<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, 1999
[ ] 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, 1999
Common Stock, no par value 6,745,194
----------------------------- ----------------------------
Class Number of shares outstanding
<PAGE>
INDEX
YARDVILLE NATIONAL BANCORP AND SUBSIDIARIES
PART 1 FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements
Consolidated Statements of Condition
June 30, 1999 and December 31, 1998
Consolidated Statements of Income
Three months ended June 30, 1999 and 1998
Consolidated Statements of Income
Six months ended June 30, 1999 and 1998
Consolidated Statements of Cash Flows
Six months ended June 30, 1999 and 1998
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures
About Market Risk
PART 2 OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
Exhibit 27.1 Financial Data Schedule
<PAGE>
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) 1999 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Cash and due from banks $ 16,225 $ 16,246
Federal funds sold 5,865 280
- ---------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents 22,090 16,526
- ---------------------------------------------------------------------------------------------------------
Interest bearing deposits with banks 830 733
Securities available for sale 273,114 185,577
Investment securities (market value of $96,784 in 1999 and
$36,203 in 1998) 101,018 36,111
Loans 553,253 491,649
Less: Allowance for loan losses (7,622) (6,768)
- ---------------------------------------------------------------------------------------------------------
Loans, net 545,631 484,881
Bank premises and equipment, net 7,010 6,251
Other real estate 4,676 4,957
Other assets 27,157 22,630
- ---------------------------------------------------------------------------------------------------------
Total Assets $ 981,526 $ 757,666
- ---------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity:
Deposits
Non-interest bearing $ 80,052 $ 75,426
Interest bearing 546,859 444,217
- ---------------------------------------------------------------------------------------------------------
Total Deposits 626,911 519,643
- ---------------------------------------------------------------------------------------------------------
Borrowed funds
Securities sold under agreements to repurchase 154,508 87,120
Federal Home Loan Bank advances 118,305 89,316
Obligation to Employee Stock Ownership Plan (ESOP) 1,800 --
Other 1,264 1,452
- ---------------------------------------------------------------------------------------------------------
Total Borrowed Funds 275,877 177,888
Company - obligated Mandatorily Redeemable Trust Preferred
Securities of Subsidiary Trust holding solely junior
Subordinated Debentures of the Company 11,500 11,500
Other liabilities 9,456 7,879
- ---------------------------------------------------------------------------------------------------------
Total Liabilities $ 923,744 $ 716,910
- ---------------------------------------------------------------------------------------------------------
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 6,917,194 in 1999
and 5,138,474 shares in 1998 40,050 20,364
Surplus 2,205 2,205
Undivided profits 24,202 21,479
Treasury stock, at cost, 172,000 shares in 1999 and
170,300 shares in 1998 (3,030) (3,008)
Unallocated ESOP shares (1,800) --
Accumulated other comprehensive income (3,845) (284)
- ---------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 57,782 40,756
- ---------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 981,526 $ 757,666
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements.
<PAGE>
Yardville National Bancorp and Subsidiaries
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
- ------------------------------------------------------------------------------------------------
(in thousands, except for share data) 1999 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $11,364 $ 9,394
Interest on deposits with banks 9 28
Interest on securities available for sale 3,618 2,614
Interest on investment securities:
Taxable 1,018 181
Exempt from Federal income tax 327 135
Interest on Federal funds sold 234 69
- ------------------------------------------------------------------------------------------------
Total Interest Income 16,570 12,421
- ------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on savings account deposits 1,187 1,247
Interest on certificates of deposit of $100,000 or more 623 339
Interest on other time deposits 4,238 2,931
Interest on borrowed funds 3,156 2,060
Interest on trust preferred securities 266 266
- ------------------------------------------------------------------------------------------------
Total Interest Expense 9,470 6,843
- ------------------------------------------------------------------------------------------------
Net Interest Income 7,100 5,578
Less provision for loan losses 750 500
- ------------------------------------------------------------------------------------------------
Net Interest Income After Provision for Loan Losses 6,350 5,078
- ------------------------------------------------------------------------------------------------
NON-INTEREST INCOME:
Service charges on deposit accounts 317 314
Gains on sales of mortgages, net 15 8
Securities gains, net 3 37
Other non-interest income 420 373
- ------------------------------------------------------------------------------------------------
Total Non-Interest Income 755 732
- ------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSE:
Salaries and employee benefits 2,437 1,997
Occupancy expense, net 321 262
Equipment expense 367 322
Other non-interest expense 1,203 1,092
- ------------------------------------------------------------------------------------------------
Total Non-Interest Expense 4,328 3,673
- ------------------------------------------------------------------------------------------------
Income before income tax expense 2,777 2,137
Income tax expense 787 755
- ------------------------------------------------------------------------------------------------
Net Income $ 1,990 $ 1,382
- ------------------------------------------------------------------------------------------------
EARNINGS PER SHARE:
Basic $ 0.34 $ 0.27
Diluted $ 0.34 $ 0.27
- ------------------------------------------------------------------------------------------------
Weighted average shares outstanding:
Basic 5,788 5,059
Diluted 5,815 5,083
- ------------------------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements.
5
<PAGE>
Yardville National Bancorp and Subsidiaries
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
- ------------------------------------------------------------------------------------------------
(in thousands, except for share data) 1999 1998
- ------------------------------------------------------------------------------------------------
INTEREST INCOME:
<S> <C> <C>
Interest and fees on loans $22,075 $18,142
Interest on deposits with banks 28 83
Interest on securities available for sale 6,471 5,054
Interest on investment securities:
Taxable 1,615 458
Exempt from Federal income tax 585 237
Interest on Federal funds sold 394 138
- ------------------------------------------------------------------------------------------------
Total Interest Income 31,168 24,112
- ------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on savings account deposits 2,282 2,502
Interest on certificates of deposit of $100,000 or more 1,114 640
Interest on other time deposits 8,039 5,604
Interest on borrowed funds 5,684 3,977
Interest on trust preferred securities 532 532
- ------------------------------------------------------------------------------------------------
Total Interest Expense 17,651 13,255
- ------------------------------------------------------------------------------------------------
Net Interest Income 13,517 10,857
Less provision for loan losses 1,400 900
- ------------------------------------------------------------------------------------------------
Net Interest Income After Provision for Loan Losses 12,117 9,957
- ------------------------------------------------------------------------------------------------
NON-INTEREST INCOME:
Service charges on deposit accounts 625 620
Gains on sales of mortgages, net 30 25
Securities gains, net 18 46
Other non-interest income 810 729
- ------------------------------------------------------------------------------------------------
Total Non-Interest Income 1,483 1,420
- ------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSE:
Salaries and employee benefits 4,728 3,940
Occupancy expense, net 634 495
Equipment expense 729 618
Other non-interest expense 2,582 2,124
- ------------------------------------------------------------------------------------------------
Total Non-Interest Expense 8,673 7,177
- ------------------------------------------------------------------------------------------------
Income before income tax expense 4,927 4,200
Income tax expense 1,383 1,484
- ------------------------------------------------------------------------------------------------
Net Income $ 3,544 $ 2,716
- ------------------------------------------------------------------------------------------------
EARNINGS PER SHARE:
Basic $ 0.66 $ 0.54
Diluted $ 0.65 $ 0.53
- ------------------------------------------------------------------------------------------------
Weighted average shares outstanding:
Basic 5,398 5,067
Diluted 5,425 5,091
- ------------------------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements.
5
<PAGE>
Yardville National Bancorp and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(in thousands) 1999 1998
- ------------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net Income $ 3,544 $ 2,716
Adjustments:
Provision for loan losses 1,400 900
Depreciation 554 448
Amortization and accretion 345 411
Gains on sales of securities available for sale (18) (46)
Loss on sales of other real estate 1 1
Write down of other real estate 278 278
Increase in other assets (2,610) (4,502)
Increase in other liabilities 1,577 183
- ------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 5,071 389
- ------------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Net (increase) decrease in interest bearing deposits with banks (97) 75
Purchase of securities available for sale (122,685) (79,838)
Maturities, calls, and paydowns of securities available for sale 20,374 35,731
Proceeds from sales of securities available for sale 9,019 26,562
Proceeds from maturities and paydowns of investment
securities 1,786 3,821
Purchase of investment securities (66,743) (4,238)
Net increase in loans (62,850) (54,257)
Expenditures for bank premises and equipment (1,313) (1,207)
Proceeds from sale of other real estate 702 84
- ------------------------------------------------------------------------------------------------------------------
Net Cash Used by Investing Activities (221,807) (73,267)
- ------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Net increase in non-interest bearing demand,
money market, and savings deposits 14,650 12,627
Net increase in certificates of deposit 92,618 40,220
Net increase in borrowed funds 97,989 31,591
Proceeds from issuance of common stock 19,686 323
Increase in unallocated ESOP shares (1,800) --
Treasury shares acquired (22) (2,965)
Dividends paid (821) (704)
- ------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 222,300 81,092
- ------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 5,564 8,214
Cash and cash equivalents as of beginning of period 16,526 20,423
- ------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents as of End of Period $ 22,090 $ 28,637
- ------------------------------------------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information:
Cash paid during period for:
Interest expense 16,919 12,279
Income taxes 982 2,035
- ------------------------------------------------------------------------------------------------------------------
Supplemental Schedule of Non-cash Investing and Financing
Activities:
Transfers to other real estate from loans, net of charge offs 700 407
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements.
<PAGE>
Yardville National Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
Three and Six Months Ended June 30, 1999
(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, 1999 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, 1999.
Consolidation
The consolidated financial statements include the accounts of Yardville National
Bancorp (the "Holding Company") and its subsidiaries, Yardville Capital Trust
(the "Trust") and The Yardville National Bank (the "Bank"), and the Bank's
wholly owned subsidiaries, Yardville National Investment Corporation, Brendan,
Inc., Nancy Beth, Inc., Jim Mary, Inc., Yardville Real Estate Holding Co., Inc,
YNB Financial Services, Inc., and YNB Realty Inc., (collectively, "YNB"). All
significant inter-company accounts and transactions have been eliminated.
Brendan, Inc., Nancy Beth, Inc. and Jim Mary, Inc. are utilized for the control
and disposal of other real estate properties. Yardville Real Estate Holding Co.,
Inc. is utilized to hold Bank branch properties, YNB Financial Services, Inc.,
provides alternative investment services, and YNB Realty, Inc., a real estate
investment trust, is utilized to more effectively manage a portion of the Bank's
real estate related loans.
Allowance for Loan Losses
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
7
<PAGE>
adjustments, as they become necessary, are reported in the periods in which they
become known. Management believes that the allowance 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, a statutory business trust and a
wholly owned subsidiary of the Holding Company, issued $11,500,000 of 9.25%
Trust Preferred Securities to the public 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 in 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, 1999 and 1998 were 5,788,000 and 5,059,000
respectively. For the diluted net income per share computation, potential common
stock of 27,000 and 24,000 are included for the three months ended June 30, 1999
and 1998, respectively.
Weighted average shares for the basic net income per share calculation for the
six months ended June 30, 1999 and 1998 were 5,398,000 and 5,067,000
respectively. For the diluted net income per share computation, potential common
stock of 27,000 and 24,000 are included for the six months ended June 30, 1999
and 1998, respectively.
8
<PAGE>
3. Comprehensive Income
Listed below is the statement of comprehensive income for three and six months
ended June 30, 1999 and 1998.
<TABLE>
<CAPTION>
Comprehensive Income Three Months Ended June 30,
- -----------------------------------------------------------------------------------------------
(in thousands) 1999 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Net Income $ 1,990 $ 1,382
- -----------------------------------------------------------------------------------------------
Other comprehensive income
Net change in unrealized loss for the
period, net of tax (2,921) (53)
Reclassification of realized net gain on sale of
securities available for sale, net of tax 2 24
- -----------------------------------------------------------------------------------------------
Holding loss arising during the period,
net of tax and reclassification (2,919) (29)
- -----------------------------------------------------------------------------------------------
Reclassification adjustment for realized net
gain, net of tax (2) (24)
- -----------------------------------------------------------------------------------------------
Other comprehensive income for the period, net of tax (2,921) (53)
- -----------------------------------------------------------------------------------------------
Total comprehensive income $ (931) $ 1,329
- -----------------------------------------------------------------------------------------------
Comprehensive Income Six Months Ended June 30,
- -----------------------------------------------------------------------------------------------
(in thousands) 1999 1998
- -----------------------------------------------------------------------------------------------
Net Income $ 3,544 $ 2,716
- -----------------------------------------------------------------------------------------------
Other comprehensive income
Net change in unrealized loss for the
period, net of tax (3,561) (302)
Reclassification of realized net gain on sale of
securities available for sale, net of tax 30 12
- -----------------------------------------------------------------------------------------------
Holding loss arising during the period,
net of tax and reclassification (3,549) (292)
- -----------------------------------------------------------------------------------------------
Reclassification adjustment for realized net
gain, net of tax (12) (30)
- -----------------------------------------------------------------------------------------------
Other comprehensive income for the period, net of tax (3,561) (302)
- -----------------------------------------------------------------------------------------------
Total comprehensive income $ (17) $ 2,414
- -----------------------------------------------------------------------------------------------
</TABLE>
4. Employee Stock Ownership Plan
The Bank established an Employee Stock Ownership Plan and related trust ("ESOP")
for eligible employees. The ESOP is a tax-qualified plan subject to the
requirements of the Employee Retirement Income Security Act of 1974 (ERISA).
Employees with twelve months of employment with the Bank and who have worked at
least 1,000 hours are eligible to participate. The ESOP borrowed $2,000,000 from
an unaffiliated financial institution and purchased 155,340 shares of common
shares, no par value, of the Holding Company. Shares purchased by the
9
<PAGE>
ESOP are held in a suspense account pending allocation among participants as the
loan is repaid. All shares in the plan are accounted for under SOP 93-6.
Compensation expense is recognized based on the fair value of the stock when it
is committed to be released. Compensation expense amounted to $88,000 for the
three months and $175,000 for the six months ended June 30, 1999. The fair value
of unearned shares at June 30, 1999 is $1,941,750.
Unallocated shares are deducted from common shares outstanding for earnings per
share purposes with shares which are committed to be released during the year
added back into weighted average shares outstanding.
10
<PAGE>
YARDVILLE NATIONAL BANCORP AND SUBSIDIARIES (YNB)
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 1998 Annual Report to stockholders and Form 10-K for the fiscal year
ended December 31, 1998 as well as with the unaudited consolidated financial
statements and the accompanying notes in this Form 10-Q.
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, and financial and other
goals. 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, 1999 were $981,526,000, an increase of
$223,860,000 or 29.6% compared to $757,666,000 at December 31, 1998. The growth
in YNB's asset base, during the first six months of 1999, was primarily due to
increases in loans (primarily commercial loans), available for sale securities,
and investment securities. The increase in the loan portfolio was the product of
an ongoing consistent strategy to improve the profitability of the organization
through relationship banking and of consolidation in YNB's market place.
Management anticipates continued loan opportunities due to this consolidation.
YNB's asset base includes US agency securities of approximately $236,430,000
purchased utilizing primarily repurchase agreements and Federal Home Loan Bank
advances (Investment Growth Strategy). The Investment Growth Strategy at June
30, 1999 increased $94,230,000 or 66.3% from the reported total of $142,200,000
at December 31, 1998. The primary goals of the Investment Growth Strategy,
improving return on equity and earnings per share, continue to be achieved.
11
<PAGE>
Federal funds sold
At June 30, 1999 Federal funds sold totaled $5,865,000 compared to $280,000 at
December 31, 1998. Average Federal funds sold for the first six months of 1999
was $16,824,000 compared to $4,996,000 for the same period in 1998. The higher
amount of Federal funds sold at June 30, 1999 was due to increased certificate
of deposit (CD) balances raised to fund loan growth and effectively manage
liquidity. Management remains focused on maintaining adequate liquidity to fund
loan growth and to improve the liquidity profile of YNB.
Securities
The following tables present the amortized cost and market value of YNB's
securities portfolios as of June 30, 1999 and December 31, 1998.
<TABLE>
<CAPTION>
Available For Sale Securities June 30, 1999 December 31, 1998
- -------------------------------------------------------------------------------------------------------------
Amortized Market Amortized Market
(in thousands) Cost Value Cost Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S.
government agency securities $ 116,482 $ 113,632 $ 55,051 $ 55,039
Mortgage-backed securities 149,765 146,834 120,410 119,986
Corporate obligations 2,612 2,477 2,867 2,867
All other securities 10,171 10,171 7,685 7,685
- -------------------------------------------------------------------------------------------------------------
Total $ 279,030 $ 273,114 $ 186,013 $ 185,577
- -------------------------------------------------------------------------------------------------------------
Investment Securities June 30, 1999 December 31, 1998
- -------------------------------------------------------------------------------------------------------------
Amortized Market Amortized Market
(in thousands) Cost Value Cost Value
- -------------------------------------------------------------------------------------------------------------
Obligations of U.S. government
agencies $ 63,184 $ 60,143 $ 4,994 $ 4,935
Obligations of state and
political subdivisions 29,303 28,305 20,773 20,982
Mortgage-backed securities 8,531 8,336 10,344 10,286
- -------------------------------------------------------------------------------------------------------------
Total $ 101,018 $ 96,784 $ 36,111 $ 36,203
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Securities represented 38.1% of total assets at June 30, 1999 and 29.3% at
December 31, 1998. Total securities increased $152,444,000 or 68.8% at June 30,
1999 to $374,132,000, compared to $221,688,000 at year-end 1998. The available
for sale portfolio represents 73.0% of the total security holdings of YNB at
June 30, 1999, compared to 83.7% at year-end 1998.
The net unrealized loss on available for sale securities as of June 30, 1999 was
$5,916,000, compared to a net unrealized loss of $436,000 at December 31, 1998.
Net unrealized loss, net of tax effect, totaling $3,845,000 was reported in
Accumulated Other Comprehensive Income in Stockholders' Equity at June 30, 1999,
compared to a net unrealized loss of $284,000 reported at December 31, 1998. The
increase in the unrealized loss on available for sale securities is
12
<PAGE>
primarily due to the rise in interest rates from December 31, 1998 to June 30,
1999 and the increased size of the available for sale securities portfolio.
Securities available for sale increased $87,537,000 or 47.2% at June 30, 1999
when compared to the December 31, 1998 balance of $185,577,000. The largest area
of increase was in U.S. Treasury and U.S. agency bonds, which increased
$58,593,000 and is the major factor for the increase in securities available for
sale. The increase was primarily due to an increase of $13,919,000 in US
treasury bonds and a $38,000,000 increase in shorter-term callable agency bonds
purchased to improve the liquidity profile of YNB. The callable agency bonds
have maturity terms of 3.5 years or less. The other category of significant
growth was in mortgage backed securities which increased $26,848,000 net of
paydowns. This growth was almost entirely related to the Investment Growth
Strategy and includes $29,805,000 in floating rate U.S. agency collaterlized
mortgage obligations.
Investment securities increased $64,907,000 or 179.7% to $101,018,000 at June
30, 1999 from $36,111,000 at December 31, 1998. The increase was due to a
$58,190,000 increase in U.S. agency callable bonds primarily related to the
Investment Growth Strategy and a $8,530,000 increase in tax free municipal
bonds. Offsetting these increases was a $1,813,000 reduction in mortgage-backed
securities reflecting paydowns.
The Investment Growth Strategy increased $94,230,000 over the year-end 1998
level. The largest increase was in US agency callable bonds which increased
$65,190,000 and account for 69.2% of the total increase. The next largest growth
was in floating rate US agency collateralized mortgage obligations that
increased $29,803,000. Modest growth was also recorded in fixed rate mortgage
backed securities up $4,436,000 net of paydowns. Offsetting this increase, was a
$5,220,000 decrease in adjustable rate mortgage backed securities. At June 30,
1999, the investment growth strategy was comprised of 77.2% of fixed rate
securities and 22.8% of adjustable or floating rate securities compared to 79.4%
fixed rate securities and 20.6% adjustable rate securities at year end 1998.
Loans
Total loans, net of unearned income, increased $61,604,000 or 12.5% at June 30,
1999 to $553,253,000 from $491,649,000 at December 31, 1998. This growth
reflects favorably when compared to the $53,483,000 in loan growth for the same
period of 1998. YNB's loan portfolio represented 56.4% of total assets at June
30, 1999 compared to 64.9% at December 31, 1998. YNB's lending focus continues
to be on commercial and industrial loans, and commercial real estate loans. The
consolidation in YNB's market place and management's philosophy of relationship
banking are key factors in continued strong loan growth. Strong competition from
both bank and nonbank competitors could result in comparatively lower yields 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. Management anticipates continued loan growth for the
second half of 1999. Providing the needed funding to meet loan demand remains a
high priority. Continued profitable loan growth is a key factor in meeting
earnings growth goals. In May, 1999, the Holding Company sold 1,610,000 shares
of its common stock in a public offering, raising $17,620,000. This capital
offering has resulted in
13
<PAGE>
an increase in the legal lending limit of the Bank and will allow for increased
lending to existing customers as well as the ability to compete for larger loan
relationships.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
(in thousands) 6/30/99 12/31/98 Change % change
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial real estate $ 183,208 $ 166,725 $ 16,483 9.9%
Real estate - mortgage
Residential 100,953 93,540 7,413 7.9
Home equity 23,067 23,474 (407) (1.7)
Commercial and industrial 161,377 133,263 28,114 21.1
Real Estate - construction 48,721 38,386 10,335 26.9
Consumer 25,531 24,531 1,000 4.1
Other loans 10,396 11,730 (1,334) (11.4)
- --------------------------------------------------------------------------------------------------
Total loans $ 553,253 $ 491,649 $ 61,604 12.5%
- --------------------------------------------------------------------------------------------------
</TABLE>
The table above lists the loan growth by type for the period of December 31,
1998 to June 30, 1999. Commercial and industrial loans had the greatest growth
increasing $28,113,000 in the period and accounting for 45.6% of the total
increase in outstanding loans. Commercial real estate loans had the second
greatest growth, increasing $16,483,000 and accounting for 26.7% of the total
increase in outstanding loans. All other loan types increased with the exception
of Home equity and Other loans, which decreased $407,000 and $1,334,000,
respectively. The strong loan growth recorded in the first half of 1999 was the
result of the continuing opportunities available to YNB due to consolidation in
the market place.
Liabilities
The following table provides information concerning YNB's deposit base at June
30, 1999 and December 31, 1998.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
(in thousands) 6/30/99 12/31/98 Change % Change
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Non-interest bearing demand
deposits $ 80,052 $ 75,426 $ 4,626 6.1%
Interest bearing demand deposits 59,387 51,672 7,715 14.9
Money market deposits 44,045 44,661 (616) (1.4)
Savings deposits 80,462 77,537 2,925 3.8
Certificates of deposit of $100,000
or over 49,685 29,525 20,160 68.3
Other time deposits 313,280 240,822 72,458 30.1
- ----------------------------------------------------------------------------------------------
Total $ 626,911 $ 519,643 $ 107,268 20.6%
- ----------------------------------------------------------------------------------------------
</TABLE>
YNB's deposit base is the principal source of funds supporting interest-earning
assets. Total deposits increased $107,268,000 or 20.6% to $626,911,000 at June
30, 1999 compared to $519,643,000 at December 31, 1998. Certificates of deposit
were competitively priced throughout the first six months of 1999 to fund new
loan growth and improve liquidity. Growth in YNB's deposit base in 1999
continued to be principally in certificates of deposit. Certificates of deposit
increased $83,900,000 or 31.0% to $354,247,000 at June 30, 1999 from
$270,347,000 at December 31, 1998. Growth in certificates of deposit accounted
for 78.2% of the total
14
<PAGE>
increase in deposits for the first six months of 1999. This strong growth rate
has resulted in certificates of deposit increasing to 56.5% of total deposits at
June 30, 1999 from 52.0% at year-end 1998. This increasing reliance on higher
cost certificates of deposit to fund asset growth is a major factor in the
continued decrease in YNB's net interest margin. In March of 1998, 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. At June 30, 1999, YNB had $62,300,000 in outstanding certificates of
deposit raised through this service. This includes $37,600,000 raised in the
first six months of 1999. Management anticipates that this market will continue
to play an important role in funding future asset growth.
Noninterest bearing demand deposits increased $4,626,000 or 6.1% to $80,052,000
as of June 30, 1999 when compared to $75,426,000 at December 31, 1998. This
increase is partially due to the normal fluctuations in demand deposit balances
but also reflects management's ongoing efforts to capture the deposit
relationships of both new and existing customers. A more meaningful measurement
of non-interest deposits results from a comparision of average balances. For the
six months ended June 30, 1999 average noninterest bearing demand deposits were
$74,457,000 an increase of $8,682,000 when compared to the same period in 1998.
Interest bearing demand deposits increased $7,715,000 or 14.9% to $59,387,000 at
June 30, 1999 from $51,672,000 at year-end 1998. This growth resulted from
management's focus on attracting lower cost deposits to fund earning asset
growth. This focus on lower cost funding is also reflected in the $2,925,000 or
3.8% increase in savings deposits, which totaled $80,462,000 at June 30, 1999
compared to $77,537,000 at year end. Offsetting these increases was a modest
decline in money market balances caused by a decrease in business money markets
partially offset by an increase in personal money markets.
While it is management's desire to fund earning asset growth with the lowest
cost deposits, core deposit growth levels, excluding certificates of deposit,
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. In a rising rate environment, this reliance will cause the
cost of funding earning assets to increase.
YNB continues to seek lower cost funding sources. One source is opening new
branches to serve a wider market area. In April 1999, YNB opened its 11th
branch, which is located in Newtown, Bucks County, Pennsylvania. This branch
opens a new market for YNB. Bucks County, Pennsylvania is located directly
across the Delaware River from Mercer County, New Jersey, where all of YNB's
other branches are currently located. There are also plans to open a branch in
Burlington County, New Jersey which is located directly south of Mercer County.
Ib addition, a third new branch is planned in 1999. This branch will be located
in the YNB Corporate headquarters building. The headquarters building is to be
located in Hamilton Township, Mercer County New Jersey. We expect these new
branches will improve YNB's ability to generate lower cost deposits and create
additional lending opportunities. With the consolidation in YNB's market place,
additional opportunities for new branches in both Pennsylvania and New Jersey
are possible and management is currently evaluating additional branch locations
to be opened in 2000.
15
<PAGE>
Borrowed Funds
Borrowed funds totaled $275,877,000 at June 30, 1999 compared to $177,888,000 at
December 31, 1998. Approximately $235,508,000 or 85.4% of borrowed funds at June
30, 1999 are related to the Investment Growth Strategy. The increase for the
first six months of 1999 was $97,989,000 or 55.1%. The majority of the increase
was in securities sold under agreements to repurchase and Federal Home Loan Bank
advances used to fund the purchase of Investment Growth Strategy assets.
Management continues to closely monitor the mix of funding used to support the
Investment Growth Strategy. As Investment Growth Strategy funding matures or is
called, management will replace it with funding that will reduce the overall
interest rate risk profile of YNB. Management anticipates that funding costs
associated with borrowed funds will increase as shorter term repurchase
agreement mature and callable funding at below market rates are called. At June
30, 1999 $142,500,000 or 60.5% of the Investment Growth Strategy funding was in
callable funding compared to $76,500,000 or 81.2% at December 31, 1998.
Securities sold under agreements to repurchase totaled $154,508,000 at June 30,
1999 compared to $87,120,000 at December 31, 1998. $61,500,000 or 39.8% of the
repurchase agreements outstanding at June 30, 1999 were callable compared to
$61,500,000 or 70.6% at December 31, 1998. Callable repurchase agreements have
terms of five to ten years and call dates of one year. All of the growth
recorded in repurchase agreements in the first six months of 1999 was in
repurchase agreements with terms of less than one year. With the recent rise in
interest rates, management anticipates that repurchase agreement costs will rise
as shorter-term repurchase agreements mature and are replaced at higher market
rates.
YNB had Federal Home Loan Bank of New York (FHLB) advances outstanding of
$118,305,000 at June 30, 1999 compared to $89,316,000 at December 31, 1998. YNB
continues to utilize callable FHLB advances to fund both Investment Growth
Strategy purchases as well as other earning assets. At June 30, 1999 callable
advances totaled $113,500,000 or 95.9% of advances outstanding compared to
$83,500,000 or 93.4% at December 31, 1998. Callable FHLB advances have terms of
ten years and are callable after periods ranging from one to five years. There
are $41,000,000 in callable advances with call dates in 1999. Management
anticipates that, if rates continue to rise, some or all of these advances will
be called and will have to be replaced with higher costing advances.
The callable FHLB Advances and repurchase agreements have allowed YNB to lower
its borrowing costs, while at the same time extending the maturity of
borrowings. 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. There have been no calls of
callable borrowings in 1999, but, if interest rates continue to rise, there
could be calls of both FHLB advances and securities sold under agreement to
repurchase. This could result in higher borrowing costs and increased borrowed
fund expenses.
Borrowed funds included $1,800,000 related to the ESOP. The ESOP purchased
155,340 shares of common stock of the Holding Company with a loan from a
nonaffiliated financial institution. The financing is for a term of five years
with an interest rate of 7.00% and a maturity date in
16
<PAGE>
2004. The interest rate is fixed for the period of the loan and the loan will be
repaid in equal monthly installments over the term of the loan. The shares
purchased by the ESOP were used as collateral for the loan. The Holding Company
guarantees the repayment of the loan.
YNB has the ability to borrow up to $37,845,000 from the FHLB through its 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 to the
public. For regulatory capital purposes the entire amount of the issue is
treated as Tier 1 capital at the Holding Company level.
Capital
On May 18, 1999, the Holding Company completed the sale of 1,610,000 shares of
its common stock in an underwritten secondary public offering. The common stock
was offered at a price of $12.00 per share and generated gross proceeds of
$19,320,000. Net proceeds after the underwriting discount and other offering
costs was approximately $17,620,000. Of the net proceeds $17,501,000 was
contributed to the Bank to support future asset growth.
Stockholders' equity at June 30, 1999 totaled $57,782,000, an increase of
$17,026,000 or 41.8% compared to $40,756,000 at December 31, 1998. This net
increase resulted from the following factors:
(i) Net income of $3,544,000 less cash dividend payments of $821,000.
(ii) The unrealized loss on available for sale securities was $284,000 at
December 31, 1998 compared to an unrealized loss of $3,845,000 at June
30, 1999. This shift resulted in a $3,561,000 reduction in
stockholders' equity.
(iii) Proceeds of $66,000 from exercised options, $2,000,000 from the
issuance of common shares to the ESOP and approximately $17,620,000
from the capital offering.
(iv) Repurchase of 1,700 shares of common shares for $22,000, which
increased treasury shares to 172,000 and the cost of total stock
repurchases to $3,030,000.
(v) Commitment to ESOP of $1,800,000, representing the balance of the loan
used to finance the purchase of common stock by the ESOP.
The improvement in the capital ratios from December 31, 1998 to June 30, 1999
was primarily due to the capital offering completed in May. Management remains
committed to keeping YNB a well-capitalized institution under the prompt
corrective action rules.
17
<PAGE>
The following table sets forth regulatory capital ratios for the Holding Company
and the Bank as of June 30, 1999 and December 31, 1998
Amount Ratios
- ------------------------------------------------------------------------------
dollars in thousands 6/30/99 12/31/98 6/30/99 12/31/98
- ------------------------------------------------------------------------------
Risk-based capital:
Tier 1:
Holding Company $ 73,127 $ 52,531 11.8% 9.9%
Bank 73,106 50,948 11.8 9.6
- ------------------------------------------------------------------------------
Total:
Holding Company 80,749 59,151 13.0 11.2
Bank 80,728 56,341 13.0 10.8
- ------------------------------------------------------------------------------
Tier 1 leverage:
Holding Company 73,127 52,531 8.3 7.7
Bank $ 73,106 $ 50,948 8.3% 8.5%
- ------------------------------------------------------------------------------
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, 1999, the ratios of the
Holding Company and the Bank exceeded the ratios required to be considered well
capitalized.
On October 28, 1997, the Holding Company's Board of Directors authorized
management to repurchase up to 172,000 shares of the Holding Company's common
stock in the open market in compliance with Rule 10b-18 under the Securities
Exchange Act of 1934. As of June 30, 1999, as part of an overall capital plan,
172,000 shares had been repurchased at an average price of $17.62.
18
<PAGE>
Credit Quality
The following table sets forth nonperforming assets and risk elements in YNB's
loan portfolio by type as of June 30, 1999 and December 31, 1998.
Nonperforming Assets
- -----------------------------------------------------------------------
(in thousands) 6/30/99 12/31/98
- -----------------------------------------------------------------------
Nonaccrual loans:
Commercial and industrial $ 857 $ 232
Real estate - mortgage 569 570
Real estate - construction -- 684
Consumer 31 31
Other 312 529
- -----------------------------------------------------------------------
Total 1,769 2,046
- -----------------------------------------------------------------------
Restructured loans 610 634
- -----------------------------------------------------------------------
Loans 90 days or more past due:
Commercial and industrial 3 --
Real estate - mortgage 1,199 1,093
Consumer 89 100
- -----------------------------------------------------------------------
Total 1,291 1,193
- -----------------------------------------------------------------------
Total nonperforming loans 3,670 3,873
- -----------------------------------------------------------------------
Other real estate 4,676 4,957
- -----------------------------------------------------------------------
Total nonperforming assets $ 8,346 $ 8,830
- -----------------------------------------------------------------------
At June 30, 1999, nonperforming loans, consisting of loans 90 days and more past
due, restructured loans and nonaccrual loans, totaled $3,670,000, a $203,000 or
5.2% decrease from the $3,873,000 at December 31, 1998. Nonperforming loans as a
percentage of total loans was 0.66% compared to 0.79% at year-end. This decline
was caused by both a decrease in nonperforming loans and an increase in loans
outstanding.
Other real estate (O.R.E.) at June 30, 1999 totaled $4,676,000, a $281,000 or
5.7% decrease when compared to $4,957,000 at December 31, 1998. Management uses
an active strategy to liquidate these assets and re-deploy the proceeds into
earning assets. One other real estate property totaling $1,800,000 is under
contract of sale.
Nonperforming assets at June 30, 1999 totaled $8,346,000 a $484,000 or a 5.5%
decrease from the $8,830,000 level at December 31, 1998. Total nonperforming
assets as a percentage of total assets was 0.85% at June 30, 1999 compared to
1.17% at December 31, 1999. This decrease was due to a drop in both
nonperforming loans and other real estate as well as an increase in 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 nonperforming loan relationships are being restructured in an effort to
return these loans to performing status.
19
<PAGE>
Allowance for Loan Losses
The allowance for loan losses totaled $7,622,000 at June 30, 1999, an increase
of $854,000 from the $6,768,000 at year-end 1998. The provision for loan losses
for the first six months of 1999 was $1,400,000 compared to $900,000 for the
same period of 1998. Gross chargeoffs were $590,000 for the first six months of
1999 compared to $394,000 for the same period in 1998. Gross recoveries were
$45,000 for the first six months of 1999 compared to $27,000 for the same period
in 1998. Annualized chargeoffs as a percentage of average loans was 0.20% for
the six months ended June 30, 1999 compared to 0.18% for the year ended December
31, 1999.
Management maintains the allowance for loan losses at a level determined in
accordance with management's documented allowance adequacy methodology, It is
management's assessment, based on management's estimates, that the allowance is
adequate in relation to the credit risk exposure levels. One measure of the
adequacy of the allowance for loan losses is the ratio of allowance for loan
losses to total loans. This ratio was 1.38% at both June 30, 1999 and December
31, 1998. Another measure of the adequacy of the allowance for loan losses is
the ratio of the allowance for loan losses to total nonperforming loans. This
ratio was 207.7% at June 30, 1999 compared to 174.7% at December 31, 1998. The
balance of the allowance for loan losses is determined by an overall analysis of
the loan portfolio and reflects an amount, which in management's judgement is
adequate to provide for potential loan losses.
Results of Operations
Net Income
YNB reported net income of $3,544,000 for the six months ended June 30, 1999, an
increase of $828,000 or 30.5% over the same period in 1998. The increase in net
income for the six months ended June 30, 1999, compared to the same period in
1998, is primarily attributed to higher net interest income, offset by a higher
provision for loan losses and increased non-interest expense. Basic earnings per
share for the six months ended June 30, 1999 increased $0.12 or 22.2% to $0.66
from $0.54 for the same period in 1998. Diluted earnings per share increased
$0.12 or 22.6% to $0.65 for the six months ended June 30, 1999 from $0.53 for
same period in 1998.
On a quarterly basis, net income for the second quarter of 1999 was $1,990,000
and represented a $608,000 or 44.0% increase over the net income for the same
period of 1998. On a per share basis, basic and diluted earnings per share for
the second quarter of 1999 were $0.34, an increase of $0.07 or 25.9% when
compared to the second quarter of 1998. The increase in net income and earnings
per share for the quarter is due to the reasons discussed above.
Net Interest Income
YNB's net interest income for the first six months of 1999 was $13,517,000, an
increase of $2,660,000 or 24.5% from the same period in 1998. The principal
factor contributing to this increase was an increase in interest income of
$7,056,000 resulting from increased loan and
20
<PAGE>
securities balances offset by an increase of $4,396,000 in interest expense.
This increase in interest expense was primarily due to higher volume of time
deposits and borrowed funds.
The net interest margin (tax equivalent basis) which is net income divided by
average earning assets, for the six months ended June 30, 1999, was 3.30% a 36
basis point or 9.8% decline compared to 3.66% for the same period in 1998. The
principal factors causing the narrowing of the net interest margin were lower
yields on and increased levels of securities and loans, and higher volumes of
certificates of deposit and borrowed funds.
The net interest margin for the 1999 and 1998 comparative periods was also
negatively impacted by the Investment Growth Strategy. The targeted spread on
this strategy is 75 basis points after tax. Because of the 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, 1999, was approximately $236,500,000 compared to $137,730,000 at June
30, 1998. Conversely, this strategy increases both return on average equity and
earnings per share, the primary goals of the strategy.
On a quarterly basis, net interest income was $7,100,000, an increase of
$1,522,000 or 27.3% when compared to the second quarter of 1998. The net
interest margin (tax equivalent basis) for the three months ended June 30, 1999
was 3.26%, a 38 basis point or 10.4% decrease from the same period in 1998. The
reasons for the decline are the same as discussed above.
Interest Income
For the six months ended June 30, 1999 total interest income was $31,168,000, an
increase of $7,056,000, or 29.3% when compared to interest income of $24,112,000
for the same period in 1998. This increase is due to higher average balances in
both loans and securities, which is partially offset by lower yields on both
earning asset types. Average loans increased $120,473,000 or 29.2% while the
yield declined 51 basis points to 8.28% from 8.79%. The decline in loan yields
reflects strong competition for loans in YNB's market as well as a 75 basis
point drop in the prime rate in the last four months of 1998. A significant
portion of YNB's commercial loans has interest rates indexed to the prime rate.
Interest and fees on loans for the six months ended June 30, 1999 increased
$3,933,000 or 21.7% to $22,075,000 from $18,142,000 for the same period in 1998.
Average securities outstanding for the six months ended June 30, 1999 increased
$103,595,000 or 56.5% to $287,056,000 when compared to the $183,461,000 for the
same period of 1998. Over the same period, the yield on the securities portfolio
decreased 23 basis points to 6.04% from 6.27%. These factors resulted in
interest on securities increasing $2,922,000 to $8,671,000 for the six months
ended June 30, 1999 compared to $5,749,000 for the same period in 1998. Overall,
the yield on YNB's interest earning asset portfolio decreased 52 basis points to
7.44% for the six months ended June 30, 1999 from the 7.96% for the same period
in 1998.
For the second quarter of 1999, total interest income was $16,570,000, an
increase of $4,149,000 or 33.4% when compared to the $12,421,000 for the second
quarter of 1998. The increase was due to higher average balances of both loans
and securities offset by lower yields on both asset types. The overall yield on
earning assets for the second quarter of 1999 was 7.41% a 55 basis
21
<PAGE>
point drop from the 7.96% reported for the same period of 1998. The decline in
yield was primarily due to the lower prime rate of interest and the increased
level of lower yielding securities.
Interest Expense
Total interest expense increased $4,396,000 or 33.2% to $17,651,000 for the
first six months of 1999 compared to $13,255,000 for the same period in 1998.
The increase in interest expense for the comparable time periods resulted from a
larger deposit base, led by higher costing time deposits, and an increase in
borrowed funds, Offsetting these higher balances were lower rates on deposits
and borrowed funds. The average rate paid on interest bearing liabilities for
the six months ended June 30, 1999 decreased 25 basis points to 4.71% from 4.96%
for the same period of 1998.
Interest on other time deposits under $100,000 increased $2,435,000 to
$8,039,000 for the six months ended June 30, 1999 from $5,604,000 for the same
period in 1998. This increase was caused by an increase in the average
outstanding balance of $100,664,000 to $296,327,000 for the six months ended
June 30, 1999, when compared to the outstanding average balance of $195,663,000
for the six months ended June 30, 1998. Offsetting this increase was a 30 basis
point drop in the cost of time deposits under $100,000 to 5.43% for the first
six months of 1999 from 5.73% for the same period of 1998. Interest expense on
certificates of deposit under $100,000 accounted for 45.5% of total interest
expense and 55.4% of the total increase in interest expense. During the first
six months of 1999, YNB offered attractive rates on CDs locally and nationwide
to fund loan growth and improve the liquidity profile of YNB.
Interest expense on borrowed funds increased $1,707,000 to $5,684,000 for the
first six months of 1999 when compared to $3,977,000 for the same period in
1998. The increase was caused by a $79,273,000 increase in the average balance
outstanding for the six months ended June 30, 1999 when compared to the same
period in 1998. The rate paid on borrowed funds declined 47 basis points for the
six months ended June 30, 1999 to 5.14% from the 5.61% 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 shifting of borrowed funds out of fixed term products into convertible
products at lower interest rates and, to a lesser extent, lower yields on term
repurchase agreements, caused the overall decrease in rate.
Total interest expense for the second quarter of 1999 increased $2,627,000 or
38.4% to $9,470,000 from $6,843,000 for the same period in 1998. The overall
cost of interest bearing liabilities decreased 22 basis points to 4.75% from
4.97% for the second quarter of 1998. The reasons for the increase in interest
expense for the second quarter are the same as discussed above.
While YNB seeks to fund asset growth with lower cost savings, money market,
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 required funding needs, YNB anticipates
continued reliance on higher cost retail CDs and, to a lesser extent,
22
<PAGE>
borrowed funds. The ability of YNB to continue to lower the cost of interest
bearing liabilities is dependent on market conditions. If interest rates should
continue to rise, YNB's interest expense will also increase.
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, 1999 was $1,400,000,
a 55.6% increase over the $900,000 provision recorded for the same period of
1998. For the three months ended June 30, 1999 the provision for possible loan
losses was $750,000, a $250,000 or 50.0% increase from the second quarter of
1998. The increase in the provision for both the quarter and year to date
comparisons was primarily due to the strong loan growth. 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 1999 was $1,483,000, an
increase of $63,000 or 4.4% over non-interest income of $1,420,000 for the same
period in 1998. The increase was primarily due to growth in other non-interest
income, offset by a decrease in the gains on sale of securities.
Other non-interest income increased $81,000 or 11.1% for the first six months of
1999 compared to the same period in 1998. The increase is principally due to
additional income derived from bank owned life insurance assets, which totaled
$380,000 and represents a $38,000 or 11.1% increase over the $342,000 for the
same period last year and accounts for 46.9% of the increase in total
non-interest income. The increase is due to higher average balances of life
insurance assets and a higher yield. The income earned on these assets is used
to offset expenses on deferred compensation programs. Other categories of
non-interest income reflect modest growth due to the increased size of YNB.
For the three months ended June 30, 1999 total non-interest income increased
$23,000 or 3.1% due to the factors discussed above. Of particular importance was
the drop in gains on sale of securities, which decreased $34,000, or 91.9%.
Excluding the impact of this decline, the increase in total non-interest income
would have been $57,000 or 8.2%.
The ability of YNB to generate higher levels of non-interest income remains a
critical factor in increasing net 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.
Non-interest Expense
Total non-interest expense increased $1,496,000 or 20.8% to $8,673,000 for the
first six months 1999 compared to $7,177,000 for the same period in 1998. The
increase in non-interest expenses was due to increases in salary and employee
benefits, equipment expense, occupancy expense and other non-interest expense.
Total non-interest expenses, on an annualized basis, as a
23
<PAGE>
percentage of average assets were 1.97% for the first six months of 1999
compared to 2.23% for the same period of 1998. The improvement in this ratio is
due to the strong asset growth in the first six months of the year. YNB's
efficiency ratio for the first six months of 1999 was 57.8%, a decrease from the
58.5% for the same period in 1998. 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 $788,000 or 20.0% to $4,728,000 for the
first six months of 1999 compared to $3,940,000 for the same period in 1998.
Salary and benefits expense accounted for 54.5% of total non-interest expenses
for the first six months of 1999. Salary expense increased $494,000 reflecting
increased staffing levels associated with the Pennington and Newtown branches
and new hires in other areas of YNB and normal salary increases. Benefit expense
increased $294,000 or 37.2%. In 1999, YNB created the ESOP for the benefit of
employees. The compensation expense portion of the ESOP was $175,000 and
accounted for 22.2% of the total increase in salary and employee benefits for
the quarter and 59.5% of the increase in benefit expense.
Equipment expense increased $111,000 or 18.0% to $729,000 for the first six
months of 1999 from $618,000 for the same period in 1998. The equipment costs
increase reflects the continuing efforts of YNB to maintain and upgrade
technology in order to provide the highest quality service, increase
productivity, and address Year 2000 issues. Equipment costs included
depreciation on equipment, which increased $106,000 and accounted for 95.6% of
the total increase in equipment expense for the period.
Occupancy expense for the first six months of 1999 was $634,000, an increase of
$139,000 or 28.1% compared to $495,000 for the same period in 1998. The increase
was primarily due to higher costs associated with the lease payments and other
operating costs of the Pennington and Newtown branches opened in August 1998 and
April 1999, respectively. Total rent expense on leased properties increased
$55,000 and accounted for 39.6% of the total increase for the period. Another
component of occupancy expense that had a significant increase was repairs and
maintenance, which increased $41,000.
Other non-interest expenses increased $458,000 or 21.6% to $2,582,000 for the
first six months of 1999 when compared to the $2,124,000 for the same period in
1998. The increase in other non-interest expenses accounts for 30.6% of the
increase in total non-interest expenses. Expenses, including write downs,
related to other real estate owned increased $245,000 or 213.0% for the six
months ended June 30, 1999 when compared to the same period in 1998. This
increase accounted for 53.5% of the total increase in other non-interest
expenses and 16.4% of the increase in total non-interest expense. Marketing
expenses increased $122,000 or 49.4% to $369,000 for the six months ended June
30, 1999 when compared to the same period last year. This increase reflects the
costs associated with increased marketing efforts related to attracting deposits
and increased costs of marketing to the wider market area now serviced by YNB.
For the three months ended June 30, 1999 total non-interest expense increased
$655,000 or 17.8% to $4,328,000 from $3,673,000 for the same period in 1998.
Total non-interest expense,
24
<PAGE>
on an annualized basis, as a percentage of average assets was 1.84% for the
three months ended June 30, 1999 compared to 2.21% for the same period in 1998.
YNB's efficiency ratio for the three months ended June 30, 1999 was 55.1%, an
improvement over the 58.2% for the same period in 1998. Salary and employee
benefit expense increased $440,000 or 22.0% to $2,437,000 from $1,997,000 for
the same period in 1998. The increase in salary and employee benefit expenses
accounted for 67.2% of the total increase in non-interest expense for the three
months ended June 30, 1999 when compared to the same period in 1998. Occupancy
expense increased $59,000 or 22.5% to $321,000 from $262,000 for the same period
in 1998. Equipment expense increased $45,000 or 14.0% to $367,000 from $322,000
for the same period in 1998. Other non-interest expense increased $111,000 or
10.2% to $1,203,000 from $1,092,000 for the same period last year. The reasons
for the increase in non-interest expense for the quarter are the same as
discussed above.
Income Tax Expense
The effective income tax rate for the three and six months ended June 30, 1999
was 28.3% and 28.1% respectively, as compared to 35.3% for the same periods in
1998. The decrease in the effective tax rate was primarily due to the use of a
state income tax planning strategy initiated in 1998. Management anticipates
that this strategy will continue to reduce state income tax expense in 1999.
Higher levels of tax-free income also reduced Federal income taxes in 1999 when
compared to 1998. Total income tax expense for the six months ended June 30,
1999 was $1,383,000, a decrease of $101,000 or 6.8% from the $1,484,000 for the
same period in 1998. The reduction in tax expense resulted from the lower
effective tax rate offsetting the increase in taxable income. For the three
months ended June 30, 1999 tax expense was $787,000 a $32,000 or 4.2% increase
from the $755,000 for the same period in 1998. The increase was due to higher
taxable income partially offset by the lower tax rate.
25
<PAGE>
Year 2000 (Y2K)
General
Issues surrounding Y2K arise out of the fact that many existing computer
programs use only two digits to identify a year in the date field. Additionally,
Y2K is not just a computer issue, but involves communication, building and
environmental systems as well as office equipment. Y2K readiness can be affected
to the extent that other entities such as loan customers and key vendors are
unsuccessful in addressing this issue. Y2K issues affect virtually all aspects
of YNB's organization. YNB began taking a proactive approach to this issue in
1997. YNB's response includes a written compliance plan. Management has also
prepared a cash contingency plan designed to insure that YNB has adequate
liquidity to meet anticipated deposit outflows that could occur towards the end
of 1999. Management believes that the level of resources committed to the
project is adequate and the oversight provided by senior management and the
Board of Directors is appropriate. YNB is on schedule with its Y2K compliance
plan.
State of Readiness
YNB has identified six distinct areas for its Y2K compliance efforts. The
Technology Committee, which consists of four directors and all of the executive
management team, and the System and Operations committee are the primary groups
coordinating YNB's Y2K efforts. The Board of Directors receives monthly
reporting on the progress of YNB's Y2K compliance efforts. In addition, YNB
receives guidance from the Federal Financial Institutions Examination Council
(FFIEC), the formal interagency group responsible for uniform principles,
standards, and procedures for the examination of financial institutions by the
federal regulatory agencies, and participates in scheduled federal Year 2000
examinations. These examinations are being conducted to assess each financial
institution's Year 2000 efforts.
Core Computer Systems: YNB utilizes Information Technology System's (ITI)
software for processing all deposit, loan and general ledger activity. In June
1998, YNB completed preliminary testing of all loan and deposit functions at a
remote disaster recovery site utilizing Y2K testing software purchased from ITI.
Results of the preliminary testing were satisfactory. Due to the recent hardware
upgrades, YNB successfully completed testing on deposit, loan functions and
general ledger in April of 1999. Management does not anticipate any major Y2K
compliance problems with the ITI system.
Significant Alliances: YNB depends on many outside vendors and suppliers to
function efficiently. However, management has identified three systems that have
significant Y2K compliance issues due to their reliance on computer hardware and
software. These systems are the Federal Reserve Bank's Fed Line wire system, the
MAC network which supports YNB's automatic teller machines (ATM) and Automated
Clearing House (ACH) which YNB uses to process direct deposit activities
including payrolls. YNB requires vendors and suppliers to provide
representations that their systems are Y2K compliant and has a system in place
to track vendors' Y2K compliance efforts. Testing of the Fed Line wire system,
the MAC network and ACH transactions has been successfully completed
26
<PAGE>
YNB has also identified our provider of mortgage servicing, Wendover Financial
Services Corporation, as a significant alliance. Wendover is a subsidiary of
Electronic Data Systems, which is one of the largest service providers of data
processing applications in the United States. Wendover utilizes software
provided by ALLTEL Incorporated. YNB has been provided detailed plans and
strategies from both companies regarding Y2K compliance. ALLTEL has advised YNB
that their systems are Y2K compliant at December 31, 1998. Based on reports
received June 11, 1999, management has determined that Wendover is in compliance
with FFIEC Y2K servicer guidelines. Management does not anticipate any major Y2K
compliance problems with either Wendover Financial Services or ALLTEL.
End User Computing: YNB's plan to ensure compliance of desktop computers
throughout the company includes the replacement of non-compliant computers and
related software. All mission critical personal computers are now Y2K complaint.
YNB is in the process of testing non-mission critical personal computers and
replacing them as necessary. YNB has determined that some personal computers, in
non-mission critical areas, will only function if the internal clocks are
manually reset to January 1, 2000. Management has successfully tested these
computers by manually resetting the date to January 1, 2000 and determined that
the computers function correctly once the date is changed. Rather than replace
these personal computers, YNB has a plan in place to manually reset the dates on
the affected personal computers to January 1, 2000. Management does not
anticipate any major Y2K complaince issues with its personal computers.
Technical Infrastructure: The most critical part of YNB's technical
infrastructure is the communication network hardware and software that links all
of YNB's departments and branches to the ITI system and allows them to process
deposit, loan and general ledger activities. To ensure Y2K compliance the
network was successfully tested at each location. Management does not anticipate
any significant Y2K compliance issues with its network.
Physical Property and Infrastructures: YNB's physical properties and
infrastructures include energy and security systems as well as date sensitive
equipment. Testing in this area is complete and management does not anticipate
any significant Y2K issues resulting from this area.
Commercial Loan Relationships: YNB has identified its commercial loan customers
as a potential area of YNB's Y2K exposure. To the extent that a borrower's
financial position is weakened as a result of Y2K issues, credit quality could
be adversely affected. Management has reviewed the commercial loan portfolio to
identify loan types having significant Y2K exposure. Loan calling officers are
in the process of contacting loan customers and assessing their Y2K exposure and
compliance efforts. All significant new commercial loan applications include an
assessment of the Y2K exposure and compliance efforts of the customer. While YNB
continues to closely monitor its commercial loan customers, management cannot
predict whether its customers will be successful in becoming Y2K complaint.
27
<PAGE>
Y2K Program Status
Core Computer Systems Plan: 100% compliant by 3/31/99.
Present Status: 100% completed.
Significant Alliances Plan: 100% ready* by 6/30/99.
Present Status: 100% completed.
End User Computing Plan: 100% compliant by 6/30/99.
Present Status: 100% completed.
Technical Infrastructure Plan: 100% compliant by 6/30/99.
Present Status: 100% completed.
Physical Properties and Plan: 100% compliant by 3/31/99.
Infrastructure Present Status: 100% completed.
Commercial Loan Customers Plan: 100% ready* by 6/30/99.
Present Status: 100% completed.
*Ready means having a comprehensive Y2K program in place and a plan that will
achieve compliance before January 1, 2000.
Y2K Costs
YNB's Y2K related costs for 1998 were approximately $810,000. This includes
approximately $615,000 in equipment related purchases that will be depreciated
over five years. The remaining expense includes additional compensation expense
and costs related to testing and upgrading systems. Management anticipates 1999
expenditures to decline significantly as most of the significant hardware and
software purchases have been completed. Total Y2K costs are projected to be
between $50,000 and $100,000 in 1999. As of June 30, 1999, YNB has expensed
approximately $30,000 in Y2K related costs. This level could rise in the event
that unanticipated Y2K compliance issues are uncovered.
Y2K Contingency Plans
YNB has established Y2K contingency plans as part of its overall disaster
recovery plan. These plans identify all mission critical systems and include
strategies to overcome Y2K related problems. These plans continue to be reviewed
and will be modified from time to time based on the results of the ongoing Y2K
compliance efforts. Management believes that the contingency plans should allow
YNB to continue to operate in the event of Y2K disruptions with a minimum of
disruption and moderate increased costs.
28
<PAGE>
Y2K Risks
The most reasonable worst case scenario for YNB with respect to the Y2K problem
is an adverse affect on the credit quality of its commercial loan portfolio.
This could be caused by the inability of customers to service their bank debt
due to their own Y2K problems or that of their key customers or suppliers. This
could result in lower interest income and higher loan chargeoffs should the Y2K
problems become very serious. Management cannot predict the number of customers
that will experience Y2K related problems or the amount of revenue that could be
lost due to them. In addition, without electrical power and telephone
communication it would be very difficult for YNB to effectively operate.
Item 3: Quantitative and Qualitative Disclosure about Market Risk
There have been no material changes in YNB's market risk from December 31, 1998
except as discussed below. For information regarding YNB's market risk refer to
the Company's 1998 Annual Report to stockholders.
Changes in Earning Risk
Net interest income over the next twelve-month period indicates a reduction in
the risk to lower rates (-200 basis points) at June 30, 1999 than reported at
December 31, 1998. Comparing the simulation results of this low rate scenario to
the flat rate interest rate scenario indicates a -2.1% change in net interest
income compared to -6.7% at year end 1998. The 1998 results reflect rate change
of up or down 300 basis points. At the same time, YNB exposure to higher rates
(+200 basis points) shifted to a -0.8% change in net interest income compared to
a 1.8% at year-end 1998. The cumulative one-year gap turned negative $81,549,000
or -8.3% of assets at June 30, 1999 compared to positive $12,718,000 or 1.7% of
assets at year-end 1998. The dollar change in the gap was $94,268,000. The most
important reasons for this change in short-term earnings risk profile include:
1. The addition of $125,547,000 in securities with repricing or maturity dates
beyond one year.
2. The origination of $46,615,000 in loans with repricing or maturity dates
beyond one year.
Changes in Market risk
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%.
29
<PAGE>
At June 30, 1999, the EVPE changes by -4.26% for rate shifts of +200 and -0.14%
for rate shifts of -200 basis points. The non-symmetry of the results is
indicative of the callable funding booked in 1998. This compares to changes of
- -2.35% and -2.74% respectively at December 31, 1998.
The primary causes for this increase to rising rates are listed below:
Liability durations had a significant impact falling to 1.40 years at June 30,
1999 from 1.84 years at December 31, 1998. This resulted from increased use of
shorter-term repurchase agreements to hedge income risks to lower interest
rates. In addition, the recent upward shift in the yield curve has shortened the
expected conversion dates of callable funding.
Asset durations increased to 2.46 years at June 30, 1999 from 1.99 years at
December 31, 1998. The primary cause of this lengthening of assets was an
increase in the investment duration to 4.69 years from 4.12 years. This
lengthening resulted from purchases of long-term tax-free municipal bonds,
callable bonds and slower prepayment speeds extending the average lives of
mortgage backed securities.
The EVPE change to rising rates of -4.26% exceeds the target limit of 3.0%.
Management is currently implementing a strategy to lower the ratio below the
3.0% limit by the end of 1999. This strategy involves the extending the duration
of liabilities. This will be accomplished by offering longer term certificates
of deposit and extending the duration on borrowed funds. This strategy is
dependent on YNB's ability to sell longer-term certificates of deposit to its
customers.
On the asset side, new security purchases will have a shorter duration than the
existing portfolio. This should result in a gradual lowering of the investment
portfolio duration. If interest rates continue to rise the existing portfolio
duration will continue to increase as the duration of fixed rate mortgage backed
securities and callable bonds increase and this could have the result of causing
the duration of the investment portfolio to continue to extend.
Lowering the change in EVPE to the 3.0% limit will be dependent on management's
ability to lower the duration of the investment portfolio while at the same time
extending the duration of the funding liabilities.
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
30
<PAGE>
Not Applicable.
Item 4: Submission of Matters to a Vote of Securities Holders
Not Applicable.
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.
31
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(G) 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.
(L) 10.1 Employment Contract between Registrant and Patrick M. Ryan.
(L) 10.2 Employment Contract between Registrant and Jay G. Destribats
(L) 10.3 Employment Contract between Registrant and Stephen F. Carman
(L) 10.4 Employment Contract between Registrant and James F. Doran
(L) 10.5 Employment Contract between Registrant and Richard A. Kauffman
(L) 10.6 Employment Contract between Registrant and Mary C. O'Donnell
(L) 10.7 Employment Contract between Registrant and Frank Durand III
(D) 10.8 Salary Continuation Plan for the Benefit of Patrick M. Ryan
</TABLE>
32
<PAGE>
INDEX TO EXHIBITS (continued)
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(D) 10.9 Salary Continuation Plan for the Benefit of Jay G. Destribats
(E) 10.10 1988 Stock Option Plan
(L) 10.11 Employment Contract between Registrant and Thomas L. Nash
(A) 10.12 Directors' Deferred Compensation Plan
(B) 10.13 Lease Agreement between Jim Cramer and the Bank dated November 3, 1993
(L) 10.14 Lease between Gardeners Property Partnership and the Bank
(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
(L) 10.19 Employment Contract between Registrant and Howard N. Hall
(L) 10.20 Employment Contract between Registrant and Sarah J. Strout
(L) 10.21 Employment Contract between Registrant and Nina D. Melker
(L) 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.
</TABLE>
33
<PAGE>
INDEX TO EXHIBITS (continued)
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(H) 10.26 1994 Stock Option Plan.
(J) 10.27 Lease agreement between Crestwood Construction and the Bank dated May 25, 1998
(K) 10.29 Yardville National Bank Employee Stock Ownership Plan
(L) 10.30 Lease Agreement between Sycamore Street Associates and the Bank dated October
30, 1998
(L) 10.31 List of Subsidiaries of the Registrant
27.1 Financial Data Schedule
- ------------------------------------------------------------------------------------------------------------------
(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)
(J) Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended June
30, 1998.
(K) Incorporated by reference to the Registration Statement
on Form S-8 (Registration No. 333-71741).
(L) Incorporated by reference to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December
31, 1998 as amended by Form 10-K/A filed on April 20,
1999.
</TABLE>
34
<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 16, 1999 By: /s/ Stephen F. Carman
----------------------------- ------------------------------
Stephen F. Carman
Executive Vice President and
Chief Financial Officer
36
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 16,225
<INT-BEARING-DEPOSITS> 830
<FED-FUNDS-SOLD> 5,865
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 273,114
<INVESTMENTS-CARRYING> 101,018
<INVESTMENTS-MARKET> 96,784
<LOANS> 545,253
<ALLOWANCE> 7,622
<TOTAL-ASSETS> 981,526
<DEPOSITS> 626,911
<SHORT-TERM> 274,077
<LIABILITIES-OTHER> 9,723
<LONG-TERM> 13,300
0
0
<COMMON> 40,050
<OTHER-SE> 17,465
<TOTAL-LIABILITIES-AND-EQUITY> 57,515
<INTEREST-LOAN> 22,075
<INTEREST-INVEST> 8,671
<INTEREST-OTHER> 422
<INTEREST-TOTAL> 31,168
<INTEREST-DEPOSIT> 11,435
<INTEREST-EXPENSE> 17,651
<INTEREST-INCOME-NET> 13,571
<LOAN-LOSSES> 1,400
<SECURITIES-GAINS> 18
<EXPENSE-OTHER> 8,673
<INCOME-PRETAX> 4,927
<INCOME-PRE-EXTRAORDINARY> 4,927
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,544
<EPS-BASIC> 0.66
<EPS-DILUTED> 0.65
<YIELD-ACTUAL> 7.44
<LOANS-NON> 1,769
<LOANS-PAST> 1,291
<LOANS-TROUBLED> 610
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 7,172
<CHARGE-OFFS> 590
<RECOVERIES> 45
<ALLOWANCE-CLOSE> 7,622
<ALLOWANCE-DOMESTIC> 7,622
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
