10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2004
[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE 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 incorporation or organization)	(IRS Employer Identification No.)

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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) 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 April 29, 2004, the following class and number of shares were outstanding:

Common Stock, no par value	10,459,088
Class	Number of shares outstanding

INDEX
YARDVILLE NATIONAL BANCORP AND SUBSIDIARIES

		PAGE NO.
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Consolidated Statements of Condition March 31, 2004 (unaudited) and December 31, 2003		1
	Consolidated Statements of Income Three months ended March 31, 2004 and 2003 (unaudited)		2
	Consolidated Statements of Cash Flows Three months ended March 31, 2004 and 2003 (unaudited)		3
	Notes to Consolidated Financial Statements		4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		7
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		27
Item 4.	Controls and Procedures		30
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings		30
Item 2.	Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities		30
Item 3.	Defaults Upon Senior Securities		30
Item 4.	Submission of Matters to a Vote of Security Holders		30
Item 5.	Other Information		30
Item 6.	Exhibits and Reports on Form 8-K		31
Signatures			32
Index to Exhibits			33
SUBLEASE AGREEMENT
EMPLOYMENT AGREEMENT WITH KATHLEEN O. BLANCHARD
EMPLOYMENT AGREEMENT WITH JOANNE C. O'DONNELL
CERTIFICATION CEO PURSUANT TO SECTION 302
CERTIFICATION CFO PURSUANT TO SECTION 302
CERTIFICATION CEO PURSUANT TO SECTION 906
CERTIFICATION CFO PURSUANT TO SECTION 906

i

Part I: FINANCIAL INFORMATION

Item 1. Financial Statements

Yardville National Bancorp and Subsidiaries

Consolidated Statements of Condition

(Unaudited)

	March 31,			December 31,
(in thousands, except share data)	2004			2003
Assets:
Cash and due from banks	$	25,498		$	25,785
Federal funds sold		66,920			7,370
Cash and Cash Equivalents		92,418			33,155
Interest bearing deposits with banks		27,161			20,552
Securities available for sale		733,517			798,007
Investment securities (market value of $72,766 in 2004 and $70,476 in 2003)		70,784			68,686
Loans		1,584,939			1,443,355
Less: Allowance for loan losses		(18,162	)		(17,295	)
Loans, net		1,566,777			1,426,060
Bank premises and equipment, net		11,438			12,307
Bank owned life insurance		43,289			42,816
Other assets		27,112			29,610
Total Assets	$	2,572,496		$	2,431,193
Liabilities and Stockholders’ Equity:
Deposits
Non-interest bearing	$	179,697		$	163,812
Interest bearing		1,435,151			1,319,997
Total Deposits		1,614,848			1,483,809
Borrowed funds
Securities sold under agreements to repurchase		10,000			10,000
Federal Home Loan Bank advances		726,000			726,000
Obligation for Employee Stock Ownership Plan (ESOP)		660			755
Other		472			1,325
Total Borrowed Funds		737,132			738,080
Subordinated debentures		47,428			47,428
Other liabilities		21,043			18,319
Total Liabilities	$	2,420,451		$	2,287,636
Stockholders’ equity
Preferred stock: no par value Authorized 1,000,000 shares, none issued
Common stock: no par value Authorized 20,000,000 shares in 2004 and 2003 Issued 10,632,233 shares in 2004 and 10,619,855 shares in 2003		90,335			90,079
Surplus		2,205			2,205
Undivided profits		58,829			56,152
Treasury stock, at cost: 180,594 shares		(3,160	)		(3,160	)
Unallocated ESOP shares		(660	)		(755	)
Accumulated other comprehensive income (loss)		4,496			(964	)
Total Stockholders’ Equity		152,045			143,557
Total Liabilities and Stockholders’ Equity	$	2,572,496		$	2,431,193

See Accompanying Notes to Unaudited Consolidated Financial Statements.

1

Yardville National Bancorp and Subsidiaries

Consolidated Statements of Income

(Unaudited)

	Three Months Ended
	March 31,
(in thousands, except per share amounts)	2004		2003
INTEREST INCOME:
Interest and fees on loans	$	23,099	$	20,054
Interest on deposits with banks		51		7
Interest on securities available for sale		8,165		8,833
Interest on investment securities:
Taxable		43		58
Exempt from Federal income tax		778		631
Interest on Federal funds sold		82		211
Total Interest Income		32,218		29,794
INTEREST EXPENSE:
Interest on savings account deposits		2,568		2,640
Interest on certificates of deposit of $100,000 or more		974		1,058
Interest on other time deposits		3,246		3,853
Interest on borrowed funds		8,874		9,034
Interest on subordinated debentures		810		880
Total Interest Expense		16,472		17,465
Net Interest Income		15,746		12,329
Less provision for loan losses		2,450		600
Net Interest Income After Provision for Loan Losses		13,296		11,729
NON-INTEREST INCOME:
Service charges on deposit accounts		863		547
Securities gains, net		586		151
Income on bank owned life insurance		486		509
Other non-interest income		439		365
Total Non-Interest Income		2,374		1,572
NON-INTEREST EXPENSE:
Salaries and employee benefits		5,832		5,017
Occupancy expense, net		1,090		1,026
Equipment expense		794		690
Other non-interest expense		2,571		1,914
Total Non-Interest Expense		10,287		8,647
Income before income tax expense		5,383		4,654
Income tax expense		1,505		1,298
Net Income	$	3,878	$	3,356
EARNINGS PER SHARE:
Basic	$	0.37	$	0.32
Diluted	$	0.36	$	0.32
Weighted average shares outstanding:
Basic		10,427		10,397
Diluted		10,800		10,565

See Accompanying Notes to Unaudited Consolidated Financial Statements.

2

Yardville National Bancorp and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended
	March 31,
(in thousands)	2004			2003
Cash Flows from Operating Activities:
Net Income	$	3,878		$	3,356
Adjustments:
Provision for loan losses		2,450			600
Depreciation		1,258			546
ESOP fair value adjustment		26			31
Amortization and accretion		488			1,210
Gains on sales of securities available for sale		(586	)		(151	)
Increase in other assets		(789	)		(2,858	)
Increase (decrease) in other liabilities		2,724			(2,941	)
Net Cash Provided by (Used In) Operating Activities		9,449			(207	)
Cash Flows From Investing Activities:
Net (increase) decrease in interest bearing deposits with banks		(6,609	)		1,629
Purchase of securities available for sale		(94,574	)		(200,525	)
Maturities, calls and paydowns of securities available for sale		58,083			168,759
Proceeds from sales of securities available for sale		109,341			34,777
Proceeds from maturities and paydowns of investment Securities		2,580			815
Purchase of investment securities		(4,666	)		(6,679	)
Net increase in loans		(143,167	)		(52,180	)
Expenditures for bank premises and equipment		(389	)		(456	)
Net Cash Used in Investing Activities		(79,401	)		(53,860	)
Cash Flows from Financing Activities:
Net increase in non-interest bearing demand, money market, and savings deposits		104,432			94,832
Net increase (decrease) in certificates of deposit		26,607			(28,016	)
Net decrease in borrowed funds		(948	)		(10,751	)
Proceeds from issuance of subordinated debentures		—			15,464
Retirement of subordinated debentures		—			(11,856	)
Proceeds from issuance of common stock		230			49
Decrease in unallocated ESOP shares		95			100
Dividends paid		(1,201	)		(1,196	)
Net Cash Provided by Financing Activities		129,215			58,626
Net increase in cash and cash equivalents		59,263			4,559
Cash and cash equivalents as of beginning of period		33,155			101,093
Cash and Cash Equivalents as of End of Period	$	92,418		$	105,652
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest		15,701			18,476
Income taxes		14			6,100
Supplemental Schedule of Non-cash Investing and Financing Activities:
Transfers from loans to other real estate, net of charge offs		—			801

See Accompanying Notes to Unaudited Consolidated Financial Statements

3

Yardville National Bancorp and Subsidiaries

Notes to Consolidated Financial Statements
Three Months Ended March 31, 2004
(Unaudited)

1. Summary of Significant Accounting Policies

Basis of Financial Statement Presentation

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates.

Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for loan losses and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans.

The consolidated financial data as of and for the three months ended March 31, 2004 includes, in the opinion of management, all adjustments, consisting of only normal recurring accruals, necessary for a fair presentation of such periods. The consolidated financial data for the interim periods presented is not necessarily indicative of the results of operations that might be expected for the entire year ending December 31, 2004.

Consolidation

The consolidated financial statements include the accounts of Yardville National Bancorp and its subsidiary, The Yardville National Bank, and the Bank’s wholly owned subsidiaries (collectively the Corporation). All significant inter-company accounts and transactions have been eliminated in consolidation. Under Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”) the following former subsidiaries have been deconsolidated: Yardville Capital Trust, Yardville Capital Trust II, Yardville Capital Trust III, Yardville Capital Trust IV, and Yardville Capital Trust V. All prior periods presented have been reclassified to reflect the deconsolidation.

Allowance for Loan Losses

The provision for loan losses charged to operating expense is determined by management and is based upon a periodic review of the loan portfolio, past experience, the economy, and other factors that may affect a borrower’s ability to repay a loan. The provision is based on management’s estimates and actual losses may vary from estimates. 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

4

necessary based on changes in economic conditions, particularly in New Jersey and due to the factors listed above. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Corporation’s allowance for loan losses and the valuation of other real estate. Such agencies may require the Corporation to recognize additions to the allowance or adjustments to the carrying value of other real estate based on their judgments about information available to them at the time of their examination.

2. Earnings Per Share

Weighted average shares for the basic net income per share computation for the three months ended March 31, 2004 and 2003 were 10,427,000 and 10,397,000, respectively. For the diluted net income per share computation, common stock equivalents of 373,000 and 168,000 are included for the three months ended March 31, 2004 and 2003, respectively. Common stock equivalents that were antidilutive were 2,500 and 379,000 for the three months ended March 31, 2004 and 2003, respectively.

3. Stock-Based Compensation

The Corporation applies APB Opinion No. 25 in accounting for its stock option plans and, accordingly, no compensation cost has been recognized for stock options in the consolidated financial statements. The following table illustrates the effect on net income and earnings per share if the Corporation had applied the fair value recognition provisions of FASB Statement No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation.

	For the three months ended March 31,
(in thousands, except per share amounts)	2004		2003
Net income as reported:
As reported	$	3,878	$	3,356
Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards, net of related tax effects		134		172
Pro forma net income	$	3,744	$	3,184
Earnings per share:
Basic:
As reported	$	0.37	$	0.32
Pro forma		0.36		0.31
Diluted:
As reported	$	0.36	$	0.32
Pro forma		0.35		0.30

5

The fair value of options granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in the first quarter of 2004 and 2003:

	2004			2003
Number of options granted		2,500			22,000
Expected annual dividend rate	$	0.46		$	0.46
Risk free rate		2.81	%		2.83	%
Expected average option life (years)		8.0			8.0
Expected volatility		16.00	%		38.00	%

4. Comprehensive Income

Below is a summary of comprehensive income for the three months ended March 31, 2004 and 2003.

	Three Months Ended March 31,
(in thousands)	2004		2003
Net Income	$	3,878	$	3,356
Other comprehensive income
Holding gain (loss) arising during the period, net of tax and reclassification		5,841		(1,693	)
Less reclassification of realized net gain on sale of securities available for sale, net of tax		381		100
Net change in unrealized gain (loss) for the period, net of tax		5,460		(1,793	)
Total comprehensive income	$	9,338	$	1,563

5. Relationships and Transactions with Directors and Officers

Certain directors and officers of the Corporation and their associates are or have in the past been customers of, and have had transactions with, the Bank. All deposit accounts, loans, and commitments comprising such transactions were made in the ordinary course of business of the Bank on substantially the same terms, including interest rates and collateral, as those prevailing for comparable transactions with other customers of the Bank. In the opinion of management of the Corporation and the Bank, these loans did not involve more than normal risks of collectibility or present other unfavorable features.

The following table summarizes activity with respect to such loans:

	For the three		For the three
	months ended		months ended
(in thousands)	3/31/04		3/31/03
Balance as of beginning of period	$	72,888	$	42,996
Additions		5,097		1,559
Reductions		3,840		3,220
Balance as of end of the period	$	74,145	$	41,335

6

None of these loans were past due or on nonaccrual status as of March 31, 2004 or March 31, 2003.

In addition, the Corporation has had, and expects in the future to have, other transactions in the ordinary course of business with many of its directors, senior officers and other affiliates (and their associates) on substantially the same terms as those prevailing for comparable transactions with others. No new material relationships or transactions were commenced, and no material changes were made to existing relationships or transactions, during the quarter ended March 31, 2004.

6. Postretirement Benefits

The Corporation provides additional postretirement benefits, namely life and health insurance, to retired employees over the age of 62 who have completed 15 years of service. The plan calls for retirees to contribute a portion of the cost of providing these benefits in relation to years of service. The table below lists the components of postretirement benefit expenses for the three months ended March 31, 2004 and 2003.

	Three months			Three months
(in thousands)	ended 3/31/04			ended 3/31/03
Service cost	$	31		$	35
Interest cost		18			21
Expected return on plan assets		—			—
Amortization of prior service costs		(1	)		(1	)
Amortization of the net loss		1			1
Balance as of end of the period	$	49		$	56

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 2003 Annual Report to Stockholders and Form 10-K for the fiscal year ended December 31, 2003, as well as the unaudited consolidated financial statements and the accompanying notes in this Form 10-Q. Throughout this report the terms “YNB,” “company,” “we,” “us,” “our,” and “corporation” refer to Yardville National Bancorp, our wholly owned banking subsidiary, The Yardville National Bank (the “Bank”), and other subsidiaries, as a consolidated entity except where noted. The purpose of this discussion and analysis is to assist in the understanding and evaluation of the financial condition, changes in financial condition and results of our operations. Certain reclassifications have been made to prior period financial statements and related information to conform them to the current presentation.

This Form 10-Q contains express and implied statements relating to our future financial condition, results of operations, plans, objectives, performance, and business, which are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These may include statements that relate to, among other things,

7

profitability, liquidity, adequacy of the allowance for loan losses, plans for growth, interest rate sensitivity, market risk, regulatory compliance, and financial and other goals. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be achieved. Actual results may differ materially from those expected or implied as a result of certain risks and uncertainties, including but not limited to, the results of our efforts to implement our retail strategy; adverse changes in our loan portfolio and the resulting credit risk-related losses and expenses, interest rate fluctuations and other economic conditions; continued levels of our loan quality and origination volume; our ability to attract core deposits; continued relationships with major customers; competition in product offerings and product pricing; adverse changes in the economy that could increase credit-related losses and expenses; adverse changes in the market price of our common stock; compliance with laws, regulatory requirements and Nasdaq standards; and other risks and uncertainties detailed from time to time in our other filings with the Securities and Exchange Commission. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

Results of Operations
2004 Overview

We are a $2.57 billion financial holding company headquartered in Hamilton, New Jersey. We operate 22 full-service branches through our wholly owned banking subsidiary, The Yardville National Bank, in Mercer, Hunterdon, Somerset, Middlesex and Burlington Counties in New Jersey and Bucks County, Pennsylvania. Our existing and target markets are located in the demographically attractive corridor between New York City and Philadelphia. We provide a broad range of lending and deposit products as well as other financial products and services with an emphasis on commercial real estate and commercial and industrial loans to small to mid-sized businesses.

We generate substantially all of our income from our loan and securities portfolios. Our earning asset base is primarily funded through deposits and, to a lesser degree, borrowed funds. Our primary objective is to increase our net interest income. To accomplish this, we must continue to lower our cost of funds and expand our loan portfolio. Our most difficult challenge is attracting more deposits at a reasonable cost. As our legal lending limit has risen, the size of loans requested has increased as well, exerting pressure on our branch network to provide funds for our growth. By implementing our retail strategy, we have increased the number of branches in our targeted markets, enhanced our brand image and introduced our products and services to an expanded geographic region. This strategy, however, requires investment of resources in people, facilities, marketing and technology. While we have seen many positive results, including a lower cost of funds, we have not yet fully realized all of the benefits of this strategic direction.

In the first quarter of 2004, increased interest income primarily from commercial loan growth and a lower cost of funds resulted in the notable improvement in our net interest margin (tax equivalent) and increase in net income compared to the same period in 2003. All references to the net interest margin are tax equivalent except where noted. We believe that by expanding into new markets and attracting lower cost deposits to fund our growth, we will further enhance profitability and the value of our franchise in 2004.

8

Net Income

We reported net income of $3.9 million for the three months ended March 31, 2004, an increase of $522,000 or 15.6% compared to $3.4 million for the same period in 2003. The increase in net income for the first three months of 2004 compared to the same period in 2003 was attributable to an increase in net interest income and non-interest income partially offset by a higher provision for loan losses and increased non-interest expenses. Diluted earnings per share for the three months ended March 31, 2004 increased 12.5% to $0.36 compared to $0.32 for the same period in 2003. The increase in both basic and diluted earnings per share resulted primarily from the higher level of net income earned in the first quarter of 2004 compared to the same period in 2003.

Net Interest Income

Net interest income is the largest and most significant component of our operating income. Our net interest income for the first three months of 2004 was $15.7 million, an increase of $3.4 million or 27.7% from the same period in 2003. The most significant factors relating to the improvement were an increase in interest and fees on loans and a reduction in interest expense on interest bearing deposits.

We are continuing our efforts to improve our net interest margin in 2004. The net interest margin is calculated as net interest income divided by average interest earning assets. The tax equivalent adjustment presents net interest income and yields on tax-exempt investments and loans on a comparable basis to those of taxable investments and loans. The adjustment for the first quarter of 2004 resulted in a $410,000 increase to net interest income and a 7 basis point increase to the net interest margin compared to $336,000 and a 6 basis point increase for the same period in 2003. For the first three months of 2004, the net interest margin was 2.69%, a 38 basis point increase compared to 2.31% for the same period in 2003. The improvement of the net interest margin resulted from a 49 basis point decline in the cost of interest bearing liabilities, partially offset by the 7 basis point lower yield on earning assets. The success in expanding the net interest margin resulted from the implementation of several strategies designed to increase net interest income and the net interest margin. By emphasizing our strength as a business-focused lender, we achieved strong commercial loan growth that resulted in an increase in the percentage of our earning asset base consisting of higher yielding loans, the extension of the duration of our securities, which improved the portfolio yield, and the continued implementation of our retail strategy, which has attracted lower cost core deposits to support our loan growth.

Interest Income

For the first three months of 2004, total interest income was $32.2 million, an increase of $2.4 million or 8.1% when compared to $29.8 million for the same period in 2003. Higher interest income was primarily due to an increased volume of average loans outstanding for the first three months of 2004 compared to the same period in 2003, partially offset by a lower yield on loans, and to a lesser extent, a lower average balance of securities. The yield on earning assets for the first three months of 2004 was 5.36%, a 7 basis point decline from 5.43% for the same period in 2003.

Interest and fees on loans for the three months ended March 31, 2004 increased $3.0 million or 15.2% to $23.1 million from $20.1 million for the same period in 2003. The increase in interest and fees on loans resulted from an increase of $285.2 million or 23.4% in average loans outstanding, primarily commercial loans, partially

9

offset by the yield on loans decreasing 44 basis points to 6.15% for the three months ended March 31, 2004 from 6.59% for the same period in 2003. The lower loan yield in 2004 reflected the continued lower interest rate environment and ongoing competition for loans.

Interest on securities declined $536,000 or 5.6% to $9.0 million for the three months ended March 31, 2004 compared to $9.5 million for the same period in 2003. Average securities for the three months ended March 31, 2004 decreased $54.3 million or 6.0% to $847.7 million when compared to the $901.9 million for the same period in 2003. Over the same period, the yield on the securities portfolio increased 2 basis points to 4.24% from 4.22%. The decline in interest income on securities for the three months ended March 31, 2004 resulted primarily from the lower average balance of securities as principal cash flows were used to fund commercial loan growth and enhance liquidity. A reduction in premium amortization on premium purchased mortgage-backed securities, including CMOs, combined with higher yields on securities purchased primarily in the 4^th quarter of 2003 accounted for the increased yield on the securities portfolio.

Interest Expense

Total interest expense decreased $1.0 million or 5.7% to $16.5 million for the first three months of 2004, compared to $17.5 million for the same period in 2003. The decrease in interest expense resulted primarily from lower rates paid on all interest bearing deposits and, to a lesser extent, on subordinated debentures, partially offset by higher average balances on total interest bearing liabilities. Average interest bearing liabilities were $2.16 billion for the three months ended March 31, 2004 reflecting an increase of $191.4 million or 9.7% when compared to $1.97 billion for the same period in 2003. The average rate paid on interest bearing liabilities for the three months ended March 31, 2004 decreased 49 basis points to 3.05% from 3.54% for the same period of 2003.

Interest expense on deposits decreased $763,000 or 10.1% to $6.8 million for the first three months of 2004 compared to $7.6 million for the same period in 2003. The decline in interest expense on deposits resulted primarily from a $691,000 decrease in interest expense on time deposits, which includes certificates of deposits of $100,000 or more, to $4.2 million for the first three months of 2004 compared to $4.9 million for the same period in 2003. Interest expense on savings, money markets and interest bearing demand deposits decreased $72,000 to $2.5 million for the first three months of 2004 compared to $2.6 million for the same period in 2003. The decrease in the expense on these deposits was partially offset by the growth in their average balances. For the first three months of 2004, the average balance of savings, money markets and interest bearing demand deposits increased $200.6 million or 35.1% to $772.2 million compared to $571.6 million for the same period in 2003. The growth in these core deposit accounts reflected our increased focus on expanding our core deposit base as part of our retail strategy, money market balances acquired through an intermediary that places deposits from brokerage clients with banks, the successful acquisition of surrogates’ deposits through a competitive bidding process and the positive reception of our new “Simply Better Checking” product.

The total cost of interest bearing deposits was 1.97% for the first three months of 2004 and reflected a 60 basis point decrease when compared to the 2.57% cost for the same period in 2003. The key factors in the decrease in the cost of interest bearing deposits was a change in the mix of our average deposits and a low interest rate environment, which resulted in lower interest expense on all interest bearing deposits. Lower cost average savings, money markets and interest bearing demand deposits for the first three months of 2004 represented 56.0% of

10

total average interest bearing deposits compared to 48.6% of total average interest bearing deposits for the same period in 2003. These deposits had a cost of 1.33% in the first three months of 2004 compared to 1.85% for the same period in 2003. In addition, for the first three months of 2004, the cost of certificates of deposit of $100,000 or more decreased 50 basis points to 2.57% compared to 3.07% for the same period in 2003. Over the same period, the cost of other time deposits decreased 45 basis points to 2.86% for the first three months of 2004 compared to 3.31% for the same period in 2003. We believe that if interest rates remain at current levels, the cost of our time deposits will continue to decline as higher rate CDs reprice to market rates at maturity.

Interest expense on borrowed funds decreased $160,000 or 1.8% to $8.9 million for the first three months of 2004 compared to $9.0 million for the same period in 2003. The decreased interest expense was the result of a decline in the average balance of borrowed funds outstanding in the first three months of 2004 to $737.6 million when compared to $757.2 million for the same period of 2003, partially offset by a 4 basis point increase in cost for the first three months of 2004 compared to the same period in 2003. As part of our strategy to improve our net interest margin, we have shifted our funding to lower cost core deposits instead of higher cost borrowed funds. To the extent that our retail strategy is successful in attracting these deposits, borrowed funds are expected to gradually become a less important funding source.

The overall cost of subordinated debentures decreased 209 basis points to 6.83% for the first three months of 2004 compared to 8.92% for the same period in 2003. In February 2003, we issued $15.5 million of subordinated debentures at a floating rate of three month LIBOR plus 340 basis points (at an average cost of 4.60% for the first quarter of 2004) and retired $11.9 million of fixed rate subordinated debentures with a cost of 9.25%. In September 2003, we issued an additional $10.3 million in subordinated debentures at a rate of three month LIBOR plus 300 basis points (at an average cost of 4.20% for the first quarter of 2004). These actions resulted in the lower cost of subordinated debentures in the first three months of 2004 compared to the same period in 2003.

We continue to implement our retail strategy with the goal of attracting lower cost core deposits and transaction accounts. This should allow us over time to reduce our historical dependency on higher cost CDs and borrowed funds and allow us to continue to lower our cost of funds, improve our net interest margin and generate service fee income. To the extent that core deposit growth is not adequate to fund earning asset growth, we would expect to use a combination of CDs and borrowed funds to meet our funding and liquidity needs. This reliance on higher cost funding sources could limit our ability to continue to lower our cost of funds in the future.

Provision for Loan Losses

The provision for loan losses for the three months ended March 31, 2004 was $2.5 million, an increase of $1.9 million from the $600,000 for the same period in 2003. The increase in the provision for loan losses was primarily due to the strong commercial loan growth experienced in the quarter and a charge off associated with one commercial loan relationship. To a lesser extent, higher levels of nonperforming loans also contributed to the increase in the provision.

11

Under the heading of “Allowance for Loan Losses”, in this report, is a more detailed discussion of our allowance for loan loss methodology.

Non-interest Income

Non-interest income consists of service charges on deposit accounts, net securities gains, income on bank owned life insurance and all other non-interest income. Total non-interest income for the first three months of 2004 was $2.4 million, an increase of $802,000 or 51.0% compared to non-interest income of $1.6 million for the same period in 2003. The increase was primarily due to an increase in net securities gains and an increase in service charges on deposit accounts for the three months ended March 31, 2004.

Service charges on deposit accounts increased $316,000 or 57.8% to $863,000 for the three months ended March 31, 2004 compared to $547,000 for the same period in 2003. Service charge income has increased in the first three months of 2004 from a broader base of deposit accounts and a higher collection rate of overdraft fees. We expect to continue to conduct targeted marketing campaigns in 2004 designed to attract lower cost and interest free demand deposit accounts with the goal of lowering our cost of funds while generating additional service charge and fee income.

Net gains on the sale of securities totaled $586,000 in the first three months of 2004 compared to $151,000 in net gains on the sale of securities for the same period in 2003. The higher level of securities gains reflected increased sale activity in the first three months of 2004 compared to the same period in 2003. We have continued to reposition securities in 2004 to achieve asset and liability and liquidity objectives, which include enhancing future interest income and managing interest rate risk.

Income on bank owned life insurance (BOLI) was $486,000 for the first three months of 2004 compared to $509,000 for the same period in 2003. The modest decrease in income on BOLI was due to the lower yield on certain BOLI assets due primarily to the lower interest rate environment. The income earned on these assets is used to offset the benefit costs of deferred compensation programs. Income on BOLI also reduces our overall effective income tax rate. Our BOLI assets are single premium policies. After the initial purchase, there are no additional premiums to be paid on those policies.

Other non-interest income increased $74,000 to $439,000 for the three months ended March 31, 2004 from $365,000 for the same period in 2003. Other non-interest income includes a variety of fee-based services, which have increased as we have expanded our retail network and increased our customer base. These include Second Check fees®, automated teller machine fees charged to non-customers, safe deposit box rental income and other non-banking service fees.

12

Non-interest Expense

Non-interest expenses consist of salaries and employee benefits, occupancy, equipment and all other operating expenses we incur. Non-interest expense totaled $10.3 million in the first three months of 2004, an increase of $1.6 million or 19.0% compared to the $8.6 million for the same period in 2003. The largest increase in non-interest expense for the first three months of 2004 compared to the same period of 2003 was in salaries and employee benefits expense. Total non-interest expenses, on an annualized basis, as a percentage of average assets were 1.65% for the first quarter of 2004 compared to 1.52% for the same period of 2003. Our efficiency ratio for the first three months of 2004 was 56.77% compared to 62.20% for the same period in 2003. The efficiency ratio is computed by dividing total operating expenses by the sum of net interest income and non-interest income. A decrease in the efficiency ratio indicates a more efficient allocation of resources while an increase would indicate more resources are being utilized to generate the same volume of income. The improvement in the efficiency ratio was primarily due to higher net interest income and non-interest income partially offset by higher non-interest expenses. Continued improvements to the efficiency ratio will depend on increases in net interest income, non-interest income and controlled growth in non-interest expenses.

Salaries and employee benefits increased $815,000 or 16.2% to $5.8 million for the first three months of 2004 compared to $5.0 million for the same period in 2003. Full time equivalent employees totaled 359 at March 31, 2004, the same level that existed at December 31, 2003, which compared to 342 at March 31, 2003. Salary expense increased $548,000 and accounted for 67.2% of the increase in salaries and employee benefits expense. The primary increase in salaries for the three months ended March 31, 2004 was the ongoing development of our Northern Region, which included the opening of two new branches in 2003, and resulted in the hiring of additional retail, lending and support staff. The staffing obtained from our first branch acquisition in late 2003, additional modest staffing throughout the bank and annual merit increases also contributed to the increase in salary expense. Benefit expense increased $267,000 or 21.4% primarily due to higher costs associated with the increased number of employees as well as increased costs associated with medical insurance premiums and our deferred compensation plans.

Occupancy expense for the first three months of 2004 was $1.1 million, an increase of $64,000 or 6.2% compared to $1.0 million for the same period in 2003. The increase in occupancy expense was due to the additional costs, including rent expense, associated with the operation of our branch network. We opened three branches in 2003, all of which were opened after the first quarter of 2003. We continue to explore other branch locations in our markets and expect occupancy expense to increase as our branch network expands.

Equipment expense increased $104,000 or 15.1% to $794,000 for the first three months of 2004 from $690,000 for the same period in 2003. The increase in equipment expense reflected our continuing efforts to maintain and upgrade technology and systems in order to provide quality products and services and the opening of new branches.

Other non-interest expenses increased $657,000 or 34.3% to $2.6 million for the first three months of 2004 compared to $1.9 million for the same period in 2003. The increase in other non-interest expenses is reflective of a growing financial institution with increased costs associated

13

with attracting new loan and deposit relationships, higher professional fees, loan workout costs and other operating expenses. In addition, the costs associated with operating a public company in the current regulatory environment resulted in increased insurance costs and audit fees. We have also tried, when possible, to outsource services that can be provided more effectively by third party providers. A number of our enhanced services like our website and cash management services for our business customers require arrangements with vendors that result in additional non-interest expense. In addition, by using third party providers we have effectively and efficiently improved products and services. Statement rendering and wire transfer processing, for example, have been outsourced which has resulted in increased service and processing fees but conversely have allowed us to limit the hiring of additional support staff.

Income Tax Expense

The provision for income taxes comprised of Federal and state income taxes was $1.5 million for the first three months of 2004 compared to $1.3 million for the same period in 2003. The increase in tax expense was primarily due to the higher level of taxable income in 2004 compared to the same period in 2003. The provision for income taxes for the first quarter of 2004 and 2003 were at an effective rate of 28.0% and 27.9%, respectively.

Financial Condition

Assets

Total consolidated assets at March 31, 2004 were $2.57 billion, an increase of $141.3 million or 5.8% compared to $2.43 billion at December 31, 2003. The growth in our asset base during the first quarter of 2004 reflected our continuing strength as a business-focused, relationship-oriented community bank as total loans increased $141.6 million. The growth in loans was principally reflected in commercial real estate and commercial and industrial loans. The funding for this asset growth was provided primarily by interest bearing deposits.

Loans

We emphasize commercial real estate and commercial and industrial loans to individuals and small to mid-sized businesses. The loan portfolio represents our largest earning asset class and is our primary source of interest income. Total loans increased $141.6 million or 9.8% to $1.58 billion at March 31, 2004 from $1.44 billion at December 31, 2003. The record commercial and overall loan growth we experienced in the first quarter of 2004 was due to several factors. Our broader geographic footprint, the strong real estate market in New Jersey, an improving economic environment and our strength as a commercial business lender primarily accounted for the robust growth for the three months ended March 31, 2004. Our loan portfolio represented 61.6% of total assets at March 31, 2004 compared to 59.4% at December 31, 2003. Continued loan growth is an important part of our strategy to increase our net interest margin and increase our franchise value. Strong competition from both bank and non-bank lenders, in addition to borrowers’ concerns over the economy, real estate prices and interest rates, among other factors, could affect future loan growth. While the majority of

14

our lending business is with customers located within our core Mercer County, New Jersey market, the continued development of our northern region has resulted in significant new loan relationships in an expanded market area. Since a significant portion of our loan portfolio is secured by real estate, the ultimate collectibility of the loan portfolio and the recovery of the carrying amount of real estate collateral are subject to changes in the region’s economic environment and real estate market.

15

The table below sets forth YNB’s loan portfolio composition and loan growth by type for the three months ended March 31, 2004.

(in thousands)	03/31/04		12/31/03		Change			% Change
Commercial real estate
Owner occupied	$	209,719	$	204,539	$	5,180			2.5	%
Investor occupied		463,473		432,571		30,902			7.1
Construction and development		146,461		123,790		22,671			18.3
Residential
1-4 family		154,049		150,733		3,316			2.2
Multi-family		25,107		30,097		(4,990	)		(16.6	)
Commercial and industrial
Term		200,437		169,296		31,141			18.4
Lines of credit		264,558		218,097		46,461			21.3
Demand		1,730		1,199		531			44.3
Consumer
Home equity		81,155		78,877		2,278			2.9
Installment		25,455		24,165		1,290			5.3
Other		12,795		9,991		2,804			28.1
Total loans	$	1,584,939	$	1,443,355	$	141,584			9.8	%

At March 31, 2004, commercial real estate loans and commercial and industrial loans represented 81.2% of total loans compared to 79.6% at year-end 2003. In underwriting these loans, we first evaluate the cash flow capacity of the borrower to repay the loan as well as the borrower’s business experience. In addition, a majority of commercial loans are also secured by real estate and business assets and most are supported by the personal guarantees and other assets of the principals. We also diligently monitor the composition and quality of the overall commercial portfolio including significant credit concentrations by borrower or industry.

Commercial real estate loans increased $58.8 million or 7.7% in the first quarter of 2004 to $819.7 million from $760.9 million at December 31, 2003. Commercial real estate loans consist of owner occupied, investor occupied, and construction and development loans. The first quarter growth was primarily in investor occupied loans and construction and development loans which increased $30.9 million and $22.7 million, respectively. Construction and development loans include residential and commercial projects and are typically made to experienced residential or commercial construction developers. Residential construction loans include single family, multi-family, and condominium projects. Commercial construction loans include office and professional development, retail development and other commercial related projects. Generally, construction loan terms run between one and two years and are interest only, adjustable rate loans indexed to the prime rate of interest.

Real estate underwriting standards include various limits on loan-to-value ratios based on the type of property and consideration of the creditworthiness of the borrower, the location of the real estate, the condition of the security property, the quality of the organization managing the property and the viability of the project including occupancy rates, tenants and lease terms. Additionally, underwriting standards require

16

appraisals, periodic inspections of the properties and ongoing monitoring of operating results. Collateral values are established based upon independently prepared appraisals.

Residential loans include 1-4 family and multi-family loans. This segment of our portfolio totaled $179.2 million at March 31, 2004, decreasing $1.7 million in the first quarter of 2004 from year-end 2003. The decrease was due to a decline in multi-family loans, partially offset by growth in 1-4 family loans. Residential 1-4 family loans represented 86.0% of the total. Our 1-4 family loans are secured by first liens on the underlying real property. We are a participating seller/servicer with the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC) and we generally underwrite our single-family residential mortgage loans to conform to the standards required by these agencies. Multi-family loans, which represented $25.1 million of the total, primarily consist of loans secured by apartment complexes. Based on higher longer-term interest rates, we expect comparatively less activity in residential mortgage loans this year.

Commercial and industrial loans include term loans, lines of credit and demand loans. Commercial and industrial loans increased $78.1 million or 20.1% to $466.7 million at March 31, 2004 compared to $388.6 million at year-end 2003. The growth was primarily in term loans and lines of credit, which increased $31.1 million and $46.5 million, respectively. Growth in commercial and industrial loans accounted for 55.2% of the total loan growth in the quarter. The increase in commercial and industrial loans primarily resulted from an improving economy and increased business activity in our market area. We anticipate continued growth as the economy continues to strengthen. Commercial and industrial loans are typically loans made to small and mid-sized businesses and consist of loans used to finance inventory, receivables, and other working capital needs. Typically term loans are provided for equipment needs. In our commercial and industrial loan portfolio, we attempt to maintain diversification of risk within industry classifications with the goal of limiting the risk of loss from any single unexpected event or trend.

Consumer loans increased $6.4 million or 5.6% to $119.4 million at March 31, 2004 compared to $113.0 million at year-end 2003. Consumer loans include fixed rate home equity loans, floating rate home equity lines, indirect auto loans and other types of installment loans. Home equity loans and lines represented 68.0% of total consumer loans at March 31, 2004 compared to 69.8% at year-end 2003. The continuation of low interest rates accounted for the increased activity in the home equity and installment loan portfolios. The expansion of our retail network has generated additional opportunities to increase the size of our consumer loan portfolio.

Substantially all of our business is with customers located within Mercer County and contiguous counties. Changes in the region’s economic environment and real estate market conditions could adversely affect loan growth. Competition and future consolidation in our markets could also impact future loan growth. Continued loan growth is an important part of our strategy to increase net interest income. While we believe we will continue to increase loans throughout the year, we except the rate of growth to be lower than it was in the first quarter of 2004.

17

Asset Quality

We place substantial reliance on real estate as collateral for our loan portfolio. A sharp downturn in real estate values in our market place could leave many of our loans undersecured. If we were required to liquidate the collateral to satisfy the debt securing a loan during periods of reduced real estate values, our earnings could be adversely affected. Adverse economic and business conditions in our market place could reduce our growth and affect our borrowers’ ability to repay their loans, and, consequently, adversely affect our financial condition and performance.

The following table sets forth nonperforming assets in our loan portfolio by type as of March 31, 2004 and December 31, 2003.

(in thousands)	03/31/04		12/31/03
Nonaccrual loans:
Commercial real estate	$	1,318	$	1,321
Residential		356		255
Commercial and industrial		10,573		8,570
Consumer		27		35
Total		12,274		10,181
Loans 90 days or more past due:
Residential		184		362
Consumer		834		97
Total		1,018		459
Total nonperforming loans		13,292		10,640
Other real estate		—		—
Total nonperforming assets	$	13,292	$	10,640

Over the last several years, we have successfully grown our loan portfolio while maintaining high asset quality standards. Based upon our strict underwriting standards, collateral based approach to lending and depth of lending experience, we anticipate that our overall credit quality will remain strong. Nonperforming assets increased $2.7 million or 24.9% to $13.3 million at March 31, 2004 compared to $10.6 million at year-end 2003. The increase was primarily the result of one commercial loan relationship going on nonaccrual status in the first quarter. Nonperforming assets represented 0.52% of total assets at March 31, 2004 compared to 0.44% at December 31, 2003. Nonperforming loans represented 0.84% of total loans at March 31, 2004 compared to 0.74% at year-end 2003. The increase in this ratio is primarily due to the increase in nonaccural loans, partially offset by the strong loan growth experienced in 2004.

Nonperforming assets consist of nonperforming loans and other real estate. We had no other real estate owned at March 31, 2004 or December 31, 2003. Nonperforming loans are comprised of loans on a nonaccrual basis, loans which are contractually past due 90 days or more as to interest or principal payments but have not been classified as nonaccrual, and loans whose terms have been restructured to provide a reduction or deferral of interest or principal because of a deterioration in the financial position of the borrower. We had no restructured loans at March 31, 2004 or December 31, 2003. Our policy regarding nonaccrual loans varies by loan type. Generally, commercial loans are placed on nonaccrual when they are 90 days past due, unless these loans are well secured and in the process of collection or, regardless of the past due status

18

of the loan, when management determines that the complete recovery of principal and interest is in doubt. Consumer loans are generally charged off after they become 120 days past due. Residential mortgage loans are not generally placed on nonaccrual status unless the value of the real estate has deteriorated to the point that a potential loss of principal or interest exists. If principal and interest payments are brought contractually current, and future collectibility is reasonably assured, loans are returned to accrual status.

Nonaccrual loans were $12.3 million at March 31, 2004 an increase of $2.1 million from the December 31, 2003 level of $10.2 million. The increase in nonaccrual loans resulted primarily from one commercial loan relationship totaling $2.6 million going on nonaccrual status in the first quarter of 2004. In conjunction with this loan relationship going on nonaccrual status we charged off approximately $1.1 million of the relationship. We are working closely with this borrower to reach a resolution. The ultimate collectibility of the remaining balances however, cannot be determined at this time. Nonaccrual commercial loans accounted for 86.1% of total nonaccrual loans and 79.5% of total nonperforming assets at March 31, 2004.

Loans 90 days or more past due but still accruing interest represented $1.0 million at March 31, 2004 an increase of $559,000 compared to the $459,000 in this category at December 31, 2003. The primary reason for the increase was a $737,000 increase in consumer loans 90 days or more past due still accruing interest.

Our objective remains to maintain high credit quality standards that are reflected in our financial results. We believe that the relatively low level of nonperforming assets we have experienced over the past five years is indicative of our sound credit culture, which includes strict underwriting standards, active loan review, and strong credit policies. We believe the increase in nonperforming assets in 2003 and into the first quarter of 2004 to be isolated events and not representative of a deteriorating asset quality trend. Although we expect a return to our traditional loan quality performance in 2004, a number of factors beyond our control such as a downturn in real estate value, adverse economic and business conditions, and specific financial condition of our borrowers could cause nonperforming assets to rise from their current or historical levels which would have a negative impact on our financial condition.

Allowance for Loan Losses

We have identified the allowance for loan losses to be a critical accounting policy. Based on internal reviews and valuations performed by our lending staff, we rate substantially all of our loans based on their respective risk. These evaluations are, in turn, examined by our internal loan review staff. A formal loan review function is in place, independent of loan origination, to identify and monitor risk classifications. Our emphasis on commercial real estate and commercial and industrial loans, while providing higher earnings, entail greater risk than residential mortgage and consumer loans. The primary focus of our risk rating system is on commercial real estate and commercial and industrial loans.

Risk is measured by use of a matrix, which is customized to measure the risk of each loan type. The reserve percentage assigned to each risk-rating category is determined quarterly from historical loan loss rates based on an eight quarter rolling trend using migration analysis. Risk ratings of 1 to 5 are considered to be acceptable and correspond to loans rated as either minimal, modest, better than average, average and acceptable. Loans with acceptable risk were reserved at a range of 0.46% to 0.56% at March 31, 2004. Risk ratings of between 6 and 8 are considered higher than acceptable risk and correspond to loans rated as special mention, substandard or doubtful. Due to the higher level of risk, these loans were reserved at a range of 4.27% to 100%

19

at March 31, 2004. Loans with a risk rating of 9 are considered to be a loss and would be reserved at 100%. At March 31, 2004, there were no 9 rated loans. Residential mortgage loans are assigned an individual risk reserve percentage of 0.04% due to the strong secured nature of these loans and the low level of losses experienced historically. Consumer loans were assigned reserve percentages of 0.01% for the lowest risk to 7.79% for the highest risk depending on the unsecured or secured status.

In addition to the methodology discussed above, we use our judgment concerning the anticipated impact on credit risk of economic conditions, real estate values, interest rates, level of business activity and other factors. We closely monitor delinquencies and delinquency trends. All criticized assets are reviewed on a quarterly basis. Allocations to the allowance for loan losses, both specific and general, are determined after this review.

The following table provides information regarding the allowance for loan losses for the periods indicated.

	Three months ended
(in thousands)	03/31/04			3/31/03
Allowance balance, beginning of period	$	17,295		$	16,821
Charge offs:
Commercial real estate		—			(194	)
Residential		(96	)		(14	)
Commercial and industrial		(1,504	)		(511	)
Consumer		(25	)		(198	)
Total charge offs		(1,625	)		(917	)
Recoveries:
Commercial and industrial		23			1
Consumer		19			56
Total recoveries		42			57
Net charge offs		(1,583	)		(860	)
Provision charged to operations		2,450			600
Allowance balance, end of period	$	18,162		$	16,561
Allowance for loan losses to total loans		1.15	%		1.33	%
Net charge offs to average loans outstanding		0.42			0.28
Nonperforming loans to total loans		0.84			0.45
Allowance for loan losses to nonperforming loans		136.64	%		297.11	%

At March 31, 2004, the allowance for loan losses totaled $18.2 million, an increase of $867,000 compared to $17.3 million at December 31, 2003. The increase in the allowance reflected the extensive analysis previously discussed. It is our assessment, based on our judgment and analysis, that the allowance for loan losses was appropriate in relation to the credit risk at March 31, 2004. The ratio of the allowance for loan losses to total loans was 1.15% at March 31, 2004 compared to 1.20% at year-end 2003. Another measure of the adequacy of the allowance for loan losses is the ratio of the allowance for loan losses to total nonperforming loans. At March 31, 2004, this ratio was 136.64% compared to 162.55% at December 31, 2003.

20

Extending credit to businesses and consumers exposes us to credit risk. We manage credit risk in the loan portfolio through adherence to strict underwriting standards, guidelines and limitations. Various approval levels, based on the amount of the loan and other credit considerations, have also been established. We recognize that despite our best efforts to manage credit risk, losses will occur. In times of economic slowdown, either within our markets or nationally, the risk inherent in our loan portfolio may increase. The timing and amount of loan losses that may occur is dependent upon several factors, most notably expected general, regional and local economic conditions and the specific financial condition of our borrowers. Although we use the best information available, the level of the allowance for loan losses remains an estimate, which is subject to significant judgment and short-term changes.

The following table describes the allocation of the allowance for loan losses among various categories of loans and certain other information as of the dates indicated. An unallocated allowance is distributed proportionately among each loan category. This unallocated portion of the allowance for loan loss is important to maintain the overall allowance at a level that is adequate to absorb potential credit losses inherent in the total loan portfolio. The allocation is made for analytical purposes and is not necessarily indicative of the categories in which future loan losses may occur. The total allowance is available to absorb losses from any segment of loans.

	As of March 31, 2004								As of December 31, 2003
						Percent of
			Percent			loans to					Percent			Percent of
	Reserve		of			Total			Reserve		of			loans to
(in thousands)	Amount		Allowance			loans			Amount		Allowance			Total loans
Commercial real estate	$	8,147		44.9	%		51.8	%	$	7,225		41.8	%		53.3	%
Residential		646		3.6			11.3			719		4.2			12.5
Commercial and industrial		8,501		46.7			29.4			8,611		49.7			26.9
Consumer		868		4.8			7.5			740		4.3			7.3
Total	$	18,162		100.0	%		100.0	%	$	17,295		100.0	%		100.0	%

Federal funds sold and interest bearing deposits with banks

We have used a number of short-term investment vehicles to invest excess funds. Short-term investment vehicles utilized include Federal funds sold and interest bearing deposits with correspondent banks. We have maintained adequate levels of overnight liquidity to meet potential loan demand and normal deposit fluctuations. At March 31, 2004 Federal funds sold and interest-bearing balances with banks totaled $94.1 million compared to $27.9 million at December 31, 2003. The increase in Federal funds sold and interest bearing deposits in the first quarter resulted from cash flows from the securities portfolio and deposits. Overnight fund levels have fluctuated as we have strategically moved funds out of these lower yielding earning assets into higher yielding earning assets. With short-term interest rates at historically low levels, we expect to continue to seek opportunities to invest excess funds at yields higher than the yield on overnight Federal funds or other short-term investment alternatives while maintaining adequate liquidity.

21

Securities

Our securities totaled $804.3 million or 31.3% of assets at March 31, 2004 compared to $866.7 million or 35.6% of assets at December 31, 2003. Cash flows from the securities portfolio were used to fund the strong commercial loan growth experienced in the first quarter and to enhance our liquidity position. Securities provide a reliable source of interest income and a stable liquidity source. There is limited credit risk in our securities portfolios. All our mortgage-backed securities are agency named and obligations of state and political subdivisions are primarily general obligation issues which typically have additional credit enhancement. Corporate obligations represented less than five percent of all securities outstanding.

Due to our interest rate risk position during 2003 and into 2004, we extended the duration of the securities portfolio and increased the yield on these assets. This strategy increases market risk in a higher rate environment but conversely provides stability to interest income were interest rates to decline further. Strategies in the securities portfolios are executed within the overall interest rate risk management guidelines of the Bank.

The following tables present the amortized cost and market value of YNB’s securities portfolios as of March 31, 2004 and December 31, 2003.

Securities Available For Sale	March 31, 2004				December 31, 2003
	Amortized		Market		Amortized		Market
(in thousands)	Cost		Value		Cost		Value
U.S. Treasury securities and obligations of other U.S. government agencies	$	144,091	$	144,952	$	143,013	$	141,898
Mortgage-backed securities		518,045		522,972		581,531		580,493
Corporate obligations		24,717		25,742		35,071		35,765
All other securities		39,851		39,851		39,851		39,851
Total	$	726,704	$	733,517	$	799,466	$	798,007

Investment Securities	March 31, 2004				December 31, 2003
	Amortized		Market		Amortized		Market
(in thousands)	Cost		Value		Cost		Value
Obligations of state and political subdivisions	$	68,024	$	69,919	$	65,747	$	67,468
Mortgage-backed securities		2,760		2,847		2,939		3,008
Total	$	70,784	$	72,766	$	68,686	$	70,476

The securities available for sale (AFS) portfolio decreased $64.5 million to $733.5 million from $798.0 million at December 31, 2003. The AFS portfolio is principally comprised of mortgage-backed securities (MBS) and agency-callable bonds. AFS securities represented 91.2% of total securities at March 31, 2004 compared to 92.1% of total securities at December 31, 2003. Activity in this portfolio may be undertaken to take advantage of market conditions that create more attractive returns or manage liquidity and interest rate risk. MBS securities made up 71.3% of the AFS portfolio at March 31, 2004 compared to 72.7% at December 31, 2003. MBS

22

represent securities guaranteed by FHLMC, GNMA or FNMA and CMOs backed by government agency securities. Principal cash flows from our MBS portfolio provide a secondary source of liquidity. However, these cash flows will likely decrease as interest rates rise and increase should interest rates decline.

AFS securities are reported at market value, with unrealized gains and losses, net of tax, included as a separate component of stockholders’ equity. Volatility in the treasury yield curve resulted in the improved market value of the AFS portfolio at March 31, 2004. At March 31, 2004, the AFS portfolio had a net unrealized gain, net of tax, of $4.5 million compared to a net unrealized loss of $964,000 at December 31, 2003, which is reported in “Accumulated Other Comprehensive Income (Loss)” in stockholders’ equity.

Securities available for sale included in the Investment Growth Strategy totaled $40.5 million at March 31, 2004 compared to $56.6 million at December 31, 2003. This strategy reflected only 1.6% of total assets at March 31, 2004 compared to 2.3% of total assets at year-end 2003. Starting in 2003 and continuing in 2004, the cash flows from this strategy were reinvested into higher yielding loans or reinvested in securities to achieve asset and liability objectives and reduce our overall effective tax rate.

Investment securities classified as held to maturity increased $2.1 million to $70.8 million at March 31, 2004 from $68.7 million at December 31, 2003. The increase was due to a $2.3 million increase in obligations of state and political subdivisions or municipal bonds partially offset by a $179,000 decrease in mortgage-backed securities. The municipal bond portfolio reduces our effective tax rate and enhances the tax equivalent yield of our investment portfolios. We expect to continue to increase our holdings of municipal bonds as part of our strategy to reduce our effective tax rate.

Deposits

Deposits represent our primary funding source supporting earning asset growth. The continued strengthening of our brand image and targeted marketing of lower cost core deposits to a geographically larger market area is again expected to contribute to a lower cost deposit base in 2004. The successful bidding and retention of surrogates deposits in several New Jersey counties and the use of money market balances acquired through an intermediary (Reserve Funds) that places deposits from brokerage clients with banks has allowed us to fund our loan growth without having to dramatically increase our reliance on higher cost time deposits in the first quarter of 2004. Total deposits at March 31, 2004 were $1.61 billion an increase of $131.0 million or 8.8% compared to total deposits of $1.48 billion at December 31, 2003.

During the first quarter of 2004, we marketed several deposit initiatives, which we believe will increase core deposits throughout the year. Lower cost “Simply Better Checking” and our Chairman’s Choice interest bearing demand deposit products have been marketed in our geographic footprint. In addition, we have introduced limited CD promotions in the new Somerset County market area.

The following table provides information concerning YNB’s deposit base at March 31, 2004 and December 31, 2003.

(in thousands)	3/31/04		12/31/03		Change		% Change
Non-interest bearing demand deposits	$	179,697	$	163,812	$	15,885		9.7	%
Interest bearing demand deposits		337,895		279,569		58,326		20.9
Money market deposits		381,090		352,760		28,330		8.0
Savings deposits		98,693		96,802		1,891		2.0
Certificates of deposit of $100,000 or more		160,264		133,947		26,317		19.6
Other time deposits		457,209		456,919		290		0.1
Total	$	1,614,848	$	1,483,809	$	131,039		8.8	%

23

Interest bearing demand deposits increased $58.3 million or 20.9% to $337.9 million at March 31, 2004 from $279.6 million at year-end 2003. The strong growth in interest bearing demand deposits resulted primarily from the successful retention and growth of surrogates’ deposits (i.e., Intermingled Minors Trust Funds) from six counties in New Jersey and the introduction of “Simply Better Checking” in our core Mercer County market. Surrogates’ deposits totaled approximately $84 million at March 31, 2004.

We also experienced other core deposit growth with money market balances increasing $28.3 million or 8.0% to $381.1 million at March 31, 2004 from $352.8 million at December 31, 2003. The increase in money market balances resulted primarily from deposits acquired from Reserve Funds partially offset by declines in both business and personal premier money market balances. At March 31, 2004, funds obtained from Reserve Funds totaled $52.7 million. The rate on these funds is tied to the overnight Federal funds rate and was a key factor in our ability to meet the strong loan demand experienced in the first quarter of 2004. We expect to use this source to support our loan growth and improve our liquidity. We believe these deposits to be stable and less expensive then raising deposits through CDs. Savings deposits are another source of low cost or core deposits and increased $1.9 million to $98.7 at March 31, 2004 compared to $96.8 million at December 31, 2003.

We market our CDs through our branch network and through a computer-based service provided by an independent third party, which enables us to place CDs nationally. Total CDs, which include CDs of $100,000 or more and other time deposits, increased $26.6 million or 4.5% to $617.5 million at March 31, 2004 from $590.9 million at December 31, 2003. The increase resulted from a $35.6 million increase in CDs obtained through the nationwide computer-based service and a $9.0 million decrease in CDs obtained through our retail network. At March 31, 2004, we had approximately $101.0 million in CDs obtained through this nationwide computer-based service, compared to approximately $65.5 million at December 31, 2003. At March 31, 2004, total CDs represented 38.2% of our total deposits compared to 39.8% at year-end 2003. While CDs are expected to continue to represent an important funding source, we are continuing our efforts through our retail strategy to further increase lower cost core deposits and reduce the need for higher cost funding sources.

Non-interest bearing demand deposits increased $15.9 million or 9.7% to $179.7 million at March 31, 2004 compared to $163.8 million at December 31, 2003. The increase in non-interest bearing demand deposits was primarily attributable to the growth in new and existing business relationships. We have seen significant growth in our “Business DDA Plus,” a checking account designed for our small business customers. We believe this product represents an opportunity to increase our non-interest bearing demand balances as our commercial relationships continue to expand.

It is our strategy to fund earning asset growth with the lowest cost deposits possible. To that end, we continue to promote our Simply Better Checking product throughout our markets and launched a targeted marketing campaign to promote our core free checking account products. Both of these campaigns should attract core deposit relationships and should continue to contribute to improving our net interest margin. Excluding certificates of deposit, core deposits have historically not been adequate to meet loan demand and are not expected to do so in the future. If interest rates rise,

24

we believe money market balances and “Simply Better Checking” interest bearing demand deposit accounts could shift to higher cost CDs. While such a shift would have a negative impact on improving our net interest margin, our goal of attracting lower cost core deposits through our retail strategy will remain an ongoing strategic objective.

Borrowed Funds

Our primary funding strategy is to rely on attracting deposits to fund new earning asset growth, and to utilize borrowed funds as a secondary funding source for earning assets as well as for asset and liability management, and liquidity purposes. Borrowed funds consist primarily of Federal Home Loan Bank (FHLB) advances. Borrowed funds totaled $737.1 million at March 31, 2004, a decrease of $948,000 from the $738.1 million outstanding at December 31, 2003. The decrease was due to modest declines in other borrowed funds and a decline in Obligation for Employee Stock Ownership Plan (ESOP). With our focus on increasing lower cost core deposits to fund our asset growth, we anticipate that borrowed funds will be a less important source of funding for YNB in 2004. At March 31, 2004, borrowed funds represented 28.7% of total assets compared to 30.4% at December 31, 2003. Within approved policy guidelines, we expect to continue to use borrowed funds as an alternative funding source or to meet desired business, asset and liability or liquidity objectives. As a result of the decreasing emphasis on our Investment Growth Strategy, we do not expect new FHLB advances to be used for that purpose in 2004.

We had FHLB advances outstanding of $726.0 million at March 31, 2004 unchanged from the year-end 2003 total. Callable borrowings, primarily FHLB advances, totaled $635.0 million or 86.3% of total borrowed funds at March 31, 2004. Callable borrowings have original terms of two years to ten years and are callable after periods ranging from three months to five years. As of March 31, 2004, YNB had $506.0 million in callable borrowings with call dates of one year or less. We anticipate that, at March 31, 2004 interest rate levels, there will be no borrowings called in 2004. If rates were to increase 100 basis points, we believe that calls in 2004 could total $26.0 million and further that rates would have to increase at least 400 basis points before we would experience significant call activity. At March 31, 2004, there were $97.0 million in floating rate FHLB advances maturing in one year or less. We believe, based on our liquidity position that we will roll these advances over at maturity. The structure of these advances will be determined based on asset and liability objectives.

Subordinated Debentures (Trust Preferred Securities)

At March 31, 2004 and December 31, 2003 there were $47.4 million in subordinated debentures outstanding. At March 31, 2004, this balance represented $46.0 million in trust-preferred securities issued to third parties and $1.4 million in equity investments in capital trusts owned by the holding company. The $46.0 million in trust preferred securities consisted of $21.0 million in fixed rate debt and $25.0 million in floating rate debt.

The $46.0 million in trust preferred securities issued to third parties qualified as tier 1 capital at March 31, 2004 for regulatory capital purposes. At December 31, 2003, we adopted FASB Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”). The adoption of FIN 46 required us to deconsolidate our investment in mandatorily redeemable trust preferred securities of subsidiary trusts in our financial statements. This deconsolidation has called into

25

question the tier 1 capital treatment of these securities. In July 2003, the Board of Governors of the Federal Reserve System instructed bank holding companies to continue to include trust preferred securities in tier 1 capital for regulatory capital purposes. If the holding company was not able to include the $46.0 million in trust preferred securities as tier 1 capital the holding company would no longer be well capitalized but would be adequately capitalized.

On May 6, 2004, the Federal Reserve Board requested public comment on a proposed rule that would retain trust preferred securities in the tier 1 capital of bank holding companies, but with stricter quantitative limits and clearer qualitative standards. Under the proposal, after a three-year transition period, the aggregate amount of trust preferred securities and certain other capital elements would be limited to 25 percent of tier 1 capital elements, net of goodwill. The amount of trust preferred securities and certain other elements in excess of the limit could be included in tier 2 capital subject to restrictions. Based on a preliminary analysis of this proposed rule, we believe that our trust preferred securities should continue to qualify as tier 1 capital.

Equity Capital

Stockholders’ equity at March 31, 2004 totaled $152.0 million an increase of $8.5 million from the $143.6 million at December 31, 2003. The increase in stockholders’ equity for the first three months of 2004 was primarily due to first quarter earnings and an improvement in the market value of securities available for sale. A more detailed breakdown of the change in stockholders’ equity is listed below:

(i)	YNB earned net income of $3.9 million less cash dividends paid of $1.2 million for the three months ended March 31, 2004.
(ii)	The net unrealized gain on securities available for sale was $4.5 million at March 31, 2004 compared to a net unrealized loss of $1.0 million at December 31, 2003. The shift to a net unrealized gain position from a net unrealized loss resulted in a $5.5 million increase in stockholders’ equity.
(iii)	Proceeds of $105,000 were received from the exercise of stock options and $125,000 was received in reinvested dividends and optional purchases associated with our Dividend Reinvestment and Stock Purchase Plan. We also recorded a $26,000 increase in stockholders’ equity associated with the fair market value adjustment related to the allocation of shares to employee accounts in our ESOP.
(iv)	Unallocated ESOP shares decreased by $95,000 to $660,000 at March 31, 2004 from $755,000 at December 31, 2003.

26

The table below presents the actual capital amounts and ratios of the Holding Company and the Bank at March 31, 2004 and December 31, 2003.

	Amount				Ratios
(amounts in thousands)	3/31/04		12/31/03		3/31/04			12/31/03
Risk-based capital:
Tier 1:
Holding Company	$	191,572	$	188,493		10.3	%		11.1	%
Bank		175,267		172,795		9.4			10.1
Total:
Holding Company		209,734		205,788		11.3			12.1
Bank		193,429		190,090		10.4			11.1
Tier 1 leverage:
Holding Company		191,572		188,493		7.7			8.0
Bank	$	193,429	$	172,795		7.0	%		7.4	%

The minimum regulatory capital requirements for financial institutions require institutions to have a tier I leverage ratio of at least 4.0%, a tier I risk-based capital ratio of at least 4.0% and a total risk-based capital ratio of at least 8.0%. To be considered “well capitalized,” an institution must have a minimum tier I capital and total risk-based capital ratio of 6.0% and 10.0%, respectively, and a minimum tier I leverage ratio of 5.0%. At March 31, 2004, the ratios of the Holding Company and the Bank exceeded the ratios required to be considered well capitalized. It is our goal to maintain adequate capital to continue to support YNB’s asset growth and maintain its status as a well-capitalized institution.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

There have been no material changes in our market risk from December 31, 2003, except as discussed below. For information regarding our market risk, please refer to the Company’s Annual Report on Form 10-K, for the year ended December 31, 2003.

The balance sheet has been positioned to perform better in a gradually increasing interest rate environment. Floating rate commercial loans booked with floors in 2003 serve a dual purpose. If rates were to decline further, in-the-money floors would protect interest income streams from decreasing. In the event rates were to rise we would benefit from floating rate loans repricing higher. Further, through our retail strategy we continued to attract lower cost core deposit accounts that are less sensitive to changes in interest rates than certificates of deposit. Based on our overall interest rate risk position during 2003 we lengthened the duration of our investment portfolio and increased current earnings with only a modest impact to our overall interest rate risk profile.

In the first quarter of 2004 the majority of our commercial loan growth was floating rate, tied to the prime rate of interest, and this trend allowed us to continue to modestly extend the investment portfolio duration. In addition we launched two marketing campaigns to further attract lower cost core deposit accounts.

27

We manage interest rate risk by identifying and quantifying interest rate risk exposures using simulation analysis, economic value at risk models, and gap analysis. At March 31, 2004, the cumulative one-year gap was a positive $23.5 million or 0.9% of total assets compared to a negative $168.4 million or 6.9% of total assets at December 31, 2003. The change in our gap position from December 31, 2003 resulted primarily from an increase in floating rate loans and increased investment cash flows. Our gap position at March 31, 2004 included $425.0 million of in-the-money floors. These floors, for gap purposes effectively converted these floating rate loans to fixed rate loans. Were interest rates to rise, these floating rate loans would begin to reprice higher and the one-year gap would become more positive.

Simulation analysis involves dynamically modeling our interest income and interest expense over a specified time period under various interest rate scenarios and balance sheet structures. We use simulation analysis primarily to measure the sensitivity of net interest income over 12 and 24-month time horizons. In our base case or static balance sheet sensitivity scenario, the model estimates the variance in net interest income with a change in interest rates of plus and minus 200 basis points over a 12-month period. Management utilized a minus 100 basis points scenario due to the low interest rate environment that existed at March 31, 2004. The plus and minus base case scenario is measured within a policy guideline of –7% change in net interest income in the first year and –14% change in year two. The following table sets forth the expected change in net interest income from the base case given the below listed change in interest rates.

Changes in market interest	Percentage Change in Net Interest Income
rates (in basis points)	Next 12 months			Next 24 months
+200		5.6	%		7.1	%
Flat		—			—
-100		-0.3	%		-0.0	%

These results reflect a greater benefit to net interest income with gradually rising interest rates at March 31, 2004 compared to December 31, 2003. Results of our simulation analysis suggest that the -100 risk to net interest income over a 12 and 24-month period is limited. When factoring our 2004 financial projections (Growth Scenario) into our simulation model we see similar results.

We measure longer-term interest rate risk through the Economic Value of Equity (“EVE”) model. This model involves projecting future cash flows from our current assets and liabilities over a long time horizon, discounting those cash flows at appropriate interest rates, and then aggregating the discounted cash flows. Our EVE is the estimated net present value of these discounted cash flows. The variance in the economic value of equity is measured as a percentage of the present value of equity. We use the sensitivity of EVE principally to measure the exposure of equity to changes in interest rates over a relatively long time horizon. The following table lists our percentage change in EVE in a plus or minus 200 basis point rate shock at March 31, 2004 and December 31, 2003. Due to the low level of interest rates at both dates, not all interest rates could be shocked down 200 basis points.

Changes in interest rate in	Percentage Change in EVE
basis points (Rate Shock)	3/31/04			12/31/03
+200		-18	%		-22	%
-200		-17	%		-8	%

28

At March 31, 2004, our longer-term exposure to rising rates, as measured by the percentage change in EVE, has decreased from the exposure at December 31, 2003 and remained within policy guidelines. At the same time, with rates near historic lows, the risk to lower rates as a percentage of EVE has increased by the actions described previously but remained within policy guidelines. The policy guideline is - 25%. We will continue to monitor and take actions to mitigate longer-term interest rate risk as we execute balance sheet strategies designed to increase net interest income.

Certain shortcomings are inherent in the methodology used in the previously discussed interest rate risk measurements. Modeling changes in the simulation and EVE analysis require the making of certain assumptions, which may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. There are many factors that we evaluate when constructing the assumptions used in short-term and long-term interest rate risk models. One of the most important assumptions involves deposits without fixed maturity dates. Each assumption made reflected some combination of market data, research analysis and business judgment. Accordingly, although the simulation and EVE models provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on YNB’s net interest income or economic value of equity and may differ materially from actual results.

We believe, based on our simulation results, that as of March 31, 2004, YNB is positioned to increase net interest income during a 12 to 24-month period of gradually increasing interest rates while mitigating a decline in net interest income should rates decline. We continue to monitor our gap position and rate shock analyses to detect changes to our exposure to fluctuating interest rates. We have the ability, to a certain extent, to shorten or lengthen maturities on assets, sell securities, enter into derivative financial instruments, or seek funding sources with different repricing characteristics in order to change our asset and liability structure for the purpose of mitigating the effect of short term and longer term interest rate risk.

29

Item 4. Controls and Procedures

Within 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon the evaluation and subject to the limitations listed below, they concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its subsidiaries) required to be included in this report. There have been no significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to the date of the evaluation.

Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, provides reasonable, not absolute, assurance that the objectives of the control system are met. The design of a control system reflects resource constraints and the benefits of controls must be considered relative to their costs. Because there are inherent limitations in all control systems no evaluation of controls can provide absolute assurance that all control issues and instances of fraud if any, within the Company have been or will be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns occur because of error or mistake. Controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all future conditions; over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with the policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II: OTHER INFORMATION

Item 1: Legal Proceedings

At March 31, 2004, there were no known material legal proceedings pending against YNB, its subsidiaries or its property.

Item 2: Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

Not Applicable.

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.

30

Item 6: Exhibits and Reports on Form 8-K

(a) Exhibits

10.1	Lease between Registrant and Samuel and Margaret Marrazzo
10.2	Employment agreement between the Registrant and Kathleen O. Blanchard
10.3	Employment agreement between the Registrant and Joanne C. O’Donnell
31.1	Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a–14(a) or 15d–14(a), as adopted by Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Vice President and Treasurer Pursuant to Exchange Act Rule 13a–14(a) or 15d–14(a) as adopted by Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Vice President and Treasurer Pursuant to 18 U.S.C. 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K.

Our Current Report on Form 8-K, dated January 27, 2004, for the announcement of our earnings for the first quarter ended March 31, 2004.

31

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: May 10, 2004	By: Stephen F. Carman
		Stephen F. Carman
		Vice President and Treasurer

32

INDEX TO EXHIBITS

Exhibit
Number	Description
10.1	Lease between the Registrant and Samuel and Margaret Marrazzo
10.2	Employment agreement between the Registrant and Kathleen O. Blanchard
10.3	Employment agreement between the Registrant and Joanne C. O’Donnell
31.1	Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a) as adopted by Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Vice President and Treasurer Pursuant to Exchange Act Rule 13a–14(a) or 15d–14(a) as adopted by Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Vice President and Treasurer Pursuant to 18 U.S.C. 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.

33

EX-10.1

Exhibit 10.1

SUBLEASE AGREEMENT

     THIS SUBLEASE AGREEMENT is made and entered into this 1st day of April, 2000 between SAMUEL MARRAZZO and MARGARET MARRAZZO, husband and wife, (hereinafter “Landlord”) and YARDVILLE NATIONAL BANK, organized and existing under the laws of                              (hereinafter “Tenant”) for a portion of the premises, as hereinafter defined, located at 1400 Parkway Avenue, Trenton, New Jersey.

     In consideration of the rents, covenants and conditions hereinafter reserved and contained, Landlord hereby agrees to lease to Tenant, and Tenant hereby agrees to hire from Landlord, the Leased Premises described herein.

     Landlord and Tenant agree that the terms and conditions of this sublease are as set forth in this Sublease Agreement and the attached General Terms of Lease including, without limitation, the exhibits or riders referred to in the General Terms of Lease, all of which are incorporated herein and are hereinafter referred to collectively as the “Lease.”

1. BACKGROUND.

     On December 21, 1973, Ewing Associates (hereinafter “Lessor”) executed a Lease Agreement (hereinafter “Ewing Lease”) with The Grand Union Company (hereinafter “Lessee”) for the premises known as 1400 Parkway Avenue, Ewing Township, Mercer County, New Jersey (hereinafter “Premises”). A true and correct copy of the Ewing Lease is attached hereto, incorporated herein and marked as Exhibit A.

     On July 9, 1979, The Grand Union Company (hereinafter “Sublessor”) executed a Sublease Agreement (hereinafter “Grand Union Lease”) with Frankford Quaker Grocery Company (hereinafter “Frankford”). Fleming Companies, Inc., an Oklahoma corporation, (hereinafter “Sublessee”) is successor in interest by merger to Frankford. A true and correct copy of the Grand Union Lease is attached hereto, incorporated herein and marked as Exhibit B.

1

     On October 22, 1999, Fleming Companies, Inc., (hereinafter “Fleming”) entered into a Sub-Sublease Agreement (hereinafter “Fleming Lease”) with Marrazzo’s Market at Ewing, L.L.C., a New Jersey Limited Liability Company, (hereafter “Marrazzo’s Market”). A copy of the Fleming Lease is attached hereto as Exhibit C. By Agreement of Assignment dated March 30, 2000, Marrazzo’s Market assigned the Fleming Lease to Samuel Marrazzo and Margaret Marrazzo, husband and wife. A true and correct copy of the Agreement of Assignment is attached hereto and marked as Exhibit D.

     Landlord herein has now agreed to Sublease a portion of the Premises to Tenant herein to be used a full service banking facility. Fleming has consented to this Sublease Agreement.

     The terms of the Ewing Associates Lease, Grand Union Lease and Fleming Lease, hereinabove referred, are herein incorporated by reference with like force and effect as if the same had been fully set out, and Tenant herein acknowledges receipt of true and correct copies of all of said Leases.

2. CONSTRUCTION; PREPARATION FOR OCCUPANCY; PLANS AND SPECIFICATIONS.

     Tenant agrees to be singularly responsible for and to construct or cause to be constructed the facility which Tenant will require to operate a full service banking facility, namely, the Leased Premises. This banking facility shall be constructed in strict accordance with plans and specifications approved by Landlord. Said plans and specifications are attached hereto and incorporated herein, marked as Exhibit E. All said improvements are to be made in strict compliance with any governmental or quasi-governmental body having jurisdiction over such construction and use. All construction is to be carried out in a manner that is compatible with ongoing construction that is taking place simultaneously therewith.

     Tenant shall obtain or cause its contractors, agents, servants, workmen or any person used in the construction of the facility described above to provide insurance naming Landlord as an additional insured or protecting Landlord from any loss or liability whatsoever caused by or resulting from the construction of the Leased Premises as set forth in this

2

paragraph. Tenant further agrees to indemnify and hold harmless Landlord from any action, cause of action, claim or loss resulting from any and all of said activity.

     All work shall be done in a good and workmanlike manner and in strict compliance with all applicable laws and lawful ordinances, by-laws, regulations and orders of governmental authority and of the insurers of the Demised Premises, and Tenant shall be responsible for payment of any and all utilities used in the construction thereof.

3. DEFINITIONS.

     For purposes of this Sublease, and any supplement(s), amendment(s), or modification(s) thereof, the terms listed below shall have the following meanings:

	“LANDLORD”: SAMUEL MARRAZZO and MARGARET MARRAZZO
	husband and wife
ADDRESS:	c/o Marrazzo’s Thriftway 1091 Washington Boulevard Robbinsville, New Jersey 08691
“TENANT”:	YARDVILLE NATIONAL BANK
	ADDRESS: 2465 Kuser Road Trenton, New Jersey 08690

“ADDITIONAL RENT” shall mean Tenant’s Pro Rata Share of all of the common area expenses and other charges for which Sub-Subtenant is responsible under the terms of the Ewing Lease, Grand Union Lease or Fleming Lease as provided in Article 4 of the General Terms of Lease.

“BASE RENT” shall mean, for the initial term of this Sublease, the sum of $ [See attached Exhibit 1] per year which will be payable at the monthly rate of $ [See attached Exhibit 1] as provided in Article 4 of the General Terms of Lease.

“BILLING ADDRESS” shall mean the address at which Tenant will be billed which is the Leased Premises.

3

“BUILDING” shall mean the structure in which the Demised Premises and Leased Premises are contained.

“COMMENCEMENT DATE” shall mean April 1, 2000.

“COMMON FACILITIES” shall mean the land surrounding the Building, the parking area and all drives and walkways, all generally as shown on Exhibit F to the General Terms of Lease.

“DEMISED PREMISES” shall mean the space leased by Landlord pursuant to the Fleming Lease.

“EWING LEASE” shall mean the Lease Agreement including amendments, if any, by and between Ewing Associates (“Lessor”) and The Grand Union Company (“Lessee”), a copy of which is attached hereto and marked as Exhibit A.

“FLEMING” shall mean Fleming Companies, Inc., the Sub-Sublandlord from time to time, under the Sub-Sublease Agreement.

“FLEMING LEASE” shall mean the Sub-Sublease Agreement, including amendments, if any, by and between Fleming Companies, Inc., (“Fleming”) and Marrazzo’s Market at Ewing, L.L.C., (“Marrazzo’s Market”) a copy of which is attached hereto and marked as Exhibit C.

“GRAND UNION LEASE” shall mean the Sublease, including amendments, if any, by and between Grand Union Company (“Sublessor”) and Fleming Companies, Inc. (“Sublessee”) a copy of which is attached hereto and marked as Exhibit B.

“HOURS OF OPERATION” shall mean Monday through Friday from 10:00 a.m. to 7:00 p.m. and Saturdays and Sundays from 10:00 a.m. to 4:00 p.m., excluding all banking holidays. The hours of operation set forth herein may be modified by the Tenant at its sole discretion provided the modified hours of operation are reasonable hours of operation as compared to other banking facilities in Mercer County.

“LEASED PREMISES” shall mean the space leased by Tenant from Landlord pursuant to this Sublease Agreement and as more particularly described in Exhibit E.

4

“LEASE YEAR” shall mean a period of twelve (12) consecutive calendar months, the first of which will begin on the Commencement Date.

“LESSEE” shall mean The Grand Union Company, the Lessee from time to time under the Ewing Lease.

“LESSOR” shall mean Ewing Associates, the Lessor from time to time, under the Ewing Lease.

“MARRAZZO’S MARKET” shall mean Marrazzo’s Market at Ewing, L.L.C., the Sub-Subtenant from time to time, under the Sub-Sublease Agreement.

“MORTGAGEE” shall mean the holder of any mortgage or security interest now or hereafter encumbering the Building, improvements, appurtenances or personal property of Landlord.

“OPERATING EXPENSES” shall mean real estate taxes, payments “in lieu of real estate taxes,” insurance premiums and other expenses as referred to in Article 4 of, and as more particularly described in Exhibit G to the General Terms of Lease.

“STANDARD INDUSTRIAL CLASSIFICATION (SIC) NUMBER” shall mean the SIC number applicable to Tenant’s primary business and referred to in Article 2 of the General Terms of Lease which Tenant represents and warrants is    .

“SUBLESSEE” shall mean Fleming Companies, Inc., the Sublessee from time to time, under the Grand Union Lease.

“SUBLESSOR” shall mean The Grand Union Company, the Sublessor from time to time, under the Grand Union Lease.

SUB-SUBLANDLORD” shall mean Fleming Companies, Inc., the Sub-Sublandlord from time to time, under the Sub-Sublease Agreement.

“SUB-SUBTENANT” shall mean Marrazzo’s Market at Ewing, L.L.C., the Sub-Subtenant from time to time, under the Sub-Sublease Agreement.

5

“TENANT IMPROVEMENTS” shall mean the improvements to the Leased Premises constructed for by Tenant for Tenant’s use and occupancy.

“TENANT PLANS” shall mean the final plans, specifications and working drawings required to be supplied by Tenant and approved in writing by Landlord for the construction of the Leased Premises and the Tenant Improvements as herein defined.

“TENANT PLANS DEADLINE” shall mean the date on or before which Landlord must deliver written approval or disapproval of the Tenant Plans, which Landlord and Tenant agree will be five (5) business days after receipt of same by Landlord.

“TENANT’S PRO RATA SHARE,” shall mean the ratio of (x) the rentable square feet in the Leased Premises, over (y) the total rentable square feet in the Demised Premises, which Landlord and Tenant agree is .981 percent as of the date hereof which is subject to change upon a recalculation of the total rentable building size.

If any of the operating expense is related to any item entirely within the Leased Premises and for the sole use and benefit of the Tenant, then Tenant shall pay 100% of such cost. Otherwise, Tenant shall pay his pro rata share.

“TERM” shall mean a period of 5 years and 0 months from the Commencement Date referred to in Article 3 of the General Terms of Lease and will, if the context requires, include any extension(s) of the initial Term and be subject to earlier termination as provided in the General Terms of Lease.

“USE” shall mean Tenant’s occupancy of the Leased Premises as referred to in Article 2 of the General Terms of Lease for the purpose of a full-service bank only.

     IN WITNESS WHEREOF, Landlord and Tenant have hereunto set their hands and seals, or caused this Sublease to be signed by their duly authorized general partners, officers or agents, as of the date and year first above written.

WITNESS: SAMUEL MARRAZZO

6

	MARGARET MARRAZZO
ATTEST:	YARDVILLE NATIONAL BANK

7

GENERAL TERMS OF LEASE

ARTICLE 1. LEASED PREMISES.

     Section 1.1 Tenant will have the right to use and occupy its leasehold interest and, with respect to the Leased Premises, the right to use in common with other tenants of the Shopping Center and their invitees, customers and employees, those public areas of the Common Facilities, all subject to the terms, conditions and limitations set forth in the Ewing Lease, Grand Union and/or Fleming Lease.

ARTICLE 2. USE.

     Section 2.1 Landlord hereby leases to Tenant, and Tenant hires from Landlord, only for the operation of a full-service banking facility, a portion of the Demised Premises consisting of approximately 346 sq. ft. as more specifically described in Exhibit E attached hereto and incorporated herein. Tenant agrees, except as to those provisions relating to the payment of rent by the Tenant and as otherwise specifically set forth in this Sublease Agreement to be bound by all of the covenants and obligations of the Sub-Subtenant as set forth in the Fleming Lease.

     Section 2.2 Tenant will use and occupy the Leased Premises for the use specified only and for no other use. Notwithstanding the foregoing, Tenant’s use of the Leased Premises will, at all times, be lawful and will not constitute waste, nuisance or unreasonable annoyance to Landlord or other tenants of the Shopping Center.

     Section 2.3 Tenant warrants that it will not do or allow anything which will cause its SIC, as hereinafter set forth in this Agreement, to change and/or fall within any of the SIC number(s) to which the Industrial Site Recovery Act, N.J.S.A. 13:1K-6, et seq. (“ISRA”) is now or may hereafter be applicable. Tenant further warrants that it will not use the Leased Premises or any part thereof to refine, produce, store, handle, transfer, process, or transport “hazardous waste” or “hazardous substances” as such terms are now or may hereafter be defined under any federal, state or local law or regulation. In the event Tenant shall breach this warranty, Landlord will have, in

1

addition to any other remedies available, the right to immediately terminate this lease.

ARTICLE 3. TERM OF LEASE.

     Section 3.1 The initial Term of this Lease shall be for the period beginning April 1, 2000, and ending at 11:59 p.m. on March 31, 2005 (“Initial Term”). Thereafter, the term of this Lease shall be automatically renewed for three (3) successive additional terms of five (5) years (“Renewal Term”) each unless Tenant terminates this Lease by giving written notice to Landlord Tenant at least ninety (90) days prior to the end of the Initial Term or Renewal Term, as applicable. The Initial Term and Renewal Term are referred to herein as the “Term.” Notwithstanding any provision herein to the contrary, this Lease shall automatically terminate upon the expiration or termination of the Fleming Lease for any reason. In no event shall Tenant have the right to exercise any options to extend the term of the Fleming Lease that may be available to Landlord under the Fleming Lease.

ARTICLE 4. RENT AND ADDITIONAL RENT.

     Section 4.1 In addition to the Base Rent, and as Additional Rent, Tenant shall pay .981 percent (sublease square footage [346 sq. ft.] divided by total square footage [35,280 sq. ft.]) of all of the common area expenses and other charges for which Sub-Subtenant is responsible under the terms of the Ewing Lease, Grand Union Lease or Fleming Lease as well as .981 percent of Landlord’s Operating Expenses, including, but not limited to, electricity, steam, utility taxes, water (including sewer rentals), casualty and liability repairs and maintenance, building and cleaning supplies, window cleaning, service contracts, independent contractors and all other expenses providing that provided that nothing herein shall obligate Tenant to be responsible for salaries, wages, medical, surgical, general welfare benefits, and pension payments of employees of Landlord. However, with respect to “repairs and maintenance” only, Tenant shall not be responsible for any prorate share of repairs and maintenance to a portion of the building that has no effect on Tenant’s Leased Premises.

     Section 4.2 Tenant will pay Base Rent and Additional Rent without any setoff, deduction or demand whatsoever. Base Rent will be paid in monthly installments, in advance, on the first

2

day of each month during the Term in the amount set forth in this Sublease Agreement.

     Section 4.3 Any and all charges and costs which Tenant is required to pay pursuant to this Sublease, together with all interest and penalties that may accrue thereon in the event of Tenant’s failure to pay such amounts, and all damages, costs, and expenses which Landlord may incur by reason of any default or failure on Tenant’s part to comply with the terms of this Sublease, will be deemed to be Additional Rent. In the event of non-payment by Tenant of any Additional Rent, Landlord will have all the rights and remedies with respect thereto which Landlord has for non-payment of Base Rent.

     Section 4.4 In addition to any other remedies provided for herein, in the event of any installment of Base Rent or payment of Additional Rent remains unpaid for more than seven (7) calendar days after receipt of written notice thereof, then a late charge of four percent (4%) of the amount(s) so overdue may be charged by Landlord for each month or part thereof that the same remains overdue. This charge will be deemed compensation to Landlord for the inconvenience and expense of policing and processing the late payment(s) and will be in addition to and not in lieu of any other remedy the Landlord may have under the circumstances and in addition to any reasonable fees and charges of any agents or attorney Landlord may employ in the event of any default hereunder, whether authorized herein or by law.

ARTICLE 5 COMPLIANCE WITH LAWS.

     Section 5.1 Tenant will, at its expense, promptly observe and comply or cause compliance with all laws and ordinances, orders, rules, regulations, and requirements of all federal, state, county or municipal governments and appropriate departments, agencies, commissions, boards and offices thereof, and the board of fire underwriters and/or any other body exercising similar functions and all insurance companies writing policies covering the building and/or Leased Premises, or any part thereof, foreseen or unforeseen, ordinary as well as extraordinary, which relate or pertain to Tenant’s use and occupancy of the Leased Premises, including the conduct of Tenant’s business therein, whether or not the same: a) involve any change of governmental policy; b) are now in force or hereafter passed, enacted or directed, or c) require extraordinary repairs, alterations, equipment or additions of any work (or changes of such work) or

3

any other requirements incidental thereto, of any kind which may be applicable to, or in or about, the Leased Premises including, without limitation, the fixtures, equipment thereof, or the purposes to which the Leased Premises are put, or manner or use of the Leased Premises at the commencement or during the term of this Sublease. Tenant’s obligations as set forth in this paragraph will include, but not be limited to, compliance with any and all laws, orders, rules, regulations and requirements relating to life safety and environmental control, conservation or protection, including, without limitation, the Occupational Safety and Health Act (OSHA), the Spill Compensation and Control Act, and the Industrial Site Recovery Act (ISRA) with respect to the use of and operation of the Leased Premises. In the event of Tenant’s failure to comply with the conditions of this paragraph, Landlord may, but will not be required to, perform any of the Tenant’s obligations as stated herein. It is specifically understood that Tenant will defend, indemnify and hold harmless Landlord, its agents, successors and assigns from and against, and be responsible for, payment of any and all costs, expenses, claims, fines, penalties, and damages that may in any manner arise out of or be imposed because of the failure of Tenant to comply with the provisions of this paragraph, including expenses incurred by Landlord in the exercise of its rights pursuant to this paragraph, and all of the foregoing shall be deemed Additional Rent.

ARTICLE 6 EVENTS OF DEFAULT; REMEDIES.

     Section 6.1 It will be a default hereunder if, at any time after the date hereof, any of the following events (hereinafter called “Events of Default”) occurs:

     (a) Tenant fails to pay any installment of Base Rent or Operating Expenses, or any part thereof, when same is due and payable and such failure continues for seven (7) days after receipt of written notice thereof;

     (b) Tenant fails to pay any item of Additional Rent or any other charges required to be paid by Tenant hereunder and such failure continues for ten (10) days after receipt of written notice thereof from Landlord to Tenant; or

     (c) Tenant fails to perform any of the requirements of this Sublease (other than the payment of money) on the part of Tenant to be performed or observed and such failure continues for

4

thirty (30) days after receipt of written notice thereof from Landlord to Tenant; or

     (d) Tenant allows the Leased Premises to become vacant, deserted, or abandoned for a period of forty-five (45) days (the fact that any Tenant property remains in the Leased Premises shall not be evidence that Tenant has not vacated or abandoned the Leased Premises) or if Tenant fails to keep the Leased Premises occupied to the extent necessary to maintain fire insurance coverage; or

     (e) Tenant assigns, mortgages or encumbers this Sublease, Tenant’s Leased Premises or any part thereof, other than as expressly permitted hereunder; or

     (f) Tenant makes an assignment for the benefit of its creditors; or

     (g) Any petitions filed by or against Tenant in any court, whether or not pursuant to any statute of the United States or any state in any bankruptcy, reorganization, extension, arrangement or any insolvency proceeding and, with regard any petition filed against Tenant, the same is not dismissed within forty-five (45) days, provided that during such period, Tenant continues to pay all Base Rent and all Additional Rent in performance of all of its obligations under this Sublease; or

     (h) A receiver or trustee is appointed for all or any substantial portion of Tenant’s property and, with regard to a proceeding brought against Tenant, the same is not dismissed in forty-five (45) days, provided that during such period Tenant continues to pay all Base Rent and all Additional Rent in performance of all of its obligations under this Sublease; or

     (i) If a petition or proceeding is filed or commenced by against Tenant for its dissolution or liquidation, other than in connection with any merger permitted hereunder, or if Tenant’s property is taken by any governmental authority in connection with a dissolution or liquidation and, with regard to a petition filed or commenced against Tenant, the same is not dismissed within forty-five (45) days, provided that during such time Tenant continues to pay all Base Rent and all Additional Rent and performs all of its obligations under this Sublease; or

5

     (j) If a levy under judgment against Tenant is not satisfied or bonded within thirty (30) days.

     Section 6.2 Upon occurrence of any one or more of the aforementioned Events of Default and the expiration of the period of time for curing the same, if any, Landlord may give Tenant a notice (hereinafter called “Notice of Termination”) of its intention to end the term of this Sublease at the expiration of five (5) days from date of service of such Notice of Termination. At the expiration of five (5) days, the term hereof, as well as all of the right, title and interest of Tenant hereunder, will wholly cease and expire in the same manner and with the same force and effect as if the date of expiration of such five (5) day period were the date originally specifically herein for expiration of the term, and Tenant will then quit and surrender the Leased Premises to Landlord, but Tenant will be liable to Landlord as hereinafter provided. Notwithstanding the foregoing provision of this paragraph, Landlord will not be required to give any Notice of Default and no cure period shall be applicable for the failure of Tenant to observe or perform any of its agreements or obligations hereunder if, within any one hundred eighty (180) day period, Tenant has committed two or more defaults hereunder and Landlord has transmitted to Tenant two or more Default Notices.

     Section 6.3 If this Sublease is terminated as provided hereinabove, Landlord or Landlord’s agent and servants may, at any time thereafter, re-enter the Leased Premises and remove Tenant, its agents, employees, servants, licensees, permittees and any sub-tenants or assignees, and all of its or their property, either by summary dispossess proceeding or by any suitable action or proceeding at law, without being liable to indictment charges of any nature, and recover and enjoy the Leased Premises together with all additions, alterations, and improvements thereto.

     Section 6.4 If default occurs during the original Term, then all Rent and Additional Rent shall be paid monthly for the remainder of the Term, and the Leased Premises shall be restored at Tenant’s sole expense within seventy-five (75) days after default.

     Section 6.5 If default occurs during any Option Period, then all Rent and Additional Rent shall be paid monthly for the twelve (12) months following such date of default, and the

6

Leased Premises shall be restored at Tenant’s sole expense within seventy-five (75) days after default.

     Section 6.7 In case of any such termination by summary proceeding or otherwise, Tenant agrees that:

     (a) The Base Rent and all Additional Rent required to be paid by Tenant hereunder will thereupon become due and be paid up to the time of such termination or dispossess. Tenant will also pay to Landlord, as Additional Rent, all of Landlord’s reasonable expenses for attorneys’ fees, brokerage commissions, all costs paid or incurred by Landlord for retaking and repossessing the Leased Premises (including the removal of personal and property therefrom), restoring the Leased Premises to good order and condition, altering and otherwise preparing the same for reletting (without regard to whether such alterations may be characterized as capital improvements), the unamortized portion of any rental concessions, Tenant fit-out or abatement (treated as if amortized over the initial Term hereof) and for all other reasonable costs and expenses incurred in securing a new tenant or tenants (all of the foregoing collectively referred to as the “Early Termination Damages”).

     (b) Landlord may, at any time and from time to time, relet the Leased Premises, in whole or in part, in its own name, for a term or terms which, at Landlord’s option, may be for the remainder of the then current Term of this Sublease, or for any longer or shorter period. Landlord undertakes to use reasonable efforts to relet the Leased Premises so as to mitigate damages but will not be required to prefer such reletting to any letting of other vacant space in the Building.

     (c) Tenant will be obligated and agrees to pay to Landlord, upon demand, and Landlord will be entitled to recover from Tenant, the Early Termination Damages plus damages in an amount equal to the excess, if any, of (i) all Base Rent and all Additional Rent as would have been required to be paid by Tenant under this Sublease for each calendar month had this Sublease and the Term not been so terminated, over (ii) the rents, if any, collected by Landlord in respect of such calendar month pursuant to any reletting. In no event will Tenant be entitled to receive any excess of such rents over the sums payable by Tenant to Landlord hereunder. Said damages will be payable by Tenant to Landlord in monthly installments in the same manner as Base Rent hereunder, and no suit or action brought to collect

7

the amount of the deficiency for any month will in any way prejudice Landlord’s right to collect the deficiency for any subsequent month by a similar proceeding.

     (d) Suit or suits for the recovery of any and all such damages, or for any installments thereof, may be brought by Landlord from time to time at its election, and nothing herein contained will be deemed to require Landlord to postpone suit until the date the Term would have expired had the Lease not been terminated as provided herein or under any provision of law or had landlord not re-entered into or upon the Leased Premises.

     (e) If any statute or rule of law governing Landlord’s claim for damages will limit the amount of such claim capable of being so proved and allowed, Landlord will be entitled to prove as and for liquidated damages and have allowed an amount equal to the maximum allowed by or under any such statute or rule of law.

SECTION 7. CUMULATIVE REMEDIES; WAIVER

     Section 7.1 Every term, condition, agreement or provision contained in this Sublease will also be deemed to be a covenant.

     Section 7.2 In addition to the other remedies provided in this Sublease, Landlord will be entitled to the restraint by injunction of any violation or attempted to threatened violation of any of the terms or covenants of this Sublease. Landlord’s remedies under the terms of this Sublease are cumulative and are not intended to be exclusive of any other remedies to which Landlord may be lawfully entitled, at law or in equity, in case of any breach by Tenant of any provision of this Sublease.

     Section 7.3 The failure of the Landlord to insist in any one or more cases upon the strict performance of any of the terms of covenants of this Sublease, or to exercise any option herein contained, will not be construed as a waiver or a relinquishment for the future of any such term or covenant. No waiver by Landlord of any term or covenant of this Sublease will be deemed to have been made unless made in a writing signed by Landlord.

     Section 7.4 Neither the payment by Tenant nor acceptance by Landlord of rent or any other payment, nor the acceptance by Landlord of performance of anything required by this Sublease to be performed, with the knowledge of the breach of any term or covenant of this Sublease, will be deemed a waiver of such

8

breach or of any of Landlord’s rights hereunder. Landlord’s acceptance of rent or any other payment in a lesser amount than is due (regardless of any endorsement on any check, or any statement in any letter accompanying any such rent or payment) will not operate or be construed either as an accord and satisfaction or in any manner other than as payment on account of the earliest rent or other sums then unpaid.

     Section 7.5 Tenant and Landlord waive all right to trial by jury in any proceeding instituted with respect to this Sublease.

ARTICLE 8. SURRENDER OF PREMISES.

     Section 8.1 Tenant will, upon the expiration or earlier termination of this Sublease, quit and surrender the Leased Premises to Landlord, together with all Tenant Improvements and other alterations (unless Landlord elects otherwise as hereinafter provided) and replacements thereof then on the Leased Premises, in good order, condition and repair, except for reasonable wear and tear. Prior to the expiration or earlier termination of this Sublease, the Tenant will remove all of its property, equipment and trade fixtures from the Leased Premises without damage, leaving the Leased Premises in broom-clean condition. All property not removed by Tenant will be deemed abandoned by Tenant and Landlord reserves the right to charge the cost of removal, storage and/or disposal of same to Tenant.

     Section 8.2 If the Leased Premises is not surrendered at the end of the Term, including a failure to surrender by virtue of failure to comply with ISRA as referred to hereinabove, or if the Leased Premises is damaged or is not in broom-clean condition upon surrender, Tenant will indemnify Landlord against any loss or liability resulting, including, without limitation and in addition to any other remedy or claim of Landlord’s, any claims made or damages sustained by any succeeding tenant founded on the delay, condition and/or damage.

     Section 8.3 Tenant’s obligations under this Article 8 will survive the expiration or earlier termination of this Sublease and surrender of the Leased Premises.

ARTICLE 9. ASSIGNMENT OR SUBLETTING.

     Section 9.1 Tenant will neither assign this Sublease, sublet the Leased Premises or any part thereof, nor encumber its

9

interest in this Sublease unless it receives the written consent of the Landlord which shall not be unreasonably withheld.

     Section 9.2 Tenant, without Landlord’s consent, may sublet or assign its interest in this Sublease to any affiliate or subsidiary corporation of Tenant or to any corporation resulting from a merger or consolidation with Tenant or to any person or entity which acquires all of the assets of Tenant’s business as a going concern without violating this provision, provided, however, that Tenant remains liable under the terms of this Sublease.

ARTICLE 10. MAINTENANCE AND REPAIRS; COVENANT AGAINST WASTE; RIGHT OF INSPECTION.

     Section 10.1 Tenant will, at its sole cost and expense, maintain the Leased Premises and all of its fixtures, systems, equipment and improvements, in clean, safe, orderly and sanitary condition free of accumulation of dirt and rubbish. Tenant will not permit or suffer any overloading of the floors of the Leased Premises and will not do or suffer any waste or injury with respect thereto. In case of any destruction or damage of any kind whatsoever to the Leased Premises, or any part thereof or system therein, including, without limitation, any glass and the Tenant Improvements in or at the Leased Premises, Tenant shall repair said damage or destruction as speedily as possible at Tenant’s own cost and expense, provided, however, that if any such damage or destruction results solely from the act, fault or negligence of Landlord, or anyone acting under Landlord, when making replacements pursuant to this Sublease Agreement, then it will be the responsibility of Landlord to make the repairs at its expense. Tenant will also be responsible, at its own cost and expense, to (i) repair HVAC, electrical or plumbing system(s), if any, (“Tenant System”) which service only the Leased Premises, and (ii) maintain throughout the Term an HVAC maintenance contract and, if required by Landlord, a maintenance contract on any other Tenant System(s), covering any such Tenant System(s). When used in this Article, the term “repair(s)” includes replacement(s), restoration(s), addition(s), improvement(s), alteration(s) and/or renewal(s) when necessary. Prior to making any repairs, Tenant will notify Landlord of the nature of the damage or destruction and contractors Tenant intends to employ to effect the repairs. The provisions and conditions of Article 12 applicable to changes or alterations (including the condition that Landlord may require that the

10

repairs be performed by its agents, servants, employees or contractors) will similarly apply to repairs required to be done by Tenant under this Article. to the extent that there are any warranties or guaranties applicable to the Leased Premises, including the fixtures, equipment and systems therein, which could be applicable to the obligations of Tenant under this Article, Landlord will assign said warranties or guaranties to Tenant.

ARTICLE 11. MECHANIC’S LIENS.

     Section 11.1 Tenant will not suffer or permit any Mechanics Notice of Intention or Mechanic’s Lien (“Lien”) against the Leased Premises and/or Property or any part thereof, by reason of any work, labor, services or materials done or supplied, or claimed to have been done or supplied, for or to Tenant or any contractor or subcontractor employed by Tenant or anyone holding the Leased Premises or any part thereof through or under Tenant (“Lien”). If at any time a Lien is filed against the Leased Premises and/or Property, Tenant will cause the same to be discharged of record or bonded within thirty (30) days after notice to Tenant of the filing of same. If Tenant fails to discharge or bond any such Lien within such period, then, in addition to any other right or remedy of Landlord, Landlord may elect, but shall not be obligated, either to procure the discharge of the Lien by bonding or by payment or deposit into court of the amount claimed to be due, or to compel the prosecution of an action for the foreclosure of such Lien by the lienor and to pay the amount of the judgment, if any, in favor of the lienor within interest, costs and allowances. Any amounts paid or deposited by Landlord for any of the aforesaid purposes, and all legal and other expenses and disbursements of Landlord, including reasonable counsel fees, in defending any action or in or about procuring the discharge of such Lien, together with interest thereon at the rate which is the Prime Rate as published in the Wall Street Journal, from time to time, plus five percent (5%), from the date of payment or deposit, will become due and payable forthwith by Tenant to Landlord, as Additional Rent.

ARTICLE 12. ALTERATIONS.

11

     Section 12.1 Tenant will not make, cause or permit any alterations, additions, improvements (“alterations”) in or to the Leased Premises without in each instance obtaining Landlord’s prior written consent thereto. By way of illustration but not limitation, Landlord will be entitled to withhold its consent if the proposed alterations (i) impair or affect the structural soundness or integrity of the Leased Premises, Building, or any of the systems or equipment therein, (ii) lessen the present or future value of the Demised Premises or Building, (iii) change the type of use of the Leased Premises; or (iv) increase the risk of damage or injury to the Leased Premises, the Building or the occupants of the Building. any such consent by Landlord may be upon condition that the work be performed by Landlord’s agents, servants, employees or contractors and that Tenant furnish to Landlord such evidence of Tenant’s financial ability to assure payment and/or completion as Landlord may reasonably require. If Landlord so elects and notifies Tenant at the time of Tenant’s request to make such alterations, Tenant will, at its sole cost and expense, remove any alterations (structural or non-structural) at the expiration or other termination of this Sublease, repair all damage caused by such removal and restore the Leased Premises to the condition in which they were prior to the installation of any such alterations. Nothing herein contained will be construed to restrict Tenant’s right to install or to make any changes in Tenant’s own movable trade fixtures or to qualify Landlord’s obligation to make structural replacements as provided in this Sublease. The provisions of this Article are subject to the terms and conditions of any mortgage to which this Sublease is subordinate, and if the consent of any such mortgagee is required for such work, such consent will be obtained by Tenant before any such work is commenced. In that regard, Landlord agrees to reasonably cooperate with Tenant in obtaining the consent of such mortgagee.

     Plans and specification for any proposed alterations will be submitted to Landlord for approval upon the request for its consent together with a reputable contractor’s (which may include a contractor in Tenant’s employ) estimate of the cost thereof. Upon completion of the alterations, Landlord is to receive one print and one reproducible copy of the “as-built” construction plans.

     Section 12.2 In making any alteration contemplated by this Article, or any repair or restoration contemplated by other

12

items and conditions of this Sublease, the parties will comply with all applicable laws, regulations, ordinances and orders and procure all requisite permits, all at Tenant’s expense. Copies of all such approvals, authorizations and permits will be delivered to and retained by Landlord. Each party will, on written request from the other, execute any documents necessary to be signed on its part in order to obtain any such permit. All alterations made hereunder will be performed in a first-class, good and workmanlike manner using new materials at least equivalent in quality to those used in the construction of the Building.

     Section 12.3 Tenant will maintain, or cause Tenant’s contractors to maintain, worker’s compensation and comprehensive general liability insurance and property damage insurance, all in amounts, and with companies and on forms reasonably satisfactory to Landlord and on an occurrence basis. Such insurance will be in effect at all times during any period of such contractor’s entry upon the Leased Premises and certificates of insurance will be delivered to Landlord prior to any such entry by Tenant or Tenant’s contractors. If required by Landlord, such insurance will name Landlord as additional insured(s), and in all cases will be primary insurance not contributing with other insurance Landlord or its contractors and/or construction manager may carry. Landlord will not in any way be liable for any injury, loss, theft or damage which may occur to any supplies or equipment of, or any decorations or installations made by, Tenant or Tenant’s contractors, the same being at the sole risk of Tenant and Tenant’s contractors.

     ARTICLE 13. INSURANCE.

     Section 13.1 During the term of this Sublease, Tenant will, at its own cost and expense, provide and keep in force the following insurance:

     (a) Comprehensive general liability insurance written on an occurrence basis, naming Landlord as additional insured, against claims for bodily injury, death or property damage occurring in or about the Leased Premises, the Demised Premises and the Common Facilities (including, without limitation, bodily injury, death or property damage resulting directly or indirectly from or in connection with any alteration, improvement or repair thereof made by and on behalf on the Tenant) with limits on an occurrence basis of not less than $1,000,000.00/$2,000,000.00

13

for bodily injury or death and $500,000.00 for property damage or $5,000,000.00 combined single. Tenant’s coverage must include (i) premises/operations, (ii) excess owner’s, contractor’s protective, and (iii) blanket contractual liability.

     (b) Workman’s Compensation in statutory amounts and employer’s liability of at least $100,000.00.

     (c) Insurance covering its contents and all Tenant Improvements from loss or damage from fire or casualty and, as to Tenant Improvements, such coverage shall be written on an all-risk special form commercial property insurance (or its equivalent) and shall include a replacement cost valuation, and shall name Landlord as loss payee and mortgagee as their interests may appear.

     (d) Such other insurance as Landlord or any mortgagee may reasonably require from time to time.

     Section 13.2 All policies will be obtained by Tenant and copies of same, or at Landlord’s option, certificates evidencing coverage will be delivered to Landlord at or before the Commencement Date. All insurance will be written by companies satisfactory to the Landlord and Mortgagee and authorized to do business in the State of New Jersey. All policies will be for periods that are consistent with the term of this Lease and shall contain a provision whereby the same cannot be canceled or materially altered unless Landlord is given at least thirty (30) days prior written notice of such cancellation. All policies of insurance to be obtained which relate or pertain to the Leased Premises, the Building, the Common Facilities or any of the Tenant’s contents, Tenant’s improvements, fixtures and property, must include a waiver by the insurer of all rights of subrogation.

ARTICLE 14. QUIET ENJOYMENT.

     Section 14.1 Landlord covenants that so long as Tenant pays the rents and performs the covenants and conditions in this Sublease, Tenant may peacefully hold and enjoy the Leased Premises during the Term subject, however, to the terms of this Sublease.

14

ARTICLE 15. DAMAGE OR DESTRUCTION.

     Section 15.1 In case of any damage to or destruction of the Leased Premises, or any part thereof, Tenant will promptly give written notice thereof to Landlord.

     Section 15.2 If the Building or the Leased Premises is partially or totally damaged or destroyed by fire or other cause, then, whether or not the damage or destruction resulted from the fault or neglect of Tenant (and if this Sublease has not been terminated as hereinafter provided in this Article), Landlord will repair the damage and restore and rebuild the Building and/or Leased Premises (which for purposes of this Article shall not include any Tenant Improvements).

     Section 15.3 If the Building or the Leased Premises is partially damaged or partially destroyed by fire or other cause, the rents payable hereunder will be abated to the extent that the Leased Premises has been rendered unusable to Tenant in the conduct of its business and for the period from the date of such damage or destruction to the date the damage was repaired or restored. If the Leased Premises or a major part thereof has been totally (which shall be deemed to include substantially) damaged or destroyed or rendered completely unusable to Tenant in the conduct of its business on account of fire or other cause, the rents shall completely abate as of the date of the damage or destruction and until Landlord repairs, restores and rebuilds the Leased Premises provided, however, that if Tenant reoccupies a portion of the Leased Premises for the conduct of Tenant’s business during the time that the restoration work is taking place and prior to the date that the same are made completely tenantable, rents allocable to such portion will be payable by Tenant from the date of such occupancy.

     Section 15.4 In case of any damage or destruction mentioned in this Article, Landlord may terminate this Sublease, by notice to the Tenant, if the Leased Premises and/or Building are not reasonably capable of restoration within ninety (90) days. Within thirty (30) days after such fire or casualty, Landlord will advise Tenant in writing as to whether or not it can restore the Premises within the ninety (90) day period referred to above, and whether or not it elects to terminate this Sublease as provided in this Section. If Landlord elects not to terminate the Sublease, then Landlord will have one hundred eighty (180) days from receipt of Tenant’s notice of such

15

damages to restore the Leased Premises. In the event Landlord is not able to restore the Leased Premises within 180 days, then Tenant shall have the option to terminate this Sublease by providing written notice of termination to Landlord.

     Section 15.5 Provided that Landlord diligently prosecutes such repair and restoration, Landlord will have no liability if the term for repair or restoration extends beyond the two hundred ten (210) day period. During any period of restoration, Tenant will be responsible for the security of its goods, fixtures and equipment and will be responsible at its costs and expense to remove same from the damaged Leased Premises pending restoration if necessary, it being understood and agreed that Landlord will have no responsibility or liability with respect thereto if the same remain in the damaged area.

     Section 15.6 Notwithstanding anything to the contrary contained herein, Landlord’s obligation to repair will not extend to the Tenant Improvements unless Tenant makes available to Landlord the funds to pay for the cost of such repairs and Landlord’s repairs will not exceed the scope of the work required to be done at the outset of this Sublease as set forth in Exhibit E and any additional improvements made by the Tenant consistent with the terms of this Lease. Furthermore, should the damage or destruction occur during the last year of the Term, then notwithstanding any contrary provision contained herein, Landlord will have the option of not repairing the Leased Premises. Landlord must give Tenant notice of its election not to repair within thirty (30) days of receipt of Tenant’s notice of the damage or destruction or such option will be deemed terminated.

     Section 15.7 No damages, compensation or claim will be payable by Landlord for inconvenience, loss of business or otherwise arising from any repair or restoration of any portion of the Leased Premises or of the Building pursuant to this Article. Landlord will use reasonable and diligent efforts to effect such repair or restoration promptly and in such manner as not to unreasonably interfere with Tenant’s use and occupancy.

     Section 15.8 Notwithstanding anything to the contrary contained herein, Landlord’s obligations to repair the damage and restore and rebuild the Building and/or the Leased Premises pursuant to this Article will be contingent upon its obtaining

16

all necessary approvals from the applicable governmental authorities.

ARTICLE 16. EMINENT DOMAIN.

     Section 16.1 The Tenant agrees that, in the event of taking of the premises by eminent domain, it will make no claim for the value of the unexpired term of this lease, except to the extent as may be necessary to recover the reasonable value of its leasehold improvements and trade fixtures. ARTICLE 17. INDEMNIFICATION.

     Section 17.1 Tenant covenants and agrees, at its sole cost and expense and in addition to any other right or remedy of Landlord hereunder, to indemnify and save harmless Landlord from and against any and all loss, costs, expense and liability from claims by any third party(ies) (but excluding any liability arising solely out of the negligence of Landlord or its agents, employees or contractors), including, without limitation, reasonable attorneys’ fees and court costs, arising from or in connection with (a) Tenant’s use, occupancy, operation and control of the Leased Premises or Common Facilities, (b) the conduct or management of any work, or any act or omission whatsoever, done in or on the Leased Premises by or under the direction or at the request of Tenant, (c) any breach or default on the part of Tenant in the payment of any rent or performance of any covenant or agreement on the part of Tenant to be performed pursuant to the terms of this Sublease, or (d) any act or negligence of Tenant or any of its agents, contractors, servants, employees, licensees or invitees.

     Section 17.2 In the event that any action or proceeding is brought against Landlord by reason of any claims covered by the foregoing indemnity, Tenant will, upon notice from Landlord, resist or defend such action or proceeding. Landlord will not defend such action or proceeding so long as Tenant is diligently doing so. Landlord will give prompt notice to Tenant of any action or proceeding brought against Landlord by reason of any claims covered by the foregoing indemnity together with copies of any documents served on Landlord in connection therewith, and Landlord will not settle any claim without Tenant’s written consent.

ARTICLE 18. SELF-HELP.

17

     Section 18.1 Tenant covenants and agrees that if it, at any time, fails to make any payments or perform any act which it is obligated to make or perform under this Sublease, then Landlord may, but will not be obligated to, after Tenant’s time to make any such payment or perform any such act as provided in this Sublease has expired and any required notice has been given, and without waiving or releasing Tenant from any of its obligations under this Sublease, make any such payment or perform any such act in such manner and to such extent as is necessary and consistent with Tenant’s obligations hereunder. In exercising any such rights, Landlord may pay or incur costs and expenses, including, without limitation, reasonably attorneys’ fees. Notwithstanding the foregoing, Landlord may make any such payment or perform any such act before Tenant’s time to do so (as provided in Article 6) has expired only if payment or performance of the same is necessary or required prior to the expiration of the applicable grace period for the preservation or protection of the Building and/or Leased Premises.

     Section 18.2 Provided Landlord has given notice to Tenant and Tenant has failed to pay all sums within thirty (30) days of such notice, then all sums so paid or incurred in connection with the performance of any such act by Landlord, together with interest thereon from the date that the Landlord made such expenditure at the rate which Yardville National Bank announces as its so-called “base rate,” from time to time for the first month after the making of such expenditure will be deemed Additional Rent hereunder and, except as otherwise in this Sublease expressly provided, will be payable to Landlord on demand or, at the option of Landlord, may be added to any rent then due or thereafter becoming due under this Sublease.

ARTICLE 19. ESTOPPEL CERTIFICATE.

     Section 19.1 Each party agrees that, at any time and from time to time, within ten (10) days of the receipt of written request by the other, it will execute, acknowledge and deliver a statement in writing certifying (i) that this Sublease is unmodified and in full force and effect, or if there have been modifications, that the same is in full force and effect as modified and stating the modification, (ii) the dates to which the Base Rent and other charges have been paid and the amount of same, and (iii) to the best of knowledge of the certifying party whether there are any default or rent abatements or offsets claimed. Notwithstanding the foregoing, it is intended that any

18

such statement delivered pursuant to this Article may be relied upon by any prospective Purchaser of the fee or mortgagee or assignee of any mortgage of the Landlord’s interest in the Building and/or Leased Premises and the statement will contain such other information as is requested, and be in the form required by such Purchaser, mortgagee or assignee.

ARTICLE 20. SUBORDINATION AND NON-DISTURBANCE.

     Section 20.1 This Sublease is and will at all times be subject and subordinate to (i) the lien of any mortgage on or affecting the Building or any part thereof, at the date hereof, and (ii) the Ewing Lease, Grand Union and/or Fleming Lease. The provisions of this subordination shall be automatic and no further instrument of subordination will be necessary, but in confirmation of this subordination Tenant will, at Landlord’s request, execute and deliver such further instruments as may be required by the holder(s) of said mortgage(s), Ewing Lease, Grand Union and/or Fleming Lease. Where there is a conflict between the obligations of the Landlord to Tenant and Landlord’s obligations under the Ewing Lease, Grand Union and/or Fleming Lease, then Landlord’s obligation under the Ewing Lease, Grand Union and/or Fleming Lease shall prevail and pass through to Tenant in accordance with this Sublease Agreement.

     Section 20.2 If any Mortgagee or any other person claiming by or through any Mortgagee, or by or through any foreclosure proceeding or sale in lieu of foreclosure, succeeds to the rights of Landlord under this Sublease, Tenant will, at the request of such successor or at Landlord’s request, attorn to and recognize such successor as the landlord of Tenant under this Sublease, and Tenant will promptly execute, acknowledge and deliver at any time any instruments required by such person to evidence such attornment and/or confirm Tenant’s agreements to attorn. Upon such attornment, this Sublease will continue as a direct lease from such successor landlord to Tenant, upon and subject to all of the provisions of this Sublease for the remainder of the Term, except that the successor landlord will not be:

     (a) liable for any previous act or omission of Landlord under this Sublease;

19

     (b) subject to any offset not expressly provided for in this Sublease which has theretofore accrued to Tenant against Landlord;

     (c) bound by (i) any modification of this lease after the date of such mortgage, or (ii) any prepayment of more than one (1) months’ Base Rent or Additional Rent, unless same has been expressly approved in writing by the holder of such mortgage through or by reason of which the successor landlord shall have succeeded to the rights of Landlord under this Sublease.

     (d) bound by any security deposit which Tenant may have paid to any prior landlord, unless such deposit is in an escrow fund available to Mortgagee, or actually received by Mortgagee;

     (e) bound by any provision in the Lease which obligates the landlord to erect or complete any building or to perform any construction work or to make any improvements to the Premises or to expand or rehabilitate any existing improvements or to restore any improvements following any casualty or taking;

     (f) bound by any notice of termination given by Landlord to Tenant without Mortgagee’s written consent thereto; or

     (g) personally liable under the Lease and Mortgagee’s liability under the Lease shall be limited to the ownership interest of Lender in the Premises. Tenant will further agree with Mortgagee that Tenant will not voluntarily subordinate the Lease to any lien or encumbrance without Mortgagee’s prior written consent.

     Notwithstanding anything to the contrary contained herein, this Sublease shall be contingent upon Landlord’s obtaining for Tenant’s benefit a recognition agreement satisfactory to Tenant from all Mortgagees having a lien on or affecting the Building or any part thereof at the date hereof and all parties having a prior interest in the Building, Common Facilities and/or Leased Premises prior to execution of this document.

ARTICLE 21. NOTICES.

20

     Section 21.1 Except as expressly provided in this Sublease to the contrary, all notices, demands and requests (other than invoices for Base Rent or Additional Rent) which are required to be given by either party to the other will be in writing and will be sent by United States first class certified or registered mail, return receipt requested, and addressed to (i) Landlord at the address set forth in the agreement with a copy to Leo R. Zamparelli, Esquire, 1719 Brunswick Pike, Lawrenceville, New Jersey 08648, or (ii) to Tenant at the address set forth in the agreement with a copy to Daniel J. O’Donnell, Esquire, c/o Destribats, Campbell, DeSantis, Magee & O’Donnell, 247 White Horse Avenue, Trenton, New Jersey 08610. Notices for late payments may be send by way of regular mail and/or facsimile transmittal.

     Section 21.2 Notice is deemed to be given upon receipt, provided, however, that in the event a party refused to accept delivery of said certified mail, the notice will nevertheless be deemed to be given upon the date of refusal to accept delivery.

ARTICLE 22. BROKER.

     Section 22.1 Landlord and Tenant represent to each other that they dealt with no broker in connection with this Sublease.

     Section 22.2 Tenant agrees that if any claim should be made for commissions by any broker by reason of any act of Tenant or its representatives, Tenant will hold Landlord free and harmless from any and all loss, liabilities, and expenses in connection therewith. Landlord will give prompt notice to Tenant after any such claim is made by any broker. Tenant will have the right to defend such claim and Landlord will not pay or settle such claim as long as Tenant is defending same.

     Section 22.3 Landlord agrees that if any claims should be made for commissions by any broker by reason of any act of Landlord or its representatives, Landlord will hold Tenant free and harmless from any and all loss, liabilities and expenses in connection therewith. Tenant will give prompt notice to Landlord after any such claim is made by any such broker. Landlord will have the right to defend such claim and Tenant will not pay or settle such claim as long as Landlord is defending same.

ARTICLE 23. SIGNS.

21

     Section 23.1 Tenant will not place any signs on the land, or the exterior or interior of the Building, or in any window whereby such sign would be visible from the outside of the Building, except as agreed to in writing by Landlord. Tenant will obtain, at its sole cost and expense, any and all permits, licenses or approvals which may be necessary in connection with its sign or signs.

     Section 23.2 Any and all signs are to be approved by Landlord, whose approval shall not be unreasonably withheld.

ARTICLE 24. HOLDOVER.

     Section 24.1 If Tenant continues in the occupancy of the Leased Premises after the expiration of the Term, Tenant’s occupancy will be deemed a month-to-month tenancy subject to the terms of the Sublease and Tenant will pay the Base Rent in effect upon the expiration of the Term together with the Additional Rent provided herein or one and one-half (1.5) times such charges if Landlord has immediate use for such space. The provision of this Article will not be construed (i) to relieve Tenant from liability to Landlord for damages resulting from any such holding over, or (ii) as Landlord’s consent for Tenant to hold over.

ARTICLE 25. LIMITATION OF LIABILITY.

     Section 25.1 Notwithstanding any contrary provision contained in this Sublease, neither Landlord, nor any of its officers, directors, principal partners, agents or employees, will be responsible or liable to Tenant:

     (a) for any damage or injury resulting from acts or omissions of persons occupying or using any other part of the Building or for any injury or damages resulting from acts or omissions of persons occupying or using any other part of the Building or for any injury or damage resulting from bursting, stoppage or leakage of water, sprinkler, gas, sewer or steam pipes; or

     (b) for any consequential damages or lost profits, under any circumstances whatsoever.

     Notwithstanding the provisions of this Section, if Landlord is in default with respect to its obligations hereunder and is

22

thereby or otherwise determined to be liable to Tenant (whether as a result of negligence, strict liability, breach of warranty or any other theory or concept of liability), Landlord will be liable for monetary damages only and as of the date such cause of action occurs, following a final judgment establishing such default or liability.

ARTICLE 26. MODIFICATIONS REQUESTED BY MORTGAGEE.

     Section 26.1 Tenant hereby agrees that if any Lender to the Landlord proposing to make a mortgage on Landlord’s interests in the Building and/or Leased Premises requires, as a condition to making any loan to be secured by such mortgage, that Tenant agree to modifications to this Sublease, or that Tenant supply corporate financial statements and/or other information, then Tenant agrees that it will enter into an agreement with Landlord making such modifications as are requested by such Lender and will supply such financial statements and other information as are requested by such Lender. Under no circumstances will Tenant be required to agree to any modification which changes the Leased Premises, increases the Base Rent or any Additional Rent, abridges or enlarges the Term, or requires the expenditure of funds by Tenant which Tenant is not obligated to expend pursuant to the existing terms of this Sublease. Tenant will execute such modification or supply such information within ten (10) days after Landlord’s request. In the event of Tenant’s refusal, Landlord will have the right among other remedies, to cancel and terminate this Sublease. Provided, however, that nothing in this Section 26.1 shall require the Tenant to consent to any modifications that materially adversely affect the Tenant’s rights under the Sublease.

ARTICLE 27. PARKING.

     Section 27.1 Employees of Tenant will be required to park in designated areas or spaces. A minimum of three (3) such spaces will be assigned to Tenant.

ARTICLE 28. RULES AND REGULATIONS.

23

     Section 28.1 Tenant, its agents, employees, contractors, licensees, and invitees, will at all times abide by and observe the Rules and Regulations as may be promulgated from time to time by Landlord for the operation and maintenance of the Building and Common Facilities provided, however, that a copy of the same are sent to Tenant and that the same are in conformity with common practice and usage in similar buildings and are not inconsistent with the provisions of this Sublease; as well as any Rules and Regulations promulgated pursuant to the Ewing Lease, Grand Union Lease or Fleming Lease. Landlord shall provide to Tenant copies of all Rules and Regulations referred to in this Article.

ARTICLE 29. REGULATION OF COMMON FACILITIES.

     Section 29.1 The Common Facilities are at all times subject to the exclusive control and management of Lessor and Landlord. Lessor and Landlord will have the right to change the areas, locations and arrangements of parking areas, lobbies, and other Common Facilities (provided that Tenant and its customers will have reasonable access to the Leased Premises) all of which is set forth in this Sublease or in the Ewing Lease, Grand Union and/or Fleming Lease as the case may be.

ARTICLE 30. CAPTIONS.

     Section 30.1 The captions in this Sublease are for convenience and reference only, in no way define, limit or describe the scope or intent of this Sublease and are in no way to affect the interpretation or construction of this Sublease.

ARTICLE 31. APPLICABILITY TO SUCCESSORS AND ASSIGNS.

     Section 31.1 The provisions of this Sublease will be binding upon and inure to the benefit of Landlord and Tenant, and their respective heirs, successors, legal representatives, and assigns, but nothing herein will grant to Tenant the right to assign this Sublease other than pursuant to the provisions hereof. It is understood that the term “Landlord” as used in this Sublease means only the owner, a mortgagee in possession, or a term lessee of the Demised Premises, so that in the event of any assignment by Landlord of the Lease for the Demised Premises, or if a mortgagee takes possession of the Building and/or Demised Premises, the Landlord named herein will be and hereby is entirely freed and relieved of all covenants and

24

obligations of Landlord hereunder accruing thereafter, and it will be deemed, without further agreement, that the Purchaser, the term lessee of the Building and/or Demised Premises, or the mortgagee in possession has assumed and agreed to carry out any and all covenants and obligations of Landlord hereunder accruing from and after the date of transfer, lease or possession, as applicable.

ARTICLE 32. ENTIRE AGREEMENT; MODIFICATION.

     Section 32.1 This Sublease (i) constitutes the entire and only agreement between the parties relating to the subject matter hereof, (ii) cancels and supersedes any prior agreements or discussions between the parties or their representatives, and (iii) may not be modified except by an instrument in writing which is signed by both parties.

ARTICLE 33. MISCELLANEOUS.

     Section 33.1 The terms, covenants, conditions, provisions and agreements of this Sublease are deemed to be severable. If any clause or provision herein contained is adjudged to be invalid or unenforceable by a court of competent jurisdiction or by operation of any applicable law or regulation, it will not affect the validity of any other clause or provision herein, but such other clause or provisions will remain in full force and effect. In addition, Landlord may pursue the relief or remedy sought in any invalid clause, by conforming such clause with the provisions of the statute or regulation as if the particular provisions of the applicable statute or regulation were set forth herein at length.

     Section 33.2 This Sublease is not to be strictly construed against either Landlord or Tenant. No remedy or election given by any provision in this Sublease is deemed exclusive unless so indicated, but each, whenever possible, is cumulative with all other remedies in law or at equity.

     Section 33.3 All obligations of Tenant which, by their nature, cannot be ascertained to have been fully performed until after the end of the Term, will survive the expiration or sooner termination of this Sublease.

     Section 33.4 With respect to any provision of this Sublease which provides, or is held to provide, that Landlord may

25

withhold or delay any consent or any approval or exercise its judgment or discretion, Tenant in no event will be entitled to make, and Tenant hereby waives, any claim for damages, directly or by way of setoff, counterclaim or defense, based upon any claim or assertion by Tenant that Landlord has unreasonably withheld or unreasonably delayed any consent or approval or unreasonably exercised its judgment or discretion.

     Section 33.5 This Sublease is to be interpreted, governed by and enforced in accordance with the substantive laws of the State of New Jersey.

26

EXHIBIT 1

Base Rent Schedule

Dates	Annual Rent		Monthly Rent		Sq. Ft. Charge
4/01/00 to 3/31/01	$	0.00	$	0.00	$	0.00
4/01/01 to 3/31/02	$	20,000.00	$	1,666.67	$	57.80
4/01/02 to 3/31/03	$	20,000.00	$	1,666.67	$	57.80
4/01/03 to 3/31/04	$	20,000.00	$	1,666.67	$	57.80
4/01/04 to 3/31/05	$	20,000.00	$	1,666.67	$	57.80
Option Renewal Term 1
4/01/05 to 3/31/06	$	21,000.00	$	1,750.00	$	60.69
4/01/06 to 3/31/07	$	21,000.00	$	1,750.00	$	60.69
4/01/07 to 3/31/08	$	21,000.00	$	1,750.00	$	60.69
4/01/08 to 3/31/09	$	21,000.00	$	1,750.00	$	60.69
4/01/09 to 3/31/10	$	21,000.00	$	1,750.00	$	60.69
Option Renewal Term 2
4/01/10 to 3/31/11
4/01/11 to 3/31/12	$	22,050.00	$	1,837.50	$	63.73
4/01/12 to 3/31/13	$	22,050.00	$	1,837.50	$	63.73
4/01/13 to 3/31/14	$	22,050.00	$	1,837.50	$	63.73
4/01/14 to 3/31/15	$	22,050.00	$	1,837.50	$	63.73
Option Renewal Term 3	$	22,050.00	$	1,837.50	$	63.73
4/01/15 to 3/31/16
4/01/16 to 3/31/17	$	23,152.50	$	1,929.38	$	66.91
4/01/17 to 3/31/18	$	23,152.500	$	1,929.38	$	66.91
4/01/18 to 3/31/19	$	23,152.50	$	1,929.38	$	66.91
4/01/19 to 3/31/20	$	23,152.50	$	1,929.38	$	66.91
	$	23,152.50	$	1,929.38	$	66.91

In addition to the Base Rent, Tenant shall pay Additional Rent as set forth in the General Terms of Lease.

27

EX-10.2

Exhibit 10.2

EMPLOYMENT CONTRACT

This AGREEMENT is made effective as of this sixth day of April, 2004 by and between THE YARDVILLE NATIONAL BANK (the “Bank”), a corporation organized under the laws of the State of New Jersey, and Kathleen O. Blanchard (the “Officer”).

RECITALS

     WHEREAS, the Bank desires to employ and retain the services of the Officer for the period provided in this Agreement; and

     WHEREAS, the Officer is willing to serve in the employ of the Bank on a full-time basis for said period;

     NOW, THEREFORE, in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereto agree as follows:

1. POSITION AND RESPONSIBILITIES

     During the period of her employment hereunder, the Officer shall serve as First Senior Vice President and Risk Management Officer of the Yardville National Bank (the “Bank”) reporting to the Chairman of the Audit Committee of the Board of Directors.

2. TERMS AND DUTIES

     (A) The period of the Officer’s employment agreement shall commence as of April 6, 2004 and shall continue for a period of nine (9) full calendar months and twenty-five (25) days thereafter, unless terminated by the Bank on account of death, disability or cause (as herein defined). This Agreement is subject to approval, for continuation, by the President/Chief Executive Officer and the Board of Directors of the Yardville National Bank, at the conclusion of each contract period. Renewals shall be on the same terms and conditions as set forth herein, except for such modification of compensation and benefits as may hereafter be agreed upon between the parties hereto from time to time.

     (B) During the period of employment, the Officer shall devote full time and attention to such employment and shall perform such duties as are customarily and appropriately vested in the First Senior Vice President and Risk Management Officer of a commercial bank.

3. DEFINITIONS

     For purposes of the Agreement,

     (A) “Cause” means any of the following:

(i) the willful commission of an act that causes or that probably will cause substantial economic damage to the Bank or substantial injury to the Bank’s business reputation; or,

(ii) the commission of an act of fraud in the performance of the Officer’s duties; or

(iii) a continuing willful failure to perform the duties of the Officer’s position with the Bank; or

(iv) the order of a bank regulatory agency or court requiring the termination of the Officer’s employment.

     (B) “Change in Control”: means any of the following:

(i) the acquisition by any person or group acting in concert of beneficial ownership of forty percent (40%) or more of any class of equity security of the Bank or the Bank’s Holding Company, or

(ii) the approval by the Board, and appropriate regulatory authorities of the sale of all or substantially all of the assets of the Bank or Holding Company; or,

(iii) the approval by the Board and appropriate regulatory authorities of any merger, consolidation, issuance of securities or purchase of assets, the result of which would be the occurrence of any event described in clause (i) or (ii) above.

     (C) “Disability” means a mental or physical illness or condition rendering the Officer incapable of performing his normal duties for the Bank.

     (D) “Willfulness” means an act or failure to act done not in good faith and without reasonable belief that the action or omission was in the best interest of the Bank.

4. COMPENSATION AND REIMBURSEMENT

     (A) During the period of employment, the Bank shall pay to the Officer an annual salary of not less than $112,500.00, which salary shall be paid in bi-weekly installments.

     The Board or a duly appointed committee shall review such salary thereof at least annually and any adjustments in the amount of salary on said review shall be fixed by the Board from time to time.

5. TERMINATION FOR CAUSE

     (A) The Officer shall not have the right to receive compensation or other benefits provided hereunder for any period after termination for Cause, except to the extent that Officer may be legally entitled to participate by virtue of COBRA or any other State or Federal Law concerning employee rights to benefits upon termination.

6. TERMINATION BY THE OFFICER

     (A) In the event of the Officer’s voluntary termination, the Officer shall not have the right to receive compensation or benefits as provided hereunder after such date of termination, except to the extent that the Officer may be legally entitled to participate by virtue of COBRA or any other State of Federal law concerning employee rights to benefits upon termination.

7. CHANGE IN CONTROL

     (A) The Executive will have the option within six (6) months after a Change in Control (as herein defined), to elect to resign his position. If the Executive’s voluntary departure is for other than death, disability or cause the Executive shall be entitled to receive two (2) years’ salary at an annual salary currently being paid, which payment shall be made in a lump sum promptly after the occurrence of such voluntary resignation.

     (B) In the event that within three (3) years after a Change in Control (as herein defined), the Officer’s employment is terminated by the Bank, other than for death, disability or Cause, the Officer shall be entitled to receive two (2) years’ salary at the annual salary currently being paid, which payment shall be made in a lump sum promptly after the occurrence of such termination.

8. TERMINATION UPON DISABILITY

     (A) In the event that the Officer experiences a Disability during the period of employment, salary shall continue at the same rate as was in effect on the day of the occurrence of such Disability, reduced by an concurrent disability benefit payments provided under disability insurance maintained by the Bank. If such Disability continues for a period of six (6) consecutive months, the Bank at its option may thereafter, upon written notice to the Officer or personal representative, terminate the Officer’s employment with no further notice.

9. GOVERNING LAW

     This Agreement and the other obligations of the parties hereto shall be interpreted, construed and enforced in accordance with the laws of the State of New Jersey.

10. ENTIRE AGREEMENT

     This instrument contains the entire agreement of the parties. It may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.

     IN WITNESS WHEREOF, the parties have hereunto executed this Agreement on the 6th day of April, 2004.

ATTEST:	YARDVILLE NATIONAL BANK
	Patrick M. Ryan
	President/CEO
WITNESS
	Kathleen O. Blanchard
	First Senior Vice President

EX-10.3

Exhibit 10.3

EMPLOYMENT CONTRACT

     This AGREEMENT is made effective as of this sixteenth day of October, 2003 by and between THE YARDVILLE NATIONAL BANK (the “Bank”), a corporation organized under the laws of the State of New Jersey, and Joanne C. O’Donnell (the “Officer”).

RECITALS

     WHEREAS, the Bank desires to employ and retain the services of the Officer for the period provided in this Agreement; and

     WHEREAS, the Officer is willing to serve in the employ of the Bank on a full-time basis for said period;

     NOW, THEREFORE, in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereto agree as follows:

1. POSITION AND RESPONSIBILITIES

     During the period of her employment hereunder, the Officer shall serve as a Senior Vice President and Credit Administration Manager of the Yardville National Bank (the “Bank”) reporting to the First Senior Vice President & Chief Credit Officer.

2. TERMS AND DUTIES

     (A) The period of the Officer’s employment agreement shall commence as of October 16, 2003 and shall continue for a period of fifteen (15) full calendar months and sixteen (16) days thereafter, unless terminated by the Bank of account of death, disability or cause (as herein defined). This Agreement is subject to approval, for continuation, by the President/Chief Executive Officer and the Board of Directors of the Yardville National Bank, at the conclusion of each contract period. Renewals shall be on the same terms and conditions as set forth herein, except for such modification of compensation and benefits as may hereafter be agreed upon between the parties hereto from time to time.

     (B) During the period of employment, the Officer shall devote full time and attention to such employment and shall perform such duties as are customarily and appropriately vested in a Senior Vice President and Credit Administration Manager.

     3. DEFINITIONS

          For purposes of the Agreement,

          (A) “Cause” means any of the following:

(i) the willful commission of an act that causes or that probably will cause substantial economic damage to the Bank or substantial injury to the Bank’s business reputation; or,

(ii) the commission of an act of fraud in the performance of the Officer’s duties; or

(iii) a continuing willful failure to perform the duties of the Officer’s position with the Bank; or

(iv) the order of a bank regulatory agency or court requiring the termination of the Officer’s employment.

          (B) “Change in Control”: means any of the following:

(i) the acquisition by any person or group acting in concert of beneficial ownership of forty percent (40%) or more of any class of equity security of the Bank or the Bank’s Holding Company, or

(ii) the approval by the Board, and appropriate regulatory authorities of the sale of all or substantially all of the assets of the Bank or Holding Company; or,

(iii) the approval by the Board and appropriate regulatory authorities of any merger, consolidation, issuance of securities or purchase of assets, the result of which would be the occurrence of any event described in clause (i) or (ii) above.

          (C) “Disability” means a mental or physical illness or condition rendering the Officer incapable of performing his normal duties for the Bank.

          (D) “Willfulness” means an act or failure to act done not in good faith and without reasonable belief that the action or omission was in the best interest of the Bank.

4. COMPENSATION AND REIMBURSEMENT

          (A) During the period of employment, the Bank shall pay to the Officer an annual salary of not less than $80,000.00, which salary shall be paid in bi-weekly installments. Such salary shall be reviewed by the Board or a duly appointed committee thereof at least annually and any adjustments in the amount of salary on said review shall be fixed by Board from time to time.

5. TERMINATION FOR CAUSE

          (A) The Officer shall not have the right to receive compensation or other benefits provided hereunder for any period after termination for Cause, except to the extent that Officer may be legally entitled to participate by virtue of COBRA or any other State or Federal Law concerning employee rights to benefits upon termination.

6. TERMINATION BY THE OFFICER

          (A) In the event of the Officer’s voluntary termination, the Officer shall not have the right to receive compensation or benefits as provided hereunder after such date of termination, except to the extent that the Officer may be legally entitled to participate by virtue of COBRA or any other State of Federal law concerning employee rights to benefits upon termination.

7. CHANGE IN CONTROL

          (A) In the event that within three (3) years after a Change in Control (as herein defined), the Officer’s employment is terminated by the Bank, other than for death, disability or Cause, the Officer shall be entitled to receive eighteen (18) months salary at the annual salary currently being paid, which payment shall be made in a lump sum promptly after the occurrence of such termination.

8. TERMINATION UPON DISABILITY

          (A) In the event that the Officer experiences a Disability during the period of employment, salary shall continue at the same rate as was in effect on the day of the occurrence of such Disability, reduced by any concurrent disability benefit payments provided under disability insurance maintained by the Bank. If such Disability continues for a period of six (6) consecutive months, the Bank at its option may thereafter, upon written notice to the Officer or personal representative, terminate the Officer’s employment with no further notice.

9. GOVERNING LAW

          This Agreement and the other obligations of the parties hereto shall be interpreted, construed and enforced in accordance with the laws of the State of New Jersey.

10. ENTIRE AGREEMENT

          This instrument contains the entire agreement of the parties. It may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.

          IN WITNESS WHEREOF, the parties have hereunto executed this Agreement on the 16th day of October, 2003.

ATTEST:	YARDVILLE NATIONAL BANK
	Patrick M. Ryan
	President/CEO
WITNESS
	Joanne C. O’Donnell
	Senior Vice President

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Patrick M. Ryan, President and Chief Executive Officer, certify that:

1.	I have reviewed this report on Form 10-Q of Yardville National Bancorp;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a.	all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information, and
b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: May 10, 2004	By:	Patrick M. Ryan
	Name:	Patrick M. Ryan
	Title:	President and Chief Executive Officer

EX-31.2

Exhibit 31. 2

CERTIFICATION

I, Stephen F. Carman, Vice President and Treasurer, certify that:

1.	I have reviewed this report on Form 10-Q of Yardville National Bancorp;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d–15(f) for the registrant and have:

a.	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit

committee of the registrant’s board of directors (or persons performing the equivalent function):

a.	all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information, and
b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: May 10, 2004	By:	Stephen F. Carman
	Name:	Stephen F. Carman
	Title:	Vice President and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Yardville National Bancorp, (the “Company”) on Form 10-Q for the period ending March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Patrick M. Ryan, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Patrick M. Ryan

Patrick M. Ryan

President and Chief Executive Officer

May 10, 2004

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Yardville National Bancorp, (the “Company”) on Form 10-Q for the period ending March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen F. Carman, Vice President and Treasurer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Stephen F. Carman

Stephen F. Carman

Vice President and Treasurer

May 10, 2004