<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
THIS PAPER DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE
901(d) OF REGULATION S-T.
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For transition period from______________ to _____________
Commission File Number: 0-26086
YARDVILLE NATIONAL BANCORP
------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2670267
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3111 Quakerbridge Road, Mercerville, New Jersey 08619
- - ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(609) 585-5100
- - ------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- - ------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if
changed from last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes(X) No( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of October 28, 1996.
Common Stock, no par value 2,429,779
- - --------------------------- ----------------------------
Class Number of shares outstanding
<PAGE>
INDEX
YARDVILLE NATIONAL BANCORP AND SUBSIDIARY
PART I FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements
Consolidated Statements of Condition
September 30, 1996 and December 31, 1995 3
Consolidated Statements of Income
Three months and nine months ended
September 30, 1996 and 1995 4
Consolidated Statements of Cash Flows
nine months ended September 30, 1996
and 1995 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-15
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
Exhibit 27.1 Financial Data Schedule 18-19
<PAGE>
Yardville National Bancorp and Subsidiary
Consolidated Statements of Condition
(unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
(in thousands, except share data) 1996 1995
<S> <C> <C>
ASSETS:
Cash and due from banks $ 11,806 $ 10,040
Federal funds sold - 2,795
Cash and Cash Equivalents 11,806 12,835
Interest bearing deposits 2,503 1,033
Securities available for sale 98,129 98,469
Investment securities (market value of $31,557 in 1996
and $35,016 in 1995) 32,283 35,384
Loans 313,280 245,054
Less: Allowance for loan losses (4,520) (3,677)
Loans, net 308,760 241,377
Bank premises and equipment, net 5,427 4,026
Other real estate 657 625
Other assets 13,256 9,366
Total Assets $ 472,821 $ 403,115
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits
Non-interest bearing $ 49,469 $ 46,682
Interest bearing 292,847 256,290
Total Deposits 342,316 302,972
Borrowed funds
Securities sold under agreements to repurchase 70,740 54,830
Other 21,588 10,391
Total Borrowed Funds 92,328 65,221
Other liabilities 4,088 3,205
Total Liabilities $ 438,732 $ 371,398
Stockholders' equity
Preferred stock: no par value
Authorized 1,000,000 shares, none issued
Common stock: no par value
Authorized 6,000,000 shares
Issued and outstanding 2,429,179 shares in 1996
and 2,329,179 shares in 1995 17,235 16,409
Surplus 2,205 2,205
Undivided Profits 15,254 12,997
Unrealized gain (loss) - securities available for sale (605) 106
Total Stockholders' Equity 34,089 31,717
Total Liabilities and Stockholders' Equity $ 472,821 $ 403,115
========== ==========
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements.
<PAGE>
Yardville National Bancorp and Subsidiary
Consolidated Statements of Income
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands, except per share amounts) 1996 1995 1996 1995
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $ 6,639 $ 5,401 $ 18,717 $ 15,503
Interest on deposits with banks 20 10 86 21
Interest on securities available for sale 1,701 1,251 4,712 2,101
Interest on securities:
Taxable 375 442 1,180 1,368
Exempt from Federal income tax 102 91 295 279
Interest on Federal funds sold 76 83 162 354
- - ------------------------------------------------------------------------------------------------------------------------------
Total Interest Income 8,913 7,278 25,152 19,626
- - ------------------------------------------------------------------------------------------------------------------------------
Interest Expense:
Interest on savings account deposits 1,017 1,020 2,979 3,079
Interest on certificates of deposit of
$100,000 or more 239 214 632 668
Interest on other time deposits 1,820 1,629 5,068 4,168
Interest on borrowed funds 1,431 678 3,687 1,125
- - ------------------------------------------------------------------------------------------------------------------------------
Total Interest Expense 4,507 3,541 12,366 9,040
- - ------------------------------------------------------------------------------------------------------------------------------
Net Interest Income 4,406 3,737 12,786 10,586
Less provision for loan losses 375 230 1,090 590
- - ------------------------------------------------------------------------------------------------------------------------------
Net Interest Income After Provision for
Loan Losses 4,031 3,507 11,696 9,996
- - ------------------------------------------------------------------------------------------------------------------------------
Non-Interest Income:
Service charges on deposit accounts 287 268 871 798
Gains on sales of mortgages, net 10 4 10 18
Security losses, net (29) (117) (75) (114)
Other non-interest income 265 238 762 646
- - ------------------------------------------------------------------------------------------------------------------------------
Total Non-Interest Income 533 393 1,568 1,348
- - ------------------------------------------------------------------------------------------------------------------------------
Non-Interest Expense:
Salaries and employee benefits 1,647 1,433 4,847 4,230
Occupancy expense, net 240 196 685 534
Equipment 190 158 547 395
Other non-interest expense 853 734 2,466 2,450
- - ------------------------------------------------------------------------------------------------------------------------------
Total Non-Interest Expense 2,930 2,521 8,545 7,609
- - ------------------------------------------------------------------------------------------------------------------------------
Income before income tax expense 1,634 1,379 4,719 3,735
Income tax expense 568 487 1,670 1,295
- - ------------------------------------------------------------------------------------------------------------------------------
Net Income $ 1,066 $ 892 $ 3,049 $ 2,440
- - ------------------------------------------------------------------------------------------------------------------------------
Earnings Per Share:
Primary $ 0.44 $ 0.36 $ 1.25 $ 1.21
Fully diluted $ 0.44 $ 0.36 $ 1.25 $ 1.19
- - ------------------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding 2,429 2,541 2,401 2,090
==============================================================================================================================
</TABLE>
<PAGE>
Yardville National Bancorp and Subsidiary
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
(in thousands) 1996 1995
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 3,049 $ 2,440
Adjustments:
Provision for Loan Losses 1,090 590
Depreciation 526 367
Amortization and accretion 438 178
Cash Flows from Financing Activities:
Net increase in non-interest bearing
demand, money market, and saving deposits 11,127 12,353
Net increase in certificates of deposit 28,217 22,284
Net increase in borrowed funds 27,107 59,940
Proceeds from issuance of common stock 826 9,169
Loss on sale of securities available for sale 75 114
Writedown of other real estate 68 15
Increase in other assets (3,416) (2,070)
Increase in other liabilities 883 1,854
- - ------------------------------------------------------------------------------------------
(336) 1,048
- - ------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 2,713 3,488
- - ------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Net increase in interest bearing deposits (1,470) (1,322)
Proceeds from maturities and paydowns of
investment securities 3,409 3,061
Purchase of securities available for sale (62,520) (80,055)
Proceeds from sale of securities available for sale 41,256 5,762
Purchase of investment securities (453) --
Maturities, calls & paydowns of securities
available for sale 20,050 4,122
Net increase in loans (68,846) (31,735)
Expenditures for bank premises and equipment (1,925) (824)
Proceeds from sale of O.R.E. 272 353
Capital improvements to O.R.E. -- (12)
- - ------------------------------------------------------------------------------------------
Net Cash Used by Investing Activities (70,227) (100,650)
- - ------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Net increase in non-interest bearing
demand, money market, and saving deposits 11,127 12,353
Net increase in certificates of deposit 28,217 22,284
Net increase in borrowed funds 27,107 59,940
Proceeds from issuance of common stock 826 9,169
Dividends paid (792) (505)
- - ------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 66,485 103,241
- - ------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (1,029) 6,079
Cash and cash equivalents at beginning of period 12,835 11,100
- - ------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 11,806 $ 17,179
- - ------------------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest expense $ 11,717 $ 7,501
Income taxes 2,064 1,347
- - ------------------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements.
<PAGE>
Yardville National Bancorp and Subsidiary
Notes to Consolidated Financial Statements
Nine Months Ended September 30, 1996
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Financial Statement Presentation
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles. In preparing the financial
statements, management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the date of the
balance sheet and revenues and expenses for the period. Actual results could
differ significantly from those estimates. Material estimates that are
particularly susceptible to significant change in the near-term relate to the
determination of the allowance for loan losses and the valuation of real
estate acquired in connection with foreclosures or in satisfaction of loans. In
connection with the determination of the allowance for loan losses and other
real estate, management obtains independent appraisals for significant
properties.
The consolidated financial data as of and for the three and nine
months ended September 30, 1996 and 1995 includes, in the opinion of
management, all adjustments, consisting of only normal recurring accruals,
necessary for a fair presentation of such periods. The consolidated financial
data for the interim periods presented is not necessarily indicative of the
results of operations that might be expected for the entire year ending
December 31, 1996.
Consolidation
The consolidated financial statements include the accounts of
Yardville National Bancorp (the "Corporation") and its sole subsidiary, the
Yardville National Bank (the "Bank") and Yardville's wholly owned subsidiary,
The Yardville National Investment Corporation. All significant intercompany
accounts and transactions have been eliminated.
<PAGE>
Allowance for Loan Losses
For financial reporting purposes, the provision for loan losses charged to
operating expense is determined by management and is based upon a periodic
review of the loan portfolio, past experience, the economy, and other factors
that may affect the borrower's ability to repay the loan. This provision is
based on management's estimates, and actual losses may vary from these
estimates. These estimates are reviewed and, as adjustments become necessary,
they are reported in the periods in which they become known. Management
believes that the allowance for losses on loans is adequate. While management
uses available information to recognize losses on loans and other real estate,
future additions to the allowance may be necessary based on changes in
economic conditions, particularly in New Jersey. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowance for losses on loans and other real
estate. Such agencies may require the Bank to recognize additions to the
allowance or adjustments to the carrying value of other real estate based on
their judgments about information available to them at the time of their
examination.
<PAGE>
YARDVILLE NATIONAL BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This financial review presents Management's discussion and analysis of
financial condition and results of operations. It should be read in
conjunction with the consolidated financial statements and the accompanying
notes. The term "Yardville" as used herein refers to the Company together with
its sole subsidiary, the Bank.
FINANCIAL CONDITION
Assets
Total consolidated assets at September 30, 1996 totaled $472,821,000, an
increase of $69,706,000 or 17.3%, compared to $403,115,000 at December 31,
1995. The growth in Yardville's asset base during the first nine months of
1996 was due primarily to an increase in loans. The increase in loans was the
product of a strategy to improve the profitability of the organization through
relationship banking and the continued consolidation in the bank's marketplace
which has solidified the bank's competitive position in the small and middle
markets.
Securities
Total securities decreased by $3,441,000 at September 30, 1996 compared to
year end 1995. The investment growth strategy, purchasing investments using
repurchase agreements, peaked at approximately $68,000,000 at the end of June
1996 and stands at approximately $57,500,000 at September 30, 1996. The
purpose of this strategy was to improve return on equity and earnings per
share. This strategy was considered by management to be temporary until loan
demand could generate sufficient net interest income to improve performance
measurements. Through September 30, 1996 loan demand has continued to be
strong in the Bank's primary market place. In July 1996, bank management
decided to begin to gradually reduce assets purchased with repurchase
agreements. The decrease in the securities portfolio noted above is a result
of the bank's withdrawal from the growth strategy coupled with principal
paydowns from mortgage backed products, called U.S. agency securities and
maturities and sales of U.S. Treasuries offset by short term security
purchases to strengthen liquidity.
At September 30, 1996 the amortized cost of investment securities classified
as held to maturity was $32,283,000 compared to $35,384,000 at December 31,
1995, a decrease of $3,101,000 or 8.8%.
Net unrealized losses as of September 30, 1996 in Yardville's available for
sale securities portfolio were $1,007,000. Unrealized losses of $605,000 net
of tax effect, were reported as a reduction of stockholders' equity at
September 30, 1996. The available for sale portfolio, except those securities
purchased utilizing repurchase agreements, provides a secondary source of
liquidity.
<PAGE>
Federal Funds
There were no Federal funds sold reflected on the balance sheet as of
September 30, 1996 compared to $2,795,000 at December 31, 1995. Average
federal funds sold totaled $4,072,000 for the nine months ended September 30,
1996. Management continues to focus on strategies to maintain adequate short
term liquidity needs.
Loans
Total loans, net of unearned discounts, increased by $68,226,000 or 27.8%, to
$313,280,000 at September 30, 1996 compared to $245,054,000 at year end 1995.
Yardville's loan portfolio represented 66.3% of assets at September 30, 1996
compared to 60.8% of assets at December 31, 1995.
Yardville's lending focus continues to be centered on commercial loans,
owner-occupied commercial mortgage loans and tenanted commercial real estate
loans.
Yardville showed positive results throughout its loan portfolio for the nine
months ended September 30, 1996 as a result of management's emphasis on
customer service and relationships and taking advantage of opportunities
associated with consolidation in the banking industry, particularly in
Yardville's markets.
On a component basis, for the nine month period ended September 30, 1996,
commercial loan balances increased 63.4%. Real estate - commercial mortgages
and real estate - residential mortgages increased 51.5% and 10.5%,
respectively, for the first nine months of 1996. The increase in actual
dollars in these loans since year end 1995 is $37,692,000 and $7,707,000
respectively. The increase in real estate-mortgage loans in the first nine
months of 1996 is reflective of a generally stable mortgage interest rate
environment. Consumer loan balances increased 17.7% through the first nine
months of 1996.
<PAGE>
Liabilities
Yardville's deposit base is the principal source of funds supporting interest
earning assets. Total deposits amounted to $342,316,000 at September 30, 1996
compared to $302,972,000 at December 31, 1995, an increase of $39,344,000 or
13.0%.
The growth in Yardville's deposit base, particularly in the third quarter,
primarily was the result of competitive pricing of 9 month and 2 year and 3
year certificates of deposit to help fund loan growth.
Average interest bearing liabilities, including CD's of $100,000 or more,
increased $79,322,000 or 28.8% to total $354,848,000 for the nine month period
ended September 30, 1996 as compared to $275,526,000 for the year ended
December 31, 1995. Interest bearing deposits have increased 14.3% and
non-interest bearing deposits have increased 6.0% as of September 30, 1996
compared to year end 1995. At September 30, 1996 interest bearing and
non-interest bearing deposits totaled $292,847,000 and $49,469,000,
respectively.
Borrowed funds totaled $92,328,000 at September 30, 1996 compared to
$65,221,000 at December 31, 1995. Average borrowed funds increased $52,772,000
to total $86,111,000 for the nine month period ended September 30, 1996 as
compared to $33,339,000 for the year ended December 31, 1995. Borrowed funds
have increased during the period to support balance sheet growth and to
increase net interest income by purchasing investments using repurchase
agreements.
Borrowed funds at September 30, 1996 were approximately $20,000,000 in FHLB
advances all with a maturity of less than 1 year, approximately $57,500,000
in repurchase agreements utilized to purchase investments and approximately
$14,400,000 in repurchase agreements supporting earning asset growth were
outstanding.
Yardville has the availability to borrow up to $20,000,000 from the FHLB
through its line of credit program. In addition, the bank is eligible to
borrow up to 30% of assets under the FHLB advance program subject to FHLB
stock level requirements, collateral requirements and individual advance
proposals based on FHLB credit standards. Yardville also has the ability to
borrow at the Federal Reserve discount window along with agreements to use two
unsecured federal funds lines of credit with two of its correspondent banks
for daily funding needs. Management's strategy, however, is to further build
the bank's core deposit base to fund asset growth. However, borrowed
funds will be utilized to meet short term liquidity needs and as an additional
source of funding for the loan and investment portfolios.
<PAGE>
Capital
Total stockholders' equity of $34,089,000 at September 30, 1996 increased
$2,372,000 or 7.5% from $31,717,000 at December 31, 1995. This increase
resulted from (i) earnings of $3,049,000 over the first nine months of 1996
(less dividend payments of $792,000 for the first nine months of 1996), (ii) a
negative equity adjustment of $711,000 for the unrealized loss on securities
available for sale as of September 30, 1996, (iii) proceeds of $551,000 from
exercised options, and (iv) $275,000 from the proceeds of warrants exercised
during the first six months of 1996.
Yardville's leverage ratio was 7.3% at September 30, 1996 compared to 7.8% at
December 31, 1995. At September 30, 1996 tier I and total tier I and II
capital to risk weighted assets were 10.5% and 11.8%, respectively. The risk
based capital levels at year end 1995 were 12.0% and 13.2% for tier I and
total risk based capital, respectively.
The minimum regulatory requirements require financial institutions to have a
leverage ratio of 3.0%, a tier I risk-based ratio of 4.0% and a total tier I
and tier II ratio of 8.0%. A bank is considered "well capitalized" if it has a
minimum Tier 1 and total risk-based capital ratios of 6% and 10%,
respectively, and a minimum Tier 1 leverage ratio of 5%.
Credit risk
At September 30, 1996, nonperforming loans, consisting of loans 90 days or
more past due, and nonaccruing loans totaled $2,682,000 compared to $2,819,000
at December 31, 1995. Other real estate owned at September 30, 1996 totaled
$657,000 compared to $625,000 at December 31, 1995.
Total nonperforming assets decreased $105,000 or 3.0% to $3,339,000 at
September 30, 1996 compared to $3,444,000 at year end 1995. Nonperforming
assets as a percentage of total loans were 1.07% at September 30, 1996. The
decrease in nonperforming loans and total nonperforming assets is reflective
of management's on going monitoring of the loan portfolio.
The allowance for loan losses increased to $4,520,000 or 1.44% of total loans,
at September 30, 1996 compared to $3,677,000, or 1.50% of total loans, at year
end 1995. The provision for loan losses through September 30, 1996 was
$1,090,000, reflective of the continued growth in the loan portfolio.
Yardville had net loan charge-offs of $248,000 for the nine month period ended
September 30, 1996. At September 30, 1996 the allowance for loan losses
covered 168.5% of nonperforming loans and 135.3% of nonperforming assets. The
allowance for loan losses, in management's judgment, is adequate to provide
for potential losses.
<PAGE>
RESULTS OF OPERATIONS
Net Income
Yardville reported net income of $3,049,000 for the nine months ended
September 30, 1996, an increase of $609,000 or 25.0%, from net income of
$2,440,000 reported for the same nine month time period in 1995. The increase
in net income for the nine months ended September 30, 1996 compared to the
same period of 1995 was primarily attributable to an increase in net interest
income partially offset by increases in the provision for loan losses and
non-interest expenses.
On a per share basis, the net income was $1.25 for the first nine months of
1996 compared to $1.19 for the first nine months of 1995 on a fully diluted
basis. Earnings per share, on a fully diluted basis, for the quarter ended
September 30, 1996 was $0.44 compared with $0.36 at the same date a year ago.
The increase in earnings per share is attributable to increased earnings and
the expiration of warrants in June 1996 which resulted in a change in the
computation method of earnings per share from the modified treasury stock
method in 1995 to the treasury stock method in 1996.
On a quarterly basis, the income for the third quarter of 1996 was $1,066,000
compared to $892,000 for the same quarter a year ago. The increase in net
income for the quarterly comparison was attributable to increases in net
interest and non-interest income offset by increases in the provision for loan
losses and non-interest expenses.
Net Interest Income
Yardville's net interest income for the nine months ended September 30, 1996
was $12,786,000, an increase of $2,200,000 or 20.8% over the $10,586,000 for
the comparable 1995 period. The principal factor contributing to the increase
in net interest income for the nine months ended September 30, 1996 was an
increase in interest income of $5,526,000 resulting from a substantial
increase in loan volume, particularly commercial loans, offset by an increase
in interest expense of $3,326,000 due to higher levels of borrowed funds and
time deposits, a higher costing funding source.
<PAGE>
The net interest margin (tax equivalent basis) between yields on average
interest earning assets and costs of average funding sources was 4.15% at
September 30, 1996 compared to 4.60% at September 30, 1995. The decrease in
the net interest margin for the comparable period was principally due to two
factors. In the second half of 1995 management instituted a strategy to
increase net interest income by purchasing investments using repurchase
agreements. Increased competition and the subsequent decrease in loan yields
also accounted, in part, for the reduction in the net interest margin. At
September 30, 1996 approximately $57,500,000 in investments purchased with
repurchase agreements were outstanding. The targeted spread on this strategy
was 75 basis points after tax. This strategy, while successful in increasing
net interest income, had a negative impact on the net interest margin. The
primary goals of the strategy are to improve return on equity and earnings per
share, which, to date, have been achieved.
On a quarterly comparison, net interest income was $4,406,000 for the third
quarter of 1996, an increase of $669,000 or 17.9%, from net interest income of
$3,737,000 for the third quarter of 1995. Average earning assets, primarily
loans and securities, increased $91,071,000 for the three months ended
September 30, 1996 to the comparable 1995 period. Increases in net interest
income due to volume were offset by a decrease in the net interest margin by
28 basis points for the comparable periods due to increased loan competition
and the investment strategy previously discussed.
Interest Income
For the nine month period ended September 30, 1996 total interest income of
$25,152,000 increased $5,526,000 or 28.2% as compared to $19,626,000 reported
for the same nine month period a year earlier. On a quarterly comparison, the
third quarter of 1996 experienced an increase of $1,635,000 or 22.5%, in
interest income compared to the same period a year earlier. The increase in
interest income is due to the higher volume of average loan and securities
assets. Average loans increased $58,476,000 or 26.9%, for the nine months
ended September 30, 1996 compared to the same 1995 period. The average yield
on the loan portfolio decreased 46 basis points for the comparable period in a
competitive lower rate market place.
Interest income on securities increased $2,438,000 or 65.0% for the first nine
months of 1996, due to a 32 basis point increase in yield and an increase of
$48,228,000 in average balances for the nine months ended September 30, 1996
as compared to the same period a year earlier. On a quarterly comparison
interest on securities increased 22.1% for the same reasons discussed above.
Interest on Federal Funds sold decreased $192,000 for the nine month period
ended September 30, 1996 due to decreases in average balances of $3,830,000
and decreases in average yields of 67 basis points.
Overall, the yield on Yardville's interest earning assets decreased 34 basis
points to 8.07% for the nine month period ended September 30, 1996 from 8.41%
for the period ended September 1995 for the combined reasons discussed above.
<PAGE>
Interest Expense
Total interest expense increased $3,326,000 or 36.8% to $12,366,000 for the
nine months ended September 30, 1996 compared to $9,040,000 reported for the
nine months ended September 30, 1995.
The increase in interest expense for the comparable time periods is the result
of a larger deposit base, primarily higher costing time deposits. Certificates
of deposit and premium money market deposit products continue to be
competitively priced to provide a source of funds for loan growth.
Average interest bearing liabilities amounted to $354,848,000 at September 30,
1996 compared to $261,921,000 at September 30, 1995. Increases in deposit
account relationships, attributable in part to increased commercial loan
activity and competitive pricing of time deposits, are reflected in the
results. Average time deposits, a higher costing funding source, increased
$19,926,000 or 17.1% for the first nine months of 1996 compared to the first
nine months of 1995.
For the third quarter of 1996 total interest expense increased $966,000 or
27.3% as compared to the third quarter of 1995. The increase in interest
expense for the comparable quarters is primarily due to higher levels of time
deposits and borrowed funds.
Interest expense on borrowed funds increased significantly during both the
quarterly and year-to-date periods when comparing 1996 to 1995. For the
year-to-date and quarterly comparisons interest expense increased $2,562,000
and $753,000, respectively, as a result of significantly higher average
balances. Repurchase agreements were used during the period to purchase
investments, and short term borrowings from the Federal Home Loan Bank were
utilized to provide liquidity and as a source of funds for asset growth.
Provision For Loan Losses
Yardville provides for possible loan losses by a charge to current operations.
The provision for loan losses for the nine month period ended September 30,
1996 was $1,090,000 compared to $590,000 for the nine months ended September
30, 1995. The provisions through the three quarters of 1996 are reflective of
continued substantial growth in the loan portfolio. Management believes that
the allowance for loan losses is adequate in relation to credit risk exposure
levels. For the three month period ended September 30, 1996 the provision for
loans losses was $375,000 compared to $230,000 for the three months ended
September 30, 1995, an increase of $145,000 or 63.0%. As with the nine month
period, the provision is reflective of the continued substantial growth in the
loan portfolio.
<PAGE>
Non-Interest Income
Total non-interest income was $1,568,000 for the first nine months of 1996
compared to $1,348,000 for the same nine month period in 1995. The increase of
$220,000 or 16.3% is primarily attributable to increased service charges and
other non-interest income.
Service charges on deposit accounts increased $73,000 or 9.1% for the first
nine months of 1996 as compared to the same period a year earlier. The
increase in service charge income was the product of a larger deposit base and
the fee income associated with it. Yardville realized $75,000 in net losses on
the sale of securities, in the first nine months of 1996 versus a loss of
$114,000 on the sale of securities, net, in the first nine months of 1995.
Proceeds from securities sold were utilized to fund higher yielding commercial
loan assets as well to reduce fixed rate securities purchased using borrowed
funds to reduce future interest rate risk exposure. Other non-interest income
increased $116,000 or 18.0% in the first nine months of 1996 versus the first
nine months of 1995. This increase was principally due to additional fee
income derived from life insurance assets, and to a lesser extent, increases
in other fee income.
For the third quarter comparison, the results were similar. Total non-interest
income for the third quarter of 1996 increased 35.6% to $533,000, or $140,000,
over the $393,000 reported in the period a year earlier. The increase
experienced during the third quarter of 1996 was in service charges on deposit
accounts and other non-interest income with increases of 7.1% and 11.3%
respectively. Additionally, net security losses for the quarter ended
September 30, 1996 were $29,000 compared to $117,000 for the same period a
year earlier.
Non-Interest Expense
Total non-interest expense increased $936,000 or 12.3% to $8,545,000 for the
first nine months of 1996 compared to $7,609,000 for the first nine months of
1995. The increase in non-interest expense was primarily the result of
increases in salaries and employee benefits and occupancy and equipment
expense.
Salaries and employee benefits were $4,847,000 for the first nine months of
1996, an increase of $617,000 or 14.6% compared to the same nine month period
of 1995. The increase resulted from increased staffing required as the result
of Yardville's growth for the comparable time periods and normal annual salary
increases. Employee benefits also increased 19.7% for the comparable time
periods. Full time equivalent staff increased to 158 at September 30, 1996
from 141 at September 30, 1995.
Net occupancy expenses increased $151,000 or 28.3% for the first nine months
of 1996 as compared to the same period in 1995 as the result of increased
maintenance costs, specifically snow removal, and the additional occupancy
costs associated with new branch offices. Equipment expense increased $152,000
or 38.5% for the same period primarily due to depreciation costs associated
with hardware and software purchased for the bank's in house computer system
as well as new furniture and fixtures in Yardville's new branches.
<PAGE>
Other non-interest expenses totaled $2,466,000 for the nine months ended
September 30, 1996, an increase of $16,000 or 0.7%, from the comparable 1995
period. The slight increase in other non-interest expense for the comparable
periods is primarily the result of increases in professional fees, stationary
and supplies costs associated with a growing branch network and insurance
expenses offset by decreases in computer expenses and the elimination of FDIC
insurance premiums.
A comparison of the third quarter of 1996 with the third quarter of 1995
indicates very similar results. Non-interest expenses increased $409,000 or
16.2% to $2,930,000 versus $2,521,000 reported in the same period a year
earlier. Salary and employee benefits increased $214,000 or 14.9%. Net
occupancy and equipment expenses increased 22.4% and 20.3% respectively. Other
non-interest expenses also increased 16.2% in the third quarter of 1996
compared to the same period in 1995. The quarterly comparison increase is due
to the same factors discussed in the year-to-date review above.
<PAGE>
PART II OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
A. The following exhibits are filed with this Form 10-QSB for the fiscal
quarter ended September 30, 1996 by Yardville National Bancorp:
INDEX TO EXHIBITS
No. Exhibits Page
--- -------- ----
* 3.1 Restated Certificate of Incorporation of
the Registrant
++ 3.2 By-Laws of the Registrant
++ 4.1 Specimen of Share of Common Stock
++ 4.2 Form of Class A Warrant
27.1 Financial Data Schedule 22-23
* Incorporated by reference to the Issuer's Annual Report on Form 10-KSB for
the Fiscal Year Ended December 31, 1994, as amended by Form 10-KSB/A filed
on July 25, 1995.
++ Incorporated by reference to the Issuer's Registration Statement on Form
SB-2 (Registration No. 33-78050)
B. No reports on FORM 8-K were filed by the registrant during the quarter
ended September 30, 1996.
<PAGE>
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.
YARDVILLE NATIONAL BANCORP
(Registrant)
Date : November 14, 1996 By :______________________________
----------------- Stephen F. Carman
Executive Vice President
and Chief Financial Officer
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