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 June 30, 2005 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-2). Yes |X| No |_|. Number of shares of Common Stock outstanding as of August 1, 2005: 8,304,283 1
<TABLE> <CAPTION> PEAPACK-GLADSTONE FINANCIAL CORPORATION PART 1 FINANCIAL INFORMATION <S> <C> Item 1 Financial Statements (Unaudited): Consolidated Statements of Condition June 30, 2005 and December 31, 2004 Page 3 Consolidated Statements of Income for the three and six months ended June 30, 2005 and 2004 Page 4 Consolidated Statements of Changes in Shareholders' Equity for the six months ended June 30, 2005 and 2004 Page 5 Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and 2004 Page 6 Notes to the Consolidated Financial Statements Page 7 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Page 9 Item 3 Quantitative and Qualitative Disclosures about Market Risk Page 18 Item 4 Controls and Procedures Page 18 PART 2 OTHER INFORMATION Item 2 Unregistered Sales of Equity Securities and Use of Proceeds Page 19 Item 4 Submission of Matters to a Vote of Security Holders Page 19 Item 6 Exhibits Page 19 </TABLE> 2
<TABLE> <CAPTION> PEAPACK-GLADSTONE FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CONDITION (Dollars in thousands) (Unaudited) June 30, December 31, 2005 2004 ----------- ----------- <S> <C> <C> ASSETS Cash and due from banks $ 24,028 $ 15,631 Federal funds sold 847 101 ----------- ----------- Total cash and cash equivalents 24,875 15,732 Interest-earning deposits 779 786 Investment Securities (approximate market value $78,655 in 2005 and $87,544 in 2004) 78,586 87,128 Securities Available for Sale 337,043 354,186 Loans: Loans secured by real estate 663,054 541,460 Other loans 31,564 30,704 ----------- ----------- Total loans 694,618 572,164 Less: Allowance for loan losses 6,366 6,004 ----------- ----------- Net loans 688,252 566,160 Premises and equipment, net 21,428 20,163 Accrued interest receivable 4,771 4,375 Cash surrender value of life insurance 17,603 17,253 Other assets 3,819 1,612 ----------- ----------- TOTAL ASSETS $ 1,177,156 $ 1,067,395 =========== =========== LIABILITIES Deposits: Noninterest-bearing demand deposits $ 185,355 $ 162,275 Interest-bearing deposits: Checking 205,520 194,669 Savings 101,173 106,576 Money market accounts 233,423 227,944 Certificates of deposit over $100,000 81,062 74,005 Certificates of deposit less than $100,000 186,088 170,197 ----------- ----------- Total deposits 992,621 935,666 Borrowed Funds 80,806 33,394 Accrued expenses and other liabilities 4,925 3,666 ----------- ----------- TOTAL LIABILITIES 1,078,352 972,726 ----------- ----------- SHAREHOLDERS' EQUITY Common stock (no par value; stated value $0.83 per share; authorized 20,000,000 shares; issued shares, 8,462,286 at June 30, 2005 and 8,393,625 at December 31, 2004; outstanding shares, 8,303,283 at June 30, 2005 and 8,246,042 at December 31, 2004) 7,052 6,994 Surplus 88,753 87,991 Treasury Stock at cost, 159,003 shares in 2005 and 147,583 shares in 2004 (3,194) (2,867) Retained Earnings 6,212 1,113 Accumulated other comprehensive (loss)/income, net of income tax (19) 1,438 ----------- ----------- TOTAL SHAREHOLDERS' EQUITY 98,804 94,669 ----------- ----------- TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 1,177,156 $ 1,067,395 =========== =========== </TABLE> See accompanying notes to consolidated financial statements. 3
<TABLE> <CAPTION> PEAPACK-GLADSTONE FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except share data) (Unaudited) Three months ended Six months ended June 30, June 30, 2005 2004 2005 2004 ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> INTEREST INCOME Interest and fees on loans $ 9,094 $ 6,278 $ 17,367 $ 12,417 Interest on investment securities: Taxable 430 690 928 1,446 Tax-exempt 307 234 582 438 Interest on securities available for sale: Taxable 3,461 3,423 6,966 6,727 Tax-exempt 90 91 181 182 Interest-earning deposits 6 2 9 13 Interest on federal funds sold 12 22 23 38 ---------- ---------- ---------- ---------- Total interest income 13,400 10,740 26,056 21,261 INTEREST EXPENSE Interest on savings and interest-bearing deposit accounts 1,949 798 3,508 1,516 Interest on certificates of deposit over $100,000 578 315 1,077 630 Interest on other time deposits 1,318 859 2,451 1,717 Interest on borrowed funds 610 274 1,048 542 ---------- ---------- ---------- ---------- Total interest expense 4,455 2,246 8,084 4,405 ---------- ---------- ---------- ---------- NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES 8,945 8,494 17,972 16,856 Provision for loan losses 200 150 350 300 ---------- ---------- ---------- ---------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 8,745 8,344 17,622 16,556 ---------- ---------- ---------- ---------- OTHER INCOME Service charges and fees 469 427 934 824 Trust department income 1,906 1,791 3,920 3,474 Securities gains 37 406 335 600 Bank owned life insurance 201 195 398 415 Other income 148 100 324 227 ---------- ---------- ---------- ---------- Total other income 2,761 2,919 5,911 5,540 OTHER EXPENSES Salaries and employee benefits 3,996 3,685 7,796 7,220 Premises and equipment 1,663 1,450 3,229 2,766 Other expense 1,358 1,368 2,547 2,556 ---------- ---------- ---------- ---------- Total other expenses 7,017 6,503 13,572 12,542 ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAX EXPENSE 4,489 4,760 9,961 9,554 Income tax expense 1,271 1,551 3,040 3,064 ---------- ---------- ---------- ---------- NET INCOME $ 3,218 $ 3,209 $ 6,921 $ 6,490 ========== ========== ========== ========== EARNINGS PER SHARE Basic $ 0.39 $ 0.39 $ 0.84 $ 0.79 Diluted $ 0.38 $ 0.38 $ 0.82 $ 0.77 Average basic shares outstanding 8,297,449 8,190,686 8,279,669 8,178,912 Average diluted shares outstanding 8,418,049 8,390,421 8,400,866 8,384,706 </TABLE> See accompanying notes to consolidated financial statements. 4
PEAPACK-GLADSTONE FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Dollars in thousands) (Unaudited) Six Months Ended June 30, 2005 2004 -------- -------- Balance, Beginning of Period $ 94,669 $ 85,054 Comprehensive income: Net Income 6,921 6,490 Unrealized holding losses on securities arising during the period, net of tax (1,239) (4,734) Less: Reclassification adjustment for gains included in net income, net of tax 218 390 -------- -------- (1,457) (5,124) -------- -------- Total Comprehensive income 5,464 1,366 Common Stock Options Exercised 511 538 Purchase of Treasury Stock (327) (282) Cash Dividends Declared (1,823) (1,416) Tax Benefit on Disqualifying and Nonqualifying 310 187 Exercise of Stock Options -------- -------- Balance, June 30, $ 98,804 $ 85,447 ======== ======== See accompanying notes to consolidated financial statements. 5
PEAPACK-GLADSTONE FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited) Six Months Ended June 30, 2005 2004 --------- --------- OPERATING ACTIVITIES: Net Income: $ 6,921 $ 6,490 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 965 802 Amortization of premium and accretion of discount on securities, net 573 790 Provision for loan losses 350 300 Gains on security sales (82) (600) Gain on loans sold (13) (2) Gain on disposal of fixed assets (10) -- Tax benefit on stock option exercises 310 187 Increase in cash surrender value of life insurance, net (350) (371) Increase in accrued interest receivable (396) (265) (Decrease)/Increase in other assets (2,027) 1,277 Decrease/(Increase) in accrued expenses and other liabilities 1,927 (1,480) --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 8,168 7,128 --------- --------- INVESTING ACTIVITIES: Proceeds from maturities of investment securities 18,718 14,301 Proceeds from maturities of securities available for sale 17,729 21,402 Proceeds from calls of investment securities 3,185 235 Proceeds from calls of securities available for sale 7,000 37,346 Proceeds from sales of securities available for sale 26,404 23,683 Purchase of investment securities (13,991) (13,845) Purchase of securities available for sale (36,162) (122,357) Net decrease in short-term investments 7 30,102 Proceeds from sales of loans 1,613 112 Purchase of loans (90,867) (12,113) Net increase in loans (33,175) (26,818) Purchases of premises and equipment (2,241) (3,628) Disposal of premises and equipment 21 -- --------- --------- NET CASH USED IN INVESTING ACTIVITIES (101,759) (51,580) --------- --------- FINANCING ACTIVITIES: Net increase in deposits 56,955 29,852 Net increase in short-term borrowings 48,250 19,000 Repayments of long-term debt (838) (813) Cash dividends paid (1,817) (1,485) Exercise of stock options 511 538 Purchase of Treasury Stock (327) (282) --------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES 102,734 46,810 --------- --------- Net increase in cash and cash equivalents 9,143 2,358 Cash and cash equivalents at beginning of period 15,732 22,695 --------- --------- Cash and cash equivalents at end of period $ 24,875 $ 25,053 ========= ========= Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 7,577 $ 4,420 Income taxes 5,503 3,552 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 U.S. generally accepted accounting principles 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 Annual Report on Form 10-K for the period ended December 31, 2004 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 U.S. generally accepted accounting principles 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. Allowance for Loan Losses: The allowance for loan losses is maintained at a level considered adequate to provide for probable loan losses inherent in the Corporation's loan portfolio. The allowance is based on management's evaluation of the loan portfolio considering, among other things, current economic conditions, the volume and nature of the loan portfolio, historical loan loss experience, and individual credit situations. The allowance is increased by provisions charged to expense and reduced by net charge-offs. Stock Option Plans: At June 30, 2005, the Corporation had stock-based employee and non-employee director compensation plans. The Corporation accounts for these 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 or greater than 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: <TABLE> <CAPTION> Three Months Ended Six Months Ended June 30, June 30, (In Thousands Except per Share Data) 2005 2004 2005 2004 --------- --------- --------- --------- <S> <C> <C> <C> <C> Net Income: As Reported $ 3,218 $ 3,209 $ 6,921 $ 6,490 Less: Total Stock-Based Compensation Expense Determined under the Fair Value Based Method on all Stock Options, Net of Related Tax Effects 99 100 196 1,360 --------- --------- --------- --------- Pro Forma $ 3,119 $ 3,109 $ 6,725 $ 5,130 Earnings Per Share: As Reported Basic $ 0.39 $ 0.39 $ 0.84 $ 0.79 Diluted $ 0.38 $ 0.38 $ 0.82 $ 0.77 Pro Forma Basic $ 0.38 $ 0.38 $ 0.81 $ 0.63 Diluted $ 0.37 $ 0.37 $ 0.80 $ 0.61 </TABLE> 7
Earnings per Common Share - Basic and Diluted: Basic earnings per share is computed by dividing net 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) utilizing the treasury stock method. All share and per share amounts have been restated to reflect all prior stock dividends and stock splits and a 10 percent stock dividend declared on September 9, 2004. Comprehensive Income: The difference between the Corporation's net income and total comprehensive income for the three and six months ended June 30, 2005 and 2004 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. Total comprehensive income for the six months ended June 30, 2005 and 2004 was $5.5 million and $1.4 million, respectively. 2. LOANS Loans outstanding as of June 30, consisted of the following: (In Thousands) 2005 2004 -------- -------- Loans Secured by 1-4 Family $475,930 $275,906 Commercial Real Estate 167,149 144,356 Construction Loans 19,975 15,371 Commercial Loans 22,672 18,346 Consumer Loans 5,876 8,999 Other Loans 3,016 2,783 -------- -------- Total Loans $694,618 $465,761 ======== ======== 3. FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS At June 30, 2005 and 2004, advances from the Federal Home Loan Bank of New York (FHLB) totaled $80.8 million and $48.2 million, respectively, with a weighted average interest rate of 3.19 percent and 2.88 percent, respectively. These advances are secured by blanket pledges of certain 1-4 family residential mortgages totaling $195.8 million at June 30, 2005. Advances totaling $23.0 million at June 30, 2005, have fixed maturity dates, while advances totaling $9.6 million were amortizing advances with monthly payments of principal and interest. The final maturity dates of the advances are scheduled as follows: (In Thousands) 2005 $ 48,250 2006 6,000 2007 4,000 2008 1,747 2009 2,000 Over 5 Years 18,809 -------- Total $ 80,806 ======== 8
4. BENEFIT PLANS The Corporation has a defined benefit pension plan covering substantially all of its salaried employees. The net periodic expense for the three and six months ended June 30 included the following components: Three Months Ended Six Months Ended June 30, June 30, (In Thousands) 2005 2004 2005 2004 ----- ----- ----- ----- Service Cost $ 351 $ 274 $ 702 $ 549 Interest Cost 147 126 293 252 Expected Return on Plan Assets (134) (117) (267) (234) Amortization of: Net Loss 17 6 34 12 Unrecognized Prior Service Cost -- 1 -- (1) Unrecognized Remaining Net Assets (1) (2) (3) (3) ----- ----- ----- ----- Net Periodic Benefit Cost $ 380 $ 288 $ 759 $ 575 ===== ===== ===== ===== As previously disclosed in the financial statements for the year ended December 31, 2004, the Corporation expects to contribute $1.3 million to its pension plan in 2005. As of June 30, 2005, contributions of $636 thousand had been made in the current year. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL: The following discussion and analysis 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 view of future interest income and net loans, 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", "look", "believe", "anticipate", "may", "will", 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 costs in connection with the additional branch openings. o Competitive pressure in the banking industry causes unanticipated adverse changes. o An unexpected decline in the economy of New Jersey causes customers to default in the payment of their loans or causes loans to become impaired. o Enforcement of the Highlands Water Protection and Planning Act 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. o A decline in the volume of increase in trust assets or deposits. o Disallowance of tax strategies. The Corporation assumes no responsibility to update such forward-looking statements in the future. 9
CRITICAL ACCOUNTING POLICIES AND ESTIMATES: "Management's Discussion and Analysis of Financial Condition and Results of Operations" is based upon the Corporation's consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. 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 Audited Consolidated Financial Statements included in the December 31, 2004 Annual Report on Form 10-K, 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. 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 provision 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 provision 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 New Jersey experience an adverse economic shock. Future adjustments to the provision for loan losses may be necessary due to economic, operating, regulatory and other conditions beyond the Corporation's control. EXECUTIVE SUMMARY: The Corporation realized earnings of $0.38 per diluted share in the second quarter of 2005 and 2004. Net income of $3.2 million for the quarter was virtually unchanged from the second quarter of 2004. Annualized return on average assets for the quarter was 1.12 percent and annualized return on average equity was 13.31 percent for the second quarter of 2005. For the six months ended June 30, 2005, the Corporation recorded net income of $6.9 million, an increase of $431 thousand or 6.6 percent from the $6.5 million reported for the same six months of last year. Diluted earnings per share were $0.82, an increase of 6.5 percent over the $0.77 recorded in the same period last year. These results produced a return on average assets of 1.22 percent and a return on average equity of 14.40 percent. Net interest income for the current quarter grew $499 thousand on a tax equivalent basis to $9.2 million and the net interest margin decreased to 3.37 percent from 3.71 percent from the second quarter of 2004. The decline in the margin was mainly the result of the flattening of the yield curve and competitive loan and deposit pricing causing a larger increase in deposit and borrowing costs than earning asset yields. Average loans grew by $205.8 million for the quarters ended June 30, 2004 and 2005 or 46.4 percent as a result of new business development, expansion of existing customer borrowings and the purchase of adjustable-rate mortgage loans from a third-party entity. The yield on loans increased to 5.60 percent representing only a two basis point increase from the first quarter of 2005. Credit quality has remained high and loan delinquencies have continued at very low levels. Average deposits increased $115.3 million or 13.4 percent for the second quarter of 2005, compared with the same period in 2004. Average demand deposits increased $13.4 million or 8.2 percent for the second quarter of 2005 as compared to the year ago period. Average borrowings increased by $35.8 million compared to the prior year in order to fund loan growth. The cost of deposits and borrowings increased by 82 basis points over the prior year period to 2.04 percent. Premises and equipment expense rose $463 thousand, or 16.7 percent, from $2.8 million for the six months ended June 30, 2004 to $3.2 million for the same period of 2005 due to the Corporation's investment in two new branches. Expanding into new markets through the branch network is a source of future growth and profitability. 10
EARNINGS ANALYSIS NET INTEREST INCOME: On a tax-equivalent basis, net interest income, before the provision for loan losses, was $9.2 million for the second quarter of 2005, compared to $8.7 million for the same quarter of 2004, an increase of $499 thousand or 5.7 percent. The increase in net interest income during the quarter was primarily the result of higher average loans outstanding and higher rates earned on investments offset in part by higher deposit and borrowing balances, higher rates paid on interest-bearing liabilities and lower investment volume. The net interest margin on a fully tax equivalent basis was 3.37 percent in the second quarter of 2005 as compared to 3.71 percent for the same quarter of 2004, a decrease of 34 basis points. Net interest income for the second quarter of 2005, when compared to the first quarter of 2005, declined $61 thousand from $9.3 million on a tax-equivalent basis. The net interest margin, on a fully tax equivalent basis declined from 3.53 percent in the first quarter of 2005, to 3.37 percent in the second quarter of 2005, a 16 basis point decrease. Average interest-earning assets increased $156.8 million or 16.7 percent to $1.09 billion for the second quarter of 2005 as compared to $937.2 million for the same quarter in 2004. This was due to the increase in average loan balances of $205.8 million, or 46.4 percent, offset in part by a decline in average investment securities and federal funds sold balances of $49.0 million, or 10.0 percent. The increase in loan balances during the second quarter of 2005 was the result of growth in residential real estate, commercial mortgage and commercial loans. The majority of residential real estate loan origination was due to the purchase of adjustable rate loans from a third-party mortgage origination entity. All of the loans purchased are secured by properties located in the State of New Jersey and many are within the Bank's market area. Average interest-bearing liabilities increased $137.7 million, or 18.7 percent, for the second quarter of 2005 to $875.1 million from $737.4 million in the same period in 2004. Average balances of interest-bearing checking accounts rose $42.6 million or 26.2 percent, certificate of deposits rose $36.0 million or 16.1 percent and money market accounts increased $28.6 million or 13.9 percent. Average savings accounts declined $5.4 million, or 5.0 percent for the second quarter of 2005 when compared to the second quarter of 2004. In addition to opening two new branches since second quarter 2004, several new deposit products have been introduced in the past year, which have been well received by customers, including Master Escrow Account, Fed Flyer CD and the Fed Tracker Money Market Account. For the second quarter of 2005, Federal Home Loan Bank advances averaged $74.7 million as compared to $38.9 million for the same quarter of 2004. Also, average non-interest-bearing demand deposits rose $13.4 million or 8.2 percent for the second quarter of 2005 as compared to the second quarter of 2004. For the second quarter of 2005, average interest rates earned on interest-earning assets, on a tax-equivalent basis, rose 33 basis points to 5.00 percent from 4.67 percent for the same quarter of 2004. The average interest rates earned on loans declined 6 basis points to 5.60 percent in the second quarter of 2005, due to the flattening yield curve and competitive pressures. For the quarter ended June 30, 2005, the average interest rates earned on investment securities was 4.12 percent, an increase of 33 basis points from 3.79 percent in the same period in 2004. The average interest rate paid on interest-bearing liabilities in the second quarter of 2005 increased 82 basis points to 2.04 percent for the second quarter of 2005. In the second quarter of 2005, the average rate paid on certificate of deposits was 2.92 percent, an 82 basis point increase from the second quarter of 2004. Average rates paid on money market accounts increased to 1.99 percent, a 122 basis point increase when compared with the same quarter in 2004. Much of this increase can be attributed to the adjustable nature of the Fed Tracker Money Market, which pays the federal funds rate. Higher retail deposit rates were the result of the Federal Reserve increasing the Federal Funds rate 200 basis points since last year. The cost of funds for the quarter increased to 1.69 percent as compared to the second quarter of 2004 of 1.00 percent. For the six months ended June 30, 2005, net interest income on a tax-equivalent basis, before the provision for loan losses, was $18.5 million compared to $17.3 million for the same period of 2004, an increase of $1.2 million or 7.0 percent. As with the second quarter, the increase in net interest income was primarily the result of higher loan volume and higher rates earned on investments offset in part by higher deposit and borrowing balances, higher rates paid on liabilities and lower investment volume. The net interest margin on a fully tax equivalent basis was 3.45 percent in the first six months of 2005, a decrease of 31 basis points as compared to 3.76 percent for the same six months of 2004. For the year to date 2005, average interest-earning assets were $1.07 billion, rising $156.3 million, or 17.1 percent, as compared to $915.5 million for the same period in 2004. Average loan balances rose $186.4 million, or 42.8 percent, while average investment securities, federal funds sold and interest-earning deposits balances declined $30.1 million, or 6.3 percent. In addition to increased borrowings, the runoff in investments was used to fund loan growth. As noted above, the increase in loan balances was the result of growth in residential real estate, commercial mortgage and commercial loans. 11
Average interest-bearing liabilities increased $136.1 million, or 18.8 percent, for the first six months of 2005 to $859.1 million from $723.0 million in the same period in 2004. When compared to the first six months of 2004, 2005 year to date increases to average interest-bearing checking balances were $55.8 million, or 37.9 percent, certificate of deposit balances were $32.3 million, or 14.5 percent and money market balances were $20.9 million, or 10.0 percent. As discussed above, the Corporation has opened two new branches since last year and introduced several new deposit products, including Master Escrow Account, Fed Flyer CD and the Fed Tracker Money Market Account. Federal Home Loan Bank advances averaged $65.7 million as compared to $37.7 million, an increase of $28.0 million, or 74.3 percent year 2005 over year 2004. For the six months ended June 30, 2005, average non-interest-bearing demand deposits rose $15.5 million or 9.9 percent as compared to the same period of 2004. Average interest rates earned on interest-earning assets, on a tax-equivalent basis, rose 24 basis points to 4.96 percent for the first six months of 2005 from 4.72 percent for the same period of 2004. The average interest rates earned on loans declined 12 basis points to 5.59 percent in the first half of 2005; due to the flattening yield curve and competitive pressures. For the six months ended June 30, 2005, the average interest rates earned on investment securities was 4.09 percent, an increase of 24 basis points from 3.85 percent for the same period in 2004. The average interest rate paid on interest-bearing liabilities in the first half of 2005 was 1.88 percent, rising 66 basis points over the first half of 2004. In the six months ended June 30, 2005, the average rate paid on certificate of deposits was 2.76 percent, a 66 basis point increase from the same six month of 2004, while average rates paid on money market accounts increased to 1.74 percent, a 94 basis point increase. Higher retail deposit rates were the result of the Federal Reserve increasing the Federal Funds rate. The cost of funds for the first half of 2005 and 2004 was 1.57 and 1.00 percent, respectively. 12
The following tables reflect the components of net interest income for the three and six months ended June 30, 2005 and 2004: <TABLE> <CAPTION> Average Balance Sheet Unaudited Quarters Ended (Tax-Equivalent Basis, Dollars in Thousands) June 30, 2005 June 30, 2004 ------------- ------------- Average Income/ Average Income/ Balance Expense Yield Balance Expense Yield ------- ------- ----- ------- ------- ----- <S> <C> <C> <C> <C> <C> <C> ASSETS: Interest-Earning Assets: Investments: Taxable (1) $ 385,908 $ 3,891 4.03% $ 441,145 $ 4,114 3.72% Tax-Exempt (1) (2) 55,881 655 4.69 42,095 536 5.09 Loans (2) (3) 649,733 9,101 5.60 443,905 6,283 5.66 Federal Funds Sold 1,719 12 2.90 9,302 22 0.95 Interest-Earning Deposits 776 6 3.02 774 2 0.88 ----------- ------------------- ----------- ------------------- Total Interest-Earning Assets 1,094,017 $ 13,665 5.00% 937,221 $ 10,957 4.67% ----------- ------------------- ----------- ------------------- Noninterest-Earning Assets: Cash and Due from Banks 21,641 19,629 Allowance for Loan Losses (6,166) (5,625) Premises and Equipment 21,155 17,540 Other Assets 23,703 25,481 ----------- ----------- Total Noninterest-Earning Assets 60,333 57,025 ----------- ----------- Total Assets $ 1,154,350 $ 994,246 =========== =========== LIABILITIES: Interest-Bearing Deposits Checking $ 205,237 $ 609 1.19% $ 162,593 $ 237 0.58% Money Markets 130,355 789 2.42 66,143 93 0.56 Tiered Money Markets 103,468 375 1.45 139,102 303 0.87 Savings 101,952 177 0.69 107,310 165 0.61 Certificates of Deposit 259,392 1,895 2.92 223,387 1,174 2.10 ----------- ------------------- ----------- ------------------- Total Interest-Bearing Deposits 800,404 3,845 1.92 698,535 1,972 1.13 Borrowings 74,668 610 3.27 38,856 274 2.82 ----------- ------------------- ----------- ------------------- Total Interest-Bearing Liabilities 875,072 4,455 2.04 737,391 2,246 1.22 ----------- ------------------- ----------- ------------------- Noninterest Bearing Liabilities Demand Deposits 177,270 163,822 Accrued Expenses and Other Liabilities 5,297 5,803 ----------- ----------- Total Noninterest-Bearing Liabilities 182,567 169,625 Shareholders' Equity 96,711 87,230 ----------- ----------- Total Liabilities and Shareholders' Equity $ 1,154,350 $ 994,246 =========== =========== Net Interest Income (tax-equivalent basis) 9,210 8,711 Net Interest Spread 2.96% 3.45% ===== ==== Net Interest Margin (4) 3.37% 3.71% ===== ==== Tax equivalent adjustment (265) (217) ---------- ----------- Net Interest Income $ 8,945 $ 8,494 =========== =========== </TABLE> 13
<TABLE> <CAPTION> Average Balance Sheet Unaudited Year-to-Date (Tax-Equivalent Basis, Dollars in Thousands) June 30, 2005 June 30, 2004 ------------- ------------- Average Income/ Average Income/ Balance Expense Yield Balance Expense Yield ------- ------- ----- ------- ------- ----- <S> <C> <C> <C> <C> <C> <C> ASSETS: Interest-Earning Assets: Investments: Taxable (1) $ 393,963 $ 7,894 4.01% $ 430,113 $ 8,173 3.77% Tax-Exempt (1) (2) 53,823 1,259 4.68 39,625 1,024 5.17 Loans (2) (3) 621,555 17,381 5.59 435,164 12,428 5.71 Federal Funds Sold 1,745 23 2.64 8,048 38 0.95 Interest-Earning Deposits 700 9 2.65 2,507 13 1.04 ----------- -------------------- ----------- --------------------- Total Interest-Earning Assets 1,071,786 $ 26,566 4.96% 915,457 $ 21,676 4.72% ----------- -------------------- ----------- --------------------- Noninterest-Earning Assets: Cash and Due from Banks 21,306 19,237 Allowance for Loan Losses (6,097) (5,575) Premises and Equipment 20,668 16,756 Other Assets 24,451 27,047 ----------- ----------- Total Noninterest-Earning Assets 60,328 57,465 ----------- ----------- Total Assets $ 1,132,114 $ 972,922 =========== =========== LIABILITIES: Interest-Bearing Deposits Checking $ 203,050 $ 1,137 1.12% $ 147,216 $ 349 0.47% Money Markets 117,853 1,223 2.08 65,777 194 0.59 Tiered Money Markets 113,108 789 1.40 144,281 648 0.90 Savings 103,816 358 0.69 104,793 325 0.62 Certificates of Deposit 255,620 3,528 2.76 223,279 2,347 2.10 ----------- -------------------- ----------- --------------------- Total Interest-Bearing Deposits 793,447 7,035 1.77 685,346 3,863 1.13 Borrowings 65,652 1,048 3.19 37,676 542 2.88 ----------- -------------------- ----------- --------------------- Total Interest-Bearing Liabilities 859,099 8,083 1.88 723,022 4,405 1.22 ----------- -------------------- ----------- --------------------- Noninterest Bearing Liabilities Demand Deposits 171,835 156,352 Accrued Expenses and Other Liabilities 5,069 6,581 ----------- ----------- Total Noninterest-Bearing Liabilities 176,904 162,933 Shareholders' Equity 96,111 86,967 ----------- ----------- Total Liabilities and Shareholders' Equity $ 1,132,114 $ 972,922 =========== =========== Net Interest Income (tax-equivalent basis) 18,483 17,271 Net Interest Spread 3.08% 3.50% ===== ===== Net Interest Margin (4) 3.45% 3.76% ===== ===== Tax equivalent adjustment (511) (415) ----------- ----------- Net Interest Income $ 17,972 $ 16,856 =========== =========== </TABLE> (1) Average balances for available-for-sale securities are based on amortized cost. (2) Interest income is presented on a tax-equivalent basis using a 35 percent federal tax rate. (3) Loans are stated net of unearned income and include non-accrual loans. (4) Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets. 14
OTHER INCOME: Other income was $2.76 million for the second quarter 2005, as compared to $2.92 million in the second quarter 2004, a decrease of $158 thousand or 5.4 percent. Income from PGB Trust and Investments, the Bank's trust division, was $1.91 million, an increase of $115 thousand or 6.4 percent over last year's second quarter. The market value of trust assets increased $115.5 million or 7.4 percent from the second quarter of 2004 to 2005. Service charges and fees were $469 thousand and $427 thousand, in the second quarters of 2005 and 2004, respectively, an increase of $42 thousand or 9.8 percent. Security gains of $37 thousand were recorded in the second quarter of 2005 as compared to $406 thousand for the same quarter of 2004. For the six months ended June 30, 2005, other income increased $371 thousand, or 6.7 percent, to $5.9 million as compared to the same six months of 2004. PGB Trust and Investments recorded 2005 year-to-date income of $3.9 million as compared to $3.5 million for the same period of 2004, an increase of $446 thousand or 12.8 percent. The Corporation recorded service charges and fees of $934 thousand and $824 thousand in the first six months of 2005 and 2004, respectively, an increase of $110 thousand or 13.3 percent. This increase was primarily the result of the introduction of a new overdraft protection product. Security gains totaled $335 thousand in the first half of 2005 as compared to $600 thousand in the first half of 2004. This year's gain includes the recognition of a $253 thousand gain on the non-monetary exchange of equity securities. The following table presents the components of other income for the three and six months ended June 30, 2005 and 2004: Three Months Ended Six Months Ended June 30, June 30, (In Thousands) 2005 2004 2005 2004 ------ ------ ------ ------ Trust department income $1,906 $1,791 $3,920 $3,474 Service charges and fees 469 427 934 824 Bank owned life insurance 201 195 398 415 Other non-interest income 67 37 152 85 Safe deposit rental fees 54 54 116 115 Fees for other services 27 9 56 27 Securities gains 37 406 335 600 ------ ------ ------ ------ Total other income $2,761 $2,919 $5,911 $5,540 ====== ====== ====== ====== OTHER EXPENSES: For the second quarter of 2005, other expenses increased $514 thousand or 7.9 percent to $7.02 million compared to $6.50 million for the second quarter of 2004. Salaries and benefits expense during the second quarter of 2005 were $4.00 million as compared to $3.69 million for the second quarter of 2004, an increase of $311 thousand or 8.4 percent. Normal salary increases as well as additions to business development officer ranks and the related benefits costs account for the increase. Premises and equipment expenses recorded for the second quarter of 2005, were $1.66 million, an increase of $213 thousand or 14.7 percent, when compared to $1.45 million for the same quarter of 2004. In the past year, premises and equipment expenses have increased due to the investment in two new branches. In addition, the Corporation invested in its technological capacity for this future growth and the expectation of increased business activity. Other expenses for the first half of 2005 totaled $13.57 million as compared to $12.54 million for the same period in 2004, an increase of $1.03 million or 8.2 percent. During the six months ended June 30, 2005, salaries and benefits expense rose $576 thousand or 8.0 percent to $7.80 million from $7.22 million during the first six months of 2004. For the first half of 2005, the Corporation recorded $3.23 million in premises and equipment expense, a $463 thousand, or 16.7 percent, increase over the $2.77 million recorded for the first half of 2004. Excluding salaries and benefits and premises and equipment expenses, all other expense categories in total remained at the same level in 2005 as incurred in 2004. 15
The following table presents the components of other expense for the three and six months ended June 30, 2005 and 2004: Three Months Ended Six Months Ended June 30, June 30, (In Thousands) 2005 2004 2005 2004 ------- ------- ------- ------- Salaries and employee benefits $ 3,996 $ 3,685 $ 7,796 $ 7,220 Premises and equipment 1,663 1,450 3,229 2,766 Advertising 337 228 492 329 Stationery and supplies 139 164 298 267 Professional fees 146 114 242 250 Trust department expense 103 91 209 193 Telephone 90 141 192 243 Postage 70 96 138 180 Other expense 473 534 976 1,094 ------- ------- ------- ------- Total other expense $ 7,017 $ 6,503 $13,572 $12,542 ======= ======= ======= ======= 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 $354 thousand and $918 thousand at June 30, 2005 and 2004, respectively. Loans past due in excess of 90 days and still accruing are in the process of collection and are considered well secured. The following table sets forth non-performing assets on the dates indicated, in conjunction with asset quality ratios: June 30, (In thousands) 2005 2004 ------- ------- Other real estate owned $ -- $ -- Loans past due in excess of 90 days and still accruing -- 817 Non-accrual loans 354 101 ------- ------- Total non-performing assets $ 354 $ 918 ======= ======= Non-performing loans as a % of total loans 0.05% 0.20% Non-performing assets as a % of total loans plus other real estate owned 0.05% 0.20% Allowance as a % of total loans 0.92% 1.23% PROVISION FOR LOAN LOSSES: The provision for loan losses was $200 thousand for the second quarter of 2005 as compared to $150 thousand for the same quarter in 2004. 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. For the six months ended June 30, 2005, the provision for loan losses was $350 thousand as compared to $300 thousand for the same six-month period last year. For the second quarter of 2005, net recoveries were $5 thousand as compared to net charge-offs of $6 thousand during the second quarter of 2004. Net recoveries for the six months ended June 30, 2005 were $12 thousand as compared to net charge-offs of $61 thousand for the six months ended June 30, 2004. A summary of the allowance for loan losses for the six-month periods ended June 30, follows: (In thousands) 2005 2004 ------- ------- Balance, January 1, $ 6,004 $ 5,467 Provision charged to expense 350 300 Loans charged off (1) (72) Recoveries 13 11 ------- ------- Balance, June 30, $ 6,366 $ 5,706 ======= ======= 16
INCOME TAXES: Income tax expense as a percentage of pre-tax income was 28.3 percent and 32.6 percent for the three months ended June 30, 2005 and 2004, respectively. On a year to date basis, income tax expense as a percentage of pre-tax income was 30.5 percent in 2005 and 32.1 percent in 2004. The rate of income tax expense decline due to higher levels of tax-exempt income as well as a decline in the state income tax due to higher taxable income in the Real Estate Investment Trust subsidiary, which has a lower effective tax rate. CAPITAL RESOURCES: The Corporation is committed to maintaining a strong capital position. At June 30, 2005, total shareholders' equity, including net unrealized losses on securities available for sale, was $98.8 million, representing an increase in total shareholders' equity recorded at December 31, 2004, of $4.1 million or 4.4 percent. 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 allowance for loan loss. At June 30, 2005, the Corporation's Tier 1 Capital and Total Capital ratios were 17.73 percent and 18.88 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 least 3 percent plus an additional 100 to 200 basis points. The Corporation's leverage ratio at June 30, 2005, was 8.68 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 $25.7 million at June 30, 2005. In addition, the Corporation has $337.0 million in securities designated as available for sale. These securities can be sold in response to liquidity concerns or pledged as collateral for borrowings as discussed below. Book value as of June 30, 2005, of investment securities and securities available for sale maturing within one year amounted to $18.5 million and $19.8 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 June 30, 2005, core deposits equaled $911.6 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. RECENT ACCOUNTING PRONOUNCEMENTS: Financial Accounting Standards Board (FASB) Statement No. 154, accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3, changes the requirements for the accounting for and reporting of a change in accounting principle. The Statement applies to all voluntary changes in accounting principle and to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific transition provisions, those provisions should be followed. The Corporation does not expect FAS No. 154 to impact on the consolidated financial statements at this time. 17
The American Institute of Certified Public Accountants (AICPA) Accounting Standards Executive Committee (AcSEC) Statements of Position (SOP) 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer, issued in December 2003, effective for loans acquired in fiscal years beginning after December 15, 2004, with early adoption encouraged. SOP 03-3 addresses accounting for differences between contractual cash flows and cash flows expected to be collected from an investors initial investments in loans or debt securities (loans) acquired in a transfer if those differences are attributable, at least in part, to credit quality. It includes loans acquired in business combinations and applies to all nongovernmental entities, including not-for-profit organizations, but does not apply to loans originated by the entity. A transition provision applies for certain aspects of loans currently within the scope of Practice Bulletin 6, Amortization of Discounts on Certain Acquired Loans. The Corporation does not expect SOP 03-3 to impact on the consolidated financial statements at this time. 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 (June 30, 2005). 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 have materially affected, or is reasonably likely to materially affect, the Corporation's internal control over financial reporting. 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 errors 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. 18
PART II. OTHER INFORMATION ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds <TABLE> <CAPTION> Issuer Purchases of Equity Securities Total Number of Shares Purchased as Maximum Number of Total Number Weighted Part of Publicly Shares that May Yet Be of Shares Average Price Announced Plans or Purchased Under the Purchased Paid per Share Programs Plans or Programs Period <S> <C> <C> <C> <C> April 1-30, 2005 4,444 $ 26.53 - - May 1-31, 2005 - - - - June 1-30, 2005 - - - - ------------- -------------- ------------------- ---------------------- Total 4,444 $ 26.53 - - ============= ============== =================== ====================== </TABLE> Note: All shares listed above were added to treasury stock through the cashless exercise of employee and director stock options as allowed in the Stock Option Plans. ITEM 4. Submission of Matters to a Vote of Security Holders At the Annual Meeting of shareholders held on April 26, 2005, in Peapack-Gladstone, New Jersey, the following persons were elected as directors of Peapack-Gladstone Financial Corporation for a term of one year: DIRECTORS FOR WITHHELD --------- --- -------- Anthony J. Consi II 6,645,552 19,876 Pamela Hill 6,654,319 11,109 T. Leonard Hill 6,649,568 15,860 Frank A. Kissel 6,658,380 7,048 John D. Kissel 6,646,739 18,689 James R. Lamb 6,645,948 19,480 Edward A. Merton 6,633,124 32,304 F. Duffield Meyercord 6,657,777 7,651 John R. Mulcahy 6,608,218 57,210 Robert M. Rogers 6,659,955 5,473 Philip W. Smith III 6,640,354 25,074 Craig C. Spengeman 6,657,829 7,599 Jack D. Stine 6,639,899 25,529 ITEM 6. Exhibits a. 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 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 the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003. 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. 19
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: August 5, 2005 By:/s/ Frank A. Kissel ---------------------------------------------- FRANK A. KISSEL Chairman of the Board and Chief Executive Officer DATE: August 5, 2005 By:/s/ Arthur F. Birmingham ------------------------------------------------- ARTHUR F. BIRMINGHAM Executive Vice President and Chief Financial Officer 20
EXHIBIT INDEX Number Description - ------ ----------- 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 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 the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003. 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. 21