<PAGE>
UNITED STATES
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 quarterly period ended September 30, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For transition period from to
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Commission File Number: 0-26086
YARDVILLE NATIONAL BANCORP
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(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2670267
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3111 Quakerbridge Road, Mercerville, New Jersey 08619
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(Address of principal executive offices) (Zip Code)
(609) 585-5100
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(Registrant's telephone number, including area code)
Not Applicable
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(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 29, 1997.
Common Stock, no par value 2,477,569
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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, 1997 and December 31, 1996 3
Consolidated Statements of Income
Three months and nine months ended
September 30, 1997 and 1996 4
Consolidated Statements of Cash Flows
nine months ended September 30, 1997
and 1996 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
<PAGE>
Yardville National Bancorp and Subsidiary
Consolidated Statements of Condition
(unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
(in thousands, except share data) 1997 1996
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<S> <C> <C>
ASSETS:
Cash and due from banks $ 15,593 $ 13,110
Federal funds sold 5,515 4,040
Cash and Cash Equivalents 21,108 17,150
Interest bearing deposits 2,913 1,357
Securities available for sale 98,803 93,671
Investment securities (market value of $27,674 in 1997
and $30,878 in 1996) 27,813 31,296
Loans 360,297 331,237
Less: Allowance for loan losses (5,400) (4,957)
Loans, net 354,897 326,280
Bank premises and equipment, net 5,160 5,418
Other real estate 3,206 395
Other assets 15,353 14,978
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Total Assets $ 529,253 $ 490,545
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits
Non-interest bearing $ 56,909 $ 55,519
Interest bearing 358,518 308,926
Total Deposits 415,427 364,445
Borrowed funds
Securities sold under agreements to repurchase 48,665 64,185
Other 20,764 22,154
Total Borrowed Funds 69,429 86,339
Other liabilities 5,624 4,531
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Total Liabilities $ 490,480 $ 455,315
========= =========
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 2,474,409 shares in 1997
and 2,430,414 shares in 1996 17,637 17,246
Surplus 2,205 2,205
Undivided Profits 18,761 15,940
Unrealized gain (loss) - securities available for sale 170 (161)
Total Stockholders' Equity 38,773 35,230
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Total Liabilities and Stockholders' Equity $ 529,253 $ 490,545
========= =========
</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,
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(in thousands, except per share amounts) 1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $ 8,106 $6,639 $23,202 $18,717
Interest on deposits with banks 34 20 66 86
Interest on securities available for sale 1,661 1,701 4,990 4,712
------- ------ ------- -------
Interest on investment securities:
Taxable 311 375 982 1,180
Exempt from Federal income tax 100 102 302 295
Interest on Federal funds sold 45 76 281 162
Total Interest Income 10,257 8,913 29,823 25,152
------- ------ ------- -------
Interest Expense:
Interest on savings account deposits 1,285 1,017 3,803 2,979
Interest on certificates of deposit of
$100,000 or more 320 239 964 632
Interest on other time deposits 2,551 1,820 7,193 5,068
Interest on borrowed funds 1,060 1,431 3,276 3,687
Total Interest Expense 5,216 4,507 15,236 12,366
Net Interest Income 5,041 4,406 14,587 12,786
Less provision for loan losses 275 375 850 1,090
Net Interest Income After Provision for
Loan Losses 4,766 4,031 13,737 11,696
------- ------ ------- -------
Non-Interest Income:
Service charges on deposit accounts 307 287 877 871
Gains on sales of mortgages, net 12 10 21 10
Securities gains (losses), net 4 (29) 11 (75)
Other non-interest income 324 265 978 762
Total Non-Interest Income 647 533 1,887 1,568
------- ------ ------- -------
Non-Interest Expense:
Salaries and employee benefits 1,880 1,647 5,549 4,847
Occupancy expense, net 253 240 728 685
Equipment 281 190 809 547
Other non-interest expense 1,047 853 2,784 2,466
Total Non-Interest Expense 3,461 2,930 9,870 8,545
Income before income tax expense 1,952 1,634 5,754 4,719
Income tax expense 687 568 2,022 1,670
Net Income $ 1,265 $1,066 $ 3,732 $ 3,049
------- ------ ------- -------
Earnings Per Share:
Primary $ 0.50 $ 0.44 $ 1.49 $ 1.25
Fully diluted $ 0.50 $ 0.44 $ 1.49 $ 1.25
------- ------ ------- -------
Weighted average shares outstanding 2,512 2,429 2,500 2,401
======= ====== ======= =======
</TABLE>
<PAGE>
Yardville National Bancorp and Subsidiary
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
--------------------------------
(in thousands) 1997 1996
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<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 3,732 $ 3,049
Adjustments:
Provision for Loan Losses 850 1,090
Depreciation 615 526
Amortization and accretion 336 438
Securities gains (losses), net (11) 75
Writedown of other real estate 498 68
Increase in other assets (595) (3,416)
Increase in other liabilities 1,104 883
2,797 (336)
Net Cash Provided by Operating Activities 6,529 2,713
Cash Flows from Investing Activities:
Net increase in interest bearing deposits (1,556) (1,470)
Proceeds from maturities and paydowns of
investment securities 3,632 3,409
Purchase of securities available for sale (48,298) (65,520)
Proceeds from sale of securities available for sale 3,012 41,256
Purchase of investment securities (267) (453)
Maturities, calls & paydowns of securities
available for sale 40,498 20,050
Net increase in loans (32,426) (68,846)
Expenditures for bank premises and equipment (357) (1,925)
Proceeds from sale of O.R.E. -- 272
Capital improvements to O.R.E. (350) --
Net Cash Used by Investing Activities (36,112) (70,227)
Cash Flows from Financing Activities:
Net increase in non-interest bearing
demand, money market, and saving deposits 27,024 11,127
Net increase in certificates of deposit 23,958 28,217
Net increase (decrease) in borrowed funds (16,921) 27,107
Proceeds from issuance of common stock 391 826
Dividends paid (911) (792)
Net Cash Provided by Financing Activities 33,541 66,485
Net increase (decrease) in cash and cash equivalents 3,958 (1,029)
Cash and cash equivalents at beginning of period 17,150 12,835
Cash and Cash Equivalents at End of Period $ 21,108 $ 11,806
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest expense $ 14,300 $ 11,717
Income taxes 2,777 2,064
</TABLE>
Supplemental Schedule of Non-cash financing Activities:
During the nine month period ended September 30, 1997 the
Corporation transferred $2,958,449, net of charge offs, from loans to other real
estate.
See Accompanying Notes to Unaudited Consolidated Financial Statements.
<PAGE>
Yardville National Bancorp and Subsidiary
Notes to Consolidated Financial Statements
Nine Months Ended September 30, 1997
(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 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, 1997 and 1996 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, 1997.
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 subsidiaries, The
Yardville National Investment Corporation, Brenden, Inc., and Nancy-Beth, Inc,
both subsidiaries of the Bank utilized for the control and disposal of other
real estate properties and the YNB Real Estate Holding Company, a subsidiary of
the Bank utilized to hold Bank branch properties. 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, 1997 totaled $529,253,000, an
increase of $38,708,000 or 7.9%, compared to $490,545,000 at December 31, 1996.
The growth in Yardville's asset base during the first nine months of 1997 was
due primarily to an increase in loans and securities available for sale.
Yardville's commercial loan portfolio continued to expand during this time
period. 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. Yardville's asset base
includes investments of approximately $49,900,000 purchased utilizing repurchase
agreements and time deposits (Investment Growth Strategy) at September 30, 1997,
a decrease of $1,100,000 compared to approximately $51,000,000 at December 31,
1996. The primary goals of improving return on equity and earnings per share
utilizing this strategy continue to be achieved.
Yardville has backed its continued growth by further strengthening its capital
base. On October 16, Yardville completed an $11.5 million offering of trust
preferred securities. The additional capital may be used for a variety of
corporate purposes, including additional branches, enhancement of our technology
base, expansion of loan and investment assets, or stock repurchase to further
improve earnings per share, among others.
Securities
Total securities increased by $1,649,000 at September 30, 1997 to
$126,616,000 compared to year end 1996. The growth in the securities portfolio
in the first nine months of 1997 was due to the purchase of short term
treasuries and government agency bonds to enhance short term liquidity offset by
principal paydowns on mortgage-backed securities, proceeds from callable
securities, and to a lesser extent a decrease in the Investment Growth Strategy.
At September 30, 1997 the amortized cost of investment securities classified as
held to maturity was $27,813,000 compared to $31,296,000 at December 31, 1996, a
decrease of $3,483,000 or 11.1%. The total held to maturity portfolio represents
approximately 22% of the entire portfolio.
<PAGE>
Net unrealized gains as of September 30, 1997 in Yardville's available for sale
securities portfolio were $284,000. Net unrealized gains, net of tax effect,
totaling $170,000 were reported as a component of stockholders' equity at
September 30, 1997. The available for sale securities portfolio, except those
securities purchased utilizing repurchase agreements, provides a secondary
source of liquidity.
Federal Funds
At September 30, 1997 Federal Funds sold totaled $5,515,000, an increase of
$1,475,000 as compared to $4,040,000 at December 31, 1996. Average federal funds
sold totaled $7,044,000 for the nine months ended September 30, 1997. While
management continues to focus on maintaining adequate short term liquidity
levels, federal funds will fluctuate due to other liquidity demands throughout
the year.
Loans
Total loans, net of unearned discounts, increased by $29,060,000 or 8.8%, to
$360,297,000 at September 30, 1997 compared to $331,237,000 at year end 1996.
Yardville's loan portfolio represented 68.1% of assets at September 30, 1997
compared to 67.5% of assets at December 31, 1996.
Yardville's lending focus continues to be centered on commercial loans,
owner-occupied commercial mortgage loans and real estate construction loans.
Yardville showed continued growth throughout its loan portfolio for the nine
months ended September 30, 1997 as a result of management's emphasis on customer
relationships and opportunities associated with the continued consolidation in
the banking industry in Yardville's markets.
Comparatively, loan growth experienced in 1997 to 1996 has decelerated due to
competitive market factors.
On a component basis, for the nine month period ended September 30, 1997,
commercial loan balances increased 28.3%. Real estate - construction and real
estate - commercial mortgage loan balances increased $5,260,000 and $4,463,000,
respectively, or 20.3% and 4.0% respectively. Consumer loan balances increased
13.2 % through the first nine months of 1997. Real estate - residential mortgage
loans decreased $808,000 for the nine months ended September 30, 1997.
<PAGE>
Liabilities
Yardville's deposit base is the principal source of funds supporting interest
earning assets. Total deposits amounted to $415,427,000 at September 30, 1997
compared to $364,445,000 at December 31, 1996, an increase of $50,982,000 or
14.0 %. Yardville was successful in bidding for Mercer County Surrogate's
deposits which netted $15,000,000 in deposits in early January 1997.
Growth in Yardville's deposit base in 1997 continues in higher yielding
certificates of deposit (CD's) and premium money market accounts, both higher
cost funding sources. Average interest bearing deposits, including CD's of
$100,000 or more, increased $71,654,000 or 25.9% to total $348,624,000 for the
nine month period ended September 30, 1997 as compared to $276,970,000 for the
year ended December 31, 1996. Of the total increase, average time deposits grew
$46,884,000 for the comparable periods. Time deposits were competitively priced
to reduce levels of borrowed funds. Average non-interest bearing deposits have
increased 10.9% for the nine month period ended September 30, 1997 compared to
the year ended December 31, 1996. At September 30, 1997 interest bearing and
non-interest bearing deposits totaled $358,518,000 and $56,909,000,
respectively.
Borrowed funds totaled $69,429,000 at September 30, 1997 compared to $86,339,000
at December 31, 1996. The decrease of $16,910,000 or 19.6% in the first nine
months of 1997 was principally due to the repayment of repurchase agreements.
Securities sold under agreement to repurchase decreased $15,520,000 or 24.2% to
$48,665,000 as of September 30, 1997 compared to $64,185,000 as of December 31,
1996. Federal Home Loan Bank advances are being utilized to strengthen short-
term liquidity and support core deposits in funding balance sheet growth. At
September 30, 1997 Yardville had $17,500,000 outstanding in FHLB advances.
$12,500,000 of these advances will mature on January 30, 1998 and the remaining
$5,000,000 will mature in November of 1998.
Yardville has the availability to borrow up to $24,500,000 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 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. 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 $38,773,000 at September 30, 1997 increased
$3,543,000 or 10.1% from $35,230,000 at December 31, 1996. This increase
resulted from the following factors during the nine months ended September 30,
1997 (i) earnings of $3,732,000 over the first nine months of 1997 (less
dividend payments of $911,000) (ii) a positive equity adjustment of $331,000 in
the unrealized gain on securities available for sale, net of income tax effect,
and (iii) proceeds of $391,000 from exercised options.
Yardville's leverage ratio was 7.3% at September 30, 1997 compared to 7.8% at
December 31, 1996. At September 30, 1997 tier I and total tier I and II capital
to risk weighted assets were 10.0% and 11.3%, respectively. The risk based
capital levels at year end 1996 were 10.2% and 11.4% for tier I and total risk
based capital, respectively.
The minimum regulatory requirements require financial institutions to have a
tier I leverage ratio of 4.0%, 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%.
On October 16th, 1997, Yardville completed the sale of 1,150,000 shares of 9.25%
Cumulative Trust Preferred Securities by Yardville Capital Trust at an offering
price of $10.00 per share in an underwritten offering. This amount includes the
shares issued upon the exercise of the over-allotment option by the underwriter.
Yardville Capital Trust will use the proceeds from the offering to purchase
subordinated debentures of Yardville. This will result in a net addition of
approximately $10.8 million to Yardville's regulatory capital base. The trust
preferred securities of Yardville Capital Trust are trading on the Nasdaq
Electronic Bulletin Board under the symbol YDVLP.
Credit risk
At September 30, 1997, nonperforming loans, consisting of loans 90 days or more
past due, and nonaccruing loans totaled $5,323,000 compared to $8,140,000 at
December 31, 1996. Other real estate owned at September 30, 1997 totaled
$3,206,000 compared to $395,000 at December 31, 1996.
Total nonperforming assets decreased $6,000 or .07% to $8,529,000 at September
30, 1997 compared to $8,535,000 at year end 1996. Nonperforming assets as a
percentage of total assets were 1.61% at September 30, 1997. Yardville continues
to actively manage nonperforming assets with the goal of reducing these assets
in relation to the entire portfolio. Where possible, existing loan relationships
are being restructured in an effort to return these loans to a performing
status.
The allowance for loan losses increased to $5,400,000 or 1.50 % of total loans,
at September 30, 1997 compared to $4,957,000, or 1.50% of total loans, at year
end 1996. The provision for loan losses through September 30, 1997 was $850,000.
Yardville had net loan charge-offs of $407,000 for the nine month period ended
September 30, 1997. At September 30, 1997 the allowance for loan losses covered
101.4% of nonperforming loans and 63.3% 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 $3,732,000 for the nine months ended September
30, 1997, an increase of $683,000 or 22.4%, from net income of $3,049,000
reported for the same nine month time period in 1996. The increase in net income
for the nine months ended September 30, 1997 compared to the same period of 1996
was primarily attributable to an increase in net interest income, and to a
lesser extent, non-interest income, partially offset by increases in
non-interest expenses.
On a per share basis, the net income was $1.49 for the first nine months of 1997
compared to $1.25 for the first nine months of 1996. The increase in earnings
per share is due primarily to the increase in net income during the first nine
months of 1997 compared to the same time period in 1996.
On a quarterly basis, the income for the third quarter of 1997 was $1,265,000 or
$.50 per share, compared to $1,066,000 or $0.44 per share for the same quarter a
year ago. The increase in net income and net income per share for the quarterly
comparison are attributable to the same reasons discussed above for the nine
month comparison.
Net Interest Income
Yardville's net interest income for the nine months ended September 30, 1997 was
$14,587,000, an increase of $1,801,000 or 14.1% over the $12,786,000 for the
comparable 1996 period. The principal factor contributing to the increase in net
interest income for the nine months ended September 30, 1997 was an increase in
interest income of $4,671,000 resulting principally from an increase in
commercial loan volume, offset by an increase in interest expense of $2,870,000
due to increases in the volume of interest bearing deposits.
The net interest margin (tax equivalent basis) between yields on average
interest earning assets and costs of average funding sources was 4.03% at
September 30, 1997 compared to 4.15% at September 30, 1996. The decrease in the
net interest margin for the comparable periods was principally due to higher
interest costs associated with interest bearing liabilities offset by an
increase in interest earning asset yields, specifically securities.
The management strategy continuing through 1997 is to increase net interest
income by purchasing investments utilizing repurchase agreements or other
funding sources. At September 30, 1997 approximately $49,900,000 was being
utilized for this purpose. The targeted spread on this strategy is 75 basis
points after tax. This strategy, while successful in increasing net interest
income, return on equity, and earnings per share has had a negative impact on
the net interest margin. Increased loan pricing competition and the subsequent
decrease in loan yields also accounted partially for the reduction in the net
interest margin of 12 basis points for the comparable periods.
On a quarterly comparison, net interest income was $5,041,000 for the third
quarter of 1997, an increase of $635,000 or 14.4%, from net interest income of
$4,406,000 for the third quarter of 1996. The 1997 increase was the result of an
increase in average earning assets of $64,546,000 combined with a decrease of
$26,030,000 in average borrowed funds offset by an increase of $77,600,000 in
average interest bearing deposits compared to the third quarter of 1996.
<PAGE>
Interest Income
For the nine month period ended September 30, 1997 total interest income of
$29,823,000 increased $4,671,000 or 18.6% as compared to $25,152,000 reported
for the same nine month period a year earlier. On a quarterly comparison, the
third quarter of 1997 experienced an increase of $1,344,000 or 15.1%, in total
interest income compared to the same period a year earlier. The increase in
interest income is due primarily to the higher volume of average loan assets.
Average loans increased $72,847,000 or 26.4%, for the nine months ended
September 30, 1997 compared to the same 1996 period. The average yield on the
loan portfolio decreased 18 basis points for the comparable period in a lower
rate competitive marketplace.
Interest income on securities increased $87,000 or 1.4% for the first nine
months of 1997, due to a 15 basis point increase in average yield offset by a
decrease of $1,430,000 in average balances for the nine months ended September
30, 1997 as compared to the same period a year earlier. On a quarterly
comparison interest on securities decreased 4.9% due principally to decreases in
average balances of $7,219,000. Interest on Federal Funds sold increased
$119,000 for the nine month period ended September 30, 1997 due to increases in
average balances of $2,972,000 combined with an increase in the average yields
of 2 basis points.
Overall, the yield on Yardville's interest earning assets increased 5 basis
points to 8.12% for the period ended September 30, 1997 from 8.07% for the
period ended September 30, 1996 for the combined reasons discussed above.
Interest Expense
Total interest expense increased $2,870,000 or 23.2% to $15,236,000 for the nine
months ended September 30, 1997 compared to $12,366,000 reported for the nine
months ended September 30, 1996. The increase in interest expense for the
comparable time periods is the result of a larger deposit base, and higher
market interest rates. Deposit products continue to be competitively priced in
the marketplace.
Average interest bearing liabilities amounted to $424,664,000 for the nine month
period ended September 30, 1997 compared to $354,848,000 for the nine month
period ended September 30, 1996. The average rate paid on interest bearing
liabilities increased 13 basis points for the time period discussed. Increases
in deposit account relationships are attributable in part to increased
commercial loan activity, community presence, ongoing consolidation within the
banking industry and the impact of new branches opened during 1996 providing new
customers that now have established deposit relationships with the bank. Average
time deposits increased $54,269,000 or 39.9% for the first nine months of 1997
compared to the first nine months of 1996.
For the third quarter of 1997 total interest expense increased $709,000 or 15.7%
to $5,216,000 compared to $4,507,000 for the third quarter of 1996. The increase
in interest expense for the comparable quarters is due primarily to higher
levels of average time deposits.
<PAGE>
Interest expense on borrowed funds decreased during both the quarterly and
year-to-date periods when comparing 1997 to 1996. For the year-to-date and
quarterly comparisons interest expense on borrowed funds decreased $411,000 and
$371,000, respectively, primarily as a result of lower average balances.
Repurchase agreements were repaid during the comparable periods to reduce
borrowed funds.
Provision For Loan Losses
Yardville provides for possible loan losses by a charge to current operations.
The provision for loan losses for the nine months and three months ended
September 30, 1997 was $850,000 and $275,000, respectively compared to
$1,090,000 and $375,000, respectively for the nine and three months ended
September 30, 1996. The year to date and quarterly 1997 provisions reflect
management's continuing analysis of the loan portfolio and non-performing
assets. Management believes that the allowance for loan losses is adequate in
relation to credit risk exposure levels.
Non-Interest Income
Total non-interest income was $1,887,000 for the first nine months of 1997
compared to $1,568,000 for the same nine month period in 1996. The increase of
$319,000 or 20.3% is primarily attributable to an increase in other non-interest
income principally due to additional fee income as discussed below.
Service charges on deposit accounts increased $6,000 or 0.7% for the first nine
months of 1997 as compared to the same period a year earlier. Yardville realized
$11,000 in gains on the sale of securities, net in the first nine months of 1997
versus a loss of $75,000 on the sale of securities net, in the first nine months
of 1996. Other non-interest income increased $216,000 or 28.3% in the first nine
months of 1997 versus the first nine months of 1996 for the reasons discussed
above.
For the third quarter comparison, the results were similar. Total non-interest
income for the third quarter of 1997 increased 21.4% over the same period a year
earlier. The increase experienced during the third quarter was the result of
several factors. Service charges on deposit accounts increased 7.0% for the
comparable quarters. Yardville realized gains on the sale of securities of
$4,000 net, compared to a loss of $29,000 on the sale of securities net, for the
three months ended September 30, 1996. Other non-interest income increased
$59,000 or 22.3% for the three months ended September 30, 1997 compared to the
three months ended September 30, 1996 due primarily to increased fee income
which includes fee assessments for "others on us" Automated Teller Machine (ATM)
card usage. Offsetting these fee income increases was the elimination of the
annual ATM fee for Yardville National Bank cardholders in January 1997.
Non-Interest Expense
Total non-interest expense increased $1,325,000 or 15.5% to $9,870,000 for the
first nine months of 1997 compared to $8,545,000 for the first nine months of
1996. The increase in non-interest expense was primarily the result of increases
in salaries and employee benefits, equipment expenses and other non-interest
expenses.
<PAGE>
Salaries and employee benefits were $5,549,000 for the first nine months of
1997, an increase of $702,000 or 14.5% compared to $4,847,000 for the same nine
month period of 1996. The increase resulted from additional staffing required as
Yardville has grown for the comparable time periods and normal annual salary
compensation and benefit increases. Full time equivalent staff increased to 168
at September 30, 1997 from 158 at September 30, 1996.
Net occupancy expenses increased $43,000 or 6.3% for the first nine months of
1997 as compared to the same period in 1996. This increase is primarily the
result of additional occupancy costs associated with new branch offices offset
by decreases in snow removal costs due to a milder winter. Equipment expense
increased $262,000 or 47.9% for the same period primarily due to depreciation
costs associated with new furniture and fixtures in Yardville's new branches and
hardware and software upgrades for the bank's in house computer system required
for the implementation of a Windows 95 based computer system.
Other non-interest expenses totaled $2,784,000 for the nine months ended
September 30, 1997, an increase of $318,000 or 12.9%, from the comparable 1996
period. The increase in other non-interest expense is primarily the result of
increased professional fees, marketing costs and expenses incurred in working
out troubled loans and other real estate. Other real estate expenses totaled
$322,000 for the nine months ended September 30, 1997 compared to $116,000 for
the nine months ended September 30, 1996. The increase in other non-interest
expenses was offset partially by the elimination of computer service fees in
February 1996 with Yardville's conversion to an in-house computer system and to
a lesser extent, stationery and supply costs.
When comparing the third quarter of 1997 with the third quarter of 1996, the
explanations for the fluctuations are similar to those presented above for the
nine month period ended September 30. Non-interest expenses increased $531,000
or 18.1% versus the same period a year earlier. Salary and employee benefits
increased $233,000 or 14.1%. Net occupancy and equipment expenses increased 5.4%
and 47.9% respectively. Other non-interest expenses also increased 22.7% in the
third quarter of 1997 compared to the same period in 1996. The quarterly
comparison increase is due to the same factors discussed in the year-to-date
review above.
Recently Issued Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128
"Earnings Per Share." SFAS 128 supersedes APB opinion No. 15, "Earnings Per
Share," and specifies the computation, presentation and disclosure requirements
for earnings per share for entities with publicly held common stock or potential
common stock. This statement is effective for financial statements for periods
ending after December 15, 1997. The adoption of this statement should not have a
material effect on the consolidated financial statements of Yardville.
In February 1997, the Financial Accounting Standards Board issued SFAS No. 129,
"Disclosure of Information about Capital Structure." SFAS 129 lists required
disclosures about capital structure that have been included in a number of
separate statements and opinions. This statement is effective for financial
statements for periods ending after December 15, 1997. The adoption of the
Statement should not have a material effect on the consolidated financial
statements of Yardville.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income." SFAS 130 establishes standards for reporting
and display of comprehensive income and its components (revenues, expenses,
gains, and losses) in a full set of general-purpose financial statements. This
statement is effective for financial statements for fiscal years beginning after
December 15, 1997. The adoption of this statement should not have a material
effect on the consolidated financial statements of Yardville.
<PAGE>
PART II OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
A. The following exhibits are filed with this Form 10-Q for the fiscal quarter
ended September 30, 1997 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
27.1 Financial Data Schedule 21
* 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, 1997.
<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, 1997 By: /s/ Stephen F. Carman
---------------------- ---------------------------------
Stephen F. Carman
Executive Vice President
and Chief Financial Officer
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