<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 ACT
OF 1934
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES ACT OF 1934
For transition period from
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 (IRS Employer Identification No.)
incorporation or organization)
3111 Quakerbridge Road, Mercerville, New Jersey 08619
-----------------------------------------------------
(Address of principal executive offices)
(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 July 31, 1998
Common Stock, no par value 4,971,174
- -------------------------- ----------------------------
Class Number of shares outstanding
1
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INDEX
YARDVILLE NATIONAL BANCORP AND SUBSIDIARIES
PART 1 FINANCIAL INFORMATION PAGE NO.
- ------ --------------------- --------
Item 1. Financial Statements
Consolidated Statements of Condition
June 30, 1998 and December 31, 1997 3
Consolidated Statements of Income
Three and six months ended June 30, 1998 and 1997 4
Consolidated Statements of Cash Flows
Six months ended June 30, 1998 and 1997 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 24
PART 2 OTHER INFORMATION
Item 1. Legal Proceedings 25
Item 2. Changes in Securities and Use of Proceeds 25
Item 3. Defaults Upon Senior Securities 25
Item 4. Submission of Matters to a Vote of Securities Holders 25
Item 5. Other Information 26
Item 6. Exhibits and Reports on Form 8-K 26
SIGNATURES 30
Exhibit 27.1 Financial Data Schedule 27
2
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Item 1. Financial Statements
Yardville National Bancorp and Subsidiaries
Consolidated Statements of Condition
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
- --------------------------------------------------------------------------------------------------------------
(in thousands, except for share data) 1998 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Cash and due from banks $ 14,772 $ 18,923
Federal funds sold 13,865 1,500
- --------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents 28,637 20,423
- --------------------------------------------------------------------------------------------------------------
Interest bearing deposits 2,144 2,219
Securities available for sale 176,499 159,724
Investment securities (market value of $27,261 in 1998 and
$26,848 in 1997) 27,254 26,912
Loans 439,234 385,751
Less: Allowance for loan losses (6,103) (5,570)
- --------------------------------------------------------------------------------------------------------------
Loans, net 433,131 380,181
Bank premises and equipment, net 5,950 5,192
Other real estate 3,216 3,171
Other assets 21,544 16,864
- --------------------------------------------------------------------------------------------------------------
Total Assets $ 698,375 $614,686
- --------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Deposits
Non-interest bearing $ 71,253 $ 66,560
Interest bearing 404,538 356,384
- --------------------------------------------------------------------------------------------------------------
Total Deposits 475,791 422,944
- --------------------------------------------------------------------------------------------------------------
Borrowed funds
Securities sold under agreements to repurchase 120,470 100,050
Other 45,437 34,266
- --------------------------------------------------------------------------------------------------------------
Total Borrowed Funds
165,907 134,316
Company - obligated Mandatorily Redeemable Trust Preferred
Securities of Subsidiary Trust Holding Solely Junior
Subordinated Debentures of the Company 11,500 11,500
Other liabilities 6,364 6,181
- --------------------------------------------------------------------------------------------------------------
Total Liabilities $ 659,562 $ 574,941
- --------------------------------------------------------------------------------------------------------------
Stockholders' equity
Preferred stock: no par value
Authorized 1,000,000 shares, none issued
Common Stock: no par value
Authorized 12,000,000 shares
Issued and outstanding 4,971,174 in 1998
And 5,082,050 shares in 1997 20,392 17,703
Surplus 2,205 2,205
Undivided profits 19,359 19,713
Common stock in treasury, at cost:
167,300 shares in 1998 (2,965) --
Accumulated other comprehensive income (178) 124
- --------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 38,813 39,745
- --------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 698,375 $614,686
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Shares and related amounts adjusted for two-for-one stock split declared
December 23, 1997 and 2.5% stock dividend declared March 25, 1998.
See Accompanying Notes to Unaudited Consolidated Financial Statements.
3
<PAGE>
Yardville National Bancorp and Subsidiaries
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
- ---------------------------------------------------------------------------------------------------------------
(in thousands, except for share data) 1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 9,394 $ 7,751
Interest on deposits with banks 28 16
Interest on securities available for sale 2,614 1,760
Interest on investment securities:
Taxable 181 329
Exempt from Federal income tax 135 100
Interest on Federal funds sold 69 72
- ---------------------------------------------------------------------------------------------------------------
Total Interest Income 12,421 10,028
- ---------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on savings account deposits 1,247 1,288
Interest on certificates of deposit of $100,000 or more 339 339
Interest on other time deposits 2,931 2,414
Interest on borrowed funds 2,060 1,059
Interest on trust preferred securities 266 --
- ---------------------------------------------------------------------------------------------------------------
Total Interest Expense 6,843 5,100
- ---------------------------------------------------------------------------------------------------------------
Net Interest Income 5,578 4,928
Less provision for loan losses 500 300
- ---------------------------------------------------------------------------------------------------------------
Net Interest Income After Provision for Loan Losses 5,078 4,628
- ---------------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME:
Service charges on deposit accounts 314 287
Gains on sales of mortgages, net 8 9
Securities gains, net 37 7
Other non-interest income 373 331
- ---------------------------------------------------------------------------------------------------------------
Total Non-Interest Income 732 634
- ---------------------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSE:
Salaries and employee benefits 1,997 1,852
Occupancy expense, net 262 241
Equipment 322 278
Other non-interest expense 1,092 959
- ---------------------------------------------------------------------------------------------------------------
Total Non-Interest Expense 3,673 3,330
- ---------------------------------------------------------------------------------------------------------------
Income before income tax expense 2,137 1,932
Income tax expense 755 677
- ---------------------------------------------------------------------------------------------------------------
Net Income $ 1,382 $ 1,255
- ---------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE:
Basic $ 0.27 $ 0.25
Diluted $ 0.27 $ 0.25
- ---------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding:
Basic 5,059 5,057
Diluted 5,083 5,114
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Shares and related amounts adjusted for two-for-one stock split declared
December 23, 1997 and 2.5% stock dividend declared March 25, 1998.
See Accompanying Notes to Unaudited Consolidated Financial Statements.
4
<PAGE>
Yardville National Bancorp and Subsidiaries
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
- --------------------------------------------------------------------------------------------------------------
(in thousands, except for share data) 1998 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 18,142 $ 15,096
Interest on deposits with banks 83 32
Interest on securities available for sale 5,054 3,329
Interest on investment securities:
Taxable 458 671
Exempt from Federal income tax 237 202
Interest on Federal funds sold 138 236
- --------------------------------------------------------------------------------------------------------------
Total Interest Income 24,112 19,566
- --------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on savings account deposits 2,502 2,518
Interest on certificates of deposit of $100,000 or more 640 644
Interest on other time deposits 5,604 4,642
Interest on borrowed funds 3,977 2,216
Interest on trust preferred securities 532 --
- --------------------------------------------------------------------------------------------------------------
Total Interest Expense 13,255 10,020
- --------------------------------------------------------------------------------------------------------------
Net Interest Income 10,857 9,546
Less provision for loan losses 900 575
- --------------------------------------------------------------------------------------------------------------
Net Interest Income After Provision for Loan Losses 9,957 8,971
- --------------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME:
Service charges on deposit accounts 620 570
Gains on sales of mortgages, net 25 9
Securities gains, net 46 7
Other non-interest income 729 654
- --------------------------------------------------------------------------------------------------------------
Total Non-Interest Income 1,420 1,240
- --------------------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSE:
Salaries and employee benefits 3,940 3,669
Occupancy expense, net 495 475
Equipment 618 528
Other non-interest expense 2,124 1,737
- --------------------------------------------------------------------------------------------------------------
Total Non-Interest Expense 7,177 6,409
- --------------------------------------------------------------------------------------------------------------
Income before income tax expense 4,200 3,802
Income tax expense 1,484 1,335
- --------------------------------------------------------------------------------------------------------------
Net Income $ 2,716 $ 2,467
- --------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE:
Basic $ 0.54 $ 0.49
Diluted $ 0.53 $ 0.49
- --------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding:
Basic 5,067 5,029
Diluted 5,091 5,086
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Shares and related amounts adjusted for two-for-one stock split declared
December 23, 1997 and 2.5% stock dividend declared March 25, 1998.
See Accompanying Notes to Unaudited Consolidated Financial Statements.
5
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Yardville National Bancorp and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30
- ---------------------------------------------------------------------------------------------------------------
(in thousands) 1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 2,716 $ 2,467
Adjustments:
Provision for loan losses 900 575
Depreciation 448 420
Amortization and accretion 411 216
Gains on sales of securities available for sale (46) (7)
Loss on sales of other real estate 1 --
Writedown of other real estate 278 8
(Increase) in other assets (4,502) (651)
Increase in other liabilities 183 591
- ---------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 389 3,619
- ---------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Net increase in interest bearing deposits 75 484
Purchase of securities available for sale (79,838) (25,970)
Maturities, calls, and paydowns of securities available
for sale 35,731 11,734
Proceeds from sales of securities available for sale 26,562 2,011
Proceeds from maturities and paydowns of investment
securities 3,821 2,113
Purchase of investment securities (4,238) --
Net increase in loans (54,257) (22,438)
Expenditures for bank premises and equipment (1,207) (309)
Proceeds from sale of other real estate 84 --
- ---------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (73,267) (32,375)
- ---------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Net increase in non-interest bearing demand,
money market, and savings deposits 12,627 28,755
Net increase in certificates of deposit 40,220 21,630
Net increase (decrease) in borrowed funds 31,591 (18,200)
Proceeds from issuance of common stock 323 379
Treasury shares acquired (2,965) --
Dividends paid (704) (589)
- ---------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 81,092 31,975
- ---------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 8,214 3,219
Cash and cash equivalents as of beginning of period 20,423 17,150
- ---------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents as of End of Period $ 28,637 $ 20,369
- ---------------------------------------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information:
Cash paid during period for:
Interest expense 12,279 9,131
Income taxes 2,035 2,301
- ---------------------------------------------------------------------------------------------------------------
Supplemental Schedule of Non-cash Investing and Financing
Activities:
Transfers to other real estate from loans, net of
charge offs 407 486
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements.
6
<PAGE>
Yardville National Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
Three and Six Months Ended June 30, 1998
(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 revenue 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 reserve 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 six months ended
June 30, 1998 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 result of operations that might
be expected for the entire year ending December 31, 1998.
Consolidation
The consolidated financial statements include the accounts of Yardville National
Bancorp (the "Holding Company") and its subsidiaries, Yardville Capital Trust
(the "Trust") and Yardville National Bank (the "Bank") and the Bank's wholly
owned subsidiaries, Yardville National Investment Corporation, Brendan Inc.,
Nancy Beth Inc., Yardville Real Estate Corporation, and YNB Financial Services,
Inc., (collectively, "YNB"). All significant inter-company accounts and
transactions have been eliminated. Brendan Inc. and Nancy Beth Inc. are utilized
for the control and disposal of other real estate properties. Yardville Real
Estate Corporation is utilized to hold Bank branch properties and YNB Financial
Services, Inc., provides alternative investment services.
Allowance for Loan Losses
For financial reporting purposes, the provision for loan losses charged to
operating expense is determined by management and based upon a periodic review
of the loan portfolio, past experience, the economy, and other factors that may
affect a 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 adjustments, as they become necessary, are reported
in the periods in which they become known. Management believes that the
allowance
7
<PAGE>
for loan losses is adequate. While management uses available information to
recognize losses on loans, 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 loan losses and the
valuation of 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 judgement about information available at the time of their
examination.
Company - Obligated Mandatorily Redeemable Trust Preferred Securities of
Subsidiary Trust Holding Solely Junior Subordinated Debentures of the Company
(Trust Preferred Securities)
On October 16, 1997, Yardville Capital Trust, (the Trust) a statutory business
trust, and a wholly owned subsidiary of the Holding Company, issued $11,500,000
of 9.25% Trust Preferred Securities and $356,000 of 9.25% Common Securities to
the Holding Company. Proceeds from the issuance of the Trust Preferred
Securities were immediately used by the Trust to purchase $11,856,000 of 9.25%
Subordinated Debentures maturing November 1, 2027 from the Holding Company. The
Trust exists for the sole purpose of issuing Trust Preferred Securities and
investing the proceeds into Subordinated Debentures of the Holding Company.
These subordinated Debentures constitute the sole assets of the Trust.
2. Earnings Per Share
Weighted average shares for the basic net income per share calculation for the
three months ended June 30, 1998 and 1997 were 5,059,000 and 5,057,000
respectively. For the diluted net income per share computation, potential common
stock of 24,000 and 57,000 are included for the three months ended June 30, 1998
and 1997, respectively.
Weighted average shares for the basic net income per share calculation for the
six months ended June 30, 1998 and 1997 were 5,067,000 and 5,029,000
respectively. For the diluted net income per share computation, potential common
stock of 24,000 and 57,000 are included for the six months ended June 30, 1998
and 1997, respectively.
3. Recently Issued Accounting Standards
SFAS No. 130
FASB Statement No. 130 "Reporting Comprehensive Income" (Statement 130)
establishes standards for reporting and display of comprehensive income and its
components (revenue, expenses, gains and losses) in a full set of
general-purpose financial statements. Statement 130 requires that all items that
are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. Statement 130 does not
require a specific format for that financial statement but requires that an
enterprise display an amount representing total comprehensive income for the
period in that financial statement.
8
<PAGE>
Statement 130 requires an enterprise to (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. This statement is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purposes are required. YNB adopted Statement No. 130 on
January 1, 1998 and the disclosure is contained in the table below.
<TABLE>
<CAPTION>
Comprehensive Net Income Three Months Ended June 30,
----------------------------------------------------------------------------------------------------------
(in thousands) 1998 1997
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Income $ 1,382 $ 1,255
----------------------------------------------------------------------------------------------------------
Other comprehensive income
Net change in unrealized gain (loss) for the
period, net of tax (53) 673
Reclassification of realized net gain on sale of
securities available for sale, net of tax
24 5
----------------------------------------------------------------------------------------------------------
Holding gain (loss) arising during the period,
net of tax and reclassification (29) 678
Reclassification adjustment for realized net
gains, net of tax (24) (5)
----------------------------------------------------------------------------------------------------------
Other comprehensive income for the period net of
tax (53) 673
----------------------------------------------------------------------------------------------------------
Total comprehensive income $ 1,329 1,928
----------------------------------------------------------------------------------------------------------
Comprehensive Income For the Six months ended June 30, 1998
----------------------------------------------------------------------------------------------------------
(in thousands) 1998 1997
----------------------------------------------------------------------------------------------------------
Net Income $ 2,716 $ 2,467
----------------------------------------------------------------------------------------------------------
Other comprehensive income
Net change in unrealized gain (loss) for the
period, net of tax (302) (142)
Reclassification of realized net gain on sale of
securities available for sale, net of tax
30 5
----------------------------------------------------------------------------------------------------------
Holding gain (loss) arising during the period,
net of tax and reclassification (272) (137)
Reclassification adjustment for realized net
gains, net of tax (30) (5)
----------------------------------------------------------------------------------------------------------
Other comprehensive income for the period net of
tax (302) (142)
----------------------------------------------------------------------------------------------------------
Total comprehensive income $ 2,414 2,609
----------------------------------------------------------------------------------------------------------
</TABLE>
SFAS No. 133
In June 1998, the FASB issued SAS No. 133 "Accounting for Derivative Instruments
and Hedging Activities." This Statement establishes accounting and reporting
standards requiring that every derivative instrument be recorded in the balance
sheet, either as an asset, or as a liability, measured at its fair value. The
Statement requires that changes in the derivative's fair
9
<PAGE>
value shall be recognized in current earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting.
SAS No. 133 is effective for fiscal years beginning after June 15, 1999. A
company may also implement the Statement as of the beginning of any fiscal
quarter after issuance but the statement cannot be applied retroactively. SAS
No. 133 must be applied to derivative instruments and certain derivative
instruments embedded in hybrid contracts that were issued, acquired or
substantively modified after December 31, 1997.
YNB does not currently have derivative or hedged instruments and management does
not anticipate the statement having a material impact on the its financial
position or results of operations. However, management continues to closely
evaluate the use of derivative to reduce interest rate risk.
10
<PAGE>
YARDVILLE NATIONAL BANCORP AND SUBSIDIARIES
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
This financial review presents management's discussion and analysis of the
financial condition and results of operation. It should be read in conjunction
with the 1997 Annual Report to stockholders and Form 10-K for the fiscal year
ended December 31, 1997 as well as with the unaudited consolidated financial
statements and the accompanying notes.
This Form 10-Q report contains express and implied statements relating to the
future financial condition, results of operations, plans, objectives,
performance, and business of YNB, which are considered forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These include statements that relate to, among other things,
profitability, liquidity, loan loss reserve adequacy, plans for growth, interest
rate sensitivity, market risk, and year 2000 issues. Actual results may differ
materially from those expected or implied as a result of certain risks and
uncertainties, including, but not limited to, changes in economic conditions,
interest rate fluctuations, continued levels of loan quality and origination
volume, successful implementation of year 2000 technology changes by YNB, its
vendors and suppliers, competitive product and pricing pressures within YNB's
markets, continued relationships with major customers including sources for
loans and deposits, personal and corporate customers' bankruptcies, legal and
regulatory barriers and structure, inflation, and technological changes, as well
as other risks and uncertainties detailed from time to time in the filings of
YNB with the Securities and Exchange Commission.
Financial Condition
Assets
Total consolidated assets at June 30, 1998 were $698,375,000 an increase of
$83,689,000 or 13.6% compared to $614,686,000 at December 31, 1997. The growth
in YNB's asset base, during the first six months of 1998 was primarily due to
increases in loans, available for sale securities and Federal funds sold. YNB's
commercial loan portfolio continued to expand during this time period. The
increase in the loan portfolio was the product of an ongoing consistent strategy
to improve the profitability of the organization through relationship banking.
In the last quarter of 1997, $7,500,000 was contributed to the Bank as a result
of YNB's Trust Preferred Securities Offering. The increase in the Bank's legal
lending limit allows management to establish larger loan relationships. The pace
of consolidation in YNB's market place continues at a rapid rate. Management
anticipates continued loan opportunities due to this consolidation. YNB's asset
base includes investments of approximately $137,739,000 purchased utilizing
primarily repurchase agreements and Federal Home Loan Bank advances (Investment
Growth Strategy). The Investment Growth Strategy at June 30, 1998 increased
$29,538,000 or 27.3% from the reported total of $108,200,000 at December 31,
1997. The primary goals of the Investment Growth Strategy of improving return on
equity and earnings per share continue to be achieved.
11
<PAGE>
Cash and due from banks
Cash and due from bank balances decreased $4,151,000 at June 30, 1998 when
compared to the $18,923,000 balance at December 31, 1997. In April of 1998, YNB
began a reserve requirement reduction program. This program allows the Bank to
reduce the amount of demand and interest bearing demand balances subject to
reserve requirements. Prior to starting the program, the Bank maintained
non-interest bearing reserve balances at the Federal Reserve Bank of
Philadelphia of between $3,000,000 and $4,000,000. With the implementation of
the program, the bank has been able to reduce to zero the amount of funds
required to be maintained at the Federal Reserve Bank of Philadelphia, for
reserve requirements. These funds are now available to be invested in earning
assets.
Federal funds sold
At June 30, 1998 Federal funds sold totaled $13,865,000 compared to $1,500,000
at December 31, 1997. Average Federal funds sold for the first six months was
$4,996,000. The Federal funds sold level experienced at June 30, 1998 was due to
increased certificate of deposit (CD) balances and, to a lesser extent, slower
than anticipated net new loan growth. Management remains focused on maintaining
adequate liquidity to fund loan growth and to meet daily liquidity requirements.
It is anticipated that the Federal funds position will decline from the current
level.
Securities
The following table present the amortized cost and market values of YNB's
securities portfolios as of June 30, 1998 and December 31, 1997.
<TABLE>
<CAPTION>
Available For Sale Securities June 30, 1998 December 31, 1997
- -----------------------------------------------------------------------------------------------------------------
Amortized Market Amortized Market
(in thousands) Cost Value Cost Value
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and other US
government agency securities $ 57,833 $ 57,884 $ 62,465 $ 62,540
Mortgage-backed securities 115,656 115,326 91,193 91,316
Corporate obligations 255 260 3,297 3,306
All other securities 3,029 3,029 2,562 2,562
- -----------------------------------------------------------------------------------------------------------------
Total $ 176,773 $ 176,499 $ 159,517 $ 159,724
- -----------------------------------------------------------------------------------------------------------------
Investment Securities June 30, 1998 December 31, 1997
- -----------------------------------------------------------------------------------------------------------------
Amortized Market Amortized Market
(in thousands) Cost Value Cost Value
- -----------------------------------------------------------------------------------------------------------------
Obligations of state and
political subdivisions $ 12,290 $ 12,402 $ 8,819 $ 8,957
Mortgage-backed securities 14,964 14,859 18,093 17,891
- -----------------------------------------------------------------------------------------------------------------
Total $ 27,254 $ 27,261 $ 26,912 $ 26,848
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
Total securities increased $17,117,000 or 9.2% at June 30, 1998 to $203,753,000
compared to $186,636,000 at year-end 1997. The available for sale portfolio
represents 86.6% of the total investment holdings of YNB at June 30, 1998,
compared to 85.6% at year-end 1997. Unpledged available for sale securities
represent a secondary source of liquidity for YNB. Securities represent 29.2% of
total assets at June 30, 1998 compared to 30.4% of total assets at December 31,
1997.
The net unrealized loss on available for sale securities as of June 30, 1998 was
$274,000, compared to a net unrealized gain of $207,000 at December 31, 1997.
Net unrealized losses, net of tax effect, totaling $178,000 were reported in
Accumulated Other Comprehensive Income in Stockholders' Equity at June 30, 1998,
compared to a net unrealized gain of $124,000 reported at December 31, 1997.
Securities available for sale increased $16,775,000 or 10.5% at June 30, 1998,
when compared to the December 31, 1997 balance of $159,724,000. The increase was
primarily due to the purchase of fixed and floating rate mortgage backed
securities related to the Investment Growth Strategy. Offsetting this increase,
were the sales of securities that either due to their small size, prepayment
outlook, or risk profile, were no longer a benefit to YNB. A secondary factor
limiting the growth in available for sale securities, were increased prepayment
speeds on both fixed and floating rate mortgage related securities. Management
anticipates principal paydowns in its mortgage-related securities to continue at
the current high levels, unless overall interest rates increase. To mitigate the
impact of prepayments, management has sold higher coupon fixed rate mortgage
backed securities and purchased lower coupon fixed rate mortgage backed
securities that should prepay at slower speeds.
The Investment Growth Strategy was increased $29,532,000 over the year-end 1997
level. The growth was in fixed and adjustable rate mortgage backed securities,
which increased $23,811,000 and $9,529,000 respectively. Offsetting these
increases, were declines of $2,000,000 in callable bonds and $1,858,000 in
floating rate collateralized mortgage obligations.
Investment securities increased $342,000 or 1.3% to $27,254,000 at June 30, 1998
from $26,912,000 at December 31, 1997. The increase resulted from the purchases
of longer term fixed rate tax-free municipal bonds that increased $3,471,000 to
$12,290,000 at June 30, 1998 compared to $8,819,000 at December 31, 1997.
Offsetting this increase, was a decline in mortgage backed securities of
$3,129,000 to $14,964,000 at June 30, 1998 from $18,093,000. This decrease was
due to principal payments.
Loans
Total loans, net of unearned income increased $53,483,000 or 13.9% at June 30,
1998 to $439,234,000 from $385,751,000 at December 31, 1997. YNB's loan
portfolio represented 62.9% of total assets at June 30, 1998 compared to 62.8%
at December 31, 1997. YNB's lending focus continues to be on commercial loans
and commercial real estate loans. The consolidation in YNB's market place, the
emphasis placed on customer service, and relationship banking are key factors in
continued strong loan growth. Strong competition from both bank and nonbank
competitors coupled with a flat yield curve could result in comparatively lower
yields
13
<PAGE>
on new and established lending relationships. In addition, borrowers concerns
over the economy, real estate prices and interest rates could all be factors in
future loan growth levels. Continued profitable loan growth is a key factor in
meeting earnings growth goals.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
(in thousands) 6/30/98 12/31/97 Change % change
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Real Estate - mortgage
Residential $ 88,206 $ 85,754 $ 2,452 2.9%
- ------------------------------------------------------------------------------------------------------------------
Commercial 146,808 134,499 12,309 9.2
- ------------------------------------------------------------------------------------------------------------------
Home equity 23,093 23,805 (712) 3.0
- ------------------------------------------------------------------------------------------------------------------
Commercial and agricultural 112,945 88,228 24,717 28.0
- ------------------------------------------------------------------------------------------------------------------
Real estate - construction 35,578 28,182 7,396 26.2
- ------------------------------------------------------------------------------------------------------------------
Consumer 23,413 18,519 4,894 26.4
- ------------------------------------------------------------------------------------------------------------------
Other loans 9,191 6,764 2,427 35.9
- ------------------------------------------------------------------------------------------------------------------
Total loans $ 439,234 $ 385,751 $ 53,483 13.9%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
The table above lists the loan growth by component for the period of December
31, 1997 to June 30, 1998. Commercial and agricultural loans had the greatest
growth increasing $24,717,000 in the period and accounting for nearly half of
the total increase in outstanding totals. Real estate - commercial loans had the
second greatest growth increasing $12,309,000. This is a reflection on
management's focus on these markets. All other loan components increased with
the exception of home equity loans. To address the declining home equity loan
portfolio, YNB lowered its rates on all home equity products on March 1, 1998.
In the short term, the home equity portfolio continues to decrease but
management believes that in the long term this strategy should make YNB's home
equity product more competitive in the marketplace.
Liabilities
The following table provides information concerning YNB' deposit base at June
30, 1998 and December 31, 1997.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
(in thousands) 6/30/98 12/31/97 Change % Change
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Noninterest bearing demand
deposits $ 71,253 $ 66,560 $ 4,693 7.1%
- ------------------------------------------------------------------------------------------------------------------
Interest bearing demand deposits 49,846 44,520 5,326 12.0
- ------------------------------------------------------------------------------------------------------------------
Money market deposits 42,752 39,937 2,815 7.0
- ------------------------------------------------------------------------------------------------------------------
Savings deposits 74,840 75,047 (207) 0.3
- ------------------------------------------------------------------------------------------------------------------
Certificates of deposit of $100,000
or over 26,873 21,556 5,317 24.7
- ------------------------------------------------------------------------------------------------------------------
Other time deposits 210,227 175,324 34,903 19.9
- ------------------------------------------------------------------------------------------------------------------
Total $ 475,791 $ 422,944 $ 52,847 12.5%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
YNB's deposit base is the principal source of funds supporting interest-bearing
assets. Total deposits increased $52,847,000 or 12.5% to $475,791,000 at June
30, 1998 compared to $422,944,000 at December 31, 1997. Certificates of deposit
were competitively priced throughout the first six months of 1998 to fund net
new loan growth. Growth in YNB's deposit base in 1998 continued to be
principally in higher costing certificates of deposit, which account
14
<PAGE>
for 76.1% of the increase in deposits. In June, YNB began to market its
certificates of deposit through a nationwide computer based service. This
service allows YNB to have access to a wider market to raise needed funding. YNB
has raised approximately $10,000,000 from this market.
YNB continued to show strong growth in noninterest bearing demand deposit
accounts, which increased $4,693,000 or 7.1%. Sustained growth was also
reflected in the lower cost funding sources of interest bearing checking and
money market deposit accounts. This growth resulted from YNB's overall
philosophy of building and maintaining long-term customer relationships and
remains the key to further expanding the core deposit base, which, in turn,
presents opportunities for YNB to cross-sell its services.
However, lower cost deposit growth levels are not adequate to meet current or
projected loan demand. This has resulted in an increased reliance on higher rate
certificates of deposit to provide the required funding. As a result,
certificates of deposit, the most expensive deposit funding source, available to
YNB, increased to 49.8% of total deposit at June 30, 1998 from 46.5% at December
31, 1997. YNB continues to seek lower cost funding sources. One source is
opening new branches to serve a wider market area. Management anticipates
opening its 10th branch in August 1998 in Pennington, New Jersey. Management
believes this will be a strong market for both deposit and loan products. With
the continued consolidation in the market place, additional branch opportunities
are possible.
Borrowed Funds
Borrowed funds totaled $165,907,000 at June 30, 1998 compared to $134,316,000 at
December 31, 1997. The increase for the first six months of 1998 was $31,591,000
or 23.5%. The majority of the increase was in repurchase agreements relating to
the Investment Growth Strategy, which increased $20,420,000 or 20.4% to
$120,470,000 at June 30, 1998 compared to $100,050,000 at December 31, 1997. As
shorter-term repurchase agreements have matured, management has utilized
attractively priced callable repurchase agreements to reduce interest expense.
These repurchase agreements typically have a maturity of five to ten years and
can be called after a lock out period ranging from one to two years. At June 30,
1998, $61,500,000 or 51.1% of the repurchase agreements were in callable
repurchase agreements compared to $10,000,000 or 10.0% at year-end 1997.
YNB had Federal Home Loan Bank of New York (FHLB) advances outstanding of
$44,327,000 at June 30, 1998. As advances have matured, management has shifted
FHLB advances from shorter-term advances into callable advances. At June 30,
1998 callable advances outstanding totaled $33,500,000 as compared to
$10,000,000 at December 31, 1997. Callable FHLB advances have terms of ten years
and call dates ranging from one to five years.
The callable FHLB Advances and repurchase agreements have allowed YNB to lower
its borrowing costs, while at the same time extending the terms. In the event
that rates rise, the callable borrowings will be called. In the event of falling
interest rates, callable borrowings will not be called and could remain
outstanding until maturity.
15
<PAGE>
YNB has the ability to borrow up to $32,684,000 from the FHLB through it line of
credit program, subject to collateral requirements. In addition, YNB is eligible
to borrow up to 30% of assets under the FHLB advance program subject to FHLB
stock requirements, collateral requirements and other restrictions. YNB also
maintains unsecured federal funds lines with four commercial banks totaling
$23,000,000 for daily funding needs. YNB's funding strategy is to rely on
deposits to fund new loan growth whenever possible and to rely on borrowed funds
as a secondary funding source for loans.
Company - Obligated Mandatorily Redeemable Trust Preferred Securities of
Subsidiary Trust Holding Solely Junior Subordinated Debentures of the Company
(Trust Preferred Securities)
On October 16, 1997, YNB through its subsidiary Yardville Capital Trust
completed the sale of $11,500,000, 9.25%, Trust Preferred Securities. For
regulatory capital purposes the entire amount of the issue is treated at Tier 1
capital at the holding company level. Approximately $7,500,000 of the proceeds
was invested in earning assets and an additional $2,965,000 was used to fund the
stock repurchase program. The remaining funds were used for various corporate
purposes.
Capital
Stockholders' equity at June 30, 1998 totaled $38,813,000, a decrease of
$932,000 or 2.3% compared to $39,745,000 at December 31, 1997. This decrease
resulted from the following factors:
(i) Net income of $2,716,000 less cash dividend payment of $704,000.
(ii) The unrealized gain on available for sale securities were $124,000 at
December 31, 1997 compared to an unrealized loss of $178,000 at June
30, 1998. This shift resulted in a $302,000 reduction in stockholders'
equity.
(iii) Proceeds of $323,000 from exercised options.
(iv) Repurchase of 167,300 shares of YNB stock, which are listed as treasury
stock in the amount of $2,965,000.
The decline in the capital ratios from December 31, 1998 to June 30, 1998 was
caused by the combination of strong asset growth and declining Stockholders'
equity. The primary cause for the decline in Stockholders' Equity was the
repurchase of 167,300 shares at a total cost of $2,965,000. Because the stock
repurchase program is nearly completed, its impact on future capital formation
rates will be far less than the impact for the first six months of 1998.
Management remains committed to keeping YNB a well-capitalized institution under
the prompt corrective action rules.
16
<PAGE>
The following table sets forth regulatory capital ratios for the Holding Company
and the Bank as of June 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
Amount Ratios
- ------------------------------------------------------------------------------------------------------------------
dollars in thousands 6/30/98 12/31/97 6/30/98 12/31/97
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Risk-based capital:
Tier 1
the Holding Company $ 50,419 $ 51,121 10.8% 12.2%
the Bank 48,899 46,496 10.5 11.2
Total
the Holding Company 56,260 56,346 12.0 13.5
the Bank 54,661 51,675 11.7 12.5
- ------------------------------------------------------------------------------------------------------------------
Tier 1 leverage:
the Holding Company 50,419 51,121 7.8 9.5
the Bank $ 48,899 $ 46,496 7.2% 8.7%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
The minimum regulatory capital requirements for financial institutions require
institutions to have a Tier 1 leverage ratio of 4.0%; a Tier 1 risk-based asset
capital ratio of 4.0% and a total risked based capital ratio of 8.0%. To be
considered "well capitalized" an institution must have a minimum Tier 1 capital
and total risk-based capital ratio of 6.0% and 10.0%, respectively, and a
minimum Tier 1 leverage ratio of 5.0%. At June 30, 1998, YNB and the bank both
exceeded the above ratios required to be considered well capitalized.
On October 28, 1997, Yardville National Bancorp's Board of Directors authorized
management to repurchase up to 172,000 shares of YNB's common shares in the open
market in compliance with Rule 10b-18 under the Securities Exchange Act of 1934.
As of June 30, 1998, as part of an overall capital plan, 167,300 shares were
repurchased at an average price of $17.72 per share. The stock repurchase
program is part of an overall plan to effectively manage capital.
17
<PAGE>
Credit Quality
The following table sets forth nonperforming assets and risk elements in YNB's
loan portfolio by type as of June 30, 1998 and December 31, 1997.
<TABLE>
<CAPTION>
Nonperforming Assets
- -------------------------------------------------------------------------------------------------
(in thousands) 6/30/98 12/31/97
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Nonaccrual loans:
- -------------------------------------------------------------------------------------------------
Commercial and agricultural $ 1,232 $ 515
- -------------------------------------------------------------------------------------------------
Real estate - mortgage 459 384
- -------------------------------------------------------------------------------------------------
Real estate - construction 2,106 2,106
- -------------------------------------------------------------------------------------------------
Consumer 31 38
- -------------------------------------------------------------------------------------------------
Other 312 312
- -------------------------------------------------------------------------------------------------
Total 4,140 3,355
- -------------------------------------------------------------------------------------------------
Restructured loans -- 969
- -------------------------------------------------------------------------------------------------
Loans 90 days or more past due:
- -------------------------------------------------------------------------------------------------
Commercial 4 --
- -------------------------------------------------------------------------------------------------
Real estate - mortgage 606 886
- -------------------------------------------------------------------------------------------------
Consumer 185 105
- -------------------------------------------------------------------------------------------------
Total 795 991
- -------------------------------------------------------------------------------------------------
Total nonperforming loans 4,935 5,315
- -------------------------------------------------------------------------------------------------
Other real estate 3,216 3,171
- -------------------------------------------------------------------------------------------------
Total nonperforming assets $ 8,151 $ 8,486
- -------------------------------------------------------------------------------------------------
</TABLE>
At June 30, 1998, nonperforming loans, consisting of loans 90 days and more past
due, restructured loans and nonaccrual loans, totaled $4,935,000 compared to
$5,315,000 at December 31, 1997. Other real estate at June 30, 1998 totaled
$3,216,000 compared to $3,171,000 at December 31, 1997. Total nonperforming
assets at June 30, 1998 were $8,151,000 a $335,000 or 3.9% decrease over
nonperforming asset levels at December 31, 1997. Nonperforming assets as a
percentage of total assets were 1.17% at June 30, 1998 compared to 1.38% at
December 31, 1997. Nonperforming assets as a percentage of total loans and other
real estate were 1.8% at June 30, 1998 compared to 2.2% at December 31, 1997.
The improvement in these ratios is due to both strong asset and loan growth
rates, and a decrease in nonperforming assets. YNB continues to actively manage
nonperforming assets with the goal of reducing these assets in relationship to
the total loan portfolio. Whenever possible, existing loan relationships are
being restructured in an effort to return these loans to performing status.
The allowance for loan losses increased to $6,103,000 or 1.39% of total loans at
June 30, 1998 compared to $5,570,000 or 1.44% at December 31, 1997. The
provision for loan losses for the first six months of 1998 was $900,000 with net
charge-offs totaling $367,000. The allowance for loan losses as a percentage of
nonperforming loans was 123.7% at June 30, 1998 compared to 104.80% at December
31, 1997. At June 30, 1998 the allowance for loan losses in management's
judgement is considered adequate in relation to credit risk exposure levels.
18
<PAGE>
Results of Operations
Net Income
YNB reported net income of $2,716,000 for the six months ended June 30, 1998 an
increase of $249,000 or 10.1% over the same period in 1997. The increase in net
income for the six months ended June 30, 1998, compared to the same period in
1997, is primarily attributed to higher net interest income and improved
non-interest income, offset by a higher provision for loan losses due to
increased loan volume, and increased non-interest expense. On a per share basis,
basic and diluted earnings per share were $0.54 and $0.53 respectively for the
six months ended June 30, 1998 compared to $0.49 for both basic and diluted
earnings per share for the six months ended June 30, 1997.
On a quarterly basis, net income for the second quarter of 1998 was $1,382,000
and represents a $127,000 or 10.1% increase over net income for the same period
of 1997. On a per share basis, basic and diluted earnings per share for the
second quarter of 1998 were both $0.27 compared to basic and diluted earnings
per share for the same period of 1997 of $0.25. The increase in net income and
earnings per share for the quarter is due to the same reasons discussed above.
Net Interest Income
YNB's net interest income for the first six months of 1998 was $10,857,000 an
increase of $1,311,000 or 13.7% from the same period in 1997. The principal
factors contributing to this increase were an increase in interest income of
$4,546,000 resulting from increased loan and investment balances offset by an
increase of $3,235,000 in interest expense. This increase in interest expense
was due to higher volume of and higher costs on CDs, a higher level of borrowed
funds and the interest associated with YNB's Trust Preferred Securities.
The net interest margin (tax equivalent basis) between the yield on average
earning assets and the cost of average funding liabilities, for the six months
ended June 30, 1998, was 3.66% a 33 basis point or 8.3% decline compared to
3.99% for the same period in 1997. The principal factors causing the narrowing
of the net interest margin were lower yields on securities and loans, and higher
cost of certificates of deposit and trust preferred securities.
On a quarterly basis, net interest income was $5,078,000 an increase of $150,000
or 3.0% when compared to the same period in 1997. The net interest margin (tax
equivalent basis) for the three months ended June 30, 1998 was 3.64% a 44 basis
point or 10.8% decrease for the same period of 1997. The reasons for the decline
were the same as discussed above.
The net interest margin for all 1998 and 1997 comparative periods is negatively
impacted by YNB's Investment Growth Strategy. This strategy involves purchasing
investments utilizing repurchase agreements or other funding sources. The
targeted spread on this strategy is 75 basis points after tax. Because of the
narrow targeted spread on this strategy, there will be a negative impact to the
net interest margin and return on assets. The balance outstanding in the
Investment Growth Strategy at June 30, was approximately $137,739,000 compared
to $57,100,000 at June 30, 1997.
19
<PAGE>
Conversely, this strategy increases both return on equity and earnings per
share, the primary goals of the strategy.
Interest Income
For the six months ended June 30, 1998 total interest income was $24,112,000 an
increase of $4,546,000 or 23.2% when compared to interest income of $19,566,000
for the same period in 1997. The increase is due to higher average balances in
both loans and securities, which is partially offset by lower yields on both
asset types. Average loans increased $70,120,000 or 20.5% while the yield
declined 2 basis points to 8.79% from 8.81%. The decline in loan yields reflects
strong competition for loans in YNB's market. The higher average levels and
lower yields resulted in interest and fees on loans for the six months ended
June 30, 1998 increasing $3,046,000 or 20.2% to $18,142,000 from $15,096,000 for
the same period in 1997. Average securities outstanding for the six months ended
June 30, 1998 increased $51,091,000 or 38.6% to $183,461,000 when compared to
the $132,370,000 the same period of 1997. Over the same period, the yield on the
securities portfolio decreased 8 basis points to 6.27% from 6.35%. These factors
resulted in interest on securities increasing $1,547,000 to $5,749,000 for the
six months ended June 30, 1998 compared to $4,202,000 for the same period in
1997. Overall, the yield on YNB's interest earning asset portfolio decreased 9
basis points to 7.97% for the six months ended June 30, 1998 from the 8.06% for
the same period in 1997.
For the second quarter of 1998, total interest income was $12,421,000 an
increase of $2,393,000 or 23.9% when compared to the $10,028,000 for the second
quarter of 1997. The increase was due to higher outstanding balances in both
investments and loans offset by lower yields on both asset types. Overall yield
on earnings assets for the second quarter of 1998 was 7.96% a 19 basis point
drop from the 8.15% yield for the same period in 1997.
Interest Expense
Total interest expense increased $3,235,000 or 32.3% to $13,255,000 for the
first six months of 1998 compared to $10,020,000 for the same period in 1997.
The increase in interest expense for the comparable time period resulted from a
larger deposit base; an increase in other borrowed funds, the interest costs
associated with the Trust Preferred Securities, and higher certificate of
deposit costs. Offsetting these factors were lower cost on the core savings,
money market and interest bearing checking accounts and lower cost on other
borrowed funds. The average rate paid on interest bearing liabilities for the
six months ended June 30, 1998 increased 19 basis points to 4.96% from 4.77% for
the same period of 1997. A major factor in the increase in the cost of interest
bearing liabilities is the interest costs associated with the Trust Preferred
Securities that account for 10 basis points or 52.6% of the 19 basis points of
increase for the period.
Interest on time deposits under $100,000 increased $962,000 to $5,604,000 for
the six months ended June 30, 1998 from $4,642,000 for the same period in 1997.
This increase was caused by an increase in the average outstanding balance of
$33,084,000 to $195,663,000 for the six months ended June 30, 1998, when
compared to the average balance of $162,579,000 for the six
20
<PAGE>
months ended June 30, 1997. During the first six months of 1998, YNB offered
attractive rates on CDs to fund loan growth.
Interest expense on borrowed funds increased $1,761,000 to $3,977,000 for the
first six months of 1998 when compared to the $2,216,000 for the same period in
1997. The increase was caused by a $64,635,000 increase in the average balance
outstanding for the six months ended June 30, 1998 when compared to the same
period in 1997. The rate paid on borrowed funds declined 14 basis points for the
six months ended June 30, 1998 to 5.61% from the 5.75% for the same period last
year. The primary cause for the increase in interest expense on borrowed funds
is the higher level of borrowings used to fund the investment growth strategy.
The overall decrease in rate was caused by the shifting of borrowed funds out of
fixed term products into convertible products at lower interest rates.
Total interest expense for the second quarter of 1998 increased $1,743,000 or
34.2% to $6,843,000 from $5,100,000 for the same period in 1997. The overall
cost of interest bearing liabilities increased 18 basis points to 4.97% from
4.79% in the second quarter of 1997. Approximately 8 basis points or 44.4% of
the increase resulted from the interest expense associated with the
Trust-Preferred Securities. The other factors contributing to higher interest
expense was an increase of $124,994,000 or 29.4% in the average balance of
interest bearing liabilities for the three months ended June 30, 1998 to
$550,830,000 compared to $425,836,000 for the same period in 1997. Offsetting
the increase in the outstanding balances, were lower yields on savings, money
markets and interest bearing checking accounts. In addition, the overall costs
of borrowed funds declined due to the factors listed above.
While YNB desires to fund asset growth with lower cost savings, money markets,
interest bearing checking and non-interest bearing demand deposits, this is not
always possible as asset growth rates continue to exceed the growth rate in
these deposit types. To meet the funding needs, YNB anticipates continued
reliance on higher cost retail CDs and, to a lesser extent, borrowed funds.
Provision for Loan Losses
YNB provides for possible loan losses by a charge to current operations. The
provision for loan losses for the six months ended June 30, 1998 was $900,000, a
56.5% increase over the $575,000 provision recorded for the same period of 1997.
For the three months ended June 30, 1998, the provision for loan losses was
$500,000, a 66.7% increase over the $300,000 for the same period in 1997. The
increase in the provision was primarily due to the strong loan growth recorded
in both the first quarter and first six months of 1998. Management believes that
the reserve for loan losses is adequate in relation to the credit risk exposure
levels.
Non-interest Income
Total non-interest income for the first six months of 1998 was $1,420,000 an
increase of $180,000 or 14.5% over non-interest income of $1,240,000 for the
same period in 1997. The increase is primarily due to increases in service
charges on deposit accounts and other non-interest income. Service charges on
deposit accounts increased $50,000 or 8.8% for the first six
21
<PAGE>
months of 1998 compared to the same period in 1997. The increase in service
charges is primarily due to both growth in the deposit base for the comparable
periods and an increased effort to collect charges and fees on existing deposit
relationships. YNB also recorded gains on sale of available for sale securities
and mortgages totaling $71,000 for the first six months of 1998 compared to
$16,000 for the same period last year. The increase in these gains represent
30.6% of the total increase in non-interest income. These gains reflect routine
sales. Other non-interest income increased $75,000 or 11.5% for the first six
months of 1998 compared to the same 1997 period. The increase is principally due
to additional income derived from life insurance assets which totaled $342,000 a
$72,000 or 26.7% increase over the $270,000 for the same period last year. The
increase is due to higher average balance of life insurance assets at a lower
comparative yield. In the second quarter, YNB began offering its customers the
ability to purchase annuities and mutual funds through its YNB Financial
Services subsidiary. Total income from the sale of mutual funds and annuities
totaled $11,000 and represents one month of revenue. Management believes that
this service can be developed into a valuable contributor of non-interest
income. Management continues to closely evaluate both traditional and
non-traditional sources of new non-interest income as part of a longer-term
strategy to increase earnings.
For the three months ended June 30, 1998, total non-interest income increased
$98,000 or 15.5% based on the factors discussed above. Of particular importance
were a $29,000 increase in gain on sale of mortgages and securities, $11,000
earned from the sale of mutual funds and annuities and the factors discussed
above.
Non-interest Expense
Total non-interest expense increased $768,000 or 12.0% to $7,177,000 for the
first six months of 1998 compared to $6,409,000 for the same period in 1997. The
increase in non-interest expenses was primarily due to increases in salary and
employee benefits, equipment expense and other non-interest expense. Total
non-interest expenses, on an annualized basis, as a percentage of average
assets, were 2.23% for the first six months of 1998 compared to 2.50% for the
same period of 1997. YNB's efficiency ratio for the first six months of 1998 was
58.5% an improvement over the 59.4% for the same period in 1997. The efficiency
ratio is computed by dividing total operating expenses by net interest income
and other income. An increase in the efficiency ratio indicates that more
resources are being utilized to generate the same or greater volume of income
while a decrease would indicate a more efficient allocation of resources.
Salary and employee benefits increased $271,000 or 7.4% to $3,940,000 for the
first six months of 1998 compared to $3,669,000 for the same period in 1997.
Salary expense increased $310,000 reflecting increased staffing levels and
normal salary increases. Benefit expense decreased $39,000 due to reduction in
the expenses associated with post retirement benefits.
Equipment expense increased $90,000 or 17.0% to $618,000 for the first six
months of 1998 from $528,000 for the same period in 1997. The equipment costs
increase reflects the continuing efforts of YNB to maintain and upgrade
technology in order to provide the highest quality service as well as resolving
Year 2000 issues. YNB is in the process of two purchases, which will further
increase equipment expense. The first is a $323,000 purchase of new and more
22
<PAGE>
powerful main frame computer. The new system will allow YNB to offer new
products and services and to continue to expand its customer base. The second is
the $200,000 purchase of a new reader sorter. The new machine will replace the
older machine that was not year 2000 compliant. Management believes that the
purchase of a new reader sorter represents the largest equipment purchase
associated with year 2000 issues. This continued investment in upgraded
technology allows YNB to operate in a more efficient manner. Better technology
increases the productivity of YNB staff and helps to control salary and benefit
costs.
Occupancy expense for the first six months of 1998 was $495,000 an increase of
$20,000 or 4.2% compared to $475,000 for the same period in 1997. The increase
was due to the leasing of additional space for the East Windsor branch and
routine rent increases. Occupancy expense will increase in the third quarter
when the Pennington branch opens in August. In the second quarter, YNB signed a
lease for a 45,000 square foot corporate headquarters building. This new
location will include a full service bank branch as well as it will bring
together all senior management in one location. The major benefits of the
corporate headquarters include, room for expansion and improved communication
among the various function areas of YNB. Total overhead associated with the new
headquarters is estimated to be approximately $1,000,000 per year. Management
anticipates occupying the new headquarter in October 1999.
Other non-interest expenses increased $387,000 or 22.3% to $2,124,000 for the
six months ended June 30, 1998 when compared to the $1,737,000 for the same
period in 1997. Most of the expense increase was related to higher costs
associated with the higher volumes and larger size of YNB. The most significant
increases in other non-interest expense include the following. First,
amortization of the issuance costs of Yardville Capital Trust were $80,000 in
the six months ended June 30, 1998 and account for 20.7% of the total increase
in other non-interest expenses. New Jersey State corporate income tax increased
$89,000 due to the improved earnings of YNB. This increase accounts for 23.0% of
the total increase in non-interest expenses. Outside fees, including audit,
examination and consulting fees increased $104,000 and account for 26.9% of the
total increase. This increase reflects the use of consultants on various
projects that YNB is involved. One project involves restructuring certain
checking and interest bearing checking accounts so that these deposits will no
longer be subject to reserve requirements under the Federal Reserve Bank's
Regulation D. This project was successfully completed in April 1998 as discussed
earlier. A key focus of YNB remains controlling the increase in non-interest
expenses.
For the three months ended June 30, 1998 total non-interest expense increased
$343,000 or 10.3% to $3,673,000 from $3,330,000 for the same period in 1997.
Total non-interest expenses, on an annualized basis, as a percentage of average
assets were 2.21% for the three months ended June 30, 1998 compared to 2.56% for
the same period of 1997. YNB's efficiency ratio for the three months ended June
30, 1998 was 58.2% an improvement over the 59.9% for the same period in 1997.
Salary and employee benefits increased $145,000 or 7.8% to $1,997,000 from
$1,852,000 for the same period in 1997. Occupancy expense increased $21,000 or
8.7% to $262,000 from $241,000 for the same period in 1997. Other non-interest
expense increased $133,000 or 13.9% to $1,092,000 from $959,000 for the same
period in 1997. The causes for these increases were discussed above.
23
<PAGE>
Item 3: Quantitative and Qualitative Disclosure about Market Risk
There have been no material changes in YNB's market risk from December 31, 1997
except as discussed below. For information regarding YNB's market risk refer to
the Company's 1997 Annual Report to stockholders.
Changes in Earning Risk
Net interest income over the next twelve-month period indicates a larger risk to
lower rates (-300 basis points) at June 30, 1998 than reported at December 31,
1997. Comparing the simulation results of this low rate scenario to the flat
rate interest rate scenario indicates a -9.4% change in net interest income
compared to -4.4% at year end 1997. The cumulative one-year negative closed to
- -2.6% of assets at June 30, 1998 compared to -13.3% at year-end. The dollar
change in the gap was $63,000,000. The reasons for this change in short term
earnings risk profile include:
1) The origination of floating rate commercial loans of $24,000,000.
2) An increase in overnight Federal funds of $12,400,000.
3) The addition of $79,000,000 of fixed rate and convertible
borrowings, which are non-rate sensitive in lower interests rate
environments.
4) An increase in certificates of deposit of $19,300,000 with
maturities greater than one year.
At the same time as liability durations extended, the investment portfolio
duration decreased with expected repricing beyond one year increasing
$10,000,000. Prepayment speeds on mortgage backed securities has increased and
this has shorten investment cash flows considerably. Management has taken steps
to sell faster paying mortgage pools and purchase lower coupon mortgage backed
securities with slower prepayment speeds.
Changes in Market risk
With the addition of callable repurchase agreements and FHLB advances, the
market risk profile of YNB has changed. Management measures market risk by
changes in the Economic Value of Portfolio Equity (EVPE) as a percentage of
total assets with rate shifts of +/- 200 basis points.
EVPE analysis is an indication of long-term market risks in the balance sheet.
It measures the present value of asset and liability cash flows based on current
inventory and market rates to determine the present value of equity. The present
value of equity is subsequently measured by shifting interest rates by +/- 200
basis points to observe the variances as a percentage of total assets. It is
management's intention to maintain modest changes in this measure with a target
of below 3%.
At June 30, 1998, the EVPE changes by -2.17% for rate shifts of +200 and -1.17%
for rate shifts of -200 basis points. The non-symmetry of the results is
indicative of the callable funding
24
<PAGE>
booked in the quarter. This compares to changes of -1.80% and 0.00% respectively
at December 31, 1997.
PART II: OTHER INFORMATION
Item 1: Legal Proceedings
Not Applicable.
Item 2: Changes in Securities and Use of Proceeds
Not Applicable.
Item 3: Defaults Upon Senior Securities
Not Applicable.
Item 4: Submission of Matters to a Vote of Securities Holders
The annual stockholders meeting of Yardville National Bancorp was held Tuesday,
April 28, 1998.
The following matter was submitted to a vote at the meeting:
The election of the following nominees as directors, the vote with respect to
each nominee was as followed:
- ------------------------------------------------------------------------------
Nominee Votes for Votes withheld
- ------------------------------------------------------------------------------
Anthony M. Giampetro 4,077,025 7,791
- ------------------------------------------------------------------------------
Patrick M. Ryan 4,078,925 5,891
- ------------------------------------------------------------------------------
F. Kevin Tylus 4,080,825 3,991
- ------------------------------------------------------------------------------
Elbert G. Basolis, Jr. 4,081,025 3,791
- ------------------------------------------------------------------------------
Directors whose terms continue beyond this Annual Stockholders Meeting.
C. West Ayres
Jay G. Destibats, Chairman of the Board
Gilbert W. Lugossy
Weldon J. McDaniel, Jr.
Lorraine Buklad
Sidney L. Hofing
James J. Kelly
Louis R. Matlack
25
<PAGE>
Item 5: Other Information
Not Applicable
Item 6: Exhibits and Reports on Form 8-K
See attached exhibits. There were no Form 8-K reports filed during the quarter
for which this report is filed.
26
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description Page
--------- ----------------------------------------------------------------
(H) 3.1 Restated Certificate of Incorporation of the Company,
as amended by the Certificate of Amendment thereto filed
on March 6, 1998.
(B) 3.2 By-Laws of the Company
(B) 4.1 Specimen Share of Common Stock
(I) 4.2 See Exhibits 3.1 and 3.2 for the Registrant's Certificate
of Incorporation and By-Laws, which contain provisions
defining the rights of stockholders of the Registrant.
(I) 4.3 Amended and Restated Trust Agreement dated October 16,
1997, among the Registrant, as depositor, Wilmington
Trust Company, as property trustee, and the
Administrative Trustees of Yardville Capital Trust.
(I) 4.4 Indenture dated October 16, 1997, between the Registrant
and Wilmington Trust Company, as trustee, relating to the
Registrant's 9.25% Subordinated Debentures due 2027.
(I) 4.5 Preferred Securities Guarantee Agreement dated as of
October 16, 1997, between the Registrant and Wilmington
Trust Company, as trustee, relating to the Preferred
Securities of Yardville Capital Trust.
(D) 10.1 Employment Contract between Registrant and Patrick M. Ryan.
(D) 10.2 Employment Contract between Registrant and Jay G. Destribats
(G) 10.3 Employment Contract between Registrant and Stephen F. Carman
(G) 10.4 Employment Contract between Registrant and James F. Doran
(G) 10.5 Employment Contract between Registrant and Richard A. Kauffman
(G) 10.6 Employment Contract between Registrant and Mary C. O'Donnell
(G) 10.7 Employment Contract between Registrant and Frank Durand III
(G) 10.8 Salary Continuation Plan for the Benefit of Patrick M. Ryan
27
<PAGE>
INDEX TO EXHIBITS (continued)
Exhibit
Number Description Page
---------- ----------------------------------------------------------------
(D) 10.9 Salary Continuation Plan for the Benefit of Jay G. Destribats
(E) 10.10 1988 Stock Option Plan
(A) 10.11 1994 Stock Option Plan
(A) 10.12 Directors' Deferred Compensation Plan
(B) 10.13 Lease Agreement between Jim Cramer and the Bank dated
November 3, 1993
(A) 10.14 Lease between Richardson Realty Company and the Bank dated
November 18, 1994
(A) 10.15 Agreement between the Lalor Urban Renewal Limited Partnership
and the Bank dated October, 1994
(C) 10.16 Survivor Income Plan for the Benefit of Stephen F. Carman
(C) 10.17 Lease Agreement between Devon Inc. and the Bank dated as of
February 9, 1996
(F) 10.18 1997 Stock Option Plan
(G) 10.19 Employment contract between Registrant and Howard N. Hall
(G) 10.20 Employment contract between Registrant and Sarah J. Strout
(G) 10.21 Employment contract between Registrant and Nina D. Melker
(G) 10.22 Employment contract between Registrant and Timothy J. Losch
(G) 10.23 Survivor Income Plan for the Benefit of Timothy J. Losch
(G) 10.24 Lease Agreement between the Ibis Group and the Bank dated
July 1997
(H) 10.25 Lease agreement between Hilton Realty Co. of Princeton and
the bank dated March 31, 1998.
28
<PAGE>
INDEX TO EXHIBITS (continued)
Exhibit
Number Description Page
---------- ----------------------------------------------------------------
(H) 10.26 Amendments to the 1994 Stock Option Plan.
10.27 Lease agreement between Crestwood Construction
and the Bank dated May 25, 1998 26
10.28 Lease addendum between Gardeners Property Partnership
and the bank dated March 1998. 47
27.1 Financial Data Schedule 56
(A) Incorporated by reference to the Registrant's Annual
Report on Form 10-KSB/A filed on July 25, 1995
(B) Incorporated by reference to the Registrant's
Registration Statement on Form SB-2 (Registration
No. 33-78050)
(C) Incorporated by reference to the Registrant's Annual
Report on Form 10-KSB for fiscal year ended December 31,
1995
(D) Incorporate by reference to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December
31, 1996
(E) Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended June
30, 1997, as amended by Form 10-Q/A filed on August 15,
1997
(F) Incorporated by reference to the Registrant's
Registration Statement on Form S-8 (Registration
NO. 333-28193)
(G) Incorporated by reference to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December
31, 1997
(H) Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended March
31, 1998, as amended by Form 10-Q/A filed June 9, 1998
(I) Incorporated by reference to the Registrant's
Registration Statement on Form S-2 (Registration
Nos. 333-35061 and 333-35061-01)
29
<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: August 10, 1998 By: /s/ Stephen F. Carman
-------------------- --------------------------
Stephen F. Carman
Executive Vice President and
Chief Financial Officer
30
<PAGE>
L E A S E A G R E E M E N T
-----------------------------
This AGREEMENT, made this day of 1998, between CRESTWOOD
CONSTRUCTION, LLC, hereinafter designated as the Landlord, and YARDVILLE
NATIONAL BANK, hereinafter designated as the Tenant.
For and in consideration of the covenants herein contained, and upon
the terms and conditions herein set forth, Landlord and Tenant agree as follows:
1. PREMISES. The Landlord does hereby lease to the Tenant and the
Tenant does hereby rent from the Landlord, the following described premises,
hereinafter referred to as "leased premises" or "premises": Bank/office building
at the corner of Yardville-Hamilton Sq. and Kuser Roads in Hamilton Square, New
Jersey and is to be constructed by the Landlord on Block 2575, Lot 184 in
Hamilton Township, Mercer County, New Jersey. The subject property is shown on
the Hamilton Township Tax Map as Block 2575, Lot 184. Said building shall be
approximately 100 feet by 150 feet totaling approximately 45,000 square feet, as
measured from outside exterior walls together with parking all as set forth on
the approved site plan dated December 11, 1997 referred to as Exhibit A.
2. TERM. The term of this lease shall be fourteen (14) years. The term
of this lease and Tenant's obligation to pay rent shall commence 60 days after
substantial completion or upon occupancy by Tenant whichever is earlier.
Substantial completion shall be deemed to have occurred upon the issuance of a
Certificate of Occupancy for any and all of Landlord's work so as to allow the
Tenant or the Tenant's contractor to commence interior finishes. It is estimated
that construction will be completed 18 months after the approval and execution
of all plans by local governmental authorities and the issuance of permits and
Landlord agrees to expeditiously pursue such execution of plans and permits to
proceed with construction. If construction has not commenced by June 1, 1998, or
if construction is not completed eighteen months following execution of plans
and issuance of permits, Tenant shall have the right to cancel this Lease by
giving Landlord written notice of intent to cancel if construction is not
commenced within 30 days of the date of the Notice. Notice by Landlord to the
Tenant of substantial completion of Landlord's work on the leased premises as
set forth above, punch list items, and work contingent upon completion of
Tenant's own work excepted, shall constitute delivery hereunder. If Tenant fails
to renew the Lease as provided in Paragraph #52, then and in that event, the
Tenant shall pay to the Landlord, on a monthly basis for up to one year
following termination of this Lease, a sum equal to the monthly rent Tenant
would have been required to pay during the first year of the renewal period.
This obligation shall terminate if Landlord replaces Tenant with another Tenant
during that one year period.
3. BASIC RENT. The Tenant shall pay to the Landlord, as basic rent for
and during the term as follows:
Upon completion and delivery as set forth above and upon mutual determination of
square footage between Landlord's architect and Tenant's architect for each use,
rent shall be calculated as follows to determine the initial annual basis:
Branch Bank Facility $22.00 per sq. foot
General Office Space $15.00 per sq. foot
Storage Space $ 8.00 per sq. foot
<PAGE>
Once the first year's rent is determined as aforesaid, that amount
shall constitute the base annual rent payable as set forth below. (If delivery
occurs on a day other than the first day of a month the Tenant shall pay a
proportionate rent for such partial month.) The base annual rent shall be
adjusted once every five years by increasing it, if necessary, to equal the
average increase in the Consumer Price Index for the New York area for the prior
five years, provided, however, the increase shall not exceed 3% for any
adjustment period.
All rent is due and payable in advance on the first day of each and
every month during the term of the lease. Tenant shall pay basic rent, and any
additional rent as hereinafter provided, to Landlord at Landlord's above stated
address, or at such other place as Landlord may designate in writing, without
demand, counterclaim, deduction or setoff.
4. USE. Tenant shall use and occupy the leased premises only for lawful
purposes permitted by local ordinance and for no other purpose.
5. CARE. The Tenant shall take good care of the premises and shall at
the Tenant's own cost and expense, make all repairs, including painting and
decorating, and shall maintain the premises in good condition and state of
repair. The Tenant shall neither encumber nor obstruct the sidewalks, parking
areas and entrances, but shall keep and maintain the same in a clean condition,
free from debris, refuse, snow and ice. Notwithstanding the above, Landlord
shall be responsible for the following:
1. Maintain the roof and exterior walls in good condition;
2. Make all structural repairs unless the repairs are made necessary by
the act or neglect of the Tenant; and
3. Make necessary replacements of the plumbing, cooling, heating,
electrical and sewer systems, except when made necessary by the act
or neglect of the Tenant.
6. SURRENDER. On the last day, or earlier permitted termination of the
lease term, Tenant shall quit and surrender the leased premises in good order
and condition, ordinary wear and tear excepted. Prior to the expiration of the
lease term, the Tenant shall remove all of its personal property, trade fixtures
and equipment from the premises, and shall repair any damage caused by such
removal. Any property of the Tenant remaining on the premises after the last day
of the term of this lease or after the earlier permitted termination of the
lease term shall be conclusively deemed abandoned and may be removed or disposed
of by Landlord. Tenant shall reimburse Landlord for the cost of such removal.
Notwithstanding the above, this paragraph does not require Tenant to restore the
leased premises to its original condition.
7. COMPLIANCE WITH LAWS. The Tenant shall comply with all laws,
regulations, requirements and directives of the federal, state, county and
municipal authorities applicable to the business to be conducted by the Tenant
in the leased premises. Landlord has obtained site plan approval for the
operation of a bank/office building on the premises and agrees to comply with
any conditions contained in said approval. Prior to the commencement of opening
for business, the Tenant shall, at its expense, obtain from the municipality (if
required) a Tenant's C of O or use permit. The Tenant shall promptly comply with
all requests, orders, regulations and directives of the Board of Fire
Underwriters or insurance companies covering the leased premises for the
prevention of fire or other casualty at Tenant's own cost and expense after
<PAGE>
commencement of the Lease. Tenant represents that it shall not violate any rules
or regulations of the occupational safety and health administration. The Tenant
shall conduct its business in such a manner, both as regards noise and other
nuisances, as will not interfere with, annoy, or disturb any other Tenant in the
conduct of its business or the Landlord in the management of the shopping center
(as shown on the proposed site plan attached hereto as Exhibit "B"). Landlord
will likewise use its best efforts to make sure that no other Tenant will
interfere with, annoy or disturb the Tenant under this Lease Agreement.
8. ASSIGNMENT. The Tenant shall not assign, mortgage or encumber this
lease, nor sublet or sublease the premises or any part thereof, without the
prior written consent of the Landlord, which consent shall not be unreasonably
withheld or delayed. If Tenant is being released from the Lease Agreement, then
Landlord may require posting of a security deposit or any other reasonable
security as a condition of approving any assignment. This lease shall be binding
upon Tenant and any acquirer or successor of Tenant. Notwithstanding the above,
Tenant does not need Landlord's consent or approval for the sale of Tenant's
stock.
9. NOTICES. All notices required under the terms of this lease shall be
given and shall be complete by mailing such notices by certified or registered
mail, return receipt requested, to the address of the parties as shown at the
head of this lease, or to such other address as may be designated in writing,
which notice of change of address shall be given in the same manner. All notices
to Tenant may be mailed to the leased premises once Tenant has occupied the
premises. The parties may designate counsel to whom copies of notices shall be
sent and may, by consent, agree to alternative methods of delivery of notices.
10. SEVERABILITY. The terms, conditions, covenants and provisions of
this lease shall be deemed to be severable. If any clause or provision herein
contained shall be adjudged to be invalid or unenforceable, it shall not affect
the validity of any other clause or provision herein, but such other clauses or
provisions shall remain in full force and effect.
11. INSPECTION. The Tenant agrees that the Landlord and the Landlord's
agents, shall have the right to enter into and upon the said premises or any
part thereof, during regular business hours, upon reasonable notice to Tenant,
while accompanied by a representative of Tenant, for the purpose of examining
the same or making such repairs or alterations therein as may be necessary for
the safety and preservation thereof. The clause shall not be deemed to be a
covenant by the Landlord nor be construed to create an obligation on the part of
the Landlord to make such inspection or repairs. Landlord recognizes that the
nature of Tenant's business may require security so as to deny Landlord access
to portions of the premises except in emergency situations under controls
acceptable to Tenant.
12. NET RENT. (The phrase "Tenant's proportionate share" shall apply
only if Landlord receives a single bill for any such items which bill covers
land buildings or operations of other Tenants otherwise Tenant's share shall be
one hundred percent (100%).) Tenant agrees to pay as additional rent, promptly
and without demand, its proportionate share of all real estate taxes, common
area expenses and insurance affecting the real estate (land and building) of
which the leased premises form a part. It is the intention of the parties that
this shall be a triple net lease. The Landlord and Tenant agree that the
proportionate share of the above taxes, common area expenses and insurance to be
paid by the Tenant, under the terms of this paragraph, shall be computed on the
<PAGE>
basis that the total area of the leased premises bears to the total area of the
entire premises. Landlord and Tenant further agree that Tenant shall pay its
proportionate share of the above common area expenses and insurance monthly by
paying one-twelfth the estimated amount with each basic monthly rent installment
in a manner similar to the escrow system used by banks in connection with
residential mortgages. Annually Landlord, upon submission of the tax, common
area expense and insurance bills, shall compute any differences from the
estimated monthly payments, notify Tenant of same, and the adjustment of the
difference shall be made with the next due installment of the basic monthly
rent. Photocopies of the tax bill, common area expense bills and insurance
bills, submitted by the Landlord to the Tenant, shall be sufficient evidence of
the amount of taxes, common area expenses and insurance. So long as Tenant is
responsible for one hundred percent of such expenses Tenant may make
arrangements to pay those expenses when due provided Landlord agrees and Tenant
provides adequate proof of timely payment of such expenses.
If at any time during the term of this Lease the methods of taxation
prevailing at the commencement of the term hereof shall be altered, so that in
lieu of or as a supplement to or a substitute for the whole or any part of the
real estate taxes now assessed or charged there is an alternate assessment or
charge or tax, then such alternate assessment or charge or tax shall be deemed
to be included in the real estate taxes payable by the Tenant pursuant to this
paragraph and the Tenant shall pay and discharge the same as herein provided in
respect to the payment of real estate taxes. The common area expenses herein
referred to are the Landlord's costs of operating, maintaining, replacing and
repairing the common areas of the premises (land) of which the leased premises
form a part. Such expenses to include, but not limited to, lighting, cleaning,
snow removal, policing, landscaping, repairing and patching of the common
roadways. The insurance herein is the rental, fire and liability coverage under
a policy issued by a commercial insurer licensed to provide insurance in New
Jersey. (Any reference to common areas shall apply only if other tenants are
sharing use of the demised premises with Tenant.
The Landlord and Tenant shall delineate on the attached site plan
(Exhibit "B") those areas which shall be considered "common areas" for the
purpose of this Lease Agreement. Landlord also agrees that Tenant may pay its
portion of the tax bill to Landlord within ten (10) days notice from Landlord of
the amount of the bill. Tenant shall pay all of the tax for improvements (so
long as it is the only building on the taxed property) and its proportionate
share of the land until such time as the Tenant's portion of the property is
subdivided out. Landlord agrees that it will use its best efforts to subdivide
out Tenant's portion of the property and, if successful, further agrees that
upon completion of the subdivision and the issuance of a separate tax bill to
Tenant's property, Tenant may pay said bill directly to the Township of Hamilton
and provide proof of said payment to Landlord within ten (20) days of said
payment. Tenant reserves the right to audit any common area expenses and all
expenses should be reasonable and customary.
13. QUIET ENJOYMENT. The Landlord represents that the Landlord is the
owner of the premises herein leased and has the right and authority to enter
into, execute and deliver this lease; and does further covenant that the Tenant
on paying the rent and performing the conditions and covenants herein contained,
shall and may peaceably and quietly have, hold and enjoy the leased premises for
the term aforementioned.
<PAGE>
14. MORTGAGE PRIORITY. This lease shall not be a lien against the said
premises in respect to any mortgages that may hereafter be placed upon said
premises. The recording of such mortgage shall have preference and precedence
and be superior and prior in lien to this lease, irrespective of the date of
recording. The Tenant agrees to execute any instruments, without cost, which
may be deemed necessary or desirable, to effect the subordination of this lease
to any such mortgage provided said mortgagee executes a subordination,
nondisturbance and attornment agreement in a form satisfactory to Tenant. A
refusal by the Tenant to execute such instruments shall entitle the Landlord to
cancel this lease. The term hereof is expressly limited accordingly.
15. SIGNS. The Tenant shall not place nor allow to be placed any signs
of any kind whatsoever, upon, in or about the leased premises without the prior
written consent of the Landlord which consent shall not be unreasonably
withheld. Tenant agrees, if required by Landlord, to attach at Tenant's own cost
and expense an illuminated sign onto a free standing sign that may be erected by
Landlord. Tenant further agrees to erect at Tenant's own cost and expense an
illuminated sign on the exterior of the leased premises. All signs herein
erected shall be approved, before erection, by the Landlord in writing as to
size, location. Any signs permitted by the Landlord shall at all times conform
with all municipal ordinances or other laws and regulations applicable thereto.
Notwithstanding the above, any signs that the Landlord requires the Tenant to
erect herein shall be limited to a cost of $2,500.00 to the Tenant.
16. PARKING. Shall be available as shown on the approved Site
Plan--Exhibit A. The parking areas shown on Exhibit A shall be for the exclusive
use of the Bank and its customers.
17. UTILITIES. The Tenant shall pay when due all the rents or charges
for water or other utilities exclusively used by the Tenant, which are or may be
assessed or imposed upon the leased premises, and if not paid, such rents or
charges shall be added to and become payable as additional rent with the
installment of rent next due. Tenant to pay for all utilities. Landlord shall
not be responsible for the interruption in service of any utility.
Notwithstanding the above, if the utility services are interrupted due to no
fault of the Tenant but due to the fault of the Landlord for a period of more
than ten (10) days, then Tenant will be entitled to an abatement of rent until
such time as the utilities are returned to service. Tenant and Landlord agrees
to use its best efforts to have the utilities returned to service as soon as
possible. In the event the utility or utilities are not restored for a period of
six months, then Tenant shall have the right to cancel this Lease Agreement
unless non-restoration results from Tenant's fault.
18. LANDLORD'S EXCULPATION. The Landlord shall not be liable for any
damage or injury which may be sustained by the Tenant or any other person, as a
consequence of the failure, breakage, leakage or obstruction of the water,
plumbing, steam, sewer, waste or soil pipes, roof, drains, leaders, gutters,
valleys, downspouts or the like or of the electrical, gas, power, refrigeration,
sprinkler, air-conditioning or heating systems; or by reason of the elements; or
resulting from the carelessness, negligence or improper conduct on the part of
any other Tenant or of the Landlord or this or any other Tenant's agents,
employees, guests, licensees, invitees, subtenants, assignees or successors; or
attributable to any interference with, interruption of or failure, beyond the
control of the landlord, of any services to be furnished or supplied by the
Landlord. Notwithstanding the, above, Landlord shall not be exculpated from (1)
any gross negligence or willful and wanton acts of the Landlord, (2) any of the
remedies provided to tenant under Paragraph 17 herein, and (3) any of the
warranties provided to Tenant under Paragraph 54 herein.
<PAGE>
19. LIABILITY INSURANCE. Tenant shall keep in force at its own expense,
so long as this Lease remains in effect, public liability insurance in companies
acceptable to the Landlord with respect to the premises, in form satisfactory to
Landlord covering both Landlord and Tenant with minimum limits of $1,000,000 per
person and $2,000,000 per accident and in which the property damage liability
shall be not less than $100,000. Tenant will deposit the policy of such
insurance or certificates thereof with Landlord within 15 days of occupying said
premises. Tenant shall also maintain at Tenant's expense to "all risk" property
insurance, business/rent interruption insurance and commercial general liability
insurance naming Landlord as an additional insured.
20. PLATE GLASS. Tenant shall be obligated to maintain, repair and
replace all plate and other glass in the leased premises.
21. NON-PERFORMANCE BY LANDLORD. This lease and the obligation of the
Tenant to pay the rent hereunder and to comply with the covenants and conditions
hereof, shall not be affected, curtailed, impaired or excused because of the
Landlord's inability to supply any service, by reason of any rule, order
regulation or preemption by any governmental entity, authority, department,
agency or subdivision or for any delay which may arise by reason of negotiations
for the adjustment of any fire or other casualty loss or because of strikes or
other labor trouble or, for any cause beyond the control of the Landlord. This
paragraph does not apply to Tenant's remedies following any interruption of
utility services provided in Paragraph 17 and Tenant's remedies for Landlord's
failure to make construction deadlines set forth in Paragraph 2.
22. REIMBURSEMENT OF LANDLORD. If the Tenant shall fail or refuse to
comply with or perform any conditions and covenants of the within lease, the
Landlord may, if the Landlord so elects, carry out and perform such conditions
and covenants, at the cost and expense of the Tenant, and the said cost and
expense shall be payable on demand, or at the option of the Landlord, shall be
added to the installment of rent due immediately thereafter, but in no case
later than one month after such demand. This remedy shall be in addition to such
other remedies as the Landlord may have hereunder by reason of the breach by the
Tenant. Landlord's rights hereunder shall apply only after giving Tenant
reasonable notice to cure the covenant or condition alleged to have not been
complied with. Likewise, if the Landlord shall fail or refuse to comply or
perform any conditions and covenants of the within Lease, the Tenant may, if the
Tenant so elects, carry out and perform such conditions and covenants, at the
cost and expense of the Landlord and the said cost and expense shall be deducted
from any future rent payable to the Landlord. This remedy shall be in addition
to such other remedies as the Tenant may have hereunder by reason of the breach
of the Landlord. Tenant's rights hereunder shall apply only after giving
Landlord reasonable notice to cure the covenant or condition alleged to have not
been complied with.
23. CONDEMNATION. In the event that the premises shall be taken for
public use by the city, state, federal government, public authority or other
corporation having the power of eminent domain, then this Lease shall terminate
as of the date on which possession thereof shall be taken for such public use,
or, at the option of the Tenant, as of the date on which the premises shall
become unsuitable for Tenant's regular business by reason of such taking;
provided, however, that if only a part of the leased premises shall be so taken,
such termination shall be at the option of Tenant only. If such a taking of only
a part of the leased premises occurs, and Tenant elects not to terminate the
Lease, there shall be a proportionate reduction of the Basic Rent and
Additional Rent to be paid under this Lease from and after the date such
<PAGE>
possession is taken for public use. Tenant shall have the right to participate,
directly or indirectly, in any award for such public taking to the extent that
it may have suffered compensable damage as a Tenant on account of such public
taking.
24. ALTERATION. No alterations, installations, additions, or
improvements shall be made, installed or attached to the leased premises,
without the written consent of the Landlord which consent shall not be
unreasonably withheld. Unless otherwise provided herein, all such alterations,
additions or improvements and installations, when made, permanently installed or
attached to the said premises, shall belong to and become the property of the
Landlord and shall be surrendered with the premises and as part thereof upon the
expiration or termination of this Lease. Notwithstanding the above, Tenant is
permitted to make any nonstructural improvement inside the building without the
Landlord's consent.
25. FIXTURES. It is agreed that the Tenant shall have the right to
install whatever trade equipment, fixtures and inventory as may be deemed
necessary by the Tenant for the conduct of the business for which the premises
have been leased, subject to compliance with applicable rules and regulations of
governmental boards having jurisdiction thereof. Any trade equipment, fixtures
or inventory of the Tenant, not removed by the Tenant upon the termination of
this Lease, or upon any quitting, vacating or abandonment of the premises by
the Tenant, or upon the Tenant's eviction, shall be considered as abandoned and
the Landlord shall have the right, without notice to the Tenant, to sell or
otherwise dispose of the same and shall not be accountable to the Tenant for any
part of the proceeds of such sale, if any.
26. FIRE OR OTHER CASUALTY. In case of fire or other casualty, the
Tenant shall give immediate notice to the Landlord. If the premises shall be
partially damaged by fire, the elements or other casualty, the Landlord shall
repair the same as speedily as practicable, but the Tenant's obligation to pay
the rent hereunder shall not cease. If the premises be so extensively and
substantially damaged as to render them untenantable, then the rent shall cease
until such time as the premises shall be made tenantable by the Landlord.
However, if the premises be totally destroyed or so extensively and
substantially damaged as to require practically a rebuilding thereof, then the
rent shall be paid up to the time of such destruction and then and from
thenceforth this lease shall come to an end. If the Tenant shall have been
insured against any of the risks herein covered, then the proceeds of such
insurance shall be paid over to the Landlord to the extent of the Landlord's
cost and expenses to make the repairs hereunder. Notwithstanding the above, if
Landlord cannot repair the damages to the property within a six-month period,
then the Tenant shall have the right to terminate this Lease and rent shall be
due and owing only up until the date of the fire or casualty.
27. REFUSE. Tenant shall at its own cost and expense maintain a refuse
container as designated on the approved site plan (Exhibit A). Such container
shall be adequate in size and structure and kept in good and secure condition.
Such container shall be located in an area designated on the approved site plan.
Tenant: shall not permit undue accumulations of trash, rubbish and other refuse.
Tenant shall cause any used cartons, containers, refuse, debris, litter and
garbage to be picked up from the parking areas, sidewalks and grounds, of the
Landlord, where same have been deposited, dropped or discarded by the Tenant or
it customers. Tenant herein also agrees to maintain a refuse container in front
of the leased premises and to be periodically emptied by Tenant, if Landlord so
requests. Tenant shall bag all garbage placed in container which has been
removed from their premises.
28. CLEANLINESS. Tenant agrees to maintain the lease premised, at its
own expense, in a clean, orderly and sanitary condition and free of insects,
rodents, vermin and other pests. Tenant also agrees not to cause or permit
objectionable odors to emanate or be dispelled from the leased premises.
<PAGE>
29. LANDLORD REPAIRS. The repairs required of the Landlord in Paragraph
5 herein shall be done at the Landlord's expense and shall not become part of or
added to the common area expenses. Furthermorel, if Landlord does not make a
repair required in this Lease within a reasonable period of time following
notice from the Tenant, then Tenant can make the repair and offset the cost of
the repair against any future rent due to the Landlord.
30. SITE REVISIONS. The Landlord herein reserves the right at any time
to make changes or revisions in the parking areas, to make alterations thereof,
additions thereto, and to construct additional buildings as permitted by
applicable land use laws and regulations, so long as such revisions have no
adverse impact on Tenant's use of the demised premises. This paragraph shall
apply only to those areas specifically designated and agreed to by Landlord and
Tenant on the site plan attached as Exhibit A.
31. DAMAGE. In case of the destruction of or damage of any kind
whatsoever to the said premises, caused by the carelessness, negligence or
improper conduct on the part of the Tenant or the Tenant's agents, employees, or
invitees, the Tenant shall repair the said damage or replace or restore any
destroyed parts of the premises, as speedily as possible, at the Tenant's own
cost and expense or from insurance proceeds.
32. INDEMNITY. Tenant agrees to indemnify the Landlord against and save
it harmless from and against any and all claims, actions, damages, liability and
expense in connection with loss of life, personal injury and/or damage to
property arising from or out of any occurrence in or about the leased premises,
and/or which result from the occupancy or use by Tenant of the leased premises
or any part thereof and/or which may be occasioned wholly or in part by any act
or omission of Tenant, its agents or employees, except if caused by Landlord or
Landlord's employees, agents or contractors. In case Landlord shall, without
fault on its part, be made a party to any litigation commenced by or against the
Tenant, then Tenant shall protect and hold Landlord harmless and shall pay all
costs, expenses and reasonable attorney's fees that may be incurred or paid by
Landlord in connection with such litigation.
33. LATE PENALTY. Any rent due under the terms of this Lease and not
received by the Landlord by the fifth day of the month in which it is due will
be subject to a late penalty of the maximum amount permitted by law, but not to
exceed five (5%) percent. The late penalty shall be imposed at the discretion of
the Landlord and if so imposed shall be payable by the Tenant on demand of the
Landlord. Landlord's failure to impose penalty shall not constitute any waiver
of this paragraph. The late penalty shall be deemed additional rent. Tenant
shall be entitled to one five (5) day notice per year of the imposition of the
first late penalty in that year.
34. REMEDIES UPON TENANT'S DEFAULT. If there should occur any default
on the part of the Tenant in the performance of any conditions and covenants
herein contained beyond any cure period, or should the Tenant be evicted by
summary proceedings or otherwise, the Landlord, in addition to any other
remedies herein contained or as may be permitted by law, may either by force or
otherwise, without being liable for prosecution therefor, or for damages,
re-enter the said premises and the same have and again possess and enjoy; and as
agent for the Tenant or otherwise, re-let the premises and receive the rents
therefore and apply the same, first to the payment of such expenses, reasonable
attorney fees and costs, as the Landlord may have been put to in re-entering and
repossessing, the same and in making such repairs and alterations as may be
necessary; and second to the payment of the rents due hereunder. The Tenant
shall remain liable for such rents as may be in arrears and also the rents as
may accrue subsequent to the reentry by the Landlord, to the extent of the
difference between the rents reserved hereunder and the rents, if any, received
by the Landlord during the remainder of the unexpired term hereof, after
deducting the aforementioned expenses, fees and costs; the same to be paid as
such deficiencies arise and are ascertained each month.
<PAGE>
Any non-monetary defaults shall require 30 days' notice to Tenant of
Tenant's right to cure which right shall continue so long as Tenant is
diligently pursuing the cure. Landlord shall also only be allowed possession of
the property in accordance with the law of New Jersey.
35. TERMINATION ON DEFAULT. Upon the occurrence of any of the
contingencies set forth in the preceding clause, or should the Tenant be
adjudicated a bankrupt, insolvent or placed in receivership, or should
proceedings be instituted by or against the Tenant for bankruptcy, insolvency,
receivership, agreement of composition or assignment for the benefit of
creditors, or if this lease or the estate of the Tenant hereunder shall pass to
another by virtue of any court proceedings, writ or execution, levy, or by
operation of law, the Landlord may, if the Landlord so elects, at any time
thereafter, terminate this lease and the term hereof, upon giving to the Tenant
or to any trustee, receiver, assignee or other person in charge of or acting as
custodian of the assets or property of the Tenant, five days notice in writing,
of the Landlord's intention so to do. Upon the giving of such notice, this lease
and the term hereof shall end on the date fixed in such notice as if the said
date was the date originally fixed in this lease for the expiration hereof; and
the Landlord shall have the right to remove all persons, goods, fixtures, and
chattels therefrom, by force or otherwise, without liability for damages. In the
event that the relationship of Landlord and Tenant may cease or terminate by
reason of the default by the Tenant or by the ejectment of the Tenant by
judicial proceedings, or after the abandonment of the premises by the Tenant, it
is hereby agreed that the Tenant shall remain liable for rent and costs as
stated in above paragraph 3.
36. NON-WAIVER. The various rights, remedies, options and elections of
the parties, expressed herein, are cumulative, and the failure of the either
party to enforce strict performance by the other of the conditions and covenants
of this lease or to exercise any election or option or to resort or have
recourse to any remedy herein conferred or the acceptance by the Landlord of any
installment of rent after any breach by the Tenant, in any one or more
instances, shall not be construed or deemed to be a waiver or a relinquishment
for the future by the Landlord of any such conditions and covenants, options,
elections or remedies, but the same shall continue in full force and effect.
Likewise, payment of rent by Tenant shall not act as a waiver of Tenant's right
to insist on performance of any of the terms hereof.
37. RIGHT TO EXHIBIT. The Tenant agrees to permit the Landlord and the
Landlord's agents to show the premises to persons wishing to rent or purchase
the same during regular business hours and while accompanied by a representative
of Tenant, and Tenant agrees that on and after 180 days next preceding the
expiration of the term hereof, the Landlord or the Landlord's agents shall have
the right to place notices on the front of said premises or any part thereof,
offering the premises for rent or for sale; and the Tenant hereby agrees to
permit the same to remain thereon without hindrance. Said right to exhibit shall
be upon reasonable notice to Tenant.
38. ABANDONMENT. Tenant shall throughout the term of this Lease conduct
and carry on the type of business for which the premises have been leased.
Tenant shall not allow the leased premises to become vacant or deserted for a
period of more than six months.
39. WAIVER OF JURY TRIAL. Landlord and Tenant do hereby waive trial by
jury in any action, proceeding or counterclaim brought by either of the parties
hereto against the other on any matter whatsoever arising out of or in
connection with this Lease, the relationship of Landlord and Tenant, Tenant's
use or occupancy of the premises, and/or claim, injury or damage.
<PAGE>
40. ENFORCEMENT. Tenant shall pay, upon demand, all of Landlord's
costs, charges and expenses, including the fees of counsel, agents and others
retained by Landlord, incurred in enforcing Tenant's obligation to pay the basic
and additional rents due under this lease. In actions to enforce any other
provision of this lease, the losing party, shall be responsible for the other
party's reasonable costs, charges, expenses and counsel, expert and other fees,
incurred in such actions.
41. LOSS OF PROPERTY. Landlord shall not be liable for any loss of
property by Tenant from any cause whatsoever, including but not limited to theft
or burglary from the leased premises, and Tenant covenants and agrees to make no
claim for any such loss at any time.
42. ENTIRE AGREEMENT. This lease contains the entire agreement between
the parties, no representative, agent or employee of the Landlord has been
authorized to make any representation or promises with reference to the within
letting or to vary, alter or modify the terms hereof. No additions, changes or
modifications, renewals or extensions hereof, shall be binding unless reduced to
writing and signed by the Landlord and the Tenant.
43. ADDITIONAL RENT. Any payments required to be made by Tenant,
whether to Landlord or otherwise, under this lease shall be deemed to be
additional rent, whether or not so designated in the lease. Landlord shall be
entitled to all remedies available to Landlord of non-payment of rent in the
event that, Tenant fails to pay any such payment.
44. BROKER. The parties warrant and represent that they have not dealt
or negotiated with any real estate broker or salesperson in connection with this
Lease agreement and that they shall indemnify and hold each other harmless from
any costs, claims or damages successfully asserted by any other person or firm
claiming to have negotiated or brought about this Lease.
45. PHOTOCOPIES. Photocopies bearing original signatures of the parties
shall be deemed to be original documents, and the parties hereto and lending
institutions may rely upon said photocopies bearing original signatures as such
originals.
46. EXECUTION. The submission of this Lease for examination does not
constitute a reservation of or option for the premises. This Lease agreement
shall become effective, only upon execution by both Landlord and Tenant.
47. HEADINGS. The headings contained in the body of this lease
agreement are for purposes of identification only, and are not a part of the
agreement between the parties.
48. PERSONAL LIABILITY. Notwithstanding anything to the contrary
provided in this lease, it is specifically understood and agreed, such agreement
being a primary consideration for the execution of this lease by Landlord, that
there shall be absolutely no personal liability on the part of Landlord, its
Partners, nor their successors with respect to any of the terms and conditions
of this lease. The Tenant shall look solely to the equity of the Landlord in the
Premises for the satisfaction of each and every remedy of Tenant in the event of
any breach by Landlord of any of the terms and conditions of this lease to be
performed by Landlord, such exculpation of liability to be absolute and without
any exceptions whatsoever.
49. LANDLORD INSTALLATION. Leased premises shall be provided the
following by Landlord: Landlord's work is described in detail in Exhibit B.
50. CONSTRUCTION. Landlord agrees that construction of the building,
designated by the Landlord to contain the leased premises, shall commence,
before the expiration of 120 days after the date the Landlord shall have
procured a building permit from the appropriate authority and Landlord further
agrees to thereafter diligently proceed with the construction of the premises.
<PAGE>
If for any reason construction has not commenced by the above date either party
here-to may terminate this lease by written notice to the other party, sent
certified mail return receipt requested, prior to the commencement of
construction. Upon such notice this lease shall become null and void without any
liability of either party to the other, with the exception of the refund of the
security deposit. Landlord shall construct the building in accordance with
architectural plans submitted to and approved by Tenant and attached hereto as
Exhibit C all in a good and workmanlike manner in compliance with all applicable
laws and regulations. Warranties shall be assigned to Tenant. Landlord agrees
that everything will be warranted for one year, the roof warranted for 20 years
and all mechanical, water penetration and site work warranted for 2 years.
Landlord further agrees to provide Tenant with a construction schedule and
communicate with Tenant on the status of construction on a regular basis.
51. TENANT WORK. Tenant is permitted to enter the leased premises prior
to commencement of the lease term in order to prepare the premises, provided
however, that such entry does not interfere, impede or disrupt the Landlord nor
violate any township ordinances. Landlord agrees to use its best efforts to
allow Tenant side-by-side access for completion of Tenant's work.
52. RENEWAL. Tenant shall have the option of renewing this lease for
two (2) additional five (5) year periods provided the Tenants give to the
Landlord Notice of Intent to Renew at least nine (9) months prior to the
expiration of the initial term or renewal period being renewed. Rent for the
renewal term shall be at least the existing rent increased to the fair market
value (FMV) as of the commencement date of each renewal. If the parties cannot
agree on the FMV increase or a mutually agreeable appraiser to determine the
same, then each party will hire an appraiser and the FMV shall be determined by
taking an average of the two appraisals provided the difference between the two
is 10% or less. If the difference between the two appraisals is greater than
10%, then the two hired appraisers shall pick a third appraiser, and the FMV
determined by the third appraiser shall be binding.
53. EXCLUSIVE USE. Landlord agrees that Landlord will not rent to
another banking facility within the shopping center anticipated to be
constructed on the same lot occupied by the building leased to Tenant.
54. ROOFTOP ANTENNA/MODIFICATIONS, Tenant, with prior review and
approval by the Landlord, which approval shall not be unreasonably withheld or
delayed, is permitted to install antenna/satellite dishes and related equipment
on the roof of the building or on the site provided, however, that Tenant shall
comply with any and all governmental restrictions and regulations and obtain all
necessary permits and, in addition, Tenant shall be responsible for any damage
or defect created in the roof by reason of the installation of such materials
and shall appropriately screen such equipment and materials from view.
55. OPTION TO PURCHASE. Tenant shall have the continuing option to
purchase the premises after the end of the fifth lease year at a price equal to
the then current fair market value (FMV) of the premises. If the parties cannot
agree on the fair market value or a mutually agreeable appraiser to determine
same, then each party will hire an appraiser and the FMV shall be determined by
taking an average of the two appraisals provided the difference between the two
is 10% or less. If the difference between the two appraisals is greater than
10%, then the two hired appraisers shall pick a third appraiser, and the FMV
determined by the third appraiser shall be binding. If, pursuant to Paragraph
#64, Tenant has paid outside of Lease payments for Lease Hold Improvements, then
and in that event, if Tenant exercises this option to purchase during the term
of the Lease, Tenant shall receive a credit for a portion of the monies so
paid, calculated by dividing the total payment made for Lease Hold Improvements
by 14 years and crediting Tenant with the sum equal to that figure times the
number of years remaining on the Lease. In the event Landlord has not subdivided
out the Tenant's portion of the property consistent with an agreed upon division
<PAGE>
by the end of the fifth lease year, the Tenant shall have the further option to
proceed with the application for said subdivision at Tenant's expense and, if
approval is received, exercise this option. Alternatively, if subdivision is
impractical, the parties will explore alternatives such as land lease or
condominium association and Landlord will pursue one of those courses in order
to permit Tenant to exercise this option.
56. RIGHT OF FIRST REFUSAL. Should the Landlord, during the original or
any renewal term of the Lease, decide to sell the building and property to any
other person, corporation or company, the Landlord shall first offer the
building and/or property for sale to Tenant at the same price as the Landlord's
best offer. Tenant shall have thirty (30) days from the date of receipt of
written notice of the other offer to match that offer in order to exercise Right
of First Refusal to purchase the premises hereunder. Tenant's offer must match
not only terms of price but, also, all terms including payment method and any
and all contingencies.
57. CHOICE OF LAW. This Lease Agreement shall be governed by the law of
the State of New Jersey and the parties agree to make Mercer County the venue of
any legal action resulting from this Lease.
58. SUCCESSORS AND ASSIGNS. This Lease Agreement shall be binding on
all successors and assigns to either party's interests herein.
59. MEMORANDUM OF LEASE. A memorandum of this Lease Agreement shall be
filed simultaneously upon execution with the clerk of Mercer County, New Jersey.
60. HOLDING OVER. In the event that the Tenant shall remain in the
demised premises after the expiration of the term of this Lease without having
executed a new written Lease with the Landlord, such holding over shall not
constitute a renewal or extension of this Lease. The Landlord may, at its
option, elect to treat the Tenant as one who has not removed at the end of its
term, and thereupon be entitled to all the remedies against the Tenant provided
by law in that situation, or the Landlord may elect, at its option, to construe
such holding over as a tenancy from month to month, subject to all the terms and
conditions of this Lease, except as to duration thereof, and rent shall be due
at 125% of the last month's rent covered under the base and/or option term of
the Lease.
61. WAIVER OF SUBROGATION. Landlord and Tenant hereby releases the
other from any and all liability or responsibility (to the other or anyone
claiming through or under them by the way of subrogation or otherwise) under
fire and extended coverage or supplementary contract casualties, if such fire or
other casualty shall have been caused by the fault or negligence of the other
party, or anyone for whom such party may be responsible; provided, however,
that, except as otherwise provided in this Lease, this release shall be
applicable and in force and effect only with respect to loss or damage occurring
during such time as the releasor's policies shall contain a clause or
endorsement to the effect that any such release shall not adversely affect or
impair said policies or prejudice the right of the releasor to recover
thereunder. Each of Landlord and Tenant agrees that its policies will include
such a clause or endorsement so long as the same shall be obtainable without
extra cost, or if such cost shall be charged therefore, so long as the other
party pays such extra cost, if extra cost shall be chargeable therefor, each
party shall notify the other party therefore and of the amount of the extra
cost, and the other party shall be obligated to pay the extra cost unless,
within ten (10) days after such notice, it elects not to be obligated so to do
by written notice to the original party. If such clause or endorsement is not
available, or if either party should not desire the coverage at extra cost to
it, then the provisions of this Article shall not apply to the policy or
policies in question.
62. BANKING APPROVAL. This Lease Agreement is contingent upon the
Tenant obtaining all necessary approvals to operate a banking facility at this
location from the Office of the Comptroller of the currency within ninety (90)
days from the execution of this Lease Agreement. Tenant agrees to apply
<PAGE>
for this approval immediately following execution of this Lease Agreement.
Tenant agrees that if Tenant cancels this Lease Agreement because the relocation
is not approved by the Comptroller of the currency as required hereunder, then
and in that event, Tenant agrees to reimburse the Landlord for any and all
expenses incurred by the Landlord in preparing the premises including
engineering, site work and any other work done after the execution of the Lease
and until the date of cancellation.
63. ARBITRATION.
(a) All disputes which may arise between the parties hereto
out of or in relation to or in connection with this Agreement, shall be settled
by arbitration in accordance with the provisions set forth in the New Jersey
Arbitration Act, N.J.S.A. 2A:24-1 et seq. The decision of such arbitration shall
be binding on both parties, and a judgment on an award rendered shall be entered
pursuant to paragraph (b).
(b) Exclusive jurisdiction over entry of judgment on any
arbitration award rendered pursuant to paragraph (a) or over any dispute, action
or suit arising therefrom shall be in any court of appropriate subject matter
jurisdiction located in New Jersey, and the parties by this Agreement expressly
subject themselves to the personal jurisdiction of said court for the entry of
any such judgment and for the resolution of any dispute, action or suit arising
in connection with the entry of such judgment.
64. LEASEHOLD IMPROVEMENTS. Tenant agrees to pay Landlord a maximum of
$35.00 per foot for any and all Tenant improvements based upon the existing
estimating plans and provided any changes thereto are reasonable in scope. (A
copy of said estimating plans are attached hereto as Exhibit "D".) Landlord
further agrees to competitively bid-out all Tenant improvements on the leased
premises and to allow Tenant to accept or reject the bids for the leasehold
improvements. In the event that Tenant does not accept any of the bids submitted
for the leasehold improvements, then Tenant reserves the right for the Landlord
to deliver to Tenant a shell of the building and then Tenant will have the right
and responsibility to finish all leasehold improvements. The shell of the
building is defined and set forth in the attached plans submitted as Exhibit
"D". Tenant further agrees to pay a mark-up of 3% to the Landlord for
supervision of the leasehold improvements if the Tenant accepts the bids
submitted to Landlord and Landlord is responsible for completing the leasehold
improvements. Payment to the Landlord hereunder shall be made in accordance with
a separate contract between Landlord and Tenant regarding said leasehold
improvements.
The parties hereto have executed this Lease Agreement on the day and
year first above written.
As to Landlord: As to Tenant:
CRESTWOOD CONSTRUCTION, LLC YARDVILLE NATIONAL BANK
By: /s/ John J. Klein, III By: /s/ Patrick M. Ryan
--------------------------- ------------------------
JOHN J. KLEIN, III PATRICK M. RYAN
President/CEO
Dated: 5-25--98 Dated: 4/2/98
-------------------------- ---------------------
<PAGE>
ADDENDUM TO LEASE AGREEMENT
---------------------------
LANDLORD: CRESTWOOD CONSTRUCTION, LLC
- ---------
TENANT: YARDVILLE NATIONAL BANK
- -------
PROPERTY: Block 2575, Lot 184, Hamilton Township, NJ
- ---------
================================================================================
The contents of this Addendum are an Integral part of the Lease Agreement dated
May 8, 1998 and wherever the contents of the Lease Agreement and this Addendum
differ, the Addendum shall govern.
1. In addition to the common areas delineated in yellow on Exhibit B,
Tenant shall be responsible for its proportionate share of the maintenance
expenses for the detention basin. Tenant's proportionate share shall be based
on total acreage of land allocated to each user of the detention basin. The
Tenant shall be entitled to an easement for use of the detention basin
throughout the term of the loan.
2. Omitted from Exhibit B is a proposed 21,000 square foot retail
center to be on the remainder of the site outside of the dotted red line.
Landlord shall supply Tenant with a copy of the revised plans including the
proposed shopping center once those plans are completed.
3. Paragraph 30 of the Lease Agreement is modified to change the
reference to Exhibit A to Exhibit B. All other terms and conditions of Paragraph
30 remain the same.
4. The date of Exhibit A referred to in Paragraph 1 of the Lease
Agreement is changed to September 15, 1997 as revised on November 5, 1997.
5. Paragraph 49 of the Lease Agreement is modified to change the
reference to Exhibit B to Exhibit C, C1, D, D1, D2 and D3.
6. Paragraph 50 of the Lease Agreement is modified to change the
reference to Exhibit C to Exhibit C, C1, D, D1, D2 and D3.
7. Paragraph 54 of the Lease Agreement is modified to change the
reference to Exhibit D (in the 5th line of said paragraph) to Exhibit C. The
reference to Exhibit D (in the 15th line of said paragraph) shall be changed to
Exhibit D, D1, D2 and D3.
8. The Tenant shall be entitled to a credit of $25,000 for the
architectural staircase which was originally proposed as part of the base
building and since eliminated by the Tenant.
9. Any discrepancies in the plans and specifications prepared by The
Aztec Corporation and Steven S. Cohen, Architect, PC, shall be controlled by
what is in The Aztec Corporation plans and specifications, with the exception
that all dimensions in said plans and specifications shall be governed by the
Steven S. Cohen, Architect, PC, plans and specifications.
10. Paragraph 2 of the Lease Agreement is modified to change the number
60 to 120 in the third line if the Tenant elects to have the Landlord deliver
only the shell of the building in accordance with Paragraph 64 of the Lease
Agreement.
<PAGE>
11. The word "replacing" shall be deleted from the 12th line of the
second paragraph of Paragraph 12 of the Lease Agreement.
12. Paragraph 64 of the Lease is modified to state that if the Tenant
elects to have the Landlord provide only a shell of the building, then Tenant
has the further option of removing certain items from the shell and be
reimbursed on a dollar-for-dollar credit for the items removed.
13. Tenant reserves the right to make any and all changes to the plans
and specifications attached as Exhibits to this Lease without charge to the
Tenant provided said changes are in materials of equal value, the changes do not
impede the construction timetable and there is no direct increase in cost to the
Landlord.
14. The Exhibits attached to the Lease Agreement shall be as follows:
Exhibit Description
------- -----------
A Preliminary and Final Site Plan prepared by
Crucili-Dolci, Inc. dated 9/30/97 as revised
on 11/5/97 (1 sheet).
B Preliminary and Final Site Plan prepared by
Crucili-Dolci, Inc. dated 9/30/97 as revised
on 11/5/97 with a dotted red line delineating
the proposed subdivision line and yellow
highlighted area delineating the common areas
(1 sheet).
C Estimating Package consisting of First Floor
Plan, Second Floor Plan and Third Floor Plan
prepared by The Aztec Corporation and dated
9/22/97 as revised on 12/5/97 (3 sheets).
C1 Interior Construction Estimating Package
prepared by The Aztec Corporation dated
11/19/97 and revised 12/8/97 (37 pages).
D Base Building Exhibit consisting of First
Floor Plan, Second Floor Plan and Third Floor
Plan prepared by The Aztec Corporation dated
9/22/97 as revised on 12/15/97 and 3/18/98 (3
sheets) along with Interior Construction
Estimating Package prepared by The Aztec
Corporation dated 11/19/97 as revised on
12/8/97 and edited on 3/17/98 (40 pages).
D1 Set of Drawings prepared by Steven S. Cohen,
Architect, PC, dated 2/16/98, consisting of
12 sheets labeled A.0 to A.11.
D2 Letter from John J. Klein III to Randy J.
Csik dated 4/2/98 with paragraphs 2 and 3
deleted and initialed by John J. Klein III
(1 page).
D3 Specification book prepared by Steven S.
Cohen, Architect, PC, dated November 19,
1997, revised December 8, 1997 and edited for
base building on February 17, 1998.
<PAGE>
AGREED & ACCEPTED:
CRESTWOOD CONSTRUCTION, LLC
LANDLORD
By: /s/ John Klein
----------------------------------------
John Klein, Manager Member
YARDVILLE NATIONAL BANK
TENANT
By: /s/ Patrick Ryan
----------------------------------------
Patrick Ryan, President/CEO
<PAGE>
ADDENDUM
TO
LEASE AGREEMENT
Landlord: CARDUNERS PROPERTY PARTNERSHIP
c/o Carduner's Liquor Store
Carduner Shopping Center
Rts. 130 & 571
East Windsor, NJ, 08520
Tenant: YARDVILLE NATIONAL BANK
3111 Quakerbridge Road
Mercerville, NJ, 08619
Property: 18 Princeton-Hightstown Road
Hightstown, NJ, 08520
===============================================================================
The contents of this Addendum shall be an integral part of the Lease Agreement
between Landlord and the Tenant dated March , 1998 and wherever the contents of
this Addendum and the Lease Agreement differ, this Addendum shall govern.
1. The Lease Term on the Summary of Basic Lease Provisions shall be
modified to state six years, 8 months.
2. Under the "Minimum Rent To Be Paid During Lease Term" in the Summary
of Basic Lease Provisions, the first line should be modified to change "8 mos"
within the ( ) to "21 mos".
3. The Security Deposit in the Summary of Basic Lease Provisions should
be changed from $5,000.00 to 0.
4. The Rent In The Renewal Term should be modified to adjust the column
headings of "Annual" and "Monthly" to coincide with the appropriate numbers and
a second renewal term of an additional five years should be inserted to allow
for the tenant's second 5-year option to renew at increases in annual rent equal
to 3% each year.
1
<PAGE>
5. Paragraph 1.1 is hereby modified to state the following: That in
consideration of the rents and covenants herein set forth, Landlord hereby
leases to Tenant, and Tenant hereby rents from Landlord, a portion of the real
estate designated on the Tax Map of East Windsor Township as Lot 15, Block 6,
consisting of the existing building known as 18 Princeton-Hightstown Road, East
Windsor, NJ, together with the right to use the driveway to Route 571 and
parking area in total being approximately 37% of the square footage of land
identified as Lot 15, Block 6, East Windsor Township, and set forth on Exhibit A
attached hereto. It is agreed, however, that Landlord and any future Tenants of
the Landlord existing on Lot 15, Block 6, of the current East Windsor Tax Map
shall have the right in common with the Tenant to use the existing driveway of
the Demised Premises provided that Tenant maintains, during the term of this
lease, and any extensions thereof, the same number of parking spaces which it is
leasing from Landlord hereunder and Tenant's use of the existing parking area
remains the same.
6. Paragraph 3.1 of the Lease is modified to add the following:
"Notwithstanding the above, Landlord shall not unreasonably withhold its consent
to any alterations or improvements and any non-structural improvements to the
interior of the premises may be made by Tenant without the consent of the
Landlord."
7. Paragraph 4.6 of the Lease is modified to add before the word, "day",
in the fourth line of this paragraph, the word: "tenth".
8. Paragraph 5.1 of the Lease should be modified to delete the word,
"continuously" in the first line of that paragraph.
9. Paragraph 6.2 of the Lease should be deleted in its entirety and
substituted with the following:
The Operation and Maintenance Costs shall include
maintaining and repairing the common areas of the
premises of which the leased premises form a part.
Such expenses shall include lighting, cleaning,
snow removal, policing, landscaping, repairing and
patching of the common roadways, and Landlord's
insurance for covering fire and such other risks
as are from time to time involved in standard
extended coverage endorsements and special broad
2
<PAGE>
form coverages, insuring not less than 90% of the
full insurable value of the Demised Premises and
improvements installed by Landlord or others within
same, in addition to rent loss insurance in amounts
acceptable to Landlord.
10. Paragraph 6.5 is hereby modified to add the following:
Notwithstanding the above, Landlord hereby agrees that Tenant is permitted to
pay the fire and liability insurance coverage directly to the appropriate
insurance company. Tenant shall provide Landlord proof of said payment within
ten days of said payment and Tenant shall be fully responsible for any interest
or penalties resulting from late payments of the same. Tenant shall be
responsible for paying one hundred percent (100%) of the tax on the improvements
for Lot 15, Block 6, East Windsor Township, and thirty-seven percent (37%) of
the tax assessment for the land. The Landlord shall be responsible for the
remaining sixty-three percent (63%) of the tax on the land. Tenant's portion of
the tax bill will be paid by Tenant to Landlord within ten (10) days of Tenant's
receipt of the tax bill from Landlord.
11. Paragraph 6.7 to the Lease Agreement should be added stating the
following: "Tenant reserves the right to audit once a year any common area
operation and maintenance costs and said costs should be reasonable and
customary."
12. Paragraph 7.1 of the Lease Agreement should be deleted since no rules
and regulations presently exist.
13. Article 9 of the Lease Agreement should be modified to state Tenant's
and Landlord's Maintenance and Repairs. Paragraph 9.1 should be deleted and
replaced with the following:
Tenant shall take good care of the premises and
shall at the Tenant's own cost and expense, make
all repairs, including painting and decorating,
and shall maintain the premises in good condition
and state of repair. The Tenant shall neither
encumber nor obstruct the sidewalks, parking areas
and entrances, but shall maintain the same in
clean condition, free from debris, refuse, snow
and ice. Tenant shall be responsible for the first
$2,500.00 per year of the following:
3
<PAGE>
a. Maintenance of the roof and exterior walls in
good condition;
b. All structural repairs; and
c. All necessary replacements of the plumbing,
cooling, heating, electrical and sewer systems.
In the event the repairs listed in (a), (b) or
(c) above exceed $2,500.00 in any given year,
during the initial lease term or the first
renewal term, then Landlord shall pay the
difference in the cost of the repair above
$2,500.00. Tenant's obligation for the repairs
in (a), (b) or (c) above shall also be capped at
$7,500.00 during the initial lease term and
$7,500.00 during the first renewal term. If the
cumulative cost of the repairs listed in (a),
(b) or (c) above exceed $7,500.00 in the initial
lease term, then Landlord shall pay the balance
of said costs above $7,500.00. The same shall
apply for the costs of said repairs in the first
renewal term. If Tenant decides to exercise its
option to renew the lease for the second renewal
term, then Tenant shall be obligated for all
costs and expenses of the repairs referred to in
(a), (b) or (c) above during the remaining term
of the lease.
14. Paragraph 10.1 is hereby modified to add the following:
"Notwithstanding the above, if the utility services are interrupted due to no
fault of the Tenant but due to the fault of the Landlord for a period of more
than ten days, then Tenant will be entitled to an abatement of rent until such
time as the utilities are returned to service. Tenant agrees to use its best
efforts to have the utilities returned to service as soon as possible. In the
event that the utility or utilities are not restored for a period of six months,
then Tenant shall have the right to cancel this Lease Agreement.
15. Paragraph 12.1(e) is hereby deleted. However, Tenant does agree to be
obligated to maintain, repair and replace all plate and other glass in the
leased premises. Also, the last paragraph of 12.1 is hereby deleted.
16. Paragraph 13.1 is hereby modified to add the following:
"Notwithstanding the above, Landlord shall not be exculpated of liability for
claims, demands or injuries resulting from the negligent act or failure to act
or perform any duty or obligation required of Landlord, its officers, employees,
agents and contractors or otherwise.
4
<PAGE>
17. Paragraph 14.1 is hereby deleted and replaced with the following:
In the event of the total destruction of the
Demised Premises by fire or other casualty
during the lease term hereof or in the event of
such partial destruction thereof as to render
the Demised Premises wholly untenable or unfit
for occupancy, then in either event, unless
such damage can be repaired within one hundred
eighty (180) days after the occurrence, this
lease and the term hereby created, shall at
either party's option, to be exercised within
fifteen (15) days after notice from one to the
other, as hereinafter provided, cease from the
date of such damage or such destruction and
Tenant shall upon written notice from Landlord
immediately surrender the Demised Premises to
Landlord and Tenant shall pay rent within said
term only to the time of such damage or
destruction. If, however, the damage as
aforesaid can be repaired within one hundred
eighty (180) days from the occurrence thereof,
Landlord shall repair the Demised Premises with
all reasonable speed, this lease shall continue
in full force and effect and there shall be an
abatement of rent. Landlord shall notify Tenant
within thirty (30) days from the occurrence of
the destruction as to whether or not the damage
can be repaired within one hundred eighty days
after the occurrence thereof. Tenant's rights
hereunder shall not apply if the fire or other
casualty is caused by the willful act of the
Tenant.
18. Paragraph 14.2 of the Lease is hereby deleted and substituted with
the following:
In the event of the partial destruction of the
Demised Premises by fire or other casualty
during the lease term hereof, which such
partial destruction does not render the Demised
Premises wholly untenable or unfit for
occupancy for more than one hundred eighty
(180) days, Landlord shall repair the damage
with all reasonable speed, this lease shall
continue in full force and effect and there
shall be an abatement of rent. If such damage
cannot be repaired within one hundred eighty
(180) days after the occurrence, this lease and
the term hereby created shall at either party's
5
<PAGE>
option, to be exercised within fifteen (15) days
after notice from the other party as hereinafter
provided shall cease from the date of such damage
or destruction as provided in Section 14.1.
Landlord shall notify Tenant within thirty (30)
days from the occurrence of the destruction as to
whether or not the damage can be repaired within
one hundred eighty (180) days after either
occurrence thereof. Tenant's rights hereunder
shall not apply if the fire or other casualty is
caused by the willful act of the Tenant.
19. Paragraph 15.2 of the lease shall be deleted and substituted with the
following:
In the event that only part of the leased
premises is taken, then Tenant shall have the
option of terminating this lease if said taking
materially interferes with Tenant's operation of
its business. If the Tenant does not terminate
this lease, there shall be a proportionate
reduction of the basic rent and additional rent
to be paid under this lease from and after the
date such possession is taken for public use
provided said taking applies to a portion of
Tenant's building or parking spaces. Tenant
shall have the right to participate, directly or
indirectly, in any award for such public taking
to the extent that it may have suffered
compensable damage as a Tenant on account of
such public taking, and provided Tenant's claim
does not decrease Landlord's award.
20. Paragraph 17.1 is hereby modified to state that said entries onto the
Demised Premises shall be made only upon reasonable notice to Tenant and during
reasonable business hours except in an emergency.
21. Paragraph 18.5 should be modified to state that in the event of a
holdover, the monthly minimum rent shall be 150% of the then existing minimum
monthly rent and additional rent.
22. Paragraph 19.1 is hereby modified to state that in the event of a
holdover, Tenant shall pay 150% of the then minimum monthly rent and additional
rent.
6
<PAGE>
23. Paragraph 20.1(c) is modified to change the number "10" to "30" in
the second to last sentence.
24. Paragraph 20.1(e) is modified to add after the words, "Demised
Premises", the following language: "for a period of 30 days or more".
25. Paragraph 20.1(f) is hereby modified to add after "course of
business", the following: ", except for the sale of the stock of the Tenant".
26. Paragraph 20.1(g) is hereby deleted.
27. At the end of Paragraph 20.1, the following paragraph should be
added:
Notwithstanding the above, Landlord shall also
only be allowed possession of the property in
accordance with NJ law. Any non-monetary defaults
shall require 30 days' written notice to Tenant of
Tenant's right to cure which right to cure shall
be extended so long as Tenant is diligently
pursuing a cure in good faith.
28. Paragraph 23.1 is hereby deleted and substituted with the following:
Whenever, under this lease, provision is made for
Tenant securing the written consent or approval by
Landlord, such consent or approval shall not be
unreasonably withheld.
29. Paragraph 24.1 is hereby modified to add the following language:
"Notwithstanding the above, Tenant consents to the above provided mortgagee
signs a Subordination, Non-Disturbance and Attornment Agreement in a form
satisfactory to Tenant.
30. Paragraph 24.2 is hereby modified to delete the last sentence of said
paragraph.
31. Paragraph 29.1 is hereby modified to add after the words, "ten
percent (10%) per annum from", the following: "the tenth day following".
7
<PAGE>
32. Paragraph 32.1 should be modified to add the following:
"Notwithstanding the above, Landlord shall be responsible for any interruptions
in utility services as set forth in the modification to Paragraph 10.1 of the
lease."
33. Paragraph 33.1 of the lease should be deleted.
34. Paragraph 38.1 should be modified to change "one (1) year" in the
fifth line to "six (6) months".
35. The following additional paragraphs should be added to the lease:
EXCLUSIVE USE. Landlord agrees that Landlord will not rent to any other
banking facility within a one mile radius of the leased premises.
ARBITRATION. (a) All disputes which may arise between the parties hereto
out of or in relation to or in connection with this agreement, shall be settled
by arbitration in accordance with the provisions set forth in the NJ Arbitration
Act, N.J.S.A. 2A:24-1 et seq. The decision of such arbitration shall be binding
upon both parties and a judgment on an award rendered shall be entered pursuant
to Paragraph (b).
(b) Exclusive jurisdiction over entry of judgment on any arbitration
award rendered pursuant to Paragraph (a) or over any dispute,, action or suit
arising therefrom shall be in any Court of appropriate subject matter
jurisdiction located in NJ, County of Mercer, and the parties by this agreement
expressly subject themselves to the personal jurisdiction of said Court for the
entry of any such judgment and for the resolution of any dispute, action or suit
arising in connection with the entry of such judgment.
WAIVER OF SUBROGATION. Landlord and Tenant hereby release the other from
any and all liability or responsibility (to the other or anyone claiming through
or under them by the way of subrogation or otherwise) under fire and extended
coverage or supplementary contract casualties, if such fire or other
8
<PAGE>
casualties shall have been caused by the fault or negligence of the other party,
or anyone for whom such party may be responsible; provided, however, that,
except as otherwise provided in this lease, this release shall be applicable and
in force and effect only with respect to loss or damage occurring during such
time as the releasor's policies shall contain a clause or endorsement to the
effect that any such release shall not adversely affect or impair such policies
or prejudice the right of the releasor to recover thereunder. Each of Landlord
and Tenant agrees that its policies will include such a clause or endorsement so
long as the same shall be obtainable without extra cost or if costs shall be
charged therefore so long as the other party pays such extra cost. If extra
costs shall be chargeable therefore, each party shall notify the other party
therefore and of the amount of the extra cost and the other party shall be
obligated to pay the extra cost unless, within ten days after such notice, it
elects not to be obligated so to do by written notice to the original party. If
such clause or endorsement is not available, or if either party should not
desire the coverage at extra cost to it, then the provisions of this paragraph
shall not apply to the policy or policies in question.
ROOFTOP ANTENNA/MODIFICATIONS. Tenant, with prior review and approval by
the Landlord, which approval shall not be unreasonably withheld, is permitted to
install antenna/satellite dishes and related equipment on the roof of the
building or on the site provided, however, that Tenant shall comply with any and
all governmental restrictions and regulations and obtain all necessary permits
and, in addition, Tenant shall be responsible for any damage or defect created
in the roof by reason of the installation, removal or existence of such
materials and shall appropriately screen such equipment and materials from view.
LANDLORD:
CARDUNERS PROPERTY PARTNERSHIP
By: /s/ Robert Carduner
-----------------------------------
Robert Carduner, General Partner
TENANT:
YARDVILLE NATIONAL BANK
By: /s/ Patrick Ryan
------------------------------------
Patrick Ryan, President, CEO
9
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