SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 2006
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 001-16197
PEAPACK-GLADSTONE FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 22-3537895 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 158 Route 206 North, Gladstone, New Jersey 07934 (Address of principal executive offices, including zip code) (908) 234-0700 (Registrant's telephone number, including area code) |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of "accelerated filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer ___ Accelerated filer _X_ Non-accelerated filer___
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes__ No _X_.
Number of shares of Common Stock outstanding as of May 1, 2006:
8,270,252
PEAPACK-GLADSTONE FINANCIAL CORPORATION
PART 1 FINANCIAL INFORMATION Item 1 Financial Statements (Unaudited): Consolidated Statements of Condition March 31, 2006 and December 31, 2005 Page 3 Consolidated Statements of Income for the three months ended March 31, 2006 and 2005 Page 4 Consolidated Statements of Changes in Shareholders' Equity for the three months ended March 31, 2006 and 2005 Page 5 Consolidated Statements of Cash Flows for the three months ended March 31, 2006 and 2005 Page 6 Notes to Consolidated Financial Statements Page 7 Item 1A Risk Factors Page 11 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Page 11 Item 3 Quantitative and Qualitative Disclosures about Market Risk Page 17 Item 4 Controls and Procedures Page 18 PART 2 OTHER INFORMATION Item 2 Unregistered Sales of Equity Securities and Use of Proceeds Page 18 Item 6 Exhibits Page 19 |
PEAPACK-GLADSTONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in thousands)
(Unaudited)
March 31, December 31, 2006 2005 ------------ ------------ ASSETS Cash and due from banks $ 24,012 $ 19,573 Federal funds sold 1,437 2,631 Interest-earning deposits 1,583 1,295 ------------ ------------ Total cash and cash equivalents 27,032 23,499 Investment Securities Held to Maturity (approximate market value $70,715 in 2006 and $77,286 in 2005) 71,771 78,084 Securities Available for Sale 351,742 341,584 Loans: Loans secured by real estate 749,770 728,122 Other loans 39,717 40,351 ------------ ------------ Total loans 789,487 768,473 Less: Allowance for loan losses 6,414 6,378 ------------ ------------ Loans, net 783,073 762,095 Premises and equipment, net 22,872 21,412 Accrued interest receivable 5,339 4,828 Cash surrender value of life insurance 18,135 17,957 Other assets 7,477 5,924 ------------ ------------ TOTAL ASSETS $ 1,287,441 $ 1,255,383 ============ ============ LIABILITIES Deposits: Noninterest-bearing demand deposits $ 183,791 $ 185,854 Interest-bearing deposits: Checking 145,846 176,175 Savings 87,934 90,744 Money market accounts 298,835 281,068 Certificates of deposit over $100,000 105,945 93,903 Certificates of deposit less than $100,000 223,848 214,252 ------------ ------------ Total deposits 1,046,199 1,041,996 Short-Term Borrowings 103,000 77,500 Long-Term Debt 31,275 31,705 Accrued expenses and other liabilities 7,895 5,027 ------------ ------------ TOTAL LIABILITIES 1,188,369 1,156,228 ------------ ------------ SHAREHOLDERS' EQUITY Common stock (no par value; stated value $0.83 per share; authorized 20,000,000 shares; issued shares, 8,479,942 at March 31, 2006 and 8,473,718 at December 31, 2005; outstanding shares, 8,270,155 at March 31, 2006 and 8,284,715 at December 31, 2005) 7,066 7,061 Surplus 89,090 88,973 Treasury Stock at cost, 209,787 shares in 2006 and 189,003 shares in 2005 (4,590) (4,022) Retained Earnings 12,187 10,100 Accumulated other comprehensive loss, net of income tax (4,681) (2,957) ------------ ------------ TOTAL SHAREHOLDERS' EQUITY 99,072 99,155 ------------ ------------ TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 1,287,441 $ 1,255,383 ============ ============ |
See accompanying notes to consolidated financial statements.
PEAPACK-GLADSTONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share data)
(Unaudited)
Three months ended March 31, 2006 2005 ---------- ---------- INTEREST INCOME Interest and fees on loans $ 11,248 $ 8,274 Interest on investment securities: Taxable 298 498 Tax-exempt 369 276 Interest on securities available for sale: Taxable 3,767 3,505 Tax-exempt 87 90 Interest-earning deposits 9 10 Interest on federal funds sold 16 3 ---------- ---------- Total interest income 15,794 12,656 INTEREST EXPENSE Interest on savings and interest-bearing deposit accounts 2,492 1,559 Interest on certificates of deposit over $100,000 2,084 498 Interest on other time deposits 1,014 1,135 Interest on borrowed funds 1,628 437 ---------- ---------- Total interest expense 7,218 3,629 ---------- ---------- NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES 8,576 9,027 Provision for loan losses 39 131 ---------- ---------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 8,537 8,896 ---------- ---------- OTHER INCOME Trust department income 2,245 2,013 Service charges and fees 472 465 Bank owned life insurance 204 197 Securities gains 51 298 Other income 214 177 ---------- ---------- Total other income 3,186 3,150 OTHER EXPENSES Salaries and employee benefits 3,859 3,652 Premises and equipment 1,725 1,566 Other expense 1,534 1,356 ---------- ---------- Total other expenses 7,118 6,574 ---------- ---------- INCOME BEFORE INCOME TAX EXPENSE 4,605 5,472 Income tax expense 1,359 1,769 ---------- ---------- NET INCOME $ 3,246 $ 3,703 ========== ========== EARNINGS PER SHARE Basic $ 0.39 $ 0.45 Diluted $ 0.39 $ 0.44 Average basic shares outstanding 8,279,156 8,261,692 Average diluted shares outstanding 8,397,319 8,405,073 |
See accompanying notes to consolidated financial statements.
PEAPACK-GLADSTONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in thousands)
(Unaudited)
Three Months Ended March 31, 2006 2005 -------- -------- Balance, Beginning of Period $ 99,155 $ 94,669 Comprehensive income: Net Income 3,246 3,703 Unrealized holding losses on securities arising during the period, net of tax (1,691) (3,182) Less: Reclassification adjustment for gains included in net income, net of tax 33 194 -------- -------- (1,724) (3,376) -------- -------- Total Comprehensive income 1,522 327 Common Stock Options Exercised 91 243 Purchase of Treasury Stock (568) (209) Cash Dividends Declared (1,158) (909) Stock-Based Compensation Expense 14 -- Tax Benefit on Disqualifying and Nonqualifying 16 150 Exercise of Stock Options -------- -------- Balance, March 31, $ 99,072 $ 94,271 ======== ======== |
See accompanying notes to consolidated financial statements.
PEAPACK-GLADSTONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three Months Ended March 31, 2006 2005 -------- -------- OPERATING ACTIVITIES: Net Income: $ 3,246 $ 3,703 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 508 474 Amortization of premium and accretion of discount on securities, net 151 310 Provision for loan losses 39 131 Gains on security sales (51) (298) Gain on loans sold (1) (7) Gain on disposal of fixed assets -- (10) Increase in cash surrender value of life insurance, net (178) (173) Increase in accrued interest receivable (511) (997) Increase in other assets (441) (755) Increase in accrued expenses and other liabilities 2,862 2,701 -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 5,624 5,079 -------- -------- INVESTING ACTIVITIES: Proceeds from maturities of investment securities 6,339 7,109 Proceeds from maturities of securities available for sale 14,241 8,173 Proceeds from calls of investment securities -- 3,185 Proceeds from calls of securities available for sale -- 2,000 Proceeds from sales of securities available for sale 228 1,489 Purchase of investment securities (64) (9,073) Purchase of securities available for sale (27,517) (33,845) Proceeds from sales of loans 226 607 Purchase of loans (6,448) (28,972) Net increase in loans (14,794) (13,630) Purchases of premises and equipment (1,968) (353) Disposal of premises and equipment -- 21 -------- -------- NET CASH USED IN INVESTING ACTIVITIES (29,757) (63,289) -------- -------- FINANCING ACTIVITIES: Net increase in deposits 4,203 51,016 Net increase in short-term borrowings 25,500 16,750 Repayments of long-term debt (430) (417) Stock-based compensation 14 -- Cash dividends paid (1,160) (906) Tax benefit on stock option exercises 16 150 Exercise of stock options 91 243 Purchase of Treasury Stock (568) (209) -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 27,666 66,627 -------- -------- Net increase in cash and cash equivalents 3,533 8,417 Cash and cash equivalents at beginning of period 23,499 16,518 -------- -------- Cash and cash equivalents at end of period $ 27,032 $ 24,935 ======== ======== Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 6,986 $ 3,469 Income taxes -- 943 |
See accompanying notes to consolidated financial statements.
PEAPACK-GLADSTONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Certain information and footnote disclosures normally included in the unaudited consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the period ended December 31, 2005 for Peapack-Gladstone Financial Corporation (the "Corporation").
Principles of Consolidation: The Corporation considers that all adjustments (all of which are normal recurring accruals) necessary for a fair presentation of the statement of the financial position and results of operations in accordance with U.S. generally accepted accounting principles for these periods have been made. Results for such interim periods are not necessarily indicative of results for a full year.
The consolidated financial statements of Peapack-Gladstone Financial Corporation are prepared on the accrual basis and include the accounts of the Corporation and its wholly owned subsidiary, Peapack-Gladstone Bank. All significant intercompany balances and transactions have been eliminated from the accompanying consolidated financial statements.
Allowance for Loan Losses: The allowance for loan losses is maintained at a level considered adequate to provide for probable loan losses inherent in the Corporation's loan portfolio. The allowance is based on management's evaluation of the loan portfolio considering, among other things, current economic conditions, the volume and nature of the loan portfolio, historical loan loss experience, and individual credit situations. The allowance is increased by provisions charged to expense and reduced by charge-offs net of recoveries.
Stock Option Plans: The Corporation has incentive and non-qualified stock option plans that allow the granting of shares of the Corporation's common stock to employees and non-employee directors. The options granted under these plans are exercisable at a price equal to the fair market value of common stock on the date of grant and expire not more than ten years after the date of grant. Stock options may vest during a period of up to five years after the date of grant.
As of January 1, 2006, the Corporation adopted the fair value recognition provisions of Financial Accounting Standards Board (FASB) Statement No. 123 (Revised 2004), Share-Based Payment, (Statement 123R), under the modified prospective transition method. Statement 123R requires public companies to recognize compensation expense related to stock-based compensation awards over the period during which an employee is required to provide service for the award. Under the modified prospective transition method, the fair value recognition provisions apply only to new awards or awards modified after January 1, 2006. Additionally, the fair value of existing unvested awards at the date of adoption is recorded in salaries and benefits expense over the remaining requisite service period. Results from prior periods have not been restated. The following table represents the impact of the adoption of Statement 123R on the Corporation's financial statements for the quarter ended March 31, 2006.
Under Under (Dollars In Thousands Except Share Data) Statement 123R APB 25 Difference ------------------------------------------ ------------------- ------------ -------------- Net income before income tax expense $ 4,605 $ 4,619 $ 14 Net income 3,246 3,260 14 Earnings per share - Basic $ 0.39 $ 0.39 $ -- Earnings per share - Diluted 0.39 0.39 -- |
Prior to January 1, 2006, the Corporation had accounted for its stock option plans under the recognition and measurement principles of Accounting Principles Board Opinion No. 25 (APB 25) and related Interpretations. No stock-based compensation cost was reflected in net income, as all options granted under those plans had an exercise price equal to the market value of their underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share for the first quarter of 2005 as if the Corporation had applied the fair value recognition provisions of Statement No. 123R, to stock-based employee compensation in 2005:
Three Months Ended (Dollars In Thousands Except Share Data) March 31, 2005 ------------------ Net Income: As Reported $3,703 Less: Total Stock-Based Compensation Expense determined under the Fair Value Based Method on all Stock Options, Net of Related Tax Effects 98 ------ Pro Forma $3,605 Earnings Per Share - As Reported Basic $ 0.45 Diluted 0.44 Earnings Per Share - Pro Forma Basic $ 0.44 Diluted 0.43 |
As of March 31, 2006, there was approximately $192 thousand of unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Corporation's stock incentive plans. That cost is expected to be recognized over a weighted average period of 1.7 years.
For the Corporation's stock option plans for employees, changes in options outstanding during the first quarter of 2006 were as follows:
Number Exercise Weighted Aggregate of Price Average Intrinsic (Dollars In Thousands Except Share Data) Shares Per Share Exercise Price Value ------------------------------------------------------------------------------------------------------------- Balance, December 31, 2005 441,363 $11.85-$32.14 $22.61 Granted 1,000 27.90 27.90 Exercised (2,515) 11.85 11.85 Forfeited (22) 27.36 27.36 ------------------------------------------------- Balance, March 31, 2006 439,826 $11.85-$32.14 $22.54 $2,047 ================================================================== Options Exercisable, March 31, 2006 404,050 $2,035 ================================================================== |
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Corporation's closing stock price on the last trading day of the first quarter of 2006 and the exercise price, multiplied by the number of in the money options).
The aggregate intrinsic value of options exercised during the quarters ended March 31, 2006 and 2005 was $40 thousand and $304 thousand, respectively.
The following table summarizes information about stock options outstanding at March 31, 2006.
Shares Remaining Shares Exercise Price Outstanding Contractual Life Exercisable -------------------------------------------------------------------- < $12.00 65,547 1.4 years 65,547 12.01 - 16.05 17,380 4.9 years 16,280 16.06 - 19.20 120,449 4.0 years 112,690 19.21 - 26.00 2,589 6.8 years 1,301 26.01 - 28.90 217,881 7.8 years 195,996 28.91 - 32.14 15,980 8.5 years 12,236 -------------------------------------------------------------------- $22.54 * 439,826 5.6 years 404,050 ==================================================================== |
* Weighted average exercise price
The Corporation also has non-qualified stock option plans for non-employee directors. Changes in options outstanding during the first quarter of 2006 were as follows:
Number Exercise Weighted Aggregate of Price Average Intrinsic (Dollars In Thousands Except Share Data) Shares Per Share Exercise Price Value --------------------------------------------------------------------------------------------------------- Balance, December 31, 2005 197,730 $15.68-$28.89 $22.91 Exercised (3,709) 15.68-17.53 16.62 -------------------------------------------------------------- Balance, March 31, 2006 194,021 $15.68-$28.89 $23.03 $826 ============================================================== Options Exercisable, March 31, 2006 194,021 $826 ============================================================== |
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Corporation's closing stock price on the last trading day of the first quarter of 2006 and the exercise price, multiplied by the number of in the money options).
The aggregate intrinsic value of options exercised during the quarters ended March 31, 2006 and 2005 was $40 thousand and $367 thousand, respectively.
The following table summarizes information about stock options outstanding at March 31, 2006.
Shares Remaining Shares Exercise Price Outstanding Contractual Life Exercisable ------------------------------------------------------------------------- < $16.00 28,750 4.9 years 28,750 16.01 - 20.00 66,272 2.2 years 66,272 20.01 - 28.89 98,999 8.0 years 98,999 ------------------------------------------------------------------------- $22.91 * 194,021 5.5 years 194,021 ========================================================================= |
* Weighted average exercise price
The per share weighted-average fair value of stock options granted during the first quarters of 2006 and 2005 for all plans was $9.50 and $10.23, respectively, on the date of grant using the Black Scholes option-pricing model with the following weighted average assumptions:
2006 2005 ------------ ------------- Dividend yield 2.19% 1.63% Expected volatility 40% 40% Expected life 5 years 5 years Risk-free interest rate 4.30% 3.71% |
Earnings per Common Share - Basic and Diluted: Basic earnings per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding. Diluted earnings
per share includes any additional common shares as if all potentially dilutive common shares were issued (i.e., stock options) utilizing the treasury stock method.
Comprehensive Income: The difference between the Corporation's net income and total comprehensive income for the three months ended March 31, 2006 and 2005 relates to the change in the net unrealized gains and losses on securities available for sale during the applicable period of time less adjustments for realized gains and losses. Total comprehensive income for the three months ended March 31, 2006 and 2005 was $1.5 million and $327 thousand, respectively.
Reclassification: Certain reclassifications have been made in the prior periods' financial statements in order to conform to the 2006 presentation.
2. LOANS
Loans outstanding as of March 31, consisted of the following:
(In Thousands) 2006 2005 -------- -------- Loans Secured by 1-4 Family $512,854 $402,732 Commercial Real Estate 205,397 164,399 Construction Loans 31,518 16,246 Commercial Loans 31,947 21,829 Consumer Loans 6,242 6,299 Other Loans 1,529 2,668 -------- -------- Total Loans $789,487 $614,173 ======== ======== |
3. FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS
Advances from the Federal Home Loan Bank of New York (FHLB) totaled $31.3 million and $33.0 million at March 31, 2006 and 2005, respectively, with a weighted average interest rate of 3.56 percent and 3.42 percent, respectively. These advances are secured by blanket pledges of certain 1-4 family residential mortgages totaling $232.8 million at March 31, 2006. Advances totaling $23.0 million at March 31, 2006, have fixed maturity dates, while advances totaling $8.3 million were amortizing advances with monthly payments of principal and interest.
The final maturity dates of the advances are scheduled as follows:
(In Thousands) 2006 $ 6,000 2007 4,000 2008 1,297 2009 2,000 2010 10,949 Over 5 Years 7,029 ------- Total $31,275 ======= |
At March 31, 2006, short-term borrowings at FHLB, with an average maturity of 90 days or less, were $95.0 million, while the Corporation had no short-term borrowings at March 31, 2005. The weighted average interest rate for short-term borrowings for the quarter ended March 31, 2006 was 4.55 percent.
Overnight borrowings totaled $8.0 million at March 31, 2006 as compared to overnight borrowings of $16.8 million at March 31, 2005. For the quarters ended, March 31, 2006 and 2005, overnight borrowings at FHLB averaged $37.9 million with a weighted average interest rate of 4.53 percent and $23.4 million with a weighted average interest rate of 2.63 percent, respectively.
4. BENEFIT PLANS
The Corporation has a defined benefit pension plan covering substantially all of its salaried employees.
The net periodic expense for the three months ended March 31 included the
following components:
Three Months Ended March 31, (In Thousands) 2006 2005 -------- -------- Service Cost $ 417 $ 351 Interest Cost 165 146 Expected Return on Plan Assets (224) (133) Amortization of: Net Loss 19 17 Unrecognized Prior Service Cost -- -- Unrecognized Remaining Net Assets (2) (2) -------- -------- Net Periodic Benefit Cost $ 375 $ 379 ======== ======== |
As previously disclosed in the financial statements for the year ended December 31, 2005, the Corporation expects to contribute $1.1 million to its pension plan in 2006. As of March 31, 2006, contributions of $285 thousand had been made for the current year.
ITEM 1A. Risk Factors
There were no material changes in the Corporation's risk factors during the three months ended March 31, 2006 from the risk factors disclosed in Part I, Item 1A of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2005.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL: The following discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about management's view of future interest income and net loans, management's confidence and strategies and management's expectations about new and existing programs and products, relationships, opportunities and market conditions. These statements may be identified by such forward-looking terminology as "expect", "look", "believe", "anticipate", "may", "will", or similar statements or variations of such terms. Actual results may differ materially from such forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities:
o Unanticipated changes or no change in interest rates.
o Competitive pressure in the banking industry causes unanticipated adverse changes.
o An unexpected decline in the economy of New Jersey causes customers to default in the payment of their loans or causes loans to become impaired.
o Enforcement of the Highlands Water Protection and Planning Act
o Loss of key managers or employees.
o Loss of major customers or failure to develop new customers.
o A decrease in loan quality and loan origination volume.
o An increase in non-performing loans.
o A decline in the volume of increase in trust assets or deposits.
The Corporation assumes no responsibility to update such forward-looking statements in the future.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES: "Management's Discussion and Analysis of Financial Condition and Results of Operations" is based upon the Corporation's consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires the Corporation to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Note 1 to the Corporation's Audited Consolidated Financial Statements included in the December 31, 2005 Annual Report on Form 10-K, contains a summary of the Corporation's significant accounting policies. Management believes the Corporation's policy with respect to the methodology for the determination of the allowance for loan losses involves a higher degree of complexity and requires management to make difficult and subjective judgments, which often require assumptions or estimates about highly uncertain matters. Changes in these judgments, assumptions or estimates could materially impact results of operations. This critical policy and its application are periodically reviewed with the Audit Committee and the Board of Directors.
The provision for loan losses is based upon management's evaluation of the adequacy of the allowance, including an assessment of known and inherent risks in the portfolio, giving consideration to the size and composition of the loan portfolio, actual loan loss experience, level of delinquencies, detailed analysis of individual loans for which full collectibility may not be assured, the existence and estimated net realizable value of any underlying collateral and guarantees securing the loans, and current economic and market conditions. Although management uses the best information available, the level of the allowance for loan losses remains an estimate which is subject to significant judgment and short-term change. Various regulatory agencies, as an integral part of their examination process, periodically review the Corporation's provision for loan losses. Such agencies may require the Corporation to make additional provisions for loan losses based upon information available to them at the time of their examination. Furthermore, the majority of the Corporation's loans are secured by real estate in the State of New Jersey. Accordingly, the collectibility of a substantial portion of the carrying value of the Corporation's loan portfolio is susceptible to changes in local market conditions and may be adversely affected should real estate values decline or should New Jersey experience adverse economic conditions. Future adjustments to the provision for loan losses may be necessary due to economic, operating, regulatory and other conditions beyond the Corporation's control.
OVERVIEW: The Corporation realized earnings of $0.39 per diluted share in the first quarter of 2006 as compared to $0.44 per diluted share for the first quarter of 2005. Net income for the first quarters of 2006 and 2005 was $3.2 million and $3.7 million, respectively, a decline of $457 thousand, or 12.3 percent between these periods. Annualized return on average assets for the quarter was 1.02 percent and annualized return on average equity was 13.04 percent for the first quarter of 2006.
EARNINGS ANALYSIS
NET INTEREST INCOME: Net interest income, on a tax-equivalent basis, before the provision for loan losses, was $8.9 million for the first quarter of 2006 as compared to $9.3 million for the first quarter of 2005, a decline of $386 thousand or 4.2 percent. The decline in net interest income during the quarter was primarily the result of higher rates paid on deposits, higher deposit and borrowings balances offset in part by higher loan volume and slightly higher rates earned on loans. The net interest margin on a fully tax-equivalent basis was 2.94 percent and 3.53 percent in the first quarter of 2006 and 2005, respectively, a decrease of 59 basis points. Net interest income for the first quarter of 2006, when compared to the fourth quarter of 2005, increased $62 thousand, or 0.7 percent, from $8.8 million on a tax-equivalent basis. This increase marks the first sequential quarterly gain in net interest income since the fourth quarter of 2004. The net interest margin, on a fully tax equivalent basis declined from 3.02 percent in the fourth quarter of 2005, to 2.94 percent in the first quarter of 2006, an eight basis point decrease.
For the first quarter of 2006, average interest-earning assets increased $159.8 million or 15.2 percent to $1.21 billion as compared to $1.05 billion for the same quarter in 2005. This was due to the increase in average loan balances of $182.0 million, or 30.7 percent, in the first quarter of 2006 compared to the first quarter of 2005, offset in part by a decline in average investment securities, federal funds sold and interest-earning deposits balances of $22.2 million, or 4.9 percent, in the first quarter of 2006 compared to the first quarter of 2005. The increase in loan balances during the first quarter of 2006 was the result of growth in residential real estate, commercial mortgage, commercial and installment loans. The majority of residential real estate loan origination was due to the purchase of adjustable rate loans from a third-party mortgage origination entity. All of the loans purchased are secured by properties located in the State of New Jersey and many are within the Bank's market area.
Average interest-bearing liabilities increased $145.5 million or 17.3 percent for the quarter ended March 31, 2006, to $988.4 million from $842.9 million in the same quarter in 2005. Average balances of money market accounts increased $55.0 million or 24.1 percent and certificate of deposits rose $70.8 million or 28.1 percent. Average interest-bearing checking deposits declined $56.5 million or 28.1 percent, while average savings deposits declined $17.3 million or 16.4 percent. In addition to opening two new branches since first quarter 2005, several new deposit products have been introduced in the past year, which have been well received by customers, including the Fed Flyer CD and the Fed Tracker Money Market Account. For the first quarter of 2006, Federal Home Loan Bank advances averaged $150.1 million as compared to $56.5 million for the first quarter of 2005. Average non-interest-bearing demand deposits totaled $176.4 million and $166.3 million for the first quarters of 2006 and 2005, respectively, a $10.1 million or 6.0 percent increase.
On a tax-equivalent basis, average interest rates earned on interest-earning assets rose 41 basis points to 5.33 percent for the first quarter of 2006, from 4.92 percent for the first quarter of 2005. Average interest rates earned on loans rose 23 basis points in the first quarter of 2006 to 5.81 percent from 5.58 percent for the same quarter in 2005, despite a flattened yield curve and competitive pressure. For the quarter ended March 31, 2006, the average interest rates earned on investment securities rose 40 basis points to 4.46 percent from 4.06 percent in the same period in 2005. The average interest rate paid on interest-bearing liabilities in the first quarter of 2006 and 2005 was 2.92 percent and 1.72 percent, respectively, a 120 basis point increase. The average rate paid on certificate of deposits in the first quarter of 2006 rose 125 basis points to 3.84 percent while average rates paid on money market accounts increased 154 basis points to 3.03 percent when compared with the same quarter in 2005. While almost all categories of liabilities are paying higher rates, certificates of deposit and money markets accounts grew at a faster pace due to the growth in the adjustable-rate Fed Flyer CD and the Fed Tracker Money Market products. Rates for these two products are tied to the Federal Funds rate, which increased many times during 2005 and has continued to rise in 2006. The cost of funds for the quarter increased to 2.48 percent as compared to 1.44 percent for the first quarter of 2005. Net interest income also continues to be negatively affected by the narrowing gap between short and long term interest rates despite strong loan and deposit growth.
The following tables reflect the components of net interest income for the three months ended March 31, 2006 and 2005:
Average Balance Sheet Unaudited Year-to-Date
(Tax-Equivalent Basis, Dollars in Thousands)
March 31, 2006 March 31, 2005 -------------- -------------- Average Income/ Average Income/ Balance Expense Yield Balance Expense Yield ------- ------- ----- ------- ------- ----- ASSETS: Interest-Earning Assets: Investments: Taxable (1) $ 374,043 $ 4,065 4.35% $ 402,107 $ 4,003 3.98% Tax-Exempt (1) (2) 57,635 752 5.22 51,741 603 4.66 Loans (2) (3) 775,015 11,261 5.81 593,063 8,280 5.58 Federal Funds Sold 1,479 16 4.33 1,772 11 2.48 Interest-Earning Deposits 904 9 4.03 622 3 1.93 ----------- ------------------ ----------- ---------------- Total Interest-Earning Assets 1,209,076 $ 16,103 5.33% 1,049,305 $ 12,900 4.92% ----------- ------------------ ----------- ---------------- Noninterest-Earning Assets: Cash and Due from Banks 21,893 20,968 Allowance for Loan Losses (6,501) (6,027) Premises and Equipment 21,716 20,176 Other Assets 23,113 25,203 ----------- ----------- Total Noninterest-Earning Assets 60,221 60,320 ----------- ----------- Total Assets $ 1,269,297 $ 1,109,625 =========== =========== LIABILITIES: Interest-Bearing Deposits Checking $ 144,319 $ 196 0.54% $ 200,839 $ 528 1.05% Money Markets 283,022 2,146 3.03 228,065 849 1.49 Savings 88,395 150 0.68 105,701 182 0.69 Certificates of Deposit 322,649 3,098 3.84 251,807 1,633 2.59 ----------- ------------------ ----------- ---------------- Total Interest-Bearing Deposits 838,385 5,590 2.67 786,412 3,192 1.62 Borrowings 150,054 1,628 4.34 56,536 437 3.09 ----------- ------------------ ----------- ---------------- Total Interest-Bearing Liabilities 988,439 7,218 2.92 842,948 3,629 1.72 ----------- ------------------ ----------- ---------------- Noninterest Bearing Liabilities Demand Deposits 176,398 166,339 Accrued Expenses and Other Liabilities 4,893 4,833 ----------- ----------- Total Noninterest-Bearing Liabilities 181,291 171,172 Shareholders' Equity 99,567 95,505 ----------- ----------- Total Liabilities and Shareholders' Equity $ 1,269,297 $ 1,109,625 =========== =========== Net Interest Income (tax-equivalent basis) 8,885 9,271 Net Interest Spread 2.41% 3.20% ====== ===== Net Interest Margin (4) 2.94% 3.53% ====== ===== Tax equivalent adjustment (309) (244) --------- --------- Net Interest Income $ 8,576 $ 9,027 ========= ========= |
(1) Average balances for available-for-sale securities are based on amortized cost.
(2) Interest income is presented on a tax-equivalent basis using a 35 percent federal tax rate.
(3) Loans are stated net of unearned income and include non-accrual loans.
(4) Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.
OTHER INCOME: For the first quarter of 2006, other income was $3.19 million as compared to $3.15 million in the first quarter of 2005, an increase of $36 thousand or 1.1 percent. Income from PGB Trust and Investments, the Bank's trust division, was $2.25 million, an increase of $232 thousand or 11.5 percent over last year's first quarter. The market value of trust assets increased $112.7 million or 6.8 percent from the first quarter of 2005 to 2006. Other non-interest income increased from $86 thousand in the first quarter of 2005 to $107 thousand in the first quarter of 2006, in part due to nonrecurring commercial and construction loan fees of $60 thousand.
Security gains of $51 thousand were recorded in the first quarter of 2006 as compared to $298 thousand for the same quarter of 2005. The first quarter of 2005 included the recognition of a $249 thousand gain on the non-monetary exchange of an equity security.
The following table presents the components of other income for the three months ended March 31, 2006 and 2005:
Three Months Ended March 31, (In Thousands) 2006 2005 ------ ------ Trust department income $2,245 $2,013 Service charges and fees 472 465 Bank owned life insurance 204 197 Other non-interest income 107 86 Safe deposit rental fees 63 61 Securities gains 51 298 Fees for other services 44 30 ------ ------ Total other income $3,186 $3,150 ====== ====== |
OTHER EXPENSES: For the first quarter of 2006, other expenses increased $544 thousand or 8.3 percent to $7.12 million compared to $6.57 million for the first quarter of 2005. During the first quarter of 2006, salaries and benefits expense was $3.86 million as compared to $3.65 million for the first quarter of 2005, an increase of $207 thousand or 5.7 percent. Normal salary increases, branch expansion, higher group health insurance and pension plan costs, offset in part by lower profit sharing plan contributions, accounted for the increase.
Premises and equipment expense recorded in the first quarter of 2006 was $1.73 million as compared to $1.57 million recorded in the same period in 2005, an increase of $159 thousand or 10.2 percent. In the past year, premises and equipment expenses have increased due to the investment in new branches and equipment.
Professional fees have increased for the first quarter of 2006 to $197 thousand from $96 thousand for the first quarter of 2005 due to additional accruals for audits, regulatory exams and professional services related to employee benefits. Advertising expense increased $29 thousand or 18.8 percent to $183 thousand in the first quarter of 2006 when compared to the same period in 2005 as the Bank continues to advertise deposit products and branch openings. The Corporation strives to operate in an efficient manner and control costs as a means of increasing earnings.
The following table presents the components of other expense for the three months ended March 31, 2006 and 2005:
Three Months Ended March 31, (In Thousands) 2006 2005 ------ ------ Salaries and employee benefits $3,859 $3,652 Premises and equipment 1,725 1,566 Professional fees 197 96 Advertising 183 154 Trust department expense 115 107 Stationery and supplies 107 158 Telephone 92 103 Postage 85 68 Other expense 755 670 ------ ------ Total other expense $7,118 $6,574 ====== ====== |
NON-PERFORMING ASSETS: Other real estate owned (OREO), loans past due in excess of 90 days and still accruing, and non-accrual loans are considered non-performing assets. These assets totaled $106 thousand and $255 thousand at March 31, 2006 and 2005, respectively. Loans past due in excess of 90 days and still accruing are in the process of collection and are considered well secured.
The following table sets forth non-performing assets on the dates indicated, in conjunction with asset quality ratios:
March 31, (In thousands) 2006 2005 -------------------- Other real estate owned $ -- $ -- Loans past due in excess of 90 days and still accruing 38 12 Non-accrual loans 68 243 -------- -------- Total non-performing assets $ 106 $ 255 ======== ======== Non-performing loans as a % of total loans 0.01% 0.04% Non-performing assets as a % of total loans plus other real estate owned 0.01% 0.04% Allowance as a % of total loans 0.81% 1.00% |
PROVISION FOR LOAN LOSSES: The provision for loan losses was $39 thousand for the first quarter of 2006 as compared to $131 thousand for the first quarter of 2005. The amount of the loan loss provision and the level of the allowance for loan losses are based upon a number of factors including management's evaluation of probable losses inherent in the portfolio, after consideration of appraised collateral values, financial condition and past credit history of the borrowers as well as prevailing economic conditions.
For the first quarter of 2006, net charge-offs were $3 thousand as compared to net recoveries of $7 thousand during the first quarter of 2005.
A summary of the allowance for loan losses for the three-month period ended March 31, follows:
(In thousands) 2006 2005 ------- ------ Balance, January 1, $ 6,378 $5,989 Provision charged to expense 39 131 Charge-offs (4) -- Recoveries 1 7 ------- ------ Balance, March 31, $ 6,414 $6,127 ======= ====== |
INCOME TAXES: Income tax expense as a percentage of pre-tax income was 29.5 percent and 32.3 percent for the three months ended March 31, 2006 and 2005, respectively. Taxable income declined from $5.5 million for the first quarter of 2005 to $4.6 million for the first quarter of 2006. The effective tax rate in 2006 decreased due to increased
tax-exempt income, as well as a decline in state income tax due to higher taxable income in the Real Estate Investment Trust subsidiary, which has a lower effective state tax rate.
CAPITAL RESOURCES: The Corporation is committed to maintaining a strong capital position. At March 31, 2006, total shareholders' equity, including net unrealized losses on securities available for sale, was $99.1 million, representing a decline in total shareholders' equity recorded at December 31, 2005, of $83 thousand or 0.08 percent. The Federal Reserve Board has adopted risk-based capital guidelines for banks. The minimum guideline for the ratio of total capital to risk-weighted assets is 8 percent. Tier 1 Capital consists of common stock, retained earnings, minority interests in the equity accounts of consolidated subsidiaries, non-cumulative preferred stock, less goodwill and certain other intangibles. The remainder may consist of other preferred stock, certain other instruments and a portion of the allowance for loan loss. At March 31, 2006, the Corporation's Tier 1 Capital and Total Capital ratios were 16.17 percent and 17.18 percent, respectively.
In addition, the Federal Reserve Board has established minimum leverage ratio guidelines. These guidelines provide for a minimum ratio of Tier 1 Capital to average total assets of 3 percent for banks that meet certain specified criteria, including having the highest regulatory rating. All other banks are generally required to maintain a leverage ratio of at least 3 percent plus an additional 100 to 200 basis points. The Corporation's leverage ratio at March 31, 2006, was 8.13 percent.
LIQUIDITY: Liquidity refers to an institution's ability to meet short-term requirements in the form of loan requests, deposit withdrawals and maturing obligations. Principal sources of liquidity include cash, temporary investments and securities available for sale.
Management's opinion is that the Corporation's liquidity position is sufficient to meet future needs. Cash and cash equivalents, interest earning deposits and federal funds sold totaled $27.0 million at March 31, 2006. In addition, the Corporation has $351.7 million in securities designated as available for sale. These securities can be sold in response to liquidity concerns or pledged as collateral for borrowings as discussed below. Book value as of March 31, 2006, of investment securities and securities available for sale maturing within one year amounted to $23.6 million and $15.8 million, respectively.
The primary source of funds available to meet liquidity needs is the Corporation's core deposit base, which excludes certificates of deposit greater than $100 thousand. As of March 31, 2006, core deposits equaled $940.3 million.
Another source of liquidity is borrowing capacity. The Corporation has a variety of sources of short-term liquidity available, including federal funds purchased from correspondent banks, short-term and long-term borrowings from the Federal Home Loan Bank of New York, access to the Federal Reserve Bank discount window and loan participations or sales of loans. The Corporation also generates liquidity from the regular principal payments made on its mortgage-backed security and loan portfolios.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes to information required regarding quantitative and qualitative disclosures about market risk from the end of the preceding fiscal year to the date of the most recent interim financial statements (March 31, 2006).
ITEM 4. Controls and Procedures
The Corporation's Chief Executive Officer and Chief Financial Officer, with the assistance of other members of the Corporation's management, have evaluated the effectiveness of the Corporation's disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, the Corporation's Chief Executive Officer and Chief Financial Officer have concluded that the Corporation's disclosure controls and procedures are effective.
The Corporation's Chief Executive Officer and Chief Financial Officer have also concluded that there have not been any changes in the Corporation's internal control over financial reporting that have materially affected, or is reasonably likely to materially affect, the Corporation's internal control over financial reporting.
The Corporation's management, including the CEO and CFO, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, provides reasonable, not absolute, assurance that the objectives of the control system are met. The design of a control system reflects resource constraints; the benefits of controls must be considered relative to their costs. Because there are inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Corporation have been or will be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns occur because of simple error or mistake. Controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all future conditions; over time, control may become inadequate because of changes in conditions or deterioration in the degree of compliance with the policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
PART II. OTHER INFORMATION
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
Total Number of Shares Maximum Number Total Purchased as of Shares that May Number of Average Part of Publicly Yet Be Purchased Shares Price Paid Announced Plans Under the Plans or Purchased per Share or Programs Programs Period January 1-31, 2006 2,826 $ 27.83 -- 120,000 February 1-28, 2006 14,000 27.26 14,000 106,000 March 1-31, 2006 3,958 27.09 3,500 102,500 ---------- ------- -------- Total 20,784 $ 27.31 17,500 ========== ======= ======== |
On April 15, 2005, the Board of Directors of Peapack-Gladstone Financial Corporation announced the authorization of a stock repurchase plan. The Board authorized the purchase of up to 150,000 shares of outstanding common stock, to be made from time to time, in the open market or in privately negotiated transactions, at prices not exceeding prevailing market prices. On April 14, 2006, the Board of Directors authorized an extension of the stock buyback program for an additional twelve months to April 15, 2007.
Note: All shares not purchased as part of the 2005 stock repurchase plan were repurchased as a result of the cashless exercise of employee and director stock options as provided in the Corporation's Stock Option Plans.
ITEM 6. Exhibits
a. Exhibits
3 Articles of Incorporation and By-Laws:
A. Restated Certificate of Incorporation as in effect on the date of this filing is incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003.
B. By-Laws of the Registrant as in effect on the date of this filing are incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10 H. 2006 Long-Term Stock Incentive Plan
31.1 Certification of Frank A. Kissel, Chief Executive Officer of the Corporation, pursuant to Securities Exchange Act Rule 13a-14(a).
31.2 Certification of Arthur F. Birmingham, Chief Financial Officer of the Corporation, pursuant to Securities Exchange Act Rule 13a-14(a).
32 Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act Of 2002, signed by Frank A. Kissel, Chief Executive Officer of the Corporation, and Arthur F. Birmingham, Chief Financial Officer of the Corporation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
PEAPACK-GLADSTONE FINANCIAL CORPORATION
(Registrant)
DATE: May 10, 2006 By: /s/ Frank A. Kissel -------------------------------------------------- Frank A. Kissel Chairman of the Board and Chief Executive Officer DATE: May 10, 2006 By: /s/ Arthur F. Birmingham -------------------------------------------------- Arthur F. Birmingham Executive Vice President and Chief Financial Officer |
EXHIBIT INDEX
Number Description ------ ----------- 3 Articles of Incorporation and By-Laws: A. Restated Certificate of Incorporation as in effect on the date of this filing is incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003. B. By-Laws of the Registrant as in effect on the date of this filing are incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003. 10 H. 2006 Long-Term Stock Incentive Plan 31.1 Certification of Frank A. Kissel, Chief Executive Officer of the Corporation, pursuant to Securities Exchange Act Rule 13a-14(a). 31.2 Certification of Arthur F. Birmingham, Chief Financial Officer of the Corporation, pursuant to Securities Exchange Act Rule 13a-14(a). 32 Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act Of 2002, signed by Frank A. Kissel, Chief Executive Officer of the Corporation, and Arthur F. Birmingham, Chief Financial Officer of the Corporation. |
EXHIBIT 10 (H)
PEAPACK-GLADSTONE FINANCIAL CORPORATION
2006 LONG-TERM STOCK INCENTIVE PLAN
(Adopted by Directors January 12, 2006)
(Adopted by Shareholders April 25, 2006)
(a) "Agreement" means the written agreement between the Company and an Optionee or Grantee evidencing the grant of an Option or Award and setting forth the terms and conditions thereof.
(b) "Award" means a grant of Restricted Stock or Stock Appreciation Rights, or either or both of them.
(c) "Bank" means Peapack-Gladstone Bank, a Subsidiary.
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" means an intentional failure to perform stated duties, breach of a fiduciary duty involving personal dishonesty, or willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order. Notwithstanding anything else herein to the contrary, in the event that an employee, Director or independent contractor is terminated or removed for Cause, or resigns at a time when Cause exists, or if, following termination, resignation or removal it is determined that Cause existed at the time of such termination, resignation or removal, then any and all Options and Awards will automatically be terminated and void as of the date that Cause arose, and no notice to that effect is required in order to effect that result.
(f) "Change in Capitalization" means any increase, reduction, change or exchange of Shares for a different number or kind of shares or other securities of the Company by reason of a reclassification, recapitalization, merger, consolidation, reorganization, issuance of warrants or rights, stock dividend, stock split or reverse stock split, combination or exchange of shares, repurchase of shares, change in corporate structure or otherwise.
(g) "Change in Control" means an event of a nature that: (1) any "person" (as the term is used in Sections 13(d) and 14(d) of the Exchange Act) who is not now presently but becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the Company's outstanding securities except for any securities purchased by any tax-qualified employee benefit plan of the Company; or (2) individuals who constitute the Board on the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board, or whose nomination for election by the Company's stockholders was approved by the same Nominating Committee serving under an Incumbent Board, shall be, for purposes of this clause (2), considered as though he were a member of the Incumbent Board; or (3) consummation of regulatory approval to implement a plan of reorganization, merger, consolidation, sale of all or substantially all the assets of the Company or similar transaction in which the Company is not the resulting entity or such plan, merger, consolidation, sale or similar transaction occurs; or (4) a proxy statement soliciting proxies from shareholders of the Company shall be distributed by someone other than the current management of the Company, seeking stockholder approval
of a plan of reorganization, merger or consolidation of the Company or similar transaction with one or more corporations as a result of which the outstanding shares of the class of securities then subject to the plan or transaction are exchanged for or converted into cash or property or securities not issued by the Company; or (5) a tender offer is made for 25% or more of the voting securities of the Company.
(h) "Code" means the Internal Revenue Code of 1986, as amended.
(i) "Committee" means a committee consisting solely of two (2) or more directors who are Non-Employee Directors (as defined in Rule 16b-3 of the Exchange Act as it may be amended from time to time) of the Company and outside directors as defined pursuant to Section 162(m) of the Code (as it may be amended from time to time) appointed by the Board to administer the Plan and to perform the functions set forth herein. Directors appointed by the Board to the Committee shall have the authority to act notwithstanding the failure to be so qualified.
(j) "Company" means Peapack-Gladstone Financial Corporation, a New Jersey corporation.
(k) "Director" means a member of the Board who is not also serving as an employee of the Company.
(l) "Disability" means the permanent and total inability by reason of mental or physical infirmity, or both, of an employee, independent contractor or Director to perform the work customarily assigned to him. Additionally, a medical doctor selected or approved by the Board must advise the Committee that it is either not possible to determine when such Disability will terminate or that it appears probable that such Disability will be permanent during the remainder of the individual's lifetime.
(m) "Eligible Employee" means any officer or other key employee of the Company or a Subsidiary designated by the Committee as eligible to receive Options or Awards subject to the conditions set forth herein.
(n) "Escrow Agent" means the escrow agent under the Escrow Agreement, designated by the Committee. The Bank may be appointed as the Escrow Agent.
(o) "Escrow Agreement" means an agreement between the Company, the Escrow Agent and a Grantee, in the form specified by the Committee, under which shares of Restricted Stock awarded pursuant hereto shall be held by the Escrow Agent until either (a) the restrictions relating to such shares expire and the shares are delivered to the Grantee or (b) the Company reacquires the shares pursuant hereto and the shares are delivered to the Company.
(p) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(q) "Fair Market Value" means the fair market value of the Shares as determined by the Committee in its sole discretion; provided, however, that (A) if the Shares are admitted to quotation on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or other comparable quotation system and have been designated as a National Market System ("NMS") security, Fair Market Value on any date shall be the last sale price reported for the Shares on such system on such date or on the last day preceding such date on which a sale was reported, (B) if the Shares are admitted to quotation on NASDAQ and have not been designated a NMS security, Fair Market Value on any date shall be the average of the highest bid and lowest asked prices of the Shares on such system on such date, or (C) if the Shares are admitted to trading on a national securities exchange, Fair Market Value on any date shall be the last sale price reported for the Shares on such exchange on such date or on the last date preceding such date on which a sale was reported.
(r) "Grantee" means a person to whom an Award has been granted under the Plan.
(s) "Incentive Stock Option" means an Option within the meaning of
Section 422 of the Code.
(t) "Nonqualified Stock Option" means an Option which is not an Incentive Stock Option.
(u) "Option" means an Incentive Stock Option, a Nonqualified Stock Option, or either or both of them.
(v) "Optionee" means a person to whom an Option has been granted under the Plan.
(w) "Parent" means any corporation in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock of one of the other corporations in such chain.
(x) "Plan" means the Peapack-Gladstone Financial Corporation 2006 Long-Term Stock Incentive Plan as set forth in this instrument and as it may be amended from time to time.
(y) "Restricted Stock" means Shares issued or transferred to an Eligible Employee or Director which are subject to restrictions as provided in Section 8 hereof.
(z) "Retirement" means the retirement from active employment of an employee or officer, but only if such person meets all of the following requirements: (i) he has a minimum combined total of years of service to the Company or any Subsidiary (excluding service to any acquired company) and age equal to eighty (80), (ii) he is age sixty-two (62) or older, and (iii) he provides six (6) months prior written notice to the Company of the retirement. For Directors, the term "Retirement" shall mean the date on which the Director ceases to be a member of the Board after both attaining age sixty (60) and completing at least ten (10) years of service on the Board.
(aa) "Shares" means the common stock, no par value, of the Company (including any new, additional or different stock or securities resulting from a Change in Capitalization).
(ab) "Stock Appreciation Right" means a right to receive all or some portion of the increase in the value of shares of Common Stock as provided in Section 7 hereof.
(ac) "Subsidiary" means any corporation in an unbroken chain of corporations, beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
(ad) "Successor Corporation" means a corporation, or a parent or subsidiary thereof, which issues or assumes a stock option in a transaction to which Section 425(a) of the Code applies.
(ae) "Ten-Percent Shareholder" means an eligible Employee, who, at the time an Incentive Stock Option is to be granted to him, owns (within the meaning of Section 422(b)(6) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, a Parent or a Subsidiary within the meaning of Section 422(b)(6) of the Code.
(a) The Plan shall be administered by the Committee which shall hold meetings
at such times as may be necessary for the proper administration of the
Plan. The Committee shall keep minutes of its meetings. A majority of the
Committee shall constitute a quorum and a majority of a quorum may
authorize any action. Each member of the Committee shall be a Non-Employee
Director (as defined in Rule 16b-3 of the Exchange Act as it may be
amended from time to time) and an outside director as defined pursuant to
Section 162(m) of the Code as it may be amended from time to time. No
failure to be so qualified shall invalidate any Option or Award or any
action or inaction under the Plan. No member of the Committee shall be
personally liable for any action, determination or interpretation made in
good faith with respect to the Plan, the Options or the Awards, and all
members of the Committee shall be fully indemnified by the Company with
respect to any such action, determination or interpretation.
Subject to the express terms and conditions set forth herein, the Committee shall have the power from time to time:
(1) to determine those Eligible Employees to whom Options shall be granted under the Plan and the number of Incentive Stock Options and/or Nonqualified Options to be granted to each eligible Employee and to prescribe the terms and conditions (which need not be identical) of each Option, including the purchase price per share of each Option;
(2) to select those Eligible Employees to whom Awards shall be granted under the Plan and to determine the number of shares of Restricted Stock and/or Stock Appreciation Rights to be granted pursuant to each Award, the terms and conditions of each Award, including the restrictions or performance criteria relating to such shares or rights, the purchase price per share, if any, of Restricted Stock and whether Stock Appreciation Rights will be granted alone or in conjunction with an Option;
(3) to construe and interpret the Plan and the Options and Awards granted thereunder and to establish, amend and revoke rules and regulations for the administration of the Plan, including, but not limited to, correcting any defect or supplying any omission, or reconciling any inconsistency in the Plan or in any Agreement, in the manner and to the extent it shall deem necessary or advisable to make the Plan fully effective, and all decisions and determinations by the Committee in the exercise of this power shall be final and binding upon the Company or a Subsidiary, the Optionees and the Grantees, as the case may be;
(4) to determine the duration and purposes for leaves of absence which may be granted to an Optionee or Grantee without constituting a termination of employment or service for purposes of the Plan;
(5) generally, to exercise such powers and to perform such acts as are deemed necessary or advisable to promote the best interests of the Company with respect to the Plan.
Subject to the terms and conditions set forth herein, the Committee may, from time to time, recommend the grant of Options and Awards to the Directors in such numbers and upon such terms as it deems appropriate, but all such grants must be approved by the Company's Board of Directors.
(a) The maximum number of Shares that may be issued or transferred pursuant to all Options and Awards under this Plan is 400,000. The maximum number of Shares that may be issued or transferred pursuant to Options or Awards for Incentive Stock Options shall be 400,000. Upon a Change in Capitalization after the adoption of this Plan by the Board, the Shares shall be adjusted to the number and kind of Shares of stock or other securities existing after such Change in Capitalization.
(b) Whenever any outstanding Option or portion thereof expires, is cancelled or is otherwise terminated (other than by exercise of the Option or any related Stock Appreciation Right), the shares of Common Stock allocable to the unexercised portion of such Option may again be the subject of Options and Awards hereunder.
(c) Whenever any Shares subject to an Award or Option are resold to the Company, or are forfeited for any reason pursuant to the terms of the Plan, such Shares may again be the subject of Options and Awards hereunder.
(a) Purchase Price. The purchase price or the manner in which the purchase price is to be determined for Shares under each Option shall be set forth in the Agreement, provided that the purchase price per Share under each Incentive Stock Option shall not be less than 100% of the Fair Market Value of a Share at the time the Option is granted (110% in the case of an Incentive Stock Option granted to a Ten-Percent Shareholder) and each Nonqualified Stock Option shall not be less than 100% of the Fair Market Value of a Share at the time the Option is granted. Incentive Stock Options cannot be granted to Directors or independent contractors.
(b) Duration. Options granted hereunder shall be for such term as the
Committee shall determine, provided that (i) no Incentive Stock
Option shall be exercisable after the expiration of ten (10) years
from the date it is granted (five (5) years in the case of an
Incentive Stock Option granted to a Ten-Percent Shareholder) and
(ii) no Nonqualified Stock Option shall be exercisable after the
expiration of ten (10) years and one (1) day from the date it is
granted.
(c) Non-Transferability. No Option granted hereunder shall be transferable by the Optionee to whom granted otherwise than by will or the laws of descent and distribution, and an Option may be exercised during the lifetime of such Optionee only by the Optionee or his guardian or legal representative. The terms of such Option shall be binding upon the beneficiaries, executors, administrators, heirs and successors of the Optionee.
(d) Stock Options; Vesting. Subject to Section 6(h) hereof, each Option shall be exercisable in such installments (which need not be equal) and at such times as may be designated by the Committee or the Board as set forth in the Option Agreement. Unless otherwise provided in the Agreement, to the extent not exercised, installments shall accumulate and be exercisable, in whole or in part, at any time after becoming exercisable, but not later than the date the Option expires. Upon the death, Disability or Retirement of an Optionee, all Options shall become immediately exercisable. Notwithstanding the foregoing, the Committee (or, with respect to Directors, the Board) may accelerate the exercisability of any Option or portion thereof at any time.
(e) Method of Exercise. The exercise of an Option shall be made only by a written notice delivered in person or by mail to the Secretary of the Company at the Company's principal executive office, specifying the number of Shares to be purchased and accompanied by payment therefore and otherwise in accordance with the Agreement pursuant to which the Option was granted. The purchase price for any shares purchased pursuant to the exercise of an Option shall be paid in full upon such exercise in cash, by check, or, at the discretion of the Committee and upon such terms and conditions as the Committee shall approve, by transferring Shares to the Company. Any Shares transferred to the Company as payment of the purchase price under an Option shall be valued at their Fair Market Value on the day preceding the date of exercise of such Option. If requested by the Committee, the Optionee shall deliver the Agreement evidencing the Option and the Agreement evidencing any related Stock Appreciation Right to the Secretary of the Company who shall endorse thereon a notation of such exercise and return such Agreement to the Optionee.
(f) Rights of Optionees. No Optionee shall be deemed for any purpose to
be the owner of any Shares subject to any Option unless and until
(i) the Option shall have been exercised pursuant to the terms
thereof, (ii) the Company shall have issued and delivered the Shares
to the Optionee, and (iii) the Optionee's name shall have been
entered as a shareholder of record on the books of the Company.
Thereupon, the Optionee shall have full voting, dividend and other
ownership rights with respect to such Shares.
(g) Termination of Employment. In the event that an Optionee who is not a Director ceases to be employed by the Company or any Subsidiary, any outstanding Options held by such Optionee shall, unless the Option Agreement evidencing such Option provides otherwise, terminate as follows:
(1) If the Optionee's termination of employment is due to his death or Disability, the Options shall become fully vested and shall be exercisable for a period of three years following such termination of employment, and shall thereafter terminate;
(2) If the Optionee's termination of employment is by the Optionee (other than due to the Optionee's Retirement), the Option shall terminate on the date of the termination of employment;
(3) If the termination of employment is due to the Optionee's Retirement, the Option shall become fully vested and shall be exercisable for 90 days (three years for an Option designated initially as a Nonqualified Stock Option); and
(4) If the Optionee's termination of employment is for any other reason, the Option (to the extent exercisable at the time of the Optionee's termination of employment) shall be exercisable for a period of ninety (90) days following such termination of employment, and shall thereafter terminate, except that with respect to an Option initially designated as a Nonqualified Stock Option, if the Optionee's termination of employment occurs within 12 months of a Change in Control, the Option shall be exercisable for three years following the termination of employment.
Notwithstanding the foregoing, the Committee may provide, either at the time an Option is granted or thereafter, that the Option may be exercised after the periods provided for in this Section 6(g), but in no event beyond the term of the Option. Notwithstanding anything to the contrary in this Section 6(g), no Option shall be exercisable beyond the term of the Option.
(h) Termination of Service for Directors. Upon the termination of a Director's service as a member of the Board for any reason other than Disability, Change in Control or death, the Director's Options shall be exercisable only as to those Shares which were immediately exercisable by the Director at the date of termination. In the event of the death, Retirement or Disability of a Director, all Options held by the Director shall become immediately exercisable. Upon termination of the Director's service due to or within 12 months after a Change in Control, all Options held by the Director shall become immediately exercisable. Options granted to a Director shall expire and no longer be exercisable upon the earlier of (i) one hundred twenty (120) months following the date of grant, or (ii) three (3) years following the date on which the Director ceases to serve as a Director (for any reason other than Cause).
(i) Effect of Change in Control. In the event of a Change in Control, all Options (other than Options granted to Directors) outstanding on the date of such Change in Control shall become immediately and fully exercisable. Notwithstanding anything else herein to the contrary, in the event of a Change in Control, the Board in its sole discretion has the authority to terminate any and all Options and Awards, and to pay to the holder of the Options or Awards the value of such Options and Awards.
(i) at any time if unrelated to an Option; or
(ii) if related to an Option, either at the time of grant, or at any time thereafter during the term of the Option.
(1) Payment. A Stock Appreciation Right granted in connection with an Option shall entitle the holder thereof, upon exercise of the Stock Appreciation Right or any portion thereof, to receive payment of an amount computed pursuant to Section 7(b)(3).
(2) Exercise. Subject to Section 7(f), a Stock Appreciation Right granted in connection with an Option shall be exercisable at such time or times and only to the extent that the related Option is exercisable, and will
not be transferable except to the extent the related Option may be transferable. A Stock Appreciation Right granted in connection with an Incentive Stock Option shall be exercisable only if the Fair Market Value of a Share on the date of exercise exceeds the purchase price specified in the related Incentive Stock Option.
(3) Amount Payable. Except as otherwise provided in Section 7(g), upon the exercise of a Stock Appreciation Right related to an Option, the Grantee shall be entitled to receive an amount determined by multiplying (A) the excess of the Fair Market Value of a Share on the date of exercise of such Stock Appreciation Right over the per Share purchase price under the related Option, by (B) the number of Shares as to which such Stock Appreciation Right is being exercised. Notwithstanding the foregoing, the Committee may limit in any manner the amount payable with respect to any Stock Appreciation Right by including such a limit in the Agreement evidencing the Stock Appreciation Right at the time it is granted.
(4) Treatment of Related Options and Stock Appreciation Rights Upon Exercise. Except as provided in Section 7(b)(v), (A) upon the exercise of a Stock Appreciation Right granted in connection with an Option, the Option shall be cancelled to the extent of the number of Shares as to which the Stock Appreciation Right is exercised and (B) upon the exercise of an Option granted in connection with a Stock Appreciation Right, the Stock Appreciation Right shall be cancelled to the extent of the number of Shares as to which the Option is exercised.
(5) Simultaneous Exercise of Stock Appreciation Right and Option.
The Committee may provide, either at the time a Stock
Appreciation Right is granted in connection with a
Nonqualified Stock Option or thereafter during the term of the
Stock Appreciation Right, that, subject to Section 7(f), upon
exercise of such Option, the Stock Appreciation Right shall
automatically be deemed to be exercised to the extent of the
number of Shares as to which the Option is exercised. In such
event, the Grantee shall be entitled to receive the amount
described in Section 7(b)(3) or 7(g) hereof, as the case may
be (or some percentage of such amount if so provided in the
Agreement evidencing the Stock Appreciation Right), in
addition to the Shares acquired pursuant to the exercise of
the Option. If a Stock Appreciation Right Agreement contains
an automatic exercise provision described in this Section
7(b)(5) and the Option or any portion thereof to which it
relates is exercised within six (6) months from the date the
Stock Appreciation Right is granted, such automatic exercise
provision shall not be effective with respect to that exercise
of the Option. The inclusion in an Agreement evidencing a
Stock Appreciation Right of a provision described in this
Section 7(b)(5) may be in addition to and not in lieu of the
right to exercise the Stock Appreciation Right as otherwise
provided herein and in the Agreement.
(c) Stock Appreciation Rights Unrelated to an Option. The Committee may grant to Eligible Employees and independent contractors (and the Board may grant to Directors) Stock Appreciation Rights unrelated to Options. Stock Appreciation Rights unrelated to Options shall contain such terms and conditions as to exercisability, vesting and duration as the Committee or the Board shall determine, but in no event shall they have a term of greater than ten (10) years. Upon the death, Disability or Retirement of a Grantee, all Stock Appreciation Rights shall become immediately exercisable. Upon the death or Disability of a Grantee, the Stock Appreciation Rights held by that Grantee shall be exercisable for a period of one (1) year following such termination of employment or service, and shall thereafter terminate. Upon the Retirement of a Grantee, the Stock Appreciation Rights held by that Grantee shall be exercisable for a period of ninety (90) days following such Retirement, and shall thereafter terminate. Except as otherwise provided in Section 7(g), the amount payable upon exercise of such Stock Appreciation Rights shall be determined in accordance with Section 7(b)(3), except that "Fair Market Value of a Share on the date of the grant of the Stock Appreciation Right" shall be substituted for "purchase price under the related Option."
(d) Method of Exercise. Stock Appreciation Rights shall be exercised by a Grantee only by a written notice delivered in person or by mail to the Secretary of the Company at the Company's principal executive office, specifying the number of Shares with respect to which the Stock Appreciation Right is being exercised. If requested by the Committee, the Grantee shall deliver the Agreement evidencing the Stock Appreciation Right being exercised and the Agreement evidencing any related Option to the Secretary of the Company who shall endorse thereon a notation of such exercise and return such Agreements to the Grantee.
(e) Form of Payment. Payment of the amount determined under Sections
7(b)(3) or 7(c), may be made solely in whole shares of Common Stock
in a number determined at their Fair Market Value on the date of
exercise of the Stock Appreciation Right or, alternatively, at the
sole discretion of the Committee, solely in cash, or in a
combination of cash and Shares as the Committee deems advisable. In
the event that a Stock Appreciation Right is exercised within the
sixty-day period following a Change in Control, any amount payable
shall be solely in cash. If the Committee decides to make full
payment in Shares, and the amount payable results in a fractional
Share, payment for the fractional Share will be made in cash.
Notwithstanding the foregoing, no payment in the form of cash may be
made upon the exercise of a Stock Appreciation Right pursuant to
Section 7(b)(3) or 7(c) to an officer of the Company or a Subsidiary
who is subject to Section 16(b) of the Exchange Act, unless the
exercise of such Stock Appreciation Right is made during the period
beginning on the third business day and ending on the twelfth
business day following the date of release for publication of the
Company's quarterly or annual statements of earnings.
(f) Restrictions. No Stock Appreciation Right may be exercised before the date six (6) months after the date it is granted, except in the event that the death or Disability of the Grantee occurs before the expiration of the six-month period.
(g) Effect of Change in Control. In the event of a Change in Control, subject to Section 7(f), all Stock Appreciation Rights shall become immediately and fully exercisable.
(1) Shares of Restricted Stock granted pursuant to an Award hereunder shall be issued in the name of the Grantee as soon as reasonably practicable after the Award is granted and the purchase price, if any, is paid by the Grantee; provided, that the Grantee has executed an Agreement evidencing the Award, an Escrow Agreement, appropriate blank stock powers and any other documents which the Committee, in its absolute discretion, may require as a condition to the issuance of such Shares. If a Grantee shall fail to execute the Agreement evidencing a Restricted Stock Award, an Escrow Agreement or appropriate blank stock powers or shall fail to pay the purchase price, if any, for the Restricted Stock, the Award shall be null and void. Shares issued in connection with a Restricted Stock Award, together with the stock powers, shall be deposited with the Escrow Agent. Except as restricted by the terms of the Agreement, upon the delivery of the Shares to the Escrow Agent, the Grantee shall have all of the rights of a shareholder with respect to such Shares, including the right to vote the shares and to receive, subject to Section 8(d), all dividends or other distributions paid or made with respect to the Shares.
(2) If a Grantee receives rights or warrants with respect to any Shares which were awarded to him as Restricted Stock, such rights or warrants or any Shares or other securities he acquires by the exercise of such rights or warrants may be held, exercised, sold or otherwise disposed of by the Grantee free and clear of the restrictions and obligations provided by this Plan.
(b) Non-Transferability. Until any restrictions upon the Shares of Restricted Stock awarded to a Grantee shall have lapsed in the manner set forth in Section 8(c), such Shares shall not be sold, transferred or otherwise disposed of and shall not be pledged or otherwise hypothecated, nor shall they be delivered to the Grantee. Upon the termination of employment of the Grantee, all of such Shares with respect to which restrictions have not lapsed shall be resold by the Grantee to the Company at the same price paid by the Grantee for such Shares or shall be forfeited and automatically transferred to and reacquired by the Company at no cost to the Company if no purchase price had been paid for such Shares. The Committee may also impose such other restrictions and conditions on the Shares as it deems appropriate.
(1) Restrictions upon Shares of Restricted Stock awarded hereunder shall lapse at such time or times and on such terms, conditions and satisfaction of performance criteria as the Committee (or, when applicable, the Board) may determine; provided, however, that the restrictions upon such Shares shall lapse only if the Grantee on the date of such lapse is then and has continuously been an employee of the Company or a Subsidiary (or a member of the Board) from the date the Award was granted, or unless the Committee sets a later date for the lapse of such restrictions.
(2) In the event of a Change in Control, all restrictions upon any Shares of Restricted Stock shall lapse immediately and all such Shares shall become fully vested in the Grantee thereof.
(3) In the event of termination of employment (or termination of service as a Director) as a result of death, Disability or Retirement of a Grantee, all restrictions upon Shares of Restricted Stock awarded to such Grantee shall thereupon immediately lapse. The Committee or Board may also decide at any time in its absolute discretion and on such terms and conditions as it deems appropriate, to remove or modify the restrictions upon Shares of Restricted Stock awarded hereunder, unless the Committee or the Board sets a later date for the lapse of such restrictions.
(d) Treatment of Dividends. At the time of an Award of Shares of
Restricted Stock, the Committee may, in its discretion, determine
that the payment to the Grantee of dividends, or a specified portion
thereof, declared or paid on Shares of Restricted Stock by the
Company, shall be deferred until the earlier to occur of (i) the
lapsing of the restrictions imposed upon such Shares, in which case
such dividends shall be paid over to the Grantee, or (ii) the
forfeiture of such Shares under Section 8(b) hereof, in which case
such dividends shall be forfeited to the Company, and such dividends
shall be held by the Company for the account of the Grantee until
such time. In the event of such deferral, interest shall be credited
on the amount of such dividends held by the Company for the account
of the Grantee from time to time at such rate per annum as the
Committee, in its discretion, may determine. Payment of deferred
dividends, together with interest accrued thereon as aforesaid,
shall be made upon the earlier to occur of the events specified in
(i) and (ii) of the immediately preceding sentence, in the manner
specified therein.
(e) Delivery of Shares. When the restrictions imposed hereunder and in the Plan expire or have been cancelled with respect to one or more shares of Restricted Stock, the Company shall notify the Grantee and the Escrow Agent of same. The Escrow Agent shall then return the certificate covering the Shares of Restricted Stock to the Company and upon receipt of such certificate the Company shall deliver to the Grantee (or such Grantee's legal representative, beneficiary or heir) a certificate for a number of shares of Common Stock, without any legend or restrictions (except those required by any federal or state securities laws), equivalent to the number of Shares of Restricted Stock for which restrictions have been cancelled or have expired. A new certificate covering Shares of Restricted Stock previously awarded to the Grantee which remain restricted shall be issued to the Grantee and held by the Escrow Agent and the Agreement, as it relates to such shares, shall remain in effect.
(a) In the event of a Change in Capitalization, the Committee shall conclusively determine the appropriate adjustments, if any, to the maximum number and class of shares of stock with respect to which Options or Awards may be granted under the Plan, the number and class of shares as to which Options or Awards have been granted under the Plan, and the purchase price therefore, if applicable.
(b) Any such adjustment in the Shares or other securities subject to outstanding Incentive Stock Options (including any adjustments in the purchase price) shall be made in such manner as not to constitute a modification as defined by Section 425(h)(3) of the Code and only to the extent otherwise permitted by Sections 422 and 425 of the Code.
(c) If, by reason of a Change in Capitalization, a Grantee of an Award shall be entitled to new, additional or different shares of stock or securities (other than rights or warrants to purchase securities), such new additional or different shares shall thereupon be subject to all of the conditions, restrictions and performance criteria which were applicable to the Shares or units pursuant to the Award prior to such Change in Capitalization.
(a) increase the number of Shares as to which Options or Awards may be granted under the Plan; or
(b) change the class of persons eligible to participate in the Plan.
Except as otherwise provided herein, rights and obligations under any Option or Award granted before any amendment of the Plan shall not be altered or impaired by such amendment, except with the consent of the Optionee or Grantee, as the case may be. In addition, no amendment shall be effective with respect to any Option or SAR to the extent that such amendment would be treated as a material modification under Section 409A of the Code.
(a) give any person any right to be granted an Option or Award other than at the sole discretion of the Committee or the Board;
(b) give any person any rights whatsoever with respect to Shares except as specifically provided in the Plan;
(c) limit in any way the right of the Company to terminate the employment or service of any person at any time; or
(d) be evidence of any agreement or understanding, expressed or implied, that the Company will employ any person in any particular position at any particular rate of compensation or for any particular period of time.
(a) This Plan and the rights of all persons claiming hereunder shall be construed and determined in accordance with the laws of the State of New Jersey without giving effect to the choice of law principles thereof, except to the extent that such law is preempted by federal law.
(b) The obligation of the Company to sell or deliver Shares with respect to Options and Awards granted under the Plan shall be subject to all applicable laws, rules and regulations, including all applicable federal and state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Committee.
(c) The Plan is intended to comply with Rule 16b-3 promulgated under the Exchange Act and Section 162(m) of the Code (each as amended from time to time) and the Committee shall interpret and administer the provisions of the Plan or any Agreement in a manner consistent therewith to the extent necessary. Any provisions inconsistent with such Rule or Section shall be inoperative but shall not affect the validity of the Plan or any grants thereunder.
(d) Except as otherwise provided in Section 12, the Board may make such changes as may be necessary or appropriate to comply with the rules and regulations of any government authority or to obtain for Eligible Employees granted Incentive Stock Options the tax benefits under the applicable provisions of the Code and regulations promulgated thereunder.
(e) Each Option and Award is subject to the requirement that, if at any time the Committee determines, in its absolute discretion, that the listing, registration or qualification of Shares issuable pursuant to the Plan is required by any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an Option or the issuance of Shares, no Options shall be granted or payment made or Shares issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions unacceptable to the Committee.
(f) In the event that the disposition of Shares acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act of 1933, as amended, and is not otherwise exempt from such registration, such Shares shall be restricted against transfer to the extent required by the Securities Act of 1933, as amended, or regulations thereunder, and the Committee may require any individual receiving Shares pursuant to the Plan, as a condition precedent to receipt of such Shares (including upon exercise of an Option), to represent to the Company in writing that the Shares acquired by such individual are acquired for investment only and not with a view to distribution.
(a) Multiple Agreements. The terms of each Option or Award may differ from other Options or Awards granted under the Plan at the same time, or at some other time. The Committee may also grant more than one Option or Award to a given Eligible Employee during the term of the Plan, either in addition to, or in substitution for, one or more Options or Awards previously granted to that Eligible Employee. The grant of multiple Options and/or Awards may be evidenced by a single Agreement or multiple Agreements, as determined by the Committee.
(b) Withholding of Taxes. The Company shall have the right to deduct from any distribution of cash to any Optionee or Grantee an amount equal to the federal, state and local income taxes and other amounts required by law to be withheld with respect to any Option or Award. Notwithstanding anything to the contrary contained herein, if an Optionee or Grantee is entitled to receive Shares upon exercise of an Option or pursuant to an Award, the Company shall have the right to require such Optionee or Grantee, prior to the delivery of such Shares, to pay to the Company the amount of any federal, state or local income taxes and other amounts which the Company is required by law to withhold. The Agreement evidencing any Incentive Stock Options granted under this Plan shall provide that if the Optionee makes a disposition, within the meaning of Section 425(c) of the Code and regulations promulgated thereunder, of any Share or Shares issued to him or her pursuant to his or
her exercise of the Incentive Stock Option within the two-year period commencing on the day after the date of grant of such Option or within the one-year period commencing on the day after the date of transfer of the Share or Shares to the Optionee pursuant to the exercise of such Option, he or she shall, within ten (10) days of such disposition, notify the Company thereof and immediately deliver to the Company any amount of federal income tax withholding required by law.
(c) Designation of Beneficiary. Each Optionee and Grantee may, with the consent of the Committee, designate a person or persons to receive in the event of his/her death, any Option or Award or any amount payable pursuant thereto, to which he/she would then be entitled. Such designation will be made upon forms supplied by and delivered to the Company and may be revoked in writing. If an Optionee fails effectively to designate a beneficiary, then his/her estate will be deemed to be the beneficiary.
Exhibit 31.1
CERTIFICATION
I, Frank A. Kissel, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Peapack-Gladstone Financial Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 10, 2006 By: /s/ Frank A. Kissel ---------------------------------- Name: Frank A. Kissel Title: Chairman of the Board and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
I, Arthur F. Birmingham, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Peapack-Gladstone Financial Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 10, 2006 By: /s/ Arthur F. Birmingham --------------------------------------- Name: Arthur F. Birmingham Title: Executive Vice President and Chief Financial Officer |
Exhibit 32
CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Peapack-Gladstone Financial Corporation, (the "Corporation") for the quarterly period ended March 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Frank A. Kissel, as Chief Executive Officer of the Corporation, and Arthur F. Birmingham, as Chief Financial Officer, each hereby certifies, pursuant to 18 U.S.C. (section) 1350, as adopted pursuant to (section) 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.
/s/ Frank A. Kissel ---------------------------------- Name: Frank A. Kissel Title: Chief Executive Officer Date: May 10, 2006 /s/ Arthur F. Birmingham --------------------------------- Name: Arthur F. Birmingham Title: Chief Financial Officer Date: May 10, 2006 |