FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 2000
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) (Zip Code)
Registrant's telephone number (908) 234-0700
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. |_|
Number of shares of Common stock outstanding as of March 31, 2000:
2,871,530
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PEAPACK-GLADSTONE FINANCIAL CORPORATION
PART I. FINANCIAL INFORMATION
Certain information and footnote disclosures normally included in the
consolidated financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. It is suggested that
these condensed consolidated financial statements be read in conjunction with
the consolidated financial statements and notes thereto included in the December
31, 1999 Annual Report on Form 10-K for Peapack-Gladstone Financial Corporation
(the "Corporation").
The Corporation considers that all adjustments (all of which are normal
recurring accruals) necessary for a fair statement of the financial position and
results of operations for these periods have been made; however, results for
such interim periods are subject to year-end adjustments. Results for such
interim periods are not necessarily indicative of results for a full year.
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PEAPACK-GLADSTONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in thousands)
(Unaudited)
March 31, December 31,
2000 1999
--------- ------------
ASSETS
Cash and due from banks $ 15,480 $ 17,770
Federal funds sold 18,994 15,247
--------- ---------
Total cash and cash equivalents 34,474 33,017
Investment Securities:(approximate market value
$62,324 in 2000 and $61,033 in 1999) 63,317 61,672
Securities Available for Sale:(amortized cost
$100,533 in 2000 and $104,386 in 1999) 97,327 101,324
Loans:
Loans secured by real estate 277,995 261,946
Other loans 26,434 25,987
--------- ---------
Total loans 304,429 287,933
Less: Allowance for loan losses 3,072 2,962
--------- ---------
Net loans 301,357 284,971
Premises and equipment 11,197 9,718
Accrued interest receivable 3,705 3,444
Other assets 3,810 3,389
--------- ---------
TOTAL ASSETS $ 515,187 $ 497,535
========= =========
LIABILITIES
Deposits:
Noninterest-bearing demand deposits $ 92,976 $ 87,034
Interest-bearing deposits:
Checking 99,165 98,699
Savings 86,030 82,962
Money market accounts 44,013 33,605
Certificates of deposit over $100,000 34,285 33,637
Certificates of deposit less than $100,000 105,369 108,151
--------- ---------
Total deposits 461,838 444,088
Accrued expenses and other liabilities 4,562 5,872
--------- ---------
TOTAL LIABILITIES 466,400 449,960
STOCKHOLDERS' EQUITY
Common stock (no par value; stated value $1 2/3
per share; authorized 10,000,000 shares; issued
2,883,428 shares.) 4,801 4,599
Surplus 19,471 19,667
Treasury Stock at cost, 11,898 shares in 2000
and 11,841 shares in 1999 (655) (655)
Retained Earnings 27,269 25,918
Accumulated other comprehensive income-
net unrealized (losses) on securities
available for sale (net of income taxes) (2,099) (1,954)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 48,787 47,575
--------- ---------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 515,187 $ 497,535
========= =========
See accompanying notes to consolidated financial statements.
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PEAPACK-GLADSTONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share data)
(Unaudited)
Three months ended
March 31,
2000 1999
---------- ----------
INTEREST INCOME
Interest and fees on loans $ 5,876 $ 4,766
Interest on investment securities:
Taxable 807 773
Tax-exempt 156 134
Interest on securities available for sale:
Taxable 1,512 1,596
Dividends 0 6
Interest on federal funds sold 246 385
---------- ----------
Total interest income 8,597 7,660
INTEREST EXPENSE
Interest on savings account deposits 979 865
Interest on certificates of deposit over $100,000 297 415
Interest on other time deposits 1,468 1,331
---------- ----------
Total interest expense 2,744 2,611
---------- ----------
NET INTEREST INCOME BEFORE
PROVISION FOR LOAN LOSSES 5,853 5,049
Provision for loan losses 126 114
---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 5,727 4,935
---------- ----------
OTHER INCOME
Service charges and fees for other services 425 539
Trust Department Income 1,004 833
Securities gains 1 0
Other income 11 33
---------- ----------
Total other income 1,441 1,405
OTHER EXPENSES
Salaries and employee benefits 2,245 1,932
Premises and equipment 789 636
Merger Related Charges 500 0
Other expenses 994 930
---------- ----------
Total other expenses 4,528 3,498
---------- ----------
INCOME BEFORE INCOME TAX EXPENSE 2,640 2,842
Income tax expense 911 1,047
---------- ----------
NET INCOME $ 1,729 $ 1,795
========== ==========
EARNINGS PER SHARE (Reflects a 5% stock
dividend in 1999)
Basic $ 0.60 $ 0.63
Diluted $ 0.59 $ 0.61
Average basic shares outstanding 2,871,497 2,867,258
Average diluted shares outstanding 2,939,604 2,950,738
See accompanying notes to consolidated financial statements.
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PEAPACK-GLADSTONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in thousands)
(Unaudited)
Three Months Ended
March 31,
2000 1999
-------- --------
Balance, Beginning of Period $ 47,575 $ 44,461
Comprehensive income:
Net Income 1,729 1,795
Net unrealized holding losses on securities
arising during the period, net of tax (150) (781)
-------- --------
Total Comprehensive income 1,579 1,014
Common Stock Options Exercised 6 (13)
Cash Dividends Declared (373) (293)
-------- --------
Balance, March 31, $ 48,787 $ 45,169
======== ========
See accompanying notes to consolidated financial statements.
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PEAPACK-GLADSTONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income: $ 1,729 $ 1,795
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 254 249
Amortization of premium and accretion of
discount on securities, net 70 116
Provision for loan losses 126 114
Gains on securities (1) 0
Increase in interest receivable (261) (84)
(Increase) decrease in other assets (54) 452
(Decrease) increase in other liabilities (1,310) 1,316
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 553 3,958
-------- --------
INVESTING ACTIVITIES:
Proceeds from maturities of investment securities 8,922 7,189
Proceeds from maturities of securities available
for sale 5,156 2,327
Proceeds from calls of investment securities 10 4,600
Proceeds from sales and calls of securities available
for sale 0 5,000
Purchase of investment securities (10,594) (4,353)
Purchase of securities available for sale (1,800) (16,876)
Net decrease (increase) in short term investments 0 (470)
Net increase in loans (16,512) (10,423)
Net decrease in other real estate 0 (41)
Purchase of premises and equipment (1,733) (244)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (16,551) (13,291)
-------- --------
FINANCING ACTIVITIES:
Net increase in deposits 17,750 19,649
Dividends paid (373) (293)
Exercise of stock options 78 (13)
Purchase of treasury stock 0 0
-------- --------
NET CASH USED IN FINANCING ACTIVITIES 17,455 19,343
-------- --------
Net increase (decrease) in cash and cash equivalents 1,457 10,010
-------- --------
Cash and cash equivalents at beginning of period 33,017 52,389
-------- --------
Cash and cash equivalents at end of period $ 34,474 $ 62,399
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest on deposits $ 3,150 $ 2,604
Income taxes 10 50
</TABLE>
See accompanying notes to consolidated financial statements.
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PEAPACK-GLADSTONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. PRINCIPLES OF CONSOLIDATION
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, the Peapack-Gladstone Bank. All significant
intercompany balances and transactions have been eliminated from the
accompanying consolidated financial statements.
Effective January 7, 2000, the Corporation acquired Chatham Savings, FSB. The
acquisition has been accounted for as a pooling-of-interests and, accordingly,
the financial statements include the accounts and activities of Chatham for all
periods presented. The transaction resulted in the issuance of 305,730 shares of
the Corporation's common stock.
Prior periods have been restated as follows:
For the three months ended March 31, 1999
<TABLE>
<CAPTION>
As Previously Reported As Restated
---------------------- -----------
<S> <C> <C>
Net Interest Income after Provision for Loan Losses $ 4,297,000 $ 4,935,000
=========== ===========
Net Income $ 1,653,000 $ 1,795,000
=========== ===========
As of December 31, 1999:
Stockholders' Equity $40,715,000 $47,575,000
=========== ===========
</TABLE>
In the first quarter of 2000, the Corporation recorded a pre-tax merger charge
of $500,000 which primarily consisted of severance costs, professional fees and
consolidation costs directly attributable to the merger.
2. ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level that management considers
adequate to reflect the risk of future 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 condition of borrowers facing financial pressure, the
relationship of the current level of the allowance to the credit portfolio and
to non-performing loans and existing economic conditions. The process of
determining the adequacy of the allowance is necessarily judgmental and subject
to changes in external conditions. The allowance is increased by provisions
charged to expense and reduced by net charge-offs.
3. EARNINGS PER COMMON SHARE - BASIC AND DILUTED
Basic earnings per share is computed by dividing income available to common
stockholders 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).
4. COMPREHENSIVE INCOME
The Corporation's total comprehensive income for the three months ended March
31, 2000 and 1999 was $1,579,000 and $1,014,000. The difference between the
Corporation's net income and total comprehensive income for the three months
ended March 31, 2000 and 1999 relates to the change in the net unrealized losses
on securities available for sale during the applicable period of time.
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MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL: This Form 10-Q contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 which involve risks and
uncertainties. 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, technology
and market conditions. You can identify forward looking statements by looking
for words such as "expect", "look", "believe", "anticipate", "may", "will", or
similar statements or variations of such terms. These forward-looking statements
involve certain risks and uncertainties. Actual results may differ materially
from the results the forward-looking statements contemplate because of, among
others, the following factors: the direction of interest rates is different than
anticipated, declines in the levels of loan quality and origination volume,
relationships with major customers including sources for loans, a decline in
trust business, as well as the adverse effects of economic conditions and legal
and regulatory barriers and structure.
RESULTS OF OPERATIONS: The Corporation realized net income of $1,729,000 for the
first quarter of 2000, as compared to net income of $1,795,000 reported for the
same period in 1999. The first quarter of 2000 included non-recurring merger
related charges, net of taxes, totaling $423,000 or $0.14 per diluted share.
Earnings per diluted share were $0.59 for the first quarter of 2000 as compared
to $0.61 for the prior year.
First quarter 2000 operating earnings, before non-recurring merger related
charges totaled $2,152,000 or $0.73 per diluted share. This represents an
increase of $357,000 or 20% from earnings of $1,795,000 for the three months
ended March 31, 1999.
The increase in earnings before merger related charges for the first quarter of
2000 compared to 1999 was primarily the result of increased net interest income,
offset in part by higher other expenses.
EARNINGS ANALYSIS
INTEREST INCOME: Interest income for the quarter ended March 31, 2000 was
$8,597,000 an increase of $937,000 or 12.2% from the $7,660,000 reported for the
same period in 1999. The yield on average interest earnings assets on a fully
taxable equivalent basis increased 42 basis points to 7.07% for the first
quarter of 2000 from 6.65% for the first quarter of 1999. Average interest
earning assets were up $18,725,000 or 4.1%, with most of the growth experienced
in the residential mortgage categories.
INTEREST EXPENSE: The Corporation's interest expense for the first quarter of
2000 increased $133,000, or 5.1%, to $2,744,000 from $2,611,000 for the same
period last year. Interest on certificates of deposit rose $174,000 as rates
increased 44 basis points, offset in part by lower rates paid on other
interest-bearing deposits. The average cost of interest-bearing liabilities
decreased to 3.05% for the first quarter of 2000 from 3.07% for the first
quarter of 1999. Average interest-bearing liabilities increased by $20,420,000
for the first quarter of 2000 compared to the same period in 1999, while average
non-interest bearing deposits declined by $1,113,000.
NET INTEREST INCOME: The net effect of the changes in interest income and
interest expense for the first quarter of 2000 was an increase of $804,000 or
15.9% in net interest income as compared to the first quarter of 1999. The net
interest margin and net interest spread, on a fully taxable equivalent basis,
increased 42 basis points and 44 basis points, respectively, from the same
period last year.
OTHER INCOME: For the first quarter of 2000, other income increased $36,000 or
2.5% as compared to the same period a year ago. The increase was primarily due
to higher trust income, up $171,000 offset in part by reduced mortgage banking
activities.
OTHER EXPENSES: For the quarter ended March 31, 2000, other expenses increased
$1,030,000 from the same period last year. Included in the first quarter of 2000
were non-recurring merger related charges related to the Chatham acquisition of
$500,000 pre-tax. Excluding these charges, other expense increased by $530,000
or 15.2% from 1999. Salary and benefits expense increased $313,000 as compared
with the same period in 1999. Merit and promotional raises along with several
additions to the professional staff contributed to this increase. Premises and
equipment expense increased $153,000 as compared with the same period in 1999.
This increase was primarily
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due to higher occupancy and depreciation costs as various branch locations and
equipment were renovated and upgraded.
PROVISION FOR LOAN LOSSES: For the three months ended March 31, 2000, the
provision for loan losses was $126,000, compared to $114,000 for the same period
last year. The amount of the loan loss provision and the level of the allowance
for possible loan losses are based upon a number of factors including
Management's evaluation of potential losses in the portfolio, after
consideration of appraised collateral values, financial condition and past
credit history of the borrowers are well are prevailing and anticipated economic
conditions. Net charge-offs were $15,000 during the first quarter of 2000 as
compared with net charge-offs of $17,000 during the same period in 1999.
A summary of the allowance for loan losses for the three month period ended
March 31, follows:
(In thousands) 2000 1999
------- -------
Balance, January 1, $ 2,962 $ 2,428
Provision charged to expense 126 114
Loans charged off (34) (29)
Recoveries 18 12
------- -------
Balance, March 31, $ 3,072 $ 2,525
======= =======
INCOME TAXES: Income taxes declined from $1,047,000 in the first quarter of 1999
to $911,000 during the same period in 2000. The effective tax rate for the
quarters ended March 31, 2000 and 1999 was 35% and 37%, respectively.
CAPITAL RESOURCES: Maintaining a strong capital position is an important goal of
the Corporation. At March 31, 2000, total shareholders' equity (including net
unrealized (losses)) was $48,787,000, representing an 8% increase over the same
period in 1999. The Federal Reserve Board has adopted risk-based capital
guidelines for banks. The minimum guidelines for the ratio of total capital to
risk-weighted assets is 8%. At least half of the total capital is to be
comprised of common stock, retained earnings, minority interests in the equity
accounts of consolidated subsidiaries, non-cumulative preferred stock, less
goodwill and certain other intangibles ("Tier 1 Capital"). The remainder may
consist of other preferred stock, certain other instruments and a portion of the
loan loss allowance. At March 31, 2000, the Bank's Tier 1 Capital and Total
Capital ratios were 19.88% and 21.21%, respectively.
In addition, the Federal Reserve Board has established minimum leverage ratio
guidelines for banks. These guidelines provide for a minimum ratio of Tier 1
Capital to average total assets of 3% for banks that meet certain specified
criteria, including having the highest regulatory rating. All other banks are
generally required to maintain a leverage ratio of at least 3% plus an
additional cushion of 100 to 200 basis points. The Bank's leverage ratio at
March 31, 2000 was 9.12%.
Market Risk: The Corporation continues to monitor its exposure to various market
risk sensitive instruments. These instruments and procedures employed to monitor
market risks are listed in the Corporation's 1999 Annual Report. There has been
no significant change in market risk since December 31, 1999.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No information is reported under this item.
ITEM 2. CHANGES IN SECURITIES
No changes have been made to the rights of holders of any class of securities
during the first quarter of 2000.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No default has occurred with respect to any of the Corporation's securities
during 2000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
9
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No information is reported under this item.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
On January 11, 2000 the Corporation reported on Form 8-K the completion of
the acquisition of Chatham Savings, FSB.
On March 2, 2000 the Corporation reported on Form 8-K its results of
operations for the one month ended February 29, 2000, solely to present the
combined financial results for the Corporation to comply with
pooling-of-interests accounting requirements in connection with the acquisition
of Chatham Savings, FSB.
10
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 11th day of May 2000.
PEAPACK-GLADSTONE FINANCIAL CORPORATION
(Registrant)
BY _______________________________________
(FRANK A. KISSEL, PRESIDENT
AND CHIEF EXECUTIVE OFFICER)
_______________________________________
(ARTHUR F. BIRMINGHAM, SENIOR
VICE PRESIDENT AND TREASURER)
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 34,474
<SECURITIES> 160,644
<RECEIVABLES> 308,134
<ALLOWANCES> 3,072
<INVENTORY> 0
<CURRENT-ASSETS> 3,810
<PP&E> 11,197
<DEPRECIATION> 0
<TOTAL-ASSETS> 515,187
<CURRENT-LIABILITIES> 461,838
<BONDS> 0
0
0
<COMMON> 4,801
<OTHER-SE> 43,986
<TOTAL-LIABILITY-AND-EQUITY> 515,187
<SALES> 0
<TOTAL-REVENUES> 10,038
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,528
<LOSS-PROVISION> 126
<INTEREST-EXPENSE> 2,744
<INCOME-PRETAX> 2,640
<INCOME-TAX> 911
<INCOME-CONTINUING> 1,729
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,729
<EPS-BASIC> 0.60
<EPS-DILUTED> 0.59
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 33,017
<SECURITIES> 162,996
<RECEIVABLES> 291,377
<ALLOWANCES> 2,962
<INVENTORY> 0
<CURRENT-ASSETS> 3,389
<PP&E> 9,718
<DEPRECIATION> 0
<TOTAL-ASSETS> 497,535
<CURRENT-LIABILITIES> 444,088
<BONDS> 0
0
0
<COMMON> 4,433
<OTHER-SE> 43,142
<TOTAL-LIABILITY-AND-EQUITY> 497,535
<SALES> 0
<TOTAL-REVENUES> 36,942
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 15,276
<LOSS-PROVISION> 555
<INTEREST-EXPENSE> 10,340
<INCOME-PRETAX> 10,771
<INCOME-TAX> 3,582
<INCOME-CONTINUING> 7,189
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,189
<EPS-BASIC> 2.51
<EPS-DILUTED> 2.44
</TABLE>
