FINANCIAL HIGHLIGHTS
(dollars in thousands, except per share data)
1997 1996 1995
---- ---- ----
SELECTED YEAR-END DATA:
NET INCOME ......................... $ 4,492 $ 3,579 $ 3,907
TOTAL ASSETS ....................... 363,665 327,404 300,076
TOTAL DEPOSITS ..................... 328,473 295,190 269,504
TOTAL SECURITIES ................... 145,558 139,794 136,430
TOTAL LOANS ........................ 174,374 149,874 122,432
STOCKHOLDERS' EQUITY ............... 33,639 30,208 28,376
TRUST DEPARTMENT ASSETS (BOOK VALUE) 453,671 378,879 251,254
FINANCIAL RATIOS:
RETURN ON AVERAGE ASSETS ........... 1.30% 1.13% 1.37%
RETURN ON AVERAGE EQUITY ........... 14.22% 12.41% 15.05%
CAPITAL LEVERAGE RATIO ............. 9.40% 9.43% 9.63%
RISK BASED CAPITAL:
TIER I ............................. 20.25% 24.06% 23.63%
TOTAL .............................. 21.43% 25.37% 24.68%
PER SHARE:
EARNINGS-BASIC ..................... $ 1.93 $ 1.53 $ 1.67
EARNINGS-DILUTED ................... 1.90 1.52 1.67
BOOK VALUE ......................... 14.47 12.97 12.15
EXHIBIT 13
PEAPACK-GLADSTONE FINANCIAL CORPORATION
1997 ANNUAL REPORT
To Our Shareholders and Friends:
This is the first annual report of Peapack-Gladstone Financial Corporation.
Shareholders overwhelmingly approved the formation of our holding company at the
special meeting on December 11, 1997. Peapack-Gladstone Bank shareholders
received Peapack-Gladstone Financial Corporation stock in a tax free exchange.
The Board of Peapack-Gladstone Financial Corporation immediately voted to
pay a 2X1 stock split to shareholders on December 29, 1997. The timing enabled
us to pay the split as the new holding company stock certificates were being
distributed. The end result was that shareholders received two shares of
Peapack-Gladstone Financial Corporation stock for each share of
Peapack-Gladstone Bank stock. It was an exciting month that ended a very
productive year.
As Mr. Hill has said, we felt that forming the holding company was an
important step for our future. It was not in response to or in anticipation of
any particular transaction. However, when we contemplate new services for our
customers, the structure may best be accommodated in a holding company format.
It just made sense to address this issue at this time.
In my talk at the special meeting in December, I said, "There is no
question in anyone's mind that the financial services industry is undergoing
tremendous change. Barely does a day go by when there isn't another announcement
of a consolidation or a new financial product or a better way to provide it. All
these changes caused us to take a long, hard look at what we do and how we do
it. The Board and virtually every officer in the Bank has spent endless hours in
strategic planning sessions to be sure that our mission is still viable in this
consolidating industry. We emerged from these sessions with renewed confidence
that an independent community bank, particularly in our community, not only can
be successful but can thrive in this rapidly changing environment.
We are convinced that technology is the key to efficient, better, and more
convenient service for our customers. Great use of technology and great service
to the customer do not have to be exclusive of each other. We are excited about
this, and we will move ahead with implementing new technology as quickly as
practicable and as soon as budgets will bear."
Planning for and implementing new technologies has been a major focus for
the Bank. An upgrade of our mainframe computer took place in the Fall. It is
extraordinary that the new machine has more than twenty times the "horsepower"
for 20% less cost than the machine purchased just four years ago. Imagine how
productive we could all be if those sorts of efficiencies were found in
everything we do.
During 1998 we will upgrade many of our main software systems which will
enable us to provide better, faster service for customers. We will also be
offering three important new services during the course of 1998. A new,
comprehensive phone banking system will enable customers to gain access to
information about their accounts, specifically, and the Bank in general, 24
hours a day, seven days a week. This system is targeted for late spring or early
summer. Later in the year we will put in a new call center which will give us
the opportunity to provide customers more complete information about their
accounts and other services that are available to them. It is our belief that
both of these new services will make banking at Peapack-Gladstone Bank even more
convenient for our customers.
We are also planning to offer THE CHAIRMAN'S CLUB to our senior customers.
THE CHAIRMAN'S CLUB will combine discounted banking services with special
newsletters and activities for this important segment of our customer base. This
will not only be fun and informative for the members, but good business for the
Bank as well.
One highlight of 1997 was our stock performance. The price of shares at the
beginning of 1997 was $56.50. Adjusted for the 2X1 stock split, shares traded at
$40.50 by the end of the year. This represents a 43% increase during that
period. That is in addition to the 31% increase recorded in our letter for the
year 1996. Nobody should believe that stock prices only go in one direction
forever, however, I do believe that the strong performance of our stock is a
reflection of the outstanding support we have traditionally had from our
shareholders. We thank you for that.
Net income increased from $3,579,000 to $4,492,000, a record for our
company, representing a 26% rise in earnings for the year. Return on average
assets and equity also improved to 1.30% and 14.22%, respectively. We look
forward to further improvement in the future.
I am pleased to report that our Trust and Investment Department continues
to grow rapidly as more and more customers take advantage of the services
provided there. Market value of assets held in the Department at year end grew
to over $676,000,000. I encourage each of you to visit this Department. We can
be a valuable resource to you and your family regarding investment management,
custody accounts, trusts, wills, bequests, mutual funds, and retirement account
services.
As we explore ways to be more valuable to you and all our customers, the
concept of what a top notch financial services company should be continues to
evolve. We are excited about the opportunities that the future will bring.
We want to thank our shareholders, our Board and all the employees who have made
1997 such an important year. We wish each of you a happy and prosperous 1998.
MANAGEMENT DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS: Peapack-Gladstone Financial Corporation's performance in
its inaugural year of 1997 was highlighted by sharply higher net interest
income, which resulted from strong loan growth which was funded by equally
strong core deposit growth. Assimilation of our new branches opened in 1996 in
Chester and Fellowship Village was a strong factor in our success.
Another significant factor during 1997 was the continued growth in the
Trust and Investment Department, as total fees generated increased 16% to nearly
$1.5 million. Fee generation has become a vital area of importance for financial
institutions as increased competition erodes traditional community bank profit
margins.
As a result of sustained earnings and capital growth, the Board of
Directors declared a two-for-one stock split effective December 29, 1997. This
constituted the third consecutive year that the Corporation has either declared
a stock split or a stock dividend.
Net income for the year ended December 31, 1997 amounted to $4,492,000 as
compared to $3,579,000 and $3,907,000 earned for the comparable periods in 1996
and 1995, respectively. The resulting diluted earnings per share amounted to
$1.90 for 1997 as compared to $1.52 and $1.67 earned in 1996 and 1995,
respectively. These figures have been restated to reflect the two-for-one stock
splits effective in 1997 and 1995 and the five percent stock dividend in 1996.
Key performance ratios reflected the strong results as the return on
average assets during 1997 was 1.30% as compared to 1.13% for the previous year,
while the return on average equity was 14.22% versus 12.41% for 1996.
The operating results of the Corporation depend primarily on net interest
income, which is the difference between interest income on interest-earning
assets, consisting primarily of loans and securities and interest expense on
interest-bearing deposits. The performance is also affected by the provision for
loan losses, resulting from management's assessment of the adequacy of the
allowance for loan losses, the level of noninterest income, including fees from
Trust Department operations, noninterest expense and income tax expense. Each of
these principal categories of net income are discussed below.
EARNING ASSETS: Total earning assets, consisting primarily of loans,
securities, and federal funds sold, increased approximately 10% from
$305,468,000 at December 31, 1996 to $335,432,000 at year-end 1997.
LOANS: The loan portfolio represents the Corporation's largest earning
asset balance and is a significant source of interest and fee income.
Total loans increased $24,500,000 or 16% from year-end 1996 levels. This
growth was focused primarily in the real estate sector, as loans secured by real
estate increased $24,926,000. The increase related primarily to the
Corporation's intent to lend within its geographic market areas to customers
seeking residential first mortgages on their primary residence. Total loans at
year-end were $174,374,000 and $149,874,000 in 1997 and 1996, respectively.
The following table presents an analysis of outstanding loans as of December 31,
(In thousands) 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Real Estate - Construction $ 4,213 $ 4,703 $ 1,686 $ 1,865 $ 2,371
Real Estate - Mortgage
1-4 Family Residential:
First Liens 99,168 77,365 59,410 47,993 47,904
Junior Liens 10,914 11,147 9,804 9,035 8,591
Home Equity 6,238 4,817 4,757 4,110 4,317
Real Estate - Commercial 29,151 26,726 22,882 19,484 18,139
Commercial Loans 10,332 11,832 10,396 9,682 6,369
Consumer Loans 13,462 11,219 10,882 11,374 10,138
Other Loans 896 2,065 2,615 1,841 1,944
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL LOANS $174,374 $149,874 $122,432 $105,384 $99,773
===========================================================================================================================
The following table sets forth the maturity distribution of the Corporation's
loan portfolio as of December 31, 1997. The table excludes real estate loans
(other than construction loans) and installment loans:
Due After
Due in One Year
One Year Through Due After Years
(In thousands) or Less Five Years Five Years Total
- -------------- -------- ---------- ---------- -----
Commercial Loans $ 2,741 $4,542 $3,049 $10,332
Construction Loans 3,434 356 423 4,213
- -------------------------------------------------------------------------------
TOTAL $ 6,175 $4,898 $3,472 $14,545
===============================================================================
The following table sets forth, as of December 31, 1997, the sensitivity of the
loan amounts due after one year to changes in interest rates. The table excludes
real estate loans (other than construction loans) and installment loans:
Due After
One Year Due
Through After Five
(In thousands) Five Years Years
---------- -----------
Fixed Interest Rates $2,912 $3,346
Variable Interest Rates 1,986 126
- --------------------------------------------------------------------------------
TOTAL $4,898 $3,472
================================================================================
INVESTMENT SECURITIES: Investment securities are those securities that the
Corporation has both the ability and intent to be held to maturity. These
securities are carried at amortized cost. The portfolio consists of U.S.
Treasury and U.S. government agency and municipal obligations. The
Corporation's investment securities amounted to $53,978,000 at December 31,
1997, compared with $55,198,000 at year-end 1996.
The following table presents the contractual maturities of investment securities
at amortized cost, as of December 31, 1997:
After 1 After 5
Within But Within But Within After
(In thousands) 1 Year 5 Years 10 Years 10 Years Total
------ ---------- ---------- --------- -----
U.S. Treasury $6,998 $12,999 $ -- $ -- $19,997
U.S. Government Agencies -- 21,558 3,002 -- 24,560
State and Political Subdivisions 1,282 4,083 3,608 448 9,421
- ---------------------------------------------------------------------------------------------------------------
TOTAL $8,280 $38,640 $6,610 $ 448 $53,978
===============================================================================================================
SECURITIES AVAILABLE FOR SALE: Securities available for sale are used as a part
of the Corporation's interest rate risk management strategy, and they may be
sold in response to changes in interest rates, liquidity needs, and other
factors. These securities are carried at estimated fair value, and unrealized
changes in fair value are recognized as a separate component of stockholders'
equity, net of income taxes. Realized gains and losses are recognized in income
at the time the securities are sold.
At December 31, 1997, the Corporation had securities available for sale with a
market value of $91,580,000, compared with $84,596,000 at year-end 1996. A
$476,000 and $329,000 unrealized gain (net of income tax) was included in
stockholders' equity at December 31, 1997 and December 31, 1996, respectively.
The following table presents the contractual maturities of debt securities
available for sale, stated at market value, as of December 31, 1997:
After 1 After 5
Within But Within But Within After
In thousands) 1 Year 5 Years 10 Years 10 Years Total
- -------------- ------- ---------- ---------- -------- -----
U.S. Treasury $ 10,044 $39,682 $ -- $ -- $49,726
U.S. Government Agencies -- 23,998 13,075 -- 37,073
Other Debt Securities Available for Sale 1,002 996 -- -- 1,998
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL $11,046 $64,676 $13,075 $ -- $88,797
===========================================================================================================================
Federal funds sold are an integral part of the Corporation's investment and
liquidity strategies. The average balance of federal funds sold during 1997 and
1996 was $15.7 million and $16.6 million, respectively.
DEPOSITS: Total deposits increased $33,283,000 or 11% to $328,473,000 at
December 31, 1997, compared to $295,190,000 at year-end 1996.
Noninterest-bearing demand deposits increased $20,173,000 or 37%, reflecting
marketing promotions and strong growth in new and existing market areas. Super
NOW accounts and certificates of deposits also grew at a steady pace, up
$8,847,000 and $8,484,000, respectively.
The Corporation does not participate in the brokered deposit market, and
certificates of deposit over $100,000 are generally purchased by local municipal
governments or individual depositors for periods of one year or less. These
factors translate into a stable customer oriented cost-effective funding source.
The following table shows remaining maturity for certificates of deposit over
$100,000 as of December 31, 1997 (in thousands):
Three months or less.................................$ 9,032
Over three months through twelve months.............. 2,818
Over twelve months................................... 6,393
-------
Total................................................$18,243
=======
The following table sets forth information concerning the composition of the
Corporation's average deposit base and average interest rates paid for the
following years:
1997 1996 1995
---- ---- ----
(In thousands) $ % $ % $ %
- - - - - -
Noninterest-Bearing Demand Deposits $ 61,508 -- $ 50,861 -- $ 43,493 --
Super NOW Deposits 67,097 1.29 59,950 1.74 53,533 2.08
Savings Deposits 71,624 2.46 72,799 2.89 71,418 2.94
Money Market Deposits 27,919 2.89 26,512 2.99 27,792 2.97
Certificates of Deposit 82,358 5.17 75,322 5.24 61,223 5.21
- -------------------------------------------------------------------------------------------------------------------------
TOTAL DEPOSITS $310,506 $285,444 $257,459
===========================================================================================================================
NET INTEREST INCOME: Net interest income on a tax-equivalent basis, the largest
component of operating income, equaled $15,323,000 for 1997, an increase of 16%
over the $13,208,000 for 1996. This increase in net interest income was
primarily due to the $25,776,000 increase in average interest-earning assets,
lower cost of funds and strong growth in demand deposits, up $10,647,000 on
average. The net interest margin for 1997 was 4.83%, an increase of 29 basis
points from 4.54% for 1996.
In 1997, the higher volume of interest-earning assets increased interest income
by $2,103,000 offset in part by lower rates earned which lowered interest income
by $179,000. When the effects of volume and rate are combined, total interest
income increased $1,924,000 compared to 1996, on a tax-equivalent basis.
The higher level of interest-bearing liabilities increased total interest
expense by $501,000 while lower interest rates paid reduced total interest
expense by $692,000. The combined effects of the volume and rate changes reduced
total interest expense by $191,000 which, when coupled with the $1,924,000
increase in total interest income, increased net interest income by $2,115,000
on a tax-equivalent basis.
The net interest rate spread, defined as the yield on total interest-earning
assets on a tax-equivalent basis less the cost of funds on total
interest-bearing liabilities, rose 28 basis points to 4.17% for 1997 from 3.89%
from 1996.
Tax-equivalent net interest income equaled $13,208,000 for 1996, an increase of
$760,000 from the $12,448,000 earned in 1995. The net interest margin of 4.54%
for 1996 resulted in a decrease of 20 basis points compared to 4.74% for 1995.
The following table compares the average balance sheet, net interest spreads and
net interest margins for the periods ended December 31, 1997, 1996, and 1995
(fully tax-equivalent - FTE): (in thousands, except yield information)
YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------------
Average Income/ Yield
Balance Expense(FTE) (FTE)
---------- ------------ ------
ASSETS:
INTEREST-EARNING ASSETS:
Investments
Taxable $132,547 $ 8,497 6.41%
Tax-Exempt 10,495 655 6.24%
Loans 158,232 13,025 8.23%
Federal Funds Sold 15,681 844 5.38%
-------- ------- ----
TOTAL INTEREST-EARNING ASSETS 316,955 23,021 7.26%
-------- ------- ----
NONINTEREST-EARNING ASSETS:
Cash and Due from Banks 16,713
Allowance for Loan Losses (1,773)
Premises and Equipment 8,508
Other Assets 4,373
--------
TOTAL NONINTEREST- EARNING ASSETS 27,821
--------
TOTAL ASSETS $344,776
========
LIABILITIES AND STOCKHOLDERS' EQUITY:
INTEREST-BEARING DEPOSITS:
Super NOW $ 67,097 $ 867 1.29%
Money Market 27,919 807 2.89%
Savings 71,624 1,765 2.46%
Certificates of Deposit 82,358 4,259 5.17%
-------- ------ ----
TOTAL INTEREST-BEARING DEPOSITS 248,998 7,698 3.09%
-------- ------ ----
NON-INTEREST BEARING LIABILITIES:
Demand Deposits 61,508
Accrued Expenses and Other Liabilities 2,686
--------
TOTAL NONINTEREST- BEARING LIABILITIES 64,194
--------
STOCKHOLDERS' EQUITY 31,584
TOTAL LIABILITIES AND STOCKHOLDERS' --------
EQUITY $344,776
========
NET INTEREST INCOME $15,323
=======
NET INTEREST SPREAD 4.17%
----
NET INTEREST MARGIN 4.83%
----
YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------------
Average Income/ Yield
Balance Expense(FTE) (FTE)
---------- ------------ ------
ASSETS:
INTEREST-EARNING ASSETS:
Investments
Taxable $129,028 $ 8,363 6.48%
Tax-exempt 10,682 715 6.69%
Loans 134,825 11,150 8.27%
Federal Funds Sold 16,644 869 5.22%
-------- ------- ----
TOTAL INTEREST-EARNING ASSETS 291,179 21,097 7.25%
-------- ------- ----
NONINTEREST- EARNING ASSETS:
Cash and Due from Banks 14,404
Allowance for Loan Losses (1,446)
Premises and Equipment 8,218
Other Assets 4,549
--------
TOTAL NONINTEREST- EARNING ASSETS 25,725
TOTAL ASSETS $316,904
========
LIABILITIES AND STOCKHOLDERS' EQUITY:
INTEREST-BEARING DEPOSITS:
Super NOW $59,950 $ 1,042 1.74%
Money Market 26,512 793 2.99%
Savings 72,799 2,107 2.89%
Certificates of Deposit 75,322 3,947 5.24%
-------- ------- ----
TOTAL INTEREST-BEARING DEPOSITS 234,583 7,889 3.36%
-------- ------- ----
NONINTEREST- BEARING LIABILITIES:
Demand Deposits 50,861
Accrued Expenses and Liabilities 2,617
--------
TOTAL NONINTEREST- BEARING LIABILITIES 53,478
STOCKHOLDERS' EQUITY 28,843
--------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $316,904
========
NET INTEREST INCOME $13,208
========
NET INTEREST SPREAD 3.89%
-----
NET INTEREST MARGIN 4.54%
-----
YEAR ENDED DECEMBER 31, 1995
Average Income/ Yield
Balance Expense(FTE) (FTE)
------- ------------ -----
ASSETS:
INTEREST-EARNING ASSETS:
Investments
Taxable $120,506 $ 8,084 6.71%
Tax Exempt 14,981 1,245 8.31%
Loans 111,382 9,455 8.49%
Federal Funds Sold 15,550 895 5.76%
-------- ------- -----
TOTAL INTEREST-EARNING ASSETS 262,419 19,679 7.50%
-------- ------- -----
NONINTEREST-EARNING ASSETS:
Cash and Due from Banks 12,109
Allowance for Loan Losses (1,365)
Premises and Equipment 6,943
Other Assets 5,694
--------
TOTAL NONINTEREST- EARNING ASSETS 23,381
--------
TOTAL ASSETS $285,800
========
LIABILITIES AND STOCKHOLDERS' EQUITY:
INTEREST-BEARING DEPOSITS:
Super NOW $ 53,533 $ 1,111 2.08%
Money Market 27,792 826 2.97%
Savings 71,418 2,102 2.94%
Certificates of Deposit 61,223 3,192 5.21%
-------- ----- -----
TOTAL INTEREST-BEARING DEPOSITS 213,966 7,231 3.38%
-------- ----- -----
NONINTEREST-BEARING LIABILITIES:
Demand Deposits 43,493
Accrued Expenses and Liabilities 2,384
--------
TOTAL NONINTEREST- BEARING LIABILITIES 45,877
--------
STOCKHOLDERS' EQUITY 25,957
--------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $285,800
========
NET INTEREST INCOME $ 12,448
========
NET INTEREST SPREAD 4.12%
-----
NET INTEREST MARGIN 4.74%
-----
1. Average loan balances include non-accrual and restructured loans.
2. The tax-equivalent adjustment was computed based on a federal tax rate of
34%.
3. Investments consist of investment securities and securities available for
sale.
RATE/VOLUME ANALYSIS (fully tax-equivalent basis):
The effect of volume and rate changes on net interest income for the year ended
December 31, 1997 and 1996 are shown below: (In thousands)
YEAR ENDED 1997 COMPARED WITH 1996 YEAR ENDED 1996 COMPARED WITH 1995
NET DIFFERENCE DUE TO CHANGE IN: NET DIFFERENCE DUE TO CHANGE IN:
INCOME/ INCOME/
------------------------------------- --------------------------------------
VOLUME RATE EXPENSE VOLUME RATE EXPENSE
------- ----- ------- ------- ---- -------
ASSETS
Investments $217 $(143) $74 $(161) $ (90) $ (251)
Loans 1,936 (61) 1,875 1,990 (295) 1,695
Federal Funds Sold (50) 25 (25) 63 (89) (26)
-------- ------- ------ ------- ------- ------
TOTAL INTEREST
INCOME $2,103 $ (179) $1,924 $1,892 $(474) $1,418
======== ======= ====== ======= ======= ======
LIABILITIES
Super NOW $124 $(299) $(175) $ 133 $ (202) $ (69)
Money Market 42 (28) 14 (38) 5 (33)
Savings (34) (308) (342) 41 (36) 5
Certificates of
Deposit 369 (57) 312 735 20 755
-------- ------- ------ ------- ------- ------
TOTAL INTEREST
EXPENSE $501 $(692) $(191) $871 $(213) $658
======== ======= ====== ======= ======= ======
PROVISION FOR LOAN LOSSES: The provision for loan losses represents management's
determination of the amount necessary to bring the allowance for loan losses to
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 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 total provision for loan losses for 1997 was $400,000 as compared to
$642,000 in 1996 and $75,000 in 1995. Net charge-offs for 1997, 1996 and 1995
were $143,000, $227,000 and $327,000, respectively. Additionally, non-performing
loans (consisting of all non-accrual loans and loans over 90 days past due and
still accruing interest) were $846,000 in 1997, $1,305,000 in 1996 and
$1,177,000 in 1995. Other real estate owned at year-end 1997 totaled $340,000,
representing a 21% decrease from the $432,000 level of 1996. Other real estate
owned on December 31, 1995 was $999,000. The allowance for loan losses was
$1,893,000 at December 31, 1997 as compared to $1,636,000 at December 31, 1996.
The allowance for loan losses currently provides 224% coverage of all
non-performing loans. At December 31, 1997, the allowance for loan losses as a
percentage of total loans outstanding was 1.09% compared to 1.09% at year-end
1996 and 1.00% at year-end 1995.
The following table presents the loan loss experience during the periods ended
December 31:
(In thousands) 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Allowance for Loan Losses at
beginning of year $1,636 $1,221 $1,473 $1,538 $1,101
Loans charged off during the period:
Real Estate 150 202 190 -- 805
Consumer 97 49 34 286 26
Commercial and Other 35 25 153 -- 173
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL LOANS CHARGED-OFF 282 276 377 286 1,004
- ---------------------------------------------------------------------------------------------------------------------------
Recoveries during the period:
Real Estate 105 19 -- 94 4
Consumer 25 8 8 7 16
Commercial and Other 9 22 42 60 11
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RECOVERIES 139 49 50 161 31
- ---------------------------------------------------------------------------------------------------------------------------
Net Charge-offs 143 227 327 125 973
- ---------------------------------------------------------------------------------------------------------------------------
Provision charged to expense 400 642 75 60 1,410
- ---------------------------------------------------------------------------------------------------------------------------
Allowance for Loan Losses at end of year $1,893 $1,636 $1,221 $1,473 $1,538
===========================================================================================================================
The following table shows the allocation of the allowance for loan losses as of
December 31:
(In thousands) 1997 % 1996 % 1995 %
---- - ---- - ---- -
Real Estate $ 946 50 $ 818 50 $ 611 50
Consumer 95 5 82 5 61 5
Commercial and Other 852 45 736 45 549 45
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL $1,893 100 $1,636 100 $1,221 100
===========================================================================================================================
NON-PERFORMING ASSETS
The following table presents for the years indicated the components of
non-performing assets: (In thousands)
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Loans past due 90 days or more
and still accruing interest $ 104 $ 122 $ 636 $ 161 $ --
Non-accrual loans 742 1,183 541 697 1,215
Total non-performing loans 846 1,305 1,177 858 1,215
- ---------------------------------------------------------------------------------------------------------------------------
Other real estate owned 340 432 999 1,592 2,436
Total non-performing assets 1,186 1,737 2,176 2,450 3,651
- ---------------------------------------------------------------------------------------------------------------------------
Loan charge-offs 282 276 377 286 1,004
Loan recoveries 139 49 50 161 31
Net loan charge-offs 143 227 327 125 973
- ---------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses $1,893 $1,636 $1,221 $1,473 $1,538
===========================================================================================================================
RATIOS:
Total non-performing loans/Total loans 0.49% 0.87% 0.96% 0.81% 1.22%
Total non-performing loans/Total assets 0.23% 0.40% 0.39% 0.31% 0.43%
Total non-performing assets/Total assets 0.33% 0.53% 0.73% 0.88% 1.30%
Allowance for loan losses/Total loans 1.09% 1.09% 1.00% 1.40% 1.54%
Allowance for loan losses/Total
non-performing loans 223.76% 125.36% 103.74% 171.68% 126.58%
Interest income of $47,000, $82,000 and $44,000 would have been recognized
during 1997, 1996, and 1995, respectively, if non-accrual loans had been current
in accordance with their original terms.
OTHER INCOME: Other income before gains on securities was $3,219,000 in 1997,
representing a 12% increase from 1996 and a 37% increase from 1995. This
increase was primarily due to higher service charges and higher trust fees.
Service charges on deposit accounts increased to just over $1.3 million in 1997,
representing a 9% gain over 1996 and a 30% gain over 1995. Trust department fees
for 1997 were $1,474,000, 16% higher than 1996 and 46% higher than 1995. For the
year ended December 31, 1997, securities gains were $29,000 as compared to gains
of $118,000 and $62,000 for 1996 and 1995, respectively.
The following table presents the major components of other income:
(in thousands) YEARS ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
---- ---- ----
Service charges on deposit accounts $1,307 $1,202 $ 1,002
Trust Department fees 1,474 1,270 1,009
Safe deposit rental fees 164 157 145
Other fee income 180 145 103
Check printing fees 49 36 40
Other non-interest income 45 59 58
- ---------------------------------------------------------------------------------------------------------------------------
Other income before gain on securities 3,219 2,869 2,357
Securities gains 29 118 62
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME $3,248 $2,987 $2,419
===========================================================================================================================
OTHER EXPENSE: Other expense during 1997 was $10,726,000 as compared with
$10,072,000 in 1996 and $9,108,000 in 1995. The increase in 1996 versus 1995 was
primarily attributable to the addition of a new administration building and two
new branch offices.
As in most financial institutions, the largest components of other expense
are salaries and employee benefits. Normal merit and promotional raises plus the
addition of several well-qualified individuals contributed to a 7% increase in
salary expense which was $4,639,000 in 1997, $4,327,000 in 1996 and $3,849,000
in 1995. Contributions to the employee savings and profit sharing plan were
approximately $198,000 in 1997, $146,000 in 1996 and $118,000 in 1995. The
Corporation sponsors
a noncontributory defined benefit pension plan for its employees. The net
periodic pension cost was $348,000, $337,000 and $309,000 for 1997, 1996 and
1995, respectively.
Total other expense, excluding salaries and employee benefits, increased
$149,000 or 3% over 1996 levels. This modest increase reflects efforts by
management and staff to control expenses and maximize operating efficiencies.
The Corporation's efficiency/overhead ratio (other expense as a percentage
of the sum of net interest income on a tax-equivalent basis and other income)
improved to 57.76% from 62.19% in 1996.
The following table presents the major components of other expense:
(in thousands) YEARS ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
---- ---- ----
Salaries $4,639 $4,327 $3,849
Retirement, health and other benefits 1,454 1,261 1,340
Premises and equipment 2,231 2,124 1,491
FDIC insurance assessment 37 1 288
Stationery and Supplies 279 245 163
Check printing expense 60 46 40
Postage 218 259 207
Telephone 187 163 136
Other expense 1,621 1,646 1,594
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER EXPENSE $10,726 $10,072 $9,108
===========================================================================================================================
INCOME TAXES: Income tax expense for the year ended December 31, 1997 was
$2,822,000 as compared to $1,760,000 and $1,518,000 for the years 1996 and 1995,
respectively. The increased income tax expense reflects changes in the levels of
taxable income relative to tax-exempt income and certain deferred tax
adjustments.
CAPITAL RESOURCES: The solid capital base of the Bank provides the ability for
future growth and financial strength. Maintaining a strong capital position
supports the Bank's goal of providing shareholders an attractive and stable
long-term return on investment. At $33,639,000, total stockholders' equity grew
11% or $3,431,000 as compared with $30,208,000 at year-end 1996. At year-end
1997, unrealized gains net of taxes were $476,000 as compared to unrealized
gains of $329,000 at December 31, 1996. Federal regulations require banks to
meet target Tier 1 and total capital ratios of 4% and 8%, respectively. At
20.25% and 21.43%, the Bank's Tier 1 and total capital ratios are well in excess
of regulatory minimums. The Bank's capital leverage ratio was 9.40% at December
31, 1997.
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 investment securities.
Management feels the Corporation's liquidity position is sufficient to meet
any future needs. Cash and cash equivalents, including federal funds sold,
averaged over $32 million in 1997. In addition, the Corporation has over $91
million in securities designated as available for sale. These securities can be
sold in response to liquidity concerns. As of December 31, 1997, investment
securities and securities available for sale maturing within one year amounted
to $21,324,000 and cash and cash equivalents totaled $33,240,000.
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, sales of securities under repurchase
agreements, loan participation or sales of loans and sales of securities
available for sale. The Corporation also generates liquidity from the regular
principal payments made on its loan portfolio.
INTEREST RATE SENSITIVITY: Interest rate sensitivity is a measure of the
relationship between interest-earning assets and supporting funds which are
susceptible to changes in interest rates during comparable time periods.
Interest rate movements and deregulation of interest rates on deposits have made
managing the Corporation's interest rate sensitivity increasingly more important
as a means of managing net interest income. The Corporation's Asset/Liability
Committee is responsible for managing the exposure to changes in market interest
rates. The "sensitivity" gap quantifies the repricing mismatch between assets
and supporting funds over various time intervals. The cumulative gap position as
a percentage of total rate-sensitive assets provides one relative measure of the
Corporation's interest rate exposure.
The Corporation's ratio of rate-sensitive assets to rate-sensitive
liabilities was approximately .36 on December 31, 1997 based on contractual
maturities for the next twelve months subject to certain assumptions explained
in the following paragraph. Since this ratio is less than 1.00, the Corporation
has a "negative gap" position which may cause its assets to reprice more slowly
than its deposit liabilities. In a declining interest rate environment, interest
costs may be expected to fall faster than the interest received on earning
assets, thus increasing the net interest spread. If interest rates increase, a
negative gap means that the interest received on earning assets may be expected
to increase more slowly than the interest paid on the Corporation's liabilities,
therefore decreasing the net interest spread.
For purposes of calculating the gap position, interest-earning demand
deposits, money market deposits and savings deposits are included in the 0-3
month category. The Corporation recognizes that certain of these deposits are
more stable with an effective maturity greater than their repricing frequency.
Assets with daily floating rates are included in the 0-3 month category. Assets
and
liabilities are included based on their maturities or period to first repricing,
subject to the foregoing assumptions.
The table below presents the maturity and repricing relationships between
interest-earning assets and interest-bearing deposits as of December 31, 1997.
(In thousands)
Repricing or 0 - 3 3 - 12 1 - 5 Over 5
Maturity Date Months Months Years Years Total
------ ------ ----- ------ ----------
ASSETS
Securities $ 12,228 $ 9,575 $103,317 $ 20,438 $145,558
Federal Funds Sold 15,500 -- -- -- 15,500
Loans (1) 28,936 10,833 51,112 82,751 173,632
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST-
SENSITIVE ASSETS $ 56,664 $20,408 $154,429 $103,189 $334,690
===========================================================================================================================
DEPOSITS
Certificates of Deposit $ 22,405 $28,012 $ 37,556 $ -- $ 87,973
Savings 70,419 -- -- -- 70,419
Money Market Accounts 24,624 -- -- -- 24,624
Super NOW 70,745 -- -- -- 70,745
Noninterest-Bearing Demand Deposits -- -- -- 74,712 74,712
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST-
SENSITIVE DEPOSITS $188,193 $28,012 $ 37,556 $ 74,712 $328,473
===========================================================================================================================
ASSETS/DEPOSITS 0.30 0.73 4.11 1.38 1.02
ASSETS/DEPOSITS (CUMULATIVE) 0.30 0.36 0.91 1.02
(1) Loan balances do not include non-accrual loans.
EFFECTS OF INFLATION AND CHANGING PRICES: The financial statements and related
financial data presented herein have been prepared in terms of historical
dollars without considering changes in the relative purchasing power of money
over time due to inflation. Unlike most industrial companies, virtually all of
the assets and liabilities of a financial institution are monetary in nature. As
a result, interest rates have a more significant impact on a financial
institution's performance than do general levels of inflation. Interest rates do
not necessarily move in the same magnitude as the prices of goods and services.
The Corporation believes residential real estate values have stabilized,
however, if real estate prices in the Corporation's trade area decrease, the
values of real estate collateralizing the Corporation's loans and real estate
held by the Corporation as other real estate owned could also be adversely
affected.
MARKET RISK SENSITIVE INSTRUMENTS: A derivative financial instrument includes
futures, forwards, interest rate swaps, option contracts and other financial
instruments with similar characteristics. The Corporation currently does not
enter into futures, forwards, swaps or options. However, the Corporation is
party to financial instruments with off-balance sheet risk in the normal course
of business to meet the financing needs of the customers of the Corporation.
These financial instruments include commitments to extend credit and standby
letters of credit. These instruments involve to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
consolidated statements of condition. Commitments to extend credit are
agreements to lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally have fixed
expiration dates and may require collateral from the borrower if deemed
necessary by the Corporation. Standby letters of credit are conditional
commitments issued by the Corporation to guarantee the performance of a customer
to a third party up to a stipulated amount and with specified terms and
conditions.
Commitments to extend credit and standby letters of credit are not recorded
as an asset or liability by the Corporation until the instrument is exercised.
The Corporation's exposure to market risk is reviewed on a regular basis by
the Asset/Liability Committee. Interest rate risk is the potential of economic
losses due to future interest rate changes. These economic losses can be
reflected as a loss of future net interest income and/or a loss of current fair
market values. The objective is to measure the effect on net interest income and
to adjust the statement of condition to minimize the inherent risk while at the
same time maximize income. Management realizes certain risks are inherent and
that the goal is to identify and minimize the risks. Tools used by management
include the standard GAP report and a recently instituted interest rate shock
simulation report. The Corporation has no market risk sensitive instruments held
for trading purposes. It appears the Corporation's market risk is reasonable at
this time.
The following table presents the scheduled maturity of market risk sensitive
instruments as December 31, 1997:
(In thousands)
Within 1-5 Over
Maturing in: 1 Year Years 5 Years Total
- ---------------------------------------------------------------------------------------------------------
ASSETS
Securities $ 21,803 $103,317 $ 20,438 $145,558
Loans 39,769 51,112 82,751 173,632
- ---------------------------------------------------------------------------------------------------------
Total $ 61,572 $154,429 $103,189 $319,190
=========================================================================================================
LIABILITIES
Savings, Super NOW
and Money Market $165,788 $ -- $ -- $165,788
CD's 50,417 37,556 -- 87,973
- ---------------------------------------------------------------------------------------------------------
Total $216,205 $37,556 $ -- $253,761
=========================================================================================================
Average Estimated
Total Interest Rate Fair Value
- ---------------------------------------------------------------------------------------------------------
ASSETS
Securities $145,558 6.43% $146,032
Loans 173,632 8.01% 173,588
LIABILITIES
Savings, Super NOW
and Money Market $165,788 2.06% $165,823
- ---------------------------------------------------------------------------------------------------------
CD's 87,973 5.17% 87,992
- ---------------------------------------------------------------------------------------------------------
CHANGES IN ACCOUNTING PRINCIPLES: In June 1997, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" (SFAS 130). SFAS 130 establishes standards
for reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general purpose financial
statements. This Statement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. This Statement requires that an enterprise (a)
classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. SFAS 130 is effective for fiscal
years beginning after December 15, 1997. Reclassification of financial
statements for earlier periods provided for comparative purposes is required.
In June 1997, the FASB issued Statement of Financial Accounting Standards
NO. 131, "Disclosures about Segments of an Enterprise and Related Information"
(SFAS 131). SFAS 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. SFAS 131 is effective for fiscal years
beginning after December 15, 1997.
YEAR 2000 CONSIDERATION: Senior management has initiated an intensive study to
prepare the Corporation's computer systems and application software for the year
2000. The Corporation expects to incur internal staff costs as well as costs to
upgrade, replace or enhance existing software to conform for the year 2000.
These efforts in most instances would be addressed in the normal course of
evaluating the Corporation's future technology needs. Accordingly, the
Corporation does not expect the expense required to have a material effect on
its financial results.
TRUST AND INVESTMENT DEPARTMENT: The Trust and Investment Department continues
to be an extremely important part of Peapack-Gladstone Financial Corporation.
Since its inception in 1972, the Trust and Investment Department has served in
the roles of executor and trustee while providing investment management,
custodial, tax, retirement, and financial services to its growing client base.
The book value of assets under management in the Trust and Investment
Department increased from $378.9 million in 1996 to $453.7 million in 1997, an
increase of 20%. The corresponding market value is now in excess of $676.1
million. Fee income generated by the Trust Department was $1,474,000, $1,270,000
and $1,009,000 in 1997, 1996 and 1995, respectively.
The following table presents the total book value of assets under management in
the Trust Department for the years ended December 31:
(In thousands) 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
TRUST ASSETS $453,671 $378,879 $251,254 $246,526 $202,754
SELECTED CONSOLIDATED FINANCIAL DATA:
The following is selected consolidated financial data for the Corporation and
its subsidiaries for the years indicated. This information is derived from the
historical consolidated financial statements and should be read in conjunction
with the Consolidated Financial Statements and Notes.
(In thousands, except per share data) Years Ended December 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
SUMMARY EARNINGS:
Interest Income $22,890 $20,955 $19,420 $17,739 $17,507
Interest Expense 7,698 7,889 7,231 5,619 6,051
Net Interest Income 15,192 13,066 12,189 12,120 11,456
Provision for Loan Losses 400 642 75 60 1,410
- --------------------------------------------------------------------------------------------------------------------------------
Net Interest Income after
Provision for Loan Losses 14,792 12,424 12,114 12,060 10,046
- --------------------------------------------------------------------------------------------------------------------------------
Other Income, Exclusive
of Securities Gains (Losses) 3,219 2,869 2,357 2,174 2,132
Other Expenses 10,726 10,072 9,108 8,506 8,091
Securities Gains (Losses) 29 118 62 (392) 134
- --------------------------------------------------------------------------------------------------------------------------------
Income Before Income Tax Expense
and Cumulative Effect of Change
in Accounting Principles 7,314 5,339 5,425 5,336 4,221
================================================================================================================================
Income Tax Expense 2,822 1,760 1,518 1,465 1,095
- --------------------------------------------------------------------------------------------------------------------------------
Income Before Cumulative Effect
of Change in Accounting Principles 4,492 3,579 3,907 3,871 3,126
- --------------------------------------------------------------------------------------------------------------------------------
Cumulative Effect of Change
in Accounting for Income Taxes -- -- -- -- 816
Cumulative Effect of Change in
Accounting for Postretirement
Benefits Other Than Pensions, Net of Taxes -- -- -- -- (112)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCOME $4,492 $ 3,579 $3,907 $3,871 $3,830
=================================================================================================================================
PER SHARE DATA: (Reflects 2:1 stock split in December, 1997; 5% stock dividend
paid in 1996; and 2:1 stock split in April, 1995.)
Income Before Cumulative Effect of Change
in Accounting Principles $1.90 $ 1.52 $ 1.67 $ 1.66 $ 1.34
Cumulative Effect of Change
in Accounting Principles -- -- -- -- 0.30
Earnings per Share-Basic 1.93 1.53 1.67 1.66 1.64
Earnings per Share-Diluted 1.90 1.52 1.67 1.66 1.64
Cash Dividends Declared 0.41 0.40 0.37 0.32 0.31
Book Value End-of-Period $14.47 $12.97 $12.15 $10.09 $9.05
Weighted Average Shares Outstanding 2,327,731 2,332,620 2,335,238 2,335,238 2,335,238
Common Stock Equivalents 42,196 27,850 6,315 -- --
CONSOLIDATED STATEMENTS OF CONDITION
DECEMBER 31,
-----------------------------
(Dollars in thousands) 1997 1996
---- ----
ASSETS
CASH AND DUE FROM BANKS $ 17,740 $ 10,962
FEDERAL FUNDS SOLD 15,500 15,800
- -------------------------------------------------------------------------------------------------------------------
TOTAL CASH AND CASH EQUIVALENTS 33,240 26,762
INVESTMENT SECURITIES (APPROXIMATE
MARKET VALUE $54,452 IN 1997 AND
$55,486 IN 1996)
U.S. TREASURY AND GOVERNMENT AGENCIES 44,557 44,543
STATES AND POLITICAL SUBDIVISIONS 9,421 10,655
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES 53,978 55,198
SECURITIES AVAILABLE FOR SALE (AMORTIZED COST
$90,817 IN 1997 AND $84,072 IN 1996)
U.S. TREASURY AND GOVERNMENT AGENCIES 86,799 75,745
OTHER SECURITIES AVAILABLE FOR SALE 4,781 8,851
- -------------------------------------------------------------------------------------------------------------------
TOTAL SECURITIES AVAILABLE FOR SALE 91,580 84,596
LOANS:
LOANS SECURED BY REAL ESTATE 149,684 124,758
OTHER LOANS 24,690 25,116
- -------------------------------------------------------------------------------------------------------------------
TOTAL LOANS 174,374 149,874
LESS: ALLOWANCE FOR LOAN LOSSES 1,893 1,636
- -------------------------------------------------------------------------------------------------------------------
NET LOANS 172,481 148,238
PREMISES AND EQUIPMENT 8,595 8,600
OTHER REAL ESTATE OWNED 340 432
ACCRUED INTEREST RECEIVABLE 3,006 2,915
OTHER ASSETS 445 663
- -------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $363,665 $327,404
===================================================================================================================
LIABILITIES
DEPOSITS:
NONINTEREST-BEARING DEMAND DEPOSITS $ 74,712 $ 54,539
INTEREST-BEARING DEPOSITS:
SUPER NOW 70,745 61,898
SAVINGS 70,419 71,831
MONEY MARKET ACCOUNTS 24,624 27,433
CERTIFICATES OF DEPOSIT OVER $100,000 18,243 16,728
CERTIFICATES OF DEPOSIT LESS THAN $100,000 69,730 62,761
- -------------------------------------------------------------------------------------------------------------------
TOTAL DEPOSITS 328,473 295,190
ACCRUED EXPENSES AND OTHER LIABILITIES 1,553 2,006
- -------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 330,026 297,196
- -------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
COMMON STOCK (NO PAR VALUE; STATED VALUE $1 2/3
PER SHARE; AUTHORIZED 10,000,000 SHARES;
ISSUED 2,335,238 SHARES; REFLECTS 2:1 STOCK
SPLIT OF DECEMBER 1997) 3,892 3,892
SURPLUS 6,218 6,205
TREASURY STOCK AT COST, 11,178 SHARES IN 1997
AND 5,446 SHARES IN 1996 (367) (142)
RETAINED EARNINGS 23,420 19,924
NET UNREALIZED GAINS ON SECURITIES
AVAILABLE FOR SALE (NET OF INCOME TAX) 476 329
- -------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 33,639 30,208
- -------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $363,665 $327,404
===================================================================================================================
See accompanying notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts) YEAR ENDED DECEMBER 31,
1997 1996 1995
---- ----- ----
INTEREST INCOME
INTEREST AND FEES ON LOANS $ 13,025 $11,150 $ 9,455
INTEREST ON INVESTMENT SECURITIES:
TAXABLE 2,800 2,465 3,871
TAX-EXEMPT 524 573 986
INTEREST ON SECURITIES AVAILABLE FOR SALE:
TAXABLE 5,697 5,898 4,213
INTEREST ON FEDERAL FUNDS SOLD 844 869 895
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 22,890 20,955 19,420
- --------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
INTEREST ON SAVINGS ACCOUNT DEPOSITS 3,439 3,942 4,039
INTEREST ON CERTIFICATES OF DEPOSIT
OVER $100,000 965 802 488
INTEREST ON OTHER TIME DEPOSITS 3,294 3,145 2,704
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 7,698 7,889 7,231
- --------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 15,192 13,066 12,189
- --------------------------------------------------------------------------------------------------------------------------
PROVISION FOR LOAN LOSSES 400 642 75
- --------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 14,792 12,424 12,114
- --------------------------------------------------------------------------------------------------------------------------
OTHER INCOME
SERVICE CHARGES AND FEES FOR OTHER SERVICES 3,125 2,774 2,259
SECURITIES GAINS 29 118 62
OTHER INCOME 94 95 98
- --------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME 3,248 2,987 2,419
- --------------------------------------------------------------------------------------------------------------------------
OTHER EXPENSES
SALARIES AND EMPLOYEE BENEFITS 6,093 5,588 5,189
PREMISES AND EQUIPMENT 2,231 2,124 1,491
FDIC INSURANCE ASSESSMENT 37 1 288
OTHER EXPENSE 2,365 2,359 2,140
- --------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER EXPENSES 10,726 10,072 9,108
- --------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAX EXPENSE 7,314 5,339 5,425
INCOME TAX EXPENSE 2,822 1,760 1,518
- --------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 4,492 $ 3,579 $ 3,907
==========================================================================================================================
EARNINGS PER SHARE (REFLECTS A 2:1 STOCK SPLIT
IN DECEMBER, 1997; 5% STOCK DIVIDEND
IN 1996 AND 2:1 STOCK SPLIT IN APRIL, 1995)
BASIC $ 1.93 $ 1.53 $ 1.67
- --------------------------------------------------------------------------------------------------------------------------
DILUTED $ 1.90 $ 1.52 $ 1.67
==========================================================================================================================
See accompanying notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in thousands, except per share amounts)
NET
UNREALIZED
GAINS
(LOSSES) ON
SECURITIES
COMMON TREASURY RETAINED AVAILABLE
STOCK SURPLUS STOCK EARNINGS FOR SALE TOTAL
- --------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994 $3,707 $3,486 $ -- $17,112 $ (745) $23,560
- --------------------------------------------------------------------------------------------------------------------------
NET INCOME 1995 3,907 3,907
DIVIDENDS DECLARED ($0.37 per share) (823) (823)
NET UNREALIZED GAINS ON
TRANSFER OF INVESTMENT
SECURITIES TO SECURITIES
AVAILABLE FOR SALE 177 177
CHANGE IN NET UNREALIZED
GAINS ON SECURITIES
AVAILABLE FOR SALE 1,555 1,555
- --------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 $3,707 $3,486 $ -- $20,196 $ 987 $28,376
- --------------------------------------------------------------------------------------------------------------------------
NET INCOME 1996 3,579 3,579
DIVIDENDS DECLARED ($0.40 per share) (911) (911)
COMMON STOCK DIVIDEND
(Five Percent) 185 2,755 (2,940) --
COMMON STOCK OPTIONS
EXERCISED (36) (36)
PURCHASE OF TREASURY STOCK
5,446 SHARES (142) (142)
CHANGE IN NET UNREALIZED
GAINS ON SECURITIES
AVAILABLE FOR SALE (658) (658)
- --------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 $3,892 $6,205 $ (142) $19,924 $ 329 $30,208
- --------------------------------------------------------------------------------------------------------------------------
NET INCOME 1997 4,492 4,492
DIVIDENDS DECLARED ($0.41 per share) (978) (978)
COMMON STOCK OPTIONS
EXERCISED AND RELATED
TAX BENEFITS 13 56 (18) 51
PURCHASE OF TREASURY STOCK
7,892 SHARES (281) (281)
CHANGE IN NET UNREALIZED
GAINS IN SECURITIES
AVAILABLE FOR SALE 147 147
- --------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997 $3,892 $6,218 $ (367) $23,420 $ 476 $33,639
- ---------------------------------------------------------------------------------------------------------------------------
Dividends declared per share reflect 2:1 stock split in December, 1997 and 2:1
stock split in April, 1995.
See accompanying notes to Consolidated Financial Statements
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
BALANCE SHEET DATA: (at period end)
Total Assets $363,665 $327,404 $300,076 $278,523 $280,166
Investment Securities 53,978 55,198 45,540 81,804 146,651
Securities Available for Sale 91,580 84,596 90,890 55,024 --
Loans 174,374 149,874 122,432 105,384 99,773
Allowance for Loan Losses 1,893 1,636 1,221 1,473 1,538
Total Deposits 328,473 295,190 269,504 253,375 257,575
Total Stockholders' Equity 33,639 30,208 28,376 23,560 21,135
Trust Assets (Book Value) 453,671 378,879 251,254 246,526 202,754
SELECTED PERFORMANCE RATIOS:
Return on Average Total Assets 1.30% 1.13% 1.37% 1.38% 1.42%
Return on Average Total Stockholders' Equity 14.22% 12.41% 15.05% 17.09% 19.25%
Dividend Payout Ratio 21.77% 25.45% 21.06% 18.10% 18.00%
Average Total Stockholders' Equity
to Average Assets 9.16% 9.10% 9.08% 8.09% 7.39%
Non-interest Expenses to Average Assets 3.11% 3.18% 3.19% 3.04% 3.00%
Non-interest Income to Average Assets 0.93% 0.91% 0.82% 0.78% 0.79%
ASSET QUALITY RATIOS: (at period end)
Non-accrual Loans to Total Loans 0.43% 0.79% 0.44% 0.66% 1.22%
Non-performing Assets to Total Assets 0.33% 0.53% 0.73% 0.88% 1.30%
Allowance for Loan Losses to
Non-performing Loans 223.76% 125.36% 103.74% 171.68% 126.58%
Allowance for Loan Losses to Total Loans 1.09% 1.09% 1.00% 1.40% 1.54%
Net Charge-Offs (Recoveries) to Average
Loans Plus Other Real Estate Owned 0.09% 0.17% 0.29% 0.12% 0.97%
LIQUIDITY AND CAPITAL RATIOS:
Average Loans to Average Deposits 50.96% 47.23% 43.26% 39.72% 39.87%
Total Stockholders' Equity to Total Assets 9.25% 9.23% 9.46% 8.46% 7.54%
Tier 1 Capital to Risk Weighted Assets 20.25% 24.06% 23.63% 20.62% 16.90%
Total Capital to Risk Weighted Assets 21.43% 25.37% 24.68% 21.87% 18.13%
Tier 1 Leverage Ratio 9.40% 9.43% 9.63% 8.68% 7.85%
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands) YEAR ENDED DECEMBER 31,
-----------------------------------
1997 1996 1995
---- ---- ----
OPERATING ACTIVITIES:
NET INCOME $ 4,492 $ 3,579 $ 3,907
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION 694 670 475
AMORTIZATION OF PREMIUM AND ACCRETION
OF DISCOUNT ON SECURITIES, NET 43 75 112
PROVISION FOR LOAN LOSSES 400 642 75
PROVISION FOR DEFERRED TAXES 399 (96) 23
GAIN ON SECURITIES (29) (118) (62)
(INCREASE) DECREASE IN INTEREST RECEIVABLE (91) (48) 39
(INCREASE) DECREASE IN OTHER ASSETS (270) 46 412
(DECREASE) INCREASE IN ACCRUED EXPENSES AND OTHER LIABILITIES (453) (190) 3
- --------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,185 4,560 4,984
- --------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
PROCEEDS FROM MATURITIES OF INVESTMENT SECURITIES 14,671 12,852 7,180
PROCEEDS FROM MATURITIES OF SECURITIES
AVAILABLE FOR SALE 11,000 25,000 5,500
PROCEEDS FROM CALLS OF INVESTMENT SECURITIES 2,000 10,207 20,542
PROCEEDS FROM SALES AND CALLS OF SECURITIES
AVAILABLE FOR SALE 6,840 10,025 12,267
PURCHASE OF INVESTMENT SECURITIES (15,466) (32,664) (19,524)
PURCHASE OF SECURITIES AVAILABLE FOR SALE (24,625) (33,814) (20,558)
NET DECREASE (INCREASE) IN SHORT-TERM INVESTMENTS 38 4,018 (2,317)
NET INCREASE IN LOANS (24,903) (27,957) (17,375)
NET DECREASE IN OTHER REAL ESTATE OWNED 352 855 593
PURCHASES OF PREMISES AND EQUIPMENT (689) (2,376) (386)
- --------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (30,782) (33,854) (14,078)
- --------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
NET INCREASE IN DEPOSITS 33,283 25,686 16,129
DIVIDENDS PAID (978) (911) (823)
EXERCISE OF STOCK OPTIONS 51 (36) --
PURCHASE OF TREASURY STOCK (281) (142) --
- --------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 32,075 24,597 15,306
- --------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 6,478 (4,697) 6,212
- --------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 26,762 31,459 25,247
- --------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $33,240 $ 26,762 $ 31,459
- --------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID DURING THE YEAR FOR:
INTEREST ON DEPOSITS $8,836 $ 8,163 $6,618
INCOME TAXES 2,487 1,885 1,495
NONCASH INVESTING ACTIVITIES:
TRANSFER OF LOANS TO OTHER REAL ESTATE 260 288 --
TRANSFER OF INVESTMENT SECURITIES TO
SECURITIES AVAILABLE FOR SALE -- -- 28,020
See accompanying notes to Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND ORGANIZATION: Effective December 12, 1997 all of
the then outstanding common shares of the Peapack-Gladstone Bank (the Bank) were
exchanged on a one-for-one basis for shares of Peapack-Gladstone Financial
Corporation (the Corporation), which was organized as a New Jersey Bank Holding
Company on August 19, 1997. This exchange of shares has been accounted for as a
"pooling-of-interests," and as a result, the Corporation reports on a combined
basis the values of the assets, liabilities and stockholders' equity of the Bank
and the Holding Company.
The consolidated financial statements of the Corporation are prepared on
the accrual basis and include the accounts of the Corporation and its
wholly-owned subsidiary, Peapack-Gladstone Bank and its wholly-owned subsidiary,
Peapack-Gladstone Investment Company. While the following footnotes include the
collective results of Peapack-Gladstone Financial Corporation and
Peapack-Gladstone Bank, these footnotes primarily reflect the Bank's activities.
All significant intercompany balances and transactions have been eliminated from
the accompanying consolidated financial statements.
BUSINESS: The Peapack-Gladstone Bank, the subsidiary of the Corporation,
provides a full range of banking services to individual and corporate customers
through its branch operations in northwestern New Jersey. The Bank is subject to
competition from other financial institutions, is regulated by certain federal
and state agencies and undergoes periodic examinations by those regulatory
authorities.
BASIS OF FINANCIAL STATEMENT PRESENTATION: The consolidated financial statements
have been prepared in accordance with generally accepted accounting principles.
In preparing the financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the statement
of condition and revenues and expenses for that period. Actual results could
differ from those estimates.
CASH AND CASH EQUIVALENTS: For purposes of the statements of cash flows, cash
and cash equivalents include cash and due from banks and federal funds sold.
Generally, federal funds are sold for one-day periods.
INVESTMENT SECURITIES: Investment securities are composed of debt securities
that the Corporation has the positive intent and ability to hold to maturity.
Such securities are stated at cost, adjusted for amortization of premium and
accretion of discount over the term of the investments.
SECURITIES AVAILABLE FOR SALE: Debt securities that cannot be categorized as
investment securities are classified as securities available for sale. Such
securities include debt securities to be held for indefinite periods of time and
not intended to be held to maturity, as well as marketable equity securities.
Securities held for indefinite periods of time include securities that
management intends to use as part of its asset/liability management strategy and
that may be sold in response to changes in interest rates, resultant prepayment
risk and other factors related to interest rate and resultant prepayment risk
changes. In November 1995, the Financial Accounting Standards Board issued
"Special Report - A Guide to Implementation of Statement 115 on Accounting for
Certain Investments in Debt and Equity Securities" within which there was
offered transition guidance permitting an enterprise to reassess the
appropriateness of the classifications of all of its securities before December
31, 1995. The Corporation reassessed its classifications and in December 1995
transferred $28.0 million (amortized cost) of its securities previously
classified as held to maturity, to the available for sale classification. The
related unrealized gain as of the transfer date was $177,000 which has been
recognized and reported as a separate component of stockholders' equity.
Securities available for sale are carried at fair value and unrealized holding
gains and losses (net of related tax effects) on such securities are excluded
from earnings, but are included in stockholders' equity. Upon realization, such
gains or losses are included in earnings using the specific identification
method.
LOANS: Loans are stated at the principal amount outstanding. Loan origination
fees and certain direct loan origination costs are deferred and recognized over
the life of the loan as an adjustment to the loan's yield. The accrual of income
on loans is discontinued if certain factors indicate reasonable doubt as to the
timely collectibility of such interest, generally when the loan becomes over 90
days delinquent. A non-accrual loan is not returned to an accrual status until
factors indicating doubtful collection no longer exist. The majority of the
loans are secured by real estate located within the Corporation's market area in
Northwestern New Jersey.
ALLOWANCE FOR LOAN LOSSES: The allowance for loan losses is maintained at a
level considered adequate to provide for potential loan losses inherent in the
portfolio. The allowance is based on management's evaluation of the loan
portfolio considering 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.
Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize loan losses, future additions
to the allowance may be necessary based on changes in economic conditions. In
addition, various regulatory agencies, as an integral part of their examination
process, periodically review the allowance for loan losses. Such agencies may
require the Corporation to recognize additions to the allowance based on their
judgments about information available to them at the time of their examinations.
Management, considering current information and events regarding the
borrowers' ability to repay their obligations, considers a loan to be impaired
when it is probable that the Corporation will be unable to collect all amounts
due according to the contractual terms of the loan agreement. When a loan is
considered to be impaired, the amount of impairment is measured based on the
fair value of the collateral. Impairment losses are included in the allowance
for loan losses through provisions charged to operations.
PREMISES AND EQUIPMENT: Premises and equipment are stated at cost, less
accumulated depreciation. Depreciation charges are computed using the
straight-line method. Premises and equipment are depreciated over the estimated
useful lives of the assets. Expenditures for maintenance and repairs are
expensed as incurred. The cost of major renewals and improvements are
capitalized. Gains or losses realized on routine dispositions are recorded as
other income or other expense.
OTHER REAL ESTATE OWNED: Other real estate owned is carried at fair value minus
estimated costs to sell, based on an independent appraisal. When a property is
acquired, the excess of the loan balance over the estimated fair value is
charged to the allowance for loan losses. Any subsequent write-downs that may be
required to the carrying value of the properties or losses on the sale of
properties are charged to the valuation allowance on other real estate owned or
to other expense.
INCOME TAXES: The Corporation files a consolidated Federal income tax return.
Separate State income tax returns are filed for each subsidiary based on current
laws and regulations.
The Corporation recognizes deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in its
financial statements or tax returns. The measurement of deferred tax assets and
liabilities is based on the enacted tax rates applicable to taxable income for
the years in which these temporary differences are expected to be recovered or
settled. Such tax assets and liabilities are adjusted for the effect of a change
in tax rates in the period of enactment.
STOCK OPTION PLAN: Prior to January 1, 1996, the Corporation accounted for its
stock option plans in accordance with the provisions of Accounting Principles
Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations. As such, compensation expense was recorded on the date
of grant only if the current market price of the underlying stock exceeded the
exercise price. On January 1, 1996, the Corporation adopted SFAS No. 123,
"Accounting for Stock-Based Compensation," which permits entities to recognize
as expense over the vesting period the fair value of all stock-based awards on
the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based method defined in SFAS No. 123 had been
applied. The Corporation has elected to continue to apply the provisions of APB
Opinion No. 25 and to provide the pro forma disclosure provisions of SFAS No.
123.
EARNINGS PER SHARE: In February 1997, the FASB issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share" (SFAS 128). SFAS 128
established standards for computing and presenting earnings per share (EPS) by
simplifying the standards for computing EPS previously found in APB Opinion No.
15, "Earnings per Share." Under the new requirements, the Corporation is
required to present both basic and diluted EPS on the face of the income
statement. Basic EPS replaced the current EPS terminology and is computed by
dividing income available to common stockholders by the weighted-average number
of common shares outstanding. Diluted EPS includes any additional common shares
as if all potentially dilutive common shares were issued (e.g. stock options).
The Corporation was required to adopt SFAS 128 for the period ended December 31,
1997. All prior-period EPS data is restated as required.
The Board of Directors approved a 2 for 1 stock split effective December
29, 1997. In addition, per share data reflects the 5 percent stock dividend paid
in November 1996. As a result, the average number of shares outstanding was
2,369,927, 2,360,470 and 2,341,553 for 1997, 1996 and 1995, respectively, and
included common stock equivalents of 42,196, 27,850 and 6,315 for 1997, 1996 and
1995, respectively.
TRANSFERS AND SERVICING OF FINANCIAL ASSETS: In June 1996, the (FASB) issued
Statement of Financial Accounting Standards No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities" (SFAS
125). SFAS 125 amends portions of SFAS 115, amends and extends to all servicing
assets and liabilities the accounting standards for mortgage servicing rights
now in SFAS 65, and supersedes SFAS 122. The Statement provides consistent
standards for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. Those standards are based upon consistent
application of a financial components approach that focuses on control. The
Statement also defines the accounting treatment for servicing assets and other
retained interest in the assets that are transferred. SFAS 125 is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996. The adoption of the Statement did not have a
material effect on the Corporation's financial condition or results of
operation.
RECLASSIFICATION: Certain reclassifications have been made in the 1995 and 1996
financial statements in order to conform to the 1997 presentation.
2. INVESTMENT SECURITIES
A summary of amortized cost and approximate market value of investment
securities included in the consolidated statement of condition as of December
31, 1997 and 1996 follows:
1997
----
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
(In thousands) COST GAINS LOSSES VALUE
--------- ---------- ----------- ------
U.S. TREASURY & GOVERNMENT AGENCIES $44,557 $174 $ (48) $ 44,683
STATES AND POLITICAL SUBDIVISIONS 9,421 348 -- 9,769
==========================================================================================================================
$53,978 $522 $ (48) $ 54,452
==========================================================================================================================
1996
----
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
(In thousands) COST GAINS LOSSES VALUE
--------- ---------- ---------- -----------
U.S. TREASURY & GOVERNMENT AGENCIES $44,543 $173 $ (156) $ 44,560
STATES AND POLITICAL SUBDIVISIONS 10,655 289 (18) 10,926
==========================================================================================================================
$55,198 $462 $ (174) $ 55,486
==========================================================================================================================
The amortized cost and approximate market value of investment securities as of
December 31, 1997, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or repay obligations with or without call or prepayment penalties.
MATURING IN:
APPROXIMATE
(In thousands) AMORTIZED COST MARKET VALUE
-------------- -------------
ONE YEAR OR LESS $ 8,280 $ 8,298
AFTER ONE YEAR THROUGH FIVE YEARS 38,640 38,806
AFTER FIVE YEARS THROUGH TEN YEARS 6,610 6,798
AFTER TEN YEARS 448 550
==========================================================================================================================
$53,978 $54,452
==========================================================================================================================
Securities having an approximate carrying value of $5,000,000 and
$3,000,000 as of December 31, 1997 and 1996, respectively, were pledged to
secure public funds and for other purposes required or permitted by law. Gross
gains of $5,000, $95,000 and $40,000 were realized in 1997, 1996 and 1995
respectively. There were no gross realized losses in 1997, 1996 and 1995. There
were no sales of investment securities in 1997, 1996 or 1995 except for
securities called by issuers.
3. SECURITIES AVAILABLE FOR SALE
A summary of amortized cost and approximate market value of securities available
for sale included in the consolidated statement of condition as of December 31,
1997 and 1996 follows:
1997
------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
(In thousands) COST GAINS LOSSES VALUE
---------- ---------- ---------- -----------
U.S. TREASURY & GOVERNMENT AGENCIES $86,035 $ 838 $ (74) $86,799
OTHER SECURITIES AVAILABLE FOR SALE 4,782 2 (3) 4,781
==========================================================================================================================
$90,817 $ 840 $ (77) $91,580
==========================================================================================================================
1996
------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
(In thousands) COST GAINS LOSSES VALUE
--------- ---------- ---------- -----------
U.S. TREASURY & GOVERNMENT AGENCIES $75,254 $680 $ (189) $75,745
OTHER SECURITIES AVAILABLE FOR SALE 8,818 45 (12) 8,851
==========================================================================================================================
$84,072 $725 $ (201) $84,596
==========================================================================================================================
The amortized cost and approximate market value of debt securities available for
sale as of December 31, 1997, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or repay obligations with or without call or prepayment
penalties.
MATURING IN:
(In thousands) APPROXIMATE
AMORTIZED COST MARKET VALUE
-------------- ------------
ONE YEAR OR LESS $11,008 $11,046
AFTER ONE YEAR THROUGH FIVE YEARS 63,985 64,676
AFTER FIVE YEARS THROUGH TEN YEARS 13,042 13,075
==========================================================================================================================
$88,035 $88,797
==========================================================================================================================
Gross gains of $24,000, $23,000 and $29,000 were realized in 1997, 1996 and
1995, respectively. There were no gross realized losses in 1997 or 1996. Gross
realized losses of $7,000 were incurred in 1995.
4. LOANS
Loans outstanding as of December 31, 1997 and 1996 consisted of the following:
(In thousands) 1997 1996
---- ----
LOANS SECURED BY REAL ESTATE $145,471 $ 120,055
CONSTRUCTION LOANS 4,213 4,703
COMMERCIAL LOANS 10,332 11,832
CONSUMER LOANS 13,462 11,219
OTHER LOANS 896 2,065
==========================================================================================================================
TOTAL LOANS $174,374 $149,874
==========================================================================================================================
Non-accrual loans totaled $742,000 and $1,183,000 at December 31, 1997 and 1996,
respectively. Loans past due 90 days or more and still accruing interest totaled
$104,000 and $122,000 at December 31, 1997 and 1996, respectively. There are no
commitments to lend additional amounts on non-accrual loans. The amount of
interest income recognized on year-end non-accrual loans totaled $25,000,
$18,000 and $9,000 in 1997, 1996 and 1995, respectively. Interest income of
$47,000, $82,000 and $44,000 would have been recognized during 1997, 1996 and
1995, respectively, under contractual terms for such non-accrual loans.
Loans that met the criteria of troubled debt restructuring totaled $261,000 and
$265,000 at December 31, 1997 and 1996, respectively. The amount of interest
income recognized on troubled debt restructurings in 1997, 1996 and 1995 totaled
$18,000, $16,000 and $4,000, respectively. Interest income of approximately
$26,000, $27,000 and $28,000 would have been recognized during 1997, 1996 and
1995, based on original terms. There are no commitments to lend additional
amounts on troubled debt restructurings.
The Corporation defines an impaired loan as an investment in a loan that is on
non-accrual status with a principal outstanding balance in excess of $100,000.
Residential mortgage loans, a group of homogeneous loans that are collectively
evaluated for impairment, are excluded. There was no recorded investment in
impaired loans as of December 31, 1997 and 1996 and no investments in impaired
loans during 1997 and 1996.
5. ALLOWANCE FOR LOAN LOSSES
A summary of changes in the allowance for loan losses for the years indicated
follows:
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
(In thousands) 1997 1996 1995
---- ---- ----
BALANCE, BEGINNING OF YEAR $1,636 $1,221 $1,473
PROVISION CHARGED TO EXPENSE 400 642 75
LOANS CHARGED- OFF (282) (276) (377)
RECOVERIES 139 49 50
==========================================================================================================================
BALANCE, END OF YEAR $1,893 $1,636 $1,221
==========================================================================================================================
6. PREMISES AND EQUIPMENT
Premises and equipment for the years indicated follows:
YEARS ENDED DECEMBER 31,
--------------------------------
(In thousands) 1997 1996
---- ----
LAND $ 2,259 $ 2,259
BUILDINGS 4,703 4,703
FURNITURE AND EQUIPMENT 3,818 3,706
LEASEHOLD IMPROVEMENTS 2,577 2,551
- --------------------------------------------------------------------------------------------------------------------------
13,357 13,219
LESS: ACCUMULATED DEPRECIATION 4,762 4,619
==========================================================================================================================
TOTAL $ 8,595 $ 8,600
==========================================================================================================================
Depreciation expense amounted to $694,000, $670,000 and $475,000 for the years
ended December 31, 1997, 1996 and 1995, respectively.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Corporation discloses estimated fair values for its significant financial
instruments. Because no market exists for a significant portion of the
Corporation's financial instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic conditions, risk
characteristics of various financial instruments and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
The following methods and assumptions were used to estimate the fair value of
each class of significant financial instruments:
CASH AND SHORT-TERM INVESTMENTS - For short-term instruments, the carrying
amount is a reasonable estimate of fair value.
SECURITIES - For securities, fair values are based upon quoted market prices or
dealer quotes.
LOANS - The fair values of loans is estimated by discounting the future cash
flows using the build-up approach consisting of four components: the risk-free
rate, credit quality, operating expense and prepayment option price.
DEPOSIT LIABILITIES - The fair value of deposits with no stated maturity, such
as demand deposits, Super NOW accounts, savings and money market accounts, is
equal to the carrying amount. The fair value of certificates of deposit is based
on the discounted value of contractual cash flows.
The following table summarizes carrying amounts and fair values for financial
instruments at December 31, 1997 and 1996:
(In thousands) 1997 1996
---- ----
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- -----
FINANCIAL ASSETS:
CASH AND CASH EQUIVALENTS $ 33,240 $ 33,240 $ 26,762 $ 26,762
INVESTMENT SECURITIES 53,978 54,452 55,198 55,486
SECURITIES AVAILABLE FOR SALE 91,580 91,580 84,596 84,596
LOANS, NET OF ALLOWANCE
FOR LOAN LOSSES 172,481 172,437 148,238 145,450
FINANCIAL LIABILITIES:
DEPOSITS 328,473 328,543 295,190 295,365
8. INCOME TAXES
The income tax expense included in the consolidated financial statements for the
years ended December 31, 1997, 1996 and 1995, is allocated as follows:
(In thousands) 1997 1996 1995
- -------------- ---- ---- ----
INCOME TAX EXPENSE FROM OPERATIONS:
FEDERAL:
CURRENT EXPENSE $2,178 $1,655 $1,461
- -------------------------------------------------------------------------------------------------------------------
DEFERRED EXPENSE (BENEFIT) 309 (83) 27
- -------------------------------------------------------------------------------------------------------------------
STATE:
CURRENT EXPENSE 245 201 34
- -------------------------------------------------------------------------------------------------------------------
DEFERRED EXPENSE (BENEFIT) 90 (13) (4)
- -------------------------------------------------------------------------------------------------------------------
TOTAL INCOME TAX EXPENSE
FROM OPERATIONS 2,822 1,760 1,518
- -------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
DEFERRED EXPENSE:
UNREALIZED GAIN ON SECURITIES
AVAILABLE FOR SALE 153 383 1,007
===================================================================================================================
Total income tax expense differed from the amounts computed by applying the U.S.
Federal income tax rate of 34% in 1997, 1996 and 1995 to income before taxes as
a result of the following:
(In thousands) 1997 1996 1995
- -------------- ---- ---- ----
COMPUTED "EXPECTED" TAX EXPENSE $2,487 $1,815 $1,844
INCREASE (DECREASE) IN TAXES RESULTING FROM:
TAX-EXEMPT INCOME (161) (176) (342)
STATE INCOME TAXES 221 124 20
DEFERRED TAX ADJUSTMENT-TAX BAD DEBT 210 -- --
OTHER 65 (3) (4)
==========================================================================================================================
$2,822 $1,760 $1,518
==========================================================================================================================
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities as of December 31, 1997
and 1996 are as follows:
(In thousands) 1997 1996
- -------------- ---- ----
DEFERRED TAX ASSETS:
LOANS, PRINCIPALLY DUE TO ALLOWANCE FOR
LOAN LOSSES AND DEFERRED FEE INCOME $462 $741
- --------------------------------------------------------------------------------
OTHER REAL ESTATE OWNED, PRINCIPALLY DUE TO
RESERVES FOR WRITEDOWNS 28 31
- --------------------------------------------------------------------------------
POST RETIREMENT BENEFITS OTHER THAN PENSIONS 50 54
- --------------------------------------------------------------------------------
CAPITAL LOSS CARRYOVER 25 33
- --------------------------------------------------------------------------------
TOTAL GROSS DEFERRED ASSETS 565 859
- --------------------------------------------------------------------------------
DEFERRED TAX LIABILITIES:
UNREALIZED GAIN ON SECURITIES
AVAILABLE FOR SALE 43 196
- --------------------------------------------------------------------------------
INVESTMENT SECURITIES, PRINCIPALLY DUE TO
THE ACCRETION OF BOND DISCOUNT 45 38
- --------------------------------------------------------------------------------
PREMISES AND EQUIPMENT
PRINCIPALLY DUE TO DIFFERENCES IN DEPRECIATION 365 267
- --------------------------------------------------------------------------------
TOTAL GROSS DEFERRED LIABILITIES 453 501
- --------------------------------------------------------------------------------
NET DEFERRED TAX ASSET $112 $358
================================================================================
9. BENEFIT PLANS
The Corporation sponsors a non-contributory defined benefit pension plan that
covers substantially all salaried employees. The benefits are based on an
employee's compensation, age at retirement and years of service. It is the
policy of the Corporation to fund not less than the minimum funding amount
required by the Employee Retirement Income Security Act (ERISA).
The following table sets forth the plan's estimated status on December 31,
(In thousands) 1997 1996
---- ----
ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATION:
ACCUMULATED BENEFIT OBLIGATION, INCLUDING VESTED
BENEFITS OF $2,183 IN 1997 AND $1,787 IN 1996 $ 2,336 $ 1,938
================================================================================
PROJECTED BENEFIT OBLIGATION 3,178 2,644
================================================================================
PLAN ASSETS AT FAIR VALUE, PRIMARILY STOCKS AND
FIXED INCOME SECURITIES 3,635 2,720
================================================================================
PLAN ASSETS IN EXCESS OF PROJECTED BENEFIT
OBLIGATION 456 76
UNRECOGNIZED PRIOR SERVICE COST (5) 9
UNRECOGNIZED NET GAIN (296) (5)
UNRECOGNIZED NET TRANSITION ASSET (77) (84)
- --------------------------------------------------------------------------------
PREPAID (ACCRUED) PENSION COST $ 78 $ (4)
================================================================================
NET PERIODIC EXPENSE FOR THE YEARS ENDED DECEMBER 31 INCLUDED THE FOLLOWING
COMPONENTS:
(In thousands) 1997 1996 1995
---- ---- ----
SERVICE COST - BENEFITS
EARNED DURING THE PERIOD $ 430 $ 405 $ 356
INTEREST COST ON PROJECTED
BENEFIT OBLIGATION 157 148 130
ACTUAL RETURN
ON PLAN ASSETS (545) (292) (326)
- --------------------------------------------------------------------------------
NET GAIN ON ASSETS
DURING THE PERIOD DEFERRED
FOR LATER RECOGNITION 313 83 155
NET AMORTIZATION (7) (7) (6)
================================================================================
NET PERIODIC PENSION COST $ 348 $ 337 $ 309
================================================================================
For December 31, 1997 and 1996 the weighted average discount rate and rate of
increase in future compensation used in determining the actuarial present value
of the projected benefit obligation were 6.0 percent and 3.0 percent,
respectively. The related expected long-term rate of return on plan assets was
7.5 percent.
SAVINGS AND PROFIT SHARING PLANS:
In addition to the retirement plan, the Corporation sponsors a profit sharing
plan and a savings plan under Section 401(K) of the Internal Revenue Code,
covering substantially all salaried employees over the age of 21 with at least
12 months service. Under the savings portion of the plan, employee contributions
are partially matched by the Corporation. Expense for the savings plan was
approximately $23,000, $21,000 and $18,000 in 1997, 1996 and 1995, respectively.
Contributions to the profit sharing portion are made at the discretion of the
Board of Directors and all funds are invested solely in Corporation stock. The
contribution to the profit sharing plan was $175,000 in 1997, $125,000 in 1996
and $100,000 in 1995.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:
The Corporation provides certain health care and life insurance benefits to
eligible retired employees. Accordingly, the cost of retiree health care and
other benefits is accrued during the employees active service. Expense for the
years ended December 31, 1997, 1996 and 1995 is not material.
10. STOCK OPTION PLAN
The Corporation's incentive stock option plan allows the granting of up to
115,500 shares of the Corporation's common stock to certain key employees. The
options granted under this plan are, in general, exercisable not earlier than
one year after the date of grant, at a price equal to the fair market value of
the common stock on the date of grant, and expire not more than ten years after
the date of grant. The stock options will vest during a period of up to five
years after the date of grant. Changes in options outstanding during the past
three years were as follows:
OPTION PRICE
SHARES PER SHARE
------ -------------
BALANCE, DECEMBER 31, 1994 -- --
GRANTED DURING 1995 66,360 $18.00-$19.80
FORFEITED DURING 1995 1,680 18.00
BALANCE, DECEMBER 31, 1995 64,680 18.00-19.80
- --------------------------------------------------------------------------------
GRANTED DURING 1996 4,830 25.00
EXERCISED DURING 1996 3,696 18.00
FORFEITED DURING 1996 2,688 18.00
- --------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 63,126 18.00-25.00
- --------------------------------------------------------------------------------
GRANTED DURING 1997 43,600 28.75-39.63
EXERCISED DURING 1997 2,160 18.00
FORFEITED DURING 1997 400 18.00
================================================================================
BALANCE, DECEMBER 31, 1997 104,166 $18.00-$39.63
================================================================================
At December 31, 1997, the number of options exercisable was 22,910 and the
weighted-average price of those options was $18.78 per share. At December 31,
1996, the number of options exercisable was 11,360 and the weighted-average
price of those options was $18.00 per share.
The Corporation has a non-qualified stock option plan for non-employee
directors. The plan allows the granting of up to 63,000 shares of the
Corporation's common stock. The options granted under this plan are, in general,
exercisable not earlier than one year after the date of grant, at a price equal
to the fair market value of the common stock on the date of grant, and expire
not more than ten years after the date of grant. The stock options will vest
during a period of up to five years after the date of grant. Changes in options
outstanding during the past three years were as follows:
OPTION PRICE
SHARES PER SHARE
------ ------------
BALANCE, DECEMBER 31, 1994 -- --
GRANTED DURING 1995 51,450 $18.00-$21.88
BALANCE, DECEMBER 31, 1995 51,450 18.00-21.88
- --------------------------------------------------------------------------------
EXERCISED DURING 1996 1,050 18.00
- --------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 50,400 18.00-21.88
- --------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 50,400 $18.00-$21.88
================================================================================
At December 31, 1997, the number of options exercisable was 19,530 and the
weighted-average price of those options was $18.00. At December 31, 1996, the
number of options exercisable was 8,800 and the weighted-average price of those
options was $18.00.
At December 31, 1997, there were 17,428 additional shares available for
grant under the Plans. The per share weighted-average fair value of stock
options granted during 1997 and 1996 was $8.64 and $5.45 on the date of grant
using the Black Scholes option-pricing model with the following weighted-average
assumptions: 1997 - expected dividend yield 0.88%, expected volatility of 11%,
risk-free interest rate of 6.13%, and an expected life of 5 years; 1996 -
expected dividend yield of 1.50%, expected volatility of 11%, risk-free interest
rate of 6.48%, and an expected life of 5 years.
The Corporation applies APB Opinion No. 25 in accounting for its Plans and,
accordingly, no compensation cost has been recognized for its stock options in
the financial statements. Had the Corporation determined compensation cost based
on the fair value at the grant date for its stock options under SFAS No. 123,
the Corporation's net income and earnings per share would have been reduced to
the pro forma amounts indicated below:
(In thousands except per share data) 1997 1996
---- ----
NET INCOME:
AS REPORTED $ 4,492 $ 3,579
PRO FORMA $ 4,389 $ 3,516
EARNINGS PER SHARE:
AS REPORTED
BASIC $ 1.93 $ 1.53
DILUTED $ 1.90 $ 1.52
PRO FORMA
BASIC $ 1.89 $ 1.51
DILUTED $ 1.85 $ 1.49
11. COMMITMENTS AND REGULATORY MATTERS
The Corporation, in the ordinary course of business, is a party to
litigation arising from the conduct of its business. Management does not
consider that its actions depart from routine legal proceedings and such actions
will not affect its financial position or results of its operations in any
material manner. There are various outstanding commitments and contingencies,
such as guarantees and credit extensions, including loan commitments of
$29,077,000 and $19,891,000 and letters of credit of $1,261,000 and $1,276,000
at December 31, 1997 and 1996, respectively, which are not included in the
accompanying consolidated financial statements. For commitments to originate
loans, the Corporation's maximum exposure to credit risk is represented by the
contractual amount of those instruments. Those commitments represent ultimate
exposure to credit risk only to the extent that they are subsequently drawn upon
by customers. The Corporation uses the same credit policies and underwriting
standards in making loan commitments as it does for on-balance-sheet
instruments. For loan commitments, the Corporation would generally be exposed to
interest rate risk from the time a commitment is issued with a defined
contractual interest rate.
At year-end 1997 and 1996, the Bank was required to maintain balances of
$7,291,000 and $4,805,000, respectively, at the Federal Reserve Bank of New York
in satisfaction of statutory reserve requirements.
At December 31, 1997, the Bank was obligated under non-cancelable operating
leases for certain premises. Rental expense aggregated $579,000, $607,000 and
$316,000 for the years ended December 31, 1997, 1996 and 1995, respectively,
which is included in premises and equipment expense in the consolidated
statements of income.
The minimum annual lease payments under the terms of the lease agreements, as of
December 31, 1997, were as follows:
(In thousands)
1998 .................................................................. $ 478
1999 .................................................................. 361
2000 .................................................................. 345
2001 .................................................................. 445
2002 .................................................................. 445
Thereafter ............................................................ 3,589
------
TOTAL ................................................................. $5,663
======
12. REGULATORY CAPITAL
The Bank is subject to various regulatory capital requirements administered
by the Federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's consolidated financial statements. Under capital adequacy guidelines and
the regulatory framework for prompt corrective action, the Bank must meet
specific capital guidelines that involve quantitative measures of the Bank's
assets, liabilities and certain off-balance sheet items as calculated under
regulatory accounting practices. The Bank's capital amounts and classification
are also subject to qualitative judgments by the regulators about components,
risk weighting and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1997, that the Bank
meets all capital adequacy requirements to which it is subject.
As of December 31, 1997, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based
and Tier I leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the Bank's
category.
The Bank's actual capital amounts and ratios are also presented in the table.
TO BE WELL
CAPITALIZED UNDER FOR CAPITAL
PROMPT CORRECTIVE ADEQUACY
(In thousands) ACTUAL ACTION PROVISIONS PURPOSES
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
AS OF DECEMBER 31, 1997:
TOTAL CAPITAL
(TO RISK-WEIGHTED ASSETS) $34,313 21.4% $16,010 10.0% $ 12,808 8.0%
TIER I CAPITAL
(TO RISK-WEIGHTED ASSETS) 32,420 20.3% 9,606 6.0% 6,404 4.0%
TIER I CAPITAL
(TO AVERAGE ASSETS) 32,420 9.4% 17,239 5.0% 10,343 3.0%
- --------------------------------------------------------------------------------------------------------------------------
AS OF DECEMBER 31, 1996:
TOTAL CAPITAL
(TO RISK-WEIGHTED ASSETS) $31,515 25.4% $12,415 10.0% $9,932 8.0%
TIER I CAPITAL
(TO RISK-WEIGHTED ASSETS) 29,879 24.1% 7,449 6.0% 4,966 4.0%
TIER I CAPITAL
(TO AVERAGE ASSETS) 29,879 9.4% 15,845 5.0% 9,507 3.0%
- --------------------------------------------------------------------------------------------------------------------------
13. FINANCIAL INFORMATION OF PARENT COMPANY
Peapack-Gladstone Financial Corporation (the parent company) was incorporated on
August 19, 1997 for the purpose of acquiring the Bank in a one-for-one stock
exchange. The following information of the parent company only financial
statements as of December 31, 1997 should be read in conjunction with the notes
to the consolidated financial statements.
CONDENSED STATEMENT OF CONDITION
December 31, 1997
-----------------
(DOLLARS IN THOUSANDS)
ASSETS:
Cash $ 947
Investment in Subsidiary 32,897
Other Assets 52
--------
TOTAL ASSETS $ 33,896
========
LIABILITIES:
Other Liabilities $ 257
--------
TOTAL LIABILITIES 257
STOCKHOLDERS' EQUITY:
Common Stock 3,892
Surplus 6,218
Treasury Stock (367)
Net Unrealized Gains on Securities Available For
Sale (Net of Income Tax) 476
Retained Earnings 23,420
--------
TOTAL STOCKHOLDERS' EQUITY 33,639
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 33,896
========
CONDENSED STATEMENT OF INCOME
For the period from
December 12, 1997 to
December 31, 1997
--------------------
(DOLLARS IN THOUSANDS)
INCOME:
Equity in Undistributed Earnings of Bank $ 140
Dividend from Bank 1,000
--------
TOTAL INCOME 1,140
--------
EXPENSES:
Other Expenses 1
--------
TOTAL EXPENSES 1
--------
NET INCOME $1,139
========
CONDENSED STATEMENT OF CASH FLOWS
For the period from
December 12, 1997 to
December 31, 1997
--------------------
(DOLLARS IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,139
Less Equity in Undistributed Earnings (140)
Increase in Other Assets (52)
Increase in Other Liabilities 257
-------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,204
CASH FLOWS FROM INVESTING ACTIVITIES --
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends Paid (257)
-------
NET CASH PROVIDED BY FINANCING ACTIVITIES (257)
Net Increase in Cash and Cash Equivalents 947
-------
Cash and Cash Equivalents at Beginning of Period 0
-------
Cash and Cash Equivalents at End of Period $ 947
=======
STOCK PRICES:
The following table shows the 1997 and 1996 range of prices paid on known trades
of Corporation stock.*
DIVIDEND
1997 HIGH LOW PER SHARE
- ---- ---- --- ---------
1ST QUARTER $ 28.25 $ 28.25 $ 0.10
- --------------------------------------------------------------------------------
2ND QUARTER 28.75 28.75 0.10
- --------------------------------------------------------------------------------
3RD QUARTER 37.50 35.00 0.10
- --------------------------------------------------------------------------------
4TH QUARTER 40.50 37.50 0.11
- --------------------------------------------------------------------------------
DIVIDEND
1996 HIGH LOW PER SHARE
- ---- ---- --- ---------
1st Quarter $ 25.00 $ 22.50 $ 0.10
- --------------------------------------------------------------------------------
2nd Quarter 26.00 25.00 0.10
- --------------------------------------------------------------------------------
3rd Quarter 26.50 26.00 0.10
- --------------------------------------------------------------------------------
4th Quarter 28.00 27.50 0.10
- --------------------------------------------------------------------------------
* Prices from 10/19/96 auction of fractional shares not included in table.
OFFICERS
- --------------------------------------------------------------------------------
GLADSTONE T. LEONARD HILL Chairman of the Board*
LOAN AND ADMINISTRATION FRANK A. KISSEL President & CEO*
BUILDING ROBERT M. ROGERS Senior Vice President & COO*
PAUL W. BELL Senior Vice President
ARTHUR F. BIRMINGHAM Senior Vice President &
Comptroller *
GARRETT P. BROMLEY Senior Vice President &
Chief Credit Officer
BARBARA A. GRECO Senior Vice President
ELIZABETH B. BOOCOCK Vice President
TODD T. BRUNGARD Vice President & Auditor
RICHARD CIMO Vice President
TERESA P. GARRUTO Vice President
V. SHERRI LiCATA Vice President
DENNIS A. LONGO Vice President
PAUL A. SMITH Vice President
JAMES STADTMUELLER Vice President
MARIA FORNARO Assistant Vice President
PATRICIA J. MORSCH Assistant Vice President
PAULA A. PHILHOWER Assistant Vice President
CATHERINE A. McCATHARN Secretary*
MARJORIE DZWONCZYK Assistant Cashier
JOHN G. HARITON Assistant Cashier
KATHRYN M. NEIGH Assistant Cashier
CHRISTOPHER POCQUAT Assistant Cashier
DIANE M. RIDOLFI Assistant Cashier
KENNETH M. SELMER Assistant Cashier
MARCIA A. TRETHAWAY Assistant Cashier
FRANK C. WALDRON Assistant Cashier
- --------------------------------------------------------------------------------
TRUST DEPARTMENT CRAIG C. SPENGEMAN Senior Vice President &
GLADSTONE Senior Trust Officer*
BRYANT K. ALFORD Vice President & Trust
Officer
JOHN M. BONK Vice President & Trust
Officer
GRETA N. DAWSON Vice President & Trust
Officer
RICHARD K. DONNELLY Vice President & Trust
Officer
JOHN C. KAUTZ Vice President & Trust
Officer
KURT G. TALKE Assistant Vice President &
Trust Officer
CATHERINE A. McCATHARN Assistant Trust Officer
- --------------------------------------------------------------------------------
BERNARDSVILLE DONNA IORIO-GISONE Vice President
- --------------------------------------------------------------------------------
CALIFON CAROL L. BEHLER Assistant Cashier
- --------------------------------------------------------------------------------
CHESTER DONNA M. WHRITENOUR Assistant Vice President
JAMES CICCONE Assistant Cashier
- --------------------------------------------------------------------------------
GLADSTONE PATRICIA A. STUMP Assistant Vice President
- --------------------------------------------------------------------------------
FAR HILLS MARK L. PETERSON Assistant Cashier
- --------------------------------------------------------------------------------
LONG VALLEY DONALD R. GOLDENBAUM Vice President
- --------------------------------------------------------------------------------
MENDHAM ELIZABETH RAHN Vice President
- --------------------------------------------------------------------------------
PEAPACK/FELLOWSHIP JANET E. BATTAGLIA Assistant Cashier
- --------------------------------------------------------------------------------
PLUCKEMIN PAMELA W. STONE Vice President
MARILYN M. MORROW Assistant Cashier
MARY ANN THOMSON Assistant Cashier
- --------------------------------------------------------------------------------
POTTERSVILLE PHYLLIS HERZOG Assistant Cashier
* Denotes a Holding Company Officer
DIRECTORS OFFICES
- --------------------------------------------------------------------------------
PAMELA HILL LOAN & ADMINISTRATION TRUST & INVESTMENT
President BUILDING DEPARTMENT
Ferris Corp. 158 Route 206 North 190 Main Street
Gladstone, NJ Gladstone, NJ 07934 Gladstone, NJ 07934
(908)234-0700 (908)234-9500
T. LEONARD HILL
Chairman of the Board
Gladstone, NJ GLADSTONE (Main Office) BERNARDSVILLE
190 Main Street 36 Morristown Road
FRANK A. KISSEL Gladstone, NJ 07934 Bernardsville, NJ 07924
President & CEO (908)234-0700 (908)766-1711
JOHN D. KISSEL
Turpin Realty, Inc. CALIFON CHESTER
Far Hills, NJ 438 Route 513 350 Main Street
Califon, NJ 07830 Chester, NJ 07930
JAMES R. LAMB, ESQ. (908)832-5131 (908)879-8115
James R. Lamb, P.C.
Morristown, NJ
FAR HILLS FELLOWSHIP VILLAGE
GEORGE R. LAYTON 26 Dumont Road 8000 Fellowship Road
Director Far Hills, NJ 07931 Basking Ridge, NJ 07920
Layton Funeral Home (908)781-1018 (908)719-4332
Bedminster, NJ
LONG VALLEY MENDHAM
EDWARD A. MERTON 59 East Mill Road 17 East Main Street
President (Route 24) Mendham, NJ 07945
Merton Excavating Long Valley, NJ 07853 (973)543-9630
& Paving Co. (908)876-3300
Chester, NJ
F. DUFFIELD MEYERCORD PLUCKEMIN POTTERSVILLE
Managing Director 468 Route 206 North 11 Pottersville Rd.
Meyercord Advisors, Inc. Bedminster, NJ 07921 Pottersville, NJ 07979
Bedminster, NJ (908)658-4500 (908)439-2265
JOHN R. MULCAHY
Basking Ridge, NJ
PHILIP W. SMITH III
President
Phillary Management Inc.
Far Hills, NJ
JACK D. STINE
Chairman
Bridgewater Community Services
Bridgewater, NJ
WILLIAM TURNBULL
Gladstone, NJ