<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 September 30, 2000
[ ] 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)
2465 Kuser Road, Hamilton, New Jersey 08690
-------------------------------------------
(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 the latest practicable date. As of November 8, 2000, the
following class and number of shares were outstanding:
Common Stock, no par value 7,442,534
-------------------------- ----------------------------
Class Number of shares outstanding
1
<PAGE>
INDEX
YARDVILLE NATIONAL BANCORP AND SUBSIDIARIES
PART 1 FINANCIAL INFORMATION PAGE NO.
-------------------------------------------------------------------------------
Item 1. Financial Statements
Consolidated Statements of Condition
September 30, 2000 and December 31, 1999
Consolidated Statements of Income
Three months ended September 30, 2000 and 1999
Consolidated Statements of Income
Nine months ended September 30, 2000 and 1999
Consolidated Statements of Cash Flows
Nine months ended September 30, 2000 and 1999
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
2
<PAGE>
Item 1. Financial Statements
Yardville National Bancorp and Subsidiaries
Consolidated Statements of Condition
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
---------------------------------------------------------------------------------------------------------
(in thousands, except share data) 2000 1999
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Cash and due from banks $ 18,568 $ 17,582
Federal funds sold 37,125 8,035
---------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents 55,693 25,617
---------------------------------------------------------------------------------------------------------
Interest bearing deposits with banks 1,324 955
Securities available for sale 422,476 309,298
Investment securities (market value of $102,426 in 2000 and
$100,121 in 1999) 108,720 108,167
Loans 766,667 646,737
Less: Allowance for loan losses (10,297) (8,965)
---------------------------------------------------------------------------------------------------------
Loans, net 756,370 637,772
Bank premises and equipment, net 9,192 9,400
Other real estate 2,253 2,585
Other assets 36,230 29,804
---------------------------------------------------------------------------------------------------------
Total Assets $1,392,258 $1,123,598
---------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity:
Deposits
Non-interest bearing $ 92,129 $ 90,219
Interest bearing 791,290 653,588
---------------------------------------------------------------------------------------------------------
Total Deposits 883,419 743,807
---------------------------------------------------------------------------------------------------------
Borrowed funds
Securities sold under agreements to repurchase 24,658 45,000
Federal Home Loan Bank advances 365,774 250,293
Obligation for Employee Stock Ownership Plan (ESOP) 1,300 1,600
Other 1,234 1,796
---------------------------------------------------------------------------------------------------------
Total Borrowed Funds 392,966 298,689
Company - obligated Mandatorily Redeemable Trust Preferred
Securities of Subsidiary Trust holding solely junior
Subordinated Debentures of the Company 26,500 11,500
Other liabilities 17,441 10,777
---------------------------------------------------------------------------------------------------------
Total Liabilities $1,320,326 $1,064,773
---------------------------------------------------------------------------------------------------------
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 7,614,534 in 2000 and 6,917,794 shares in 1999 46,872 40,052
Surplus 2,205 2,205
Undivided profits 33,083 27,462
Treasury stock, at cost, 172,000 shares in 2000 and 1999 (3,030) (3,030)
Unallocated ESOP shares (1,300) (1,600)
Accumulated other comprehensive loss (5,898) (6,264)
---------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 71,932 58,825
---------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $1,392,258 $1,123,598
---------------------------------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements.
3
<PAGE>
Yardville National Bancorp and Subsidiaries
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
---------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts) 2000 1999
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $16,684 $12,126
Interest on deposits with banks 18 9
Interest on securities available for sale 7,444 4,359
Interest on investment securities:
Taxable 1,150 1,310
Exempt from Federal income tax 421 351
Interest on Federal funds sold 790 218
---------------------------------------------------------------------------------------------------------
Total Interest Income 26,507 18,373
---------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on savings account deposits 2,064 1,286
Interest on certificates of deposit of $100,000 or more 2,032 671
Interest on other time deposits 6,436 4,387
Interest on borrowed funds 5,372 3,868
Interest on trust preferred securities 622 266
---------------------------------------------------------------------------------------------------------
Total Interest Expense 16,526 10,478
---------------------------------------------------------------------------------------------------------
Net Interest Income 9,981 7,895
Less provision for loan losses 1,200 1,000
---------------------------------------------------------------------------------------------------------
Net Interest Income After Provision for Loan Losses 8,781 6,895
---------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME:
Service charges on deposit accounts 380 349
Gains on sales of mortgages, net -- 5
Securities gains, net 9 --
Other non-interest income 477 427
---------------------------------------------------------------------------------------------------------
Total Non-Interest Income 866 781
---------------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSE:
Salaries and employee benefits 2,969 2,602
Occupancy expense, net 644 333
Equipment expense 471 396
Other non-interest expense 1,761 1,263
---------------------------------------------------------------------------------------------------------
Total Non-Interest Expense 5,845 4,594
---------------------------------------------------------------------------------------------------------
Income before income tax expense 3,802 3,082
Income tax expense 1,110 882
---------------------------------------------------------------------------------------------------------
Net Income $ 2,692 $ 2,200
---------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE:
Basic $ 0.37 $ 0.33
Diluted $ 0.37 $ 0.33
---------------------------------------------------------------------------------------------------------
Weighted average shares outstanding:
Basic 7,349 6,621
Diluted 7,366 6,648
---------------------------------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements.
4
<PAGE>
Yardville National Bancorp and Subsidiaries
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------------------------------------------------------------------
(in thousands, except per share amounts) 2000 1999
----------------------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $46,667 $34,201
Interest on deposits with banks 54 37
Interest on securities available for sale 18,902 10,830
Interest on investment securities:
Taxable 3,518 2,925
Exempt from Federal income tax 1,194 936
Interest on Federal funds sold 1,552 612
----------------------------------------------------------------------------------------------------
Total Interest Income 71,887 49,541
----------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on savings account deposits 5,502 3,568
Interest on certificates of deposit of $100,000 or more 4,704 1,785
Interest on other time deposits 17,831 12,426
Interest on borrowed funds 14,492 9,552
Interest on trust preferred securities 1,186 798
----------------------------------------------------------------------------------------------------
Total Interest Expense 43,715 28,129
----------------------------------------------------------------------------------------------------
Net Interest Income 28,172 21,412
Less provision for loan losses 2,900 2,400
----------------------------------------------------------------------------------------------------
Net Interest Income After Provision for Loan Losses 25,272 19,012
----------------------------------------------------------------------------------------------------
NON-INTEREST INCOME:
Service charges on deposit accounts 1,141 974
(Losses) gains on sales of mortgages, net (10) 35
Securities gains, net 4 18
Other non-interest income 1,356 1,237
----------------------------------------------------------------------------------------------------
Total Non-Interest Income 2,491 2,264
----------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSE:
Salaries and employee benefits 8,625 7,330
Occupancy expense, net 1,876 967
Equipment expense 1,415 1,125
Other non-interest expense 4,960 3,845
----------------------------------------------------------------------------------------------------
Total Non-Interest Expense 16,876 13,267
----------------------------------------------------------------------------------------------------
Income before income tax expense 10,887 8,009
Income tax expense 3,170 2,265
----------------------------------------------------------------------------------------------------
Net Income $ 7,717 $ 5,744
----------------------------------------------------------------------------------------------------
EARNINGS PER SHARE:
Basic $ 1.12 $ 0.99
Diluted $ 1.11 $ 0.98
----------------------------------------------------------------------------------------------------
Weighted average shares outstanding:
Basic 6,912 5,810
Diluted 6,929 5,837
----------------------------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements.
5
<PAGE>
Yardville National Bancorp and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
------------------------------------------------------------------------------------------------------------------
(in thousands) 2000 1999
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 7,717 $ 5,744
Adjustments:
Provision for loan losses 2,900 2,400
Depreciation 1,122 822
ESOP fair value adjustment (67) --
Amortization and accretion 205 444
Gains on sales of securities available for sale (4) (18)
Loss on sales of other real estate 16 1
Write down of other real estate 599 304
Increase in other assets (6,623) (2,688)
Increase in other liabilities 6,665 576
------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 12,530 7,585
------------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Net increase in interest bearing deposits with banks (369) (73)
Purchase of securities available for sale (188,280) (138,075)
Maturities, calls, and paydowns of securities available for sale 28,160 25,519
Proceeds from sales of securities available for sale 47,342 11,014
Proceeds from maturities and paydowns of investment securities 4,886 2,664
Purchase of investment securities (5,478) (77,810)
Net increase in loans (122,045) (109,952)
Expenditures for bank premises and equipment (914) (2,768)
Proceeds from sale of other real estate 265 908
------------------------------------------------------------------------------------------------------------------
Net Cash Used by Investing Activities (236,433) (288,573)
------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Net increase in non-interest bearing demand,
money market, and savings deposits 61,373 29,164
Net increase in certificates of deposit 78,239 125,078
Net increase in borrowed funds 94,276 125,511
Proceeds from issuance of trust preferred securities 15,000 --
Proceeds from issuance of common stock 6,887 19,688
Decrease (increase) in unallocated ESOP shares 300 (1,700)
Treasury shares acquired -- (22)
Dividends paid (2,096) (1,396)
------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 253,979 296,323
------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 30,076 15,335
Cash and cash equivalents as of beginning of period 25,617 16,526
------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents as of End of Period $ 55,693 $ 31,861
------------------------------------------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information:
Cash paid during period for:
Interest expense 39,642 27,227
Income taxes 3,912 2,938
------------------------------------------------------------------------------------------------------------------
Supplemental Schedule of Non-cash Investing and Financing
Activities:
Transfers to other real estate from loans, net of charge offs 547 951
------------------------------------------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements.
6
<PAGE>
Yardville National Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
Three and Nine Months Ended September 30, 2000
(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 of real estate acquired in
connection with foreclosures or in satisfaction of loans. In connection with the
determination of the allowance for loan losses and other real estate, management
obtains independent appraisals for significant properties.
The consolidated financial data as of and for the three and nine months ended
September 30, 2000 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, 2000.
Consolidation
The consolidated financial statements include the accounts of Yardville National
Bancorp (the "Holding Company") and its subsidiaries, Yardville Capital Trust
(the "Trust"), Yardville Capital Trust II (the "Trust II") 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 Corporation, YNB Financial Services, Inc., YNB
Realty Inc., and Capital Development, 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 Corporation
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. Capital Development, Inc. is utilized for
nontraditional lending opportunities.
7
<PAGE>
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
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 June 23, 2000, Yardville Capital Trust II, a statutory business trust and a
wholly owned subsidiary of the Holding Company, issued $15,000,000 of 9.50%
Trust Preferred Securities to one nonaffiliated financial institution and
$464,000 of 9.50% Common Securities to the Holding Company. Proceeds from the
issuance of the Trust Preferred Securities were immediately used by the Trust to
purchase $15,464,000 of 9.50% Subordinated Debentures due June 22, 2030 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.
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 September 30, 2000 and 1999 were 7,349,000 and 6,621,000
respectively. For the diluted net income per share computation, potential common
stock of 17,000 and 27,000 are included for the three months ended September 30,
2000 and 1999, respectively.
Weighted average shares for the basic net income per share calculation for the
nine months ended September 30, 2000 and 1999 were 6,912,000 and 5,810,000
respectively. For the diluted net income per share computation, potential common
stock of 17,000 and 27,000 are included for the nine months ended September 30,
2000 and 1999, respectively.
8
<PAGE>
3. Comprehensive Income
Listed below is the statement of comprehensive income for three and nine months
ended September 30, 2000 and 1999.
<TABLE>
<CAPTION>
Comprehensive Income Three Months Ended September 30, 2000
--------------------------------------------------------------------------------------------------------------
(in thousands) 2000 1999
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Income $ 2,692 $ 2,200
--------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss)
Net change in unrealized loss for the period,
net of tax 1,653 (1,106)
Reclassification of realized net gain on sale of
Securities available for sale, net of tax 6 --
--------------------------------------------------------------------------------------------------------------
Holding gain (loss) arising during the period,
net of tax and reclassification 1,659 (1,106)
--------------------------------------------------------------------------------------------------------------
Reclassification adjustment for realized net
gain, net of tax (6) --
--------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss)
for the period, net of tax 1,653 (1,106)
--------------------------------------------------------------------------------------------------------------
Total comprehensive income $ 4,345 $ 1,094
==============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Comprehensive Income Nine Months Ended September 30, 2000
--------------------------------------------------------------------------------------------------------------
(in thousands) 2000 1999
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Income $ 7,717 $ 5,744
--------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss)
Net change in unrealized loss for the period,
net of tax 366 (4,667)
Reclassification of realized net gain on sale of
Securities available for sale, net of tax 3 12
--------------------------------------------------------------------------------------------------------------
Holding gain (loss) arising during the period,
net of tax and reclassification 369 (4,655)
--------------------------------------------------------------------------------------------------------------
Reclassification adjustment for realized net
gain, net of tax (3) (12)
--------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss)
for the period, net of tax 366 (4,667)
--------------------------------------------------------------------------------------------------------------
Total comprehensive income $ 8,083 $ 1,077
==============================================================================================================
</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
stock, no par value, of the Holding Company. Shares purchased by the ESOP are
held in a suspense account pending allocation among participants as the loan is
repaid.
9
<PAGE>
Compensation expense is recognized based on the fair value of the stock when it
is committed to be released. Compensation expense amounted to approximately
$76,000 and $87,000 for the three months and approximately $196,000 and $262,000
for the nine months ended September 30, 2000 and 1999 respectively. The fair
value of unearned shares at September 30, 2000 is $1,522,332.
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.
5. Recent Accounting Pronouncements
Statement of Financial Accounting Standards No. 140 (SFAS 140), "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities,
an Amendment of FASB Statement No. 125", provides guidance on the following
topics: sales of financial assets such as receivables, loans and securities,
servicing assets and extinguishments of liabilities. This statement becomes
effective for transactions entered into after March 31,2001. The adoption of
SFAS is not expected to have a material impact on the financial position or
results of operations of YNB.
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 operations. It should be read in conjunction
with the 1999 Annual Report to stockholders and Form 10-K for the fiscal year
ended December 31, 1999 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 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, 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 U.S. Securities and Exchange Commission.
Financial Condition
Assets
Total consolidated assets at September 30, 2000 were $1,392,258,000, an increase
of $268,660,000 or 23.9% compared to $1,123,598,000 at December 31, 1999. The
growth in YNB's asset base during the nine months of 2000 was primarily due to
increases in loans, Federal funds sold, and available for sale 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.
With consolidation in its markets YNB has established its niche as the
preeminent business community bank in Mercer County specializing in commercial
lending. YNB's asset base includes US agency securities of approximately
$284,000,000 purchased utilizing primarily Federal Home Loan Bank advances
(Investment Growth Strategy). The Investment Growth Strategy securities at
September 30, 2000 increased approximately $55,600,000 or 24.3% from the
reported total of $228,400,000 at December 31, 1999. The primary goals of the
Investment Growth Strategy, improving return on average equity and earnings per
share, continue to be achieved.
11
<PAGE>
Federal funds sold
At September 30, 2000 Federal funds sold totaled $37,125,000 compared to
$8,035,000 at December 31, 1999. The higher amount of Federal funds sold at
September 30, 2000 was primarily due to increased certificate of deposit (CD)
balances, private trust preferred and private equity capital offering proceeds
and borrowed funds raised to fund loan growth and effectively manage liquidity.
The average Federal funds sold balance for the nine months of 2000 was
$32,386,000 compared to $16,793,000 for the same period in 1999. Management
remains focused on maintaining adequate liquidity to fund loan growth and to
enhance the liquidity profile of YNB.
Securities
The following tables present the amortized cost and market value of YNB's
securities portfolios as of September 30, 2000 and December 31, 1999.
<TABLE>
<CAPTION>
Available For Sale Securities September 30, 2000 December 31, 1999
------------------------------------------------------------------------------------------------------------------
Amortized Market Amortized Market
(in thousands) Cost Value Cost Value
----------------------------------------------- ---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of other U.S.
government agencies $ 138,345 $ 134,331 $ 117,496 $ 112,731
Mortgage-backed securities 251,984 247,866 170,775 166,164
Corporate obligations 21,310 20,368 5,783 5,522
All other securities 19,911 19,911 24,881 24,881
----------------------------------------------- ---------------- ---------------- --------------- ----------------
Total $ 431,550 $ 422,476 $ 318,935 $ 309,298
==================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Investment Securities September 30, 2000 December 31, 1999
------------------------------------------------------------------------------------------------------------------
Amortized Market Amortized Market
(in thousands) Cost Value Cost Value
----------------------------------------------- ---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Obligations of other U.S.
government agencies $ 68,186 $ 63,724 $ 69,184 $ 63,992
Obligations of state and
Political subdivisions 36,296 34,603 31,892 29,281
Mortgage-backed securities 4,238 4,099 7,091 6,848
----------------------------------------------- ---------------- ---------------- --------------- ----------------
Total $ 108,720 $ 102,426 $ 108,167 $ 100,121
==================================================================================================================
</TABLE>
Securities represented 38.2% of total assets at September 30, 2000 and 37.2% at
December 31, 1999. Total securities increased $113,731,000 or 27.2% at September
30, 2000 to $531,196,000 compared to $417,465,000 at year-end 1999. The
available for sale portfolio represented 79.5% of the total security holdings of
YNB at September 30, 2000, compared to 74.1% at year-end 1999.
The net unrealized loss on available for sale securities was $9,074,000 as of
September 30, 2000 and was $9,637,000 at December 31, 1999. Net unrealized loss,
net of tax effect, was $5,898,000 as reported in Accumulated other comprehensive
loss in Stockholders' Equity at September 30, 2000, and $6,264,000 reported at
December 31, 1999. The decrease in the net unrealized loss on available for sale
securities is primarily due to the changes in interest rates from December 31,
1999 to September 30, 2000.
12
<PAGE>
Securities available for sale increased $113,178,000 or 36.6% at September 30,
2000 when compared to the December 31, 1999 balance of $309,298,000. The largest
increase was in mortgage-backed securities, which increased $81,702,000.
Mortgage-backed securities purchased were primarily comprised of floating rate
CMO's that increased by $52,923,000, and fixed rate mortgage-backed securities.
Floating rate CMO's have been purchased to improve the performance of the
investment portfolio in a rising rate environment. U.S. Treasury and other U.S.
agency obligations increased $21,600,000 or 19.2%. The growth was primarily in
shorter-term callable bonds purchased to enhance YNB's liquidity profile.
Corporate obligations increased $14,846,000 or 268.9% to $20,368,000 at
September 30, 2000 from $5,522,000 at December 31, 1999. This increase resulted
primarily from the purchases of bank trust preferred securities. These
securities were primarily purchased to offset the increased interest expense
associated with YNB's trust preferred securities issued in June 2000.
Investment securities increased $553,000 to $108,720,000 at September 30, 2000
from $108,167,000 at December 31, 1999. The increase was primarily due to an
increase in obligations of state and political subdivisions offset by principal
paydowns on mortgage backed securities.
The Investment Growth Strategy securities increased $55,600,000 over the
year-end 1999 level. The largest increase was in floating rate US agency
collateralized mortgage obligations, which increased $34,510,000. The next
largest growth was in US agency fixed rate mortgage backed securities, which
increased $18,837,000. Reductions were recorded in adjustable rate mortgage
backed securities due to principal paydowns. At September 30, 2000, the
Investment Growth Strategy portfolio was comprised of 72.0% of fixed rate
securities and 28.0% of adjustable or floating rate securities compared to 77.8%
fixed rate securities and 22.2% adjustable rate securities at year end 1999.
Loans
Total loans, net of unearned income, increased $119,930,000 or 18.5% at
September 30, 2000 to $766,667,000 from $646,737,000 at December 31, 1999. This
growth exceeded the $108,190,000 experienced in the first nine months of 1999.
YNB's loan portfolio represented 55.1% of total assets at September 30, 2000
compared to 57.6% at December 31, 1999. YNB's lending focus continues to be on
commercial and industrial loans, and commercial real estate loans. The ability
of YNB to enter into larger loan relationships 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 slowing future loan growth. . The table below lists loan
growth by type for the period of December 31, 1999 to September 30, 2000.
13
<PAGE>
<TABLE>
<CAPTION>
Loan Portfolio Composition
--------------------------------------------------------------------------------------------------------------------
(in thousands) 9/30/00 12/31/99 Change % change
--------------------------------------------- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial real estate $ 326,275 $ 294,413 $ 31,862 10.8%
Real estate - mortgage
Residential 157,394 120,556 36,838 30.6
Home equity 23,702 23,581 121 0.5
Commercial and industrial 141,544 114,388 27,156 23.7
Real Estate - construction 85,928 59,457 26,471 44.5
Consumer 24,510 22,879 1,631 7.1
Other loans 7,314 11,463 (4,149) 36.1
--------------------------------------------- ----------------------------------------------------------------------
Total loans $ 766,667 $ 646,737 $ 119,930 18.5%
====================================================================================================================
</TABLE>
Commercial real estate loans had the strongest dollar growth increasing
$31,862,000 or 10.8%. Commercial and industrial loans increased $27,156,000 or
23.7% and Real estate construction loans increased $26,471,000 or 44.5%. These
three loan categories increased $85,489,000 and accounted for 71.3% of the total
loan growth for the period. YNB's continued success in generating these types of
loans is based on several factors. First, management's focus on commercial
related lending has resulted in YNB's growing reputation as a business lender in
our market place. Second, YNB's increased legal lending limit allows for larger
loans to both new and existing customers.
Real estate residential loans are primarily composed of 1-4 family residential
loans, multi family residential loans, fixed rate home equity loans and business
loans secured by residential real estate. Growth in this portfolio remained
strong in the first nine months of 2000 with an increase in the outstanding
balance of $36,838,000 or 30.6% from the December 31, 1999 balance. Residential
mortgage loans represented $70,288,000 or 44.7% of the total at September 30,
2000 compared to $60,942,000 or 50.6% of the total at year-end 1999. Growth in
residential mortgages was $9,346,000 and accounted for 25.4% of the total
increase for the period. Home equity loans increased $121,000 or 0.5% and
consumer loans increased $1,631,000 or 7.1%. Management believes that there
continues to be opportunities to increase the consumer and home equity loan
portfolios. However, competition for quality loan relationships remains strong.
14
<PAGE>
Deposit liabilities
The following table provides information concerning YNB's deposit base at
September 30, 2000 and December 31, 1999.
<TABLE>
<CAPTION>
Deposits
--------------------------------------------- ----------------------------------------------------------------------
(in thousands) 9/30/00 12/31/99 Change % Change
--------------------------------------------- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Non-interest bearing demand
deposits $ 92,129 $ 90,219 $ 1,910 2.1%
Interest bearing demand deposits 66,765 61,483 5,282 8.6
Money market deposits 116,243 57,143 59,100 103.4
Savings deposits 75,380 80,300 (4,920) 6.1
Certificates of deposit of $100,000
or over 121,573 72,528 49,045 67.6
Other time deposits 411,329 382,134 29,195 7.6
--------------------------------------------- ----------------------------------------------------------------------
Total $ 883,419 $ 743,807 $ 139,612 18.8%
============================================= ======================================================================
</TABLE>
YNB's deposit base is the principal source of funds supporting interest-earning
assets. Total deposits increased $139,612,000 or 18.8% to $883,419,000 at
September 30, 2000 compared to $743,807,000 at December 31, 1999. In January
2000, YNB increased the rates on its Premier Money Market Accounts for both
business and personal customers and launched an aggressive advertising and
calling campaign to promote the higher rates. This campaign has resulted in
strong growth in money market deposits with the total increasing $59,100,000 or
103.4% to $116,243,000 at September 30, 2000 from $57,143,000 at December 31,
1999. Certificates of deposit were also competitively priced in the in 2000 to
fund new loan growth and improve liquidity. Certificates of deposits continue to
be an important source of funding for YNB in 2000. Certificates of deposit of
$100,000 or over increased $49,045,000 or 67.6% to $121,573,000 from $72,528,000
at December 31, 1999 and accounted for 35.1% of the total deposit growth for the
period. Other time deposits increased $29,195,000 or 7.6% to $411,329,000 from
$382,134,000 at December 31, 1999. Growth in time deposits accounted for 56.0%
of the total increase in deposits for the first nine months of 2000.
Certificates of deposit accounted for 60.3% of total deposits at September 30,
2000 compared to 61.1% at year-end 1999.
YNB also markets 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 September 30, 2000, YNB had approximately $139,210,000 in
outstanding certificates of deposit raised through this service. This reflects a
net increase of $38,580,000 in 2000. Management anticipates that this market
will continue to play an important role in funding future asset growth. However,
as new branches open and if the efforts to generate lower cost core deposits
continue to be successful, it is anticipated that these new lower costing
deposits will replace higher costing certificates of deposit.
Non-interest bearing demand deposits increased $1,910,000 or 2.1% to $92,129,000
at September 30, 2000 when compared to $90,219,000 at December 31, 1999. This
increase is primarily due to management's ongoing efforts to capture and expand
the deposit relationships of both new and existing consumer and business
customers. YNB recently introduced and is aggressively marketing a totally free
checking account for personal depositors. This account has been well received
and its growth accounts for a portion of the increased non-interest bearing
deposit balances and provides YNB with increased opportunities to cross sell
other products.
15
<PAGE>
Interest bearing demand deposits increased $5,282,000 or 8.6% to $66,765,000 at
September 30, 2000 from $61,483,000 at year-end 1999. In addition, money market
balances increased $59,100,000 or 103.4% to $116,243,000 at September 30, 2000
from $57,143,000 at December 31, 1999. This increase resulted from higher rates
paid and the aggressive marketing campaign of the Premier Money Market Account
conducted by YNB. Savings deposits decreased $4,920,000 or 6.1% to $75,380,000
at September 30, 2000 from $80,300,000 at December 31, 1999. A key factor for
this decline was the migration of accounts from lower yielding savings to higher
yielding money market accounts.
While it is management's intention 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. YNB's ability to
generate lower cost deposits could affect achieving earnings targets. The
continuing reliance on higher cost certificates of deposit to fund asset growth
is a major factor in the continued pressure on YNB's net interest margin.
YNB continues to seek lower cost funding sources. In January 2000, YNB
introduced YNB Online, PC based home and business banking service. This service
will allow customers to have greater access to their accounts and should help to
make YNB's deposit products more competitive in the market place. Another source
of low cost funds is the opening of new branches to serve a wider market area.
In April 2000, YNB opened its first supermarket branch located in Ewing
Township, New Jersey. Management believes that this branch should be a strong
source of both core deposits and consumer loans. In addition, management
continues to seek additional branch sites. YNB currently has regulatory approval
to open three additional branches. One of these branches will be located in
Lawrence Township, Mercer County, New Jersey and will fill a gap in YNB's
existing market coverage. Management anticipates opening this branch in December
2000. The other two branches will expand YNB into the neighboring counties of
Burlington and Hunterdon. The Burlington County branch will be located in
Bordentown, New Jersey and allow YNB to better serve a market where it already
does business. This branch should open in the first quarter of 2001. The
Hunterdon County branch will be located in Flemington, New Jersey. Management
expects this branch to open in November 2000. Management believes Hunterdon
County represents a strong market opportunity for both loans and deposits. To
better service this market a local business development board was established to
promote the bank. Management intends to continue to seek and evaluate
opportunities for additional branches both inside and outside of its core Mercer
County market place. Management believes that expanding the branch network to
tap new deposit markets is the best solution for generating lower cost funds to
support asset growth.
16
<PAGE>
Borrowed Funds
Borrowed funds totaled $392,966,000 at September 30, 2000, an increase of
$94,277,000 or 31.5% when compared to $298,689,000 at December 31, 1999. The
growth in Federal Home Loan Bank advances (FHLB) was used to fund the Investment
Growth Strategy and to replace called or matured securities sold under
agreements to repurchase accounted for the increase in borrowed funds.
Approximately $292,158,000 or 74.6% of borrowed funds at September 30, 2000 are
related to the Investment Growth Strategy. In determining funding, as Investment
Growth Strategy funding matures or is called, management evaluates several
factors: the future outlook for interest rates, interest rate risk, the trade
off between maximizing current income or preserving longer term earnings and
other relevant factors. Management anticipates that funding costs associated
with borrowed funds will increase as shorter-term repurchase agreements mature
and callable funding at below market rates is called. At September 30, 2000,
$282,500,000 or 96.7% of the Investment Growth Strategy funding was in callable
funding compared to $220,000,000 or 97.8% at December 31, 1999.
Securities sold under agreements to repurchase totaled $24,658,000 at September
30, 2000 compared to $45,000,000 at December 31, 1999. $10,000,000 or 40.6% of
the repurchase agreements outstanding at September 30, 2000 were callable
compared to $40,000,000 or 88.9% at December 31, 1999. Management has been
shifting funding from repurchase agreements to callable FHLB advances due to
lower funding costs available at the FHLB. With the increase in interest rates
since the end of 1999, management anticipates that repurchase agreement costs
will rise as shorter-term repurchase agreements mature and below market rate
callable repurchase agreements are called and are replaced at higher market
rates.
YNB had FHLB advances outstanding of $365,774,000 at September 30, 2000, an
increase of $115,481,000 or 46.1% when compared to $250,293,000 at December 31,
1999. YNB continues to utilize callable FHLB advances to fund both Investment
Growth Strategy purchases as well as other earning assets. In 2000, as advances
were called or matured, management has followed a strategy of extending call
dates when the rates appear attractive. At September 30, 2000 callable advances
totaled $348,000,000 or 95.1% of advances outstanding compared to $239,500,000
or 95.7% at December 31, 1999. Callable FHLB advances have terms of two to ten
years and are callable after periods ranging from three months to five years.
There is $142,000,000 in callable advances with call dates in 2000 outstanding
as of September 30, 2000. 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.
Borrowed funds included $1,300,000 related to the ESOP. The ESOP purchased
155,340 shares of the common stock, no par value, 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 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 $37,485,000 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
$25,000,000 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.
17
<PAGE>
Company - Obligated Mandatorily Redeemable Trust Preferred Securities of
Subsidiary Trust Holding Solely Junior Subordinated Debentures of the Company
(Trust Preferred Securities)
On June 23, 2000, the Holding Company through the Trust II, completed the sale
of $15,000,000 of 9.50% Trust Preferred Securities to a nonaffiliated financial
institution.
On October 16, 1997, the Holding Company through the Trust, completed the sale
of $11,500,000, of 9.25% Trust Preferred Securities to the public.
As of September 30, 2000, $25,943,000 or 97.9% of the $26,500,000 in trust
preferred securities outstanding qualify as Tier I capital. The remaining
$557,000 is treated as Tier II capital. Management anticipates that all Trust
Preferred outstanding at September 30, 2000 will qualify for Tier I capital
within the next 12 months.
Equity Capital
On June 23, 2000, the Holding Company completed the private placement of 68,500
units, each unit consisting of 10 shares of common stock and 1 common stock
purchase warrant. The units were sold to a limited number of accredited
investors and generated gross proceeds of $6,850,000. Net proceeds after
offering costs was $6,835,000.
$21,300,000 of the total proceeds raised in 2000, by the trust preferred and
equity offerings was contributed to the Bank to support future asset growth.
Stockholders' equity at September 30, 2000 totaled $71,932,000, an increase of
$13,107,000 or 22.3%, compared to $58,825,000 at December 31, 1999. This net
increase resulted from the following factors:
(i) YNB earned net income of $7,717,000 for the nine months ended September
30, 2000 and paid cash dividends of $2,096,000.
(ii) The unrealized loss on available for sale securities was $5,898,000 at
September 30, 2000 compared to an unrealized loss of $6,264,000 at
December 31, 1999. This decrease in the unrealized loss resulted in a
$67,000 increase in stockholders' equity.
(iii) YNB received $52,000 in proceeds from exercised options and $6,835,000
from the equity capital offering. Offsetting these increases was a
$67,000 decrease associated with the fair market value adjustment
related to the allocation of shares from the employee stock option
plan.
(iv) A reduction in commitment to ESOP of $300,000 to $1,300,000 at
September 30, 2000 from $1,600,000 resulted in an increase of $300,000
in Stockholders' equity.
18
<PAGE>
While total Stockholders' equity increased $13,107,000, Tier one regulatory
capital increased $27,184,000 or 35.5% and total regulatory capital increased
$29,073,000 or 34.0%. The following table sets forth regulatory capital ratios
for the Holding Company and the Bank as of September 30, 2000 and December 31,
1999.
<TABLE>
<CAPTION>
Amount Ratios
--------------------------------------------------------------------------------------------------------------------
dollars in thousands 09/30/00 12/31/99 09/30/00 12/31/99
-------------------------------------------------- ---------------- ------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Risk-based capital:
Tier 1:
Holding Company 103,766 $ 76,579 11.4% 10.3%
Bank 102,897 76,279 11.3 10.2
-------------------------------------------------- ---------------- ------------- ---------------- -----------------
Total:
Holding Company 114,620 85,544 12.5 11.5
Bank 113,194 85,244 12.4 11.4
-------------------------------------------------- ---------------- ------------- ---------------- -----------------
Tier 1 leverage:
Holding Company 103,766 76,579 8.3 7.9
Bank 102,897 $ 76,279 8.2% 7.8%
--------------------------------------------------------------------------------------------------------------------
</TABLE>
The minimum regulatory capital requirements for financial institutions require
institutions to have a Tier 1 leverage ratio of 4.0%; a Tier 1 risk-based
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 September 30, 2000, the ratios of the
Holding Company and the Bank exceeded the ratios required to be considered well
capitalized. It is management's goal to provide YNB with adequate capital to
continue to support asset growth and maintain both the Bank and Holding Company
as well capitalized institutions.
19
<PAGE>
Credit Quality
The following table sets forth nonperforming assets and risk elements in YNB's
loan portfolio by type as of September 30, 2000 and December 31, 1999.
In the third quarter of 2000, management of YNB became aware of a fraudulent
loan situation committed by an employee in the consumer loan department of the
bank. After a careful review of the consumer loan portfolio management believes
that $413,000 of consumer loans represent all of the fraudulent transactions
entered into by this individual. In the third quarter of 2000, $100,000 of these
loans was charged off to the loan loss reserve with the remaining $313,000
listed as nonaccrual loans. Management is currently working with its insurance
carrier and the amount of recovery, if any, cannot be determined at this time.
<TABLE>
<CAPTION>
Nonperforming Assets
--------------------------------------------------------------------------------------------------
(in thousands) 09/30/00 12/31/99
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Nonaccrual loans:
Commercial and industrial $ 993 $ 676
Real estate - mortgage 4,754 1,189
Consumer 275 12
Other -- 312
--------------------------------------------------------------------------------------------------
Total 6,022 2,189
--------------------------------------------------------------------------------------------------
Restructured loans 751 540
--------------------------------------------------------------------------------------------------
Loans 90 days or more past due:
Commercial and industrial 616 46
Real estate - mortgage 710 277
Consumer 21 26
--------------------------------------------------------------------------------------------------
Total 1,347 349
--------------------------------------------------------------------------------------------------
Total nonperforming loans 8,120 3,078
--------------------------------------------------------------------------------------------------
Other real estate 2,253 2,585
--------------------------------------------------------------------------------------------------
Total nonperforming assets $ 10,373 $ 5,663
--------------------------------------------------------------------------------------------------
Allowance for loan losses to total loans, end of period 1.34% 1.39%
Allowance for loan losses to nonperforming loans, end of
period 126.81% 291.26%
==================================================================================================
</TABLE>
At September 30, 2000, nonperforming loans, which are loans 90 days and more
past due, restructured loans and nonaccrual loans, totaled $8,120,000, a
$5,042,000 or 163.8% increase from the $3,078,000 at December 31, 1999. The
increase in nonperforming loans was primarily due to four individual loan
relationships totaling $4,903,000 that were classified as nonaccrual during
2000. These loans primarily consist of commercial and industrial loans secured
by commercial real estate and commercial real estate related loans.
Other real estate at September 30, 2000 totaled $2,253,000, a $332,000 or 12.8%
decrease when compared to $2,585,000 at December 31, 1999.
20
<PAGE>
Nonperforming assets at September 30, 2000 totaled $10,373,000 a $4,710,000 or
83.2% increase from the $5,663,000 level at December 31, 1999. Total
nonperforming assets as a percentage of total assets were 0.75% at September 30,
2000 compared to 0.50% at December 31, 1999. The increase in nonperforming
assets resulted from the higher level of nonperforming loans partially offset by
a reduction in other real estate.
Allowance for Loan Losses
The allowance for loan losses totaled $10,297,000 at September 30, 2000, an
increase of $1,332,000 from the $8,965,000 at year-end 1999. The provision for
loan losses for the nine months of 2000 was $2,900,000 compared to $2,400,000
for the same period of 1999. Gross chargeoffs were $1,681,000 for the nine
months of 2000 compared to $879,000 for the same period in 1999. Gross
recoveries were $113,000 for the nine months of 2000 compared to $68,000 for the
same period in 1999. Annualized net chargeoffs as a percentage of average loans
were 0.30% for the nine months of 2000 and 0.17% 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 1.34% at September 30, 2000 compared to
1.39% at December 31, 1999. 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 126.81% at September 30, 2000 compared to 291.26% at
December 31, 1999. The decrease in this ratio was due to an increase in
nonperforming loans.
Results of Operations
Net Income
YNB reported net income of $7,717,000 for the nine months ended September 30,
2000, an increase of $1,973,000 or 34.3% over the $5,744,000 for the same period
in 1999. The increase in net income for the nine months of 2000 compared to the
same period in 1999 is attributable to higher net interest income and increased
non-interest income offset by increased non-interest expenses and, to a lesser
extent, a higher provision for loan losses. Basic earnings per share for the
nine months ended September 30, 2000 increased $0.13 or 13.1% to $1.12 compared
to $0.99 for the same period in 1999. Diluted earnings per share for the nine
months ended September 30, 2000 was $1.11, an increase of $0.13 or 13.3% when
compared to $0.98 for the same period of 1999.
On a quarterly basis, net income for the third quarter of 2000 was $2,692,000
and represented a $492,000 or 22.4% increase over net income for the same period
in 1999. On a per share basis, basic and diluted earnings per share for the
third quarter of 2000 were $0.37, an increase of $0.04 or 12.1% when compared to
the second quarter of 1999. The reasons for the increase are the same as
discussed above.
21
<PAGE>
Net Interest Income
YNB's net interest income for the nine months of 2000 was $28,172,000, an
increase of $6,760,000 or 31.6% from the same period in 1999. The principal
factor contributing to this increase was an increase in interest income of
$22,346,000 resulting primarily from increased loan and securities balances and
higher yields offset by an increase of $15,586,000 in interest expense. This
increase in interest expense was primarily due to both higher average balances
of time deposits and borrowed funds and higher interest rates on all deposit
types and borrowed funds.
The net interest margin (tax equivalent basis) which is net interest income
divided by average interest earning assets, for the nine months of 2000, was
3.21% a 9 basis point or 2.7% decline compared to 3.30% for the same period in
1999. The principal factors causing the narrowing of the net interest margin
were the more rapid increase in the cost of interest bearing liabilities as
compared to the increased yield on interest earning assets. Total interest
bearing liability costs increased 64 basis points as compared to a 52 basis
point increase in the yield on interest earning assets. Interest income on
securities for the nine months ended September 30, 2000 included a one-time FHLB
stock dividend in the amount of $412,000. This payment increased the reported
net interest margin by 5 basis points for the year.
On a quarterly basis, net interest income was $9,981,000 an increase of
$2,086,000 or 26.4% when compared to the third quarter of 1999. The net interest
margin (tax equivalent basis) for the three months ended September 30, 2000 was
3.17% a 14 basis point or 4.2% decrease from the same period in 1999. As
mentioned above the $412,000 FHLB stock dividend increased the reported net
interest margin for the quarter ended September 30, 2000 by 13 basis points. The
reasons for the decline are the same as discussed above.
The net interest margin for the 2000 and 1999 comparative periods was also
negatively impacted by the Investment Growth Strategy. The securities in the
Investment Growth Strategy at September 30, 2000, were approximately
$284,000,000 compared to $236,800,000 at September 30, 1999. The targeted spread
on this strategy is 75 basis points after tax. Because of the targeted spread on
this strategy, there is a negative impact to the net interest margin and return
on average assets. Conversely, this strategy is designed to increase both return
on average equity and earnings per share, the primary goals of the strategy. The
goals of this strategy continue to be achieved.
Interest Income
For the nine months of 2000 total interest income was $71,887,000, an increase
of $22,346,000 or 45.1% when compared to interest income of $49,541,000 for the
same period in 1999. This increase is due to higher average balances in both
loans and securities and higher yields on both earning asset types. Average
loans increased $155,821,000 or 28.5% and the yield increased 51 basis points to
8.86% from 8.35%. The increased loan yields reflected the higher prime rate of
interest as well as higher overall interest rates in the nine months of 2000
compared to the same period in 1999. Interest and fees on loans for the nine
months ended September 30, 2000 increased $12,466,000 or 36.4% to $46,667,000
from $34,201,000 for the same period in 1999. Average securities outstanding for
the nine months ended September 30, 2000 increased $143,569,000 or 44.7% to
$464,446,000 when compared to the $320,877,000 for the same period of 1999. Over
the same period, the yield on the security portfolio increased 68 basis points
to 6.78% from 6.10%. The yield on the security portfolio includes a $412,000
one-time dividend from the FHLB. This payment increased the yield on the
investment portfolio by 12 basis points. Without the one time dividend payment
the yield on the investment portfolio would have been 6.66%. The increase in
average balance and yield resulted in interest on securities increasing
$8,923,000 or 60.7% to $23,614,000 for the nine months ended September 30, 2000
compared to $14,691,000 for the same period in 1999. Overall, the yield on YNB's
interest earning asset portfolio increased 52 basis points to 7.99% for the nine
months ended September 30, 2000 from the 7.47% for the same period in 1999.
22
<PAGE>
For the third quarter of 2000, total interest income was $26,507,000, an
increase of $8,134,000 or 44.3% when compared to $18,373,000 for the third
quarter of 1999. The increase was due to both higher average balances of both
loans and securities and higher yields on both asset types. The overall yield on
earning assets for the third quarter of 2000 was 8.22% a 70 basis point increase
from the 7.52% for the same period of 1999. The increase in yield was primarily
due to the higher prime rate of interest and higher yields on the securities
portfolio.
Interest Expense
Total interest expense increased $15,586,000 or 55.4% to $43,715,000 for the
nine months of 2000 compared to $28,129,000 for the same period in 1999. The
increase in interest expense for the comparable time periods is primarily from
higher levels of time deposits and borrowed funds. In addition to the higher
balances, the rates paid on both deposits and borrowed funds increased due to
the higher rates experienced in 2000 when compared to 1999. The average rate
paid on interest bearing liabilities for the nine months ended September 30,
2000 increased 64 basis points to 5.39% from 4.75% for the same period of 1999.
Interest on other time deposits under $100,000 increased $5,405,000 to
$17,831,000 for the nine months ended September 30, 2000 from $12,426,000 for
the same period in 1999. This increase was caused by both an increase of
$95,107,000 in the average outstanding balance to $401,225,000 for the nine
months ended September 30, 2000, when compared to the outstanding average
balance of $306,118,000 for the nine months ended September 30, 1999, and an
increase of 52 basis points in the cost to 5.93% from 5.41% for the same periods
as described above. Interest expense on certificates of deposit under $100,000
accounted for 40.8% of total interest expense for the nine months ended
September 30, 2000 and 44.2% of the total increase in interest expense for the
same period last year. During the nine months of 2000, YNB offered attractive
rates on CDs locally and nationwide to fund loan growth and enhance the
liquidity profile of YNB.
Interest on certificates of deposit (CDs) of $100,000 or more increased
$2,919,000 or 163.5% to $4,704,000 for the nine months ended September 30, 2000
from $1,785,000 for the same period in 1999. The increase was caused by an
increase in the average outstanding balance of $53,211,000 or 114.6% to
$99,627,000 for the nine months ended September 30, 2000 when compared to the
outstanding average balance of $46,416,000 for the nine months ended September
30, 1999. The cost of certificates of deposit of $100,000 or more increased 117
basis points to 6.30% for the nine months of 2000 from 5.13% for the same period
in 1999.
23
<PAGE>
Interest expense on borrowed funds increased $4,940,000 or 51.7% to $14,492,000
for the nine months of 2000 when compared to $9,552,000 for the same period in
1999. The increased expense was caused by a $95,073,000 increase in the average
balance outstanding in the first nine months of 2000 to $339,289,000 when
compared to the $244,216,000 for the same period in 1999. The rate paid on
borrowed funds increased 48 basis points for the nine months ended September 30,
2000 to 5.70% from the 5.22% for the same period last year. The primary causes
for the increase in interest expense on borrowed funds are higher rates and the
higher level of borrowings used to fund both the Investment Growth Strategy and
other earning asset growth. The higher interest rate environment in 2000 has
resulted in increased costs as existing below market callable FHLB advances and
repurchase agreements are called and are replaced at current market level rates.
Management anticipates that if interest rates continue to rise the cost of
borrowed funds will also increase.
Interest expense on savings, money markets and interest bearing demand accounts
increased $1,934,000 or 54.2% to $5,502,000 for the nine months of 2000 when
compared to the $3,568,000 for the same period in 1999. Early in January 2000,
YNB redesigned its Premier Money Market Account for both personal and business
customers. The most significant change was an increase, on a tiered basis, in
the rate paid to be more competitive in the market place. This had the immediate
impact of increasing the cost of existing money market balances and was a key
factor in the increased cost on these deposit types. Money market accounts are
historically less expensive than CDs and present more opportunities to cross
sell other bank products and services. YNB has already experienced substantial
growth in Premier Money Market balances due to the higher rate and aggressive
marketing campaign conducted to promote the product. The cost of savings, money
markets and interest bearing demand deposits increased 65 basis points to 3.28%
for the nine months of 2000 when compared to 2.63% for the same period in 1999.
At the same time, the average balance of these deposit types increased
$42,500,000 or 23.5% to $223,605,000 for the nine months of 2000 from
$181,105,000 for the same period in 1999.
Total interest expense for the third quarter of 2000 increased $6,048,000 or
57.7% to $16,526,000 from $10,478,000 for the same period in 1999. The overall
cost of interest bearing liabilities increased 86 basis points to 5.68% from
4.82% for the third quarter of 1999. The reasons for the increase in interest
expense for the second quarter are the same as discussed above and the impact of
the Trust preferred securities completed in June 2000. The trust preferred issue
resulted in interest expense increasing $356,000 and increased the quarterly
cost of funds by 14 basis points.
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 attract lower cost deposits to fund asset growth,
management has launched several new products including YNB Online, an improved
Premier Money Market account and a new free checking product. Management
anticipates that over time, these new products, along with additional branches
in new markets should result in lower cost core deposits providing a higher
percentage of the new funding than has been experienced recently. This
anticipated improvement in the deposit mix will help to control interest expense
going forward. However, the ability of YNB 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.
24
<PAGE>
Provision for Loan Losses
YNB provides for possible loan losses by a charge to current operations. The
provision for loan losses for the nine months ended September 30, 2000 was
$2,900,000, a $500,000 or 20.8% increase over the $2,400,000 provision recorded
for the same period of 1999.
For the three months ended September 30, 2000 the provision for loan losses was
$1,200,000, a $200,000 or 20.0% increase from the same period in 1999. The
increase in the provision for both the quarter and year to date comparisons was
primarily due to strong loan growth, and increased net charge offs. 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 nine months of 2000 was $2,491,000, an
increase of $227,000 or 10.0% over non-interest income of $2,264,000 for the
same period in 1999. The increase was due principally to increased service
charges on deposit accounts.
Service charges on deposit accounts increased $167,000 or 17.1% to $1,141,000
for the nine months ended September 30, 2000 compared to $974,000 for the same
period in 1999. This increase accounted for 73.6% of the total increase in
non-interest income for the period. This increase reflects the continuing growth
in core deposits as well as better collection efforts.
Other non-interest income increased $119,000 or 9.6% to $1,356,000 for the nine
months ended September 30, 2000 from $1,237,000 for the same period in 1999.
Increases in ATM fees and income on Bank owned life insurance assets accounted
for the increase. The single largest component of other non-interest income was
income derived from bank owned life insurance assets, which totaled $614,000 for
the nine months of 2000 as compared to $573,000 for the same period in 1999.
This income represented 24.6% and 25.3% of total other non-interest income for
the nine months of 2000 and 1999 respectively. The income earned on these assets
is used to offset expenses on deferred compensation programs.
For the three months ended September 30, 2000 total non-interest income
increased $85,000 or 10.9% to $866,000 from $781,000 for the same period in
1999. The key factors for the increase are the same as discussed above with
service charges on deposit accounts increasing $31,000 and accounting for 36.5%
of the total increase in non-interest income.
Non-interest income represented 3.3% of YNB's total revenue in the nine months
of 2000 and 3.2% of total revenue for the third quarter of 2000 compared to 4.4%
and 4.1% for the same periods in 1999. The reduction in these ratios was caused
by the growth rate of interest income exceeding the growth rate of non-interest
income. Management views this low level of non-interest income as an opportunity
to increase overall revenue. 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.
25
<PAGE>
Non-interest Expense
Total non-interest expense increased $3,609,000 or 27.2% to $16,876,000 for the
nine months of 2000 compared to $13,267,000 for the same period in 1999. The
increase in non-interest expense was primarily due to increases in salaries and
employee benefits, occupancy, and other non-interest expenses. Total
non-interest expenses, on an annualized basis, as a percentage of average assets
were 1.80% for the nine months of 2000 compared to 1.91% for the same period of
1999. The improvement in this ratio is due to the strong asset growth
experienced by YNB. YNB's efficiency ratio for the nine months of 2000 was
55.04%, a decrease from the 56.04% for the same period in 1999. 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 $1,295,000 or 17.7% to $8,625,000 for the
nine months of 2000 compared to $7,330,000 for the same period in 1999. Salary
and benefits expense accounted for 51.1% of total non-interest expenses for the
nine months of 2000. Salary expense increased $1,153,000 or 20.3% reflecting
increased staffing levels throughout YNB as the organization continues to grow
and normal salary increases. Benefit expense increased $142,000 or 8.3%. The
increase in salary and benefit expense in the nine months of 2000 accounted for
35.9% of the total increase in non-interest expense when the nine months of 2000
is compared to the same period in 1999.
Occupancy expense for the nine months of 2000 was $1,876,000, an increase of
$909,000 or 94.0% compared to $967,000 for the same period in 1999. Total rent
expense on leased properties increased $483,000 and accounted for 53.1% of the
total increase for the period. The primary cause for the increase in rent
expense, as well as the total increase in occupancy expense, were the expenses
associated with YNB's corporate headquarters building. YNB first occupied the
building in October of 1999.
Equipment expense increased $290,000 or 25.8% to $1,415,000 for the nine months
of 2000 from $1,125,000 for the same period in 1999. The increase in equipment
costs reflects the continuing efforts of YNB to maintain and upgrade technology
in order to provide the highest quality products and service and increase
productivity. Equipment costs included depreciation on equipment, which totaled
$855,000 for the nine months of 2000 reflecting an increase of $194,000 or 29.3%
from the $661,000 for the same period in 1999. The increase in depreciation
accounted for 66.9% of the total increase in equipment expense. A significant
portion of the increased equipment expense related to the equipment costs
associated with YNB's new corporate headquarters.
26
<PAGE>
Other non-interest expenses increased $1,115,000 or 29.0% to $4,960,000 for the
nine months of 2000 when compared to the $3,845,000 for the same period in 1999.
A key factor for the increase in other non-interest expenses related to $411,000
in costs associated with the restructuring of one commercial loan relationship.
This expense accounted for 36.9% of the total increase in other non-interest
expense and 11.4% of the increase in total non-interest expense. While most
expense categories in other non-interest expenses increased, two expense
categories, other real estate expense and marketing expense accounted for 30.0%
of the total increase. Other real estate expenses totaled $657,000 for the nine
months ended September 30, 2000 an increase of $208,000 or 46.3% when compared
to the $449,000 for the same period in 1999. Marketing expense for the nine
months ended September 30, 2000 increased $127,000 or 22.8% to $685,000 from
$558,000 for the same period in 1999. This increase resulted from increased
efforts to promote lower cost deposit products. Management closely monitors
non-interest expenses and seeks to control the growth of these expenses.
However, as YNB continues to grow, the costs associated with properly managing
the organization will also continue to increase.
For the three months ended September 30, 2000 total non-interest expense
increased $1,251,000 or 27.2% to $5,845,000 from $4,594,000 for the same period
in 1999. Total non-interest expense on an annualized basis, as a percentage of
average assets was 1.74% for the three months ended September 30, 2000 and is
below the 1.80% for the same period in 1999. YNB's efficiency ratio for the
three months ended September 30, 2000 was 53.89% and in over the 52.95% for the
same period in 1999. Salary and benefit expense increased $367,000 or 14.1% to
$2,969,000 from $2,602,000 for the same period in 1999. Occupancy expense
increased $311,000 or 93.4% to $644,000 from $333,000 for the same period in
1999. Equipment expense increased $75,000 or 18.9% to $471,000 from $396,000 for
the same period in 1999. Occupancy and equipment cost increases are primarily
due to the costs associated with the new corporate headquarters building. Other
non-interest expense increased $498,000 or 39.4% to $1,761,000 from $1,263,000
for the same period in 1999. Other real estate expense increased $305,000 or
317.7% to $401,000 for the three months ended September 30, 2000 as compared to
$96,000 for the same period in 1999. This increase accounted for 61.2% of the
total increase in other non-interest expense for the period. The other 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 nine months ended September 30, 2000 was
29.1% compared to 28.3% for the same period in 1999. The modest increase in the
tax rate resulted from the growth in tax-free income not keeping pace with the
growth in overall income. Total income tax expense for the nine months ended
September 30, 2000 was $3,170,000, an increase of $905,000 from the $2,265,000
for the same period in 1999. The increase in tax expense resulted from higher
taxable income and a higher effective tax rate.
The effective income tax rate for the three months ended September 30, 2000 was
29.2% compared to 28.6% for the same period in 1999. Total income tax expense
for the three months ended September 30, 2000 was $1,110,000, an increase of
$228,000 from the $882,000 for the same period in 1999. The reasons for the
increase are the same as these discussed above.
27
<PAGE>
Item 3: Quantitative and Qualitative Disclosure about Market Risk
There have been no material changes in YNB's market risk from December 31, 1999
except as discussed below. For information regarding YNB's market risk refer to
the Company's 1999 Annual Report to stockholders.
Changes in Earnings Risk
Net interest income over the next twelve-month period indicates an increased
risk to lower rates (-200 basis points) at September 30, 2000 than reported at
December 31, 1999. Comparing the simulation results of this low rate scenario to
the flat rate interest rate scenario indicates a change in net interest income
of -5.3% compared to -2.5% at year end 1999. At the same time, YNB's exposure to
higher rates (+200 basis points) increased modestly to a 0.3% change in net
interest income compared to a 1.5% change at year-end 1999. The cumulative
one-year gap remained a negative $53,240,000 or -3.8% of total assets at
September 30, 2000 compared to a negative $152,280,000 or -13.6% of assets at
year-end 1999. The dollar change in the gap was $99,040,000.
Changes in Market risk
Management measures longer-term market risk through the Economic Value of
Portfolio Equity ("EVPE"). The present value of asset and liability cash flows
are subjected to rate shocks of plus or minus 200 basis points. The variance in
the residual, or economic value of equity is measured as a percentage of total
assets. This variance is managed within a negative 3% boundary.
At September 30, 2000, the EVPE changes by -3.86% for rate shifts of +200 and
-2.26% for rate shifts of -200 basis points. The non-symmetry of the results is
indicative of the callable funding utilized to fund earning asset growth. This
compares to changes of -3.67% and -0.01% respectively at December 31, 1999 and
-4.02% and -0.21% at September 30, 1999.
The primary causes for this change in risk to rising rates since year-end 1999
are primarily due to the increased holding of floating rate cmos with life time
interest rate caps, a large investment portfolio and the addition of fixed rate
loans.
Management has initiated strategies designed to bring this measurement back
within policy guidelines.
PART II: OTHER INFORMATION
Item 1: Legal Proceedings
Not Applicable.
Item 2: Changes in Securities and Use of Proceeds
(a) Not Applicable.
(b) Not Applicable.
(c) On June 23, 2000, the Registrant issued and sold 68,500 units for an
aggregate purchase price of $6,850,000. Each unit comprises one share of the
Registrant's common stock, no par value per share (the "Common Stock") and one
common stock purchase warrant (a "Warrant"). The units were issued in a private
placement to a limited number of accredited investors, and the offering was
exempt from registration under the Securities Act of 1933 pursuant to section
4(2) thereof and Rule 506 of Regulation D thereunder. Each Warrant entitles its
holder to purchase one share of Common Stock at a purchase price of $12.00 per
share, subject to antidilution provisions, for a period of ten years from the
date of issuance, subject to earlier termination in certain circumstances.
(d) Not Applicable.
28
<PAGE>
Item 3: Defaults Upon Senior Securities
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
(a) Exhibits
(b) Reports on Form 8-K. There were no Form 8-K reports filed during the quarter
for which this report is filed.
29
<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
4.3 The Registrant hereby agrees to furnish to the Commission,
upon request, a copy of each instrument defining the rights
of the holders of the Registrant's 9.25% Subordinated
Debentures due 2027 and the Registrant's 9.50% Series A
Junior Subordinated Deferrable Interest Debentures due 2030
relating to Company-obligated Mandatorily Redeemable Trust
Preferred Securities of subsidiary trusts.
(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
(M) 10.4 Employment Contract between Registrant and James F. Doran
(M) 10.5 Employment Contract between Registrant and Richard A. Kauffman
(M) 10.6 Employment Contract between Registrant and Mary C. O'Donnell
(M) 10.7 Employment Contract between Registrant and Frank Durand III
(D) 10.8 Salary Continuation Plan for the Benefit of Patrick M. Ryan
</TABLE>
30
<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
(M) 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 Carduner's 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
(N) 10.18 1997 Stock Option Plan, as amended effective May 2, 2000.
(M) 10.19 Employment Contract between Registrant and Howard N. Hall
(M) 10.20 Employment Contract between Registrant and Sarah J. Strout
(M) 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>
31
<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, As amended
(L) 10.30 Lease Agreement between Sycamore Street Associates and the Bank dated October
30, 1998
10.31 List of Subsidiaries of the Registrant
(M) 10.32 Employment Contract between Registrant and Kathleen A. Fone
(O) 10.33 Lease agreement between Samuel and Margaret Marrazzo and the Bank dated April 1,
2000
10.34 Lease agreement between AAA Central-West Jersey, Inc. and the Bank dated August
23, 2000
10.35 Lease agreement between Union Properties, LLC and the Bank dated July 5, 2000 as
revised September 5, 2000
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
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(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
(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.
(M) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999.
(N) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 2000.
(O) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 2000.
</TABLE>
33
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
YARDVILLE NATIONAL BANCORP
-----------------------------------
(Registrant)
Date: November 14, 2000 By: /s/ Stephen F. Carman
-------------------- ------------------------------
Stephen F. Carman
Executive Vice President and
Chief Financial Officer
34
