outstanding 7,384,772 7,358,204 7,379,418 7,343,072 Average diluted shares outstanding 7,638,696 7,603,173 7,609,055 7,548,394
See accompanying notes to consolidated financial statements. 4 PEAPACK-GLADSTONE FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Dollars in thousands) (Unaudited)
Nine Months Ended September 30, 2003 2002 -------- -------- Balance, Beginning of Period $ 77,158 $ 63,085 Comprehensive income: Net Income 9,427 9,179 Unrealized holding gains/(losses) on securities arising during the period, net of tax (1,399) 4,054 Less: Reclassification adjustment for gains included in net income, net of tax (798) (13) -------- -------- (2,197) 4,041 -------- -------- Total Comprehensive income 7,230 13,220 Common Stock Options Exercised 190 515 Purchase of Treasury Stock (100) (403) Cash Dividends Declared (1,946) (1,602) Tax Benefit on Disqualifying and Nonqualifying Exercise of Stock Options 159 -- -------- -------- Balance, September 30, $ 82,691 $ 74,815 ======== ========
See accompanying notes to consolidated financial statements. 5 PEAPACK-GLADSTONE FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)
Nine Months Ended September 30, 2003 2002 --------- --------- OPERATING ACTIVITIES: Net Income: $ 9,427 $ 9,179 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,055 989 Amortization of premium and accretion of discount on securities, net 2,271 674 Provision for loan losses 450 599 Gains on security sales (1,227) (19) Increase in cash surrender value of life insurance (603) (546) (Increase)/decrease in accrued interest receivable (530) 378 (Increase)/decrease in other assets (2,044) 2,703 Increase in other liabilities 1,449 2,455 --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 10,248 16,412 --------- --------- INVESTING ACTIVITIES: Proceeds from maturities of investment securities 83,269 12,881 Proceeds from maturities of securities available for sale 24,279 10,508 Proceeds from calls of investment securities 9,170 3,170 Proceeds from calls of securities available for sale 46,825 30,730 Proceeds from sales of securities available for sale 51,401 19,042 Purchase of investment securities (32,755) (97,074) Purchase of securities available for sale (295,339) (84,622) Net decrease in short-term investments 46 15,111 Net decrease/(increase) in loans 3,365 (13,234) Purchases of premises and equipment (1,696) (1,082) --------- --------- NET CASH USED IN INVESTING ACTIVITIES (111,435) (104,570) --------- --------- FINANCING ACTIVITIES: Net increase in deposits 45,742 76,526 Net increase in borrowed funds 42,934 18,500 Cash dividends paid (1,811) (1,501) Exercise of stock options 190 515 Purchase of Treasury Stock (100) (403) --------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES 86,955 93,637 --------- --------- Net (decrease)/increase in cash and cash equivalents (14,232) 5,479 Cash and cash equivalents at beginning of period 38,320 19,983 --------- --------- Cash and cash equivalents at end of period $ 24,088 $ 25,462 ========= ========= Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 8,530 $ 8,703 Income taxes 4,968 3,996
See accompanying notes to consolidated financial statements. 6 PEAPACK-GLADSTONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Certain information and footnote disclosures normally included in the unaudited consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the December 31, 2002 Annual Report on Form 10-K for Peapack-Gladstone Financial Corporation (the "Corporation"). Principles of Consolidation: The Corporation considers that all adjustments (all of which are normal recurring accruals) necessary for a fair presentation of the statement of the financial position and results of operations in accordance with accounting principles generally accepted in the United States for these periods have been made. Results for such interim periods are not necessarily indicative of results for a full year. The consolidated financial statements of Peapack-Gladstone Financial Corporation are prepared on the accrual basis and include the accounts of the Corporation and its wholly owned subsidiary, Peapack-Gladstone Bank. All significant intercompany balances and transactions have been eliminated from the accompanying consolidated financial statements. In the opinion of management, the information presented includes all adjustments and normal recurring accruals considered necessary for a fair presentation, in all material respects, of the interim period results. Allowance for Loan Losses: The allowance for loan losses is maintained at a level that management considers adequate to reflect the risk of losses inherent in the Corporation's loan portfolio. In its evaluation of the adequacy of the allowance for loan losses, management considers past loan loss experience, changes in the composition of non-performing loans, the borrowers' current financial condition, the relationship of the current level of the allowance to the credit portfolio and to non-performing loans and existing economic conditions. The allowance is increased by provisions charged to expense and reduced by net charge-offs. Stock Option Plans: At September 30, 2003, the Corporation had stock-based employee and non-employee director compensation plans. The Corporation accounts for those plans under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net income as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of the grant. The following table illustrates the effect on net income and earnings per share for the periods indicated if the Corporation had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation:
Three Months Ended Nine Months Ended September 30, September 30, (In Thousands Except per Share Data) 2003 2002 2003 2002 ---------- ---------- ---------- ---------- Net Income: As Reported $ 2,884 $ 3,063 $ 9,427 $ 9,179 Less: Total Stock-Based Employee Compensation Expense Determined under the Fair Value Based Method on all Stock Options, Net of Related Tax Effects 49 62 98 124 ---------- ---------- ---------- ---------- Pro Forma $ 2,835 $ 3,001 $ 9,329 $ 9,055 Earnings Per Share: As Reported Basic $ 0.39 $ 0.42 $ 1.28 $ 1.25 Diluted $ 0.38 $ 0.40 $ 1.24 $ 1.22 Pro Forma Basic $ 0.38 $ 0.41 $ 1.26 $ 1.23 Diluted $ 0.37 $ 0.39 $ 1.23 $ 1.20
7 Earnings per Common Share - Basic and Diluted: Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per share includes any additional common shares as if all potentially dilutive common shares were issued (i.e., stock options). All share and per share amounts have been restated to reflect the 10 percent stock dividend declared September 11, 2003 and all prior stock dividends and stock splits. Comprehensive Income: The difference between the Corporation's net income and total comprehensive income for the nine months ended September 30, 2003 and 2002 relates to the change in the net unrealized gains and losses on securities available for sale during the applicable period of time less adjustments for realized gains and losses. Recent Accounting Pronouncements: Statement of Financial Accounting Standards No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity," was issued in May 2003. Statement 150 requires instruments within its scope to be classified as a liability (or, in some cases, as an asset). Statement 150 is generally effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003 (i.e. July 1, 2003 for calendar year entities). For financial instruments created before June 1, 2003 and still existing at the beginning of the interim period of adoption, transition generally should be applied by reporting the cumulative effect of a change in an accounting principle by initially measuring the financial instruments at fair value or other measurement attributes of the Statement. The adoption of Statement 150 did not have a significant effect on the Corporation's consolidated financial statements. Statement of Financial Accounting Standards No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities," was issued on April 30, 2003. The Statement amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under Statement 133. This Statement is effective for contracts entered into or modified after June 30, 2003. The adoption of this Statement is not expected to have a significant effect on the Corporation's consolidated financial statements. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL: 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, relationships, opportunities and market conditions. These statements may be identified by such forward-looking terminology as "expect", "believe", or similar statements or variations of such terms. Actual results may differ materially from such forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: o Unanticipated changes in interest rates. o Competitive pressure in the banking industry causes unanticipated adverse changes. o A downturn in the economy of New Jersey causes customers to default in the payment of their loans or causes loans to become impaired. o Loss of key managers or employees. o Loss of major customers or failure to develop new customers. o A decrease in loan quality and loan origination volume. o An increase in non-performing loans. The Corporation assumes no responsibility to update such forward-looking statements in the future. CRITICAL ACCOUNTING POLICIES AND ESTIMATES: "Management's Discussion and Analysis of Financial Condition and Results of Operation" is based upon the Corporation's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Corporation to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Note 1 to the Corporation's Unaudited Consolidated Financial Statements for the nine months ended September 30, 2003, contains a summary of the Corporation's significant accounting policies. Management believes the Corporation's policy with respect to the methodology for the determination of the allowance for loan losses involves a higher degree of complexity and requires management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters. 8 Changes in these judgments, assumptions or estimates could materially impact results of operations. This critical policy and its application are periodically reviewed with the Audit Committee and the Board of Directors. The allowance for loan losses is based upon management's evaluation of the adequacy of the allowance, including an assessment of known and inherent risks in the portfolio, giving consideration to the size and composition of the loan portfolio, actual loan loss experience, level of delinquencies, detailed analysis of individual loans for which full collectibility may not be assured, the existence and estimated net realizable value of any underlying collateral and guarantees securing the loans, and current economic and market conditions. Although management uses the best information available, the level of the allowance for loan losses remains an estimate which is subject to significant judgment and short-term change. Various regulatory agencies, as an integral part of their examination process, periodically review the Corporation's allowance for loan losses. Such agencies may require the Corporation to make additional provisions for loan losses based upon information available to them at the time of their examination. Furthermore, the majority of the Corporation's loans are secured by real estate in the State of New Jersey. Accordingly, the collectibility of a substantial portion of the carrying value of the Corporation's loan portfolio is susceptible to changes in local market conditions and may be adversely affected should real estate values decline or the Central New Jersey area experience an adverse economic shock. Future adjustments to the allowance for loan losses may be necessary due to economic, operating, regulatory and other conditions beyond the Corporation's control. RESULTS OF OPERATIONS: For the third quarter of 2003, the Corporation realized earnings of $0.38 per diluted share as compared to $0.40 per diluted share for the same quarter in 2002, a decline of 5.0 percent. Net income for the quarter declined 5.8 percent to $2.9 million compared with $3.1 million for the quarter ended September 30, 2002. Annualized return on average assets for the quarter was 1.21 percent and annualized return on average equity was 14.08 percent. Net income for the year to date September 30, 2003, increased 2.7 percent to $9.4 million as compared to $9.2 million for the year to date September 30, 2002. The per diluted share earnings were $1.24 for the nine months ended September 30, 2003, as compared to $1.22 for the year to date September 30, 2002. Annualized return on average assets was 1.38 percent and annualized return on average equity was 15.63 percent for the first nine months of 2003. EARNINGS ANALYSIS NET INTEREST INCOME: Third quarter 2003 net interest income, before the provision for loan losses, was $7.3 million while the same quarter of 2002 was $8.2 million, a decrease of $847 thousand or 10.3 percent. The decline in net interest income during the third quarter of 2003 was primarily the result of declining interest rates on loans and investments due to refinancing and reinvestment activity. Deposit and borrowing rates have declined as well. The net interest margin on a fully tax equivalent basis was 3.32 percent in the third quarter of 2003 as compared to 4.33 percent for the third quarter of 2002, a decline of 101 basis points. Average interest earning assets increased $147.5 million or 19.7 percent for the third quarter 2003 as compared to the third quarter in 2002. This was primarily due to the increase in average investment security balances of $173.8 million, as average loan balances declined $22.4 million. The Corporation has been careful to attempt to limit its interest rate risk by not extending long-term fixed rate assets during this low interest rate cycle. During this time, average federal funds sold and interest earning deposit balances also declined a total of $3.9 million. Average interest-bearing liabilities for the quarter ended September 30, 2003 increased $115.0 million or 19.1 percent to $718.1 million from $603.1 million in the same period in 2002. Average balances of interest-bearing checking accounts rose $10.7 million while average balances of savings accounts and certificates of deposits rose $9.8 million and $9.1 million, respectively. Money market accounts increased $44.0 million from the third quarter of 2002 to the third quarter of 2003, an increase of 29.1 percent. Federal Home Loan Bank advances averaged $53.3 million for the quarter ended September 30, 2003 as compared to $11.8 million for the quarter ended September 30, 2002. During the third quarter of 2003, the Corporation continued to position some of its borrowings to try to take advantage of the low long-term interest rate environment that existed. This strategy of extending the maturities of borrowings and matching with lower yielding fixed rate loans is intended to reduce interest rate risk if interest rates begin to rise. Average demand deposits increased $31.8 million or 27.9 percent as compared to the third quarter of 2002. Average interest rates earned on interest-earning assets, on a tax-equivalent basis, declined to 4.52 percent in the third quarter of 2003, from 6.03 percent earned in the same quarter of 2002. This is a decline of 151 basis points. The average interest rates earned on loans declined 94 basis points while the average interest rates earned on investment securities declined 166 basis points in the third quarter of 2003 as compared with the same period in 2002. When compared to the quarter ended September 30, 2002, the average interest rate paid on interest-bearing liabilities declined 57 basis points to 1.44 percent in 2003. The average rate paid on certificate of deposits declined 9 76 basis points and average rates paid on money market accounts declined 72 basis points in the third quarter of 2003 as compared with the same quarter in 2002. For the nine months ended September 30, 2003 and 2002, net interest income before the provision for loan loss was $23.0 million and $24.1 million, respectively, a decrease of $1.0 million or 4.3 percent. The decline in net interest income during the first nine months of 2003 was primarily the result of declining interest rates on loans and investments due to refinancing and reinvestment activity. Deposit and borrowing rates also declined, but at a slower pace than the rates on loans and investments. The net interest margin on a fully tax-equivalent basis for the nine months ended September 30, 2003 and 2002 was 3.65 percent and 4.49 percent, respectively, a decline of 84 basis points. For the nine months ended September 30, 2003, average interest-earning assets increased $137.0 million from the same period in 2002 as the investment portfolio experienced significant growth. Average balances of investments increased $163.9 million or 59.2 percent. Interest-earning deposits declined 83.5 percent to $698 thousand on average. Average loan balances decreased $22.5 million, primarily due to residential mortgage pay-offs as consumers refinanced their mortgages to their benefit from the historically low interest rate environment. Average interest-bearing liabilities for the nine months ended September 30, 2003 increased $111.5 million or 19.5 percent from the nine months ended September 30, 2002. Average balances of money market accounts rose $54.0 million and certificates of deposit balances increased $14.7 million on average. Savings accounts and interest-bearing checking accounts increased $11.0 million and $9.5 million, respectively, in the nine months ended September 30, 2003 when compared to the same period of 2002. Federal Home Loan Bank advances averaged $30.8 million during the year to date September 30, 2003 as compared to $8.5 million for the year to date ended September 30, 2002. Average demand deposits increased $23.3 million or 20.6 percent as compared to the nine months ended September 30, 2002. Average interest rates earned on investments and loans declined 156 basis points and 74 basis points, respectively, for the year to date ended September 30, 2003. Interest rates paid on interest-bearing deposits declined 59 basis points with the largest decreases in the interest rates paid on certificates of deposit, 77 basis points and money market accounts, 67 basis points. For the nine months ended September 30, 2003, average interest rates on FHLB borrowings declined 34 basis points as compared to the same period a year ago. OTHER INCOME: For the quarter ended September 30, 2003, other income totaled $2.6 million as compared to $2.0 million for the quarter ended September 30, 2002. This is an increase of $597 thousand or 30.1 percent. PGB Trust and Investments, the Bank's trust division, generated gross fees of $1.4 million for the third quarter of 2003 as compared to $1.2 million in the third quarter of 2002, an increase of 15.9 percent. This increase was primarily due to an increase in trust assets under management. Service charges and fees declined slightly from $424 thousand in the third quarter of 2002 to $415 thousand for the quarter ended September 30, 2002. Due to the Corporation's additional investment of $2.8 million in Bank Owned Life Insurance (BOLI) in the fourth quarter of 2002, income rose 10.7 percent over the same period in 2002 to $217 thousand. BOLI assists in offsetting the rising cost of employee benefits. For the nine-month period ended September 30, 2003, total other income increased $2.1 million or 35.0 percent as compared to the same nine-month period in 2002. For the nine months ended September 30, 2003 other income, exclusive of gains and losses on securities sold, reflects an increase of $903 thousand, or 15.0 percent, when compared with the nine months ended September 30, 2002. This increased revenue was primarily driven by the increase in fees from PGB Trust and Investments, which rose $845 thousand, or 23.6 percent, to $4.4 million for the year to date ended September 30, 2003 as compared to $3.6 million for the same period in 2002. Income from BOLI totaled $661 thousand for the nine months ended September 30, 2003, rising $69 thousand or 11.7 percent, from $592 thousand for the same nine months in 2002. For the quarter ended September 30, 2003, the Corporation recorded net gains on securities sold from the available for sale investment portfolio of $400 thousand as compared to net losses of $7 thousand for the same quarter in 2002. For the nine-month periods ended September 30, 2003 and 2002, the Corporation's net gains on securities were $1.2 million and $19 thousand, respectively. 10 The following table presents the components of other income for the three and nine months ended September 30, 2003 and 2002:
Three Months Ended Nine Months Ended September 30, September 30, (In Thousands) 2003 2002 2003 2002 ------- ------- ------- ------- Trust department income $ 1,358 $ 1,172 $ 4,422 $ 3,577 Service charges 415 424 1,251 1,249 Fee for other services 90 89 284 272 Bank owned life insurance 217 196 661 592 Other non-interest income 41 55 132 160 Safe deposit rental fees 62 57 173 170 Securities gains/(losses) 400 (7) 1,227 19 ------- ------- ------- ------- Total other income $ 2,583 $ 1,986 $ 8,150 $ 6,039 ======= ======= ======= =======
OTHER EXPENSES: For the three months ended September 30, 2003 total other expenses increased $200 thousand or 3.7 percent over the comparable three months of 2002, with increased salary and benefit expense and premises and equipment expense accounting for most of the increase. Salaries and employee benefits expense for the quarter ended September 30, 2003 increased 9.2 percent to $3.3 million from $3.0 million for the quarter ended September 30, 2002. This increase can be attributed to additions to the professional staff, higher health insurance and pension costs and overtime costs associated with the conversion of the Bank's core processing system. Premises and equipment expense increased $166 thousand or 15.9 percent, $1.2 million and $1.0 million for the quarters ended September 30, 2003 and 2002, respectively. These higher costs are attributable to additional rent for new branch and data center space, depreciation expense and computer expense. The significant components of other expense include professional fees, trust department expense, advertising, telephone, postage and stationery expense. These expenses totaled $571 thousand and $719 thousand for the three months ended September 30, 2003 and 2002, respectively. For the nine-month period ended September 30, 2003, other expenses increased to $16.8 million from $15.9 million for the same period in 2002, a increase of $964 thousand or 6.1 percent. The largest component of other expense, salaries and employee benefits, increased from $9.0 million to $9.9 million or 10.4 percent. Premises and equipment expense rose $372 thousand or 12.2 percent year over year to $3.4 million. The significant components of other expense, professional fees, trust department expense, advertising, telephone, postage and stationery expense, declined year over year, totaling $1.9 million and $2.2 million at September 30, 2003 and 2002 respectively. The level of operating expenses during both the nine and three-month periods of 2003 were affected by an increase in several expense categories. The year to year increase in expenses are primarily attributable to the continued investment in technology, as the Bank converted to a new core processing system, the need to attract, develop and retain high caliber employees and higher health insurance and pension costs. The Corporation's year-to-date efficiency ratio at September 30, 2003 was 56.16 percent as compared to 52.72 percent at September 30, 2002. The Corporation believes the efficiency ratio effectively measures a company's ability to control its expenses in relation to increases and decreases in income components. The Corporation calculates the efficiency ratio by dividing total other expense by the total of net interest income and total other income excluding security gains and losses. The formula used is a common formula for banks, which allows for comparison to other banks. The formula may not be the same as that used by other companies. The following table presents the components of other expense for the three and nine months ended September 30, 2003 and 2002:
Three Months Ended Nine Months Ended September 30, September 30, (In Thousands) 2003 2002 2003 2002 ------- ------- ------- ------- Salaries and employee benefits $ 3,306 $ 3,028 $ 9,902 $ 8,972 Premises and equipment 1,213 1,047 3,416 3,044 Advertising 109 147 343 486 Stationery and supplies 102 115 365 359 Professional fees 95 167 418 543 Trust department expense 107 93 367 309 Telephone 101 110 278 283 Postage 70 87 247 247 Other expense 487 596 1,485 1,614 ------- ------- ------- ------- Total other expense $ 5,590 $ 5,390 $16,821 $15,857 ======= ======= ======= =======
11 NON-PERFORMING ASSETS: Other real estate owned (OREO), loans past due in excess of 90 days and still accruing, and non-accrual loans are considered non-performing assets. These assets totaled $228 thousand and $279 thousand at September 30, 2003 and 2002, respectively. Loans past due in excess of 90 days and still accruing are in the process of collection and are well secured. The following table sets forth non-performing assets on the dates indicated, in conjunction with asset quality ratios: September 30, (In thousands) 2003 2002 ---------------------- Loans past due in excess of 90 days and still accruing $ 65 $ 94 Non-accrual loans 163 185 ------- ------- Total non-performing assets $ 228 $ 279 ======= ======= Non-performing loans as a % of total loans 0.06% 0.06% Non-performing assets as a % of total Loans plus other real estate owned 0.06% 0.06% Allowance as a % of loans 1.30% 1.07% PROVISION FOR LOAN LOSSES: For the three months ended September 30, 2003 and 2002, the provision for loan losses was $150 thousand and $199 thousand, respectively. For the nine months ended September 30, 2003 and 2002, the provision for loan losses was $450 thousand and $599 thousand, respectively. The amount of the loan loss provision and the level of the allowance for loan losses are based upon a number of factors including Management's evaluation of probable losses inherent in the portfolio, after consideration of appraised collateral values, financial condition and past credit history of the borrowers as well as prevailing economic conditions. Net recoveries were $2 thousand for the third quarter of 2003 as compared to net charge-offs of $25 thousand during the third quarter of 2002. Net recoveries were $29 thousand for the nine months ended September 30, 2003, as compared to $28 thousand in net charge-offs for the same period in 2002. A summary of the allowance for loan losses for the nine-month period ended September 30, follows: (In thousands) 2003 2002 ---- ----- Balance, January 1, $ 4,798 $ 4,023 Provision charged to expense 450 599 Loans charged off (24) (64) Recoveries 53 36 ------- ------- Balance, September 30, $ 5,277 $ 4,594 ======= ======= INCOME TAXES: Income tax expense as a percentage of pre-tax income was 31 percent for the three months ended September 30, 2003 compared to 33 percent for the same period in 2002 due to higher levels of tax-exempt income. For the nine months ended September 30, 2003 and 2002, the income tax expense as a percentage of pre-tax income was 32 percent and 33 percent, respectively. Income tax expense remained flat for the nine months ended September 30, 2003 and 2002. CAPITAL RESOURCES: The Corporation is committed to maintaining a strong capital position. At September 30, 2003, total shareholders' equity, including net unrealized gains on securities available for sale, was $82.7 million, representing a 10.5 percent increase over the same period in 2002. The Federal Reserve Board has adopted risk-based capital guidelines for banks. The minimum guideline for the ratio of total capital to risk-weighted assets is 8 percent. Tier 1 Capital consists of common stock, retained earnings, minority interests in the equity accounts of consolidated subsidiaries, non-cumulative preferred stock, less goodwill and certain other intangibles. The remainder may consist of other preferred stock, certain other instruments and a portion of the loan loss allowance. At September 30, 2003, the Corporation's Tier 1 Capital and Total Capital ratios were 20.62 percent and 21.99 percent, respectively. In addition, the Federal Reserve Board has established minimum leverage ratio guidelines. These guidelines provide for a minimum ratio of Tier 1 Capital to average total assets of 3 percent for banks that meet certain specified criteria, including having the highest regulatory rating. All other banks are generally required to maintain a leverage ratio of at 12 least 3 percent plus an additional 100 to 200 basis points. The Corporation's leverage ratio at September 30, 2003, was 8.74 percent. LIQUIDITY: Liquidity refers to an institution's ability to meet short-term requirements in the form of loan requests, deposit withdrawals and maturing obligations. Principal sources of liquidity include cash, temporary investments and securities available for sale. Management's opinion is that the Corporation's liquidity position is sufficient to meet future needs. Cash and cash equivalents, interest earning deposits and federal funds sold totaled $24.6 million at September 30, 2003. In addition, the Corporation has $381.8 million in securities designated as available for sale. These securities can be sold in response to liquidity concerns. Book value as of September 30, 2003, of investment securities and securities available for sale maturing within one year amounted to $9.4 million and $9.8 million, respectively. The primary source of funds available to meet liquidity needs is the Corporation's core deposit base, which excludes certificates of deposit greater than $100 thousand. As of September 30, 2003, core deposits equaled $751.7 million. Another source of liquidity is borrowing capacity. The Corporation has a variety of sources of short-term liquidity available, including federal funds purchased from correspondent banks, short-term and long-term borrowings from the Federal Home Loan Bank of New York, access to the Federal Reserve Bank discount window and loan participations or sales of loans. The Corporation also generates liquidity from the regular principal payments made on its mortgage-backed security and loan portfolios. ITEM 3. Quantitative and Qualitative Disclosures about Market Risk There have been no material changes to information required regarding quantitative and qualitative disclosures about market risk from the end of the preceding fiscal year to the date of the most recent interim financial statements (September 30, 2003). ITEM 4. 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 Quarterly Report on Form 10-Q. 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. 13 PART II. OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K a. Exhibits 3 (i) Articles of Incorporation A. Restated Certificate of Incorporation of the Corporation, as in effect on the date of this filing (incorporated by reference to the Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 filed with the Securities and Exchange Commission on May 13, 2003 (Exhibit 3)). (ii) By-Laws A. By-Laws of the Corporation, as in effect on the date of this filing (filed herewith) (Exhibit 3.2). 31.1 Certification of Frank A. Kissel, Chief Executive Officer of the Corporation, pursuant to Securities Exchange Act Rule 13a-14(a). 31.2 Certification of Arthur F. Birmingham, Chief Financial Officer of the Corporation, pursuant to Securities Exchange Act Rule 13a-14(a). 32 Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act Of 2002, signed by Frank A. Kissel, Chief Executive Officer of the Corporation, and Arthur F. Birmingham, Chief Financial Officer of the Corporation. b. Reports on Form 8-K 1. Current Report on Form 8-K dated August 4, 2003 (furnishing second quarter earnings release for Peapack-Gladstone Financial Corporation). 14 SIGNATURES Pursuant to the requirements 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 (Registrant) DATE: November 12, 2003 By: ---------------------------------------------------- FRANK A. KISSEL Chairman of the Board and Chief Executive Officer DATE: November 12, 2003 By: ---------------------------------------------------- ARTHUR F. BIRMINGHAM Executive Vice President and Chief Financial Officer 15 EXHIBIT INDEX Number Description - ------ ----------- 3 (i) Articles of Incorporation A. Restated Certificate of Incorporation of the Corporation, as in effect on the date of this filing (incorporated by reference to the Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 filed with the Securities and Exchange Commission on May 13, 2003 (Exhibit 3)). (ii) By-Laws A. By-Laws of the Corporation, as in effect on the date of this filing (filed herewith) (Exhibit 3.2). 31.1 Certification of Frank A. Kissel, Chief Executive Officer of the Corporation, pursuant to Securities Exchange Act Rule 13a-14(a). 31.2 Certification of Arthur F. Birmingham, Chief Financial Officer of the Corporation, pursuant to Securities Exchange Act Rule 13a-14(a). 32 Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act Of 2002, signed by Frank A. Kissel, Chief Executive Officer of the Corporation, and Arthur F. Birmingham, Chief Financial Officer of the Corporation. 16 EX-3.2 3 exhibit3-2.txt Exhibit 3.2 BY-LAWS OF PEAPACK-GLADSTONE FINANCIAL CORPORATION ARTICLE I SHAREHOLDERS MEETINGS 1. Annual Meeting. The annual meeting of shareholders for the election of directors and such other business as may properly come before the meeting shall be held upon not less than 10 nor more than 60 days written notice of the date, time, place and purposes of the meeting. The annual meeting shall be held at 3:00 p.m. on the fourth Tuesday of April each year at the principal place of business of the Corporation, 158 Route 206 North, Gladstone, New Jersey, or at such other time and place as shall be fixed by the Board of Directors. 2. Nominations for Director. Nominations for election to the Board of Directors may be made by the Board of Directors or upon 90 days advance written notice to the Board of Directors by any shareholder of any outstanding class of stock of the Corporation entitled to vote for the election of directors. 3. Special Meetings. A special meeting of shareholders may be called for any purpose by the Chairman, Chief Executive Officer, the President or a majority of the Board of Directors. A special meeting shall be held upon not less than 10 nor more than 60 days written notice of the time, place and purpose of the meeting. 4. Quorum. The holders of a majority of the outstanding common stock represented in person or by proxy, shall constitute a quorum at any meeting of shareholders. The majority of the shareholders at a meeting, though less than a quorum, may adjourn any meeting. The Corporation shall not be required to give notice of an adjourned meeting if the time and place of the meeting are announced at the meeting from which an adjournment is taken and the business transacted at the adjourned meeting is limited to that which might have been transacted at the original meeting. 5. Shareholder Action. A majority of the votes cast shall decide every question or matter submitted to the shareholders at any meeting, unless otherwise provided by the New Jersey Business Corporation Act, by the certificate of incorporation or by these By-Laws. 6. Record Date. The Board of Directors shall fix a record date for each meeting of shareholders and for other corporate action for purposes of determining the shareholders of the corporation who are entitled to: (i) notice of or to vote at any meeting of shareholders; (ii) give a written consent to any action without a meeting; or (iii) receive payment of any dividend, distribution, or allotment of any right. The record date may not be more than 60 days nor less than 10 days prior to the shareholders meeting, or other corporate action or event to which it relates. 7. Inspectors of Election. In advance of any shareholders meeting, the Board of Directors may appoint one or more inspectors of election whose duty it shall be to determine the shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the validity and effect of proxies. The inspectors shall receive and tabulate all votes, except voice votes, determine the results of all such votes, including the election of directors, and do such acts as are proper to conduct the election or vote, including hearing and determining all challenges and questions arising in connection with the right to vote. After any meeting, the inspectors shall file with the Secretary of the meeting a certificate under their hands, certifying the result of any vote or election, and in the case of an election, the names of the directors elected. 8. Proxies. Shareholders may vote at any meeting of the shareholders by proxies duly authorized in writing. 17 ARTICLE II DIRECTORS 1. Board of Directors. The Board of Directors (the "Board") shall have the power to manage and administer the business and affairs of the Corporation. Except as expressly limited by these By-Laws, all powers of the Corporation shall be vested in and may be exercised by the Board. 2. Number and Term of Office. The number of directors shall not be less than five and not more than 25. The exact number shall be determined by the Board. Directors shall be elected by the shareholders at each annual meeting of shareholders and until their successors shall have been elected and qualified. The Board shall have the right to increase the number of directors between annual meetings and to fill vacancies so created and other vacancies occurring for any reason. 3. Directors Emeritus and Honorary Directors. The Board may grant the title of Director Emeritus or Honorary Director to such former directors or other worthy individuals as it determines who will receive any fees, entitlements, duties and powers as may be conferred by the Board in its discretion. 4. Regular Meetings. A regular meeting of the Board, for the purpose of electing officers and conducting any other business as may come before the meeting, shall be held without notice after the annual shareholders meeting and before the Board's next regular meeting. The Board shall hold a regular meeting on the second Thursday of March, June, September, and December and, by resolution, may provide for different or additional regular meetings. All regular meetings shall be held in the Main Office of Peapack-Gladstone Bank, 158 Route 206 North, Gladstone, New Jersey, unless otherwise provided by the Board. All regular meetings may be held without notice to any director, except that a director not present at the time of the adoption of a resolution setting forth different or additional regular meeting dates shall be entitled to notice of those meetings. 5. Special Meetings. A special meeting of the Board may be called for any purpose at any time by the Chairman, Chief Executive Officer, the President or by a majority of the directors. The meeting shall be held upon not less than one day's notice if given by telegraph or orally (either by telephone or in person), or upon not less than three days' notice if given by depositing the notice in the United States mails, postage prepaid. The notice shall specify the time and place of the meeting. 6. Action Without Meeting. The Board may act without a meeting if, prior or subsequent to the action, each member of the Board shall consent in writing to the action. The written consent or consents shall be filed in the minute book. 7. Quorum. A majority of the directors shall constitute a quorum at any meeting, except when otherwise provided by the New Jersey Business Corporation Act. However, a smaller number may adjourn any meeting and the meeting may be held, as adjourned, without further notice. The act of the majority present at a meeting at which a quorum is present shall be the act of the Board, unless otherwise provided by the New Jersey Business Corporation Act, the certificate of incorporation or these By-Laws. 8. Vacancies in Board of Directors. Any vacancy in the Board, including a vacancy caused by an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors. 9. Telephone Participation in Board Meetings. One or more directors may participate in a meeting of the Board, or of any committee thereof, by means of a speaker or conference telephone or similar communications equipment which permits all persons participating in the meeting to hear each other. Any director who is unable to attend any meeting of the Board or any committee thereof shall have the right, upon prior written request, to participate in the meeting by such telephone hook-up if the means are reasonably available at the place where the meeting is to be held. 18 ARTICLE III COMMITTEES OF THE BOARD 1. Executive Committee. The Board, by the vote of a majority of the entire Board, annually shall appoint an Executive Committee composed of at least five directors, among whom shall be the Chairman and the Chief Executive Officer of the Corporation. At least three members or a majority of the Committee shall not be employees of the Corporation or any of its subsidiaries. The Executive Committee shall have and may exercise all of the power of the Board except as otherwise provided in the New Jersey Business Corporation Act. As provided in the New Jersey Business Corporation Act, the Executive Committee shall not (i) make, alter or repeal any of these By-Laws; (ii) elect or appoint any director, or remove any officer or director; (iii) submit to shareholders any action that requires shareholders approval; and (iv) amend or repeal any resolution theretofore adopted by the Board which by its terms is amendable or repealable only by the Board. The Executive Committee shall keep minutes of its meetings, and such minutes shall be submitted to the next regular or special meeting of the Board at which a quorum is present, and any action taken by the Board with respect thereto shall be entered in the minutes of the Board. A majority of the directors on the Executive Committee shall constitute a quorum for the transaction of business. The Chairman shall serve as chairman of the Executive Committee. The Executive Committee shall identify and select candidates for nomination to the Board and recommend those selected to the entire Board for its approval. 2. Audit and Examining Committee. The Board, by the vote of a majority of the entire Board, annually shall appoint an Audit and Examining Committee composed of not less than three directors who shall not be active officers or employees of the Corporation. This Committee shall review significant audit and accounting principles, policies and practices, meet with the internal auditors of Peapack-Gladstone Bank (the "Bank"), review the report of the annual directors' examination of the Bank conducted by the outside auditors and review examination reports and other reports of federal regulatory agencies. 3. Compensation Committee. The Board, by the vote of a majority of the entire Board, annually shall appoint a Compensation Committee composed of at least five directors, none of whom shall be an officer of the Corporation. The Compensation Committee shall approve the salaries of Senior Officers of the Corporation and the Corporation's Profit Sharing, Pension, Long Term Stock Incentive and other compensation plans. 4. Other Committees. The Board may appoint, from time to time, from its own members, ad hoc and other committees of one or more directors, for such purposes and with such powers as the Board may determine. ARTICLE IV WAIVERS OF NOTICE Any notice required by these By-Laws, by the certificate of incorporation, or by the New Jersey Business Corporation Act may be waived in writing by any person entitled to notice. The waiver, or waivers, may be executed either before or after the event with respect to which the notice is waived. Each director or shareholder attending a meeting without protesting, prior to its conclusion, the lack of proper notice shall be deemed conclusively to have waived notice of the meeting. 19 ARTICLE V OFFICERS 1. Election. At its regular meeting following the annual meeting of shareholders, the Board shall elect a Chief Executive Officer, a Chairman of the Board, a President, a Vice President, a Treasurer, a Secretary, and such other officers as it shall deem necessary. One person may hold two or more offices. 2. Chairman of the Board. The Board shall appoint one of its members to be Chairman of the Board to serve at the pleasure of the Board. Such person shall preside at all meetings of the Board and of the shareholders, and shall also have and may exercise such further powers and duties as from time to time may be conferred or assigned by the Board or by the Chief Executive Officer. In the Chairman's absence, the Board will designate one of the senior officers who are members of the Board to serve as Chairman. 3. Chief Executive Officer. The Board of Directors shall appoint one of its members to be Chief Executive Officer of the Corporation to serve at the pleasure of the Board. The Chief Executive Officer may also hold another office or offices in the Corporation. He shall have general authority over all the business and affairs of the Corporation. 4. President. The Board shall appoint one of its members to be President of the Corporation. The President shall have and may exercise any and all powers and duties pertaining by law, regulation, or practice to the office of president, or imposed by these By-Laws. The President shall also have and may exercise such further powers and duties as from time to time may be conferred or assigned by the Board or the Chief Executive Officer. 5. Vice President. The Board may appoint one or more Executive Vice Presidents, one or more Senior Vice Presidents, and one or more Vice Presidents. Each Vice President shall perform the duties and have the authority as from time to time may be delegated to him by the Chief Executive Officer, by the Board of Directors, or by these By-Laws. 6. Secretary. The Board shall appoint a Secretary who shall be Secretary for meetings of the Board and of the Corporation, and shall keep accurate minutes of those meetings. The Secretary shall attend to the giving of all notices required by these By-Laws and shall be custodian of the corporate seal, records, documents and papers of the Corporation. The Secretary also shall have and may exercise any and all other powers and duties pertaining by law or practice to the office of Secretary, and shall also perform such other duties as may be assigned from time to time by the Board. 7. Treasurer. The Board shall appoint a Treasurer who shall have custody of the funds and securities of the Corporation and shall keep or cause to be kept regular books of the account for the Corporation. The Treasurer shall perform such other duties and possess such other powers as are incident to his office or as shall be assigned to him by the President or the Board. 8. Other Officers. The Board may appoint one or more Assistant Vice Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other officers as from time to time may appear to the Board to be required or desirable to transact the business of the Corporation. Such officers shall respectively exercise such power and perform such duties as pertain to their several offices, or as may be conferred upon or assigned to them by the Board, the Chief Executive Officer, or the President. 9. Tenure of Office. The Chairman, the Chief Executive Officer, the President, the Secretary, the Treasurer and all other officers shall hold office for the current year for which the Board was elected, unless they shall resign, become disqualified, or be removed. Any vacancy occurring in the office of Chief Executive Officer, Chairman, President, Secretary or Treasurer shall be filled promptly by the Board. 20 ARTICLE VI STOCK AND STOCK CERTIFICATES 1. Transfers. Shares of stock shall be transferable on the books of the Corporation, and a transfer book shall be kept in which all transfers of stock shall be recorded. Every person becoming a shareholder by such transfer shall, in proportion to his shares, succeed to all rights of the prior holder of such shares. 2. Share Certificates. The shares of the Corporation shall be represented by certificates signed by or in the name of the Corporation, by the Chairman, Chief Executive Officer, or the President or a Vice President, and by the Secretary, Treasurer, Assistant Secretary or Assistant Treasurer of the Corporation, and may be sealed with the seal of the Corporation. Any signature and the seal may be reproduced by facsimile. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be an officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of its issue. ARTICLE VII AMENDMENTS TO AND EFFECT OF BY-LAWS; FISCAL YEAR 1. Force and Effect of By-Laws. These By-Laws are subject to the provisions of the New Jersey Business Corporation Act and the Corporation's certificate of incorporation, as it may be amended from time to time. If any provision in these By-Laws is inconsistent with a provision of the Act or the certificate of incorporation, the provisions of the Act or the certificate of incorporation shall govern. 2. Amendments to By-Laws. These By-Laws may be altered, amended, or repealed by the shareholders or by the Board. Any By-Law adopted, amended, or repealed by the shareholders may be amended or repealed by the Board, unless the resolution of the shareholders adopting such By-Law expressly reserves to the shareholders the right to amend or repeal it. 3. Fiscal Year. The fiscal year of the Corporation shall begin on the first day of January each year. 4. Records. The certificate of incorporation, the By-Laws and the proceedings of all meetings of the shareholders, the Board, and standing committees of the Board shall be recorded in appropriate minute books provided for the purpose. The minutes of each meeting shall be signed by the Secretary or other officer appointed to act as secretary of the meeting. 5. Inspection. A copy of the By-Laws, with all amendments thereto, shall at all times be kept in a convenient place at the principal place of business of the Corporation, and for a proper purpose shall be open for inspection to any shareholder during business hours. ARTICLE VIII CORPORATE SEAL The Chairman, the Chief Executive Officer, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer and any Assistant Treasurer, shall have authority to affix the corporate seal to any document requiring such seal, and to attest the same. Such seal shall be substantially in the following form: (Impression) ( of ) ( Seal ) 21 EX-31.1 4 exhibit31-1.txt Exhibit 31.1 CERTIFICATIONS I, Frank A. Kissel, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Peapack-Gladstone Financial Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 12, 2003 - ----------------------------------- Frank A. Kissel Chairman of the Board and Chief Executive Officer 22 EX-31.2 5 exhibit31-2.txt Exhibit 31.2 CERTIFICATIONS I, Arthur F. Birmingham, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Peapack-Gladstone Financial Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 12, 2003 - ---------------------------- Arthur F. Birmingham Executive Vice President and Chief Financial Officer 23 EX-32 6 exhibit32.txt Exhibit 32 CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of Peapack-Gladstone Financial Corporation, (the "Corporation") for the quarterly period ended September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Frank A. Kissel, as Chief Executive Officer of the Corporation, and Arthur F. Birmingham, as Chief Financial Officer, each hereby certifies, pursuant to 18 U.S.C. (section) 1350, as adopted pursuant to (section) 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation. - -------------------------------- Name: Frank A. Kissel Title: Chief Executive Officer Date: November 12, 2003 - -------------------------------- Name: Arthur F. Birmingham Title: Chief Financial Officer Date: November 12, 2003 24 -----END PRIVACY-ENHANCED MESSAGE-----