10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ            Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the fiscal year ended December 31, 2004.

OR

o            Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from                      to                     .

Commission File No.: 0-26086

Yardville National Bancorp

(Exact name of registrant as specified in its charter)

New Jersey	22-2670267
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
Incorporation or organization)
2465 Kuser Road, Hamilton, New Jersey	08690
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (609) 585-5100

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, no par value
(Title of class)

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 þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes þ No o

The aggregate market value of voting Common Stock held by non-affiliates (computed by using the closing sales price on the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2004)) was $175,334,403. An aggregate of 10,528,544 shares of Common Shares were outstanding as of March 29, 2005.

Documents Incorporated By Reference

Portions of the definitive proxy statement for the Annual Meeting of Stockholders of Yardville National Bancorp to be held June 3, 2005 are incorporated by reference into Part III of this Form 10-K.

FORM 10-K

INDEX

		PAGE
PART I
Item 1.	Business		1
Item 2.	Properties		15
Item 3.	Legal Proceedings		15
Item 4.	Submission of Matters to a Vote of Security Holders		15
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities		15
Item 6.	Selected Financial Data		17
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		55
Item 8.	Financial Statements and Supplementary Data		55
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		55
Item 9A.	Controls and Procedures		55
Item 9B.	Other Information
PART III
Item 10.	Directors and Executive Officers of the Registrant		55
Item 11.	Executive Compensation		55
Item 12.	Security Ownership of Certain Beneficial Owners and Management		55
Item 13.	Certain Relationships and Related Transactions		55
Item 14.	Principal Accountant Fees and Services		55
PART IV
Item 15.	Exhibits and Financial Statement Schedules		56
	Signatures		57
	Index to Financial Statements		F-1
	Index to Exhibits		E-1
EMPLOYMENT CONTRACT BETWEEN THE BANK AND KATHLEEN O. BLANCHARD
EMPLOYMENT CONTRACT BETWEEN THE BANK AND BRIAN K. GRAY
EMPLOYMENT CONTRACT BETWEEN THE BANK AND HOWARD N. HALL
EMPLOYMENT CONTRACT BETWEEN THE BANK AND DANIEL J. O'DONNELL
EMPLOYMENT CONTRACT BETWEEN THE BANK AND JOANNE C. O'DONNELL
EMPLOYMENT CONTRACT BETWEEN THE BANK AND PATRICK L. RYAN
EMPLOYMENT CONTRACT BETWEEN THE BANK AND JOHN P. SAMBORSKI
SECOND, AMENDED AND RESTATED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
LEASE AGREEMENT
YARDVILLE NATIONAL BANK'S CHANGE IN CONTROL SEVERENCE COMPENSATION PLAN
CONSULTING AGREEMENT BETWEEN REGISTRANT AND LAWRENCE SEIDMAN
REAL PROPERTY LEASE BETWEEN THE BANK AND LALOR STORAGE LLC
LIST OF SUBSIDIARIES OF THE REGISTRANT
CONSENT OF KPMG, LLP
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302
CERTIFICATION OF VICE PRESIDENT AND TREASURER PURSUANT TO SECTION 302
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 908
CERTIFICATION OF VICE PRESIDENT AND TREASURER PURSUANT TO SECTION 908

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PART I

Item 1. Business

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Certain information included in this Annual Report on Form 10-K and other materials filed by the Company with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by the Company) contain statements that are forward-looking. These may include statements that relate to, among other things, profitability, liquidity, loan loss reserve adequacy, plans for growth, interest rate sensitivity, market risk, regulatory compliance, and financial and other goals. Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be achieved. As forward-looking statements, these statements involve risks, uncertainties and other factors that could cause actual results to differ materially from the expected results and, accordingly, such results may differ from those expressed in any forward-looking statements made by, or on behalf of, the Company. Factors that could cause actual results to differ materially from management’s current expectations include, among other things:

•   the results of our ongoing efforts to execute 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;

•   other factors, including those matters discussed in additional detail under the heading “Risk Factors;” and

•   other risks and uncertainties detailed from time to time in our filings with the SEC.

Although forward-looking statements help to provide complete information about us, readers should keep in mind that forward-looking statements may not be reliable. Readers are cautioned not to place undue reliance on the forward-looking statements. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

General

Yardville National Bancorp, referred to as “we” or the “Company,” is a registered financial holding company headquartered in Mercer County, New Jersey with total assets of $2.81 billion, total deposits of $1.81 billion and total stockholders’ equity of $160.2 million at December 31, 2004. We conduct a general commercial and retail banking business through our principal operating subsidiary, The Yardville National Bank, referred to as the “Bank,” which commenced operations as a commercial bank in 1925. We provide a broad range of lending, deposit and other financial products and services with an emphasis on commercial real estate and commercial and industrial lending to small- to mid-sized businesses and individuals. Our existing and target markets are located in the corridor between New York City and Philadelphia. We currently operate 23 full-service branches, including 15 branches in our primary market of Mercer County. Over the past several years, as part of our retail strategy, we have expanded into the demographically attractive markets of Hunterdon, Somerset and Middlesex Counties in New Jersey and completed the first branch acquisition in our history, in Mercer County in 2003.

Due to continued consolidation among financial institutions, we have grown our asset base both in our existing markets and by expanding into contiguous markets, and we see opportunities for continued growth. We believe these markets have customers with banking needs that are not adequately served by smaller local institutions but who still desire the personalized service that larger institutions typically do not offer. We believe that the key differentiating factors between us and our larger competitors are our philosophy of relationship banking and our in-market expertise. Our ability to enter into larger loan relationships enables us to effectively compete against smaller institutions.

Our goals are to further develop the earnings power and increase the value of our franchise. In order to achieve these goals, we need to continue to generate commercial loans, reduce our cost of funds and increase our net interest income. Specifically in 2005, we plan to continue to execute our retail strategy by further expanding our branch network, strengthening our brand image and upgrading our technology infrastructure.

The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed by the Company with the Securities and Exchange Commission (referred to as the “SEC”) are available, without charge, under “Investor

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Relations” on the Company’s Internet web site, “http://www.ynb.com,” as soon as reasonably practicable after such materials are filed with the SEC. The Company’s Internet web site and the information contained in or connected with that web site are not intended to be incorporated by reference into this report.

Our principal and executive offices are located at 2465 Kuser Road, Hamilton, New Jersey 08690. Our telephone number is (609) 585-5100.

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Subsidiaries

The Company directly owns the Bank and six additional subsidiaries, Yardville Capital Trust, Yardville Capital Trust II, Yardville Capital Trust III, Yardville Capital Trust IV, Yardville Capital Trust V and Yardville Capital Trust VI. The Company is also the indirect owner, through the Bank, of eight subsidiaries, which provide insurance and financial services and own a portion of the real estate and securities utilized by the Bank. The assets, liabilities and results of operations of the Bank and its subsidiaries are consolidated with the Company for financial reporting purposes. The trusts are not consolidated subsidiaries. See Note 8 of the Notes to Consolidated Financial Statements.

Competition

The Bank’s primary market area in Central New Jersey is highly competitive for financial services and the Bank faces significant competition both in making loans and in attracting deposits. The Bank is subject to competition in all aspects of its business from other financial institutions such as commercial banks, savings banks, savings and loan associations, credit unions, insurance companies and finance and mortgage companies. Within the direct market area of the Bank, there are a significant number of competing financial institutions. The Bank competes in its market area with a number of larger commercial banks which have substantially greater resources, higher lending limits and larger branch systems, and which provide a broader array of banking products and services. Liberalized branching and acquisition laws have lowered barriers to entry into the banking business, and increased both competition for and opportunities to acquire other financial institutions. Savings banks, savings and loan associations and credit unions also actively compete for deposits and for various types of loans. In its lending business, the Bank is subject to competition from consumer finance companies and mortgage companies, which are subject to fewer regulatory restrictions than banks, and can often offer lower loan rates than banks. Financial institutions are intensely competitive in the interest rates they offer on deposits. In addition, the Bank faces competition for deposits from non-bank institutions such as brokerage firms, insurance companies and investment companies who offer the opportunity to invest in such instruments as short-term money market funds, corporate and government securities funds, mutual funds and annuities.

Supervision and Regulation

General

The Company and its subsidiaries are subject to extensive supervision and regulation under both Federal and state laws. The regulation and supervision of the Company and the Bank are designed primarily for the protection of the depositors of the Bank and the Federal Deposit Insurance Corporation (FDIC) deposit insurance fund and not the Company or its stockholders. These laws restrict permissible activities and investments and require compliance with various consumer protection provisions applicable to lending, deposit, brokerage and fiduciary activities. They also impose capital adequacy requirements and restrict the Company’s ability to repurchase stock or to receive dividends from the Bank. The Company and its subsidiaries are also subject to comprehensive examination and supervision by the Board of Governors of the Federal Reserve System (“FRB”) and the Office of the Comptroller of the Currency (“OCC”). The Company and its subsidiaries are also functionally regulated by the Securities and Exchange Commission (“SEC”) and state insurance regulators. These regulatory agencies generally have broad discretion to impose restrictions and limitations on the operations of the Company and the Bank. The consequences of noncompliance with these laws and regulations can include substantial monetary and nonmonetary penalties and sanctions. This supervisory framework could materially impact the conduct and profitability of the Company’s activities.

To the extent that the following information describes statutory and regulatory provisions, it is qualified in its entirety by reference to the particular statutory and regulatory provisions. A change in applicable statutes, regulations or regulatory policy may have a material effect on the business of the Company and the Bank.

Bank Holding Company Act

The Company is registered as a financial holding company under the Bank Holding Company Act of 1956, as amended (the “BHC Act”), and is subject to regulation and supervision by the FRB. The BHC Act requires the Company to secure the prior approval of the FRB before it owns or controls, directly or indirectly, more than five percent (5%) of the voting shares or substantially all of the assets of, any bank or thrift, or merges or consolidates with another bank or thrift holding company.

In addition, bank holding companies are restricted in the types of activities in which they may engage, directly or indirectly through subsidiaries, and prior approval of the FRB may be required before engaging in certain activities. The Company has elected to be a “financial holding company” under the Gramm-Leach-Bliley Act of 1999 (“GLB Act”). The GLB Act amended the BHC Act to allow a “financial holding company” to engage in certain activities that were not previously permitted for a bank holding company, and to engage on less restrictive terms in certain activities that were previously permitted. These expanded activities include securities underwriting and dealing, insurance underwriting and sales, and merchant banking activities. In order to maintain its status as a financial holding company, the Company and the Bank must be “well capitalized” and “well managed”, and have a “satisfactory” rating under the Community Reinvestment Act (“CRA”). For

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bank holding companies that are not financial holding companies, the permissible activities are limited to those previously determined by the FRB to be so “closely related to banking” as to be a “proper incident thereto.” The Company became a financial holding company in March 2000. The Company is not currently engaged in any activity that would not be permissible if it ceased to be a financial holding company.

There are a number of restrictions imposed on the Company and the Bank by Federal law that are designed to reduce potential loss exposure to the depositors of the Bank and the FDIC insurance funds in the event the Bank should become insolvent. For example, FRB policy requires a bank holding company to serve as a source of financial and managerial strength to its subsidiary banks and to commit resources to support such institutions in circumstances where it might not do so otherwise. The FRB has, in some cases, entered orders for bank holding companies to take affirmative action to strengthen the finances or management of subsidiary banks.

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Supervision and Regulation of the Bank

The operations and investments of the Bank are also limited by Federal and state statutes and regulations. The primary Federal regulator of the Bank is the OCC. The Bank and its operating subsidiaries may engage in any activities that are determined by the OCC to be part of or incidental to the business of banking. Under the GLB Act, the Bank may engage in expanded activities through the formation of a “financial subsidiary.” The Bank has filed a financial subsidiary certification with OCC and thus may engage through a financial subsidiary in such expanded activities as insurance sales and securities underwriting.

In order to be eligible to establish or acquire a financial subsidiary, the Bank must be “well capitalized” and “well managed” and may not have less than a “satisfactory” CRA rating. In calculating its risk-based capital, the Bank must exclude from its assets and equity all equity investments, including retained earnings, in a financial subsidiary, and the assets of the financial subsidiary from the Bank’s consolidated assets. If the Bank were to fail to meet the “well capitalized” or “well managed” criteria, it would not be permitted to continue these expanded activities. In addition, if the Bank receives less than a “satisfactory” CRA rating, it would not be permitted to engage in any new activities or to make new investments in reliance on the financial subsidiary authority.

OCC banking laws and regulations generally govern, among other things, the scope of a bank’s business, the investments a bank may make, the reserves against deposits a bank must maintain, loans a bank makes and collateral it takes, the activities of a bank with respect to mergers and consolidations and the establishment of branches. In addition, the OCC possesses broad powers to prohibit the Bank from engaging in any activity that it determines would be an unsafe and unsound banking practice.

The Bank is also subject to Federal laws that limit the amount of transactions between the Bank and its nonbank affiliates, including the Company. Under these provisions, transactions (such as a loan or investment) by the Bank with any nonbank affiliate are generally limited to 10% of the Bank’s capital and surplus for all covered transactions with such affiliate or 20% of capital and surplus for all covered transactions. Any extensions of credit, with limited exceptions, must be secured by eligible collateral in specified amounts. The Bank is also prohibited from purchasing any “low quality” asset from an affiliate. The GLB Act imposes similar restrictions on transactions between the Bank and its financial subsidiaries.

Under the CRA, the record of a bank holding company and its subsidiary banks must be considered by the appropriate Federal banking agencies in reviewing and approving or disapproving a variety of regulatory applications including approval of a branch or other deposit facility, office relocation, a merger and certain acquisitions of bank shares. Regulators are required to assess the record of the Company and the Bank to determine if they are meeting the credit needs of the communities they serve. Regulators make publicly available an evaluation of banks’ records in meeting credit needs in their communities, including a descriptive rating and a statement describing the basis for the rating.

Deposit Insurance

The deposits of the Bank are insured up to $100,000 per insured depositor by the FDIC. The premiums paid by insured depository institutions range from $0.00 to $0.27 per $100 of insured deposits, and are based on an institution’s relative risk to the deposit insurance funds, as measured by the institution’s regulatory capital position and other supervisory factors. The Bank currently does not pay any FDIC insurance premiums based on this risk assessment.

Since 1996, the FDIC has not assessed banks in the most favorable capital and risk assessment categories due to a surplus in the FDIC’s deposit insurance fund. This has resulted in a significant cost savings to all insured banks. There can be no assurance that this surplus will continue, and the FDIC may be required to assess deposit insurance premiums against insured banks in the most favorable capital and risk assessment categories. If the FDIC assesses premiums for all deposits, the net funding costs of the Bank would increase and its net income would be reduced. In addition, since FDIC deposit insurance premiums are “risk-based,” higher premiums would be charged to banks that have lower capital ratios or higher risk profiles. Consequently, a decrease in the Bank’s capital ratios, or a negative evaluation by the OCC, as the Bank’s primary Federal banking regulator, may also increase the Bank’s net funding costs and reduce its net income.

All FDIC-insured depository institutions must pay an annual assessment to provide funds for the payment of interest on bonds issued by the Financing Corporation, a Federal corporation chartered under the authority of the Federal Housing Finance Board. The bonds (commonly referred to as FICO bonds) were issued to capitalize the Federal Savings and Loan Insurance Corporation. FDIC-insured depository institutions paid approximately 1.5 cents per $100 of assessable deposits in 2004. The FDIC established the FICO assessment rate effective for the first quarter of 2005 at approximately 1.4 cents annually per $100 of assessable deposits.

Capital Rules

Under risk-based capital requirements for bank holding companies, the Company is required to maintain a minimum ratio of total capital to risk-weighted assets (including certain off-balance sheet activities, such as standby letters of credit) of eight percent. At least half of the total capital is to be composed of common equity, retained earnings and qualifying perpetual preferred stock, less certain intangible assets (“Tier 1 Capital”). The remainder may consist of certain subordinated debt, certain hybrid capital instruments and other qualifying preferred stock, and a limited amount of the allowance for loan losses (“Tier 2 Capital” and, together with Tier 1 Capital, “Total Capital”). At December 31, 2004, the Company’s Tier 1 Capital and Total Capital ratios were 10.1 percent and 11.4 percent, respectively.

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In addition, the Federal Reserve Board has established minimum leverage ratio requirements for bank holding companies. For bank holding companies that meet certain specified criteria, including having the highest regulatory rating and not experiencing significant growth or expansion, these requirements provide for a minimum leverage ratio of Tier 1 Capital to adjusted average assets, equal to three percent. Other bank holding companies that fail to meet such criteria will generally be required to maintain a leverage ratio of four to five percent. The Company’s leverage ratio at December 31, 2004, was 8.0 percent.

The Bank is subject to similar capital requirements adopted by the OCC. The OCC has not advised the Bank of any specific minimum leverage ratios applicable to it. The capital ratios of the Bank are set forth below.

Both the FRB and the OCC risk-based capital standards explicitly identify concentrations of credit risk and the risk arising from non-traditional activities, as well as an institution’s ability to manage these risks, as important factors to be taken into account by the agency in assessing an institution’s general capital adequacy. The capital guidelines also provide that an institution’s exposure to a decline in the economic value of its capital due to changes in interest rates to be considered by the agency as a factor in evaluation the Bank’s capital adequacy. The FRB has issued additional guidelines for certain bank holding companies that engage in trading activities. The Company does not believe that consideration of these additional factors will affect the regulators’ assessment of the Company’s or the Bank’s capital position.

In addition to the required minimum capital levels described above, Federal law establishes a system of “prompt corrective actions” which Federal banking agencies are required to take, and certain actions which they have discretion to take, based upon the capital category into which a federally regulated depository institution falls. The extent of these powers depends upon whether the institution in question is considered “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” Generally, the smaller an institution’s capital base relative to its total assets, the greater the scope and severity of the agencies’ powers. The capital thresholds for a “well capitalized” institution and “adequately capitalized” institution are set forth below. An institution will be deemed “undercapitalized” if it fails to meet the minimum capital requirements, “significantly undercapitalized” if it has a Total Capital ratio that is less than 6.0 percent, a Tier 1 Capital ratio that is less than 3.0 percent, or a leverage ratio that is less than 3.0, percent and “critically undercapitalized” if the institution has a ratio of tangible equity to total assets that is equal to or less than 2.0 percent.

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The following table sets forth the minimum capital ratios that a bank must satisfy in order to be considered adequately capitalized or well capitalized under the prompt corrective action regulations, and the Bank’s capital ratios at December 31, 2004:

	Adequately			Well			Bank ratios at
	Capitalized			Capitalized			December 31, 2004
Total Risk-Based Capital Ratio		8.00	%		10.00	%		10.1	%
Tier 1 Risk-Based Capital Ratio		4.00	%		6.00	%		9.1	%
Leverage Ratio		4.00	%		5.00	%		6.8	%

The prompt corrective action rules require an undercapitalized institution to file a written capital restoration plan, along with a performance guaranty by its holding company or a third party. In addition, an undercapitalized institution becomes subject to certain automatic restrictions including a prohibition on payment of dividends, a limitation on asset growth and expansion, in certain cases, a limitation on the payment of bonuses or raises to senior executive officers, and a prohibition on the payment of certain “management fees” to any “controlling person.” Institutions that are classified as undercapitalized are also subject to certain additional supervisory actions, including increased reporting burdens and regulatory monitoring, a limitation on the institution’s ability to make acquisitions, open new branch offices, or engage in new lines of business, obligations to raise additional capital, restrictions on transactions with affiliates, and restrictions on interest rates paid by the institution on deposits. In certain cases, bank regulatory agencies may require replacement of senior executive officers or directors, or sale of the institution to a willing purchaser. If an institution is deemed to be “critically undercapitalized” and continues in that category for four quarters, the statute requires, with certain narrowly limited exceptions, that the institution be placed in receivership.

This classification of depository institutions is primarily for the purpose of applying the agencies’ prompt corrective action rules and is not intended to be and should not be construed as a representation of the overall financial condition or prospects of any financial institution.

Under currently applicable guidance, subordinated debentures recorded on the Company’s balance sheet (issued in connection with trust preferred securities) are included in Tier 1 Capital of the Company, up to a maximum of 25% of Tier 1 Capital. Historically, this capital treatment was based on the accounting for these instruments. As a result of recent accounting guidance, trust preferred securities are no longer consolidated under GAAP. Partly in response to this accounting change, the FRB amended its risk-based capital standards for bank holding companies to allow for the continued inclusion of outstanding and prospective issuances of trust preferred securities in Tier 1 Capital subject to stricter quantitative limits and qualitative standards. Under the amended rule, the aggregate amount of trust preferred securities and certain other capital instruments would be limited to 25% of Tier 1 Capital, net of goodwill less any deferred tax liability. The amount of trust preferred securities and certain other capital instruments in excess of the limit could be included in Tier 2 Capital, subject to restrictions. The amended rule provides a five-year transition period for the application of the quantitative limits. The Company would continue to follow GAAP in accounting for these instruments for regulatory reporting purposes. The amended rule would not impact the Company’s existing treatment of trust preferred securities for purposes of computing its Tier 1 Capital, nor would it affect the capital adequacy rating of the Bank, which remains “well capitalized.” See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Limitations on Payment of Dividends

Under applicable New Jersey law, the Company is not permitted to pay dividends on its capital stock if, following the payment of the dividend, (1) it would be unable to pay its debts as they become due in the usual course of business or (2) its total assets would be less than its total liabilities. Further, it is the policy of the FRB that bank holding companies should pay dividends only out of current earnings and only if future retained earnings would be consistent with the Company’s capital, asset quality and financial condition.

Since it has no significant independent sources of income, the ability of the Company to pay dividends is dependent on its ability to receive dividends from the Bank. Under national banking laws, the Bank must obtain the approval of the OCC before declaring any dividend which, together with all other dividends declared by the Bank in the same calendar year, will exceed the total of the bank’s net profits of that year combined with its retained net profits of the preceding two years, less any required transfers to surplus or a fund for the retirement of any preferred stock. Net profits are to be calculated without adding back any provision for the Bank’s allowance for loan losses. Furthermore, the Bank, as an FDIC-insured institution, may not pay dividends or make distributions that would cause the institution to fail to meet minimum capital requirements. These restrictions would not prevent the Bank from paying dividends from current earnings to the Company at this time.

In addition, as a bank whose deposits are insured by the FDIC, the Bank may not pay dividends or distribute any of its capital assets while it remains in default of any assessment due to the FDIC. The Bank is not in default under any of its obligations to the FDIC.

Federal regulators also have authority to prohibit banks and bank holding companies from paying a dividend if they deem such payment to be an unsafe or unsound practice.

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Effect of Government Monetary Policies

The earnings of the Company are and will be affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The FRB has had, and will likely continue to have, an important impact on the operating results of commercial banks through its power to implement national monetary policy in order, among other things, to curb inflation or combat a recession. The FRB has a major effect upon the levels of bank loans, investments and deposits through its open market operations in United States government securities and through its regulation of, among other things, the discount rate on borrowings of member banks and the reserve requirements against member banks’ deposits. It is not possible to predict the nature and impact of future changes in monetary and fiscal policies.

USA PATRIOT Act

The USA PATRIOT Act authorizes the Secretary of the Treasury, in consultation with the other Federal financial institution regulatory agencies, to adopt special measures applicable to financial institutions. Among its provisions, the USA PATRIOT Act requires each financial institution to (1) establish an anti-money laundering program, (2) establish due diligence policies, procedures and controls that are reasonably designed to detect and report instances of money laundering in United States private bank accounts and correspondent accounts maintained for non-United States persons or their representatives, and (3) avoid establishing, maintaining, administering or managing correspondent accounts in the United States for, or on behalf of, a foreign bank that does not have a physical presence in any country. In addition, the USA PATRIOT Act expands the circumstances under which funds in a bank account may be forfeited and requires covered financial institutions to respond under certain circumstances to request for information from Federal banking agencies within 120 hours.

The USA PATRIOT Act also requires the Federal banking regulators to consider the effectiveness of a financial institution’s anti-money laundering activities when reviewing bank mergers and bank holding company acquisitions.

The Department of Treasury has issued regulations implementing the due diligence requirements of the USA PATRIOT Act. These regulations require minimum standards to verify customer identity and maintain accurate records, encourage cooperation among financial institutions, Federal banking agencies, and law enforcement authorities regarding possible money laundering or terrorist activities, prohibit the anonymous use of “concentration accounts,” and require all covered financial institutions to have in place an anti-money laundering compliance program.

Sarbanes-Oxley Act

The Sarbanes-Oxley Act of 2002 comprehensively revised the laws affecting corporate governance, auditing and accounting, executive compensation and corporate reporting for entities, such as the Company, with equity or debt securities registered under the Securities Exchange Act of 1934. Among other things, Sarbanes-Oxley and its implementing regulations have established new membership requirements and additional responsibilities for our audit committee, imposed restrictions on the relationship between the Company and its outside auditors (including restrictions on the types of non-audit services our auditors may provide to us), imposed additional responsibilities for our external financial statements on our chief executive officer and chief financial officer, expanded the disclosure requirements for our corporate insiders, and required our management to evaluate the Company’s disclosure controls and procedures and its internal control over financial reporting, and required our auditors to issue a report on our internal control over financial reporting. The Nasdaq Stock Market, Inc. (“NASDAQ”) has also adopted corporate governance rules that have been approved by the SEC. The changes required by the Sarbanes-Oxley Act and new SEC and NASDAQ rules are intended to allow stockholders to more easily and efficiently monitor the performance of companies and directors. The Company and its Board of Directors have, as appropriate, adopted or modified the Company’s policies and practices in order to assure compliance with these regulatory requirements and to enhance the Company’s corporate governance practices.

As of the date of this report, the Company is in the process of carrying 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 Company’s internal control over financial reporting. To date, our review of our internal control over financial reporting has not brought any material weaknesses to our attention, and our independent registered public accounting firm has not communicated, any finding of such a material weakness to us. However, we have not yet completed our assessment and material weaknesses may be identified.

Other Laws and Regulations

The Company and the Bank are subject to a variety of laws and regulations which are not limited to banking organizations. In lending to commercial and consumer borrowers, and in owning and operating its own property, the Bank is subject to regulations and potential liabilities under state and Federal environmental laws.

Legislation and Regulatory Changes

Legislation and regulations may be enacted which increase the cost of doing business, limit or expand permissible activities, or affect the competitive balance between banks and other financial services providers. Proposals to change the laws and regulations governing the operations and taxation of banks, bank holding companies, and other financial institutions are frequently made in Congress and before various bank regulatory agencies. No prediction can be made as to the likelihood of any major changes or the impact such changes might have on the Company and the Bank.

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Employees

At December 31, 2004, the Company employed 351 full-time employees and 25 part-time employees.

Statistical Disclosure

The Company’s statistical disclosure information, required of bank holding companies, is contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is set forth in Item 7 of this report.

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Risk Factors

The following is a discussion of certain significant risk factors that could potentially negatively impact our financial condition and results of operations.

We may not be able to continue to grow our business, which may adversely impact our results of operations.

During the last five years, our total assets have grown substantially from $1.62 billion at December 31, 2000 to $2.81 billion at December 31, 2004. Our business strategy calls for continued expansion, but we do not anticipate growth to continue at this rate. Our ability to continue to grow depends, in part, upon our ability to open new branch locations, successfully attract deposits to existing and new branches, and identify favorable loan and investment opportunities. In the event that we do not continue to grow, our results of operations could be adversely impacted.

We may not be able to manage our growth, which may adversely impact our financial results.

As part of our expansion strategy, we plan to open new branches in our existing and target markets. However, we may be unable to identify attractive locations on terms favorable to us or to hire qualified management to operate the new branches. In addition, the organizational and overhead costs may be greater than we anticipated or we may not be able to obtain the regulatory approvals necessary to open new branches. New branches may take longer than expected to reach profitability, and we cannot assure that they will become profitable. The additional costs of starting new branches may adversely impact our financial results.

Our ability to manage growth successfully will depend on whether we can continue to fund this growth while maintaining cost controls and asset quality, as well as on factors beyond our control, such as national and regional economic conditions and interest rate trends. If we are not able to control costs and maintain asset quality, such growth could adversely impact our earnings and financial condition.

The Company’s continued pace of growth may require it to raise additional capital in the future, but that capital may not be available when it is needed.

The Company is required by Federal regulatory authorities to maintain adequate levels of capital to support its operations. The Company may at some point need to raise additional capital to support continued growth. The Company’s ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside the Company’s control, and on its financial performance. Accordingly, the Company cannot assure you of its ability to raise additional capital if needed or on terms acceptable to the Company. If the Company cannot raise additional capital when needed, the ability to further expand its operations could be materially impaired.

Our exposure to credit risk, because we focus on commercial lending, could adversely affect our earnings and financial condition.

There are certain risks inherent in making loans. These risks include interest rate changes over the time period in which loans may be repaid, risks resulting from changes in the economy, risks inherent in dealing with borrowers and, in the case of a loan backed by collateral, risks resulting from uncertainties about the future value of the collateral.

Commercial loans are generally viewed as having a higher credit risk than residential real estate or consumer loans because they usually involve larger loan balances to a single borrower and are more susceptible to a risk of default during an economic downturn. Commercial and industrial loans and commercial real estate loans, which comprise our commercial loan portfolio, were 82.6% of our total loan portfolio at December 31, 2004. Construction and development loans, which are included as part of our commercial real estate loans, were 10.7% of our total loan portfolio at December 31, 2004. Construction financing typically involves a higher degree of credit risk than commercial mortgage lending. Risk of loss on a construction loan depends largely on the accuracy of the initial estimate of the property’s value at completion of construction compared to the estimated cost (including interest) of construction. If the estimated property value proves to be inaccurate, the loan may be undersecured.

Because our loan portfolio contains a significant number of commercial real estate loans and commercial and industrial loans with relatively large balances, the deterioration of one or a few of these loans may cause a significant increase in nonperforming loans. An increase in nonperforming loans could cause an increase in the provision for loan losses and an increase in loan charge offs, which could adversely impact our results of operations and financial condition.

10

Adverse economic and business conditions in our market area may have an adverse effect on our earnings.

Substantially all of our business is with customers located within Mercer County and contiguous counties. Generally, we make loans to small to mid-sized businesses, most of whose success depends on the regional economy. These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities. Adverse economic and business conditions in our market area could reduce our growth rate, affect our borrowers’ ability to repay their loans and, consequently, adversely affect our financial condition and performance. Further, we place substantial reliance on real estate as collateral for our loan portfolio. A sharp downturn in real estate values in our market area could leave many of our loans undersecured. If we are required to liquidate the collateral to satisfy the debt securing a loan during a period of reduced real estate values, our earnings could be adversely affected.

If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings would decrease.

In an attempt to mitigate any loan losses we may incur, we maintain an allowance for loan losses based on, among other things, national and regional economic conditions, and historical loss experience and delinquency trends among loan types. However, we cannot predict loan losses with certainty and we cannot assure you that charge offs in future periods will not exceed the allowance for loan losses. In addition, regulatory agencies, as an integral part of their examination process, review our allowance for loan losses and may require additions to the allowance based on their judgment about information available to them at the time of their examination. Factors that require an increase in our allowance for loan losses could reduce our earnings.

Loss of our key personnel or an inability to hire and retain qualified personnel could adversely affect our business.

Our future operating results are substantially dependent on the continued service of Patrick M. Ryan, our President and Chief Executive Officer, Jay G. Destribats, our Chairman of the Board, and other key personnel. The loss of the services of Mr. Ryan would have a negative impact on our business because of his lending expertise and years of industry experience. In addition, the loss of the services of Mr. Ryan or Mr. Destribats could have a negative impact on our business because of their business development skills and community involvement. Our success also depends on the experience of our branch managers and our lending officers and on their relationships with the communities they serve. The loss of these or other key persons could negatively impact our banking operations. Although we have employment agreements with Mr. Ryan, Mr. Destribats and our other key personnel, our employees may voluntarily terminate their employment at any time. We cannot assure you that we will be able to retain our key personnel or attract the qualified personnel necessary for the management of our business.

Changes in interest rates may adversely affect our earnings and financial condition.

Our net income depends primarily upon our net interest income. Net interest income is the difference between interest income earned on loans, investments and other interest-earning assets and the interest expense incurred on deposits and borrowed funds.

Different types of assets and liabilities may react differently, and at different times, to changes in market interest rates. We expect that we will periodically experience “gaps” in the interest rate sensitivities of our assets and liabilities. That means either our interest-bearing liabilities will be more sensitive to changes in market interest rates than our interest-earning assets, or vice versa. When interest-bearing liabilities mature or reprice more quickly than interest-earning assets, an increase in market rates of interest could reduce our net interest income. Likewise, when interest-earning assets mature or reprice more quickly than interest-bearing liabilities, falling interest rates could reduce our net interest income. We are unable to predict changes in market interest rates, which are affected by many factors beyond our control, including inflation, recession, unemployment, money supply, domestic and international events and changes in the United States and other financial markets.

We may not be able to successfully integrate acquisitions, which may adversely affect our business.

We intend to consider future strategic acquisitions, some of which could be material to us and which may include companies that are substantially equivalent or larger in size compared to us. We continually explore and conduct discussions with third parties regarding possible acquisitions. As of the date of this report, we have not entered into any definitive agreement and we do not have any definitive plans relating to any specific acquisitions.

We will have to integrate any acquisitions into our business. The difficulties of combining the operations, technologies and personnel of companies we acquire include coordinating and integrating geographically separated organizations and integrating personnel with diverse business backgrounds. We may not be able to effectively manage or integrate the acquired companies. Further, we may not be successful in implementing appropriate operational, financial and management systems and controls to achieve the benefits expected to result from these acquisitions. Our efforts to integrate these businesses could be affected by a number of factors beyond our control, such as regulatory developments, general economic conditions and increased competition. In addition, the process of integrating these businesses could cause an interruption of, or loss of momentum in, the activities of our existing business and the loss of key personnel and customers. The diversion of

11

management’s attention and any delays or difficulties encountered in connection with the transition and integration of these businesses could negatively impact our business and results of operations if any of the above adverse effects were to occur. Further, the benefits that we anticipate from any acquisitions may not be obtained.

12

Competition from other financial institutions in originating loans and attracting deposits may adversely affect our profitability.

We face substantial competition in originating loans. This competition comes principally from other banks, savings institutions, mortgage banking companies and other lenders. Many of our competitors enjoy advantages, including greater financial resources and higher lending limits, a wider geographic presence, more accessible branch office locations, the ability to offer a wider array of services or more favorable pricing alternatives, as well as lower origination and operating costs. This competition could reduce our net income by decreasing the number and size of loans that we originate and the interest rates we may charge on these loans.

In attracting deposits, we face substantial competition from other insured depository institutions such as banks, savings institutions and credit unions, as well as institutions offering uninsured investment alternatives, including money market funds. Many of our competitors enjoy advantages, including greater financial resources, more aggressive marketing campaigns, better brand recognition and more branch locations. These competitors may offer higher interest rates than we do, which could decrease the deposits that we attract or require us to increase our rates to retain existing deposits or attract new deposits. Increased deposit competition could adversely affect our ability to generate the funds necessary for lending operations and increase our cost of funds.

We also compete with non-bank providers of financial services, such as brokerage firms, consumer finance companies, insurance companies and governmental organizations which may offer more favorable terms. Some of our non-bank competitors are not subject to the same extensive regulations that govern our operations. As a result, such non-bank competitors may have advantages over us in providing certain products and services. This competition may reduce or limit our margins on banking services, reduce our market share and adversely affect our earnings and financial condition.

Government regulation significantly affects our business.

The banking industry is extensively regulated. Banking regulations are intended primarily to protect depositors, and the FDIC deposit insurance funds, not the stockholders of the Company. We are subject to regulation and supervision by the FRB. The Bank is subject to regulation and supervision by the OCC. Regulatory requirements affect our lending practices, capital structure, investment practices, dividend policy and growth. The bank regulatory agencies possess broad authority to prevent or remedy unsafe or unsound practices or violations of law. We are subject to various regulatory capital requirements, which involve both quantitative measures of our assets and liabilities and qualitative judgments by regulators regarding risks and other factors. Failure to meet minimum capital requirements or comply with other regulations could result in actions by regulators that could adversely affect our ability to pay dividends or otherwise adversely impact operations. In addition, changes in laws, regulations and regulatory practices affecting the banking industry may limit the manner in which we conduct our business. Such changes may adversely affect us, including our ability to offer new products and services, obtain financing, attract deposits, make loans and achieve satisfactory spreads and impose additional costs on us. The Bank is also subject to a number of Federal laws which, among other things, require it to lend to various sectors of the economy and population, and establish and maintain comprehensive programs relating to anti-money laundering and customer identification. The Bank’s compliance with these laws will be considered by the Federal banking regulators when reviewing bank merger and bank holding company acquisitions or commence new activities or make new investment in reliance on the GLB Act. As a public company, we are also subject to the corporate governance standards set forth in the Sarbanes-Oxley Act of 2002, as well as any rules or regulations promulgated by the SEC or NASDAQ.

The evaluation of our internal control over financial reporting by our management and our independent auditors is not complete, and it is possible that significant deficiencies or material weaknesses could be noted.

We and our independent auditors are currently evaluating our internal control over financial reporting in order to allow management to report on, and our independent auditors to attest to, management’s assessment of such control as required by Section 404 of the Sarbanes-Oxley Act of 2002 and rules and regulations of the SEC thereunder. In the course of our evaluation, we or our independent auditors may identify significant deficiencies or material weaknesses that have not presently been identified.

We continually encounter technological change, and we may have fewer resources than many of our competitors to continue to invest in technological improvements, which could reduce our ability to effectively compete.

The financial services industry is undergoing rapid technological changes with frequent introduction of new technology-driven products and services. In addition to better serving customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs. Our future success will depend, in part, upon our ability to address the needs of our customers by using technology to provide products and services to enhance customer convenience, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements. We cannot assure you that we will be able to effectively implement new technology-driven products and services, which could reduce our ability to effectively compete.

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Our hardware and software systems are vulnerable to damage that could harm our business.

We rely upon our existing information systems for operating and monitoring all major aspects of our business, including deposit and loan information, as well as various internal management functions. These systems and our operations are vulnerable to damage or interruption from natural disasters, power loss, network failure, improper operation by our employees, security breaches, computer viruses or intentional attacks by third parties. Any disruption in the operation of our information systems could adversely impact our operations, which may affect our results of operations and financial condition.

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Item 2. Properties

As of March 15, 2005, the Company and the Bank were conducting their business through 23 banking branches, an operations center and a maintenance center.

The executive offices for the Company and the Bank are located at 2465 Kuser Road, Hamilton, New Jersey (also the location of one of our branches). The Bank leases the offices at this location pursuant to a lease that began in October 1999, has an initial term of 14 years ending in 2013, and is renewable for two additional five-year periods thereafter. The monthly rental payments under the lease are $56,387 during the second five years of the lease, which commenced in October 2004. The monthly rental will be adjusted every five years in accordance with a formula based on the Consumer Price Index, provided that the monthly rental payment for any lease period may not vary by more than 3% from the monthly rental payment in the immediately preceding lease period. The Bank has the option to purchase the property at a purchase price equal to the fair market value of the property at the time the option is exercised.

Of the 23 banking branches, five of the buildings and the land on which they are located are owned and 18 buildings and the land on which they are located are leased. The operations center and the land on which it is located is leased.

Item 3. Legal Proceedings

The Company and the Bank are party, in the ordinary course of business, to litigation involving collection matters, contract claims and other miscellaneous causes of action arising from their business. Management does not consider that any such proceedings depart from usual routine litigation, and in its judgment, the Company’s consolidated financial position or results of operations will not be affected materially by the final outcome of any pending legal proceedings.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended December 31, 2004.

PART II

Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

The Company’s common stock is traded in The Nasdaq Stock Market, Inc.’s National Market under the symbol YANB. The following table shows the high and low closing sales prices of the common stock in the The Nasdaq Stock Market, Inc.’s National Market during 2003 and 2004.

	High		Low
Year Ended December 31, 2003:
First Quarter	$	17.33	$	16.30
Second Quarter		19.52		17.14
Third Quarter		22.20		18.37
Fourth Quarter		25.90		21.76
Year Ended December 31, 2004:
First Quarter	$	26.00	$	23.50
Second Quarter		25.53		23.80
Third Quarter		29.88		23.21
Fourth Quarter		35.05		29.35

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Holders

As of December 31, 2004, the Company had approximately 3,400 holders of record of our common stock, which included approximately 650 registered holders and an estimate of individual participants who hold our common stock through registered clearing agencies and their nominees.

Dividends

In 2003, the Company paid four quarterly cash dividends on the common stock in the aggregate amount of $4.8 million. In 2004, the Company paid four quarterly cash dividends on the common stock in the aggregate amount of $4.8 million. Dividends paid per share in 2004 totaled $0.46. Cash dividends are generally paid quarterly or four times a year. In the first quarter of 2005, the Company paid a cash dividend in the amount of $0.115 per share on the common stock. Because substantially all of the funds available for the payment of cash dividends are derived from the Bank, future cash dividends will depend primarily upon the Bank’s earnings, financial condition, need for funds, and government policies and regulations applicable to both the Bank and the Company. The Company has also agreed with the holders of the trust preferred securities issued by subsidiary trusts (see Note 8 of the Notes to Consolidated Financial Statements) that the Company will not pay dividends if an event of default should occur (and remain uncured) under the terms of the trust preferred securities. As of December 31, 2004, the net profits of the Bank available for distribution to the Company as dividends without regulatory approval were approximately $23.0 million. The Company expects to pay quarterly cash dividends for the remaining three quarters in 2005 to holders of common stock, subject to the conditions described above.

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Item 6. Selected Financial Data

The following table sets forth certain historical financial data with respect to Yardville National Bancorp. This table should be read in conjunction with the consolidated financial statements and related notes thereto included in this Annual Report.

	At or for the year ended December 31,
	2004		2003		2002		2001		2000
Statement of Income (in thousands)
Interest income	$	139,864	$	121,469	$	120,259	$	119,044	$	100,472
Interest expense		69,145		68,289		73,776		82,909		62,737
Net interest income		70,719		53,180		46,483		36,135		37,735
Provision for loan losses		9,625		9,360		4,375		3,925		3,700
Securities gains, net		1,297		1,513		3,084		3,182		46
Other non-interest income		6,682		6,581		5,220		4,855		3,380
Non-interest expense		42,649		38,159		31,044		29,052		22,861
Income before income tax expense		26,424		13,755		19,368		11,195		14,600
Income tax expense		7,899		3,446		5,364		2,642		4,259
Net income	$	18,525	$	10,309	$	14,004	$	8,553	$	10,341
Balance Sheet (in thousands, except per share data)
Assets	$	2,805,917	$	2,431,193	$	2,232,468	$	1,944,399	$	1,620,132
Loans		1,782,592		1,443,355		1,195,143		1,007,973		818,289
Allowance for loan losses		20,116		17,295		16,821		13,542		10,934
Securities		880,782		866,693		876,365		813,246		676,458
Deposits		1,810,004		1,483,809		1,272,286		1,092,690		950,318
Subordinated debentures		62,892		47,428		33,510		33,510		27,320
Borrowed funds		753,130		738,080		757,711		707,113		545,223
Stockholders’ equity		160,158		143,557		145,939		93,245		78,237
Per Share Data
Net income - basic	$	1.77	$	0.99	$	1.72	$	1.13	$	1.47
Net income - diluted		1.71		0.97		1.68		1.11		1.47
Cash dividends		0.46		0.46		0.44		0.44		0.40
Stockholders’ equity (book value)		15.27		13.80		14.08		11.68		10.64
Other Data
Average shares outstanding - basic		10,455		10,391		8,124		7,601		7,022
Average shares outstanding - diluted		10,861		10,651		8,319		7,678		7,039

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	At or for the year ended December 31,
	2004			2003			2002			2001			2000
Financial Ratios
Return on average assets		0.70	%		0.44	%		0.67	%		0.48	%		0.79	%
Return on average stockholders’ equity		12.38			7.09			13.45			9.86			15.64
Net interest margin		2.76			2.35			2.29			2.10			3.00
Net interest margin (tax equivalent basis) (see note below)		2.83			2.42			2.36			2.17			3.07
Efficiency ratio		54.19			62.28			56.66			65.77			55.54
Total loans to total assets		63.53			59.37			53.53			51.84			50.51
Capital Ratios
Average stockholders’ equity to average assets		5.64			6.19			4.97			4.85			5.05
Dividend payout ratio		26.00			46.46			25.32			39.06			27.46
Tier 1 leverage ratio		7.99			8.03			8.16			6.92			8.13
Tier 1 capital as a percent of risk-weighted assets		10.09			11.05			11.84			10.03			10.56
Total capital as a percent of risk-weighted assets		11.42			12.07			13.00			11.25			11.65
Asset Quality Ratios
Allowance for loan losses to total loans		1.13			1.20			1.41			1.34			1.34
Net loan charge offs to average total loans		0.42			0.67			0.10			0.15			0.24
Nonperforming loans to total loans		0.56			0.74			0.52			0.51			0.86
Nonperforming assets to total loans and other real estate owned		0.56			0.74			0.61			0.74			1.11
Nonperforming assets to total assets		0.36			0.44			0.33			0.38			0.56
Allowance for loan losses to nonperforming assets		201.00			162.55			229.73			181.67			120.50
Allowance for loan losses to nonperforming loans		201.00	%		162.55	%		268.11	%		264.23	%		155.47	%
Market price per share of common stock
Closing	$	34.26		$	25.74		$	17.24		$	12.50		$	12.06
High closing		35.05			25.90			21.20			14.45			12.31
Low closing		23.21			16.30			12.25			10.96			8.56

Note:   The net interest margin is presented on a tax equivalent basis. We believe that this presentation provides comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice. Although we believe that this financial measure enhances investors’ understanding of our business and performance, these measures should not be considered an alternative to GAAP. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Average Balances, Yields and Costs.”

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The purpose of this discussion and analysis is to provide the reader with pertinent information to understanding and assessing Yardville National Bancorp’s results of operations for each of the past three years and financial condition for each of the past two years. Throughout this annual report the terms “YNB,” “Company,” “we,” “us,” “our,” and “corporation” will 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 following discussion and analysis should be read in conjunction with the consolidated financial statements, notes and tables included elsewhere in this report.

Management’s Discussion and Analysis of Financial Condition and Results of Operations contains certain forward-looking statements with respect to the financial condition, results of operations and business of YNB. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements are set herein under the caption “Forward-looking Statements” on page 54.

Critical Accounting Policies and Estimates

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. In the preparation of our financial statements we are required to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

YNB’s significant accounting policies are fundamental to understanding Management’s Discussion and Analysis of Financial Condition and Results of Operations. Note 1 to the Consolidated Financial Statements contains a summary of our significant accounting policies. Two of these policies are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. These policies govern the allowance for loan losses and income tax liabilities. Management has reviewed and approved these critical accounting policies and has discussed these policies with the Audit Committee.

The allowance for loan losses represents management’s estimate of possible credit losses inherent in the loan portfolio at the balance sheet date. The allowance for loan losses has been determined in accordance with accounting principles generally accepted in the United States of America, under which we are required to maintain adequate allowances for loan losses. The allowance for loan losses is determined based on our assessment of several factors. Those factors include reviews and evaluations of specific loans, current economic conditions, historical loan loss experience and the level of classified and nonperforming loans. We believe that our allowance for loan losses is adequate to cover specificially identifiable loan losses, as well as estimated losses inherent in our portfolio for which certain losses are probable but not specifically identifiable. Note 1 of the Notes to Consolidated Financial Statements describes the methodology used to determine the allowance for loan losses.

We account for income taxes by recognizing the amount of taxes payable for the current year and deferred tax liabilities and assets for the estimated future tax consequences, which require judgment of events, that have been recognized in our financial statements or tax returns. Fluctuations in the actual outcome of these future tax consequences could materially impact YNB’s consolidated financial statements or results of operations. Notes 1 and 9 of the Notes to Consolidated Financial Statements include further explanation on the accounting for income taxes.

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Results of Operations

2004 Executive Summary

Yardville National Bancorp is a $2.81 billion financial holding company headquartered in Hamilton, New Jersey. We provide a broad range of lending, deposit, and other financial products and services. We emphasize commercial real estate and commercial and industrial lending to small- to mid-sized businesses. Headquartered in Mercer County since 1925, YNB offers its style of personalized community banking to customers throughout New Jersey and Eastern Pennsylvania. Our focus is to provide top quality products and exceptional service to customers, and to build long-term, sustainable shareholder value by expanding and extending the YNB franchise.

Located in the dynamic business corridor connecting New York City and Philadelphia, YNB operates 23 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.

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. Increasing net interest income is critical in reaching our financial goals. To accomplish our goals, we must effectively manage our cost of funds and expand our loan portfolio. Loan opportunities in our markets have put pressure on our branch network to provide lower cost deposits to fund our growth. Our retail strategy is designed to increase the number of branches in our markets, enhance our brand image and introduce our products and services to an expanded geographic area. This strategy, however, requires investment of resources in people, facilities, marketing and technology. While we have seen many positive results, we have not yet fully realized all of the benefits of this ongoing strategic initiative.

During 2004, we opened one branch, continued enhancing our brand image, introduced new products and services, and lowered our cost of funds. Looking forward, we expect to open several branches in 2005 and introduce new products and services in our markets. We believe that by continuing to grow our commercial loan business, expanding our geographic footprint and attracting lower cost core deposits to fund our growth, we will enhance profitability and the value of the YNB franchise.

We earned net income of $18.5 million or $1.71 per diluted share for the year ended December 31, 2004, compared to $10.3 million or $0.97 per diluted share for the year ended December 31, 2003. This represents an increase of 79.7% and 76.3%, respectively. The rebound in our financial performance in 2004 was due to strong net interest income growth of $17.5 million or 33.0%, primarily due to continued robust commercial loan growth. Partially offsetting the improvement in net interest income was a $4.5 million increase in non-interest expense, as well as higher income tax expense due to notably better financial performance. Return on average assets for 2004 increased to 0.70% compared with 0.44% in 2003, while the return on average equity increased to 12.38% in 2004 compared to 7.09% in 2003.

During 2004, total loans increased $339.2 million or 23.5% to $1.78 billion. At the same time, overall credit quality strengthened as net loan charge offs declined to $6.8 million for 2004, compared to almost $9.0 million in 2003. Nonperforming asset levels were stable at $10.0 million or 0.36% of total assets at December 31, 2004, compared to $10.6 million or 0.44% of total assets at the same date in 2003.

One of our retail strategy objectives, which was ongoing throughout 2004, was to attract lower cost deposits, reduce our cost of funds and increase net interest income. During 2004, we successfully introduced Simply Better Checking^SM, our featured interest bearing demand deposit account, in our home Mercer County market. Combined with our other markets, we attracted over $200 million in deposits with this product. The cost of interest bearing deposits declined 38 basis points for 2004 despite the gradually increasing interest rate environment in the second half of the year. Total deposits increased $326.2 million or 22.0% to $1.81 billion from $1.48 billion at December 31, 2003. Lower cost savings, money markets and interest bearing demand deposits increased $238.9 million or 73.2% of the total increase in overall deposits.

YNB’s non-interest expenses increased 11.8% due primarily to our growth, which resulted in higher salaries and employee benefit costs. In addition, non-interest expenses rose due to increased director and committee fees, the costs associated with Sarbanes-Oxley 404 compliance and expenses related to the ongoing execution of our retail strategy. In spite of the increase in non-interest expenses, YNB’s efficiency ratio improved to 54.19% in 2004 from 62.28% in 2003 due to the significant growth in net interest income.

We have positioned our balance sheet to take advantage of an environment of gradually increasing interest rates during 2005. We believe that we will continue to have opportunities to attract quality commercial borrowers while credit quality strengthens. With the anticipation of several new branches during 2005, we believe the expansion of our footprint and attractive core deposit products and services will result in a modestly higher cost of funds and an improving net interest margin. We are optimistic about our prospects for financial success in 2005.

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Net Interest Income

Net interest income is the largest and most significant component of our operating income. Net interest income is the difference between income on interest earning assets and expense on interest bearing liabilities. Net interest income depends upon the relative amounts and types of interest earning assets and interest bearing liabilities, and the interest rate earned or paid on them. Net interest income is also impacted by changes in interest rates and the shape of market yield curves.

The following table sets forth an analysis of net interest income by each major category of average interest earning assets and interest bearing liabilities and the related yields and costs for the years ended December 31, 2004, 2003, 2002, 2001 and 2000. Average yields for each year are derived by dividing income by the average balance of the related assets, and average costs are derived by dividing expense by the average balance of the related liabilities. The yields and costs include fees, costs, premiums and discounts, which are considered adjustments to interest rates.

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Financial Summary
Average Balances, Yields and Costs

	December 31, 2004								December 31, 2003
						Average								Average
	Average					Yield/			Average					Yield/
(in thousands)	Balance			Interest		Cost			Balance			Interest		Cost
INTEREST EARNING ASSETS:
Interest bearing deposits with banks	$	25,545		$	371		1.45	%	$	10,383		$	121		1.17	%
Federal funds sold		26,198			347		1.32			48,102			523		1.09
Securities		879,794			38,640		4.39			878,698			35,296		4.02
Loans (1)		1,626,477			100,506		6.18			1,323,243			85,529		6.46
Total interest earning assets	$	2,558,014		$	139,864		5.47	%	$	2,260,426		$	121,469		5.37	%
NON-INTEREST EARNING ASSETS:
Cash and due from banks	$	29,026							$	25,428
Allowance for loan losses		(18,805	)							(17,060	)
Premises and equipment, net		11,200								12,085
Other assets		73,045								67,005
Total non-interest earning assets		94,466								87,458
Total assets	$	2,652,480							$	2,347,884
INTEREST BEARING LIABILITIES:
Deposits:
Savings, money markets, and interest bearing demand	$	880,130		$	12,929		1.47	%	$	662,262		$	10,834		1.64	%
Certificates of deposit of $100,000 or more		161,065			4,165		2.59			137,168			4,014		2.93
Other time deposits		460,694			12,269		2.66			457,717			14,521		3.17
Total interest bearing deposits		1,501,889			29,363		1.96			1,257,147			29,369		2.34
Borrowed funds		738,110			36,071		4.89			742,877			35,799		4.82
Subordinated debentures		55,718			3,711		6.66			40,395			3,121		7.73
Total interest bearing liabilities	$	2,295,717		$	69,145		3.01	%	$	2,040,419		$	68,289		3.35	%
NON-INTEREST BEARING LIABILITIES:
Demand deposits	$	185,443							$	139,332
Other liabilities		21,679								22,728
Stockholders’ equity		149,641								145,405
Total non-interest bearing liabilities and stockholders’ equity	$	356,763							$	307,465
Total liabilities and stockholders’ equity	$	2,652,480							$	2,347,884
Interest rate spread (2)							2.46	%							2.02	%
Net interest income and margin (3)				$	70,719		2.76	%				$	53,180		2.35	%
Net interest income and margin (tax equivalent basis) (4)				$	72,397		2.83	%				$	54,599		2.42	%

(1)	Loan origination fees are considered an adjustment to interest income. For the purpose of calculating loan yields, average loan balances include nonaccrual loans with no related interest income.
(2)	The interest rate spread is the difference between the average yield on interest earning assets and the average rate paid on interest bearing liabilities.
(3)	The net interest margin is equal to net interest income divided by average interest earning assets.
(4)	In order to present pre-tax income and resultant yields on tax-exempt investments and loans on a basis comparable to those on taxable investments and loans, a tax equivalent adjustment is made to interest income. The tax equivalent adjustment has been computed using the appropriate Federal income tax rate for the period and has the effect of increasing interest income by $1,678,000, $1,419,000, $1,245,000, $1,062,000 and $921,000 for the years ended December 31, 2004, 2003, 2002, 2001 and 2000, respectively.

22

December 31, 2002								December 31, 2001								December 31, 2000
					Average								Average								Average
Average					Yield/			Average					Yield/			Average					Yield/
Balance			Interest		Cost			Balance			Interest		Cost			Balance			Interest		Cost
$	2,887		$	60		2.08	%	$	3,816		$	171		4.48	%	$	1,322		$	82		6.20	%
	72,790			1,157		1.59			74,624			2,765		3.71			37,961			2,454		6.46
	864,895			43,647		5.05			748,182			45,700		6.11			495,328			33,518		6.77
	1,085,306			75,395		6.95			891,957			70,408		7.89			723,570			64,418		8.90
$	2,025,878		$	120,259		5.94	%	$	1,718,579		$	119,044		6.93	%	$	1,258,181		$	100,472		7.99	%
$	22,965							$	21,026							$	18,307
	(14,771	)							(11,583	)							(9,798	)
	11,363								10,081								9,303
	51,198								52,288								32,944
	70,755								71,812								50,756
$	2,096,633							$	1,790,391							$	1,308,937
$	469,985		$	11,228		2.39	%	$	318,595		$	9,931		3.12	%	$	233,012		$	7,937		3.41	%
	148,119			5,184		3.50			129,340			7,581		5.86			106,851			6,918		6.47
	469,858			17,747		3.78			453,747			27,085		5.97			408,414			24,772		6.07
	1,087,962			34,159		3.14			901,682			44,597		4.95			748,277			39,627		5.30
	735,201			36,403		4.95			644,690			35,264		5.47			367,021			21,219		5.78
	33,700			3,214		9.54			32,058			3,048		9.51			20,222			1,891		9.35
$	1,856,863		$	73,776		3.97	%	$	1,578,430		$	82,909		5.25	%	$	1,135,520		$	62,737		5.52	%
$	118,154							$	104,577							$	96,024
	17,493								20,617								11,284
	104,123								86,767								66,109
$	239,770							$	211,961							$	173,417
$	2,096,633							$	1,790,391							$	1,308,937
						1.97	%							1.68	%							2.47	%
			$	46,483		2.29	%				$	36,135		2.10	%				$	37,735		3.00	%
			$	47,728		2.36	%				$	37,197		2.16	%				$	38,656		3.07	%

23

Changes in net interest income and margin result from the interaction between the volume and composition of interest earning assets, interest bearing liabilities, related yields, and associated funding costs. The following table demonstrates the impact on tax equivalent net interest income of changes in the volume of interest earning assets and interest bearing liabilities and changes in interest rates earned and paid.

RATE/VOLUME ANALYSIS

	2004 vs. 2003									2003 vs. 2002
	Increase (Decrease)									Increase (Decrease)
	Due to changes in:									Due to changes in:
(in thousands)	Volume			Rate			Total			Volume			Rate			Total
Interest Earning Assets:
Interest bearing deposits with banks	$	215		$	35		$	250		$	97		$	(36	)	$	61
Federal funds sold		(271	)		95			(176	)		(329	)		(305	)		(634	)
Securities		45			3,299			3,344			687			(9,038	)		(8,351	)
Loans (1)		18,826			(3,849	)		14,977			15,716			(5,582	)		10,134
Total interest income		18,815			(420	)		18,395			16,171			(14,961	)		1,210
Interest Bearing Liabilities:
Deposits:
Savings, money markets, and interest bearing demand		3,305			(1,210	)		2,095			3,767			(4,161	)		(394	)
Certificates of deposit of $100,000 or more		650			(499	)		151			(365	)		(805	)		(1,170	)
Other time deposits		94			(2,346	)		(2,252	)		(445	)		(2,781	)		(3,226	)
Total deposits		4,049			(4,055	)		(6	)		2,957			(7,747	)		(4,790	)
Borrowed funds		(235	)		507			272			372			(976	)		(604	)
Subordinated debentures		1,066			(476	)		590			577			(670	)		(93	)
Total interest expense		4,880			(4,024	)		856			3,906			(9,393	)		(5,487	)
Net interest income	$	13,935		$	3,604		$	17,539		$	12,265		$	(5,568	)	$	6,697

(1) Loan origination fees are considered an adjustment to interest income.

One of our major objectives in 2004 was to continue the improvement in our net interest margin. The table below lists various components relating to our net interest margin by quarter for 2004 and 2003.

	2004												2003
	4th			3rd			2nd			1st			4th			3rd			2nd			1st
	Qtr			Qtr			Qtr			Qtr			Qtr			Qtr			Qtr			Qtr
Interest Earning Assets:
Interest bearing deposits with banks		2.10	%		1.52	%		0.94	%		1.00	%		1.02	%		1.17	%		1.25	%		2.01	%
Federal funds sold		1.99			1.39			0.97			0.98			0.97			0.97			1.16			1.13
Securities		4.53			4.49			4.30			4.24			4.08			3.70			4.05			4.22
Loans		6.33			6.16			6.06			6.15			6.31			6.44			6.54			6.59
Total interest earning assets		5.65	%		5.49	%		5.35	%		5.36	%		5.40	%		5.26	%		5.40	%		5.43	%
Interest Bearing Liabilities:
Total interest bearing deposits		2.03	%		1.92	%		1.89	%		1.97	%		2.10	%		2.25	%		2.46	%		2.57	%
Borrowed funds		5.01			4.91			4.82			4.81			4.85			4.84			4.82			4.77
Subordinated debentures		6.72			6.39			6.77			6.83			6.87			7.63			7.67			8.92
Total interest bearing liabilities		3.07	%		2.98	%		2.95	%		3.05	%		3.17	%		3.27	%		3.42	%		3.54	%
Interest rate spread		2.58	%		2.51	%		2.40	%		2.31	%		2.23	%		1.99	%		1.98	%		1.89	%
Net interest margin		2.90			2.82			2.70			2.62			2.54			2.31			2.31			2.25
Net interest margin (tax equivalent basis)		2.97			2.89			2.76			2.69			2.60			2.37			2.37			2.31

Net interest income totaled $70.7 million in 2004, an increase of $17.5 million or 33.0% from net interest income of $53.2 million in 2003. The primary factor contributing to the increase in net interest income in 2004 was an increase in interest income of $18.4 million resulting from a 17.5% increase in interest and fees on loans, due to increased volumes for the comparative periods. Also contributing to the net interest income improvement was a 34 basis point decline in the cost of interest bearing liabilities, partially offset by a 12.5% increase in average interest bearing liabilities.

24

YNB’s financial success in 2004 was primarily the result of a higher net interest margin. We have continued to take advantage of our strength as a commercial business lender while building momentum from our retail strategy. The combination of a low interest rate environment, the expansion of our branch network in new markets and attractive core deposit products resulted in a lower cost of funds and a higher net interest margin in 2004. The net interest margin, on a tax equivalent basis, was 2.83% for the twelve months ended December 31, 2004 compared with 2.42% for the same period in 2003. With anticipated continued success in our commercial lending business, the key to moving our net interest margin higher will depend on our ability to cost effectively fund commercial loan growth.

During 2004, interest income rose to $139.9 million, compared to $121.5 million for 2003. Average interest earning assets increased by $297.6 million or 13.2% to $2.56 billion for 2004, compared to $2.26 billion in 2003. The growth in average earning assets was complemented by a 10 basis point increase on the yield of our earning assets to 5.47% despite a decline in our average loan yield.

Loans averaged $1.63 billion for 2004, representing an increase of $303.2 million or 22.9% when compared with $1.32 billion for 2003. During this same time period, loan yields declined 28 basis points to 6.18%, partially offsetting the impact of higher loan balances on interest income. That said, interest and fees on loans increased $15.0 million or 17.5%. The principal factor that accounted for the lower loan yield, even with an increase of 125 basis points in short-term interest rates in the second half of 2004. The composition of our commercial loans portfolio, consisting of commercial real estate and commercial and industrial loans, contributed to the decrease in the overall loan yield. The majority of commercial loans booked in 2004 were floating rate. Initially, these floating rate loans had a lower yield than fixed rate loans and had the effect of lowering the loan portfolio yield. Approximately 50% of our commercial loans have floating interest rates, typically tied to the prime rate of interest. In 2004, the average prime rate increased to 4.35% compared to 4.12% in 2003. Over the last few years we instituted floors on a significant portion of our floating rate commercial loans, totaling approximately $716 million, to protect interest income in the lower interest rate environment we were experiencing. Over the last six months of 2004, the floating rates on many of our commercial loans have risen above their floors. The timing of these commercial loans coming off of their floors as rates increased affected the level of yield improvement. At year-end 2004, approximately 90% of the rates on floating rate commercial loans had come off of their floors. With short-term interest rates expected to increase in 2005, we expect our loan yields to move higher as well.

During 2004, consistent with our historical performance, our level of nonaccrual loans had only a modestly negative impact to our loan yield and interest income. Nonaccrual loans totaled $10.0 million at December 31, 2004, a modest decrease of $632,000 from the $10.6 million reported in 2003. Had these nonaccrual loans performed at original contract terms, we would have recognized additional interest income of approximately $600,000 in 2004 and $541,000 in 2003 and our tax equivalent net interest margin would have been higher by 2 basis points in 2004 and 2003.

Also contributing to net interest income and margin improvement was a higher yield on our securities portfolio. Securities averaged $879.8 million in 2004, representing a $1.1 million increase from the prior year, while yields increased 37 basis points to 4.39% in 2004 from 4.02% in 2003. Interest on securities increased $3.3 million or 9.5% from 2003. The improvement in interest income on securities resulted primarily from a higher yield on securities. As a result of our experience with premium purchased mortgage-backed securities in 2003, we strategically moved in a different direction in 2004. Our goal in 2004 was to purchase mortgage-backed securities closer to par with stable cash flows. This action alone, we believed, would reduce the level of premium amortization in the portfolio and protect securities yields from higher prepayment speeds. In addition, we purchased modestly longer duration securities, which accounted for the increased yield on the securities portfolio. Of note, our Investment Growth Strategy, or securities purchased using borrowed funds to enhance return on average stockholders’ equity and earnings per share, totaled only $17.8 million or less than 1% of total assets at December 31, 2004 compared to $56.6 million or 2.3% of our assets at December 31, 2003.

Average interest bearing liabilities rose $255.3 million to $2.30 billion, while overall funding costs declined 34 basis points to 3.01% during 2004. The higher volume of average interest bearing liabilities resulted in increased interest expense of $856,000 or 1.3% to $69.1 million when compared to $68.3 million in 2003.

The principal objective of our retail strategy is to reduce or better manage our cost of funds to raise our net interest margin. To achieve that objective, we have focused on attracting lower cost core deposits and changing the composition of our deposit base. In addition, our philosophy of relationship banking has resulted in establishing long-term business relationships and higher interest free demand balances in 2004. Growth in average demand deposits of $46.1 million or 33.1% to $185.4 million in 2004 positively impacted our net interest margin. Total interest expense on interest bearing deposits remained the same for 2004 compared to 2003 as higher average interest bearing deposit balances of $244.7 million were offset by a 38 basis point decline in their cost. Average savings, money market and interest bearing demand deposits increased $217.9 million, or 32.9% to $880.1 million during this past year. The corresponding cost of funds declined 17 basis points to 1.47%. Average savings, money markets and interest bearing demand represented 58.6% of total average interest bearing deposits during 2004 compared to 52.7% for 2003. Average time deposits, including CDs of $100,000 or more, represented 36.8% of our average deposit base during 2004 compared to 42.6% during 2003. The cost of these time deposits declined to 2.64% for 2004 compared to 3.12% in 2003, in part due to our utilization of interest rate swaps on new two-year CD money attracted, which lowered the cost of this money. The changing composition of our deposit base, as a result of our retail strategy, has contributed to our lower overall cost of deposits in 2004.

25

Average borrowed funds decreased by $4.8 million or 0.6% to $738.1 million during 2004, while related borrowing costs increased by seven basis points to 4.89%. The modest increase in interest expense was due to higher costs associate with floating rate advances from the Federal Home Loan Bank of New York (“FHLB”) that have repriced higher in the second half of 2004 as interest rates gradually moved higher. Part of our strategy for improving the net interest margin is to reduce our dependency on borrowed funds. Average borrowed funds declined to 27.8% of average assets in 2004 compared to 31.6% in 2003.

Average total subordinated debentures increased by $15.3 million to $55.7 million during 2004 compared to $40.4 million for 2003. Interest expense associated with these subordinated debentures increased $590,000 due to higher volumes as average costs decreased 107 basis points to 6.66% from 7.73% during 2003. In June 2004 we issued $15.5 million in additional subordinated debentures, which accounted for the increased volume. The decrease in the average interest rate is due to two factors. In 2003, we retired $11.9 million in fixed rate subordinated debentures with a cost of 9.25%. During 2003 and 2004 we issued $41.2 million in lower cost floating rate advances, all tied to three month LIBOR. In a gradually increasing interest rate environment we would expect interest expense on borrowed funds to continue to rise.

Meeting our profitability goals in 2005 will depend on increasing net interest income and improving our net interest margin. Our two-pronged strategic approach that was successful in 2004 will continue in 2005. Most important, from a liability perspective, we will continue to build upon the successes of our retail strategy. We will continue to open branches in new markets and neighborhoods, promote our brand image and market attractive core deposit products like Simply Better Checking and the recently introduced Simply Better Savings^SM. To effectively manage our cost of funds during our retail building process, we will use alternative funding sources such as Reserve Funds, which are money market balances acquired through an intermediary that places deposits from brokerage clients with banks. In addition, we will use interest rate swaps to change the pricing characteristics of certain interest bearing liabilities. We continue our efforts to reduce our reliance on higher cost time deposits and borrowed funds. From an earning asset perspective, we must continue to capitalize on opportunities to grow our higher yielding commercial loan portfolio. We believe our balance sheet is properly positioned to grow net interest income in a gradually increasing interest rate environment in 2005. We believe our strategy will give us the best opportunity to increase profitability and franchise value in 2005.

Provision for Loan Losses

We provide for possible loan losses by a charge to current income to maintain the allowance for loan losses at an adequate level determined according to our documented allowance adequacy methodology. The provision for loan losses totaled $9.6 million for 2004, an increase of $265,000 when compared to $9.4 million for 2003. The modest increase is reflective of the strong commercial loan growth experienced in 2004 partially offset by lower net charge offs. The allowance for loan losses increased by $2.8 million to $20.1 million at December 31, 2004 compared to $17.3 million at the end of 2003. The allowance for loan losses as a percentage of total loans was 1.13% at December 31, 2004 compared with 1.20% at December 31, 2003. (See “Asset Quality” and “Allowance for Loan Losses” for additional detail and information).

Non-Interest Income

We earn fee and other income from service charges on deposit accounts and other banking products and services. These continue to be the most significant components of our fee income. In addition, we derive considerable non-interest income from income on bank owned life insurance (BOLI) and net securities gains. Non-interest income totaled $8.0 million in 2004 compared to $8.1 million in 2003, a decrease of $115,000 or 1.4%. Non-interest income represented 5.4% of total revenues for 2004 compared to 6.2% for 2003.

Non-interest income, excluding net securities gains and the gain on sale of our operations building in 2003, rose $530,000 or 8.6% to $6.7 million for 2004 when compared to $6.2 million for 2003. The increase was primarily due to higher service charge income partially offset by a reduction in income on bank owned life insurance.

The components of non-interest income for the three-year period ended December 31, 2004 are presented in the following table.

	Year ended December 31,
(in thousands)	2004		2003		2002
Service charges on deposit accounts	$	3,134	$	2,388	$	2,203
Income on bank owned life insurance		1,766		2,036		1,678
Other service fees		1,495		1,384		1,145
Securities gains, net		1,297		1,513		3,084
Investment and insurance fees		89		72		35
Other non-interest income		198		701		159
Total	$	7,979	$	8,094	$	8,304

26

Service charges on deposit accounts represented the largest single source of core non-interest income in 2004. Service charges on deposit accounts increased $746,000 or 31.2% due to higher service charges and overdraft fees. Branches in new markets and targeted marketing campaigns have resulted in generating a larger base of lower cost checking accounts in 2004, which generates additional service charge and fee income.

At December 31, 2004, our investment in BOLI totaled $44.5 million. There were no BOLI assets purchased in 2004. In addition, there are no further premiums paid associated with BOLI assets after their initial purchase. We have purchased BOLI to offset the costs of deferred compensation plans and other employee benefits. Income on BOLI is tax-exempt and provides a high rate of return relative to alternative earning assets, while reducing our overall effective income tax rate. Income on BOLI was $1.8 million in 2004, a decrease of 13.3% when compared to $2.0 million in 2003. Earnings on BOLI are impacted by the interest-crediting rate determined on an annual basis by the insuring companies. During 2004, a lower interest-crediting rate resulted in a decrease in BOLI income compared to 2003, reflective of the lower interest rate environment that existed when the interest crediting rate was established.

Net securities gains totaled $1.3 million during 2004 compared to $1.5 million in 2003. During 2004, we made the decision to sell selected securities as part of our interest rate risk management process.

We also generate non-interest income from a variety of fees earned from general banking services. These include automated teller machine related fees, Second Check, wire transfer and check fees. Other service fees increased $111,000 to $1.5 million in 2004 from $1.4 million in 2003. Other non-interest income, which includes mortgage servicing and safe deposit box rentals, totaled $198,000 in 2004 compared to $701,000 in 2003. Included in our 2003 results was the sale of our former operations building to a board member, which resulted in a $429,000 gain.

As we continue to build our core retail and commercial customer bases in new markets, we expect to generate additional service fee income, which should translate into higher levels of non-interest income.

Non-Interest Expense

Non-interest expense totaled $42.7 million in 2004, an increase of $4.5 million or 11.8%, compared to $38.2 million in 2003. The largest increases in non-interest expense in 2004 were primarily in salaries and employee benefits, and directors and committee fees. To a somewhat lesser extent, expenses associated with Sarbanes-Oxley Section 404 compliance, which includes audit and consulting fees and outsourced services, contributed to the increase in non-interest expense.

We continuously assess the effectiveness of our operations. The efficiency ratio is used by the financial services industry to measure a company’s operating efficiency. The efficiency ratio measures total non-interest expense as a percentage of net interest income plus non-interest income. We also measure our efficiency, excluding securities gains and any items deemed to be non-recurring. YNB’s efficiency ratio improved in 2004 to 54.2% compared to 62.3% in 2003. Excluding net securities gains and the sale of our former operations building in 2003, our efficiency ratio was 55.1% and 64.3% for 2004 and 2003, respectively. The improvement in the efficiency ratio was principally due to the increasing level of net interest income. A decrease in the efficiency ratio is indicative of a more efficient use of resources, while an increase in this ratio indicates a less efficient use of resources.

27

The following table presents the components of non-interest expense for the years ended December 31, 2004, 2003 and 2002.

	Year ended December 31,
(in thousands)	2004		2003		2002
Salaries and employee benefits	$	23,476	$	21,433	$	17,890
Occupancy expense, net		4,283		3,934		3,507
Equipment expense		3,123		2,955		2,423
Marketing		1,768		1,661		1,104
Outside services and processing		1,483		819		646
Directors and committee fees		1,355		346		339
Audit and examination fees		1,032		725		570
Communication and postage		938		844		809
Stationery and supplies		757		908		823
Insurance		509		408		205
Attorneys’ fees		393		480		258
Amortization of subordinated debentures expense		251		169		190
FDIC insurance premium		239		213		200
Deposit intangible amortization		204		17		—
ORE expense		5		194		418
Other		2,833		3,053		1,662
Total	$	42,649	$	38,159	$	31,044

Salaries and employee benefits, which represent the largest portion of non-interest expense, increased $2.0 million or 9.5% to $23.5 million for the year ended December 31, 2004 compared to $21.4 million for the same period in 2003. Full time equivalent employees increased to 364 at December 31, 2004 from 359 at December 31, 2003. The increase in salaries and employee benefits in 2004 was primarily due to additional salary expense. Salaries rose $1.9 million or 11.4% to $18.4 million in 2004, primarily due to additional lending staff and from growth. The full impact of 2003 hires, including the staffing of three new branches opened in 2003, is reflected in 2004 expense. We also increased staff in our risk management division as the result of current regulatory and Federal requirements. Benefits expense, which includes health benefits and payroll taxes, rose $166,000 or 3.4% to $5.1 million in 2004. The increase in benefits expense was relatively modest due to a non-recurring adjustment in our salary continuation costs for executives, which reduced benefits expense in the last quarter of 2004.

Net occupancy expense increased $349,000 or 8.9% to $4.3 million in 2004 from $3.9 million in 2003. Total rent expense on leased properties increased $273,000 or 78.3% of the total increase in occupancy expense due to a full year’s rent in 2004 on new branches opened in 2003 and normal rent increases. Also contributing to the increase were typical facilities-related expenses such as repairs and maintenance.

Equipment expense rose $168,000 or 5.7% to $3.1 million in 2004. The increase in equipment expense was primarily related to costs associated with our automated teller machines, equipment maintenance and depreciation costs. During 2004 we also continued to selectively upgrade technology and systems to ensure quality products and services.

In addition to the opening of branches, marketing continues to be a significant component of our retail strategy. During 2004 we continued to enhance our brand image while consistently marketing our products and services. Marketing expenses increased 6.4% to $1.8 million in 2004, compared to $1.7 million in 2003.

Outside services and processing expenses increased $664,000 or 81.1% to $1.5 million in 2004 from $819,000 in 2003. Outside services and processing expenses include services provided by third parties, outsourced services and consulting fees. Through our third party providers, we have been able to offer quality products and services to our customer base, such as cash management and state-of-the-art website services, including electronic bill payment. The cost to provide these services, in addition to other processing costs, was $738,000 in 2004 compared to $396,000 in 2003. The benefit of outsourcing labor intensive functions, like statement rendering and wire transfer processing, has been the resultant staff savings as we have grown. During 2004 consulting fees almost doubled to $654,000 compared to $328,000 in 2003, primarily as a result of expenses associated with Sarbanes-Oxley Section 404 (SOX 404) compliance.

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We estimate that the impact to pre-tax earnings of implementing SOX 404, as a result of additional expenses, was approximately $750,000 to $1,000,000 or 5 to 7 cents on diluted earnings per share in 2004. Audit and examination fees increased $307,000 or 42.3% to $1.0 million in 2004 compared to $725,000 in 2003 primarily due to higher audit fees associated with the review of our internal controls and the attestation of our financial statements. Fees paid to our consultant totaled approximately $350,000 for SOX 404. During 2004, additional staff was also hired to strengthen and address internal control issues. We also believe the significant time allocated by staff for this compliance effort throughout the Bank also resulted in lost revenue opportunities. We do expect costs associated with SOX 404 compliance to be comparatively less in 2005.

During 2004, we incurred a nonrecurring cost associated with our director deferred compensation plan. Under this plan, outside directors can defer all or a portion of their director, committee and annual retainer fees, while receiving a matching contribution and interest on their deferred funds. Changes and enhancements to the director deferred compensation plan resulted in the plan being underfunded. As a result, directors and committee fees increased to $1,355,000 for 2004 compared to $346,000 for 2003. We do not anticipate the same growth in directors and committee fees in 2005.

Other expenses totaled $2.8 million in 2004 compared to $3.1 million in 2003. Other expenses are comprised of a variety of professional fees, expenses associated with the origination of loans and other operating expenses.

We will continue to make investments in technology, our retail strategy and delivery systems to attract new customers and provide the ongoing quality products and services our customers expect. We anticipate our efficiency ratio may experience some upward pressure as we continue to grow, but we believe that our efficiency ratio should remain below 60% during 2005.

Income Tax

We have identified the accounting for income taxes as a critical accounting policy. The provision for income taxes, comprised of Federal and state taxes, was $7.9 million in 2004 compared to $3.4 million in 2003. The provisions for income taxes in 2004 and 2003 were at effective tax rates of 29.9% and 25.1%, respectively. The increase in tax expense and our effective tax rates was principally due to higher taxable income.

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FINANCIAL CONDITION

Total Assets

Total assets at December 31, 2004 were $2.81 billion, an increase of $374.7 million or 15.4%, as compared to total assets of $2.43 billion at December 31, 2003. Loans increased to $1.78 billion at December 31, 2004 from $1.44 billion at December 31, 2003, while deposits increased to $1.81 billion from $1.48 billion during the same time period.

Total interest earning assets increased 16.0% to $2.71 billion in 2004 from $2.34 billion in 2003. The growth in interest earning assets was primarily funded in 2004, as was the case in 2003, by the increase in lower cost savings, money markets and interest and non-interest bearing demand deposits.

We believe the balance sheet growth we have experienced is reflective of our relationship banking philosophy, strength as a commercial lender and the ongoing successful execution of our retail strategy. The introduction of Simply Better Checking into our home Mercer County market combined with the positive reception we have received in the relatively new demographically attractive markets of Hunterdon, Somerset and Middlesex Counties in New Jersey is reflected in the continued growth of lower cost core deposits in 2004. As a result, we experienced solid financial results in 2004 and enhanced the value of our franchise.

Loans

During 2004 we again experienced strong commercial loan demand as the result of the strength of New Jersey’s real estate market and business activity. Commercial loans, which include commercial real estate and commercial and industrial loans, grew 28.1% as a result of strong consistent growth in our home Mercer County market in addition to the further development of lending opportunities in our expanded marketplace. We emphasize commercial real estate and commercial and industrial lending to individuals and small-to mid-sized businesses. As a result of our strength as a commercial lender, relationship banking philosophy and market expansion, we have experienced robust lending growth from December 31, 2000 to December 31, 2004. During that period, loans have increased from $818.3 million to $1.78 billion, resulting in a compound annual growth rate of approximately 23%. During this period we have stressed quality growth, and product and industry diversification, emphasized relationships, and maintained strict underwriting standards.

The following table reflects the composition of the loan portfolio for the five years ended December 31, 2004.

LOAN PORTFOLIO COMPOSITION
	December 31,
	2004					2003					2002					2001					2000
(in thousands)	Amount		%			Amount		%			Amount		%			Amount		%			Amount		%
Commercial real estate
Investor occupied	$	594,799		33.4	%	$	432,571		30.0	%	$	321,583		26.9	%	$	255,471		25.3	%	$	198,184		24.2	%
Owner occupied		215,313		12.1			204,539		14.2			164,450		13.8			143,767		14.3			135,234		16.5
Construction and development		190,546		10.7			123,790		8.6			121,295		10.1			99,978		9.9			93,432		11.4
Commercial and industrial
Lines of credit		301,163		16.9			218,097		15.1			207,562		17.4			164,075		16.3			72,217		8.8
Term		169,829		9.5			169,296		11.7			129,513		10.8			117,005		11.6			116,995		14.3
Demand		374		0.0			1,199		0.1			972		0.1			1,055		0.1			1,389		0.2
Residential
1-4 family		159,306		8.9			150,733		10.4			116,829		9.8			107,840		10.7			92,876		11.4
Multi- family		22,717		1.3			30,097		2.1			34,012		2.8			33,970		3.4			27,800		3.4
Consumer
Home equity		86,295		4.8			78,877		5.5			70,579		5.9			58,084		5.8			50,809		6.2
Installment		32,149		1.8			24,165		1.7			19,078		1.6			19,266		1.9			22,428		2.7
Other		10,101		0.6			9,991		0.6			9,270		0.8			7,462		0.7			6,925		0.9
Total	$	1,782,592		100.0	%	$	1,443,355		100.0	%	$	1,195,143		100.0	%	$	1,007,973		100.0	%	$	818,289		100.0	%

Loans increased $339.2 million or 23.5% to $1.78 billion at December 31, 2004 from $1.44 billion at December 31, 2003. Commercial real estate and commercial and industrial loans experienced growth of $239.8 million and $82.8 million, respectively, in 2004. At December 31, 2004, these two loan types represented 82.6% of our total loans, compared to 79.6% in 2003.

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In underwriting commercial loans, which are primarily secured by real estate, we follow strict underwriting standards. These standards include varying limits on loan-to-value ratios based on property types, property condition, quality and experience of the organization or developer managing the property, and evaluation of the cash flow capability of the borrower to repay the loan. We also analyze the feasibility of these projects, which includes occupancy rates, tenants and lease terms. Additionally, our underwriting standards require independent appraisals, periodic property inspections and the monitoring of operating results. In addition to real estate, the majority of our commercial loans are secured by business assets and most are supported by personal guarantees and other assets of the principals.

Commercial real estate loans increased by $239.8 million, or 31.5% in 2004, to $1.0 billion from $760.9 million in 2003. Commercial real estate loans consist of investor occupied, owner occupied, and construction and development loans. Investor occupied and construction and development loans increased by $162.2 million and $66.8 million, respectively, in 2004. Growth in real estate loans accounted for 70.7% of the total loan growth in 2004 compared to 61.9% in 2003. Commercial real estate loans generally have a final maturity of five to fifteen years. Commercial mortgages are secured by professional office buildings, retail stores, shopping centers and industrial developments. Construction and development loans include land loans to acquire vacant land for future development in addition to residential and commercial projects. 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, with floating rates indexed to the prime rate.

Commercial and industrial loans include lines of credit, term loans and demand loans. Led by an increase in lines of credit of $82.8 million, total commercial and industrial loans grew 21.3% to $471.4 million at December 31, 2004 compared to $388.6 million at December 31, 2003. Commercial and industrial loans typically consist of term loans or lines of credit that finance equipment, inventory, receivables, and other working capital needs. As shown in the table below, we have maintained diversification of risk within industry classifications with the goal of limiting the risk of loss from any single unexpected event or trend.

	December 31, 2004
YEAR- END COMMERCIAL AND INDUSTRIAL LOANS			Percent of			Number
BY INDUSTRY CLASSIFICATION (in thousands)	Balance		balance			of loans
Real estate-related	$	117,527		24.9	%		251
Services		102,372		21.7			310
Construction		95,952		20.4			128
Retail trade		39,773		8.4			125
Individuals		35,505		7.5			96
Manufacturing		23,033		4.9			82
Wholesale trade		13,593		2.9			49
Transportation and public utilities		4,224		0.9			35
Other		39,387		8.4			56
Total	$	471,366		100.0	%		1,132

During 2004, we have increased the level of commercial loan participations with other financial institutions. Commercial loan participations totaled $71.4 million at December 31, 2004 compared to $3.0 million at the end of 2003. Commercial real estate and commercial and industrial loan participations totaled $32.8 million and $38.6 million, respectively, at year-end 2004. We use the same strict underwriting standards in making decisions regarding participations that we use for our own loan portfolio. We will continue to assess participation opportunities in 2005 that meet our credit standards and interest spread objectives.

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The following table provides information concerning the maturity and interest rate sensitivity of YNB’s commercial and industrial and commercial real estate-construction and development portfolios at December 31, 2004.

			After one		After
	Within		but within		five
(in thousands)	one year		five years		years		Total
Maturities:
Commercial and industrial	$	245,131	$	201,664	$	24,571	$	471,366
Commercial real estate - construction and development		81,954		102,869		5,723		190,546
Total	$	327,085	$	304,533	$	30,294	$	661,912
Type:
Floating rate loans	$	260,939	$	193,089	$	12,027	$	466,055
Fixed rate loans		66,146		111,444		18,267		195,857
Total	$	327,085	$	304,533	$	30,294	$	661,912

Residential real estate loans are comprised of 1- 4 family and multi-family loans. These loans totaled $182.0 million at December 31, 2004, up less than 1% from the prior year total of $180.8 million. Growth in 1- 4 family residential mortgage loans totaled only $8.6 million as a result of modestly higher interest rates in the second half of 2004, partially offset by a decline in multi-family loans of $7.4 million. Residential 1-4 family loans represented $159.3 million, or 87.5% of the total. Residential mortgages represent first liens on owner occupied 1-4 family residences located principally in our markets. We are a participating seller and servicer with the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC). We generally underwrite residential real estate loans to conform with standards required by these agencies. Multi-family loans, which primarily consist of loans secured by apartment complexes, have historically not been an area of focus, and represented only 12.5% of total residential real estate loans at December 31, 2004.

Consumer loans increased 13.7% to $128.5 million at December 31, 2004 compared to $113.0 million at December 31, 2003. Consumer loans include fixed rate home equity loans and floating rate lines of credit, indirect auto loans, personal loans and other conventional installment loans. Like the commercial lending portfolio, the majority of our consumer loan portfolio is also secured by collateral. Home equity loans and lines represented 67.1% of total consumer loans at the end of 2004. Interest rates on consumer loans in 2004 remained relatively attractive, which accounted for the modest increase in our home equity and installment portfolios.

We believe we will have ample opportunities to continue the growth in our commercial loan portfolio during 2005. In addition, as we grow our retail network into new markets and neighborhoods, we expect to have opportunities to expand the consumer side of our business. Substantially all of our business is with customers located in Mercer County and our Northern region, comprised of Hunterdon, Somerset and Middlesex Counties, and the contiguous counties that surround those markets. Changes in the region’s economic environment, real estate market conditions, competition and consolidation in our markets are all factors that could impact the level of loan growth we expect in 2005.

Asset Quality

Over the five-year period ended December 31, 2004, we have successfully grown our loan portfolio while maintaining high asset quality standards. Nonperforming asset levels have averaged less than $9.0 million during a period in which compound annual growth exceeded 20%. Nonperforming assets as a percentage of total assets declined to 0.36% at December 31, 2004 compared to 0.44% at December 31, 2003.

During 2003 we addressed issues relating to several problem loan relationships, which resulted in net charge offs of almost $9.0 million. By working closely with our problem loan relationships, we reduced net loan charge offs to $6.8 million in 2004. At December 31, 2004 approximately 78% of our nonperforming assets were represented by three commercial loan relationships. By working closely with each borrower, each loan relationship is in some form of resolution, which includes collection, restructure or possible charge off. While the ultimate collectibility of each relationship is not known, we do expect positive improvement in all three relationships during 2005. Based on our strict underwriting standards, collateral based approach to lending, and depth of lending experience, we are anticipating continued improvement in our asset quality profile in 2005.

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The following table sets forth nonperforming assets in our loan portfolio by type for the five-year period ended December 31, 2004.

NONPERFORMING ASSETS
	December 31,
(in thousands)	2004		2003		2002		2001		2000
Nonaccrual loans:
Commercial real estate	$	910	$	1,321	$	2,395	$	888	$	2,075
Commercial and industrial		7,867		8,570		1,143		1,494		851
Residential		51		255		1,526		1,133		2,423
Consumer		281		35		55		98		453
Total		9,109		10,181		5,119		3,613		5,802
Restructured loans		—		—		711		770		532
Loans 90 days or more past due:
Residential		791		362		323		514		526
Consumer		108		97		121		228		173
Total		899		459		444		742		699
Total nonperforming loans		10,008		10,640		6,274		5,125		7,033
Other real estate		—		—		1,048		2,329		2,041
Total nonperforming assets	$	10,008	$	10,640	$	7,322	$	7,454	$	9,074

Nonperforming assets decreased $632,000 to $10.0 million at December 31, 2004 compared to $10.6 million at December 31, 2003. Nonperforming assets as a percentage of total loans and other real estate was 0.56% at December 31, 2004, compared to 0.74% at December 31, 2003. There was no outstanding other real estate owned at December 31, 2004 or 2003. Net loan charge offs as a percent of average total loans also showed improvement, decreasing to 0.42% for the year ended December 31, 2004 compared to 0.67% in 2003.

Nonperforming assets consist of nonperforming loans and other real estate owned. 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.

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 of the loan, when management determines that the complete recovery of principal or 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. Subsequent payments are credited to income only if collection of principal is not in doubt. If principal and interest payments are brought contractually current, and future collectibility is reasonably assured, loans are returned to accrual status.

Loans are classified as restructured loans when, for economic or legal reasons related to the borrower’s financial condition, we grant concessions to the customer that we would not otherwise consider. Generally, this occurs when the cash flow of the borrower is insufficient to service the loan under its original terms. Restructured loans remain on nonaccrual until collectibility improves and a satisfactory payment history is established, generally six consecutive monthly payments.

Nonperforming loans, primarily comprised of nonaccrual loans, totaled $10.0 million, a decrease of 5.9% when compared to total nonperforming loans of $10.6 million at December 31, 2003. Nonaccrual loans, primarily commercial and industrial, represented 86.4% of the total. Nonaccrual loans totaled $9.1 million or 0.51% of total loans at December 31, 2004, compared to $10.2 million, or 0.71% of total loans at December 31, 2003. There were no restructured loans outstanding at December 31, 2004 or 2003.

Commercial lending is one of our most critical functions. While the most profitable part of YNB’s business is commercial lending, the risk and complexity of that business is also the greatest. We have a sound credit culture in place, which includes strict underwriting standards, effective

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risk assessment, strong credit policies and the periodic evaluation of the overall creditworthiness of borrowers. Our reliance on real estate collateral could result in our earnings being negatively impacted if it were necessary to liquidate our real estate collateral during periods of reduced real estate values. Adverse economic and business conditions could negatively affect our financial condition and performance.

While we believe our levels of nonperforming assets and credit quality will improve in 2005, a number of factors beyond our control could cause nonperforming asset levels to rise from their current or recent levels, which would have a negative impact on our financial performance.

Allowance for Loan Losses

We have identified the allowance for loan losses to be a critical accounting policy. The allowance for loan losses is maintained at a level estimated to absorb possible loan losses of the loan portfolio. The formal evaluation process for determining the adequacy of the allowance for losses takes place on a quarterly basis.

As part of the formal process our commercial lending staff reviews, evaluates and then rates all of our commercial loans based on their respective risks at origination. The risk classifications range from 1 to 9 or from minimal risk to loss. A formal loan review process, independent of loan origination, is in place to evaluate risk ratings and monitor risk classifications. Internal loan review reports to our risk management officer, who in turn, reports directly to our audit committee. Currently, the Criticized and Classified Asset Committee meets monthly to review criticized and classified assets. This committee includes the Chief Financial Officer, Senior Lending Officer, Senior Credit Administration Officer, Senior Risk Management Officer and Senior Internal Loan Review Officer and an independent director. During these meetings the committee examines trends of criticized assets and reviews information about classified assets with our lending officers. Loans that fall into criticized categories are further evaluated for impairment as called for in Statement of Financial Accounting Standards (FASB) No. 114, “Accounting by Creditors for Impairment of a Loan.”

We measure risk by use of a matrix, which is customized to measure the risk of each loan type. Because we emphasize commercial real estate and commercial and industrial lending, the primary focus in our risk rating system is on those loans. Risk ratings of 1 to 5 are considered to be acceptable risk and consist of loans rated as either “minimal, modest, better than average, average and acceptable.” Loans with acceptable risk were reserved at a range of 0.70% to 0.75% at December 31, 2004. Risk ratings of between 6 and 9 are considered higher than acceptable risk and consist of loans rated as “special mention, substandard and doubtful.” Due to the higher level of risk, these loans were reserved at a range of 3.75% to 100% at December 31, 2004. Loans with a risk rating of 9 are considered to be a loss and reserved at 100%. At December 31, 2004 there were no 9 rated loans. Residential mortgage loans were assigned an individual risk reserve percentage of 0.04% due to the strong secured nature of these loans and the low levels of losses that have been experienced historically. Consumer loans were assigned reserve percentages of 0.09% for the lowest risk to 8.03% for the highest risk dependent on the secured or unsecured status of each consumer loan.

The reserve percentage assigned to each risk-rating category is determined quarterly from historical loan loss rates based on an eight quarter rolling trend, utilizing migration analysis. In addition, we use our judgment concerning the anticipated impact on credit risk of economic conditions, real estate values, interest rates and level of business activity. Allocations for the allowance for loan losses, both specific and general, are determined after this review. Factors used to evaluate the adequacy of the allowance for loan losses include the amounts and trends of criticized loans, results of regulatory examinations and economic data associated with New Jersey’s real estate market.

We provide for possible loan losses by a charge to current income to maintain the allowance for loan losses at an adequate level according to our documented allowance adequacy methodology. For additional information on the allowance for loan losses see “Results of Operations – Provision for Loan Losses.”

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The following table provides information regarding loans charged off, loan recoveries, the provision for loan losses and the allowance for loan losses for the five-year period ended December 31, 2004.

ALLOWANCE FOR LOAN LOSSES
	Year Ended December 31,
(in thousands)	2004			2003			2002			2001			2000
Allowance balance, beginning of year	$	17,295		$	16,821		$	13,542		$	10,934		$	8,965
Charge offs:
Commercial real estate		—			(1,853	)		(78	)		(696	)		(356	)
Commercial and industrial		(6,556	)		(6,592	)		(719	)		(591	)		(896	)
Residential		(254	)		(251	)		(168	)		—			(288	)
Consumer		(229	)		(293	)		(223	)		(412	)		(327	)
Total charge offs		(7,039	)		(8,989	)		(1,188	)		(1,699	)		(1,867	)
Recoveries:
Commercial real estate		—			—			1			—			—
Commercial and industrial		156			6			11			31			—
Residential		30			—			—			—			—
Consumer		49			97			80			351			136
Total recoveries		235			103			92			382			136
Net charge offs		(6,804	)		(8,886	)		(1,096	)		(1,317	)		(1,731	)
Provision charged to operations		9,625			9,360			4,375			3,925			3,700
Allowance balance, end of year	$	20,116		$	17,295		$	16,821		$	13,542		$	10,934
Loans, end of year	$	1,782,592		$	1,443,355		$	1,195,143		$	1,007,973		$	818,289
Average loans outstanding	$	1,626,477		$	1,323,243		$	1,085,306		$	891,957		$	723,570
Allowance for loan losses to total loans		1.13	%		1.20	%		1.41	%		1.34	%		1.34	%
Net charge offs to average loans outstanding		0.42			0.67			0.10			0.15			0.24
Nonperforming loans to total loans		0.56			0.74			0.52			0.51			0.86
Nonperforming assets to total assets		0.36			0.44			0.33			0.38			0.56
Nonperforming assets to total loans and other real estate owned		0.56			0.74			0.61			0.74			1.11
Allowance for loan losses to nonperforming assets		201.00			162.55			229.73			181.67			120.50
Allowance for loan losses to nonperforming loans		201.00	%		162.55	%		268.11	%		264.23	%		155.47	%

At December 31, 2004, the allowance for loan losses totaled $20.1 million, an increase of $2.8 million or 16.3% from $17.3 million at December 31, 2003. It is our assessment, based on our judgment and analysis, that the allowance was appropriate in relation to the credit risk at December 31, 2004. The ratio of the allowance for loan losses to total loans was 1.13%, 1.20% and 1.41%, at December 31, 2004, 2003, and 2002, respectively. We also measure the adequacy of the allowance for loan losses by reviewing coverage of nonperforming loans. The allowance for loan losses to total nonperforming loans increased to 201.0% at December 31, 2004 compared to 162.6% at December 31, 2003.

Loans or portions of loans deemed uncollectible are deducted from the allowance for loan losses, while recoveries of amounts previously charged off, if any, are added to the allowance. Net loan charge offs were $6.8 million for the year ended December 31, 2004, compared to $8.9 million for the same period in 2003. The ratio of net charge offs to average loans decreased to 0.42% for 2004 compared with 0.67% for 2003.

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. Many of our loans depend upon real estate collateral. Any adverse trends in our real estate markets could have a significant negative effect on the quality of our loan portfolio and level of the allowance for loan losses. In addition to economic conditions and other factors, the timing and amount of loan losses will also be dependent on 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.

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Allocation of the Allowance for Loan Losses

The following table describes the allocation for loan losses among various categories of loans and certain other information as of the dates indicated. The allowance contains an unallocated portion to cover inherent losses within a given loan category which have not been otherwise reviewed or measured on an individual basis and is distributed proportionately among each loan category. This unallocated portion of the loan loss allowance 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 only 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.

ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
	December 31,
	2004								2003								2002
						Percent of								Percent of								Percent of
	Reserve		Percent of			Loans to			Reserve		Percent of			Loans to			Reserve		Percent of			Loans to
(in thousands)	Amount		Allowance			Total Loans			Amount		Allowance			Total Loans			Amount		Allowance			Total Loans
Commercial real estate	$	10,312		51.3	%		56.2	%	$	7,225		41.8	%		53.3	%	$	8,189		48.7	%		50.8	%
Commercial and industrial		8,575		42.6			26.4			8,611		49.7			26.9			6,886		40.9			28.3
Residential		611		3.0			10.2			719		4.2			12.5			1,063		6.3			12.6
Consumer		618		3.1			7.2			740		4.3			7.3			683		4.1			8.3
Total	$	20,116		100.0	%		100.0	%	$	17,295		100.0	%		100.0	%	$	16,821		100.0	%		100.0	%

	December 31,
	2001								2000
						Percent of								Percent of
	Reserve		Percent of			Loans to			Reserve		Percent of			Loans to
(in thousands)	Amount		Allowance			Total Loans			Amount		Allowance			Total Loans
Commercial real estate	$	6,843		50.5	%		49.5	%	$	6,303		57.6	%		52.1	%
Commercial and industrial		4,974		36.7			28.0			2,739		25.1			23.3
Residential		1,106		8.2			14.1			1,118		10.2			14.8
Consumer		619		4.6			8.4			774		7.1			9.8
Total	$	13,542		100.0	%		100.0	%	$	10,934		100.0	%		100.0	%

Securities

Securities totaled $880.8 million or 31.4% of assets at December 31, 2004 compared to $866.7 million or 35.6% of assets at December 31, 2003. Mortgage-backed securities (MBS) represented 56.0% of total securities at year-end 2004. Our portfolio has been structured to provide consistent cash flow to enhance liquidity and provide funding for commercial loan growth. Our securities are comprised of high quality earning assets that provide favorable returns and serve as a tool to actively manage our interest rate risk position. There is limited credit risk in our securities portfolios. The lower risk weights associated with our securities also has a beneficial impact to our risk-based capital ratios. All of our mortgage-backed securities are agency named and obligations of state and political subdivisions are primarily general obligation issues, the majority of which have additional credit enhancement. Corporate obligations, which include capital securities (trust preferred securities) of certain financial institutions and corporate bonds, represented less than four percent of all securities outstanding at December 31, 2004.

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The following table presents the amortized cost and market values of our securities portfolio at December 31, 2004, 2003 and 2002:

SECURITIES AVAILABLE FOR SALE
	December 31,
	2004				2003				2002
			Estimated				Estimated				Estimated
	Amortized		Market		Amortized		Market		Amortized		Market
(in thousands)	Cost		Value		Cost		Value		Cost		Value
U.S. Treasury obligations	$	2,016	$	1,938	$	2,018	$	1,922	$	998	$	1,026
U.S. government-sponsored agencies		236,846		235,441		140,995		139,976		244,975		247,875
Mortgage-backed securities
Issued by FNMA/FHLMC		470,993		470,787		518,875		517,281		343,972		350,684
Issued by GNMA		20,339		20,597		62,656		63,212		124,773		127,673
Corporate obligations		31,723		33,111		35,071		35,765		56,097		54,706
Federal Reserve Bank stock		3,551		3,551		3,551		3,551		2,411		2,411
Federal Home Loan Bank stock		37,100		37,100		36,300		36,300		37,300		37,300
Total	$	802,568	$	802,525	$	799,466	$	798,007	$	810,526	$	821,675

INVESTMENT SECURITIES
	December 31,
	2004				2003				2002
			Estimated				Estimated				Estimated
	Amortized		Market		Amortized		Market		Amortized		Market
(in thousands)	Cost		Value		Cost		Value		Cost		Value
Obligations of state and political subdivisions	$	76,142	$	77,785	$	65,747	$	67,468	$	50,308	$	52,212
Mortgage-backed securities
Issued by FNMA/FHLMC		2,115		2,169		2,939		3,008		4,382		4,498
Total	$	78,257	$	79,954	$	68,686	$	70,476	$	54,690	$	56,710

The securities available for sale (AFS) portfolio increased by $4.5 million to $802.6 million at December 31, 2004 from $798.0 million at December 31, 2003. The AFS portfolio represented 91.1% of total securities and was principally comprised of MBS and agency callable bonds. The AFS portfolio is a flexible asset and liability management tool that is utilized to take advantage of market conditions that create more attractive returns and to manage liquidity and interest rate risk.

During 2004, as part of our interest rate risk management process, we extended the duration of the securities portfolio. The duration of our securities portfolio was modestly extended to 3.8 years at December 31, 2004 compared to approximately 3.6 years at December 31, 2003. With approximately 50% of our commercial loan assets earning a floating rate of interest, that portion of the balance sheet was positioned for gradually higher interest rates. The effect of extending duration with longer-term rates declining, even as short-term rates were rising, was a higher yielding AFS portfolio with consistent cash flows and protection to interest income were interest rates to decline. In addition, MBS purchased in 2004 were primarily at levels at or near par, mitigating the risk to the AFS portfolio yield due to premium amortization. The improved yield on the AFS portfolio was the primary factor in the increase in the overall securities yield to 4.39% during 2004 compared to 4.02% during 2003.

AFS securities are reported at market value, with unrealized gains and losses, net of tax, included as a separate component of stockholders’ equity. We were able to take advantage of changes in longer-term treasury yields to reposition securities throughout the year to improve future securities performance while achieving net securities gains of $1.3 million. Volatility in the treasury yield curve resulted in a fluctuating level of market value appreciation and depreciation during 2004. At December 31, 2004, securities available for sale had a net unrealized loss, net of tax effect, of $28,000 compared to a net unrealized loss of $964,000 at December 31, 2003, which is reported in “Accumulated Other Comprehensive Loss” in stockholders’ equity.

Investment securities, classified as held to maturity, totaled $78.3 million at December 31, 2004, compared to $68.7 million at December 31, 2003. Investment securities are carried at book value or amortized cost. Obligations of state and political subdivisions or tax-free municipal bonds comprise 97.3% of the total. The increase in investment securities was due principally to the $10.4 million increase in the municipal bond portfolio. The municipal bond portfolio grew to $76.1 million at December 31, 2004 from $65.7 million at December 31, 2003.

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Municipal bonds were purchased to reduce our effective tax rate and enhance the tax equivalent yield of the portfolio. Based on our anticipated levels of taxable income, we expect to further increase the size of our municipal bond portfolio in 2005. At December 31, 2004, investment securities had net unrealized gains of $1.7 million compared to net unrealized gains of $1.8 million at December 31, 2003.

The expected maturities and average weighted yields for the securities portfolios as of December 31, 2004 are shown below. Yields for tax-exempt securities are presented on a fully taxable basis assuming a 35% tax rate. Expected maturities may differ from stated maturities because issuers may have the right to call their obligations with or without call or prepayment penalties. Mortgage-backed securities experience principal cash flows based on the activity on the underlying mortgages.

SECURITY MATURITIES AND AVERAGE WEIGHTED YIELDS
Securities Available for Sale

	December 31, 2004
	After one			After five
	but within			but within			After
(in thousands)	five years			ten years			ten years			Total
U.S. Treasury obligations	$	—		$	1,938		$	—		$	1,938
U.S. government-sponsored agencies		49,875			185,566			—			235,441
Mortgage-backed securities		—
Issued by FNMA/FHLMC		—			12,570			458,217			470,787
Issued by GNMA		—			—			20,597			20,597
Corporate obligations		1,000			3,981			28,130			33,111
Federal Reserve Bank stock		—			—			3,551			3,551
Federal Home Loan Bank stock		—			—			37,100			37,100
Total	$	50,875		$	204,055		$	547,595		$	802,525
Weighted average yield, computed on a tax equivalent basis		3.90	%		4.53	%		4.69	%		4.60	%

Investment Securities

	December 31, 2004
				After one			After five
	Within			but within			but within			After
(in thousands)	one year			five years			ten years			ten years			Total
Obligations of state and political subdivisions	$	745		$	4,086		$	11,613		$	59,698		$	76,142
Mortgage-backed securities
Issued by FNMA/FHLMC		—			316			—			1,799			2,115
Total	$	745		$	4,402		$	11,613		$	61,497		$	78,257
Weighted average yield, computed on a tax equivalent basis		7.72	%		7.20	%		7.02	%		6.96	%		7.03	%

Mortgage-backed securities (MBS)

MBS, including CMOs, represent securities guaranteed by the Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage Association (FNMA), or the Government National Mortgage Association (GNMA). MBS yields reflected in the preceding table are impacted by changes in interest rates and related prepayment activity. In a rising interest rate environment, MBS prepayment activity would be expected to decrease, extending duration. Conversely, the opposite would occur in a declining interest rate environment. The negative impact of the amortization of premiums to MBS yields and net interest income has been mitigated through the purchase of MBS in 2004 and the latter half of 2003 at or close to par.

At December 31, 2004 we had total MBS balances of $493.5 million, of which $481.7 million were fixed rate. MBS securities guaranteed by FNMA and FHLMC totaled $284.0 million and $188.9 million, respectively, at December 31, 2004. At December 31, 2003, YNB had mortgage-backed securities totaling $583.4 million, of which $574.9 million were fixed rate. CMOs represented $177.9 million and $257.7 million of total outstanding MBS balances at December 31, 2004 and 2003 respectively. Cash flows from the MBS portfolio declined to $188.3 million in 2004 compared to $385.2 million in 2003 due to a shift in the composition of the portfolio and comparatively slower prepayment speeds.

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In 2005, our strategy for managing the MBS portfolio will depend on the overall interest rate risk profile of our balance sheet and market conditions. Our goal will continue to be to provide stable, consistent cash flows for liquidity and funding purposes regardless of the interest rate environment. Should the composition of our commercial loan portfolio shift to a more fixed rate profile, then we would expect to purchase MBS with shorter weighted average lives and durations.

We evaluate all securities with unrealized losses quarterly to determine whether the loss is other than temporary. At December 31, 2004, we determined that all unrealized losses were temporary in nature. This conclusion was based on several factors, including the strong credit quality of the securities with unrealized losses, the performing nature of these securities, and the low level and short time frame of the unrealized losses. Management believes that the unrealized losses in the securities portfolios were caused by changes in interest rates, market credit spreads, and perceived and actual changes in prepayment speeds on mortgage-backed securities. For a discussion of these matters, see “Notes to Consolidated Financial Statements — Note 3.”

Deposits

Deposits represent our primary funding source supporting earning asset growth. Over the last several years, we have concentrated on the successful implementation of our retail strategy. The objectives of this ongoing strategy are to expand our geographic footprint into new markets, strengthen our brand image, introduce new products and services, manage our cost of funds and continue to enhance the value of our franchise.

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In 2004, we enjoyed considerable success in executing our retail strategy. Aided by a lower interest rate environment that continued into the first half of 2004, we were able to lower our cost of interest bearing deposits to 1.96% for 2004 compared to 2.34% in 2003. We also enhanced or introduced several new deposit products in 2004 to attract new relationships to YNB. These included “Simply Better Checking” for retail customers, and new and improved business checking products for our business customers.

Expanding our branch network is another critical factor in enhancing our franchise value and controlling our cost of funds. While only one branch was opened in 2004, we anticipate opening additional branches in both 2005 and 2006. We expect to open an additional branch in Hopewell Township (Mercer County) early in the second quarter of 2005. For the remainder of 2005 we are developing plans to open additional branches in Mercer County and an additional branch in Hunterdon County, New Jersey and Bucks County, Pennsylvania. As many as five branches could be opened in 2005 with several sites planned for 2006.

As shown in the following table, core deposit interest bearing demand and non-interest bearing demand deposits were the two principal areas of deposit growth during 2004. Average total deposits increased $290.9 million, or 20.8% to $1.69 billion for 2004 compared to $1.40 billion for 2003. The average interest rate paid on our deposits during 2004 declined 36 basis points to 1.74%, compared to 2.10% during 2003. Despite a 125 basis point increase in short-term interest rates in the last half of 2004, the strengthening of our core deposit base without a significant change in the level of higher cost time deposits contributed to our lower cost of deposits.

AVERAGE DEPOSIT BALANCES AND RATES
	2004								2003								2002
						% of								% of								% of
(in thousands)	Balance		Rate			Total			Balance		Rate			Total			Balance		Rate			Total
Non-interest bearing demand deposits	$	185,443		—	%		11.0	%	$	139,332		—	%		10.0	%	$	118,154		—	%		9.8	%
Interest bearing demand deposits		418,772		1.91			24.8			233,210		2.16			16.7			113,261		2.38			9.4
Money market deposits		356,794		1.22			21.1			341,145		1.59			24.4			276,506		2.75			22.9
Savings deposits		104,564		0.55			6.2			87,907		0.76			6.3			80,218		1.16			6.7
Certificates of deposit of $100,000 or more		161,065		2.59			9.6			137,168		2.93			9.8			148,119		3.50			12.3
Other time deposits		460,694		2.66			27.3			457,717		3.17			32.8			469,858		3.78			38.9
Total	$	1,687,332		1.74	%		100.0	%	$	1,396,479		2.10	%		100.0	%	$	1,206,116		2.83	%		100.0	%

We continue our objective of attracting and increasing non-interest demand deposit balances. Our relationship banking philosophy requires the majority of our small business and commercial customers to establish deposit accounts with us. The increase in non-interest bearing demand deposits was primarily attributable to the growth in new and existing business relationships. During 2004, several of our business demand deposit offerings were enhanced, which resulted in a major contribution to the increase in balances. Average non-interest bearing demand deposits increased $46.1 million or 33.1% in 2004.

Average interest bearing demand deposits increased 79.6% during 2004. Average money market and savings deposits increased 4.6% and 18.9%, respectively, in 2004. The primary factor contributing to the continued outstanding growth in interest bearing demand deposits during 2004 was our “Simply Better Checking” product. “Simply Better Checking” is a relationship-oriented interest bearing demand deposit account with a competitive interest rate guaranteed for a 12-month period. The initial introduction of this product in 2003 was in our Northern Region and we exceeded goals in attracting these deposits using targeted direct mail and advertising. In 2004, we introduced “Simply Better Checking” to our home Mercer County market with outstanding results. For 2004, 2,929 net new accounts were opened with approximately $212.1 million in balances. At December 31, 2004, total Simply Better Checking^sm balances exceeded $273.9 million. In addition, through an extensive marketing campaign, we opened net new lower cost Chairman’s Choice accounts of 1,867, with net new balances of $3.4 million. These accounts further solidify relationships with our customers.

To supplement our in-market deposit growth, we successfully bid and retained Surrogate’s deposits (minor trust accounts) in several New Jersey counties. Surrogate’s deposits totaled approximately $85.4 million at year-end 2004. During the last quarter of 2004, approximately $78.1 million of these deposits were up for competitive bid. We were successful in the competitive bidding process, increasing the level of Surrogate’s deposits by approximately $4.3 million to $89.7 million for 2005. The majority of these funds will be up for competitive bid in 2005 and 2006. Approximately $55.7 million will be up for bid in December 2005. We now have Surrogate’s deposits from Mercer, Burlington, Camden, Hunterdon, Middlesex, Monmouth, Ocean and Warren Counties in New Jersey.

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Money market deposits include personal and business accounts as well as money market balances acquired through an independent third party intermediary (Reserve Funds) that places deposits from brokerage clients with banks. During 2004, we experienced a shift out of our personal Premier Money Market accounts into higher yielding Simply Better Checking, which contributed to a decline in money market balances of approximately $115.7 million. Reserve Funds, which totaled less than $1.0 million at the end of 2003, increased to $73.5 million at the end of 2004, partially offsetting the movement of our money market deposits into higher rate deposit alternatives. The rate we pay on Reserve Funds is at a premium over the Federal funds rate. Reserve Funds have been used to support commercial loan growth and liquidity, at a cost less expensive than time deposits in 2004. We believe this funding source to be reliable and stable, and it continues to be part of our funding strategy in 2005. The cost of average money market deposits declined 37 basis points to 1.22% for 2004 compared to 1.59% for 2003. We would expect the cost of money market deposits to increase in 2005 based on the projected interest rate environment for 2005.

Total average time deposits, consisting of both certificates of deposit of $100,000 or more and other time deposits, modestly increased 4.5% or $26.9 million to $621.8 million from $594.9 million in 2003. The CD portfolio’s maturity profile is relatively short, with average months to maturity of approximately 12 months at December 31, 2004. Due to the repricing characteristics and pricing of time deposits in relation to other deposit products, the average cost of time deposits declined 48 basis points in 2004 to 2.64% from 3.12% in 2003. At December 31, 2004 total average time deposits represented 36.8% of average total deposits compared to 42.6% during 2003. We have selectively marketed CDs in our new markets during 2004 for greater marketplace identity. In addition, to help fund our loan growth and retain retail CD relationships we introduced a competitively priced two-year CD product. We then used interest rate swaps to change the pricing characteristics of some of these funds, lower our cost of funds and better match the repricing characteristics of our floating rate commercial loans. We also market our CDs nationally through a computer-based software service. These CDs totaled $104.8 million at December 31, 2004 compared to $65.5 million at December 31, 2003. This funding source has been a dependable management tool for liquidity and funding purposes although historically, these funds tend to be more costly. We would expect time deposits to be a more important funding source in 2005 as rates begin to rise.

The following table details amounts and maturities for certificates of deposit of $100,000 or more for the years indicated:

	December 31,
(in thousands)	2004		2003
Maturity Range:
Within three months	$	53,102	$	36,740
After three months but within six months		22,833		28,701
After six months but within twelve months		32,866		24,213
After twelve months		58,182		44,293
Total	$	166,983	$	133,947

We will continue to execute our retail strategy in 2005 and expect to attract lower cost core deposits and effectively manage our cost of funds in what is expected to be a higher interest rate environment, while increasing net interest income and our net interest margin. For 2005, we have introduced a new savings product called “Simply Better Savings” and a new checking product called “Preferred Choice Checking,” which comes with free on line bill payment, to all of our markets. Our new competitively priced savings product is expected to change the composition of our deposit base and we believe help retain “Simply Better Checking” balances repricing off of their initial 12-month introductory rate. In addition, this product will be showcased during 2005 as we open new branches. Enhanced cash management services will also be available in the first half of this year to our business and commercial customers. We believe these new products and services, along with the marketing of existing products and services, should help us manage our cost of funds in a rising interest rate environment, and create and expand profitable retail and business relationships.

While we believe we have the tools to effectively manage our cost of funds, there are significant challenges for 2005. With the firming of financial markets and increased competition from other financial institutions, we may not be able to fund our asset growth with lower cost core deposits as our customers seek the highest return possible on their funds. Funding our growth with higher cost deposits would potentially have a negative affect on net interest income and our net interest margin.

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Borrowed Funds

We utilize borrowed funds for our earning asset growth not provided by deposit generation and for asset and liability management purposes. Borrowed funds consist primarily of FHLB advances. Borrowed funds totaled $816.0 million at December 31, 2004, an increase of $30.5 million or 3.9% when compared to $785.5 million at December 31, 2003. The increase in borrowed funds was due principally to the increase in FHLB advances and subordinated debentures. We believe that as we continue to implement our retail strategy that borrowed funds will represent a less significant portion of our funding. At December 31, 2004, borrowed funds declined to 29.1% of our assets compared to 32.3% at year-end 2003.

FHLB advances totaled $742.0 million at December 31, 2004 compared to $726.0 million at December 31, 2003. The increase in advances in 2004 was due to $20.0 million in short-term advances used to bolster short-term liquidity at year-end. Those advances were paid off in January  2005. Our FHLB advance portfolio is collateralized by securities and mortgages (residential and commercial). At December 31, 2004, we had $473.5 million in advances collateralized by securities and $268.5 million by mortgages. As additional commercial and residential mortgages qualify as collateral, it is our intent to replace securities collateral with mortgage collateral when advances are renewed to enhance our liquidity profile.

We have used FHLB advances for funding earning asset growth, enhancing liquidity, managing interest risk and funding the purchase of certain securities. We currently own $37.1 million of FHLB stock due to requirements associated with these borrowings. Our FHLB advances at December 31, 2004 were comprised of $79.0 million in advances priced at or near one-month or three-month LIBOR, all maturing in 2005, callable advances totaling $659.0 million and $4.0 million in term funding. Callable advances have terms of five to ten years and are callable after periods ranging from three months to five years. Callable borrowings totaled $669.0 million at December 31, 2004, of which $556.0 million have call dates in 2005. Generally, as interest rates continue to rise, advances have more likelihood of being called, while the opposite is true when rates fall. Based on our analysis at the end of 2004 we would not expect to see significant calls in 2005 unless interest rates were to rise 275 basis points from year-end 2004 levels. Maturing LIBOR based advances in December totaling $30.0 million were renewed in comparatively longer term callable advances with call dates of one or two years. We determined to extend these advances based on attractive opportunities presented by the treasury yield curve at that time. We believe the cost on these advances will be relatively less expensive based on the outlook for interest rates in 2005.

Excluding subordinated debentures, borrowed funds averaged $738.1 million in 2004, a decrease of $4.8 million from the $742.9 million average reported in 2003. The average cost of borrowed funds, driven primarily by FHLB advance rates, increased seven basis points to 4.89% during 2004 compared to 4.82% during 2003. The increase in cost is primarily the result of LIBOR based advances pricing higher as short-term interest rates increased in the second half of 2004. Our FHLB advances represent a comparatively more expensive piece of our funding base. The fixed rate portion of our FHLB advance portfolio will become less expensive should rates continue to rise, although the likelihood of calls could increase as well. We are evaluating strategies to change the pricing characteristics of our fixed rate advances using derivatives. Those decisions will be dependent on several factors including our view of future interest rates, and asset and liability management objectives.

Subordinated Debentures

We have obtained a portion of capital needed to support the growth of the Bank and for other purposes through the sale of subordinated debentures of Yardville National Bancorp to subsidiary statutory business trusts of Yardville National Bancorp (“trusts”). These trusts exist for the sole purpose of raising funds through the issuance of trust preferred securities, typically in private placement transactions, and investing the proceeds in the purchase of the subordinated debentures. The interest rate on the subordinated debentures is identical to the interest rate on the trust preferred securities. Subordinated debentures are the sole assets of each trust and each trust is obligated to distribute all proceeds of a redemption of the subordinated debentures, whether voluntary or upon maturity, to holders of its trust preferred securities. Yardville National Bancorp’s obligation with respect to the subordinated debentures, when viewed together with the obligations of each trust with respect to its trust preferred securities, provides a full and unconditional guarantee on a subordinated basis by Yardville National Bancorp of the obligations of each trust to pay amounts when due on the trust preferred securities of each respective trust.

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As of December 31, 2004, our trust subsidiaries, along with the transaction date, principal amount of subordinated debentures issued, interest rate of subordinated debentures, maturity date of subordinated debentures, commencement date for redemption of subordinated debentures, and principal use of proceeds, were comprised of the following:

(in thousands)		Principal		Interest	Maturity	Earliest Date upon
		Amount of		Rate for	Date of	which
		Subordinated		Subordinated	Subordinated	Redemptions are
Name of Trust	Transaction Date	Debentures		Debentures	Debentures	Permitted
Yardville Capital Trust II	June 2000	$	15,464	9.50%	June 22, 2030	June 23, 2010
Yardville Capital Trust III	March 2001	$	6,190	10.18%	June 8, 2031	June 8, 2011
Yardville Capital Trust IV	February 2003	$	15,464	Floating rate based on three month LIBOR plus 340 basis points	March 1, 2033	March 1, 2008
Yardville Capital Trust V	September 2003	$	10,310	Floating rate based on three month LIBOR plus 300 basis points	October 8, 2033	October 8, 2008
Yardville Capital Trust VI	June 2004	$	15,464	Floating rate based on three month LIBOR plus 270 basis points	July 23, 2034	July 23, 2009
Total		$	62,892

The principal use of proceeds for Yardville Capital Trust, II, III and V were contributed as capital to the Bank to support growth. A portion of the proceeds of Yardville Capital Trust IV were used to retire the subordinated debentures of Yardville Capital Trust in March 2003 with the remainder contributed as capital to the Bank to support growth. The proceeds from Capital Trust VI are being used to meet cash flow needs of the holding company, which may include contributions of capital to the Bank to support growth. The cost of subordinated debentures declined 107 basis points to 6.66% in 2004 compared to 7.73% in 2003. Floating rate subordinated debentures represented approximately 66% of total subordinated debentures of $62.9 million at December 2004 and were comparatively less expensive than fixed rate subordinated debentures.

Borrowed funds also include $377,000 related to our Employee Stock Ownership Plan (ESOP).

With our deposit base continuing to grow we expect that borrowed funds as a percentage of assets will continue to diminish in importance. As interest rates rise, fixed rate advances will become more valuable and may provide management with the opportunity to reposition or retire a portion of our borrowings. We will use derivatives, if appropriate, to change the pricing characteristics of our borrowed funds to protect or improve future income streams.

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CONTRACTUAL OBLIGATIONS, COMMITMENTS, CONTINGENT LIABILITIES, AND OFF –BALANCE SHEET ARRANGEMENTS

The following table presents, as of December 31, 2004, our significant fixed and determinable contractual obligations by payment date. The payment amounts represent those amounts contractually due to the recipient and do not include any unamortized premiums or discounts, or other similar carrying value adjustments.

	Payments due by period
	Less						More
	than 1						than
(in thousands)	year		1 -3 years		3 -5 years		5 years		Total
Contractual Obligations
Time deposits	$	350,409	$	257,327	$	32,243	$	—	$	639,979
Borrowed funds		80,130		26,500		533,500		113,000		753,130
Subordinated debentures		—		—		—		62,892		62,892
Operating lease obligations		2,455		7,383		2,274		7,968		20,080
Other long-term liabilities		1,133		92		1,445		3,555		6,225
Total	$	434,127	$	291,302	$	569,462	$	187,415	$	1,482,306

In the normal course of business, we enter into certain contractual obligations. Such obligations include obligations to make future payments on debt and lease arrangements, as well as payments on deferred compensation and postretirement benefits. We have no capital lease obligations or other significant long-term contractual obligations. Time deposits are shown at the maturity date. Borrowed funds include periodic payments of principal. Noncallable borrowed funds are shown at the maturity date, while callable borrowed funds are shown at either the call date, if a call was deemed likely at December 31, 2004, or otherwise at the maturity date. Subordinated debentures are shown at the maturity date.

We enter into a variety of financial instruments with off-balance sheet risk in the normal course of business. These financial instruments include commitments to extend credit and letters of credit, both of which involve to varying degrees, elements of risk in excess of the amount reflected in the consolidated financial statements.

Credit risk for letters of credit is managed by limiting the total amount of arrangements outstanding and by applying normal credit policies to all activities with credit risk. Collateral is obtained based on management’s credit assessment of the customer. The contract amounts of off-balance sheet financial instruments as of December 31, 2004 and 2003 for commitments to extend credit were $406.8 million and $305.5 million, respectively, and for letters of credit, were $36.2 million and $28.2 million, respectively. Commitments to extend credit and letters of credit may expire without being drawn upon, and therefore, the total commitment amounts do not necessarily represent future cash flow requirements.

Further discussion of our “Other Commitments and Contingent Liabilities” is included in Note 14 of Notes to the Consolidated Financial Statements. In addition, we have commitments and obligations under other postretirement benefit plans as described in Note 10 of Notes to the Consolidated Financial Statements.

Asset and Liability Management

Asset and liability management involves the evaluation, monitoring, and managing of market risk, interest rate risk, liquidity risk and the appropriate use of capital, while maximizing profitability. Our Asset and Liability Committee (ALCO) provides oversight to the risk management process. This committee consists of both management and members of the Board of Directors. ALCO recommends policy guidelines regarding exposure to interest rates, and liquidity and capital limits for approval by the Board of Directors. Adherence to these policies is monitored on an ongoing basis and decisions related to the management of interest rate exposure due to changes in balance sheet composition and/or market interest rates are made when appropriate and agreed to by ALCO and approved by the Board of Directors. One of the primary goals of asset and liability management is to prudently maximize net interest income. The risk to net interest income is derived from the difference in the maturity and repricing characteristics between assets and liabilities.

Market and Interest Rate Risk

Market risk is the risk of loss from adverse changes in market prices and rates. Market risk arises principally from interest rate risk inherent in loans, securities, deposits and borrowings. We seek to manage our asset and liability portfolios to help reduce any adverse impact on net interest income and earnings caused by fluctuating interest rates. We are subject to interest rate risk because:

•  assets and liabilities may mature or reprice at different times (for example, if assets reprice faster than liabilities and interest rates are generally falling, earnings will initially decline).

•  assets and liabilities may reprice at the same time but by different amounts (for example, when the general level of interest rates is falling, we may reduce rates paid on checking and savings accounts by an amount that is less than the general decline in market interest rates).

•  short and long-term interest rates may change by different amounts; or

•  the remaining maturity of various assets or liabilities may shorten or lengthen as interest rates change. In addition, interest rates may have an indirect impact on loan demand, credit losses and other sources of earnings.

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The primary goals of our interest rate risk management are to control exposure to interest rate risk inherent in our balance sheet, determine the appropriate risk level given our strategic objectives, and manage the risk consistent with ALCO and the Board of Directors’ approved limits and guidelines. These limits and guidelines reflect our tolerance for interest rate risk over both short- and long-term time horizons. Our ALCO meets monthly to discuss pertinent asset and liability issues. On a quarterly basis, we provide a detailed review of our interest rate risk position to the Board of Directors.

We manage and control interest rate risk by identifying and quantifying interest rate risk exposures through the use of net interest income simulation and economic value at risk models. Both measures may change periodically as the balance sheet composition and underlying assumptions change.

We also use a traditional gap analysis that complements the simulation and economic value at risk modeling. The gap analysis does not assess the relative sensitivity of assets and liabilities to changes in interest rates and also does not fully account for embedded options, caps and floors. The gap analysis is prepared based on the maturity and repricing characteristics of interest earning assets and interest bearing liabilities for selected time periods.

One measure of interest rate risk is the gap ratio, which is defined as the difference between the dollar volume of interest earning assets and interest bearing liabilities maturing or repricing within a specified period of time as a percentage of total assets. A positive gap results when the volume of interest rate-sensitive assets exceeds that of interest rate-sensitive liabilities within comparable time periods. A negative gap results when the volume of interest rate-sensitive liabilities exceeds that of interest rate-sensitive assets within comparable time periods.

As indicated in the table, our one-year gap position at December 31, 2004 was 4.2%. Beginning in the second half of 2004, prime related commercial loans with floors totaling approximately $716.0 million started to reprice higher. Prior to the first increase in the Federal funds rate in late June 2004, these floating rate loans were at their floors, which effectively converted these floating rate loans to fixed rate loans. The targeted Federal funds rate increased 125 basis points by year-end 2004 and approximately 90% of our floating rate loans were off their floors at December 31, 2004. The combination of adding callable FHLB advances and Simply Better Checking deposits, in addition to floating rate commercial loans coming off their floors has resulted in our increasing positive gap.

Gaps, as a static measurement, cannot capture the effects of options on earnings. Generally, a financial institution with a positive gap position will most likely experience an increase in net interest income during periods of rising rates and decreases in net interest income during periods of falling interest rates.

Included in the analysis of our gap position are certain savings, money markets and interest bearing demand deposits, which are less sensitive to fluctuations in interest rates than other interest bearing sources of funds. In determining the sensitivity of such deposits, we review the movement of our deposit rates relative to market rates over a 12-month period. Historically, we had used regression analysis to determine deposit sensitivity, but due to the lower interest rate environment experienced over the last several years, recent pricing patterns are considered a more accurate tool.

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	December 31, 2004
RATE SENSITIVE ASSETS AND LIABILITIES
							More than			More than			More than			More than
	Under			Six months			one year			two years			five years			ten years
	six			through			through			through			through			and not
(in thousands)	months			one year			two years			five years			ten years			repricing			Total
Assets
Cash and due from banks	$	—		$	—		$	—		$	—		$	—		$	32,115		$	32,115
Federal funds sold and interest bearing deposits		48,066			—			—			—			—			—			48,066
Available for sale securities		57,123			104,126			147,109			258,676			129,168			106,323			802,525
Investment securities		1,163			1,136			1,960			9,041			28,296			36,661			78,257
Loans		858,225			80,041			144,308			522,338			97,891			79,789			1,782,592
Other assets, net		—			—			—			—			—			62,362			62,362
Total Assets	$	964,577		$	185,303		$	293,377		$	790,055		$	255,355		$	317,250		$	2,805,917
Liabilities and Stockholders’ Equity
Non-interest bearing demand	$	—		$	—		$	—		$	—		$	—		$	202,196		$	202,196
Savings and interest bearing demand		140,696			132,970			32,800			202,463			126,828			—			635,757
Money market		116,235			47,141			—			—			168,696			—			332,072
Certificates of deposit of $100,000 or more		75,935			32,866			37,498			20,684			—			—			166,983
Other time deposits		147,233			94,375			150,098			81,290			—			—			472,996
Total deposits		480,099			307,352			220,396			304,437			295,524			202,196			1,810,004
Borrowed funds		80,130			—			20,000			653,000			—			—			753,130
Subordinated debentures		40,000			—			—			—			—			22,892			62,892
Other liabilities		—			—			—			—			—			19,733			19,733
Stockholders’ equity		—			—			—			—			—			160,158			160,158
Total Liabilities and Stockholders’ Equity	$	600,229		$	307,352		$	240,396		$	957,437		$	295,524		$	404,979		$	2,805,917
Gap		364,348			(122,049	)		52,981			(167,382	)		(40,169	)		(87,729	)
Derivative instruments (notional amounts)		(125,000	)		—			125,000			—			—			—
Gap after derivative instruments		239,348			(122,049	)		177,981			(167,382	)		(40,169	)		(87,729	)
Cumulative gap		239,348			117,299			295,280			127,898			87,729			—
Cumulative gap to total assets		8.5	%		4.2	%		10.5	%		4.6	%		3.1	%		—

Simulation Modeling

Our simulation model measures the volatility of net interest income to changes in market interest rates. We dynamically model our interest income and interest expenses over specified time periods under different interest rate scenarios and balance sheet structures. We measure the sensitivity of net interest income over 12- and 24-month time horizons, based on assumptions approved by ALCO and ratified by the Board of Directors. The Board has established certain policy limits for the potential volatility of net interest income as projected by the simulation model.

In our base case simulation, the composition of the balance sheet is kept static. Volatility is measured from a base case where interest rates are assumed to be flat and is expressed as the percentage change, from the base case, in net interest income over 12- and 24-month periods with a change in interest rates of plus and minus 200 basis points over a 12-month period and continuation of rates at that level for the second year. The base case scenario is measured within a policy guideline of –7% change in net interest income in year one and –14% change in year two.

The following table reflects the estimated change in net interest income from the base case scenario for a one- and two-year period based on our December 31, 2004 balance sheet:

	Percentage Change in
	Net Interest Income
Change in Market Interest Rates	2005			2006
+200 basis points		2.8	%		0.6	%
Flat		—			—
-200 basis points		-2.4	%		-1.0	%

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Based on our simulation analysis, we believe our interest rate risk position remains fairly balanced over the next 12 to 24 months whether we experience either rising or falling interest rates. Our net interest income will benefit most from gradually rising interest rates due to our asset-sensitive profile. Through changes in the composition and characteristics of the balance sheet in 2004, we have positioned ourselves to experience rising net interest income levels in 2005 and a higher net interest margin in what is expected to be a gradually rising rate environment. Throughout 2004, the majority of our new commercial loans had floating rates of interest. During 2004 we extended the duration of our securities portfolio, which enhanced current period earnings but reduced modestly the expected net interest income improvement in a higher interest rate environment. The effect of funding the majority of our loan growth with Simply Better Checking deposits provided a benefit in a higher interest rate environment but increased the risk to net interest income in a lower rate environment. The asset-sensitive profile continued through year-end 2004 as liabilities were lengthened as floating rate borrowings were changed to callable borrowings at their maturity dates and additional commercial loans came off of their floors. While we anticipate positive net interest income improvement in a gradually rising interest rate environment, two factors could limit the extent of the improvement. First, our modeling assumes that our core deposit rates increase at a slower pace than overall interest rates. To the extent that we increase our core deposit rates faster than the model assumptions our benefit to rising rates will be reduced. In addition, approximately $360.0 million in floating rate commercial loans, tied to the prime rate of interest, have interest rate caps. The weighted average cap rate is 7.52% and the caps have an weighted average life of 43 months. The weighted average rate is 6.00%. If rates rise above the cap levels, these loans will become fixed rate loans.

We also measure, through simulation analysis, the impact to net interest income based on expected balance sheet growth scenarios, in addition to rate ramps or increases greater than 2% over 12- and 24-month periods. When factoring our 2005 financial projections (Growth Scenario) into the simulation model, we see similar results to our base case. Based on our simulation analysis, we believe our net interest income would be fairly comparable to our base case, assuming expected changes in balance sheet composition. Due to the assumptions used in preparing our simulation analysis, actual outcomes could differ significantly from the simulation outcomes.

Economic Value at Risk

We also measure long-term interest rate risk through the Economic Value of Equity (“EVE”) model. This model involves projecting cash flows from our 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. The sensitivity of EVE to changes in the level of interest rates is a measure of the sensitivity of long-term earnings to changes in interest rates. 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 December 31, 2004 and 2003. The policy guideline is –25%. Due to the low interest rate environment in 2003, not all interest rates could be shocked 200 basis points.

	Percentage Change in EVE
Change in Market Interest Rates (Rate Shock)	2004		2003
+200 basis points		-17		-22
-200 basis points		-22		-8

Based on the underlying assumptions, we were within our policy guidelines at year-end 2004 and 2003. During 2004, our longer-term interest rate risk profile was modestly better in a plus 200 basis point rate shock at December 31, 2004 compared to the same period in 2003. In an immediate interest rate increase of 200 basis points our profile was slightly improved from its 2003 level due to growth in our core deposit base and the lengthening of liability durations. At December 31, 2004, our most significant long term interest rate risk exposure as measured by EVE, is the exposure to lower rates. The risk relates primarily to our FHLB callable advances. Due to their above market interest costs, these advances reduce the present value of equity. Due to the relatively longer maturity dates of these advances, the downward rate shock results in significant market losses on our holdings and negatively impacts our present value of equity. Management believes that as these advances move closer to their maturity dates and become a smaller portion of our funding base that their negative impact on our longer term interest rate risk profile will moderate over time. Management believes that the likelihood of a 200 basis point drop in rates is small, and therefore, additional actions to limit this risk are not required. We do continue to closely monitor our longer-term rate exposures and evaluate strategies to reduce risk while still reaching financial goals.

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 management evaluates 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. These include non-interest bearing demand, interest bearing demand, savings and money market deposits, and represent a significant portion of our deposit base. We believe these deposits are less sensitive to changes in interest rates than other interest bearing assets and liabilities on our balance sheet. The balance of these deposits and the rates paid on them may fluctuate due to changes in market interest rates, competition, or by the fact that customers may add or withdraw these deposits at any time at no cost. These characteristics and the lack of a maturity date makes modeling these deposits for both simulation and EVE purposes very difficult. A modest change in the maturity term or repricing characteristics can result in very different outcomes. Since each financial institution assigns different repricing and maturity terms to these non-maturity deposits, comparing risk between institutions without understanding the treatment of non-maturity deposits has limited value. Another source of uncertainty reflects the

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options embedded in many of our financial instruments, which included loans, investments and callable FHLB advances. To deal with the many uncertainties when constructing either short or long-term interest rate risk measurements, management has developed a number of assumptions. Depending on the product or behavior in question, each assumption will reflect some combination of market data, research analysis and business judgment. Assumptions are reviewed periodically with changes made when deemed appropriate.

Accordingly, although these 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 that more likely scenarios include gradual changes in interest rate levels. 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 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 interest rate risk changes.

Derivatives

We use and expect to use derivatives in the future to manage our exposure to interest rate risk. All derivatives are recorded on the balance sheet at fair value with realized and unrealized gains and losses included in the results of operations or in other comprehensive income, depending on the nature and purpose of the derivative transaction. Derivative interest rate contracts may include interest rate swaps, caps and floors, and are used to modify the repricing characteristics of specific assets and liabilities. (See Notes 1 and 18 of the “Notes to Consolidated Financial Statements.”)

During 2004, we competitively priced two-year CDs to fund commercial loan growth and improve our liquidity profile by locking in funding for the next twenty-four months. Over this same period the majority of our commercial loan growth had floating rates tied to the prime rate of interest. This resulted in a significant mismatch between the repricing characteristics of these loans and the CDs. This mismatch exposed us to interest rate risk. To reduce this risk we entered into $125.0 million in notional value pay floating swaps designated as fair value hedges at inception. These swaps allowed us to more closely match the repricing characteristics of the CDs with the loans, and lock in spreads of approximately 300-325 basis points for the period of the swaps should rates either rise or fal. These transactions reduced interest expense on time deposits by $497,000 for the year ended December 31, 2004.

The credit risk associated with these derivative instruments is the risk of nonperformance by the counter party to the agreements. We deal only with counter parties of good credit standing and have established counter party credit limits. We do not expect any counter parties to fail to perform.

Liquidity Risk

The objective of effective liquidity management is to meet the cash flow requirements of depositors and borrowers, as well as the operating cash needs of YNB at the most reasonable cost. Liquidity risk arises from the possibility we may not be able to satisfy current or future financial commitments as well as the risk of not being able to meet unexpected cash needs or unexpected deposit outflows.

ALCO is responsible for liquidity risk management. This committee recommends liquidity policy guidelines that are approved by the Board of Directors and receives detailed monthly reports on our liquidity position, including compliance with limits and guidelines. In addition, these reports include a review of forecast liquidity needs over time frames up to one year and the adequacy of funding sources to meet these needs. As part of liquidity risk management, we have developed a detailed contingency funding plan. On a quarterly basis, ALCO reviews the adequacy of funding in adverse environments due to changes in interest rates, credit markets or other external risks through its contingency funding report.

Traditional sources of liquidity include deposit growth and scheduled amortization and prepayment of loans and mortgage-backed securities principal. We emphasize maximizing and maintaining customer deposits through our relationship banking philosophy. Deposit rates and levels are monitored, and trends and significant changes are reported up through ALCO. Deposit strategies are reviewed for consistency with our liquidity policy objectives. In addition, we have used and may continue to use borrowed funds to support and enhance liquidity. In addition to the ongoing execution of our retail strategy in 2004, which has increased core deposits, we utilize a nationwide computer software-based service to raise funds through placement of CDs to bolster liquidity and fund loan growth. Brokered CD facilities are also available as another source of liquidity. Mortgage-backed securities represented approximately 56% of total securities at December 31, 2004 and generated substantial cash flows of approximately $188 million during 2004, which strengthened liquidity. While maturities and scheduled amortization of loans and MBS are generally a predictable source of funds, deposit flows and securities prepayments are greatly influenced by interest rates and competition.

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We are eligible to borrow additional funds from the FHLB subject to its stock and collateral requirements, and individual advance proposals based on FHLB credit standards. FHLB advances are collateralized by securities as well as residential and commercial mortgage loans. Subject to collateral requirements, we also maintain lines of credit totaling approximately $300 million at December 31, 2004 with the FHLB and three brokerage firms. We also have the ability to borrow at the Federal Reserve discount window. We also maintain unsecured Federal funds lines totaling $29 million with five correspondent banks for daily funding needs.

At the financial holding company level, we use cash to pay dividends to stockholders and interest due on subordinated debentures. The principal source of funding for these payments generally comes from dividends from the Bank.

During 2004, we continued actions to further strengthen our liquidity profile. The ongoing execution of our retail strategy has increased core deposits. Core deposits have historically provided a relatively stable source of funding. We hold a diversified portfolio of marketable securities from which funds could be promptly generated. Total unpledged securities were approximately $368.4 million (market value) at December 31, 2004. In addition, mortgage-backed securities have provided cash flows to support asset growth in 2004. Effective liquidity planning and management will be critical in funding loan growth at a reasonable cost to achieve profitability targets in 2005. We believe the ongoing execution of our retail strategy, cash flows from our securities portfolios, competitive bidding on Surrogate’s deposits and the development of additional funding sources will provide the funding to achieve profitability goals in 2005.

Capital Management

The management of capital in a highly regulated environment requires a balance between earning the highest return for stockholders while maintaining sufficient capital levels for proper risk management, satisfying regulatory requirements, and for future expansion. Our capital management is designed to generate attractive returns on equity to our stockholders and to assure that we are always well capitalized, as defined by regulatory authorities, while having the necessary capital for our expansion plans.

Stockholders’ equity at December 31, 2004 totaled $160.2 million compared to $143.6 million at December 31, 2003. The increase in stockholders’ equity was primarily due to the increase in undivided profits. The increase in equity of $16.6 million or 11.6% resulted from earnings of $18.5 million, proceeds of $965,000 from exercised stock options, proceeds of $451,000 from shares issued through our dividend reinvestment plan, $378,000 from allocated ESOP shares, and an increase of $163,000 associated with the fair market adjustment related to the allocation of shares from the ESOP, partially offset by cash dividend payments of $4.8 million and positive adjustment to equity of $936,000 from the appreciation in market value of securities available for sale.

We have an ESOP that permits eligible employees to share in our growth through stock ownership. In May 2003, the ESOP purchased an additional 39,515 shares from our 401(k) Plan for $755,000. The YNB Stock Fund, a fund offered through our 401(k) Plan, was discontinued in May 2003. The ESOP financed the stock purchase with a loan from a nonaffiliated financial institution. The loan is for a term of two years with a maturity date of December 31, 2005. The balance of the new loan will be repaid in equal installments over the remaining term of the loan. The shares purchased by the ESOP were used as collateral for the loan. At December 31, 2003, the original loan used to purchase 155,340 shares for $2 million, when the ESOP was initiated in 1999, had been paid in full.

The balance of unallocated ESOP shares at December 31, 2004 was $377,000. The annual expenses associated with the ESOP were $550,000 in 2004, $618,000 in 2003 and $526,000 in 2002. These expenses include compensation expense, debt service on the loan and any adjustment required due to changes in the market value of the shares at time of allocation. The reason for the decrease in cost was related to common shares allocated.

In June 2003, the stockholders approved a non-qualified stock option plan for non-employee directors (The 2003 Directors Plan). The 2003 Directors Plan allows for the granting of 250,000 shares of our common stock at an option price no less than the market value of the stock on the date of grant. Options granted under this plan vest immediately and have a term not to exceed ten years. This plan provides for a grant of 3,000 options per year to each non-employee director who is a director on the day immediately after each annual meeting of stockholders. In addition, the 2003 Directors Plan allows for the granting of stock options to new non-employee directors. At December 31, 2004 there were 193,000 shares available for grant under the 2003 Director Plan.

Dividends declared on common stock for 2004 and 2003 totaled $0.46 per share, respectively. The dividend payout ratio was 26.0% for 2004, compared to 46.5% for 2003. The decrease in the dividend payout ratio was due to higher earnings in 2004.

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Regulatory Capital

We are subject to capital guidelines under Federal banking regulations. These banking regulations relate a company’s regulatory capital to the risk profile of its total assets and off-balance sheet items, and provide the basis for evaluating capital adequacy. Under these guidelines, assets and certain off-balance sheet items are assigned to broad risk categories each with applicable weights. The resulting capital ratios represent capital as a percentage of total risk weighted assets and certain off-balance sheet items. These guidelines require a minimum ratio of total risk based capital to total risk-weighted assets (“total risk based capital”) of 8%, Tier 1 capital to total risk-weighted assets (“Tier 1 risk based”) of 4% and a Tier 1 capital to average total assets (“Tier 1 leverage”) of at least 4%.

At December 31, 2004, the most recent notification from the appropriate Federal regulator categorized the Company as “well capitalized” under the regulatory framework. Under the capital adequacy guidelines, a well capitalized institution must maintain a total risk based capital ratio of at least 10%, a Tier 1 risk based capital ratio of at least 6% and a Tier 1 leverage ratio of at least 5%.

The following table sets forth our regulatory capital ratios at December 31, 2004, 2003 and 2002:

	December 31,
(in thousands)	2004			2003			2002
Tier 1 leverage		8.0	%		8.0	%		8.2	%
Tier 1 risk based		10.1	%		11.1	%		11.8	%
Total risk based		11.4	%		12.1	%		13.0	%

Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”) was issued in January 2003. FIN 46 applies immediately to enterprises that hold a variable interest in variable interest entities created after January 31, 2003. It applies in the first fiscal year or interim period beginning after June 15, 2003 to enterprises that hold a variable interest in variable interest entities created before February 1, 2003. In December 2003, FASB issued a revised version of FIN 46 (“FIN 46R”), which required us to deconsolidate our subsidiary trusts. This change in accounting guidance led to some uncertainty as to the Tier 1 capital treatment of trust-preferred securities under FRB’s capital adequacy regulations.

Partly in response to this accounting change, the FRB has amended its risk-based capital standards for bank holding companies to allow for the continued inclusion of outstanding and prospective issuances of trust preferred securities in Tier 1 Capital subject to stricter quantitative limits and qualitative standards. Under the amended rule, the aggregate amount of trust preferred securities and certain other Capital instruments would be limited to 25% of Tier 1 Capital, net of goodwill less any associated deferred tax liability. The amount of trust preferred securities and certain other capital instruments in excess of the limit could be included in Tier 2 capital, subject to restrictions. The amended rule provides a five-year transition period for the application of the quantitative limits. The Company would continue to follow GAAP in accounting for these instruments for regulatory reporting purposes. The amended rule would not impact the Company’s existing treatment of trust preferred securities for purposes of computing its Tier 1 Capital, nor would it affect the capital adequacy rating of the Bank, which remains “well capitalized.”

Earnings Analysis for Prior Year
(2003 compared to 2002)

YNB earned $10.3 million or $0.97 per diluted share in 2003 compared to $14.0 million or $1.68 per diluted share in 2002. This represents a decrease of 26.4% and 42.3%, respectively, in 2003. The decrease in net income of $3.7 million in 2003 was due to a $5.0 million increase in the provision for loan losses, a $7.1 million increase in non-interest expense, and a $1.6 million decline in net securities gains, partially offset by net interest income growth of $6.7 million. The decrease in diluted earnings per share was attributable to both lower net income and to the significantly greater number of weighted average shares outstanding due to the full year impact in 2003 of the December 2002 stock offering.

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Net Interest Income

Net interest income totaled $53.2 million in 2003, an increase of $6.7 million or 14.4% from net interest income of $46.5 million in 2002. The net interest margin, on a tax equivalent basis, increased six basis points to 2.42% from 2.36% in 2002. The improvement in net interest income and the net interest margin was primarily due to a lower cost on interest bearing liabilities of 62 basis points, which decreased interest expense by $5.5 million in 2003. Also contributing to the improvement in net interest income and the margin were increased volumes of loans offset by lower yields on interest earning assets.

Average interest earning assets increased $234.5 million or 11.6% to $2.26 billion for 2003, compared to $2.03 billion for 2002. As a result, interest income rose to $121.5 million during 2003, compared to $120.3 million for 2002. The level of interest income improvement was impacted by the 57 basis point decline in the yield on average interest earning assets to 5.37% for 2003 compared to 5.94% for 2002. During 2003, the historically low interest rate environment resulted in continued pressure on earning asset yields.

The growth in average interest earning assets was principally in commercial loans. Loans averaged $1.32 billion for 2003, representing an increase of $237.9 million, or 21.9% when compared with $1.09 billion for 2002. During this same period, loan yields declined 49 basis points to 6.46%, partially offsetting higher loan balances. The principal driver of increased interest and fees on loans of 13.4% in 2003 compared to 2002 was the higher level of average commercial loans. Approximately 46% of our commercial real estate and commercial and industrial loans have floating rates typically tied to the prime rate of interest. In 2003, the average prime rate declined to 4.12% compared to 4.68% in 2002. Further impacting loan yields in 2003 were the lower rates earned on fixed rate loans during this historically low interest rate environment.

During 2003, average securities increased $13.8 million. Interest on securities, however, declined $8.4 million as the yield on the securities portfolio decreased 103 basis points to 4.02% in 2003 from 5.05% in 2002. The most significant factor contributing to the lower securities yield dealt with the largest segment of our securities portfolio, mortgage-backed securities. Higher than projected prepayment speeds resulted in significant cash flows and an acceleration of premium amortization which negatively impacted the yield on securities. The reinvestment of principal cash flows in a lower interest rate environment resulted in lower yields on newly purchased securities during 2003.

The lower interest rate environment that continued through 2003 resulted in a decline of $5.5 million or 7.4% in interest expense to $68.3 million from $73.8 million in 2002. The cost of interest bearing liabilities declined 62 basis points to 3.35% during 2003 as generally higher cost time deposits repriced lower to market levels or were replaced by lower cost savings, money market and interest bearing demand deposits. In addition, the cost on average total borrowings of $742.9 million and subordinated debentures of $40.4 million declined 13 basis points and 181 basis points, respectively, during 2003. Growth in average interest free demand deposits of $21.2 million to $139.3 million contributed to our overall lower funding costs. Our greater focus on retail banking and ability to establish long-term business relationships resulted in an increase in core business and personal checking accounts in 2003. Partially offsetting the decline in interest expense during 2003 was a $183.6 million, or 9.9% increase in average interest bearing liabilities.

Average savings, money market and interest bearing demand deposits increased $192.3 million, or 40.9% to $662.3 million during 2003 compared to $470.0 million for the same period in 2002. The corresponding cost of funds on these deposits declined 75 basis points to 1.64% in 2003 from 2.39% in 2002. Average time deposits decreased $23.1 million to $594.9 million during 2003 from $618.0 million the prior year. The related cost of our average time deposits declined 59 basis points to 3.12% during 2003 from 2002. The combination of lower interest rates and the change in composition of our interest bearing deposits resulted in a 80 basis point decline in interest bearing deposits to 2.34% from 3.14% during 2002.

Provision for Loan Losses

The provision for loan losses totaled $9.4 million for 2003, an increase of $5.0 million when compared to $4.4 million for 2002, with the increase attributable to higher net loan charge offs, principally related to two problem credits in the last quarter of 2003, and overall loan growth. Net loan charge offs increased to $8.9 million in 2003 compared to $1.1 million in 2002.

Non-interest Income

Non-interest income, excluding securities gains and the sale of our former operations building, increased $932,000 or 17.9% to $6.2 million for 2003 when compared to $5.2 million for 2002. The increase was due to higher service charge income and other service related fees of $424,000 due to a greater number of transactional deposit accounts and the expansion of our customer base using fee-based services. Additional income on BOLI of $358,000 contributed to the increase in non-interest income in 2003 as well.

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During 2003, fee-based services, which include automated teller machine fees on non-customers, Second Check® fees and check fees, increased 20.9% to $1.4 million in 2003 from $1.1 million in 2002. Other non-interest income totaled $701,000 in 2003, an increase of $542,000 when compared to $159,000 in 2002. Accounting for this increase was the sale of our former operations building to a board member, which resulted in a $429,000 gain, and to a lesser extent, income derived from mortgage servicing and safe deposit box rentals.

During 2003 we offered enhanced internet and cash management products and services designed to generate fee income and build non-interest income. While achieving some success, non-interest income, excluding securities gains and the sale of our former operations building, represented a modest 4.8% of total revenues in 2003 compared to 4.2% in 2002.

Non-interest expense

Non-interest expense totaled $38.2 million in 2003, an increase of $7.1 million or 22.9% compared to $31.0 million in 2002. The largest increases in non-interest expense in 2003 were primarily in salaries and employee benefits, equipment, marketing and other expenses.

Salaries and employee benefits increased $3.5 million or 19.8% to $21.4 million for the year ended December 31, 2003 compared to $17.9 million for the same period in 2002. Increases in lending, administrative, product support and risk management staffing and the full impact of additional staffing for the three new branches opened in 2002, as well as the partial impact of three new branches opened in 2003, all as part of our retail strategy, were reflected in the increase of salaries and employee benefits. Equipment expense increased $532,000 or 22.0% to $2.9 million in 2003 from $2.4 million in 2002. The increase in equipment expense was primarily related to additional equipment maintenance and depreciation costs. Marketing expenses increased by $557,000 or 50.5% in 2003 to $1.7 million, compared to $1.1 million in 2002. The increase in expense was attributable to marketing campaigns designed to increase low cost core deposits, further develop our brand image and our continued support of community activities. Other expenses, which included a variety of professional fees, costs associated with the origination of commercial loans and other operating expenses, totaled $3.3 million in 2003 compared to $2.0 million in 2002.

Excluding net securities gains and the sale of our former operations building in 2003, our efficiency ratio was 64.31% and 60.04% for 2003 and 2002, respectively.

Income Taxes

The provision for Federal and state income taxes was $3.4 million in 2003 compared to $5.4 million in 2002. For 2003, the effective tax rate was 25.1% compared to 27.7% for 2002. Our effective tax rate declined, principally due to higher levels of the tax-exempt income, and tax benefits from ownership of certain real estate assets used by the Bank in a real estate investment trust subsidiary.

Recent Accounting Pronouncements

On September 30, 2004, the FASB issued Staff Position Emerging Issues Task Force (“EITF”) Issue No. 03-01, “Effective Date of Paragraphs 10-20 of EITF Issue No. 03-01, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments,” which delays the effective date for the measurement and recognition guidance contained in EITF Issue No. 03-01, provides guidance for evaluation whether an investment is other-than-temporarily impaired and was originally effective for other-than-temporarily impairment evaluations made in reporting periods beginning after June 15, 2004. The delay in the effective date for the measurement and recognition guidance contained in paragraphs 10 through 20 of EITF Issue No. 03-01 does not suspend the requirement to recognize other-than-temporary impairments as required by existing authoritative literature. The disclosure guidance in paragraphs 21 and 22 of EITF Issue No. 03-01 remains effective. The delay will be superceded concurrent with the final issuance of EITF Issue No. 03-01a, which is expected to provide implementation guidance on matters such as impairment evaluations for declines in value caused by increases in interest rates and/or sector spreads.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment.” This Statement is a revision of SFAS No. 123, “Accounting for Stock Based Compensation,” and superceded APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related guidance. SFAS No. 123 (revised 2004) established standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. This Statement requires that the cost results from all share-based payment transactions be recognized in the financial statements.

52

This Statement establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement method in accounting for share-based payment transactions with employees, except for equity instruments held by employee share ownership plans. This Statement is effective for public entities that do not file as small business issuers as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. We will adopt FAS 123R effective July 1, 2005 as required and will use the modified prospective transition method. Under this method, awards modified or settled after July 1, 2005 will be measured and accounted for in accordance with FAS 123R. In addition, beginning July 1, 2005, expense must be recognized for unvested awards that were granted prior to July 1, 2005. The expense will be based on the fair value determined at the date of grant. We do not expect the adoption of SFAS No. 123 (revised 2004) will have a material impact on our financial condition or results of operations.

53

Quarterly Financial Data (unaudited)

	Three Months Ended
(in thousands, except per share data)	December 31			September 30		June 30		March 31
2004
Interest income	$	37,897		$	36,048	$	33,701	$	32,218
Interest expense		18,411			17,529		16,733		16,472
Net interest income		19,486			18,519		16,968		15,746
Provision for loan losses		2,800			2,400		1,975		2,450
Non-interest income		1,593			2,296		1,716		2,374
Non-interest expense		11,157			10,622		10,583		10,287
Income before income tax expense		7,122			7,793		6,126		5,383
Income tax expense		2,386			2,344		1,664		1,505
Net income	$	4,736		$	5,449	$	4,462	$	3,878
Earnings per share-basic	$	0.45		$	0.52	$	0.43	$	0.37
Earnings per share-diluted		0.43			0.50		0.41		0.36
2003
Interest income	$	31,485		$	30,143	$	30,047	$	29,794
Interest expense		16,676			16,933		17,215		17,465
Net interest income		14,809			13,210		12,832		12,329
Provision for loan losses		6,135			1,375		1,250		600
Non-interest income		1,880			2,104		2,538		1,572
Non-interest expense		10,698			9,648		9,166		8,647
Loss (income) before income tax (benefit) expense		(144	)		4,291		4,954		4,654
Income tax (benefit) expense		(343	)		1,129		1,362		1,298
Net income	$	199		$	3,162	$	3,592	$	3,356
Earnings per share-basic	$	0.02		$	0.30	$	0.35	$	0.32
Earnings per share-diluted		0.02			0.29		0.34		0.32

FORWARD-LOOKING STATEMENTS

This Annual Report contains express and implied statements related 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, 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 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.

54

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The information with respect to this Item is contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is set forth in Item 7 of this report.

Item 8. Financial Statements and Supplementary Data

The information with respect to this Item is contained in our financial statements included in Item 15 of this report and the quarterly financial data included in Item 7 of this report.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by it in its reports filed or submitted pursuant to the Securities Exchange Act of 1934, as amended (Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that information required to be disclosed by the Company in its Exchange Act reports is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e) as of December 31, 2004. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of such date.

Section 404 Assessment

Section 404 of the Sarbanes-Oxley Act of 2002 requires us to conduct an annual assessment of our internal control over financial reporting and to include a report on, and an attestation by our independent registered public accountants, KPMG LLP, of the effectiveness of these controls, beginning in this Annual Report on Form 10-K as of December 31, 2004.

On November 30, 2004, the Securities and Exchange Commission issued an exemptive order under which certain companies are permitted to delay, for up to 45 days after the due date of their Annual Report on Form 10-K, the filing of the internal control report and the related attestation of the independent registered public accountants. The Company qualifies under the provisions of this exemptive order for such 45-day delay. In reliance on this exemptive order, this Annual Report on Form 10-K does not include the internal control report or related attestation, which the Company plans to file by amendment prior to the expiration of the 45-day extension.

The Company is currently performing its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004, using the control criteria framework of the Committee of Sponsoring Organizations (COSO) of the Treadway Commission published in its report entitled Internal Control-Integrated Framework.

Changes to Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the fourth quarter ended December 31, 2004 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We have identified deficiencies that we do not consider to be “material weaknesses” but which we nonetheless believe should be remedied. These deficiencies have been disclosed to our Audit Committee and to our independent auditors. In conjunction with our internal auditors, we will continue to review, evaluate, document and test our internal controls and procedures as required under Section 404 of the Sarbanes-Oxley Act and may identify additional areas where disclosure and corrective measures are advisable or required.

Management has discussed its remedial action plans with the Audit Committee and will continue to provide periodic updates on progress made.

Limitations of Effectiveness of Controls

We note that, like other companies, any system of internal controls, however well designed and operated, can provide only reasonable assurance, and not absolute assurance, that the objectives of the internal control system will be met. The design of any control system is based, in part, upon the benefits of the control system relative to its costs. Because of the 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 detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of control. In addition, over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of inherent limitation in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

We are continuing our assessment of the effectiveness of our internal control over financial reporting, and expect this review to be competed shortly. Yardville’s independent auditors, KPMG LLP, are also continuing their testing of the effectiveness of our internal control over financial reporting and their assessment of management’s assertion related to internal control over financial reporting as of the date this Form 10-K is filed. Any material weaknesses identified by management arising from the completion of our assessment or by the auditors upon completion of their attestation regarding our internal control over financial reporting will be included in an amended Form 10-K that will be issued on or before May 2, 2005.

Item 9B. Other Information

None.

PART III

Item 10. Directors and Executive Officers of the Company

Incorporated herein by reference to the Company’s definitive proxy statement to be filed with the Securities and Exchange Commission in connection with its Annual Meeting of Stockholders to be held June 3, 2005.

Item 11. Executive Compensation

Incorporated herein by reference to the Company’s definitive proxy statement to be filed with the Securities and Exchange Commission in connection with its Annual Meeting of Stockholders to be held June 3, 2005. The information contained in the Company’s definitive proxy statement under the captions “Organization and Compensation Committee Report,” “Performance Graph” and “Audit Committee Report” shall not be deemed to be incorporated by reference herein.

Item 12. Security Ownership of Certain Beneficial Owners and Management

Incorporated herein by reference to the Company’s definitive proxy statement to be filed with the Securities and Exchange Commission in Connection with its Annual Meeting of Stockholders to be held June 3, 2005.

Item 13. Certain Relationships and Related Transactions

Incorporated herein by reference to the Company’s definitive proxy statement to be filed with the Securities and Exchange Commission in connection with its Annual Meeting of Stockholders to be held June 3, 2005.

Item 14. Principal Accountant Fees and Services

Incorporated herein by reference to the Company’s definitive proxy statement to be filed with the Securities and Exchange Commission in connection with its Annual Meeting of Stockholders to be held June 3, 2005.

55

PART IV

Item 15. Exhibits and Financial Statement Schedules

Financial Statement Schedules

For a list of the financial statements filed herewith, see the Index to Financial Statements on page F-1. No schedules are included with the financial statements because the required information is inapplicable or is presented in the financial statements or notes thereto.

Exhibits

The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears at page E-1.

56

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 31, 2005.

YARDVILLE NATIONAL BANCORP
By:	Patrick M. Ryan
	Patrick M. Ryan, President and
	Chief Executive Officer

Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

Signature	Title	Date
Jay G. Destribats	Chairman of the Board	March 31, 2005
Jay G. Destribats	and Director
Patrick M. Ryan	Director, President	March 31, 2005
Patrick M. Ryan	and Chief Executive Officer
F. Kevin Tylus	Director, Senior Executive	March 31, 2005
F. Kevin Tylus	Vice President, Chief Operating Officer
Stephen F. Carman	Vice President, Treasurer, Principal Financial	March 31, 2005
Stephen F. Carman	Officer and Principal Accounting Officer
James E. Bartolomei	Director	March 31, 2005
James E. Bartolomei
Elbert G. Basolis, Jr.	Director	March 31, 2005
Elbert G. Basolis, Jr.
Lorraine Buklad	Director	March 31, 2005
Lorraine Buklad
Anthony M. Giampetro	Director	March 31, 2005
Anthony M. Giampetro
Sidney L. Hofing	Director	March 31, 2005
Sidney L. Hofing
Gilbert W. Lugossy	Director	March 31, 2005
Gilbert W. Lugossy
Samuel D. Marrazzo	Director	March 31, 2005
Samuel D. Marrazzo
Louis R. Matlack	Director	March 31, 2005
Louis R. Matlack
Martin Tuchman	Director	March 31, 2005
Martin Tuchman
Christopher S. Vernon	Director	March 31, 2005
Christopher S. Vernon
Robert L. Workman	Director	March 31, 2005
Robert L. Workman

57

INDEX TO FINANCIAL STATEMENTS

Description	Page
Consolidated Statements of Condition at December 31, 2004 and 2003	F-2
Consolidated Statements of Income for each of the years ended December 31, 2004, 2003 and 2002	F-3
Consolidated Statements of Changes in Stockholders’ Equity for each of the years ended December 2004, 2003 and 2002	F-4
Consolidated Statements of Cash Flows for each of the years ended December 31, 2004, 2003 and 2002	F-5
Notes to Consolidated Financial Statements	F-6
Independent Auditors’ Report	F-43

F-1

Yardville National Bancorp and Subsidiaries

Consolidated Statements of Condition

	December 31,
(in thousands, except share data)	2004			2003
Assets:
Cash and due from banks	$	32,115		$	25,785
Federal funds sold		6,769			7,370
Cash and Cash Equivalents		38,884			33,155
Interest bearing deposits with banks		41,297			20,552
Securities available for sale		802,525			798,007
Investment securities (market value of $79,954 in 2004 and $70,476 in 2003)		78,257			68,686
Loans		1,782,592			1,443,355
Less: Allowance for loan losses		(20,116	)		(17,295	)
Loans, net		1,762,476			1,426,060
Bank premises and equipment, net		10,431			12,307
Bank owned life insurance		44,501			42,816
Other assets		27,546			29,610
Total Assets	$	2,805,917		$	2,431,193
Liabilities and Stockholders’ Equity:
Deposits
Non-interest bearing	$	202,196		$	163,812
Interest bearing		1,607,808			1,319,997
Total Deposits		1,810,004			1,483,809
Borrowed funds
Securities sold under agreements to repurchase		10,000			10,000
Federal Home Loan Bank advances		742,000			726,000
Subordinated debentures		62,892			47,428
Obligation for Employee Stock Ownership Plan (ESOP)		377			755
Other		753			1,325
Total Borrowed Funds		816,022			785,508
Other liabilities		19,733			18,319
Total Liabilities	$	2,645,759		$	2,287,636
Commitments and Contingent Liabilities
Stockholders’ equity
Preferred stock: no par value
Authorized 1,000,000 shares, none issued
Common Stock: no par value
Authorized 20,000,000 shares
Issued 10,691,213 shares in 2004 and 10,619,855 shares in 2003		91,658			90,079
Surplus		2,205			2,205
Undivided profits		69,860			56,152
Treasury stock, at cost: 180,594 shares		(3,160	)		(3,160	)
Unallocated ESOP shares		(377	)		(755	)
Accumulated other comprehensive loss		(28	)		(964	)
Total Stockholders’ Equity		160,158			143,557
Total Liabilities and Stockholders’ Equity	$	2,805,917		$	2,431,193

See Accompanying Notes to Consolidated Financial Statements.

F-2

Yardville National Bancorp and Subsidiaries

Consolidated Statements of Income

	Year Ended December 31,
(in thousands, except per share amounts)	2004		2003		2002
Interest Income:
Interest and fees on loans	$	100,506	$	85,529	$	75,395
Interest on deposits with banks		371		121		60
Interest on securities available for sale		35,282		32,308		40,612
Interest on investment securities:
Taxable		137		192		690
Exempt from Federal income tax		3,221		2,796		2,345
Interest on Federal funds sold		347		523		1,157
Total Interest Income		139,864		121,469		120,259
Interest Expense:
Interest on savings account deposits		12,929		10,834		11,228
Interest on certificates of deposit of $100,000 or more		4,165		4,014		5,184
Interest on other time deposits		12,269		14,521		17,747
Interest on borrowed funds		36,071		35,799		36,403
Interest on subordinated debentures		3,711		3,121		3,214
Total Interest Expense		69,145		68,289		73,776
Net Interest Income		70,719		53,180		46,483
Less provision for loan losses		9,625		9,360		4,375
Net Interest Income After Provision for Loan Losses		61,094		43,820		42,108
Non-Interest Income:
Service charges on deposit accounts		3,134		2,388		2,203
Securities gains, net		1,297		1,513		3,084
Income on bank owned life insurance		1,766		2,036		1,678
Other non-interest income		1,782		2,157		1,339
Total Non-Interest Income		7,979		8,094		8,304
Non-Interest Expense:
Salaries and employee benefits		23,476		21,433		17,890
Occupancy expense, net		4,283		3,934		3,507
Equipment expense		3,123		2,955		2,423
Other non-interest expense		11,767		9,837		7,224
Total Non-Interest Expense		42,649		38,159		31,044
Income before income tax expense		26,424		13,755		19,368
Income tax expense		7,899		3,446		5,364
Net Income	$	18,525	$	10,309	$	14,004
Earnings Per Share:
Basic	$	1.77	$	0.99	$	1.72
Diluted	$	1.71	$	0.97	$	1.68

See Accompanying Notes to Consolidated Financial Statements.

F-3

Yardville National Bancorp and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

	Year Ended December 31, 2004, 2003 and 2002
																	Accumulated
														Unallocated			Other
	Common			Common				Undivided			Treasury			ESOP			Comprehensive
(in thousands, except share amounts)	Shares			Stock		Surplus		Profits			Stock			Shares			Income (loss)			Total
BALANCE, December 31, 2001		8,042,568		$	54,334	$	2,205	$	40,175		$	(3,030	)	$	(800	)	$	361		$	93,245
Net income									14,004												14,004
Unrealized gain - securities available for sale, net of tax of $4,646																		9,032			9,032
Less reclassification of realized net gain on sale of securities available for sale, net of tax of $1,049																		(2,035	)		(2,035	)
Total comprehensive income																					21,001
Cash dividends ($0.44 per share)									(3,546	)											(3,546	)
ESOP fair value adjustment					110																110
Common stock issued:
Exercise of stock options		61,589			602																602
Common shares issued		2,300,000			34,251																34,251
ESOP shares allocated															400						400
Treasury shares acquired		(8,248	)									(124	)								(124	)
BALANCE, December 31, 2002		10,395,909		$	89,297	$	2,205	$	50,633			(3,154	)	$	(400	)	$	7,358		$	145,939
Net income									10,309												10,309
Unrealized loss - securities available for sale, net of tax benefit of $3,772																		(7,323	)		(7,323	)
Less reclassification of realized net gain on sale of securities available for sale, net of tax of $514																		(999	)		(999	)
Total comprehensive income																					1,987
Cash dividends ($0.46 per share)									(4,790	)											(4,790	)
ESOP shares acquired															(755	)					(755	)
ESOP fair value adjustment					221																221
Common stock issued:
Exercise of stock options		40,596			492																492
Dividend reinvestment plan		3,102			69																69
ESOP shares allocated															400						400
Treasury shares acquired		(346	)									(6	)								(6	)
BALANCE, December 31, 2003		10,439,261		$	90,079	$	2,205	$	56,152			(3,160	)	$	(755	)	$	(964	)	$	143,557
Net income									18,525												18,525
Unrealized gain - securities available for sale, net of tax of $958																		1,779			1,779
Less reclassification of realized net gain on sale of securities available for sale net of tax of $454																		(843	)		(843	)
Total comprehensive income																					19,461
Cash dividends ($0.46 per share)									(4,817	)											(4,817	)
ESOP fair value adjustment					163																163
Common stock issued:
Exercise of stock options and related tax benefit		54,487			965																965
Dividend reinvestment plan		16,871			451																451
ESOP shares allocated															378						378
BALANCE, December 31, 2004		10,510,619		$	91,658	$	2,205	$	69,860			(3,160	)	$	(377	)	$	(28	)	$	160,158

See Accompanying Notes to Consolidated Financial Statements.

F-4

Yardville National Bancorp and Subsidiaries

Consolidated Statements of Cash Flows

	Year Ended December 31,
(in thousands)	2004			2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	18,525		$	10,309		$	14,004
Adjustments:
Provision for loan losses		9,625			9,360			4,375
Depreciation		2,355			2,267			1,894
ESOP fair value adjustment		163			221			110
Amortization of deposit intangible		204			17			—
Amortization and accretion on securities		1,652			5,307			2,909
Gain on sales of securities available for sale		(1,297	)		(1,513	)		(3,084	)
Gain on sale of bank branch		5			—			—
Writedown and loss on sale of other real estate		—			236			232
Increase in other assets		(306	)		(7,226	)		(2,598	)
Increase (decrease) in other liabilities		1,414			(4,703	)		5,181
Net Cash Provided by Operating Activities		32,340			14,275			23,023
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in interest bearing deposits with banks		(20,745	)		(18,051	)		(181	)
Purchase of securities available for sale		(446,025	)		(753,178	)		(679,333	)
Maturities, calls and paydowns of securities available for sale		240,415			592,237			379,487
Proceeds from sales of securities available for sale		202,139			168,215			237,492
Proceeds from maturities and paydowns of investment securities		6,297			7,129			15,755
Purchase of investment securities		(15,853	)		(21,133	)		(5,751	)
Purchase of bank owned life insurance		—			—			(7,500	)
Net increase in loans		(346,041	)		(257,992	)		(188,282	)
Expenditures for bank premises and equipment		(1,125	)		(2,366	)		(3,190	)
Proceeds from sale of bank branch		641			—			—
Proceeds from sale of other real estate		—			1,706			1,065
Net Cash Used by Investing Activities		(380,297	)		(283,433	)		(250,438	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand, money market, and savings deposits		277,082			247,415			144,721
Net increase (decrease) in certificates of deposit		49,113			(35,892	)		34,875
Net increase (decrease) in borrowed funds		15,050			(19,631	)		50,598
Proceeds from issuance of subordinated debentures		15,464			25,774			—
Retirement of subordinated debentures		—			(11,856	)		—
Proceeds from issuance of common stock		1,416			561			34,853
Decrease (increase) in unallocated ESOP Shares		378			(355	)		400
Treasury shares acquired		—			(6	)		(124	)
Dividends paid		(4,817	)		(4,790	)		(3,546	)
Net Cash Provided by Financing Activities		353,686			201,220			261,777
Net increase (decrease) in cash and cash equivalents		5,729			(67,938	)		34,362
Cash and cash equivalents as of beginning of year		33,155			101,093			66,731
Cash and Cash Equivalents as of End of Year	$	38,884		$	33,155		$	101,093
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest	$	69,266		$	70,822		$	75,204
Income taxes		7,304			10,097			1,097
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Transfers from loans to other real estate, net of charge offs	$	—		$	894		$	16

See Accompanying Notes to Consolidated Financial Statements.

F-5

YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

Notes to Consolidated Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

Yardville National Bancorp is a registered financial holding company, which conducts a general commercial and retail banking business through its principal operating subsidiary, The Yardville National Bank (the Bank), a nationally chartered banking institution. The Bank provides a broad range of lending, deposit and other financial products and services with an emphasis on commercial real estate and commercial and industrial loans to small-to mid-sized businesses and individuals. Our existing and targeted markets are located in the corridor between New York City and Philadelphia. We operate 23 full-service branches including 15 branches in our primary market of Mercer County, New Jersey. We have expanded our franchise into the demographically attractive markets of Hunterdon, Somerset, and Middlesex Counties in New Jersey. The Bank is subject to competition from other financial institutions and non-bank providers of financial services. Yardville National Bancorp and the Bank are both subject to the regulations of certain Federal agencies and undergo periodic examinations by those regulatory authorities.

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 and disclosure of contingent assets and liabilities as of the date of the statements of condition and revenues and expenses for the periods. 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.

A. Consolidation. The consolidated financial statements include the accounts of Yardville National Bancorp and its subsidiary, the 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, Yardville Capital Trust V and Yardville Capital Trust VI. All prior periods presented have been reclassified to reflect the deconsolidation.

B. Cash and Cash Equivalents. For purposes of the consolidated statements of cash flows, cash and cash equivalents include cash on hand, amounts due from banks, and Federal funds sold. Generally, Federal funds are purchased or sold for one day periods.

C. Securities. Securities that the Corporation has the positive intent and ability to hold to maturity are classified as held-to-maturity and carried at amortized cost. The premium or discount adjustments are recognized as adjustments

F-6

to interest income, on a level yield basis. Securities that may be sold in response to, or in anticipation of, changes in interest rates, liquidity needs or other factors and marketable equity securities are classified as available-for-sale and carried at market value. The unrealized gains and losses on these securities are reported, net of applicable taxes, in accumulated other comprehensive (loss) income, a component of stockholders’ equity. All securities with unrealized losses are evaluated quarterly to determine whether the unrealized losses are other than temporary. If an unrealized loss is determined to be other than temporary, the security is written down to its market value with the loss recognized in the consolidated statements of income. Gains and losses on disposition are included in earnings using the specific identification method. Debt securities that are purchased and held primarily for the purpose of being sold in the near term are classified as trading. Trading securities are carried at market value with realized and unrealized gains and losses reported in non-interest income. There were no trading securities at December 31, 2004 or 2003.

D. Loans. Interest on loans is recognized based upon the principal amount outstanding. Loans are stated at face value, less unearned income and net deferred fees. A loan is considered past due when a payment has not been received in accordance with the contractual terms. Generally, commercial loans are placed on nonaccrual status when they are 90 days past due unless they are well secured and in the process of collection or, regardless of the past due status of the loan, when management determines that the complete recovery of principal and interest is in doubt. Commercial loans are generally charged off after an analysis is completed which indicates that collectibility of the full principal balance is in doubt. Consumer loans are generally charged off after they become 120 days past due. Mortgage loans are not generally placed on a nonaccrual status unless the value of the real estate has deteriorated to the point that a potential loss of principal or interest exists. Subsequent payments are credited to income only if collection of principal is not in doubt. If principal and interest payments are brought contractually current and future collectibility is reasonably assured, loans are returned to accrual status. Mortgage loans are generally charged off when the value of the underlying collateral does not cover the outstanding principal balance. Loan origination and commitment fees less certain costs are deferred and the net amount amortized as an adjustment to the related loan’s yield. Loans held for sale are recorded at the lower of aggregate cost or market value.

E. 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 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.

     Management has identified the allowance for loan losses to be a critical accounting policy. The Corporation utilizes a system to rate substantially all loans based on their respective risk. Consumer and residential mortgage loans are evaluated as a group with only those loans that are delinquent evaluated separately. The primary emphasis in the risk rating system is on commercial real estate and commercial and industrial loans, due to the greater credit risk they entail compared to residential mortgage and consumer 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

F-7

eight-quarter rolling trend using migration analysis. Commercial risk ratings of 1 to 5 are considered to be acceptable and correspond to loans rated as minimal, modest, better than average, average and acceptable. At December 31, 2004, the following reserve percentages were applied. Loans with acceptable risk were reserved at a range of 0.70% to 0.75%. Risk ratings of between 6 and 9 are considered higher than acceptable risk and correspond to loans rated as special mention, substandard, doubtful and loss. Due to the higher level of risk, these loans were reserved at a range of 3.75% to 100%. Loans with a risk rating of 9 are considered to be a loss and would be reserved at 100%. At December 31, 2004, there were no 9 rated loans. In setting the reserve percentage for each risk rating, management uses a computer software program to perform migration analysis to determine historic loan loss experience. In addition, management relies on its judgment concerning the anticipated impact on credit risk of economic conditions, real estate values, interest rates and level of business activity.

     At December 31, 2004, residential mortgage loans were assigned an individual risk reserve percentage of 0.04% due to the strong secured nature of these loans and the historically low level of losses experienced with this loan type. Multi-family residential loans are included in commercial real estate loans for reserve analysis purposes.

     Consumer loans include home equity loans, installment loans and all other loans. At December 31, 2004, home equity loans were assigned reserve percentages of 0.09% for the lowest risk to 0.13% for the highest risk. This range is reflective of the strict underwriting standards and the historically low level of losses experienced with these loans. All other secured consumer loans, primarily automobile loans, are reserved at a range of 0.63% to 3.32%. The higher reserve percentages assigned to these loans reflect the greater risk and higher historical losses. Unsecured consumer loans are reserved at a range of 3.77% to 8.03%. This portfolio was less than $1.0 million at December 31, 2004 and 2003. The higher reserve limit reflects the unsecured nature of these loans as well as the higher historical level of losses.

     Management, considering current information and events regarding the borrowers’ ability to repay their obligations, considers a loan to be impaired when it is probable that the Corporation will be unable to collect all amounts due according to the contractual terms of the loan agreement. When a loan is considered to be impaired, the amount of impairment is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or fair value of the collateral. Impairment losses are included in the allowance for loan losses through charges to income.

F. Bank Premises and Equipment. Bank premises and equipment, including leasehold improvements, are stated at cost less accumulated depreciation. Depreciation is computed on straight-line and accelerated methods over the estimated useful lives of the assets ranging from three years to forty years depending on the asset or lease. Charges for maintenance and repairs are expensed as they are incurred.

G. Other Real Estate (ORE). ORE comprises real properties acquired through foreclosure or deed in lieu of foreclosure in partial or total satisfaction of loans. The properties are recorded at the lower of cost or fair value less estimated disposal costs at the date acquired. When a property is acquired, the excess of the loan balance over the fair value is charged to the allowance for loan losses. Any subsequent writedowns that may be required to the carrying value of the property are included in other non-interest expense. Gains realized from the sale of other real estate are included in other non-interest income, while losses are included in non-interest expense.

H. Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in

F-8

the years in which temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period of enactment. Management has identified the accounting for income taxes to be a critical accounting policy.

I. Stock-Based Compensation. The Corporation applies Accounting Principles Board (APB) Opinion 25 in accounting for its stock option plans and, accordingly, no compensation cost has been recognized for its 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 stock options issued with a grading vesting schedule, compensation expense is recognized on a straight line basis over the vesting period.

F-9

(in thousands)	2004		2003		2002
Net income as reported:	$	18,525	$	10,309	$	14,004
Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards, net of related tax effects		952		687		563
Pro forma net income	$	17,573	$	9,622	$	13,441
Earnings per share
Basic:
As reported	$	1.77	$	0.99	$	1.72
Pro forma		1.68		0.93		1.65
Diluted:
As reported	$	1.71	$	0.97	$	1.68
Pro forma		1.62		0.91		1.62

     The fair value of options granted is estimated on the date of grant using the Black-Scholes option-pricing model. The table below lists the weighted average assumptions used for grants in 2004, 2003 and 2002, respectively. The Black-Scholes option pricing model requires the use of highly subjective assumptions, including expected stock price volatility, which if changed, can materially affect fair value estimates. The weighted average fair value of options granted in 2004, 2003, and 2002 was $10.45, $8.23 and $7.89, respectively.

	2004			2003			2002
Number of options granted		77,500			134,500			56,000
Expected annual dividend rate	$	0.46		$	0.46		$	0.46
Risk free rate		3.6	%		2.9	%		2.7	%
Expected average option life (years)		6.8			7.4			5.0
Expected volatility		32.50	%		35.0	%		36.0	%

J. Earnings Per Share. Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period.

     Diluted earnings per share is computed by dividing net income available to stockholders by the weighted average number of shares outstanding, adjusted for common stock equivalents outstanding during the period accounted for under the treasury stock method.

     Weighted average shares for the basic net income per share computation for the years ended December 31, 2004, 2003, and 2002 were 10,455,000, 10,391,000 and 8,124,000, respectively. For the diluted net income per share computation, common stock equivalents of 406,000, 260,000 and 195,000 are included for the years ended December 31, 2004, 2003, and 2002, respectively. Common stock equivalents that were antidilutive were 7,000, 11,000 and 410,000 in 2004, 2003, and 2002, respectively.

K. Comprehensive Income. Comprehensive income consists of net income and other comprehensive income. Other comprehensive income includes items recorded directly to equity, such as unrealized gains and losses on securities available for sale, net of tax. Comprehensive income is presented in the consolidated statements of changes in stockholders’ equity.

F-10

L. Intangible Assets. Intangible assets of the Corporation consist primarily of a core deposit intangible. Core deposit intangibles represent the intangible value of depositor relationships assumed in purchase acquisitions and are amortized on a straight-line basis over a period of ten years, and the unamortized balance is evaluated for impairment on a periodic basis.

M. Derivative Financial Instruments. Derivative financial instruments are recorded at fair value as either assets or liabilities on the balance sheet. For non-exchange traded contracts, fair value is based on dealer quotes, pricing models or quoted prices for instruments with similar characteristics. The Corporation designates a derivative as held for trading or hedging purposes when it enters into a derivative contract. Derivatives designated as held for trading activities are included in the Corporation’s trading portfolio with changes in fair value reflected in trading account profits. The Corporation formally documents at inception all relationships between hedging instruments and hedged items, as well as its risk management objectives, strategies for undertaking various hedge transactions, and the methodology for measuring ineffectiveness as required by SFAS 133. Additionally, the Corporation uses regression analysis at the hedge’s inception and quarterly thereafter to assess whether the derivative used in its hedging transaction is expected to be or has been highly effective in offsetting changes in the fair value or cash flows of the hedged items. The Corporation discontinues hedge accounting when it is determined that a derivative is not expected to be or has ceased to be highly effective as a hedge, and then reflects changes in fair value in earnings.

     The Corporation uses its derivatives designated for hedging activities as either fair value or cash flow hedges. Fair value hedges are used to limit the Corporation’s exposure to changes in the fair value of its fixed rate interest earning assets or interest bearing liabilities that are due to interest rate volatility. Cash flow hedges are used to minimize the variability of cash flows of interest bearing assets or liabilities caused by interest rate fluctuations. Changes in the fair value of derivatives designated as highly effective as hedges are recorded in earnings or other comprehensive income, depending on whether the hedging relationship satisfies the criteria for a fair value or cash flow hedge, respectively. Hedge ineffectiveness and gains and losses on the excluded component of a derivative in assessing hedge effectiveness are recorded in earnings.

     If a derivative instrument in a fair value hedge is terminated or the hedge designation removed, the difference between a hedge item’s then carrying amount and its face amount is recognized into income over the original hedge period. Similarly, if a derivative instrument in a cash flow hedge is terminated or the hedge designation removed, related amounts accumulated in other comprehensive income are reclassified into earnings over the original hedge period during which the hedged item affects income.

N. Segment Reporting. Substantially all of the Corporation’s business is conducted through its banking subsidiary and involves the delivery of loan and deposit products to customers. The Corporation makes operating decisions and assesses performance based on an ongoing review of these banking operations, which constitute the only operating segment for financial reporting.

O. Reclassification. Certain reclassifications have been made in the consolidated financial statements for 2003 and 2002 to conform to the classification presented in 2004.

2. CASH AND DUE FROM BANKS

The Corporation maintains various deposits with other banks. As of December 31, 2004 and 2003, the Corporation maintained sufficient cash on hand to satisfy Federal regulatory requirements.

F-11

3. SECURITIES

The amortized cost and estimated market value of securities available for sale are as follows:

	December 31,
	2004									2003
			Gross		Gross			Estimated				Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market		Amortized		Unrealized		Unrealized			Market
(in thousands)	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
U.S. Treasury obligations	$	2,016	$	—	$	(78	)	$	1,938	$	2,018	$	—	$	(96	)	$	1,922
U.S. government-sponsored agencies		236,846		309		(1,714	)		235,441		140,995		366		(1,385	)		139,976
Mortgage-backed securities
Issued by FNMA/FHLMC		470,993		4,002		(4,208	)		470,787		518,875		4,176		(5,770	)		517,281
Issued by GNMA		20,339		296		(38	)		20,597		62,656		1,019		(463	)		63,212
Corporate obligations		31,723		1,483		(95	)		33,111		35,071		846		(152	)		35,765
Federal Reserve Bank stock		3,551		—		—			3,551		3,551		—		—			3,551
Federal Home Loan Bank stock		37,100		—		—			37,100		36,300		—		—			36,300
Total	$	802,568	$	6,090	$	(6,133	)	$	802,525	$	799,466	$	6,407	$	(7,866	)	$	798,007

The amortized cost and estimated market value of investment securities are as follows:

	December 31,
	2004									2003
			Gross		Gross			Estimated				Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market		Amortized		Unrealized		Unrealized			Market
(in thousands)	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
Obligations of state and political subdivisions	$	76,142	$	1,977	$	(334	)	$	77,785	$	65,747	$	2,007	$	(286	)	$	67,468
Mortgage-backed securities
Issued by FNMA/FHLMC		2,115		56		(2	)		2,169		2,939		73		(4	)		3,008
Total	$	78,257	$	2,033	$	(336	)	$	79,954	$	68,686	$	2,080	$	(290	)	$	70,476

F-12

     The amortized cost and estimated market value of securities available for sale and investment securities as of December 31, 2004 by contractual maturity are shown below. The contractual maturity of Federal Reserve Bank stock, Federal Home Loan Bank stock and other equity securities are shown as due after ten years. Expected maturities may differ from contractual maturities because issuers may have the right to call their obligations with or without call or prepayment penalties.

SECURITIES AVAILABLE FOR SALE
			Estimated
	Amortized		Market
(in thousands)	Cost		Value
Due after one year through five years	$	50,988	$	50,875
Due after five years through ten years		192,860		191,485
Due after ten years		67,388		68,781
Subtotal		311,236		311,141
Mortgage-backed securities
Issued by FNMA/FHLMC		470,993		470,787
Issued by GNMA		20,339		20,597
Total	$	802,568	$	802,525

INVESTMENT SECURITIES
			Estimated
	Amortized		Market
(in thousands)	Cost		Value
Due in one year or less	$	745	$	759
Due after one year through five years		4,086		4,216
Due after five years through ten years		11,613		12,150
Due after ten years		59,698		60,660
Subtotal		76,142		77,785
Mortgage-backed securities
Issued by FNMA/FHLMC		2,115		2,169
Total	$	78,257	$	79,954

     Proceeds from sale of securities available for sale during 2004, 2003, and 2002 were $202.1 million, $168.2 million and $237.5 million, respectively. Gross gains of $1,663,000, $1,809,000, and $3,383,000 were realized on those sales in 2004, 2003, and 2002, respectively. Gross losses of $366,000, $296,000 and $299,000 were realized on those sales in 2004, 2003 and 2002, respectively.

F-13

     Securities with a carrying value of approximately $508.8 million as of December 31, 2004 were pledged to secure public deposits and for other purposes as required or permitted by law. As of December 31, 2004, FHLB stock with a carrying value of $37.1 million was held by the Corporation as required by the FHLB.

     The following tables provide additional information regarding securities with unrealized losses at December 31, 2004.

SECURITIES AVAILABLE FOR SALE
	December 31, 2004
	Less than 12 months					12 months or longer					Total
			Unrealized					Unrealized					Unrealized
(in thousands)	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
U.S. Treasury obligations	$	—	$	—		$	1,938	$	(78	)	$	1,938	$	(78	)
U.S. government-sponsored agencies		118,502		(1,363	)		14,650		(351	)		133,152		(1,714	)
Mortgage-backed securities
Issued by FNMA/FHLMC		110,096		(1,122	)		102,912		(3,086	)		213,008		(4,208	)
Issued by GNMA		6,272		(38	)		—		—			6,272		(38	)
Corporate obligations		6,321		(95	)		—		—			6,321		(95	)
Total	$	241,191	$	(2,618	)	$	119,500	$	(3,515	)	$	360,691	$	(6,133	)

INVESTMENT SECURITIES
	December 31, 2004
	Less than 12 months					12 months or longer					Total
			Unrealized					Unrealized					Unrealized
(in thousands)	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
Obligations of state and political subdivisions	$	8,519	$	(141	)	$	8,281	$	(193	)	$	16,800	$	(334	)
Mortgage-backed securities
Issued by FNMA/FHLMC		—		—			331		(2	)		331		(2	)
Total	$	8,519	$	(141	)	$	8,612	$	(195	)	$	17,131	$	(336	)

     The Corporation evaluates all securities with unrealized losses quarterly to determine whether the loss is other than temporary. At December 31, 2004, the Corporation determined that all unrealized losses were temporary in nature. This conclusion was based on several factors, including the strong credit quality of the securities with unrealized losses, the performing nature of these securities, and the low level and short time frame of the unrealized losses. Management believes that the unrealized losses in the securities portfolios were caused by changes in interest rates, market credit spreads, and perceived and actual changes in prepayment speeds on mortgage-backed securities.

     At December 31, 2004, there were 72 issues that had unrealized losses of less than twelve months. These issues included 19 issues of U.S. government-sponsored agencies, 28 agency named mortgage-backed securities, including CMOs, and 23 obligations of state and political subdivisions (tax-free municipal bonds), all of which had an investment grade rating at the time of purchase and at year end. The remaining two issues were fixed rate corporate bonds issued by financial institutions.

F-14

     At December 31, 2004, there were 49 issues that had unrealized losses of twelve months or longer. Three of those issues were U.S. government-sponsored agencies, one issue was a U.S. Treasury bond, 28 were issues of agency named mortgage-backed securities, including CMOs and 17 were tax-free municipal bonds, all of which had an investment grade rating at the time of purchase and at year end.

     The following tables provide information regarding securities with unrealized losses at December 31, 2003.

SECURITIES AVAILABLE FOR SALE
	December 31, 2003
	Less than 12 months					12 months or longer					Total
			Unrealized					Unrealized					Unrealized
(in thousands)	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
U.S. Treasury obligations	$	1,923	$	(95		$	—	$	—		$	1,923	$	(95	)
U.S. government-sponsored agencies		88,610		(1,386	)		—		—			88,610		(1,386	)
Mortgage-backed securities
Issued by FNMA/FHLMC		276,891		(5,760	)		549		(10	)		277,440		(5,770	)
Issued by GNMA		22,030		(454	)		143		(9	)		22,173		(463	)
Corporate obligations		—		—			4,744		(152	)		4,744		(152	)
Total	$	389,454	$	(7,695	)	$	5,436	$	(171	)	$	394,890	$	(7,866	)

INVESTMENT SECURITIES
	December 31, 2003
	Less than 12 months					12 months or longer					Total
			Unrealized					Unrealized					Unrealized
(in thousands)	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
Obligations of state and political subdivisions	$	12,797	$	(260	)	$	598	$	(26	)	$	13,395	$	(286	)
Mortgage-backed securities
Issued by FNMA/FHLMC		—		—			574		(4	)		574		(4	)
Total	$	12,797	$	(260	)	$	1,172	$	(30	)	$	13,969	$	(290	)

F-15

4. LOANS AND ALLOWANCE FOR LOAN LOSSES

The following table shows comparative year-end detail of the loan portfolio and includes unamortized deferred fees of $2.4 million and $1.2 million at December 31, 2004 and 2003, respectively:

	December 31,
(in thousands)	2004		2003
Commercial real estate	$	1,000,658	$	760,900
Commercial and industrial		471,366		388,592
Residential		182,023		180,830
Consumer		128,545		113,033
Total loans	$	1,782,592	$	1,443,355

     Residential mortgage loans held for sale amounted to $453,000 and $578,000 as of December 31, 2004 and 2003, respectively. These loans are accounted for at the lower of aggregate cost or market value and are included in the table above. At December 31, 2004, approximately $420.8 million of loans were pledged as collateral under borrowing arrangements with the FHLB.

     The Corporation originates and sells mortgage loans to FNMA and FHLMC. Generally, servicing on such loans is retained by the Corporation. As of December 31, 2004 and 2003, loans serviced for FNMA and FHLMC were $ 7.8 million and $10.9 million, respectively.

     The Corporation has extended credit in the ordinary course of business to directors, officers, and their associates on substantially the same terms, including interest rates and collateral, as those prevailing for comparable transactions with other customers of the Corporation. None of these loans were past due or on nonaccrual status as of December 31, 2004 and 2003.

     The following table summarizes activity with respect to such loans:

	Year Ended December 31,
(in thousands)	2004		2003
Balance as of beginning of year	$	72,888	$	42,996
Additions		13,696		52,220
Reductions		31,721		22,328
Balance as of end of year	$	54,863	$	72,888

     The majority of the Corporation’s business is with customers located within Mercer County, New Jersey and contiguous counties. Accordingly, the ultimate collectibility of the loan portfolio and the recovery of the carrying amount of real estate are subject to changes in the region’s economic environment and real estate market. A significant portion of the total portfolio is secured by real estate. The principal areas of exposure are construction and

F-16

development loans, which are primarily commercial and residential projects, and commercial mortgage loans. Commercial mortgage loans are completed projects and are generally owner-occupied or tenanted investment projects, creating cash flow.

     Changes in the allowance for loan losses are as follows:

	Year Ended December 31,
(in thousands)	2004			2003			2002
Balance as of beginning of year	$	17,295		$	16,821		$	13,542
Loans charged off		(7,039	)		(8,989	)		(1,188	)
Recoveries of loans charged off		235			103			92
Net charge offs		(6,804	)		(8,886	)		(1,096	)
Provision charged to operations		9,625			9,360			4,375
Balance as of end of year	$	20,116		$	17,295		$	16,821

     The detail of loans charged off is as follows:

	Year Ended December 31,
(in thousands)	2004			2003			2002
Commercial real estate	$	—		$	(1,853	)	$	(78	)
Commercial and industrial		(6,556	)		(6,592	)		(719	)
Residential		(254	)		(251	)		(168	)
Consumer		(229	)		(293	)		(223	)
Total	$	(7,039	)	$	(8,989	)	$	(1,188	)

     Nonperforming assets include nonperforming loans and other real estate. The nonperforming loan category includes loans on which accrual of interest has been discontinued (nonaccrual), loans 90 days past due or more on which interest is still accruing, and restructured loans. Nonperforming loans as a percentage of total loans were 0.56% as of December 31, 2004 and 0.74% as of December 31, 2003.

F-17

     A summary of nonperforming assets follows:

	December 31,
(in thousands)	2004		2003
Nonaccrual loans:
Commercial real estate	$	910	$	1,321
Commercial and industrial		7,867		8,570
Residential		51		255
Consumer		281		35
Total nonaccrual loans	$	9,109	$	10,181
Loans past due 90 days or more:
Residential	$	791	$	362
Consumer		108		97
Total loans past due 90 days or more		899		459
Total nonperforming loans		10,008		10,640
Total nonperforming assets	$	10,008	$	10,640

     The Corporation has defined the population of impaired loans to be all nonaccrual commercial real estate and commercial and industrial loans. Impaired loans are individually assessed to determine that the loan’s carrying value is not in excess of the fair value of the collateral or the present value of the loan’s expected cash flows. Smaller balance homogeneous loans that are collectively evaluated for impairment, including residential mortgage and consumer loans, are specifically excluded from the impaired loan portfolio.

     The recorded investment in loans receivable for which an impairment has been recognized as of December 31, 2004 and 2003 was $8.8 million and $10.0 million, respectively. The related allowance for loan losses on these loans as of December 31, 2004 and 2003 was $2.7 million and $3.6 million, respectively. The average recorded investment in impaired loans during 2004, 2003, and 2002 was $10.6 million, $6.7 million and $3.8 million, respectively. There was no interest income recognized on impaired loans in 2004, 2003, and 2002 while the loans were impaired. There are no commitments to lend additional funds to debtors whose loans are nonperforming.

     Additional income before income taxes amounting to approximately $600,000 in 2004, $541,000 in 2003 and $240,000 in 2002 would have been recognized if interest on all nonaccrual loans had been recorded based upon original contract terms.

F-18

5. BANK PREMISES AND EQUIPMENT

The following table represents comparative information for premises and equipment:

	December 31,
(in thousands)	2004		2003
Land and improvements	$	409	$	562
Buildings and improvements		8,855		9,073
Furniture and equipment		18,094		17,317
Construction in process		312		233
Total		27,670		27,185
Less accumulated depreciation		17,239		14,878
Bank premises and equipment, net	$	10,431	$	12,307

     Depreciation expense on bank premises and equipment included in non-interest expense in the consolidated statements of income was $2.4 million, $2.3 million and $1.9 million for 2004, 2003, and 2002, respectively.

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6. DEPOSITS

Total deposits consist of the following:

	December 31,
(in thousands)	2004		2003
Non-interest bearing demand deposits	$	202,196	$	163,812
Interest bearing demand deposits		542,186		279,569
Money market deposits		332,072		352,760
Savings deposits		93,571		96,802
Certificates of deposit of $100,000 or more		166,983		133,947
Other time deposits		472,996		456,919
Total	$	1,810,004	$	1,483,809

     A summary of certificates of deposit by maturity is as follows:

	December 31,
(in thousands)	2004		2003
Within one year	$	350,409	$	391,865
One to two years		187,596		101,096
Two to three years		69,730		21,363
Three to four years		19,722		53,551
Four to five years		12,522		22,991
Total	$	639,979	$	590,866

     In December 2003, the Bank purchased the Lawrence, New Jersey branch of First Savings Bank, a subsidiary of First Sentinel Bancorp. Under the terms of the agreement, the Bank assumed approximately $38.0 million in deposits and purchased the land and building. In March 2004 the Corporation entered into a sale lease back transaction on the acquired land and building, which resulted in an immaterial gain. The primary purpose of this purchase was to continue to expand the Bank’s branch network and increase deposits. The Corporation recognized a core deposit intangible of approximately $2.0 million. This core deposit intangible is being amortized over a ten-year period using a straight-line methodology. Under SFAS No. 142 “Goodwill and Other Intangible Assets” (“SFAS 142”) intangible assets, having finite useful lives, are separately recognized and amortized over their estimated useful lives. Intangible assets with finite useful lives are reviewed for impairment on a periodic basis. Core deposit intangible amortization was approximately $204,000 and approximately $17,000 in 2004 and 2003 respectively. At December 31, 2004 the balance in core deposit intangible, which is included in other assets in the accompanying Consolidated Statement of Condition, was approximately $1.8 million.

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7. BORROWED FUNDS

Borrowed funds include securities sold under agreements to repurchase, FHLB advances, subordinated debentures and obligation for ESOP. Other borrowed funds consist of Federal funds purchased and Treasury tax and loan deposits.

     The following table presents comparative data related to borrowed funds of the Corporation as of and for the years ended December 31, 2004, 2003, and 2002.

	December 31,
(in thousands)	2004			2003			2002
Securities sold under agreements to repurchase	$	10,000		$	10,000		$	10,000
FHLB advances		742,000			726,000			746,000
Subordinated debentures		62,892			47,428			33,510
Obligation for ESOP		377			755			400
Other		753			1,325			1,311
Total	$	816,022		$	785,508		$	791,221
Maximum amount outstanding at any month end	$	816,022		$	785,508		$	791,221
Average interest rate on year-end balance		5.15	%		4.95	%		5.05	%
Average amount outstanding during the year	$	793,828		$	783,272		$	768,901
Average interest rate for the year		5.01	%		4.97	%		5.15	%

     There were $10.0 million in securities sold under agreements to repurchase with an expected maturity over 90 days as of December 31, 2004. The outstanding amount is a callable repurchase agreement with an original maturity date of ten years and an original call date of one year. Due to the call provision, the expected maturity could differ from the contractual maturity.

     The FHLB advances as of December 31, 2004 mature as follows:

(in thousands)	2004
Within one year	$	79,000
Over two years to three years		10,000
Over three years to four years		16,500
Over four years to five years		143,500
Over five years		493,000
Total	$	742,000

     The outstanding amount includes $659.0 million in callable advances with original maturity dates of five to ten years and original call dates of three months to five years. After the original call period expires, the borrowings are callable quarterly. Due to the call provisions, expected maturities could differ from contractual maturities.

F-21

Interest expense on borrowed funds is comprised of the following:

	Year Ended December 31,
(in thousands)	2004		2003		2002
Securities sold under agreements to repurchase	$	655	$	624	$	624
FHLB advances		35,381		35,138		35,722
Subordinated debentures		3,711		3,121		3,214
Obligation for ESOP		28		31		44
Other		7		6		13
Total	$	39,782	$	38,920	$	39,617

8. SUBORDINATED DEBENTURES (COMPANY-OBLIGATED MANDATORILY REDEEMABLE TRUST PREFERRED SECURITIES OF SUBSIDIARY TRUSTS)

The Corporation has obtained a portion of funds needed to support the growth of the Bank through the sale of subordinated debentures (“subordinated debentures”) of Yardville National Bancorp to subsidiary statutory business trusts of Yardville National Bancorp (“trusts”). These trusts exist for the sole purpose of raising funds through the issuance of trust preferred securities (“trust preferred securities”), typically in private placement transactions, and investing the proceeds in the purchase of subordinated debentures. The interest rate on the subordinated debentures is identical to the interest rate on the trust preferred securities. Subordinated debentures are the sole assets of each trust and each trust is obligated to distribute all proceeds of a redemption of the subordinated debentures, whether voluntary or upon maturity, to holders of its trust preferred securities. Yardville National Bancorp’s obligation with respect to the subordinated debentures, when viewed together with the obligations of each trust with respect to its trust preferred securities, provides a full and unconditional guarantee on a subordinated basis by Yardville National Bancorp of the obligations of each trust to pay amounts when due on the trust preferred securities of each respective trust.

F-22

     For the year ended December 31, 2004, the Corporation’s trust subsidiaries, along with the transaction date, principal amount of subordinated debentures issued, interest rate of subordinated debentures, maturity date of subordinated debentures, commencement date for redemption of subordinated debentures, and principal use of proceeds, were comprised of the following:

(in thousands)		Principal		Interest	Maturity	Earliest Date upon
		Amount of		Rate for	Date of	which
		Subordinated		Subordinated	Subordinated	Redemptions are
Name of Trust	Transaction Date	Debentures		Debentures	Debentures	Permitted
Yardville Capital Trust II	June 2000	$	15,464	9.50%	June 22, 2030	June 23, 2010
Yardville Capital Trust III	March 2001	$	6,190	10.18%	June 8, 2031	June 8, 2011
Yardville Capital Trust IV	February 2003	$	15,464	Floating rate based on three month LIBOR +340 basis points	March 1, 2033	March 1, 2008
Yardville Capital Trust V	September 2003	$	10,310	Floating rate based on three month LIBOR +300 basis points	October 8, 2033	October 8, 2008
Yardville Capital Trust VI	June 2004	$	15,464	Floating rate based on three month LIBOR +270 basis points	July 23, 2034	July 23, 2009
Total		$	62,892

     At December 31, 2004 subordinated debentures consisted of $1,892,000 in equity securities and $61,000,000 in trust preferred securities.

     The principal use of proceeds for Yardville Capital Trust, II, III and V were contributed as capital to the Bank to support growth. A portion of the proceeds of Yardville Capital Trust IV was used to retire the subordinated debentures of Yardville Capital Trust in March 2003 with the remainder contributed as capital to the Bank to support growth. The proceeds from Yardville Capital Trust VI are being used to meet cash flow needs of the holding company, which may include contributions as capital to the Bank to support growth.

     FASB Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”) was issued in January 2003 and was reissued as FASB Interpretation No. 46 (revised December 2003) (“FIN 46R”). For public entities, FIN 46 or FIN 46R is applicable to all special-purpose entities (SPEs) in which the entity holds a variable interest no later than the end of the first reporting period ending after December 15, 2003. FIN 46 and FIN 46R may be applied prospectively with a cumulative-effect adjustment as of the date on which it is first applied or by restating previously issued financial statements for one or more years with a cumulative-effect adjustment as of the beginning of the first year restated. FIN 46 and FIN 46R provides guidance on the identification of entities controlled through means other than voting rights. FIN 46 and FIN 46R specifies how a business enterprise should evaluate its interest in a variable interest entity to determine whether to consolidate that entity. A variable interest entity must be consolidated by its primary beneficiary if the entity does not effectively disperse risks among the parties involved. The adoption of FIN 46 required the Corporation to deconsolidate its investment in Mandatorily Redeemable Trust Preferred Securities of subsidiary trusts in its financial statements. See Note 15 — Regulatory Matters.

F-23

9. INCOME TAXES

Income taxes reflected in the consolidated financial statements for 2004, 2003, and 2002 are as follows:

	Year Ended December 31,
(in thousands)	2004			2003			2002
Federal:
Current	$	8,629		$	3,509		$	6,357
Deferred		(1,208	)		(279	)		(1,120	)
State:
Current		622			719			669
Deferred		(144	)		(503	)		(542	)
Total tax expense	$	7,899		$	3,446		$	5,364

F-24

     Deferred income taxes reflect the impact of “temporary differences” between amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws. Temporary differences which give rise to a significant portion of deferred tax assets and liabilities for 2004 and 2003 are as follows:

	December 31,
(in thousands)	2004			2003
Deferred tax assets:
Allowance for loan losses	$	8,217		$	6,907
Writedown of basis of ORE properties		207			202
Nonaccrual loans		39			38
Deferred compensation		2,543			1,787
State tax credits		900			1,039
Accumulated other comprehensive loss		15			496
Total deferred tax assets	$	11,921		$	10,469
Deferred tax liabilities:
Deferred income		(2,601	)		(1,846	)
Depreciation		18			(123	)
Unamortized discount accretion		(95	)		(127	)
Total deferred tax liability		(2,678	)		(2,096	)
Net deferred tax assets	$	9,243		$	8,373

     The Corporation is not aware of any factors which would generate significant differences between taxable income and pre-tax accounting income in future years, except for the effects of the reversal of current or future net deductible temporary differences. Management believes, based upon current information, that it is more likely than not that there will be sufficient taxable income through carryback to prior years to realize the net deferred tax assets. However, there can be no assurance regarding the level of earnings in the future.

F-25

     A reconciliation of the tax expense computed by multiplying pre-tax accounting income by the statutory Federal income tax rate of 35% for 2004 and 34% for 2003 and 2002 is as follows:

	Year ended December 31,
(in thousands)	2004			2003			2002
Income tax expense at statutory rate	$	9,248		$	4,677		$	6,585
State income taxes, net of Federal benefit		310			143			84
Changes in taxes resulting from:
Tax-exempt interest		(1,082	)		(937	)		(822	)
Tax-exempt income		(618	)		(692	)		(571	)
Non-deductible expenses		220			164			88
Other		(179	)		91			—
Total	$	7,899		$	3,446		$	5,364

F-26

10. BENEFIT PLANS

Retirement Savings Plan. The Corporation has a 401(k) plan which covers substantially all employees. After one year of service, the Corporation provides a matching contribution of 50% up to 6% of base compensation for 2004, 2003, and 2002. The plan permits all eligible employees to make contributions to the plan of up to the maximum deferral limit in effect in the calendar year. Employer contributions to the plan amounted to $363,000 in 2004, $284,000 in 2003, and $209,000 in 2002.

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 cost of retiree health and life insurance benefits is recognized over the employees’ period of service. There were $243,000 in periodic postretirement benefit costs under FASB Statement No. 106 in 2004, $130,000 in 2003 and $128,000 in 2002. The actuarial present value of benefit obligations was approximately $1.3 million in 2004 and $1.1 million in 2003.

Other Benefit Plans. The Corporation has a salary continuation plan for key executives and a director deferred compensation plan for its non-employee board members. The plans provide for either yearly retirement benefits to be paid over a specified period or a lump sum payout based on the election choice of the participant. In addition, there is an officer group life insurance plan for divisional officers. The present value of the benefits accrued under these plans as of December 31, 2004 and 2003 was approximately $4.9 million and $3.3 million, respectively, and is included in other liabilities in the accompanying consolidated statements of condition. Compensation expense of approximately $1,588,000, $709,000 and $744,000 is included in the accompanying consolidated statements of income for the years ended December 31, 2004, 2003, and 2002, respectively.

     In connection with the benefit plans, the Corporation has purchased life insurance policies on the lives of the executives, directors, and divisional officers. The Corporation is the owner and beneficiary of the policies. The cash surrender values of the policies were approximately $44.5 million and $42.8 million as of December 31, 2004 and 2003, respectively.

Stock Option Plans. The Corporation maintains stock option plans for both officers and directors. Common shares issued relating to the exercise of stock options are obtained from authorized shares. In March 1988, the stockholders approved the 1988 plan for key employees (Employee Plan). The Employee Plan allowed for the granting of up to 328,000 shares of the Corporation’s common stock at an option price no less than the market value of stock on the date such options are granted. As of February 28, 1998, no stock options may be granted under the Employee Plan. As of December 31, 2004, there were no stock options outstanding related to the Employee Plan.

     In April 1997, the stockholders approved the 1997 stock option plan for key employees (the 1997 Plan). The 1997 Plan allows for the granting of 1,070,000 shares of the Corporation’s common stock at an option price to be no less than the market value of the stock on the date such options are granted. Options typically have a ten-year term and vest ratably over a five-year period. At December 31, 2004, there were 120,190 shares available for grant under the 1997 Plan.

     In April 1994, the Board of Directors approved a non-qualified stock option plan for non-employee directors (the 1994 Director Plan). The 1994 Director Plan allowed for the granting of 228,820 shares of the Corporation’s common stock at an option price to be no less than the market value of the stock on the date such options are granted.

F-27

As of November 1, 2002, options to purchase an aggregate of 125,980 shares of common stock were outstanding under the plan (at exercise prices ranging from $10.94 to $17.20 per share, with vesting over a period of four years and terms of ten years). In addition, an aggregate of 8,248 shares had been acquired upon exercise of vested options by two directors. On three occasions (once in 1998, once in 2000 and once in 2002), the number of shares available for grant of options under this plan was increased by the Board of Directors. Each of these increases was inadvertently implemented without obtaining shareholder approval required under applicable rules of the Nasdaq Stock Market. Upon being advised of this shareholder approval requirement, the Corporation cancelled the increases in number of shares available under the plan, and the non-employee directors holding options granted without shareholder approval have rescinded and terminated such options. These terminations were also completed in November 2002. In addition, the Corporation and the two directors that had exercised vested options agreed to rescind the exercise by taking back shares that had been acquired upon exercise of such options in exchange for a return of the exercise price (aggregating approximately $124,000) to the applicable holder. These terminations were completed in November 2002. These transactions did not have a material adverse effect on the Corporation’s financial condition or results of operations. At December 31, 2004, there were no shares available for grant under the 1994 Director Plan.

     In June 2003, the stockholders approved a non-qualified stock option plan for non-employee directors (the 2003 Directors Plan). The 2003 Directors Plan allows for the granting of 250,000 shares of the Corporation’s common stock at an option price to be no less than the market value of the stock on the date such options are granted. Options granted under this plan vest immediately and have a term not to exceed ten years. The plan provides for a grant of 3,000 options per year to each non-employee director who is a director on the day immediately after each annual meeting of stockholders. In addition, the plan allows for the granting of stock options to new non-employee directors. At December 31, 2004, there were 193,000 shares available for grant under the 2003 Director Plan.

     The tables below list the activity in the Corporation’s stock option plans for each of the years in the three-year period ended December 31, 2004:

			Weighted Average
1988 and 1997 Plans	Shares		Exercise Price
Balance, December 31, 2001		874,961	$	13.31
Shares:
Granted		56,000		17.45
Exercised		53,341		8.97
Expired		4,906		12.06
Balance, December 31, 2002		872,714	$	13.86
Shares:
Granted		107,500		20.00
Exercised		37,596		11.58
Expired		56,540		17.73
Balance, December 31, 2003		886,078	$	14.46
Shares:
Granted		47,500		28.51
Exercised		51,487		14.38
Expired		48,920		19.17
Balance, December 31, 2004		833,171	$	14.98
Shares exercisable as of December 31, 2004		653,963	$	14.81

F-28

			Weighted Average
1994 Director Plan	Shares		Exercise Price
Balance, December 31, 2001		148,100	$	13.67
Shares:
Granted		7,500		12.52
Exercised		8,248		14.92
Expired		28,684		12.94
Terminated		118,668		13.74
Balance, December 31, 2002		—	$	—

			Weighted Average
2003 Director Plan	Shares		Exercise Price
Balance, December 31, 2002		—	$	—
Shares:
Granted		27,000		18.96
Exercised		3,000		18.96
Balance, December 31, 2003		24,000	$	18.96
Shares:
Granted		30,000		24.54
Exercised		3,000		24.54
Balance, December 31, 2004		51,000	$	21.91
Shares exercisable as of December 31, 2004		51,000	$	21.91

     The table below lists information on stock options outstanding as of December 31, 2004:

	Options Outstanding						Options Exercisable
			Weighted Average		Weighted
	Number Of		Remaining		Average		Number of		Weighted
	Shares		Contractual Life in		Exercise		Shares Exercisable		Average
Range of Exercise Prices	Outstanding		Years		Price		at Period End		Exercise Price
$9.50 - $14.25		413,519		5.87	$	11.13		315,011	$	11.10
$16.35 - $24.52		402,152		4.24		17.72		337,952		17.46
$24.70- $33.53		68,500		7.62		27.28		52,000		27.07
		884,171		5.27	$	15.38		704,963	$	15.32

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11. COMMON STOCK

     On December 18, 2002, the Corporation completed the sale of 2,300,000 shares of its common stock in an underwritten public offering. The common stock was offered at a price of $16.25 per share and generated gross proceeds of $37.4 million. Net proceeds after the underwriting discount and other offering costs were $34.3 million. Of the net proceeds, $33.0 million was contributed to the Bank to support asset growth.

     On June 23, 2000, the Corporation completed the private placement of 68,500 units, each unit consisting of 10 shares of common stock and one common stock purchase warrant. The warrants have an expiration date of June 23, 2010 and a purchase price of $12.00 per share. The units were sold to a limited number of accredited investors and generated gross proceeds of $6.9 million. Net proceeds after offering costs were $6.8 million. Nearly all the net proceeds were contributed to the Bank to support asset growth. At December 31, 2004, there were 68,500 warrants outstanding relating to this offering.

     On November 14, 2002, the Corporation repurchased 8,248 shares of the Corporation’s common stock for approximately $124,000 from two directors relating to the termination of the 1994 Director Plan. See Note 10 – Benefit Plans.

     In 1997, in connection with adding a 3% discount to dividend reinvestments through our dividend reinvestment and stock purchase plan (the “YNB DRIP”), the Corporation inadvertently did not register with the Securities and Exchange Commission common stock purchased through the YNB DRIP and may not have distributed certain information to plan participants as required by securities laws. After being advised of those requirements, the Corporation promptly suspended operation of the YNB DRIP. Beginning in the second quarter of 2003 and ending July 21, 2003, the Corporation made an offer to all YNB DRIP participants to rescind their purchases of common stock through the YNB DRIP since December 1, 1997. Approximately 125,993 shares of common stock, as adjusted for stock splits and stock dividends, were acquired through the YNB DRIP since December 1, 1997, at prices ranging from $8.88 to $19.93 per share. On July 21, 2003, the rescission offer expired. YNB DRIP participants accepted the offer with respect to 346 shares. The cost of the repurchase of those shares, the interest paid to those YNB participants and the other costs related to the rescission offer were not material to the Corporation’s financial condition or results of operations.

     On October 15, 2003, the Corporation filed a registration statement for a new Dividend Reinvestment and Stock Purchase Plan and offered reinvestment of dividends starting with the fourth quarter 2003 dividend. In conjunction with the reinvestment of dividends, the Corporation issued 16,871 shares for the year ended December 31, 2004 and 3,102 shares for the year ended December 31, 2003.

     In 1999, the Bank established an Employee Stock Ownership Plan and related trust (“ESOP”) for eligible employees. The ESOP is a tax-qualified plan subject to the requirements of the Employee Retirement Income Security Act of 1974 (ERISA). Employees with twelve months of employment with the Bank and who have worked at least 1,000 hours are eligible to participate. The ESOP has borrowed $2.0 million from an unaffiliated financial institution and purchased 155,340 shares of common shares, no par value, of the Corporation. Shares purchased by the ESOP are held in a suspense account pending allocation among participants as the loan is repaid. This borrowing was repaid in 2003.

     The Corporation’s 401(k) savings plan had, since August 1998, included an option for employees to invest a portion of their plan accounts in a fund (the “YNB Stock Fund”) that acquired shares of the Corporation’s common

F-30

stock in the open market. In connection with the addition of the YNB Stock Fund to the plan, the Corporation inadvertently did not register with the Securities and Exchange Commission the 401(k) savings plan interests or the shares of common stock acquired by the YNB Stock Fund and may not have distributed certain information to plan participants on a timely basis as required by securities laws. After being advised of those requirements, management promptly completed the registration and distributed the required information to the plan participants. In November 2002, the Corporation’s Board of Directors approved the discontinuance of the YNB Stock Fund, and the sale of all common stock shares owned by the YNB Stock Fund to the ESOP. As of May 31, 2003, there was approximately $5.9 million invested in the 401(k) savings plan. In May 2003, the ESOP purchased the 39,515 shares of common stock representing all common shares in the YNB Stock Fund from the 401(k) savings plan for approximately $755,000. The ESOP funded this transaction by borrowing $755,000 from an unaffiliated financial institution. While it is still possible that the Corporation may have liability based on the requirements applicable to the 401(k) savings plan, management does not believe that any such liabilities or claims, if asserted, would have a material adverse effect on our financial condition or results of operations.

     ESOP compensation expense is recognized based on the fair value of the stock when it is committed to be released. Compensation expense amounted to $522,000, $588,000, and $483,000 for the years ended December 31, 2004, 2003, and 2002, respectively. The fair value of unearned shares at December 31, 2004 was $677,000. The number of shares allocated as of December 31, 2004 was 175,098.

     Unallocated shares are deducted from common shares outstanding for earnings per share purposes with shares, which are committed to be released during the year added back into weighted average shares outstanding.

12. OTHER NON-INTEREST EXPENSE

     Other non-interest expense included the following:

	Year ended December 31,
(in thousands)	2004		2003		2002
Marketing	$	1,768	$	1,661	$	1,104
Outside services and processing		1,483		819		646
Directors and committee fees		1,355		346		339
Audit and examination fees		1,032		725		570
Communication and postage		938		844		809
Stationery and supplies		757		908		823
Insurance		509		408		205
Attorneys’ fees		393		480		258
Amortization of subordinated debentures expense		251		169		190
FDIC insurance premium		239		213		200
Deposit intangible amortization		204		17		—
ORE expense		5		194		418
Other		2,833		3,053		1,662
Total	$	11,767	$	9,837	$	7,224

F-31

13. RELATED PARTY TRANSACTIONS

     The Corporation has had and expects to have 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. For a discussion of credit transactions, see Note 4 — Loans and Allowance for Loan Losses. Listed below is a summary of other material relationships or transactions with the Corporation’s directors, senior officers and other affiliates.

     In February 2005, the Corporation entered into a non-exclusive consulting agreement with Mr. Lawrence Seidman for a period commencing on February 18, 2005 and expiring on January 31, 2006. During the term of the agreement, Mr. Seidman has agreed to perform reasonable consulting services in the areas of planning, acquisition and growth opportunities as requested by management and will be paid $5,000 after each fiscal quarter of 2005, as well as a $1,000 monthly fee. In addition, Mr. Seidman agreed that during the term of the agreement he will vote his stock in favor of proposals and nominees put forth by the Corporation and he will not make statements in opposition to, or that would reflect negatively on the Corporation or its banking subsidiary, or their officers and directors. Mr. Seidman retains the right to agree or disagree with any capital offering in excess of $15.0 million. Mr. Seidman also agreed he will not support, initiate or participate in any litigation or proxy contest against the Corporation, its banking subsidiary, or their officers and directors during the term of this agreement. The Corporation agreed to give Mr. Seidman consideration for a future directorship in accordance with the Corporation’s policies regarding nominations and nomination criteria. According to a Schedule 13D/A filed with the Securities and Exchange Commission on February 18, 2005, Mr. Seidman and related parties control an aggregate of 745,658 shares or approximately 7.1% of the Corporation’s outstanding class of common stock.

     In January 2005, Patrick L. Ryan, the son of Patrick M. Ryan, the President and Chief Executive Officer of the Holding Company and the Bank, joined the Bank in the position of Senior Vice President and Strategic Planning Officer. His employment agreement with the Bank includes a base salary of $125,000 together with benefits provided to other officers of the same level.

     In January 2005, the Bank signed a five-year lease with 2 five-year renewal options for its maintenance department center. This property is owned by Lalor Storage LLC, a limited liability company of which Christopher S. Vernon, a director of the Corporation and the Bank, is a member. Under the terms of the lease, the Bank is required to pay $4,984 per month, which includes any common area maintenance expenses.

     In October 2004, upon expiration of the initial five-year term and the second five-year renewal term, the Bank renewed its lease for another five-year term for its Trenton branch office, which is owned by The Lalor Urban Renewal Limited Partnership. The Lalor Corporation, which is the general partner of the limited partnership, is owned by Sidney L. Hofing, a director of the Corporation and the Bank. Under the lease, the Bank is obligated to pay approximately $2,950 per month, which includes any common area maintenance expenses.

     In June 2003, the Bank sold its former operations building to Christopher S. Vernon, a director of the Corporation and the Bank. The purchase price was $650,000 and the Bank recorded a gain of $429,000 in the second quarter of 2003, which is included in other non-interest income in the consolidated statements of income. The Bank leased the basement of the building on a month-by-month basis. Under the terms of that lease, the Bank was required to pay $2,783 per month, which included any common area maintenance expenses. In January 2005, the Bank ended its lease for this property.

     In October 2001, the Bank signed a fifteen-year lease with 3 five-year renewal options for its Hunterdon County Regional Headquarters. The property is owned by FYNB LLC, a limited liability company of which Sidney L. Hofing, a director of the Corporation and the Bank, previously had an ownership interest and several members of Mr. Hofing’s immediate family, including his spouse, continue to have an ownership interest. Under the terms of the lease, the Bank is obligated to pay approximately $21,700 per month, which included any common area maintenance expenses.

F-32

     In May 2001, the Bank signed a ten-year lease with 3 five-year renewal options for its Bordentown, New Jersey branch office. The Bank acquired the property from the bankruptcy estate of a borrower and sold the property to BYN, LLC, a limited liability company of which Sidney L. Hofing, a director of the Corporation and the Bank, is a member. The purchase price was approximately $537,000. Under the terms of the lease, the Bank is obligated to pay approximately $7,100 per month, which included any common area maintenance expenses.

     In July 2000, the Bank signed a ten-year lease with 4 five-year renewal options for the Lawrence branch office. The property is owned by Union Properties LLC, a limited liability company of which Sidney L. Hofing, a director of the Corporation and the Bank, is a member. Under the terms of the lease, the Bank is obligated to pay approximately $7,700 per month, which included any common area maintenance expenses.

     In April 2000, the Bank signed a five-year lease with 3 five-year renewal options for its branch in Marrazzo’s Thriftway in West Trenton, New Jersey. The property is owned by Serenity Point LLC, a limited liability company of which Mr. Marrazzo, a director of the Company and the Bank, is a member. Mr. Marrazzo also owns and operates Marrazzo’s Thriftway. Under the terms of the lease, which was executed prior to Mr. Marrazzo becoming a member of the Board, the Bank is obligated to pay approximately $2,100 per month, which included any common area maintenance expenses.

     Except as described in Note 4 — Loans and Allowance for Loan Losses and above, there were no new material loan relationships established in 2004.

14. OTHER COMMITMENTS AND CONTINGENT LIABILITIES

The Corporation enters into a variety of financial instruments with off-balance sheet risk in the normal course of business. These financial instruments include commitments to extend credit and letters of credit, both of which involve, to varying degrees, elements of risk in excess of the amount recognized in the consolidated financial statements.

     Credit risk, the risk that a counterparty of a particular financial instrument will fail to perform, is the contract amount of the commitments to extend credit and letters of credit. The credit risk associated with these financial instruments is essentially the same as that involved in extending loans to customers. Credit risk is managed by limiting the total amount of arrangements outstanding and by applying normal credit policies to all activities with credit risk. Collateral is obtained based on management’s credit assessment of the customer.

     The contract amounts of off-balance sheet financial instruments as of December 31, 2004 and 2003 for commitments to extend credit were $406.8 million and $305.5 million, respectively. For letters of credit, the contract amounts were $36.2 million and $28.2 million, respectively.

F-33

     As part of its normal course of business, the Corporation issues standby letters of credit as part of an overall lending relationship. These standby letters of credit are primarily related to performance guarantees on real estate development. At December 31, 2004 and 2003, the amount of standby letters of credit outstanding (and the maximum liability of the Corporation) were $32.9 million and $24.9 million, respectively. The Corporation typically obtains collateral to secure standby letters of credit. At December 31, 2004 and 2003, collateral securing standby letters of credit was $20.0 million and $14.9 million, respectively, and is available to offset potential losses.

     Commitments to extend credit and letters of credit may expire without being drawn upon and, therefore, the total commitment amounts do not necessarily represent future cash flow requirements.

     The Corporation maintains lines of credit with five of its correspondent banks. There were $29.0 million in lines of credit available as of December 31, 2004. Subject to collateral requirements, the Corporation also maintains lines of credit with the FHLB and three brokerage firms. There were approximately $300.0 million in lines available at December 31, 2004.

     The Corporation leases various banking offices, its corporate headquarters and operations center. Total lease rental expense was $2.3 million, $2.1 million, and $1.9 million for the years ended December 31, 2004, 2003, and 2002, respectively. Minimum rentals under the terms of the leases are approximately $2.5 million per year in 2005, 2006 and 2007, $2.4 million in 2008 and $2.3 million in 2009.

     The Corporation and the Bank are party, in the ordinary course of business, to litigation involving collection matters, contract claims and other miscellaneous causes of action arising from their business. Management does not consider that any such proceedings depart from usual routine litigation and, in its judgment, the Corporation’s consolidated financial condition and results of operations will not be adversely affected by the final outcome of any pending legal proceedings.

15. REGULATORY MATTERS

     The Corporation and the Bank are subject to risk based capital guidelines administered by Federal banking agencies. The guidelines are designed to make regulatory capital requirements more sensitive to risk profiles among banks and bank holding companies, to account for off-balance exposure and to minimize disincentives for holding liquid assets. Under the guidelines, assets and certain off-balance sheet items are assigned to broad risk categories, each with applicable weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and certain off-balance sheet items. The guidelines require all banks and bank holding companies to maintain a minimum ratio of total risk based capital to total risk weighted assets of 8%, maintain a minimum ratio of Tier 1 capital to total risk-weighted assets of 4% and Tier 1 capital to average total assets of 4%. Capital amounts and classification are also subject to qualitative judgment by Federal banking agencies concerning components, risk weightings and other factors. Failures to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have an adverse material effect on the consolidated financial statements.

F-34

     The following table presents the Corporation’s and Bank’s actual capital amounts and ratios:

Regulatory Capital									Per Regulatory Guidelines
			Actual				Minimum					“Well Capitalized”
(amounts in thousands)	Amount			Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2004:
Corporation
Total capital (to risk-weighted assets)	$	239,480			11.4	%	$	167,823		8.0	%	$	209,779		10.0	%
Tier 1 capital (to risk-weighted assets)		211,759			10.1			83,912		4.0			125,867		6.0
Tier 1 capital (to average assets)		211,759			8.0			106,026		4.0			132,533		5.0
Bank
Total capital (to risk-weighted assets)	$	210,758			10.1	%	$	167,320		8.0	%	$	209,150		10.0	%
Tier 1 capital (to risk-weighted assets)		190,642			9.1			83,660		4.0			125,490		6.0
Tier 1 capital (to average assets)		190,642			6.8			112,209		4.0			140,261		5.0
As of December 31, 2003:
Corporation
Total capital (to risk-weighted assets)	$	205,788			12.1	%	$	136,454		8.0	%	$	170,293		10.0	%
Tier 1 capital (to risk-weighted assets)		188,493			11.1			68,227		4.0			102,340		6.0
Tier 1 capital (to average assets)		188,493			8.0			93,834		4.0			117,293		5.0
Bank
Total capital (to risk-weighted assets)	$	190,090			11.1	%	$	136,454		8.0	%	$	170,567		10.0	%
Tier 1 capital (to risk-weighted assets)		172,795			10.1			68,227		4.0			102,340		6.0
Tier 1 capital (to average assets)		172,795			7.4			93,469		4.0			116,836		5.0

     As of December 31, 2004, the most recent notification from the Office of the Comptroller of the Currency categorized the Bank as well capitalized under the regulatory framework. Under the capital adequacy guidelines, a well capitalized institution must maintain a total risk adjusted capital ratio of at least 10%, a Tier 1 capital ratio of at least 6%, a leverage ratio of at least 5%, and not be subject to any regulatory written order, agreement or directive.

     The principal source of funds for the Corporation is dividends from the Bank. There are various legal and regulatory limits on the extent to which banking subsidiaries can finance or otherwise provide funds to their holding companies. Permission from the Office of the Comptroller of the Currency is required if the total of dividends declared in a calendar year exceeds the total of the Bank’s net profits, as defined by the Comptroller, for that year, combined with its retained net profits for the two preceding years. In addition, if the Corporation were to defer payments on the subordinated debentures used to fund payments on its trust-preferred securities, it would be unable to pay dividends on its common stock until the deferred payments were made. The retained net profits of the Bank available for dividends were approximately $23.0 million as of December 31, 2004.

     The adoption of FIN 46R required the Corporation to deconsolidate its investment in Company-Obligated Mandatorily Redeemable Trust Preferred Securities of Subsidiary Trusts in its financial statements (see Note 8).

F-35

     On March 1, 2005, the Board of Governors of the Federal Reserve System adopted a final rule that allows the continued inclusion of outstanding and prospective issuances of trust preferred securities in the Tier 1 capital of bank holding companies, subject to stricter quantitative limits and qualitative standards. The new quantitative limits become effective after a five-year transition period ending March 31, 2009. Under the final rules, trust preferred securities and other restricted core capital elements are limited to 25% of all core capital elements. Amounts of restricted core capital elements in excess of these limits may be included in Tier 2 capital. At December 31, 2004, the only restricted core capital element owned by the Corporation is trust preferred securities. Based on a preliminary review of the final rule, the Corporation believes that its trust preferred issues will qualify as Tier 1 capital up to the limit with the remaining qualifying as Tier 2 capital.

16. FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107 “Disclosure About Fair Value of Financial Instruments” (SFAS 107) requires the Corporation to disclose estimated fair value for its financial instruments. Fair value estimates are made at a specific point in time, based on relevant market data and information about the financial instruments. SFAS 107 has no effect on the financial position or results of operations in the current year or any future period. Furthermore, the fair values disclosed under SFAS 107 are not representative of the total value of the Corporation. The following fair value estimates, methods and assumptions were used to measure the fair value of each class of financial instruments for which it is practical to estimate that value:

Cash and Cash Equivalents. For such short-term investments, the carrying amount was considered to be a reasonable estimate of fair value.

Interest Bearing Deposits with Banks. For interest bearing deposits with banks, the carrying amount was considered to be a reasonable estimate of fair value.

Securities Available for Sale and Investment Securities. The fair value of securities, including mortgage-backed securities, is based on bid prices published in financial newspapers or bid quotations received from securities dealers.

Loans. Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial and industrial, commercial real estate, residential mortgage and other consumer. Each loan category is further segmented into fixed and adjustable rate interest terms and by performing and nonperforming categories.

     The fair value of performing loans, except residential mortgage loans, is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan. The estimate of maturity is based on the Corporation’s historical experience with repayments for each loan classification, modified, as required, by an estimate of the effect of current economic and lending conditions. For performing residential mortgage loans, fair value is estimated by discounting contractual cash flows adjusted for prepayment estimates using discount rates based on secondary market sources adjusted to reflect differences in servicing and credit costs.

     Fair value for significant nonperforming loans is based on recent external appraisals. If appraisals are not available, estimated cash flows are discounted using a rate commensurate with the risk associated with the estimated cash flows. Assumptions regarding credit risk, cash flows, and discount rates are judgmentally determined using available market information and specific borrower information.

F-36

Deposit Liabilities. The fair value of deposits with no stated maturity, such as non-interest bearing demand deposits, interest bearing demand deposits, money market, and savings deposits, is considered to be equal to the amount payable on demand. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.

Borrowed Funds. For securities sold under agreements to repurchase and FHLB advances, fair value was based on rates currently available to the Corporation for agreements with similar terms and remaining maturities. For convertible securities sold under agreements to repurchase and FHLB advances, option adjusted spread pricing (OAS) was obtained from sources believed to be reliable. For other borrowed funds, the carrying amount was considered to be a reasonable estimate of fair values.

Subordinated Debentures. For subordinated debentures, the fair value was based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for subordinated debentures having similar credit and maturity terms.

F-37

     The estimated fair values of the Corporation’s financial instruments are as follows:

	December 31, 2004
	Carrying		Fair
(in thousands)	Value		Value
Financial Assets:
Cash and cash equivalents	$	38,884	$	38,884
Interest bearing deposits		41,297		41,297
Securities available for sale		802,525		802,525
Investment securities		78,257		79,954
Loans, net		1,762,476		1,764,803
Financial Liabilities:
Deposits		1,810,004		1,808,962
Borrowed funds		753,130		804,587
Subordinated debentures		62,892		64,763

	December 31, 2003
	Carrying		Fair
(in thousands)	Value		Value
Financial Assets:
Cash and cash equivalents	$	33,155	$	33,155
Interest bearing deposits		20,552		20,552
Securities available for sale		798,007		798,007
Investment securities		68,686		70,476
Loans, net		1,426,060		1,435,330
Financial Liabilities:
Deposits		1,483,809		1,491,810
Borrowed funds		738,080		809,668
Subordinated debentures		47,428		49,311

     The fair value of commitments to extend credit and letters of credit are estimated using the fees currently charged to enter into similar agreements, and as the fair value for these financial instruments was not material, are not included above.

Limitations. Fair value estimates do not reflect any premium or discount that could result from offering for sale at one time the Corporation’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Corporation’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

F-38

     Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets that are not considered financial assets include the deferred tax assets and bank premises and equipment. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in many of the estimates.

17. PARENT CORPORATION INFORMATION

The condensed financial statements of the parent company only are presented below:

Condensed Statements of Condition
	December 31,
(in thousands)	2004		2003
Assets:
Cash	$	14,923	$	12,978
Securities available for sale		5,328		1,678
Investment in subsidiary		192,304		173,857
Other assets		11,535		3,561
Total Assets	$	224,090	$	192,074
Liabilities and Stockholders’ Equity:
Other liabilities	$	663	$	334
Obligation for ESOP		377		755
Subordinated debentures		62,892		47,428
Stockholders’ equity		160,158		143,557
Total Liabilities and Stockholders’ Equity	$	224,090	$	192,074

F-39

Condensed Statements of Income
	Year Ended December 31,
(in thousands)	2004			2003			2002
Operating Income:
Dividends from subsidiary	$	3,970		$	7,575		$	6,647
Interest income		113			96			116
Other income		405			431			444
Total Operating Income		4,488			8,102			7,207
Operating Expense:
Interest expense		3,738			3,057			3,257
Other expense		1,306			1,320			996
Total Operating Expense		5,044			4,377			4,253
(Loss) income before taxes and equity in undistributed income of subsidiary		(556	)		3,725			2,954
Federal income tax benefit		(1,439	)		(1,289	)		(1,243	)
Income before equity in undistributed income of subsidiary		883			5,014			4,197
Equity in undistributed income of subsidiary		17,642			5,295			9,807
Net Income	$	18,525		$	10,309		$	14,004

F-40

Condensed Statements of Cash Flows
	Year Ended December 31,
(in thousands)	2004			2003			2002
Cash Flows from Operating Activities:
Net Income	$	18,525		$	10,309		$	14,004
Adjustments:
(Increase) decrease in other assets		(8,044	)		(1,931	)		1,788
Equity in undistributed income of subsidiary		(17,642	)		(5,295	)		(9,807	)
Increase in other liabilities		492			59			91
Net Cash (Used in) Provided by Operating Activities		(6,669	)		3,142			6,076
Cash Flows from Investing Activities:
Purchase of securities available for sale		(3,449	)		(668	)		—
Investing in subsidiary		—			(5,600	)		(33,787	)
Net Cash Used by Investing Activities		(3,449	)		(6,268	)		(33,787	)
Cash Flows from Financing Activities:
(Decrease) increase in obligation for ESOP		(378	)		355			(400	)
Proceeds from issuance of subordinated debentures		15,464			25,744			—
Retirement of subordinated debentures		—			(11,856	)		—
Proceeds from shares issued		1,794			961			35,253
Treasury stock acquired		—			(6	)		(124	)
Dividends paid		(4,817	)		(4,790	)		(3,546	)
Net Cash Provided by Financing Activities		12,063			10,408			31,183
Net increase in cash		1,945			7,282			3,472
Cash as of beginning of year		12,978			5,696			2,224
Cash as of end of year	$	14,923		$	12,978		$	5,696

18. DERIVATIVE FINANCIAL INSTRUMENTS

The use of derivative financial instruments creates exposure to credit risk. This credit risk relates to losses that would be recognized if the counterparties fail to perform their obligations under the contracts. To mitigate this exposure to nonperformance, the Corporation only deals with counterparties of good credit standing and establishes counterparty credit limits. As part of the Corporation’s interest rate risk management process, the Corporation periodically enters into interest rate derivative contracts. Interest rate derivative contracts are typically used to limit the variability of the Corporation’s net interest income that could result due to shifts in interest rates. These derivative interest rate contracts may include interest rate swaps, caps, and floors and are used to modify the repricing characteristics of specific assets and liabilities. At December 31, 2004, the Corporation’s position in derivative contracts consisted entirely of interest rate swaps. The Corporation had no derivative contracts outstanding at December 31, 2003.

F-41

The following table details the interest rate swaps and associated hedged liabilities outstanding as of December 31, 2004.

(dollars in thousands)	Hedged	Notional		Swap Fixed			Swap Variable
Maturity	Liability	Amounts		Interest Rates			Interest Rates
Pay Floating Swaps
2006	Time Deposits	$	125,000		3.10% - 2.73	%		2.41% - 2.26	%

During 2004, the Corporation issued two-year fixed-rate certificates of deposit to fund loan growth and generate liquidity. In conjunction with the certificate of deposit issuance, the Corporation entered into $125.0 million in pay floating swaps designated as fair value hedges that were used to convert fixed rate two year final maturity time deposits to variable rates indexed to one month and three month LIBOR, based on common notional amounts and maturity dates. The pay floating swaps change the repricing characteristics of the certificates of deposit from fixed rate to floating rate. The result is a better match between the repricing characteristics of the certificates of deposit with floating rate commercial loans the Corporation made in 2004. These transactions reduced interest expense by approximately $497,000 for the year ended December 31, 2004. The amount of hedge ineffectiveness recorded in non-interest expense in the Consolidated Statement of Income on these transactions for the year ended December 31, 2004 was less than $1,000. The fair value of the pay floating swaps outstanding at December 31, 2004 was $532,000 and was recorded in Other Liabilities in the Consolidated Statements of Condition. There were no derivative financial instruments outstanding in 2003.

F-42

Independent Auditors’ Report

The Board of Directors and Stockholders
Yardville National Bancorp:

We have audited the accompanying consolidated statements of condition of Yardville National Bancorp and subsidiaries (the “Company”) as of December 31, 2004 and 2003, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2004. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Yardville National Bancorp and subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.

Short Hills, New Jersey
March 31, 2005

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INDEX TO EXHIBITS

	Exhibit
	Number		Description
(A)		3.1	Restated Certificate of Incorporation of the Company, as corrected by the Certificate of Correction thereto filed on July 6, 1995 and as amended by the Certificate of Amendment thereto filed on March 6, 1998.
(B)		3.2	Certificate of Amendment to the Restated Certificate of Incorporation of the Company filed on June 6, 2003.
(C)		3.3	By-Laws of the Company
(C)		4.1	Specimen Share of Common Stock
(D)		4.2	Amended and Restated Trust Agreement dated October 16, 1997, among the Registrant, as depositor, Wilmington Trust Company, as property trustee, and the Administrative Trustees of Yardville Capital Trust.
(D)		4.3	Indenture dated October 16, 1997, between the Registrant and Wilmington Trust Company, as trustee, relating to the Registrant’s 9.25% Subordinated Debentures due 2027.
(D)		4.4	Preferred Securities Guarantee Agreement dated as of October 16, 1997, between the Registrant and Wilmington Trust Company, as trustee, relating to the Preferred Securities of Yardville Capital Trust.
		4.5	The Registrant will furnish to the Commission upon request copies of the following documents relating to the Registrant’s Series A 9.50% Junior Subordinated Deferrable Interest Debentures due June 22, 2030: (i) Amended and Restated Declaration of Trust dated June 23, 2000, among the Registrant, The Bank of New York, as property trustee, and the Administrative Trustees of Yardville Capital Trust II; (ii) Indenture dated as of June 23, 2000, between the Registrant and The Bank of New York, as trustee, relating to the Registrant’s Series A 9.50% Junior Subordinated Deferrable Interest Debentures due June 22, 2030; and (iii) Series A Capital Securities Guarantee Agreement dated as of June 23, 2000, between the Registrant and The Bank of New York, as trustee, relating to the Series A Capital Securities of Yardville Capital Trust II.
		4.6	The Registrant will furnish to the Commission upon request copies of the following documents relating to the Registrant’s Series A 10.18% Junior Subordinated Deferrable Interest Debentures due June 8, 2031: (i) Amended and Restated Declaration of Trust dated March 28, 2001, among the Registrant, Wilmington Trust Company, as property trustee, and the Administrative Trustees of Yardville Capital Trust III; (ii) Indenture dated as of March 28, 2001, between the Registrant and Wilmington Trust Company, as trustee, relating to the Registrant’s Series A 10.18% Junior Subordinated Deferrable Interest Debentures due June 8, 2031; and (iii) Series A Capital Securities Guarantee Agreement dated as of March 28, 2001, between the Registrant and Wilmington Trust Company, as trustee, relating to the Series A Capital Securities of Yardville Capital Trust III.
		4.7	The Registrant will furnish to the Commission upon request copies of the following documents relating to the Registrant’s Floating Rate Junior Subordinated Deferrable Interest Debentures due March 1, 2033: (i) Amended and Restated Declaration of Trust dated February 19, 2003, among the Registrant, Wilmington Trust Company, as property trustee, and the Administrative Trustees of Yardville Capital Trust IV; (ii) Indenture dated as of February 19, 2003, between the Registrant and Wilmington Trust Company, as trustee, relating to the Registrant’s Floating Rate Junior Subordinated Deferrable Interest Debentures due March 1, 2033; and (iii) Capital Securities Guarantee Agreement dated as of February 19, 2003, between the Registrant and Wilmington Trust Company, as trustee, relating to the Floating Rate Capital Securities of Yardville Capital Trust IV.
		4.8	The Registrant will furnish to the Commission upon request copies of the following documents relating to the Registrant’s Floating Rate Junior Subordinated Deferrable Interest

E-1

	Exhibit
	Number		Description
			Debentures due October 8, 2033: (i) Amended and Restated Declaration of Trust among the Registrant, Wilmington Trust Company, as property trustee, and the Administrative Trustees of Yardville Capital Trust V; (ii) Indenture between the Registrant and Wilmington Trust Company, as trustee, relating to the Registrant’s Floating Rate Junior Subordinated Deferrable Interest Debentures due October 8, 2033; and (iii) Capital Securities Guarantee Agreement between the Registrant and Wilmington Trust Company, as trustee, relating to the Floating Rate Capital Securities of Yardville Capital Trust V.
		4.9	The Registrant will furnish to the Commission upon request copies of the following documents relating to the Registrant’s Floating Rate Junior Subordinated Deferrable Interest Debentures due July 23, 2034: (i) Amended and Restated Declaration of Trust among the Registrant, Wilmington Trust Company] as property trustee, and the Administrative Trustees of Yardville Capital Trust VI; (ii) Indenture between the Registrant and Wilmington Trust Company, as trustee, relating to the Registrant’s Floating Rate Junior Subordinated Deferrable Interest Debentures due July 23, 2034; and (iii) Capital Securities Guarantee Agreement between the Registrant and Wilmington Trust Company, as trustee, relating to the Floating Rate Capital Securities of Yardville Capital Trust VI.
		10.1	Employment Contract between the Bank and Kathleen O. Blanchard*
(F)		10.2	Employment Agreement among Registrant, the Bank, and Stephen F. Carman*
(F)		10.3	Employment Agreement among Registrant, the Bank, and Jay G. Destribats*
		10.4	Employment Contract between the Bank and Brian K. Gray*
		10.5	Employment Contract between the Bank and Howard N. Hall*
(F)		10.6	Employment Agreement among Registrant, the Bank, and Timothy J. Losch*
		10.7	Employment Contract between the Bank and Daniel J. O’Donnell*
		10.8	Employment Contract between the Bank and Joanne C. O’Donnell*
(F)		10.9	Employment Agreement among Registrant, the Bank, and Patrick M. Ryan*
		10.10	Employment Contract between the Bank and Patrick L. Ryan*
		10.11	Employment Contract between the Bank and John P. Samborski*
(F)		10.12	Employment Agreement among Registrant, the Bank, and F. Kevin Tylus*
(F)		10.13	Employment Agreement among Registrant, the Bank, and Stephen R. Walker*
		10.14	Second, Amended and Restated Supplemental Executive Retirement Plan*
(A)		10.15	1988 Stock Option Plan*
(H)		10.16	Directors’ Deferred Fee Plan*
(I)		10.17	1997 Stock Option Plan*

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	Exhibit
	Number		Description
(J)		10.18	Yardville National Bank Employee Stock Ownership Plan, as amended*
(B)		10.19	Yardville National Bancorp 2003 Stock Option Plan for Non-Employee Directors*
(F)		10.20	Yardville National Bancorp 2003 Stock Option Plan for Non-Employee Directors—Form of Stock Option Agreement*
		10.21	Lease agreement between Crestwood Construction and the Bank dated May 25, 1998
(K)		10.22	Real property lease between the Bank and BYN, LLC for our branch located at 1041 Route 206, Bordentown, New Jersey
(K)		10.23	Real property lease between the Bank and FYNB, LLC for our branch located in Raritan, New Jersey
(K)		10.24	Real property lease between the Bank and Union Properties, LLC for our branch located at 1575 Brunswick Avenue, Lawrence, New Jersey
(K)		10.25	Real property lease between the Bank and The Lalor Urban Renewal Limited Partnership for our branch located in the Lalor Plaza in Trenton, New Jersey
(L)		10.26	Contract of Sale dated February 24, 2003, between the Bank and Christopher S. Vernon
(G)		10.27	Lease agreement between the Registrant and Christopher S. Vernon, Eileen Vernon and Mark Corcoran
(E)		10.28	Real property Sublease Agreement between the Bank and Serenity Point LLC successor in interest to Samuel Marrazzo and Margaret Marrazzo for our branch located at 1400 Parkway Avenue, Ewing, New Jersey
		10.29	Yardville National Bank’s Change in Control Severance Compensation Plan*
		10.30	Consulting Agreement between Registrant and Lawrence Seidman
		10.31	Real property lease between the Bank and Lalor Storage LLC for our maintenance center
(H)		14	Code of Ethics
		21	List of Subsidiaries of the Registrant
		23	Consent of KPMG, LLP
		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.

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(A)	Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002, as amended by Form 10-K/A filed with the SEC on May 2, 2003
(B)	Incorporated by reference to the Company’s Definitive Proxy Statement on Schedule 14A filed on April 30, 2003
(C)	Incorporated by reference to the Registrant’s Registration Statement on Form SB-2 (Registration No. 33-78050)
(D)	Incorporated by reference to the Registrant’s Registration Statement on Form S-2 (Registration Nos. 333-35061 and 333-35061-01)
(E)	Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2004
(F)	Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2004, as amended by Form 10-Q/A filed with the SEC on December 13, 2004
(G)	Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2003
(H)	Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003
(I)	Incorporated by reference to the Registrant’s Registration Statement on Form S-8 (Registration No. 333-28193)
(J)	Incorporated by reference to the Registrant’s Registration Statement on Form S-8 (Registration No. 333-71741)
(K)	Incorporated by reference to the Registrant’s Registration Statement on Form S-3 (Registration No. 333-99269)
(L)	Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2003

*   Management contract or compensatory plan or arrangement required to be filed as an exhibit to Form 10-K.

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EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT
FOR FIRST SENIOR VICE PRESIDENTS

     THIS AGREEMENT (the “Agreement”), made this 1st day of February, 2005, by and between YARDVILLE NATIONAL BANK (the “Bank”) and Kathleen O. Blanchard (the “Officer”). References to “the Company” herein shall refer to YARDVILLE NATIONAL BANCORP, a New Jersey corporation (the “Company”) and the holding company for the Bank.

W I T N E S S E T H

     WHEREAS, the Bank desires to retain the services of the Officer as an employee of the Bank; and

     WHEREAS, the Officer and the Bank (desire to enter into an employment agreement setting forth the terms and conditions of the continuing employment of the Officer and the related rights and obligations of the parties.

     NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, the parties hereby agree as follows:

     1. Employment. The Bank shall employ the Officer as a First Senior Vice President/Risk Management Officer of the Bank. The Officer shall render such administrative and management services as are customarily provided by persons employed in similar officer capacities and shall have such other powers and duties as the Chief Executive Officer or the Board may prescribe from time to time.

     2. Location and Facilities. The Bank will furnish the Officer with the working facilities and staff customary for officers with the title and duties set forth in Section 1 and as are necessary for the performance of the Officer’s duties. The location of such facilities and staff shall be at the principal administrative offices of the Bank, or at such other site or sites customary for such offices.

     3. Term.

a.

The term of this Agreement shall be (i) the initial term, consisting of the period commencing on the date of this Agreement (the “Effective Date”) and ending on the first anniversary of the Effective Date, plus (ii) any and all extensions of the initial term made pursuant to this Section 3.

b.

On each anniversary date of the Effective Date prior to a termination of the Agreement, the term under this Agreement shall be extended automatically for an additional one (1) year period without action by any party provided, however, that neither the Bank nor the Officer shall have given written notice at least sixty (60) days prior to such anniversary date of their election not to extend the term of the Agreement.

     4. Base Compensation.

a.	The Bank agrees to pay the Officer during the term of this Agreement a base salary at the rate of $127,500.00 per year, payable in accordance with customary payroll practices.
b.	The Executive Management Committee of the Bank shall review annually the rate of the Officer’s base salary based upon factors they deem relevant, and may maintain, increase or decrease the Officer’s base salary.
c.	In the absence of action by the Executive Management Committee, the Officer shall continue to receive base salary at the annual rate specified on the Effective Date or, if another rate has been

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established under the provisions of this Section 4, the rate last properly established by action of the Executive Management Committee under the provisions of this Section 4.

     5. Bonuses. Officer shall be entitled to participate in any discretionary bonuses or other incentive compensation programs that may be awarded from time to time to senior management employees, pursuant to bonus plans or otherwise.

     6. Benefit Plans. The Officer shall be entitled to participate in such life insurance, medical, dental, pension, profit sharing, and retirement plans, stock compensation plans and other benefit programs and arrangements as may be approved from time to time for the benefit of Bank employees.

     7. Vacation and Leave.

a.

The Officer may take vacations and other leave in accordance with Bank policy for senior officers, or otherwise as approved by the Board.

b.

In addition to paid vacations and other leave, the Officer shall be entitled, without loss of pay, to absent himself voluntarily from the performance of his duties for such additional periods of time and for such valid and legitimate reasons as the Bank may determine in its discretion. Further, the Bank may grant to the Officer a leave or leaves of absence, with or without pay, at such time or times and upon such terms and conditions as the Bank, in its discretion, may determine.

     8. Expense Payment and Reimbursements. The Officer shall be reimbursed for all reasonable out-of-pocket business expenses incurred in connection with services performed under this Agreement upon substantiation of such expenses in accordance with applicable policies of the Bank.

     9. This Section 9 has been intentionally left blank.

     10. Loyalty and Confidentiality.

a.	During the term of this Agreement: (i) the Officer shall devote the requisite time, attention, skill, and efforts to the faithful performance of his duties hereunder; provided, however, that from time to time, the Officer may serve on the boards of directors of, and hold any other offices or positions in, companies or organizations which will not present any conflict of interest with the Bank or any of its subsidiaries or affiliates, unfavorably affect the performance of the Officer’s duties pursuant to this Agreement, or violate any applicable statute or regulation; and (ii) the Officer shall not engage in any business or activity contrary to the business affairs or interests of the Bank or any of its subsidiaries or affiliates.
b.	Nothing contained in this Agreement shall prevent or limit the Officer’s right to invest in the capital stock or other securities of any business dissimilar from that of the Bank or any of its subsidiaries or affiliates, or, solely as a passive, minority investor, in any business.
c.	The Officer agrees to maintain the confidentiality of any and all information concerning the operations or financial status of the Bank; the names or addresses of any borrowers, depositors and other customers; any information concerning or obtained from such customers; and any other information concerning the Bank to which the Officer may be exposed during the course of the Officer’s employment with the Bank. The Officer further agrees that, unless required by law or specifically permitted by the Board in writing, the Officer will not disclose to any person or entity, either during or subsequent to employment with the Bank, any of the above-mentioned information which is not generally known to the public, nor shall the Officer employ such information in any way other than for the benefit of the Bank or any of its subsidiaries or affiliates.

     11. Termination and Termination Pay. Subject to Section 12 of this Agreement, the Officer’s employment under this Agreement may be terminated in the following circumstances:

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a.	Death. The Officer’s employment under this Agreement shall terminate upon the Officer’s death during the term of this Agreement, in which event the Officer’s estate shall be entitled to receive the compensation due to the Officer through the last day of the calendar month of death.
b.	Retirement. Notwithstanding anything in this Agreement to the contrary, this Agreement shall terminate upon the Officer’s retirement and will be subject to any retirement benefit plan or plans provided for under Section 6 of this Agreement or otherwise.
c.	Disability.

i.	The Bank or the Officer may terminate the Officer’s employment after having established the Officer’s Disability. For purposes of this Agreement, “Disability” means the Officer’s suffering a sickness, accident or injury which has been determined by the carrier of any individual or group disability insurance policy covering the Officer, or by the Social Security Administration, to be a disability rendering the Officer totally and permanently disabled. The Bank shall determine in good faith whether or not the Officer is disabled for purposes of this Agreement. As a condition to any benefits, the Bank may require the Officer to submit proof of the carrier’s or the Social Security Administration’s determination of disability.
ii.	In the event of such Disability, the Officer’s obligation to perform services under this Agreement will terminate. In the event of such termination, the Officer shall continue to receive one-hundred percent (100%) of the Officer’s monthly base salary (at the annual rate in effect on the date of termination) through the earlier of the date of the Officer’s death, the date the Officer attains age 65 or the date which is six (6) months after the Officer’s termination date. Such payments shall be reduced by the amount of any short- or long-term disability benefits payable to the Officer under any other disability program sponsored by the Bank.
iii.	In addition, during any period of Disability for which the Officer is receiving payments under this Section 11(c), the Officer and the Officer’s dependents shall, to the greatest extent possible, continue to be covered under all benefit plans (including, without limitation, retirement plans and medical, dental and life insurance plans) under which the Officer participated prior to the Disability, on the same terms as if the Officer were actively employed through the earlier of the date of the Officer’s death, the date the Officer attains age 65 or the date which is six (6) months after the Officer’s termination date.

d.   Just Cause.

i.   The Bank may, by written notice to the Officer in the form and manner specified in this paragraph, immediately terminate the Officer’s employment with the Company or the Bank, respectively, at any time, for Just Cause. The Officer shall have no right to receive compensation or other benefits for any period after termination for Just Cause, except for previously vested benefits. Termination for “Just Cause” shall mean termination because of, in the good faith determination of the Bank, the Officer’s:

(1)	Personal dishonesty;
(2)	Incompetence;
(3)	Willful misconduct;
(4)	Breach of fiduciary duty involving personal profit;

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(5)	Intentional failure to perform duties under this Agreement;
(6)	Willful violation of any law, rule or regulation (other than traffic violations or similar offenses) that reflects adversely on the reputation of the Bank, any felony conviction, any violation of law involving moral turpitude, or any violation of a final cease-and-desist order; or
(7)	Material breach of any provision of this Agreement.

e.	Voluntary Termination by the Officer. In addition to the Officer’s other rights to terminate employment under the Agreement, the Officer may voluntarily terminate employment during the term of this Agreement upon at least sixty (60) days prior written notice to the Bank, in which case the Officer shall receive only compensation, vested rights and employee benefits up to the date of termination.
f.	Without Just Cause.

i.	In addition to termination pursuant to Sections 11(a) through 11(e), the Bank may, by means of written notice, immediately terminate the Officer’s employment at any time for a reason other than Just Cause (a termination “Without Just Cause”).
ii.	Subject to Section 12 hereof, in the event of termination under this Section 11(f), the Officer shall be entitled to receive the annual base salary that would have been paid for the remaining term of the Agreement, including any renewals or extensions thereof, determined by reference to the highest annual rate of base salary in effect pursuant to Section 4 of this Agreement in any of the twelve (12) months immediately preceding the Officer’s termination date. The sum due under this Section 11(f) shall be paid in one lump sum within thirty (30) calendar days of the Officer’s termination.
iii.	Notwithstanding the foregoing, a reduction in base salary or a reduction or elimination of the Officer’s participation in or benefits under one or more benefit plans that occurs as part of a good faith, overall reduction in salary or a reduction or elimination of plans or benefits provided thereunder, provided such reduction or elimination applies to all participants in a non-discriminatory manner (except as such discrimination may be necessary to comply with law), shall not constitute a material breach of this Agreement, provided that benefits of the same type or to the same general extent as those offered under the plan prior to reduction or elimination are not available to other officers of the Bank or its affiliates, or any company that controls either of them, under a plan or plans under which the Officer is not entitled to participate.
iv.	Notwithstanding anything in this Agreement to the contrary, during the six (6) month period beginning on the effective date of a Change in Control (as defined in Section 12(a)), the Officer may voluntarily terminate employment under this Agreement for any reason and such termination shall constitute termination Without Just Cause.

g.   Continuing Covenant Not to Compete or Interfere with Relationships. Regardless of anything herein to the contrary, following a termination by the Bank or the Officer pursuant to Section 11(f) and continuing until the six (6) month anniversary of the effective date of such termination, (i) the Officer’s obligations under Section 10(c) of this Agreement will continue in effect; and (ii) the Officer shall not interfere with the relationship between the Bank and any of its employees, agents, customers or representatives.

     12. Termination in Connection with a Change in Control.

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a.   “Change in Control” means any one of the following events occurs:

i.	Merger: the Company merges into or consolidates with another corporation, or merges another corporation into the Company and, as a result, less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company immediately before the merger or consolidation;
ii.	Acquisition of Significant Share Ownership: a report on Schedule 13D or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner(s) of 25% or more of a class of the Company’s voting securities, but this clause (ii) shall not apply to beneficial ownership of Company voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns fifty percent (50%) or more of its outstanding voting securities;
iii.	Change in Board Composition: during any period of two consecutive years, individuals who constitute the Company’s or the Bank’s Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Company’s or the Bank’s Board of Directors; provided, however, that for purposes of this clause (iii), each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least three-fourths (3/4) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period; or
iv.	Sale of Assets: The Company sells to a third party all or substantially all of its assets.

b.   If, within the period beginning six (6) months prior to and ending two (2) years after a Change in Control, the Bank shall terminate the Officer’s employment Without Just Cause, the Bank shall, within thirty (30) calendar days of the Officer’s termination of employment, make a lump-sum cash payment to the Officer in an amount equal to two times the Officer’s highest annual rate of base salary during the two (2) year period preceding the effective date of the Change in Control. This cash payment shall be made in lieu of any payment also required under Section 11(f) of this Agreement because of a termination in such period.

     13. Indemnification and Liability Insurance.

a.   Indemnification. The Bank agrees to indemnify the Officer (and the Officer’s heirs, executors, and administrators), and to advance expenses related thereto, to the fullest extent permitted under applicable law and regulations, against any and all expenses and liabilities reasonably incurred by the Officer in connection with or arising out of any action, suit, or proceeding in which the Officer may be involved by reason of having been a director or Officer of the Bank or any of its subsidiaries or affiliates (whether or not the Officer continues to be a director or Officer at the time of incurring any such expenses or liabilities). Such expenses and liabilities shall include, but shall not be limited to, judgments, court costs, attorneys’ fees and the costs of reasonable settlements, such settlements to be approved by the Board, if such action is brought against the Officer in the Officer’s capacity as an officer or director of the Bank or any of its subsidiaries or affiliates. Indemnification for expenses shall not extend to matters for which the Officer has been terminated for Just Cause. Nothing contained herein shall be deemed to provide indemnification otherwise prohibited by applicable law or regulation. Notwithstanding anything herein to the contrary, the obligations of this Section 13 shall survive the term of this Agreement by a period of six (6) years.

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b.   Insurance. During the period in which indemnification of the Officer is required under this Section 13, the Bank shall provide the Officer (and the Officer’s heirs, executors, and administrators) with coverage under a directors’ and officers’ liability policy at the expense of the Bank, at least equivalent to the coverage provided to directors and senior officers of the Bank.

     14. Injunctive Relief. If there is a breach or threatened breach of Section 11(g) of this Agreement, the Bank and the Officer agree that there is no adequate remedy at law for such breach, and further, that the Bank shall be entitled to injunctive relief restraining the Officer from such breach or threatened breach, but such relief shall not be the exclusive remedy hereunder for such breach. The parties hereto likewise agree that the Officer, without limitation, shall be entitled to injunctive relief to enforce the obligations of the Bank under Section 12 of this Agreement.

     15. Successors and Assigns.

a.	This Agreement shall inure to the benefit of and be binding upon any corporate or other successor that acquires, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of the Company or the Bank.
b.	Since the Bank is contracting for the Officer’s unique and personal skills, the Officer shall be precluded from assigning or delegating any rights or duties hereunder without first obtaining the written consent of the Bank.

     16. No Mitigation. The Officer shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking new employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Officer in any subsequent employment.

     17. Notices. All notices, requests, demands and other communications in connection with this Agreement shall be made in writing and shall be deemed to have been given when delivered by hand or 48 hours after mailing at any general or branch office of the United States Postal Service, by registered or certified mail, postage prepaid, addressed to the Bank at its principal business office and to the Officer at the Officer’s home address as maintained in the records of the Bank.

     18. Joint and Several Liability; Payments by the Company and the Bank. To the extent permitted by law, the Company shall be jointly and severally liable with the Bank for the payment of all amounts due under this Agreement and shall guarantee the performance of the Bank’s obligations hereunder, provided, however, that the Company shall not be required by this Agreement to pay the Officer a base salary or any bonuses or any other cash payments, except in the event that the Bank does not fulfill its obligations to the Officer for such payments.

     19. No Plan Created by this Agreement. The Officer and the Bank expressly declare and agree that this Agreement was negotiated among them and that no provisions of this Agreement are intended to, or shall be deemed to, create any “plan” for purposes of the Employee Retirement Income Security Act of 1974 (ERISA) or any other law or regulation, and each party expressly waives any right to assert the contrary. Any assertion in any judicial or administrative filing, hearing, or process that such a plan was created by this Agreement shall be deemed a material breach of this Agreement by the party making such an assertion.

     20. Amendments. No amendments or additions to this Agreement shall be binding unless made in writing and signed by all of the parties, except as otherwise specifically provided for herein.

     21. Applicable Law. Except to the extent preempted by federal law, the laws of the State of New Jersey shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise.

     22. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the remaining provisions hereof.

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     23. Headings. Headings contained herein are for convenience of reference only.

     24. Entire Agreement. This Agreement, together with any understandings or modifications agreed to in writing by the parties, shall constitute the entire agreement among the parties with respect to the subject matter hereof, other than written agreements with respect to specific plans, programs or arrangements described in Sections 5 and 6. This agreement supercedes and replaces in its entirety any previous employment agreements between or among the Bank, the Company and the Officer.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first set forth above.

Attest:		YARDVILLE NATIONAL BANK
		By:	F. Kevin Tylus
	Kathleen Fone	Title:	SEVP & Chief Operating Officer
		YARDVILLE NATIONAL BANCORP
		By:	F. Kevin Tylus
	Kathleen Fone	Title:	Senior Executive Vice President
Witness:
	Kathleen Fone		Kathleen O. Blanchard
			Kathleen O. Blanchard
			First Senior Vice President

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EX-10.4

Exhibit 10.4

EMPLOYMENT AGREEMENT
FOR FIRST SENIOR VICE PRESIDENTS

     THIS AGREEMENT (the “Agreement”), made this 1st day of February, 2005, by and between YARDVILLE NATIONAL BANK (the “Bank”) and Brian K. Gray (the “Officer”). References to “the Company” herein shall refer to YARDVILLE NATIONAL BANCORP, a New Jersey corporation (the “Company”) and the holding company for the Bank.

W I T N E S S E T H

     WHEREAS, the Bank desires to retain the services of the Officer as an employee of the Bank; and

     WHEREAS, the Officer and the Bank (desire to enter into an employment agreement setting forth the terms and conditions of the continuing employment of the Officer and the related rights and obligations of the parties.

     NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, the parties hereby agree as follows:

     1. Employment. The Bank shall employ the Officer as a First Senior Vice President/Retail & Marketing Officer of the Bank. The Officer shall render such administrative and management services as are customarily provided by persons employed in similar officer capacities and shall have such other powers and duties as the Chief Executive Officer or the Board may prescribe from time to time.

     2. Location and Facilities. The Bank will furnish the Officer with the working facilities and staff customary for officers with the title and duties set forth in Section 1 and as are necessary for the performance of the Officer’s duties. The location of such facilities and staff shall be at the principal administrative offices of the Bank, or at such other site or sites customary for such offices.

     3. Term.

a.

The term of this Agreement shall be (i) the initial term, consisting of the period commencing on the date of this Agreement (the “Effective Date”) and ending on the first anniversary of the Effective Date, plus (ii) any and all extensions of the initial term made pursuant to this Section 3.

b.

On each anniversary date of the Effective Date prior to a termination of the Agreement, the term under this Agreement shall be extended automatically for an additional one (1) year period without action by any party provided, however, that neither the Bank nor the Officer shall have given written notice at least sixty (60) days prior to such anniversary date of their election not to extend the term of the Agreement.

     4. Base Compensation.

a.	The Bank agrees to pay the Officer during the term of this Agreement a base salary at the rate of $110,000.00 per year, payable in accordance with customary payroll practices.
b.	The Executive Management Committee of the Bank shall review annually the rate of the Officer’s base salary based upon factors they deem relevant, and may maintain, increase or decrease the Officer’s base salary.
c.	In the absence of action by the Executive Management Committee, the Officer shall continue to receive base salary at the annual rate specified on the Effective Date or, if another rate has been established under the provisions of this Section 4, the rate last properly established by action of the Executive Management Committee under the provisions of this Section 4.

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     5. Bonuses. Officer shall be entitled to participate in any discretionary bonuses or other incentive compensation programs that may be awarded from time to time to senior management employees, pursuant to bonus plans or otherwise.

     6. Benefit Plans. The Officer shall be entitled to participate in such life insurance, medical, dental, pension, profit sharing, and retirement plans, stock compensation plans and other benefit programs and arrangements as may be approved from time to time for the benefit of Bank employees.

     7. Vacation and Leave.

a.

The Officer may take vacations and other leave in accordance with Bank policy for senior officers, or otherwise as approved by the Board.

b.

In addition to paid vacations and other leave, the Officer shall be entitled, without loss of pay, to absent himself voluntarily from the performance of his duties for such additional periods of time and for such valid and legitimate reasons as the Bank may determine in its discretion. Further, the Bank may grant to the Officer a leave or leaves of absence, with or without pay, at such time or times and upon such terms and conditions as the Bank, in its discretion, may determine.

     8. Expense Payment and Reimbursements. The Officer shall be reimbursed for all reasonable out-of-pocket business expenses incurred in connection with services performed under this Agreement upon substantiation of such expenses in accordance with applicable policies of the Bank.

     9. This Section 9 has been intentionally left blank.

     10. Loyalty and Confidentiality.

a.	During the term of this Agreement: (i) the Officer shall devote the requisite time, attention, skill, and efforts to the faithful performance of his duties hereunder; provided, however, that from time to time, the Officer may serve on the boards of directors of, and hold any other offices or positions in, companies or organizations which will not present any conflict of interest with the Bank or any of its subsidiaries or affiliates, unfavorably affect the performance of the Officer’s duties pursuant to this Agreement, or violate any applicable statute or regulation; and (ii) the Officer shall not engage in any business or activity contrary to the business affairs or interests of the Bank or any of its subsidiaries or affiliates.
b.	Nothing contained in this Agreement shall prevent or limit the Officer’s right to invest in the capital stock or other securities of any business dissimilar from that of the Bank or any of its subsidiaries or affiliates, or, solely as a passive, minority investor, in any business.
c.	The Officer agrees to maintain the confidentiality of any and all information concerning the operations or financial status of the Bank; the names or addresses of any borrowers, depositors and other customers; any information concerning or obtained from such customers; and any other information concerning the Bank to which the Officer may be exposed during the course of the Officer’s employment with the Bank. The Officer further agrees that, unless required by law or specifically permitted by the Board in writing, the Officer will not disclose to any person or entity, either during or subsequent to employment with the Bank, any of the above-mentioned information which is not generally known to the public, nor shall the Officer employ such information in any way other than for the benefit of the Bank or any of its subsidiaries or affiliates.

     11. Termination and Termination Pay. Subject to Section 12 of this Agreement, the Officer’s employment under this Agreement may be terminated in the following circumstances:

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a.	Death. The Officer’s employment under this Agreement shall terminate upon the Officer’s death during the term of this Agreement, in which event the Officer’s estate shall be entitled to receive the compensation due to the Officer through the last day of the calendar month of death.
b.	Retirement. Notwithstanding anything in this Agreement to the contrary, this Agreement shall terminate upon the Officer’s retirement and will be subject to any retirement benefit plan or plans provided for under Section 6 of this Agreement or otherwise.
c.	Disability.

i.	The Bank or the Officer may terminate the Officer’s employment after having established the Officer’s Disability. For purposes of this Agreement, “Disability” means the Officer’s suffering a sickness, accident or injury which has been determined by the carrier of any individual or group disability insurance policy covering the Officer, or by the Social Security Administration, to be a disability rendering the Officer totally and permanently disabled. The Bank shall determine in good faith whether or not the Officer is disabled for purposes of this Agreement. As a condition to any benefits, the Bank may require the Officer to submit proof of the carrier’s or the Social Security Administration’s determination of disability.
ii.	In the event of such Disability, the Officer’s obligation to perform services under this Agreement will terminate. In the event of such termination, the Officer shall continue to receive one-hundred percent (100%) of the Officer’s monthly base salary (at the annual rate in effect on the date of termination) through the earlier of the date of the Officer’s death, the date the Officer attains age 65 or the date which is six (6) months after the Officer’s termination date. Such payments shall be reduced by the amount of any short- or long-term disability benefits payable to the Officer under any other disability program sponsored by the Bank.
iii.	In addition, during any period of Disability for which the Officer is receiving payments under this Section 11(c), the Officer and the Officer’s dependents shall, to the greatest extent possible, continue to be covered under all benefit plans (including, without limitation, retirement plans and medical, dental and life insurance plans) under which the Officer participated prior to the Disability, on the same terms as if the Officer were actively employed through the earlier of the date of the Officer’s death, the date the Officer attains age 65 or the date which is six (6) months after the Officer’s termination date.

d.   Just Cause.

i.   The Bank may, by written notice to the Officer in the form and manner specified in this paragraph, immediately terminate the Officer’s employment with the Company or the Bank, respectively, at any time, for Just Cause. The Officer shall have no right to receive compensation or other benefits for any period after termination for Just Cause, except for previously vested benefits. Termination for “Just Cause” shall mean termination because of, in the good faith determination of the Bank, the Officer’s:

(1)	Personal dishonesty;
(2)	Incompetence;
(3)	Willful misconduct;
(4)	Breach of fiduciary duty involving personal profit;

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(5)	Intentional failure to perform duties under this Agreement;
(6)	Willful violation of any law, rule or regulation (other than traffic violations or similar offenses) that reflects adversely on the reputation of the Bank, any felony conviction, any violation of law involving moral turpitude, or any violation of a final cease-and-desist order; or
(7)	Material breach of any provision of this Agreement.

e.	Voluntary Termination by the Officer. In addition to the Officer’s other rights to terminate employment under the Agreement, the Officer may voluntarily terminate employment during the term of this Agreement upon at least sixty (60) days prior written notice to the Bank, in which case the Officer shall receive only compensation, vested rights and employee benefits up to the date of termination.
f.	Without Just Cause.

i.	In addition to termination pursuant to Sections 11(a) through 11(e), the Bank may, by means of written notice, immediately terminate the Officer’s employment at any time for a reason other than Just Cause (a termination “Without Just Cause”).
ii.	Subject to Section 12 hereof, in the event of termination under this Section 11(f), the Officer shall be entitled to receive the annual base salary that would have been paid for the remaining term of the Agreement, including any renewals or extensions thereof, determined by reference to the highest annual rate of base salary in effect pursuant to Section 4 of this Agreement in any of the twelve (12) months immediately preceding the Officer’s termination date. The sum due under this Section 11(f) shall be paid in one lump sum within thirty (30) calendar days of the Officer’s termination.
iii.	Notwithstanding the foregoing, a reduction in base salary or a reduction or elimination of the Officer’s participation in or benefits under one or more benefit plans that occurs as part of a good faith, overall reduction in salary or a reduction or elimination of plans or benefits provided thereunder, provided such reduction or elimination applies to all participants in a non-discriminatory manner (except as such discrimination may be necessary to comply with law), shall not constitute a material breach of this Agreement, provided that benefits of the same type or to the same general extent as those offered under the plan prior to reduction or elimination are not available to other officers of the Bank or its affiliates, or any company that controls either of them, under a plan or plans under which the Officer is not entitled to participate.
iv.	Notwithstanding anything in this Agreement to the contrary, during the six (6) month period beginning on the effective date of a Change in Control (as defined in Section 12(a)), the Officer may voluntarily terminate employment under this Agreement for any reason and such termination shall constitute termination Without Just Cause.

g.   Continuing Covenant Not to Compete or Interfere with Relationships. Regardless of anything herein to the contrary, following a termination by the Bank or the Officer pursuant to Section 11(f) and continuing until the six (6) month anniversary of the effective date of such termination, (i) the Officer’s obligations under Section 10(c) of this Agreement will continue in effect; and (ii) the Officer shall not interfere with the relationship between the Bank and any of its employees, agents, customers or representatives.

     12. Termination in Connection with a Change in Control.

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a.   “Change in Control” means any one of the following events occurs:

i.	Merger: the Company merges into or consolidates with another corporation, or merges another corporation into the Company and, as a result, less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company immediately before the merger or consolidation;
ii.	Acquisition of Significant Share Ownership: a report on Schedule 13D or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner(s) of 25% or more of a class of the Company’s voting securities, but this clause (ii) shall not apply to beneficial ownership of Company voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns fifty percent (50%) or more of its outstanding voting securities;
iii.	Change in Board Composition: during any period of two consecutive years, individuals who constitute the Company’s or the Bank’s Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Company’s or the Bank’s Board of Directors; provided, however, that for purposes of this clause (iii), each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least three-fourths (3/4) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period; or
iv.	Sale of Assets: The Company sells to a third party all or substantially all of its assets.

b.   If, within the period beginning six (6) months prior to and ending two (2) years after a Change in Control, the Bank shall terminate the Officer’s employment Without Just Cause, the Bank shall, within thirty (30) calendar days of the Officer’s termination of employment, make a lump-sum cash payment to the Officer in an amount equal to two times the Officer’s highest annual rate of base salary during the two (2) year period preceding the effective date of the Change in Control. This cash payment shall be made in lieu of any payment also required under Section 11(f) of this Agreement because of a termination in such period.

     13. Indemnification and Liability Insurance.

a.   Indemnification. The Bank agrees to indemnify the Officer (and the Officer’s heirs, executors, and administrators), and to advance expenses related thereto, to the fullest extent permitted under applicable law and regulations, against any and all expenses and liabilities reasonably incurred by the Officer in connection with or arising out of any action, suit, or proceeding in which the Officer may be involved by reason of having been a director or Officer of the Bank or any of its subsidiaries or affiliates (whether or not the Officer continues to be a director or Officer at the time of incurring any such expenses or liabilities). Such expenses and liabilities shall include, but shall not be limited to, judgments, court costs, attorneys’ fees and the costs of reasonable settlements, such settlements to be approved by the Board, if such action is brought against the Officer in the Officer’s capacity as an officer or director of the Bank or any of its subsidiaries or affiliates. Indemnification for expenses shall not extend to matters for which the Officer has been terminated for Just Cause. Nothing contained herein shall be deemed to provide indemnification otherwise prohibited by applicable law or regulation. Notwithstanding anything herein to the contrary, the obligations of this Section 13 shall survive the term of this Agreement by a period of six (6) years.

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b.   Insurance. During the period in which indemnification of the Officer is required under this Section 13, the Bank shall provide the Officer (and the Officer’s heirs, executors, and administrators) with coverage under a directors’ and officers’ liability policy at the expense of the Bank, at least equivalent to the coverage provided to directors and senior officers of the Bank.

     14. Injunctive Relief. If there is a breach or threatened breach of Section 11(g) of this Agreement, the Bank and the Officer agree that there is no adequate remedy at law for such breach, and further, that the Bank shall be entitled to injunctive relief restraining the Officer from such breach or threatened breach, but such relief shall not be the exclusive remedy hereunder for such breach. The parties hereto likewise agree that the Officer, without limitation, shall be entitled to injunctive relief to enforce the obligations of the Bank under Section 12 of this Agreement.

     15. Successors and Assigns.

a.	This Agreement shall inure to the benefit of and be binding upon any corporate or other successor that acquires, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of the Company or the Bank.
b.	Since the Bank is contracting for the Officer’s unique and personal skills, the Officer shall be precluded from assigning or delegating any rights or duties hereunder without first obtaining the written consent of the Bank.

     16. No Mitigation. The Officer shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking new employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Officer in any subsequent employment.

     17. Notices. All notices, requests, demands and other communications in connection with this Agreement shall be made in writing and shall be deemed to have been given when delivered by hand or 48 hours after mailing at any general or branch office of the United States Postal Service, by registered or certified mail, postage prepaid, addressed to the Bank at its principal business office and to the Officer at the Officer’s home address as maintained in the records of the Bank.

     18. Joint and Several Liability; Payments by the Company and the Bank. To the extent permitted by law, the Company shall be jointly and severally liable with the Bank for the payment of all amounts due under this Agreement and shall guarantee the performance of the Bank’s obligations hereunder, provided, however, that the Company shall not be required by this Agreement to pay the Officer a base salary or any bonuses or any other cash payments, except in the event that the Bank does not fulfill its obligations to the Officer for such payments.

     19. No Plan Created by this Agreement. The Officer and the Bank expressly declare and agree that this Agreement was negotiated among them and that no provisions of this Agreement are intended to, or shall be deemed to, create any “plan” for purposes of the Employee Retirement Income Security Act of 1974 (ERISA) or any other law or regulation, and each party expressly waives any right to assert the contrary. Any assertion in any judicial or administrative filing, hearing, or process that such a plan was created by this Agreement shall be deemed a material breach of this Agreement by the party making such an assertion.

     20. Amendments. No amendments or additions to this Agreement shall be binding unless made in writing and signed by all of the parties, except as otherwise specifically provided for herein.

     21. Applicable Law. Except to the extent preempted by federal law, the laws of the State of New Jersey shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise.

     22. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the remaining provisions hereof.

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     23. Headings. Headings contained herein are for convenience of reference only.

     24. Entire Agreement. This Agreement, together with any understandings or modifications agreed to in writing by the parties, shall constitute the entire agreement among the parties with respect to the subject matter hereof, other than written agreements with respect to specific plans, programs or arrangements described in Sections 5 and 6. This agreement supercedes and replaces in its entirety any previous employment agreements between or among the Bank, the Company and the Officer.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first set forth above.

Attest:		YARDVILLE NATIONAL BANK
		By:	F. Kevin Tylus
	Kathleen Fone	Title:	SEVP & Chief Operating Officer
		YARDVILLE NATIONAL BANCORP
		By:	F. Kevin Tylus
	Kathleen Fone	Title:	Senior Executive Vice President
Witness:
	Kathleen Fone		Brian K. Gray
			Brian K. Gray
			First Senior Vice President

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EX-10.5

Exhibit 10.5

EMPLOYMENT AGREEMENT
FOR FIRST SENIOR VICE PRESIDENTS

     THIS AGREEMENT (the “Agreement”), made this 1st day of February, 2005, by and between YARDVILLE NATIONAL BANK (the “Bank”) and Howard N. Hall (the “Officer”). References to “the Company” herein shall refer to YARDVILLE NATIONAL BANCORP, a New Jersey corporation (the “Company”) and the holding company for the Bank.

W I T N E S S E T H

     WHEREAS, the Bank desires to retain the services of the Officer as an employee of the Bank; and

     WHEREAS, the Officer and the Bank (desire to enter into an employment agreement setting forth the terms and conditions of the continuing employment of the Officer and the related rights and obligations of the parties.

     NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, the parties hereby agree as follows:

     1. Employment. The Bank shall employ the Officer as a First Senior Vice President/Investments & Financial Planning Officer of the Bank. The Officer shall render such administrative and management services as are customarily provided by persons employed in similar officer capacities and shall have such other powers and duties as the Chief Executive Officer or the Board may prescribe from time to time.

     2. Location and Facilities. The Bank will furnish the Officer with the working facilities and staff customary for officers with the title and duties set forth in Section 1 and as are necessary for the performance of the Officer’s duties. The location of such facilities and staff shall be at the principal administrative offices of the Bank, or at such other site or sites customary for such offices.

     3. Term.

a.

The term of this Agreement shall be (i) the initial term, consisting of the period commencing on the date of this Agreement (the “Effective Date”) and ending on the first anniversary of the Effective Date, plus (ii) any and all extensions of the initial term made pursuant to this Section 3.

b.

On each anniversary date of the Effective Date prior to a termination of the Agreement, the term under this Agreement shall be extended automatically for an additional one (1) year period without action by any party provided, however, that neither the Bank nor the Officer shall have given written notice at least sixty (60) days prior to such anniversary date of their election not to extend the term of the Agreement.

     4. Base Compensation.

a.	The Bank agrees to pay the Officer during the term of this Agreement a base salary at the rate of $141,000.00 per year, payable in accordance with customary payroll practices.
b.	The Executive Management Committee of the Bank shall review annually the rate of the Officer’s base salary based upon factors they deem relevant, and may maintain, increase or decrease the Officer’s base salary.
c.	In the absence of action by the Executive Management Committee, the Officer shall continue to receive base salary at the annual rate specified on the Effective Date or, if another rate has been established under the provisions of this Section 4, the rate last properly established by action of the Executive Management Committee under the provisions of this Section 4.

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     5. Bonuses. Officer shall be entitled to participate in any discretionary bonuses or other incentive compensation programs that may be awarded from time to time to senior management employees, pursuant to bonus plans or otherwise.

     6. Benefit Plans. The Officer shall be entitled to participate in such life insurance, medical, dental, pension, profit sharing, and retirement plans, stock compensation plans and other benefit programs and arrangements as may be approved from time to time for the benefit of Bank employees.

     7. Vacation and Leave.

a.

The Officer may take vacations and other leave in accordance with Bank policy for senior officers, or otherwise as approved by the Board.

b.

In addition to paid vacations and other leave, the Officer shall be entitled, without loss of pay, to absent himself voluntarily from the performance of his duties for such additional periods of time and for such valid and legitimate reasons as the Bank may determine in its discretion. Further, the Bank may grant to the Officer a leave or leaves of absence, with or without pay, at such time or times and upon such terms and conditions as the Bank, in its discretion, may determine.

     8. Expense Payment and Reimbursements. The Officer shall be reimbursed for all reasonable out-of-pocket business expenses incurred in connection with services performed under this Agreement upon substantiation of such expenses in accordance with applicable policies of the Bank.

     9. This Section 9 has been intentionally left blank.

     10. Loyalty and Confidentiality.

a.	During the term of this Agreement: (i) the Officer shall devote the requisite time, attention, skill, and efforts to the faithful performance of his duties hereunder; provided, however, that from time to time, the Officer may serve on the boards of directors of, and hold any other offices or positions in, companies or organizations which will not present any conflict of interest with the Bank or any of its subsidiaries or affiliates, unfavorably affect the performance of the Officer’s duties pursuant to this Agreement, or violate any applicable statute or regulation; and (ii) the Officer shall not engage in any business or activity contrary to the business affairs or interests of the Bank or any of its subsidiaries or affiliates.
b.	Nothing contained in this Agreement shall prevent or limit the Officer’s right to invest in the capital stock or other securities of any business dissimilar from that of the Bank or any of its subsidiaries or affiliates, or, solely as a passive, minority investor, in any business.
c.	The Officer agrees to maintain the confidentiality of any and all information concerning the operations or financial status of the Bank; the names or addresses of any borrowers, depositors and other customers; any information concerning or obtained from such customers; and any other information concerning the Bank to which the Officer may be exposed during the course of the Officer’s employment with the Bank. The Officer further agrees that, unless required by law or specifically permitted by the Board in writing, the Officer will not disclose to any person or entity, either during or subsequent to employment with the Bank, any of the above-mentioned information which is not generally known to the public, nor shall the Officer employ such information in any way other than for the benefit of the Bank or any of its subsidiaries or affiliates.

11.   Termination and Termination Pay. Subject to Section 12 of this Agreement, the Officer’s employment under this Agreement may be terminated in the following circumstances:

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a.	Death. The Officer’s employment under this Agreement shall terminate upon the Officer’s death during the term of this Agreement, in which event the Officer’s estate shall be entitled to receive the compensation due to the Officer through the last day of the calendar month of death.
b.	Retirement. Notwithstanding anything in this Agreement to the contrary, this Agreement shall terminate upon the Officer’s retirement and will be subject to any retirement benefit plan or plans provided for under Section 6 of this Agreement or otherwise.
c.	Disability.

i.	The Bank or the Officer may terminate the Officer’s employment after having established the Officer’s Disability. For purposes of this Agreement, “Disability” means the Officer’s suffering a sickness, accident or injury which has been determined by the carrier of any individual or group disability insurance policy covering the Officer, or by the Social Security Administration, to be a disability rendering the Officer totally and permanently disabled. The Bank shall determine in good faith whether or not the Officer is disabled for purposes of this Agreement. As a condition to any benefits, the Bank may require the Officer to submit proof of the carrier’s or the Social Security Administration’s determination of disability.
ii.	In the event of such Disability, the Officer’s obligation to perform services under this Agreement will terminate. In the event of such termination, the Officer shall continue to receive one-hundred percent (100%) of the Officer’s monthly base salary (at the annual rate in effect on the date of termination) through the earlier of the date of the Officer’s death, the date the Officer attains age 65 or the date which is six (6) months after the Officer’s termination date. Such payments shall be reduced by the amount of any short- or long-term disability benefits payable to the Officer under any other disability program sponsored by the Bank.
iii.	In addition, during any period of Disability for which the Officer is receiving payments under this Section 11(c), the Officer and the Officer’s dependents shall, to the greatest extent possible, continue to be covered under all benefit plans (including, without limitation, retirement plans and medical, dental and life insurance plans) under which the Officer participated prior to the Disability, on the same terms as if the Officer were actively employed through the earlier of the date of the Officer’s death, the date the Officer attains age 65 or the date which is six (6) months after the Officer’s termination date.

d.   Just Cause.

i.   The Bank may, by written notice to the Officer in the form and manner specified in this paragraph, immediately terminate the Officer’s employment with the Company or the Bank, respectively, at any time, for Just Cause. The Officer shall have no right to receive compensation or other benefits for any period after termination for Just Cause, except for previously vested benefits. Termination for “Just Cause” shall mean termination because of, in the good faith determination of the Bank, the Officer’s:

(1)	Personal dishonesty;
(2)	Incompetence;
(3)	Willful misconduct;
(4)	Breach of fiduciary duty involving personal profit;

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(5)	Intentional failure to perform duties under this Agreement;
(6)	Willful violation of any law, rule or regulation (other than traffic violations or similar offenses) that reflects adversely on the reputation of the Bank, any felony conviction, any violation of law involving moral turpitude, or any violation of a final cease-and-desist order; or
(7)	Material breach of any provision of this Agreement.

e.	Voluntary Termination by the Officer. In addition to the Officer’s other rights to terminate employment under the Agreement, the Officer may voluntarily terminate employment during the term of this Agreement upon at least sixty (60) days prior written notice to the Bank, in which case the Officer shall receive only compensation, vested rights and employee benefits up to the date of termination.
f.	Without Just Cause.

i.	In addition to termination pursuant to Sections 11(a) through 11(e), the Bank may, by means of written notice, immediately terminate the Officer’s employment at any time for a reason other than Just Cause (a termination “Without Just Cause”).
ii.	Subject to Section 12 hereof, in the event of termination under this Section 11(f), the Officer shall be entitled to receive the annual base salary that would have been paid for the remaining term of the Agreement, including any renewals or extensions thereof, determined by reference to the highest annual rate of base salary in effect pursuant to Section 4 of this Agreement in any of the twelve (12) months immediately preceding the Officer’s termination date. The sum due under this Section 11(f) shall be paid in one lump sum within thirty (30) calendar days of the Officer’s termination.
iii.	Notwithstanding the foregoing, a reduction in base salary or a reduction or elimination of the Officer’s participation in or benefits under one or more benefit plans that occurs as part of a good faith, overall reduction in salary or a reduction or elimination of plans or benefits provided thereunder, provided such reduction or elimination applies to all participants in a non-discriminatory manner (except as such discrimination may be necessary to comply with law), shall not constitute a material breach of this Agreement, provided that benefits of the same type or to the same general extent as those offered under the plan prior to reduction or elimination are not available to other officers of the Bank or its affiliates, or any company that controls either of them, under a plan or plans under which the Officer is not entitled to participate.
iv.	Notwithstanding anything in this Agreement to the contrary, during the six (6) month period beginning on the effective date of a Change in Control (as defined in Section 12(a)), the Officer may voluntarily terminate employment under this Agreement for any reason and such termination shall constitute termination Without Just Cause.

g.   Continuing Covenant Not to Compete or Interfere with Relationships. Regardless of anything herein to the contrary, following a termination by the Bank or the Officer pursuant to Section 11(f) and continuing until the six (6) month anniversary of the effective date of such termination, (i) the Officer’s obligations under Section 10(c) of this Agreement will continue in effect; and (ii) the Officer shall not interfere with the relationship between the Bank and any of its employees, agents, customers or representatives.

     12. Termination in Connection with a Change in Control.

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a.   “Change in Control” means any one of the following events occurs:

i.	Merger: the Company merges into or consolidates with another corporation, or merges another corporation into the Company and, as a result, less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company immediately before the merger or consolidation;
ii.	Acquisition of Significant Share Ownership: a report on Schedule 13D or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner(s) of 25% or more of a class of the Company’s voting securities, but this clause (ii) shall not apply to beneficial ownership of Company voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns fifty percent (50%) or more of its outstanding voting securities;
iii.	Change in Board Composition: during any period of two consecutive years, individuals who constitute the Company’s or the Bank’s Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Company’s or the Bank’s Board of Directors; provided, however, that for purposes of this clause (iii), each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least three-fourths (3/4) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period; or
iv.	Sale of Assets: The Company sells to a third party all or substantially all of its assets.

b.   If, within the period beginning six (6) months prior to and ending two (2) years after a Change in Control, the Bank shall terminate the Officer’s employment Without Just Cause, the Bank shall, within thirty (30) calendar days of the Officer’s termination of employment, make a lump-sum cash payment to the Officer in an amount equal to two times the Officer’s highest annual rate of base salary during the two (2) year period preceding the effective date of the Change in Control. This cash payment shall be made in lieu of any payment also required under Section 11(f) of this Agreement because of a termination in such period.

13.   Indemnification and Liability Insurance.

a.   Indemnification. The Bank agrees to indemnify the Officer (and the Officer’s heirs, executors, and administrators), and to advance expenses related thereto, to the fullest extent permitted under applicable law and regulations, against any and all expenses and liabilities reasonably incurred by the Officer in connection with or arising out of any action, suit, or proceeding in which the Officer may be involved by reason of having been a director or Officer of the Bank or any of its subsidiaries or affiliates (whether or not the Officer continues to be a director or Officer at the time of incurring any such expenses or liabilities). Such expenses and liabilities shall include, but shall not be limited to, judgments, court costs, attorneys’ fees and the costs of reasonable settlements, such settlements to be approved by the Board, if such action is brought against the Officer in the Officer’s capacity as an officer or director of the Bank or any of its subsidiaries or affiliates. Indemnification for expenses shall not extend to matters for which the Officer has been terminated for Just Cause. Nothing contained herein shall be deemed to provide indemnification otherwise prohibited by applicable law or regulation. Notwithstanding anything herein to the contrary, the obligations of this Section 13 shall survive the term of this Agreement by a period of six (6) years.

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b.   Insurance. During the period in which indemnification of the Officer is required under this Section 13, the Bank shall provide the Officer (and the Officer’s heirs, executors, and administrators) with coverage under a directors’ and officers’ liability policy at the expense of the Bank, at least equivalent to the coverage provided to directors and senior officers of the Bank.

     14. Injunctive Relief. If there is a breach or threatened breach of Section 11(g) of this Agreement, the Bank and the Officer agree that there is no adequate remedy at law for such breach, and further, that the Bank shall be entitled to injunctive relief restraining the Officer from such breach or threatened breach, but such relief shall not be the exclusive remedy hereunder for such breach. The parties hereto likewise agree that the Officer, without limitation, shall be entitled to injunctive relief to enforce the obligations of the Bank under Section 12 of this Agreement.

     15. Successors and Assigns.

a.	This Agreement shall inure to the benefit of and be binding upon any corporate or other successor that acquires, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of the Company or the Bank.
b.	Since the Bank is contracting for the Officer’s unique and personal skills, the Officer shall be precluded from assigning or delegating any rights or duties hereunder without first obtaining the written consent of the Bank.

     16. No Mitigation. The Officer shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking new employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Officer in any subsequent employment.

     17. Notices. All notices, requests, demands and other communications in connection with this Agreement shall be made in writing and shall be deemed to have been given when delivered by hand or 48 hours after mailing at any general or branch office of the United States Postal Service, by registered or certified mail, postage prepaid, addressed to the Bank at its principal business office and to the Officer at the Officer’s home address as maintained in the records of the Bank.

     18. Joint and Several Liability; Payments by the Company and the Bank. To the extent permitted by law, the Company shall be jointly and severally liable with the Bank for the payment of all amounts due under this Agreement and shall guarantee the performance of the Bank’s obligations hereunder, provided, however, that the Company shall not be required by this Agreement to pay the Officer a base salary or any bonuses or any other cash payments, except in the event that the Bank does not fulfill its obligations to the Officer for such payments.

     19. No Plan Created by this Agreement. The Officer and the Bank expressly declare and agree that this Agreement was negotiated among them and that no provisions of this Agreement are intended to, or shall be deemed to, create any “plan” for purposes of the Employee Retirement Income Security Act of 1974 (ERISA) or any other law or regulation, and each party expressly waives any right to assert the contrary. Any assertion in any judicial or administrative filing, hearing, or process that such a plan was created by this Agreement shall be deemed a material breach of this Agreement by the party making such an assertion.

     20. Amendments. No amendments or additions to this Agreement shall be binding unless made in writing and signed by all of the parties, except as otherwise specifically provided for herein.

     21. Applicable Law. Except to the extent preempted by federal law, the laws of the State of New Jersey shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise.

     22. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the remaining provisions hereof.

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     23. Headings. Headings contained herein are for convenience of reference only.

     24. Entire Agreement. This Agreement, together with any understandings or modifications agreed to in writing by the parties, shall constitute the entire agreement among the parties with respect to the subject matter hereof, other than written agreements with respect to specific plans, programs or arrangements described in Sections 5 and 6. This agreement supercedes and replaces in its entirety any previous employment agreements between or among the Bank, the Company and the Officer.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first set forth above.

Attest:	YARDVILLE NATIONAL BANK
	By:	F. Kevin Tylus
Kathleen Fone	Title:	SEVP & Chief Operating Officer
	YARDVILLE NATIONAL BANCORP
	By:	F. Kevin Tylus
Kathleen Fone	Title:	Senior Executive Vice President
Witness:
Kathleen Fone		Howard N. Hall
		Howard N. Hall
		First Senior Vice President

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EX-10.7

Exhibit 10.7

EMPLOYMENT AGREEMENT
FOR FIRST SENIOR VICE PRESIDENTS

     THIS AGREEMENT (the “Agreement”), made this 1st day of February, 2005, by and between YARDVILLE NATIONAL BANK (the “Bank”) and Daniel J. O’Donnell (the “Officer”). References to “the Company” herein shall refer to YARDVILLE NATIONAL BANCORP, a New Jersey corporation (the “Company”) and the holding company for the Bank.

W I T N E S S E T H

     WHEREAS, the Bank desires to retain the services of the Officer as an employee of the Bank; and

     WHEREAS, the Officer and the Bank (desire to enter into an employment agreement setting forth the terms and conditions of the continuing employment of the Officer and the related rights and obligations of the parties.

     NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, the parties hereby agree as follows:

     1. Employment. The Bank shall employ the Officer as a First Senior Vice President/General Counsel of the Bank. The Officer shall render such administrative and management services as are customarily provided by persons employed in similar officer capacities and shall have such other powers and duties as the Chief Executive Officer or the Board may prescribe from time to time.

     2. Location and Facilities. The Bank will furnish the Officer with the working facilities and staff customary for officers with the title and duties set forth in Section 1 and as are necessary for the performance of the Officer’s duties. The location of such facilities and staff shall be at the principal administrative offices of the Bank, or at such other site or sites customary for such offices.

3. Term.

a.

The term of this Agreement shall be (i) the initial term, consisting of the period commencing on the date of this Agreement (the “Effective Date”) and ending on the first anniversary of the Effective Date, plus (ii) any and all extensions of the initial term made pursuant to this Section 3.

b.

On each anniversary date of the Effective Date prior to a termination of the Agreement, the term under this Agreement shall be extended automatically for an additional one (1) year period without action by any party provided, however, that neither the Bank nor the Officer shall have given written notice at least sixty (60) days prior to such anniversary date of their election not to extend the term of the Agreement.

     4. Base Compensation.

a.	The Bank agrees to pay the Officer during the term of this Agreement a base salary at the rate of $135,000.00 per year, payable in accordance with customary payroll practices.
b.	The Executive Management Committee of the Bank shall review annually the rate of the Officer’s base salary based upon factors they deem relevant, and may maintain, increase or decrease the Officer’s base salary.
c.	In the absence of action by the Executive Management Committee, the Officer shall continue to receive base salary at the annual rate specified on the Effective Date or, if another rate has been established under the provisions of this Section 4, the rate last properly established by action of the Executive Management Committee under the provisions of this Section 4.

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     5. Bonuses. Officer shall be entitled to participate in any discretionary bonuses or other incentive compensation programs that may be awarded from time to time to senior management employees, pursuant to bonus plans or otherwise.

     6. Benefit Plans. The Officer shall be entitled to participate in such life insurance, medical, dental, pension, profit sharing, and retirement plans, stock compensation plans and other benefit programs and arrangements as may be approved from time to time for the benefit of Bank employees.

     7. Vacation and Leave.

a.

The Officer may take vacations and other leave in accordance with Bank policy for senior officers, or otherwise as approved by the Board.

b.

In addition to paid vacations and other leave, the Officer shall be entitled, without loss of pay, to absent himself voluntarily from the performance of his duties for such additional periods of time and for such valid and legitimate reasons as the Bank may determine in its discretion. Further, the Bank may grant to the Officer a leave or leaves of absence, with or without pay, at such time or times and upon such terms and conditions as the Bank, in its discretion, may determine.

     8. Expense Payment and Reimbursements. The Officer shall be reimbursed for all reasonable out-of-pocket business expenses incurred in connection with services performed under this Agreement upon substantiation of such expenses in accordance with applicable policies of the Bank.

     9. This Section 9 has been intentionally left blank.

     10. Loyalty and Confidentiality.

a.	During the term of this Agreement: (i) the Officer shall devote the requisite time, attention, skill, and efforts to the faithful performance of his duties hereunder; provided, however, that from time to time, the Officer may serve on the boards of directors of, and hold any other offices or positions in, companies or organizations which will not present any conflict of interest with the Bank or any of its subsidiaries or affiliates, unfavorably affect the performance of the Officer’s duties pursuant to this Agreement, or violate any applicable statute or regulation; and (ii) the Officer shall not engage in any business or activity contrary to the business affairs or interests of the Bank or any of its subsidiaries or affiliates.
b.	Nothing contained in this Agreement shall prevent or limit the Officer’s right to invest in the capital stock or other securities of any business dissimilar from that of the Bank or any of its subsidiaries or affiliates, or, solely as a passive, minority investor, in any business.
c.	The Officer agrees to maintain the confidentiality of any and all information concerning the operations or financial status of the Bank; the names or addresses of any borrowers, depositors and other customers; any information concerning or obtained from such customers; and any other information concerning the Bank to which the Officer may be exposed during the course of the Officer’s employment with the Bank. The Officer further agrees that, unless required by law or specifically permitted by the Board in writing, the Officer will not disclose to any person or entity, either during or subsequent to employment with the Bank, any of the above-mentioned information which is not generally known to the public, nor shall the Officer employ such information in any way other than for the benefit of the Bank or any of its subsidiaries or affiliates.

     11. Termination and Termination Pay. Subject to Section 12 of this Agreement, the Officer’s employment under this Agreement may be terminated in the following circumstances:

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a.	Death. The Officer’s employment under this Agreement shall terminate upon the Officer’s death during the term of this Agreement, in which event the Officer’s estate shall be entitled to receive the compensation due to the Officer through the last day of the calendar month of death.
b.	Retirement. Notwithstanding anything in this Agreement to the contrary, this Agreement shall terminate upon the Officer’s retirement and will be subject to any retirement benefit plan or plans provided for under Section 6 of this Agreement or otherwise.
c.	Disability.

i.	The Bank or the Officer may terminate the Officer’s employment after having established the Officer’s Disability. For purposes of this Agreement, “Disability” means the Officer’s suffering a sickness, accident or injury which has been determined by the carrier of any individual or group disability insurance policy covering the Officer, or by the Social Security Administration, to be a disability rendering the Officer totally and permanently disabled. The Bank shall determine in good faith whether or not the Officer is disabled for purposes of this Agreement. As a condition to any benefits, the Bank may require the Officer to submit proof of the carrier’s or the Social Security Administration’s determination of disability.
ii.	In the event of such Disability, the Officer’s obligation to perform services under this Agreement will terminate. In the event of such termination, the Officer shall continue to receive one-hundred percent (100%) of the Officer’s monthly base salary (at the annual rate in effect on the date of termination) through the earlier of the date of the Officer’s death, the date the Officer attains age 65 or the date which is six (6) months after the Officer’s termination date. Such payments shall be reduced by the amount of any short- or long-term disability benefits payable to the Officer under any other disability program sponsored by the Bank.
iii.	In addition, during any period of Disability for which the Officer is receiving payments under this Section 11(c), the Officer and the Officer’s dependents shall, to the greatest extent possible, continue to be covered under all benefit plans (including, without limitation, retirement plans and medical, dental and life insurance plans) under which the Officer participated prior to the Disability, on the same terms as if the Officer were actively employed through the earlier of the date of the Officer’s death, the date the Officer attains age 65 or the date which is six (6) months after the Officer’s termination date.

d.   Just Cause.

i.   The Bank may, by written notice to the Officer in the form and manner specified in this paragraph, immediately terminate the Officer’s employment with the Company or the Bank, respectively, at any time, for Just Cause. The Officer shall have no right to receive compensation or other benefits for any period after termination for Just Cause, except for previously vested benefits. Termination for “Just Cause” shall mean termination because of, in the good faith determination of the Bank, the Officer’s:

(1)	Personal dishonesty;
(2)	Incompetence;
(3)	Willful misconduct;
(4)	Breach of fiduciary duty involving personal profit;

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(5)	Intentional failure to perform duties under this Agreement;
(6)	Willful violation of any law, rule or regulation (other than traffic violations or similar offenses) that reflects adversely on the reputation of the Bank, any felony conviction, any violation of law involving moral turpitude, or any violation of a final cease-and-desist order; or
(7)	Material breach of any provision of this Agreement.

e.	Voluntary Termination by the Officer. In addition to the Officer’s other rights to terminate employment under the Agreement, the Officer may voluntarily terminate employment during the term of this Agreement upon at least sixty (60) days prior written notice to the Bank, in which case the Officer shall receive only compensation, vested rights and employee benefits up to the date of termination.
f.	Without Just Cause.

i.	In addition to termination pursuant to Sections 11(a) through 11(e), the Bank may, by means of written notice, immediately terminate the Officer’s employment at any time for a reason other than Just Cause (a termination “Without Just Cause”).
ii.	Subject to Section 12 hereof, in the event of termination under this Section 11(f), the Officer shall be entitled to receive the annual base salary that would have been paid for the remaining term of the Agreement, including any renewals or extensions thereof, determined by reference to the highest annual rate of base salary in effect pursuant to Section 4 of this Agreement in any of the twelve (12) months immediately preceding the Officer’s termination date. The sum due under this Section 11(f) shall be paid in one lump sum within thirty (30) calendar days of the Officer’s termination.
iii.	Notwithstanding the foregoing, a reduction in base salary or a reduction or elimination of the Officer’s participation in or benefits under one or more benefit plans that occurs as part of a good faith, overall reduction in salary or a reduction or elimination of plans or benefits provided thereunder, provided such reduction or elimination applies to all participants in a non-discriminatory manner (except as such discrimination may be necessary to comply with law), shall not constitute a material breach of this Agreement, provided that benefits of the same type or to the same general extent as those offered under the plan prior to reduction or elimination are not available to other officers of the Bank or its affiliates, or any company that controls either of them, under a plan or plans under which the Officer is not entitled to participate.
iv.	Notwithstanding anything in this Agreement to the contrary, during the six (6) month period beginning on the effective date of a Change in Control (as defined in Section 12(a)), the Officer may voluntarily terminate employment under this Agreement for any reason and such termination shall constitute termination Without Just Cause.

g.   Continuing Covenant Not to Compete or Interfere with Relationships. Regardless of anything herein to the contrary, following a termination by the Bank or the Officer pursuant to Section 11(f) and continuing until the six (6) month anniversary of the effective date of such termination, (i) the Officer’s obligations under Section 10(c) of this Agreement will continue in effect; and (ii) the Officer shall not interfere with the relationship between the Bank and any of its employees, agents, customers or representatives.

     12. Termination in Connection with a Change in Control.

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a.   “Change in Control” means any one of the following events occurs:

i.	Merger: the Company merges into or consolidates with another corporation, or merges another corporation into the Company and, as a result, less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company immediately before the merger or consolidation;
ii.	Acquisition of Significant Share Ownership: a report on Schedule 13D or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner(s) of 25% or more of a class of the Company’s voting securities, but this clause (ii) shall not apply to beneficial ownership of Company voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns fifty percent (50%) or more of its outstanding voting securities;
iii.	Change in Board Composition: during any period of two consecutive years, individuals who constitute the Company’s or the Bank’s Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Company’s or the Bank’s Board of Directors; provided, however, that for purposes of this clause (iii), each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least three-fourths (3/4) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period; or
iv.	Sale of Assets: The Company sells to a third party all or substantially all of its assets.

b.   If, within the period beginning six (6) months prior to and ending two (2) years after a Change in Control, the Bank shall terminate the Officer’s employment Without Just Cause, the Bank shall, within thirty (30) calendar days of the Officer’s termination of employment, make a lump-sum cash payment to the Officer in an amount equal to two times the Officer’s highest annual rate of base salary during the two (2) year period preceding the effective date of the Change in Control. This cash payment shall be made in lieu of any payment also required under Section 11(f) of this Agreement because of a termination in such period.

     13. Indemnification and Liability Insurance.

a.   Indemnification. The Bank agrees to indemnify the Officer (and the Officer’s heirs, executors, and administrators), and to advance expenses related thereto, to the fullest extent permitted under applicable law and regulations, against any and all expenses and liabilities reasonably incurred by the Officer in connection with or arising out of any action, suit, or proceeding in which the Officer may be involved by reason of having been a director or Officer of the Bank or any of its subsidiaries or affiliates (whether or not the Officer continues to be a director or Officer at the time of incurring any such expenses or liabilities). Such expenses and liabilities shall include, but shall not be limited to, judgments, court costs, attorneys’ fees and the costs of reasonable settlements, such settlements to be approved by the Board, if such action is brought against the Officer in the Officer’s capacity as an officer or director of the Bank or any of its subsidiaries or affiliates. Indemnification for expenses shall not extend to matters for which the Officer has been terminated for Just Cause. Nothing contained herein shall be deemed to provide indemnification otherwise prohibited by applicable law or regulation. Notwithstanding anything herein to the contrary, the obligations of this Section 13 shall survive the term of this Agreement by a period of six (6) years.

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b.   Insurance. During the period in which indemnification of the Officer is required under this Section 13, the Bank shall provide the Officer (and the Officer’s heirs, executors, and administrators) with coverage under a directors’ and officers’ liability policy at the expense of the Bank, at least equivalent to the coverage provided to directors and senior officers of the Bank.

     14. Injunctive Relief. If there is a breach or threatened breach of Section 11(g) of this Agreement, the Bank and the Officer agree that there is no adequate remedy at law for such breach, and further, that the Bank shall be entitled to injunctive relief restraining the Officer from such breach or threatened breach, but such relief shall not be the exclusive remedy hereunder for such breach. The parties hereto likewise agree that the Officer, without limitation, shall be entitled to injunctive relief to enforce the obligations of the Bank under Section 12 of this Agreement.

     15. Successors and Assigns.

a.	This Agreement shall inure to the benefit of and be binding upon any corporate or other successor that acquires, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of the Company or the Bank.
b.	Since the Bank is contracting for the Officer’s unique and personal skills, the Officer shall be precluded from assigning or delegating any rights or duties hereunder without first obtaining the written consent of the Bank.

     16. No Mitigation. The Officer shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking new employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Officer in any subsequent employment.

     17. Notices. All notices, requests, demands and other communications in connection with this Agreement shall be made in writing and shall be deemed to have been given when delivered by hand or 48 hours after mailing at any general or branch office of the United States Postal Service, by registered or certified mail, postage prepaid, addressed to the Bank at its principal business office and to the Officer at the Officer’s home address as maintained in the records of the Bank.

     18. Joint and Several Liability; Payments by the Company and the Bank. To the extent permitted by law, the Company shall be jointly and severally liable with the Bank for the payment of all amounts due under this Agreement and shall guarantee the performance of the Bank’s obligations hereunder, provided, however, that the Company shall not be required by this Agreement to pay the Officer a base salary or any bonuses or any other cash payments, except in the event that the Bank does not fulfill its obligations to the Officer for such payments.

     19. No Plan Created by this Agreement. The Officer and the Bank expressly declare and agree that this Agreement was negotiated among them and that no provisions of this Agreement are intended to, or shall be deemed to, create any “plan” for purposes of the Employee Retirement Income Security Act of 1974 (ERISA) or any other law or regulation, and each party expressly waives any right to assert the contrary. Any assertion in any judicial or administrative filing, hearing, or process that such a plan was created by this Agreement shall be deemed a material breach of this Agreement by the party making such an assertion.

     20. Amendments. No amendments or additions to this Agreement shall be binding unless made in writing and signed by all of the parties, except as otherwise specifically provided for herein.

     21. Applicable Law. Except to the extent preempted by federal law, the laws of the State of New Jersey shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise.

     22. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the remaining provisions hereof.

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     23. Headings. Headings contained herein are for convenience of reference only.

     24. Entire Agreement. This Agreement, together with any understandings or modifications agreed to in writing by the parties, shall constitute the entire agreement among the parties with respect to the subject matter hereof, other than written agreements with respect to specific plans, programs or arrangements described in Sections 5 and 6. This agreement supercedes and replaces in its entirety any previous employment agreements between or among the Bank, the Company and the Officer.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first set forth above.

Attest:	YARDVILLE NATIONAL BANK
	By:	F. Kevin Tylus
Kathleen Fone	Title:	SEVP & Chief Operating Officer
	YARDVILLE NATIONAL BANCORP
	By:	F. Kevin Tylus
Kathleen Fone	Title:	Senior Executive Vice President
Witness:
Kathleen Fone		Daniel J. O’Donnell
		First Senior Vice President

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EX-10.8

Exhibit 10.8

EMPLOYMENT AGREEMENT FOR SENIOR VICE PRESIDENTS

     THIS AGREEMENT (the “Agreement”), made this 1^st day of February, 2005, by and between YARDVILLE NATIONAL BANK (the “Bank”) and Joanne C. O’Donnell (the “Officer”). References to “the Company” herein shall refer to YARDVILLE NATIONAL BANCORP, a New Jersey corporation (the “Company”) and the holding company for the Bank.

W I T N E S S E T H

     WHEREAS, the Bank desires to retain the services of the Officer as an employee of the Bank; and

     WHEREAS, the Officer and the Bank (desire to enter into an employment agreement setting forth the terms and conditions of the continuing employment of the Officer and the related rights and obligations of the parties.

     NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, the parties hereby agree as follows:

     1. Employment. The Bank shall employ the Officer as a Senior Vice President/Credit Administration Officer of the Bank. The Officer shall render such administrative and management services as are customarily provided by persons employed in similar officer capacities and shall have such other powers and duties as the Chief Executive Officer or the Board may prescribe from time to time.

     2. Location and Facilities. The Bank will furnish the Officer with the working facilities and staff customary for officers with the title and duties set forth in Section 1 and as are necessary for the performance of the Officer’s duties. The location of such facilities and staff shall be at the principal administrative offices of the Bank, or at such other site or sites customary for such offices.

     3. Term.

a.

The term of this Agreement shall be (i) the initial term, consisting of the period commencing on the date of this Agreement (the “Effective Date”) and ending on the first anniversary of the Effective Date, plus (ii) any and all extensions of the initial term made pursuant to this Section 3.

b.

On each anniversary of the Effective Date prior to the termination of the Agreement, the term under this Agreement shall be extended automatically for an additional one (1) year period without action by any party provided, however, that neither the Bank nor the Officer shall have given written notice at least sixty (60) days prior to such anniversary date of their desire that the term not be extended.

     4. Base Compensation.

a.	The Bank agrees to pay the Officer during the term of this Agreement a base salary at the rate of $115,000.00 per year, payable in accordance with customary payroll practices.
b.	The Executive Management Committee of the Bank shall review annually the rate of the Officer’s base salary based upon factors they deem relevant, and may maintain, increase or decrease the Officer’s base salary.
c.	In the absence of action by the Executive Management Committee, the Officer shall continue to receive base salary at the annual rate specified on the Effective Date or, if another rate has been established under the provisions of this Section 4, the rate last properly established by action of the Executive Management Committee under the provisions of this Section 4.

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     5. Bonuses. Officer shall be entitled to participate in any discretionary bonuses or other incentive compensation programs that may be awarded from time to time to senior management employees, pursuant to bonus plans or otherwise.

     6. Benefit Plans. The Officer shall be entitled to participate in such life insurance, medical, dental, pension, profit sharing, and retirement plans, stock compensation plans and other benefit programs and arrangements as may be approved from time to time for the benefit of Bank employees.

     7. Vacation and Leave.

a.

The Officer may take vacations and other leave in accordance with Bank policy for senior officers, or otherwise as approved by the Board.

b.

In addition to paid vacations and other leave, the Officer shall be entitled, without loss of pay, to absent himself voluntarily from the performance of his duties for such additional periods of time and for such valid and legitimate reasons as the Bank may determine in its discretion. Further, the Bank may grant to the Officer a leave or leaves of absence, with or without pay, at such time or times and upon such terms and conditions as the Bank, in its discretion, may determine.

     8. Expense Payment and Reimbursements. The Officer shall be reimbursed for all reasonable out-of-pocket business expenses incurred in connection with services performed under this Agreement upon substantiation of such expenses in accordance with applicable policies of the Bank.

     9. This Section 9 has been intentionally left blank.

     10. Loyalty and Confidentiality.

a.	During the term of this Agreement: (i) the Officer shall devote the requisite time, attention, skill, and efforts to the faithful performance of his duties hereunder; provided, however, that from time to time, the Officer may serve on the boards of directors of, and hold any other offices or positions in, companies or organizations which will not present any conflict of interest with the Bank or any of its subsidiaries or affiliates, unfavorably affect the performance of the Officer’s duties pursuant to this Agreement, or violate any applicable statute or regulation; and (ii) the Officer shall not engage in any business or activity contrary to the business affairs or interests of the Bank or any of its subsidiaries or affiliates.
b.	Nothing contained in this Agreement shall prevent or limit the Officer’s right to invest in the capital stock or other securities of any business dissimilar from that of the Bank or any of its subsidiaries or affiliates, or, solely as a passive, minority investor, in any business.
c.	The Officer agrees to maintain the confidentiality of any and all information concerning the operations or financial status of the Bank; the names or addresses of any borrowers, depositors and other customers; any information concerning or obtained from such customers; and any other information concerning the Bank to which the Officer may be exposed during the course of the Officer’s employment with the Bank. The Officer further agrees that, unless required by law or specifically permitted by the Board in writing, the Officer will not disclose to any person or entity, either during or subsequent to employment with the Bank, any of the above-mentioned information which is not generally known to the public, nor shall the Officer employ such information in any way other than for the benefit of the Bank or any of its subsidiaries or affiliates.

     11. Termination and Termination Pay. Subject to Section 12 of this Agreement, the Officer’s employment under this Agreement may be terminated in the following circumstances:

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a.	Death. The Officer’s employment under this Agreement shall terminate upon the Officer’s death during the term of this Agreement, in which event the Officer’s estate shall be entitled to receive the compensation due to the Officer through the last day of the calendar month of death.
b.	Retirement. Notwithstanding anything in this Agreement to the contrary, this Agreement shall terminate upon the Officer’s retirement and will be subject to any retirement benefit plan or plans provided for under Section 6 of this Agreement or otherwise.
c.	Disability.

i.	The Bank or the Officer may terminate the Officer’s employment after having established the Officer’s Disability. For purposes of this Agreement, “Disability” means the Officer’s suffering a sickness, accident or injury which has been determined by the carrier of any individual or group disability insurance policy covering the Officer, or by the Social Security Administration, to be a disability rendering the Officer totally and permanently disabled. The Bank shall determine in good faith whether or not the Officer is disabled for purposes of this Agreement. As a condition to any benefits, the Bank may require the Officer to submit proof of the carrier’s or the Social Security Administration’s determination of disability.
ii.	In the event of such Disability, the Officer’s obligation to perform services under this Agreement will terminate. In the event of such termination, the Officer shall continue to receive one-hundred percent (100%) of the Officer’s monthly base salary (at the annual rate in effect on the date of termination) through the earlier of the date of the Officer’s death, the date the Officer attains age 65 or the date which is six (6) months after the Officer’s termination date. Such payments shall be reduced by the amount of any short- or long-term disability benefits payable to the Officer under any other disability program sponsored by the Bank.
iii.	In addition, during any period of Disability for which the Officer is receiving payments under this Section 11(c), the Officer and the Officer’s dependents shall, to the greatest extent possible, continue to be covered under all benefit plans (including, without limitation, retirement plans and medical, dental and life insurance plans) under which the Officer participated prior to the Disability, on the same terms as if the Officer were actively employed through the earlier of the date of the Officer’s death, the date the Officer attains age 65 or the date which is six (6) months after the Officer’s termination date.

d.   Just Cause.

i.   The Bank may, by written notice to the Officer in the form and manner specified in this paragraph, immediately terminate the Officer’s employment with the Company or the Bank, respectively, at any time, for Just Cause. The Officer shall have no right to receive compensation or other benefits for any period after termination for Just Cause, except for previously vested benefits. Termination for “Just Cause” shall mean termination because of, in the good faith determination of the Bank, the Officer’s:

(1)	Personal dishonesty;
(2)	Incompetence;
(3)	Willful misconduct;
(4)	Breach of fiduciary duty involving personal profit;

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(5)	Intentional failure to perform duties under this Agreement;
(6)	Willful violation of any law, rule or regulation (other than traffic violations or similar offenses) that reflects adversely on the reputation of the Bank, any felony conviction, any violation of law involving moral turpitude, or any violation of a final cease-and-desist order; or
(7)	Material breach of any provision of this Agreement.

e.	Voluntary Termination by the Officer. In addition to the Officer’s other rights to terminate employment under the Agreement, the Officer may voluntarily terminate employment during the term of this Agreement upon at least sixty (60) days prior written notice to the Bank, in which case the Officer shall receive only compensation, vested rights and employee benefits up to the date of termination.
f.	Without Just Cause.

i.	In addition to termination pursuant to Sections 11(a) through 11(e), the Bank may, by means of written notice, immediately terminate the Officer’s employment at any time for a reason other than Just Cause (a termination “Without Just Cause”).
ii.	Subject to Section 12 hereof, in the event of termination under this Section 11(f), the Officer shall be entitled to receive the annual base salary that would have been paid for the remaining term of the Agreement, including any renewals or extensions thereof, determined by reference to the highest annual rate of base salary in effect pursuant to Section 4 of this Agreement in any of the twelve (12) months immediately preceding the Officer’s termination date. The sum due under this Section 11(f) shall be paid in one lump sum within thirty (30) calendar days of the Officer’s termination. (2)
iii.	Notwithstanding the foregoing, a reduction in base salary or a reduction or elimination of the Officer’s participation in or benefits under one or more benefit plans that occurs as part of a good faith, overall reduction in salary or a reduction or elimination of plans or benefits provided thereunder, provided such reduction or elimination applies to all participants in a non-discriminatory manner (except as such discrimination may be necessary to comply with law), shall not constitute a material breach of this Agreement, provided that benefits of the same type or to the same general extent as those offered under the plan prior to reduction or elimination are not available to other officers of the Bank or its affiliates, or any company that controls either of them, under a plan or plans under which the Officer is not entitled to participate.
iv.	Notwithstanding anything in this Agreement to the contrary, during the six (6) month period beginning on the effective date of a Change in Control (as defined in Section 12(a)), the Officer may voluntarily terminate employment under this Agreement for any reason and such termination shall constitute termination Without Just Cause.

g.   Continuing Covenant Not to Compete or Interfere with Relationships. Regardless of anything herein to the contrary, following a termination by the Bank or the Officer pursuant to Section 11(f) and continuing until the six (6) month anniversary of the effective date of such termination, (i) the Officer’s obligations under Section 10(c) of this Agreement will continue in effect; and (ii) the Officer shall not interfere with the relationship between the Bank and any of its employees, agents, customers or representatives.

     12. Termination in Connection with a Change in Control.

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a.   “Change in Control” means any one of the following events occurs:

i.	Merger: the Company merges into or consolidates with another corporation, or merges another corporation into the Company and, as a result, less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company immediately before the merger or consolidation;
ii.	Acquisition of Significant Share Ownership: a report on Schedule 13D or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner(s) of 25% or more of a class of the Company’s voting securities, but this clause (ii) shall not apply to beneficial ownership of Company voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns fifty percent (50%) or more of its outstanding voting securities;
iii.	Change in Board Composition: during any period of two consecutive years, individuals who constitute the Company’s or the Bank’s Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Company’s or the Bank’s Board of Directors; provided, however, that for purposes of this clause (iii), each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least three-fourths (3/4) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period; or
iv.	Sale of Assets: The Company sells to a third party all or substantially all of its assets.

b.   If, within the period beginning six (6) months prior to and ending eighteen (18) months after a Change in Control, the Bank shall terminate the Officer’s employment Without Just Cause, the Bank shall, within thirty (30) calendar days of the Officer’s termination of employment, make a lump-sum cash payment to the Officer in an amount equal to one and one-half times the Officer’s highest annual rate of base salary during the eighteen (18) month period preceding the effective date of the Change in Control. This cash payment shall be made in lieu of any payment also required under Section 11(f) of this Agreement because of a termination in such period.

     13. Indemnification and Liability Insurance.

a.   Indemnification. The Bank agrees to indemnify the Officer (and the Officer’s heirs, executors, and administrators), and to advance expenses related thereto, to the fullest extent permitted under applicable law and regulations, against any and all expenses and liabilities reasonably incurred by the Officer in connection with or arising out of any action, suit, or proceeding in which the Officer may be involved by reason of having been a director or Officer of the Bank or any of its subsidiaries or affiliates (whether or not the Officer continues to be a director or Officer at the time of incurring any such expenses or liabilities). Such expenses and liabilities shall include, but shall not be limited to, judgments, court costs, attorneys’ fees and the costs of reasonable settlements, such settlements to be approved by the Board, if such action is brought against the Officer in the Officer’s capacity as an officer or director of the Bank or any of its subsidiaries or affiliates. Indemnification for expenses shall not extend to matters for which the Officer has been terminated for Just Cause. Nothing contained herein shall be deemed to provide indemnification otherwise prohibited by applicable law or regulation. Notwithstanding anything herein to the contrary, the obligations of this Section 13 shall survive the term of this Agreement by a period of six (6) years.

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b.   Insurance. During the period in which indemnification of the Officer is required under this Section 13, the Bank shall provide the Officer (and the Officer’s heirs, executors, and administrators) with coverage under a directors’ and officers’ liability policy at the expense of the Bank, at least equivalent to the coverage provided to directors and senior officers of the Bank.

     14. Injunctive Relief. If there is a breach or threatened breach of Section 11(g) of this Agreement, the Bank and the Officer agree that there is no adequate remedy at law for such breach, and further, that the Bank shall be entitled to injunctive relief restraining the Officer from such breach or threatened breach, but such relief shall not be the exclusive remedy hereunder for such breach. The parties hereto likewise agree that the Officer, without limitation, shall be entitled to injunctive relief to enforce the obligations of the Bank under Section 12 of this Agreement.

     15. Successors and Assigns.

a.	This Agreement shall inure to the benefit of and be binding upon any corporate or other successor that acquires, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of the Company or the Bank.
b.	Since the Bank is contracting for the Officer’s unique and personal skills, the Officer shall be precluded from assigning or delegating any rights or duties hereunder without first obtaining the written consent of the Bank.

     16. No Mitigation. The Officer shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking new employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Officer in any subsequent employment.

     17. Notices. All notices, requests, demands and other communications in connection with this Agreement shall be made in writing and shall be deemed to have been given when delivered by hand or 48 hours after mailing at any general or branch office of the United States Postal Service, by registered or certified mail, postage prepaid, addressed to the Bank at its principal business office and to the Officer at the Officer’s home address as maintained in the records of the Bank.

     18. Joint and Several Liability; Payments by the Company and the Bank. To the extent permitted by law, the Company shall be jointly and severally liable with the Bank for the payment of all amounts due under this Agreement and shall guarantee the performance of the Bank’s obligations hereunder, provided, however, that the Company shall not be required by this Agreement to pay the Officer a base salary or any bonuses or any other cash payments, except in the event that the Bank does not fulfill its obligations to the Officer for such payments.

     19. No Plan Created by this Agreement. The Officer and the Bank expressly declare and agree that this Agreement was negotiated among them and that no provisions of this Agreement are intended to, or shall be deemed to, create any “plan” for purposes of the Employee Retirement Income Security Act of 1974 (ERISA) or any other law or regulation, and each party expressly waives any right to assert the contrary. Any assertion in any judicial or administrative filing, hearing, or process that such a plan was created by this Agreement shall be deemed a material breach of this Agreement by the party making such an assertion.

     20. Amendments. No amendments or additions to this Agreement shall be binding unless made in writing and signed by all of the parties, except as otherwise specifically provided for herein.

     21. Applicable Law. Except to the extent preempted by federal law, the laws of the State of New Jersey shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise.

     22. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the remaining provisions hereof.

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     23. Headings. Headings contained herein are for convenience of reference only.

     24. Entire Agreement. This Agreement, together with any understandings or modifications agreed to in writing by the parties, shall constitute the entire agreement among the parties with respect to the subject matter hereof, other than written agreements with respect to specific plans, programs or arrangements described in Sections 5 and 6. This agreement supercedes and replaces in its entirety any previous employment agreements between or among the Bank, the Company and the Officer.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first set forth above.

Attest:	YARDVILLE NATIONAL BANK
	By:	F. Kevin Tylus
Kathleen Fone	Title:	Senior Executive Vice President & Chief Operating Officer
	YARDVILLE NATIONAL BANCORP
	By:	F. Kevin Tylus
Kathleen Fone	Title:	Senior Executive Vice President
Witness:
Kathleen Fone		Joanne c. O’Donnell
Witness		Joanne C. O’Donnell
		Senior Vice President

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EX-10.10

Exhibit 10.10

EMPLOYMENT AGREEMENT FOR SENIOR VICE PRESIDENTS

     THIS AGREEMENT (the “Agreement”), made this 17th day of January, 2005, by and between YARDVILLE NATIONAL BANK (the “Bank”) and Patrick L. Ryan (the “Officer”). References to “the Company” herein shall refer to YARDVILLE NATIONAL BANCORP, a New Jersey corporation (the “Company”) and the holding company for the Bank.

W I T N E S S E T H

     WHEREAS, the Bank desires to retain the services of the Officer as an employee of the Bank; and

     WHEREAS, the Officer and the Bank (desire to enter into an employment agreement setting forth the terms and conditions of the continuing employment of the Officer and the related rights and obligations of the parties.

     NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, the parties hereby agree as follows:

     1. Employment. The Bank shall employ the Officer as a Senior Vice President/Strategic Planning Officer of the Bank. The Officer shall render such administrative and management services as are customarily provided by persons employed in similar officer capacities and shall have such other powers and duties as the Chief Executive Officer or the Board may prescribe from time to time.

     2. Location and Facilities. The Bank will furnish the Officer with the working facilities and staff customary for officers with the title and duties set forth in Section 1 and as are necessary for the performance of the Officer’s duties. The location of such facilities and staff shall be at the principal administrative offices of the Bank, or at such other site or sites customary for such offices.

     3. Term.

a.

The term of this Agreement shall be (i) the initial term, consisting of the period commencing on the date of this Agreement (the “Effective Date”) and ending on the first anniversary of the Effective Date, plus (ii) any and all extensions of the initial term made pursuant to this Section 3.

b.

On each anniversary of the Effective Date prior to the termination of the Agreement, the term under this Agreement shall be extended automatically for an additional one (1) year period without action by any party provided, however, that neither the Bank nor the Officer shall have given written notice at least sixty (60) days prior to such anniversary date of their desire that the term not be extended.

     4. Base Compensation.

a.	The Bank agrees to pay the Officer during the term of this Agreement a base salary at the rate of $126,000.00 per year, payable in accordance with customary payroll practices.
b.	The Executive Management Committee of the Bank shall review annually the rate of the Officer’s base salary based upon factors they deem relevant, and may maintain, increase or decrease the Officer’s base salary.
c.	In the absence of action by the Executive Management Committee, the Officer shall continue to receive base salary at the annual rate specified on the Effective Date or, if another rate has been established under the provisions of this Section 4, the rate last properly established by action of the Executive Management Committee under the provisions of this Section 4.

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     5. Bonuses. Officer shall be entitled to participate in any discretionary bonuses or other incentive compensation programs that may be awarded from time to time to senior management employees, pursuant to bonus plans or otherwise.

     6. Benefit Plans. The Officer shall be entitled to participate in such life insurance, medical, dental, pension, profit sharing, and retirement plans, stock compensation plans and other benefit programs and arrangements as may be approved from time to time for the benefit of Bank employees.

     7. Vacation and Leave.

a.

The Officer may take vacations and other leave in accordance with Bank policy for senior officers, or otherwise as approved by the Board.

b.

In addition to paid vacations and other leave, the Officer shall be entitled, without loss of pay, to absent himself voluntarily from the performance of his duties for such additional periods of time and for such valid and legitimate reasons as the Bank may determine in its discretion. Further, the Bank may grant to the Officer a leave or leaves of absence, with or without pay, at such time or times and upon such terms and conditions as the Bank, in its discretion, may determine.

     8. Expense Payment and Reimbursements. The Officer shall be reimbursed for all reasonable out-of-pocket business expenses incurred in connection with services performed under this Agreement upon substantiation of such expenses in accordance with applicable policies of the Bank.

     10. This Section 9 has been intentionally left blank.

     10. Loyalty and Confidentiality.

a.	During the term of this Agreement: (i) the Officer shall devote the requisite time, attention, skill, and efforts to the faithful performance of his duties hereunder; provided, however, that from time to time, the Officer may serve on the boards of directors of, and hold any other offices or positions in, companies or organizations which will not present any conflict of interest with the Bank or any of its subsidiaries or affiliates, unfavorably affect the performance of the Officer’s duties pursuant to this Agreement, or violate any applicable statute or regulation; and (ii) the Officer shall not engage in any business or activity contrary to the business affairs or interests of the Bank or any of its subsidiaries or affiliates.
b.	Nothing contained in this Agreement shall prevent or limit the Officer’s right to invest in the capital stock or other securities of any business dissimilar from that of the Bank or any of its subsidiaries or affiliates, or, solely as a passive, minority investor, in any business.
c.	The Officer agrees to maintain the confidentiality of any and all information concerning the operations or financial status of the Bank; the names or addresses of any borrowers, depositors and other customers; any information concerning or obtained from such customers; and any other information concerning the Bank to which the Officer may be exposed during the course of the Officer’s employment with the Bank. The Officer further agrees that, unless required by law or specifically permitted by the Board in writing, the Officer will not disclose to any person or entity, either during or subsequent to employment with the Bank, any of the above-mentioned information which is not generally known to the public, nor shall the Officer employ such information in any way other than for the benefit of the Bank or any of its subsidiaries or affiliates.

     11. Termination and Termination Pay. Subject to Section 12 of this Agreement, the Officer’s employment under this Agreement may be terminated in the following circumstances:

a.   Death. The Officer’s employment under this Agreement shall terminate upon the Officer’s death during the term of this Agreement, in which event the Officer’s estate shall be entitled to receive the compensation due to the Officer through the last day of the calendar month of death.

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b.	Retirement. Notwithstanding anything in this Agreement to the contrary, this Agreement shall terminate upon the Officer’s retirement and will be subject to any retirement benefit plan or plans provided for under Section 6 of this Agreement or otherwise.
c.	Disability.

i.	The Bank or the Officer may terminate the Officer’s employment after having established the Officer’s Disability. For purposes of this Agreement, “Disability” means the Officer’s suffering a sickness, accident or injury which has been determined by the carrier of any individual or group disability insurance policy covering the Officer, or by the Social Security Administration, to be a disability rendering the Officer totally and permanently disabled. The Bank shall determine in good faith whether or not the Officer is disabled for purposes of this Agreement. As a condition to any benefits, the Bank may require the Officer to submit proof of the carrier’s or the Social Security Administration’s determination of disability.
ii.	In the event of such Disability, the Officer’s obligation to perform services under this Agreement will terminate. In the event of such termination, the Officer shall continue to receive one-hundred percent (100%) of the Officer’s monthly base salary (at the annual rate in effect on the date of termination) through the earlier of the date of the Officer’s death, the date the Officer attains age 65 or the date which is six (6) months after the Officer’s termination date. Such payments shall be reduced by the amount of any short- or long-term disability benefits payable to the Officer under any other disability program sponsored by the Bank.
iii.	In addition, during any period of Disability for which the Officer is receiving payments under this Section 11(c), the Officer and the Officer’s dependents shall, to the greatest extent possible, continue to be covered under all benefit plans (including, without limitation, retirement plans and medical, dental and life insurance plans) under which the Officer participated prior to the Disability, on the same terms as if the Officer were actively employed through the earlier of the date of the Officer’s death, the date the Officer attains age 65 or the date which is six (6) months after the Officer’s termination date.

d.   Just Cause.

i.   The Bank may, by written notice to the Officer in the form and manner specified in this paragraph, immediately terminate the Officer’s employment with the Company or the Bank, respectively, at any time, for Just Cause. The Officer shall have no right to receive compensation or other benefits for any period after termination for Just Cause, except for previously vested benefits. Termination for “Just Cause” shall mean termination because of, in the good faith determination of the Bank, the Officer’s:

(1)	Personal dishonesty;
(2)	Incompetence;
(3)	Willful misconduct;
(4)	Breach of fiduciary duty involving personal profit;
(5)	Intentional failure to perform duties under this Agreement;

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(6)	Willful violation of any law, rule or regulation (other than traffic violations or similar offenses) that reflects adversely on the reputation of the Bank, any felony conviction, any violation of law involving moral turpitude, or any violation of a final cease-and-desist order; or
(7)	Material breach of any provision of this Agreement.

e.	Voluntary Termination by the Officer. In addition to the Officer’s other rights to terminate employment under the Agreement, the Officer may voluntarily terminate employment during the term of this Agreement upon at least sixty (60) days prior written notice to the Bank, in which case the Officer shall receive only compensation, vested rights and employee benefits up to the date of termination.
f.	Without Just Cause.

i.	In addition to termination pursuant to Sections 11(a) through 11(e), the Bank may, by means of written notice, immediately terminate the Officer’s employment at any time for a reason other than Just Cause (a termination “Without Just Cause”).
ii.	Subject to Section 12 hereof, in the event of termination under this Section 11(f), the Officer shall be entitled to receive the annual base salary that would have been paid for the remaining term of the Agreement, including any renewals or extensions thereof, determined by reference to the highest annual rate of base salary in effect pursuant to Section 4 of this Agreement in any of the twelve (12) months immediately preceding the Officer’s termination date. The sum due under this Section 11(f) shall be paid in one lump sum within thirty (30) calendar days of the Officer’s termination. (3)
iii.	Notwithstanding the foregoing, a reduction in base salary or a reduction or elimination of the Officer’s participation in or benefits under one or more benefit plans that occurs as part of a good faith, overall reduction in salary or a reduction or elimination of plans or benefits provided thereunder, provided such reduction or elimination applies to all participants in a non-discriminatory manner (except as such discrimination may be necessary to comply with law), shall not constitute a material breach of this Agreement, provided that benefits of the same type or to the same general extent as those offered under the plan prior to reduction or elimination are not available to other officers of the Bank or its affiliates, or any company that controls either of them, under a plan or plans under which the Officer is not entitled to participate.
iv.	Notwithstanding anything in this Agreement to the contrary, during the six (6) month period beginning on the effective date of a Change in Control (as defined in Section 12(a)), the Officer may voluntarily terminate employment under this Agreement for any reason and such termination shall constitute termination Without Just Cause.

g.   Continuing Covenant Not to Compete or Interfere with Relationships. Regardless of anything herein to the contrary, following a termination by the Bank or the Officer pursuant to Section 11(f) and continuing until the six (6) month anniversary of the effective date of such termination, (i) the Officer’s obligations under Section 10(c) of this Agreement will continue in effect; and (ii) the Officer shall not interfere with the relationship between the Bank and any of its employees, agents, customers or representatives.

     12. Termination in Connection with a Change in Control.

a.   “Change in Control” means any one of the following events occurs:

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i.	Merger: the Company merges into or consolidates with another corporation, or merges another corporation into the Company and, as a result, less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company immediately before the merger or consolidation;
ii.	Acquisition of Significant Share Ownership: a report on Schedule 13D or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner(s) of 25% or more of a class of the Company’s voting securities, but this clause (ii) shall not apply to beneficial ownership of Company voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns fifty percent (50%) or more of its outstanding voting securities;
iii.	Change in Board Composition: during any period of two consecutive years, individuals who constitute the Company’s or the Bank’s Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Company’s or the Bank’s Board of Directors; provided, however, that for purposes of this clause (iii), each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least three-fourths (3/4) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period; or
iv.	Sale of Assets: The Company sells to a third party all or substantially all of its assets.

b.   If, within the period beginning six (6) months prior to and ending eighteen (18) months after a Change in Control, the Bank shall terminate the Officer’s employment Without Just Cause, the Bank shall, within thirty (30) calendar days of the Officer’s termination of employment, make a lump-sum cash payment to the Officer in an amount equal to one and one-half times the Officer’s highest annual rate of base salary during the eighteen (18) month period preceding the effective date of the Change in Control. This cash payment shall be made in lieu of any payment also required under Section 11(f) of this Agreement because of a termination in such period.

     13. Indemnification and Liability Insurance.

a.

Indemnification. The Bank agrees to indemnify the Officer (and the Officer’s heirs, executors, and administrators), and to advance expenses related thereto, to the fullest extent permitted under applicable law and regulations, against any and all expenses and liabilities reasonably incurred by the Officer in connection with or arising out of any action, suit, or proceeding in which the Officer may be involved by reason of having been a director or Officer of the Bank or any of its subsidiaries or affiliates (whether or not the Officer continues to be a director or Officer at the time of incurring any such expenses or liabilities). Such expenses and liabilities shall include, but shall not be limited to, judgments, court costs, attorneys’ fees and the costs of reasonable settlements, such settlements to be approved by the Board, if such action is brought against the Officer in the Officer’s capacity as an officer or director of the Bank or any of its subsidiaries or affiliates. Indemnification for expenses shall not extend to matters for which the Officer has been terminated for Just Cause. Nothing contained herein shall be deemed to provide indemnification otherwise prohibited by applicable law or regulation. Notwithstanding anything herein to the contrary, the obligations of this Section 13 shall survive the term of this Agreement by a period of six (6) years.

b.

Insurance. During the period in which indemnification of the Officer is required under this Section 13, the Bank shall provide the Officer (and the Officer’s heirs, executors, and administrators) with coverage under a directors’ and officers’ liability policy at the expense of the Bank, at least equivalent to the coverage provided to directors and senior officers of the Bank.

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     14. Injunctive Relief. If there is a breach or threatened breach of Section 11(g) of this Agreement, the Bank and the Officer agree that there is no adequate remedy at law for such breach, and further, that the Bank shall be entitled to injunctive relief restraining the Officer from such breach or threatened breach, but such relief shall not be the exclusive remedy hereunder for such breach. The parties hereto likewise agree that the Officer, without limitation, shall be entitled to injunctive relief to enforce the obligations of the Bank under Section 12 of this Agreement.

     15. Successors and Assigns.

a.	This Agreement shall inure to the benefit of and be binding upon any corporate or other successor that acquires, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of the Company or the Bank.
b.	Since the Bank is contracting for the Officer’s unique and personal skills, the Officer shall be precluded from assigning or delegating any rights or duties hereunder without first obtaining the written consent of the Bank.

     16. No Mitigation. The Officer shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking new employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Officer in any subsequent employment.

     17. Notices. All notices, requests, demands and other communications in connection with this Agreement shall be made in writing and shall be deemed to have been given when delivered by hand or 48 hours after mailing at any general or branch office of the United States Postal Service, by registered or certified mail, postage prepaid, addressed to the Bank at its principal business office and to the Officer at the Officer’s home address as maintained in the records of the Bank.

     18. Joint and Several Liability; Payments by the Company and the Bank. To the extent permitted by law, the Company shall be jointly and severally liable with the Bank for the payment of all amounts due under this Agreement and shall guarantee the performance of the Bank’s obligations hereunder, provided, however, that the Company shall not be required by this Agreement to pay the Officer a base salary or any bonuses or any other cash payments, except in the event that the Bank does not fulfill its obligations to the Officer for such payments.

     19. No Plan Created by this Agreement. The Officer and the Bank expressly declare and agree that this Agreement was negotiated among them and that no provisions of this Agreement are intended to, or shall be deemed to, create any “plan” for purposes of the Employee Retirement Income Security Act of 1974 (ERISA) or any other law or regulation, and each party expressly waives any right to assert the contrary. Any assertion in any judicial or administrative filing, hearing, or process that such a plan was created by this Agreement shall be deemed a material breach of this Agreement by the party making such an assertion.

     20. Amendments. No amendments or additions to this Agreement shall be binding unless made in writing and signed by all of the parties, except as otherwise specifically provided for herein.

     21. Applicable Law. Except to the extent preempted by federal law, the laws of the State of New Jersey shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise.

     22. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the remaining provisions hereof.

     23. Headings. Headings contained herein are for convenience of reference only.

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     24. Entire Agreement. This Agreement, together with any understandings or modifications agreed to in writing by the parties, shall constitute the entire agreement among the parties with respect to the subject matter hereof, other than written agreements with respect to specific plans, programs or arrangements described in Sections 5 and 6. This agreement supercedes and replaces in its entirety any previous employment agreements between or among the Bank, the Company and the Officer.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first set forth above.

Attest:	YARDVILLE NATIONAL BANK
	By:	F. Kevin Tylus
Kathleen Fone	Title:	Senior Executive Vice President & Chief Operating Officer
Witness:
	YARDVILLE NATIONAL BANCORP
	By:	F. Kevin Tylus
Kathleen Fone	Title:	Senior Executive Vice President
Witness:
Kathleen Fone		Patrick L. Ryan
Witness		Patrick L. Ryan
		Senior Vice President

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EX-10.11

Exhibit 10.11

EMPLOYMENT AGREEMENT
FOR FIRST SENIOR VICE PRESIDENTS

     THIS AGREEMENT (the “Agreement”), made this 1st day of February, 2005, by and between YARDVILLE NATIONAL BANK (the “Bank”) and John P. Samborski (the “Officer”). References to “the Company” herein shall refer to YARDVILLE NATIONAL BANCORP, a New Jersey corporation (the “Company”) and the holding company for the Bank.

W I T N E S S E T H

     WHEREAS, the Bank desires to retain the services of the Officer as an employee of the Bank; and

     WHEREAS, the Officer and the Bank (desire to enter into an employment agreement setting forth the terms and conditions of the continuing employment of the Officer and the related rights and obligations of the parties.

     NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, the parties hereby agree as follows:

     1. Employment. The Bank shall employ the Officer as a First Senior Vice President/Senior Lending Officer of the Bank. The Officer shall render such administrative and management services as are customarily provided by persons employed in similar officer capacities and shall have such other powers and duties as the Chief Executive Officer or the Board may prescribe from time to time.

     2. Location and Facilities. The Bank will furnish the Officer with the working facilities and staff customary for officers with the title and duties set forth in Section 1 and as are necessary for the performance of the Officer’s duties. The location of such facilities and staff shall be at the principal administrative offices of the Bank, or at such other site or sites customary for such offices.

     3. Term.

a.

The term of this Agreement shall be (i) the initial term, consisting of the period commencing on the date of this Agreement (the “Effective Date”) and ending on the first anniversary of the Effective Date, plus (ii) any and all extensions of the initial term made pursuant to this Section 3.

b.

On each anniversary date of the Effective Date prior to a termination of the Agreement, the term under this Agreement shall be extended automatically for an additional one (1) year period without action by any party provided, however, that neither the Bank nor the Officer shall have given written notice at least sixty (60) days prior to such anniversary date of their election not to extend the term of the Agreement.

     4. Base Compensation.

a.	The Bank agrees to pay the Officer during the term of this Agreement a base salary at the rate of $135,000.00 per year, payable in accordance with customary payroll practices.
b.	The Executive Management Committee of the Bank shall review annually the rate of the Officer’s base salary based upon factors they deem relevant, and may maintain, increase or decrease the Officer’s base salary.
c.	In the absence of action by the Executive Management Committee, the Officer shall continue to receive base salary at the annual rate specified on the Effective Date or, if another rate has been established under the provisions of this Section 4, the rate last properly established by action of the Executive Management Committee under the provisions of this Section 4.

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     5. Bonuses. Officer shall be entitled to participate in any discretionary bonuses or other incentive compensation programs that may be awarded from time to time to senior management employees, pursuant to bonus plans or otherwise.

     6. Benefit Plans. The Officer shall be entitled to participate in such life insurance, medical, dental, pension, profit sharing, and retirement plans, stock compensation plans and other benefit programs and arrangements as may be approved from time to time for the benefit of Bank employees.

     7. Vacation and Leave.

a.

The Officer may take vacations and other leave in accordance with Bank policy for senior officers, or otherwise as approved by the Board.

b.

In addition to paid vacations and other leave, the Officer shall be entitled, without loss of pay, to absent himself voluntarily from the performance of his duties for such additional periods of time and for such valid and legitimate reasons as the Bank may determine in its discretion. Further, the Bank may grant to the Officer a leave or leaves of absence, with or without pay, at such time or times and upon such terms and conditions as the Bank, in its discretion, may determine.

     8. Expense Payment and Reimbursements. The Officer shall be reimbursed for all reasonable out-of-pocket business expenses incurred in connection with services performed under this Agreement upon substantiation of such expenses in accordance with applicable policies of the Bank.

     9. This Section 9 has been intentionally left blank.

     10. Loyalty and Confidentiality.

a.	During the term of this Agreement: (i) the Officer shall devote the requisite time, attention, skill, and efforts to the faithful performance of his duties hereunder; provided, however, that from time to time, the Officer may serve on the boards of directors of, and hold any other offices or positions in, companies or organizations which will not present any conflict of interest with the Bank or any of its subsidiaries or affiliates, unfavorably affect the performance of the Officer’s duties pursuant to this Agreement, or violate any applicable statute or regulation; and (ii) the Officer shall not engage in any business or activity contrary to the business affairs or interests of the Bank or any of its subsidiaries or affiliates.
b.	Nothing contained in this Agreement shall prevent or limit the Officer’s right to invest in the capital stock or other securities of any business dissimilar from that of the Bank or any of its subsidiaries or affiliates, or, solely as a passive, minority investor, in any business.
c.	The Officer agrees to maintain the confidentiality of any and all information concerning the operations or financial status of the Bank; the names or addresses of any borrowers, depositors and other customers; any information concerning or obtained from such customers; and any other information concerning the Bank to which the Officer may be exposed during the course of the Officer’s employment with the Bank. The Officer further agrees that, unless required by law or specifically permitted by the Board in writing, the Officer will not disclose to any person or entity, either during or subsequent to employment with the Bank, any of the above-mentioned information which is not generally known to the public, nor shall the Officer employ such information in any way other than for the benefit of the Bank or any of its subsidiaries or affiliates.

     11. Termination and Termination Pay. Subject to Section 12 of this Agreement, the Officer’s employment under this Agreement may be terminated in the following circumstances:

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a.	Death. The Officer’s employment under this Agreement shall terminate upon the Officer’s death during the term of this Agreement, in which event the Officer’s estate shall be entitled to receive the compensation due to the Officer through the last day of the calendar month of death.
b.	Retirement. Notwithstanding anything in this Agreement to the contrary, this Agreement shall terminate upon the Officer’s retirement and will be subject to any retirement benefit plan or plans provided for under Section 6 of this Agreement or otherwise.
c.	Disability.

i.	The Bank or the Officer may terminate the Officer’s employment after having established the Officer’s Disability. For purposes of this Agreement, “Disability” means the Officer’s suffering a sickness, accident or injury which has been determined by the carrier of any individual or group disability insurance policy covering the Officer, or by the Social Security Administration, to be a disability rendering the Officer totally and permanently disabled. The Bank shall determine in good faith whether or not the Officer is disabled for purposes of this Agreement. As a condition to any benefits, the Bank may require the Officer to submit proof of the carrier’s or the Social Security Administration’s determination of disability.
ii.	In the event of such Disability, the Officer’s obligation to perform services under this Agreement will terminate. In the event of such termination, the Officer shall continue to receive one-hundred percent (100%) of the Officer’s monthly base salary (at the annual rate in effect on the date of termination) through the earlier of the date of the Officer’s death, the date the Officer attains age 65 or the date which is six (6) months after the Officer’s termination date. Such payments shall be reduced by the amount of any short- or long-term disability benefits payable to the Officer under any other disability program sponsored by the Bank.
iii.	In addition, during any period of Disability for which the Officer is receiving payments under this Section 11(c), the Officer and the Officer’s dependents shall, to the greatest extent possible, continue to be covered under all benefit plans (including, without limitation, retirement plans and medical, dental and life insurance plans) under which the Officer participated prior to the Disability, on the same terms as if the Officer were actively employed through the earlier of the date of the Officer’s death, the date the Officer attains age 65 or the date which is six (6) months after the Officer’s termination date.

d.   Just Cause.

i.   The Bank may, by written notice to the Officer in the form and manner specified in this paragraph, immediately terminate the Officer’s employment with the Company or the Bank, respectively, at any time, for Just Cause. The Officer shall have no right to receive compensation or other benefits for any period after termination for Just Cause, except for previously vested benefits. Termination for “Just Cause” shall mean termination because of, in the good faith determination of the Bank, the Officer’s:

     (1) Personal dishonesty;

     (2) Incompetence;

     (3) Willful misconduct;

     (4) Breach of fiduciary duty involving personal profit;

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     (5) Intentional failure to perform duties under this Agreement;

     (6) Willful violation of any law, rule or regulation (other than traffic violations or similar offenses) that reflects adversely on the reputation of the Bank, any felony conviction, any violation of law involving moral turpitude, or any violation of a final cease-and-desist order; or

     (7) Material breach of any provision of this Agreement.

e.	Voluntary Termination by the Officer. In addition to the Officer’s other rights to terminate employment under the Agreement, the Officer may voluntarily terminate employment during the term of this Agreement upon at least sixty (60) days prior written notice to the Bank, in which case the Officer shall receive only compensation, vested rights and employee benefits up to the date of termination.
f.	Without Just Cause.

i.

In addition to termination pursuant to Sections 11(a) through 11(e), the Bank may, by means of written notice, immediately terminate the Officer’s employment at any time for a reason other than Just Cause (a termination “Without Just Cause”).

ii.

Subject to Section 12 hereof, in the event of termination under this Section 11(f), the Officer shall be entitled to receive the annual base salary that would have been paid for the remaining term of the Agreement, including any renewals or extensions thereof, determined by reference to the highest annual rate of base salary in effect pursuant to Section 4 of this Agreement in any of the twelve (12) months immediately preceding the Officer’s termination date. The sum due under this Section 11(f) shall be paid in one lump sum within thirty (30) calendar days of the Officer’s termination.

     iii. Notwithstanding the foregoing, a reduction in base salary or a reduction or elimination of the Officer’s participation in or benefits under one or more benefit plans that occurs as part of a good faith, overall reduction in salary or a reduction or elimination of plans or benefits provided thereunder, provided such reduction or elimination applies to all participants in a non-discriminatory manner (except as such discrimination may be necessary to comply with law), shall not constitute a material breach of this Agreement, provided that benefits of the same type or to the same general extent as those offered under the plan prior to reduction or elimination are not available to other officers of the Bank or its affiliates, or any company that controls either of them, under a plan or plans under which the Officer is not entitled to participate.

     iv. Notwithstanding anything in this Agreement to the contrary, during the six (6) month period beginning on the effective date of a Change in Control (as defined in Section 12(a)), the Officer may voluntarily terminate employment under this Agreement for any reason and such termination shall constitute termination Without Just Cause.

g.   Continuing Covenant Not to Compete or Interfere with Relationships. Regardless of anything herein to the contrary, following a termination by the Bank or the Officer pursuant to Section 11(f) and continuing until the six (6) month anniversary of the effective date of such termination, (i) the Officer’s obligations under Section 10(c) of this Agreement will continue in effect; and (ii) the Officer shall not interfere with the relationship between the Bank and any of its employees, agents, customers or representatives.

     12. Termination in Connection with a Change in Control.

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a.   “Change in Control” means any one of the following events occurs:

i.	Merger: the Company merges into or consolidates with another corporation, or merges another corporation into the Company and, as a result, less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company immediately before the merger or consolidation;
ii.	Acquisition of Significant Share Ownership: a report on Schedule 13D or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner(s) of 25% or more of a class of the Company’s voting securities, but this clause (ii) shall not apply to beneficial ownership of Company voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns fifty percent (50%) or more of its outstanding voting securities;
iii.	Change in Board Composition: during any period of two consecutive years, individuals who constitute the Company’s or the Bank’s Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Company’s or the Bank’s Board of Directors; provided, however, that for purposes of this clause (iii), each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least three-fourths (3/4) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period; or
iv.	Sale of Assets: The Company sells to a third party all or substantially all of its assets.

b.   If, within the period beginning six (6) months prior to and ending two (2) years after a Change in Control, the Bank shall terminate the Officer’s employment Without Just Cause, the Bank shall, within thirty (30) calendar days of the Officer’s termination of employment, make a lump-sum cash payment to the Officer in an amount equal to two times the Officer’s highest annual rate of base salary during the two (2) year period preceding the effective date of the Change in Control. This cash payment shall be made in lieu of any payment also required under Section 11(f) of this Agreement because of a termination in such period.

     13. Indemnification and Liability Insurance.

a.   Indemnification. The Bank agrees to indemnify the Officer (and the Officer’s heirs, executors, and administrators), and to advance expenses related thereto, to the fullest extent permitted under applicable law and regulations, against any and all expenses and liabilities reasonably incurred by the Officer in connection with or arising out of any action, suit, or proceeding in which the Officer may be involved by reason of having been a director or Officer of the Bank or any of its subsidiaries or affiliates (whether or not the Officer continues to be a director or Officer at the time of incurring any such expenses or liabilities). Such expenses and liabilities shall include, but shall not be limited to, judgments, court costs, attorneys’ fees and the costs of reasonable settlements, such settlements to be approved by the Board, if such action is brought against the Officer in the Officer’s capacity as an officer or director of the Bank or any of its subsidiaries or affiliates. Indemnification for expenses shall not extend to matters for which the Officer has been terminated for Just Cause. Nothing contained herein shall be deemed to provide indemnification otherwise prohibited by applicable law or regulation. Notwithstanding anything herein to the contrary, the obligations of this Section 13 shall survive the term of this Agreement by a period of six (6) years.

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b.   Insurance. During the period in which indemnification of the Officer is required under this Section 13, the Bank shall provide the Officer (and the Officer’s heirs, executors, and administrators) with coverage under a directors’ and officers’ liability policy at the expense of the Bank, at least equivalent to the coverage provided to directors and senior officers of the Bank.

     14. Injunctive Relief. If there is a breach or threatened breach of Section 11(g) of this Agreement, the Bank and the Officer agree that there is no adequate remedy at law for such breach, and further, that the Bank shall be entitled to injunctive relief restraining the Officer from such breach or threatened breach, but such relief shall not be the exclusive remedy hereunder for such breach. The parties hereto likewise agree that the Officer, without limitation, shall be entitled to injunctive relief to enforce the obligations of the Bank under Section 12 of this Agreement.

     15. Successors and Assigns.

a.	This Agreement shall inure to the benefit of and be binding upon any corporate or other successor that acquires, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of the Company or the Bank.
b.	Since the Bank is contracting for the Officer’s unique and personal skills, the Officer shall be precluded from assigning or delegating any rights or duties hereunder without first obtaining the written consent of the Bank.

     16. No Mitigation. The Officer shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking new employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Officer in any subsequent employment.

     17. Notices. All notices, requests, demands and other communications in connection with this Agreement shall be made in writing and shall be deemed to have been given when delivered by hand or 48 hours after mailing at any general or branch office of the United States Postal Service, by registered or certified mail, postage prepaid, addressed to the Bank at its principal business office and to the Officer at the Officer’s home address as maintained in the records of the Bank.

     18. Joint and Several Liability; Payments by the Company and the Bank. To the extent permitted by law, the Company shall be jointly and severally liable with the Bank for the payment of all amounts due under this Agreement and shall guarantee the performance of the Bank’s obligations hereunder, provided, however, that the Company shall not be required by this Agreement to pay the Officer a base salary or any bonuses or any other cash payments, except in the event that the Bank does not fulfill its obligations to the Officer for such payments.

     19. No Plan Created by this Agreement. The Officer and the Bank expressly declare and agree that this Agreement was negotiated among them and that no provisions of this Agreement are intended to, or shall be deemed to, create any “plan” for purposes of the Employee Retirement Income Security Act of 1974 (ERISA) or any other law or regulation, and each party expressly waives any right to assert the contrary. Any assertion in any judicial or administrative filing, hearing, or process that such a plan was created by this Agreement shall be deemed a material breach of this Agreement by the party making such an assertion.

     20. Amendments. No amendments or additions to this Agreement shall be binding unless made in writing and signed by all of the parties, except as otherwise specifically provided for herein.

     21. Applicable Law. Except to the extent preempted by federal law, the laws of the State of New Jersey shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise.

     22. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the remaining provisions hereof.

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     23. Headings. Headings contained herein are for convenience of reference only.

     24. Entire Agreement. This Agreement, together with any understandings or modifications agreed to in writing by the parties, shall constitute the entire agreement among the parties with respect to the subject matter hereof, other than written agreements with respect to specific plans, programs or arrangements described in Sections 5 and 6. This agreement supercedes and replaces in its entirety any previous employment agreements between or among the Bank, the Company and the Officer.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first set forth above.

Attest:		YARDVILLE NATIONAL BANK
		By:		F. Kevin Tylus
	Kathleen Fone	Title:	SEVP/Chief Operating Officer
		YARDVILLE NATIONAL BANCORP
		By:		F. Kevin Tylus
	Kathleen Fone	Title:	Senior Executive Vice President
Witness:
	Kathleen Fone			John P. Samborski
				John P. Samborski
				First Senior Vice President

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EX-10.14

Exhibit 10.14

SECOND AMENDED AND RESTATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
OF YARDVILLE NATIONAL BANK

Purpose

     The purpose of the Yardville National Bank Supplemental Executive Retirement Plan is to provide those officers of Yardville National Bank listed in Appendix A attached hereto with supplemental retirement benefits in addition to those otherwise provided to employees of Yardville National Bank.

     The Plan is an unfunded plan maintained for the purpose of providing deferred compensation for selected officers of the Bank, each of whom is a member of a select group of management or highly compensated employees for purpose of Title I of the Employee Retirement Income Security Act of 1974, as amended.

     Previously, the officers listed in Appendix A were participants in either the Yardville National Bank Salary Continuation Plan or the Yardville National Bank Survivor Income Plan (collectively the “Prior Plans”). In order to achieve administrative efficiency, Prior Plans were combined in this restated Plan. This Second Amended and Restated Plan was adopted by the Board on February 25, 2004. The Plan, as originally amended and restated was effective January 1, 2002. The Second Amended and Restated Plan reflects various technical modifications approved by the Board

ARTICLE 1
Definitions

     For purposes hereof, unless otherwise clearly apparent from the context, the following phrases and terms shall have the indicated meanings:

     1.1 “Accrued Benefit” shall mean a Participant’s Target Benefit, multiplied by a factor, no greater than one, the numerator of which is his or her Years of Participation and the denominator of which is the full number of years beginning on a Participant’s Eligibility Date and ending on his or her Normal Retirement Date.

     1.2 “Actuarial Equivalent” shall mean an amount or a series of payments that, at a given point in time, is determined to have the same or equivalent value, at that point in time, as another given amount or another given series of payments, taking into consideration the time value of money, mortality and such other actuarial factors as may be appropriate. The Actuarial Equivalent of a benefit payable under this Plan shall be determined by reference to actuarial factors consistent with Section 417(e) of the Internal Revenue Code of 1986, as amended.

     1.3 “Beneficiary” shall mean those persons designated by the Participant to receive benefits under the Plan as described in Article 6 upon the death of the Participant.

     1.4 “Board” shall mean the Board of Directors of Yardville National Bank.

     1.5 “Cause” is defined in Section 6.3 of this Plan.

     1.6 “Change of Control” is defined in Article 10 of this Plan.

     1.7 “Committee” shall mean the administrative committee appointed to manage and administer this Plan in accordance with the provisions of Article 13.

     1.8 “Company” shall mean Yardville National Bancorp, Inc.

     1.9 “Considered Compensation” shall mean the total of all payments (including salary, bonuses and all other elements of cash compensation except as specifically provided otherwise herein) made to a Participant on account of employment with the Company for services rendered, including any amounts of salary that the Participant may from time to time elect to defer under the Company’s 401(k) Plan (or any similar successor plan or

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plans) or under any cafeteria plan (within the meaning of Section 125 of the Internal Revenue Code of 1986, as amended) or any nonqualified deferred compensation plan from time to time maintained by the Company, but excluding:

(a)	Income arising from any stock bonus, stock option, stock appreciation rights or restricted stock plan;
(b)	Contributions to and payments from any qualified or nonqualified employee benefit plan of the Company (except as provided above); and
(c)	Cost of living differential, and automobile allowances.

     Considered Compensation in a particular period shall include salary payments actually received in that period as well as any amounts of salary that would have been received in that period had payment not been deferred through participation in the Company’s 401(k) Plan (or any similar successor plan or plans) or in a cafeteria plan or nonqualified deferred compensation plan of the Company.

     1.10 “Disability” shall mean a condition which qualifies for receipt of disability income payments under the Disability Plan.

     1.11 “Disability Offset Amount” shall mean the sum of the following:

(a)	The annual amount of any disability income payments received by a Participant or his or her family members under the Social Security Act; and
(b)	The annual amount of disability income payments received by the Participant under the Disability Plan.

     1.12 “Disability Plan” shall mean the long-term disability plan of the Company, if any, as now or hereafter amended, including any similar successor plan.

     1.13 “Eligibility Date” shall mean the date the Participant began accruing benefits under the Plan. This date shall be established from the Prior Plans for those individuals listed in Appendix A as of the Effective Date, except as otherwise provided by the Board. For any other individuals, this date will be established by the Board.

     1.14 “Final Average Earnings” shall mean the average of the highest annual Considered Compensation received by a Participant during the three calendar years out of the current and preceding five calendar years during which his considered Compensation was the highest. At any point in time, Final Average Earnings shall be computed to the date of determination by taking into account actual Considered Compensation during the current calendar year (with annualization) and the five preceding calendar years.

     1.15 “Normal Retirement Age” shall mean attainment of age 65 or attainment of both age 60 and 20 years of service, or such other date as described in a Prior Plan or Appendix A.

     1.16 “Normal Retirement Date” shall mean the first day of the month following the month in which a Participant attains his or her Normal Retirement Age.

     1.17 “Participant” shall mean an executive of the Company designated by the Board of Directors of the Company and approved by the Committee who is a member of a select group of management or highly compensated employees within the meaning of Section 201(2) of the Employee Retirement Income Security Act of 1974, as amended.

     1.18 “Plan” shall mean this Supplemental Executive Retirement Plan of Yardville National Bank, as amended and restated.

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     1.19 “Prior Plan” shall mean either the Yardville National Bank Salary Continuation Plan or the Yardville National Bank Survivor Income Plan previously established by the Company for any Participant listed on Appendix A as of the Effective Date.

     1.20 “Plan Year” shall mean the 12-consecutive-month period ending December 31 of each year.

     1.21 “Target Benefit” shall mean an amount equal to a stated percentage of a Participant’s Final Average Earnings as described in Appendix A.

     1.22 “Trust” shall mean the Supplemental Executive Retirement Plan Trust Agreement of Yardville National Bank.

     1.23 “Year of Participation” shall mean for a Participant the full year measured from a Participant’s Eligibility Date and anniversaries thereafter.

     1.24

ARTICLE 2
Participation

     2.1 Participation. Upon nomination by the Board of Directors of the Company and approval by the Committee, an executive of the Company shall become a Participant effective as of the date specified in the nomination document.

ARTICLE 3
Retirement

     3.1 Normal Retirement Benefit. Except as provided in Section 6.2, upon retirement from the Company at or after his or her Normal Retirement Date, a Participant shall be entitled to receive an annual retirement benefit equal to his or her Target Benefit.

     3.2 Form and Time of Retirement Payments Pursuant to Articles 3 and 6.

(a)	Form of Payment. Benefits pursuant to Articles 3 and 6 shall be paid, at the Participant’s election, in the form of (i) monthly installments for a period ending at the later of: (i) the Participant’s death or (ii) one hundred eighty (180) months measured from the date on which benefits commence hereunder; or (ii) a lump sum which is the Actuarial Equivalent of the monthly benefits otherwise payable under the Plan. The Participant’s election shall be made on a form designated by the Committee for such purpose.
(b)	Time of Payment. Installment payments shall be made in equal amounts on a monthly basis commencing on the Normal Retirement Date or the actual date of retirement if the Participant defers his retirement beyond the Normal Retirement Date. A lump sum payment, if elected, shall be paid within 90 days following the Participant’s termination of employment. Neither installment payments nor a lump sum payment shall be adjusted on account of a Participant’s deferral of retirement past his or her Normal Retirement Date, except to the extent such adjustment results from changes in a Participant’s Final Average Earnings. The Company may withhold from any payment any income tax or other amounts as required by law.
(c)	A Participant, while employed by the Bank, may change the form in which his benefits shall be paid by filing a revised election indicating such change at least one (1) calendar year prior to the date payments are to commence. Such election shall be irrevocable beginning one (1) calendar year prior to the date payments are to commence. Subject to Section 10.3, no changes in the form of benefit payment shall be permitted following a Participant’s termination of employment.

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ARTICLE 4
Disability

     4.1 Disability Benefit. If a Participant suffers a Disability while employed by the Company prior to his or her Normal Retirement Date for which he or she receives disability income payments under the Disability Plan, the Participant shall be entitled to receive a monthly disability benefit under this Plan equal to 100% of the Participant’s Final Average Earnings, as of the date which is the first day of the seventh month following an onset of the Disability, reduced by the Disability Offset Amount.

     4.2 Form and Duration of Disability Payment. The annual disability benefit under Section 4.1 shall be payable in equal monthly installments commencing on the date specified under Section 4.1 and continuing until the earliest of the following dates:

(a)	The date the Participant returns to active employment with either the Company or another employer;
(b)	The date that disability income payments cease under the Disability Plan; or
(c)	The Participant’s Normal Retirement Date or date of death.

     4.3 Benefits on Cessation of Disability Payments. After a Participant’s disability benefits cease pursuant to Section 4.2, the Participant shall be entitled to benefits under this Plan determined as follows:

(a)	If the Participant’s disability benefits cease because the Participant returns to active employment with the Company, or if they cease pursuant to Section 4.2(b) and the Participant returns to active employment with the Company within six (6) months following such cessation, then (i) the Participant shall be credited with Years of Participation for the period during which disability benefits were provided under this Plan; and (ii) the Participant shall thereafter be entitled to receive such benefits, if any, as are available under the other provisions of this Plan.
(b)	If the Participant’s disability benefits cease because the Participant returns to active employment with another employer, or if they cease pursuant to Section 4.2(b) and the Participant does not return to active employment with the Company within six (6) months following such cessation, then (i) the Participant shall, for purposes of this Plan, be considered to have terminated employment as of the date of onset of his or her Disability and shall be credited with no further Years of Participation after that date; and (ii) the Participant shall thereafter be entitled to receive such benefits, if any, as are available under the other provisions of this Plan.
(c)	If the Participant’s disability benefits cease because the Participant reaches his or her Normal Retirement Date or dies, then (i) the Participant shall be credited with Years of Participation for the period during which disability benefits were provided under this Plan; and (ii) the Participant shall be entitled to receive the benefit specified in Section 3.1, as if he or she had retired on that date, or the Participant’s beneficiary shall be entitled to receive any death benefit specified in Section 5.1 or 5.2, as the case may be. Such benefit shall be computed as of the Participant’s Normal Retirement Date or date of death, as the case may be, based on the Participant’s Final Average Earnings as of the date of onset of the Participant’s Disability, without reduction for disability benefits paid under this Plan. Such benefit shall be paid at the time and in the form specified in Section 3.2, 5.l or 5.2, as the case may be, except that, in the case of payments pursuant to Section 3.2, if any Disability Offset Amounts continue to be paid following the Participant’s Normal Retirement Date, the payments shall be offset by such Amounts so long as they continue to be paid.

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     4.4 Disability After Normal Retirement Date. If a Participant suffers a Disability after his or her Normal Retirement Date but prior to actual retirement, the Participant shall be deemed to have retired as of the date of onset of the Disability and shall thereafter be entitled to receive the benefit specified in Section 3.1. Such benefit shall be computed as of the Participant’s deemed date of retirement. Such benefit shall be paid at the time and in the form specified in Section 3.2, except that, if any Disability Offset Amounts are paid following the Participant’s deemed retirement, the annuity payments shall be offset by such amounts so long as they continue to be paid.

ARTICLE 5
Death Benefit

     5.1 Death Prior to Benefit Commencement. If a Participant dies before receiving any benefits under Article 3 of this Plan, then, the Participant’s Beneficiary shall be entitled to receive an annual benefit equal to 100% of the monthly retirement benefit that the Participant would have been entitled to receive under Section 3.1 if the Participant had retired on his or her Normal Retirement Date (without regard to the Participant’s actual age and years of service as of such date) immediately prior to his or her death and such benefit had been paid pursuant to Section 3.2. Such benefits will be payable to the Beneficiary in accordance with the Participant’s election under Section 3.2(a).

     5.2 Death After Benefit Commencement. If a Participant dies after commencing the receipt of benefits under this Plan, then, the Participant’s Beneficiary will receive any remaining payments which otherwise are due under Section 3.2(a).

     5.3 Lack of Beneficiary Designation. In the absence of any effective beneficiary designation by the Participant, any amounts becoming due and payable upon the death of the Participant shall be paid to his or her executor or administrator.

ARTICLE 6
Termination of Employment

     6.1 Termination Prior to Normal Retirement Date. Except as provided in Sections 6.2 and 10.2, a Participant who terminates employment with the Company prior to his or her Normal Retirement Date for a reason other than death or Disability shall be entitled to receive an annual benefit commencing on his or her Normal Retirement Date equal to his or her Accrued Benefit as of the date of termination from employment.

     6.2 Termination With Cause. If the Company terminates a Participant’s employment with cause, then, except as expressly provided in Section 10.2 below, the Participant shall not thereafter be entitled to any benefits under this Plan.

     6.3 Definition of Cause. As used in this Article 6, the term “Cause” shall include, without limitation, willful misconduct, fraud, violation of any federal or state law involving the commission of a crime against the Company, commission of a felony, or commission of a gross misdemeanor. The term “willful misconduct,” as used in this Section 6.3, shall mean any act or failure to act which is done in bad faith with the intent to injure the Company’s business or reputation.

     6.4 Vesting Requirements. A Participant’s nonforfeitable benefits under this Plan shall be determined by reference to this Section 6.4. A Participant shall be 100% vested upon the occurrence of any of the following events: (a) attainment of his or her Normal Retirement Age, (b) the Participant’s Disability as provided in Article 4, (c) the Participant’s death as provided in Article 5, and (d) a Change of Control as described in Article 10. Upon a Participant’s termination of employment for any other reason, except as provided in Section 6.2, the Participant’s vested benefit shall be equal to the Participant’s Accrued Benefit as of the date of termination. If a Participant’s termination of employment is subject to Section 6.2, his or her nonforfeitable percentage shall be zero.

ARTICLE 7
Company/Participant Liability

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     7.1 General Assets. Amounts payable to a Participant shall be paid exclusively from the general assets of the Company. However, the Company has established the Trust to which the Company may make contributions in order to provide for the payment of benefits under the Plan. Notwithstanding the foregoing, Trust assets shall be treated as assets of the Company and shall remain subject to the claims of the general creditors of the Company under the circumstances set forth in the Trust.

     7.2 Company’s Liability. The Company’s liability for the payment of benefits shall be defined only by this Plan.

     7.3 Limitation of Obligation. Except as expressly provided for in this Plan, the Company shall have no obligation under this Plan to a Participant or his or her Beneficiary, if any.

     7.4 Participant Cooperation. A Participant must at all times cooperate with the Company and the Committee and furnish all information requested by the Company or the Committee in order to facilitate the determination of benefits or the administration of this Plan. Such cooperation shall include, without limitation, taking a physical or mental examination if so requested by the Company or the Committee. If a Participant fails promptly to cooperate or furnish requested information, the Committee, in its sole and absolute discretion, may withhold benefits from the Participant.

     7.5 Unsecured General Creditor. A Participant and his or her Beneficiary, if any, shall not have, by reason of this Plan, any legal or equitable rights, claims or interests in any property or assets of the Company nor shall they be beneficiaries of, or have any legal or equitable rights, claims or interest in the life insurance policies or annuities or the proceeds there from owned, or which may be acquired, by the Company. Any and all of the Company’s assets shall be, and remain, the general, unpledged, unrestricted assets of the Company. The Company’s obligations under this Plan shall be merely those of an unfunded and unsecured promise of the Company to pay money in the future.

ARTICLE 8
No Guarantee of Employment

     8.1 No Guarantee of Employment. Nothing in this Plan shall alter in any manner the employment relationship with a Participant.

ARTICLE 9
Plan Amendment and Termination

     9.1 Amendment. The Company may amend this Plan at any time so long as the rights required to be preserved on termination under Section 9.2 are not reduced. No amendment of this Plan or waiver of any of the specific provisions of this Plan shall be valid unless made pursuant to a duly executed written document.

     9.2 Termination. Subject to Article 10, the Company may terminate this Plan at any time, for any reason, as follows:

(a)	Termination shall be by notice to the Committee, which shall notify Participants of the termination. The effective date of the termination shall not be earlier than the first day of the month in which notice is given.
(b)	After the effective date of termination, no further executives shall be selected for participation and no further benefits shall accrue for existing Participants.
(c)	In the event of termination, the retirement benefits of each existing Participant shall be paid at the time and in the amount and form specified under the terms of this Plan as in effect on the day before termination, except that the Participants’ respective Accrued Benefits and Vested Amounts shall be based on their Final Average Earnings, Years of Service and Years of Participation as of the effective date of Plan termination. Notwithstanding the foregoing, the Company shall be entitled to provide retirement

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	benefits in any alternative form that is the Actuarial Equivalent of the form in which the retirement benefits were payable under the provisions of this Plan in effect before termination.
(d)	Unless otherwise expressly provided at the time of termination of the Plan, no Participant shall be entitled to any benefit under this Plan on account of any Disability that commences following the effective date of Plan termination.

ARTICLE 10
Change of Control

     10.1 Change of Control. For purposes of this Plan, the term “Change of Control” means:

(a)	Merger: the Company merges into or consolidates with another corporation, or merges another corporation into the Company and, as a result, less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company immediately before the merger or consolidation;
(b)	Acquisition of Significant Share Ownership: a report on Schedule 13D or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner(s) of 25% or more of a class of the Company’s voting securities, but this clause (b) shall not apply to beneficial ownership of Company voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns fifty percent (50%) or more of its outstanding voting securities;
(c)	Change in Board Composition: during any period of two consecutive years, individuals who constitute the Company’s or the Bank’s Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Company’s or the Bank’s Board of Directors; provided, however, that for purposes of this clause (c), each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least three-fourths (3/4) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period; or
(d)	Sale of Assets: The Company sells to a third party all or substantially all of its assets.

     10.2 Termination of Employment Following a Change of Control. If, during the three-year period following a Change of Control, the employment of a Participant is involuntarily terminated (other than for Cause) or if the Participant’s employment is constructively terminated (as defined in Section 10.3), then the Participant shall be deemed to have retired as of his termination date at or after his or her Normal Retirement Date (without regard to his actual age or service as of such date) under the provisions of this Plan, and shall be entitled to receive a retirement benefit in an annual amount equal to the Participant’s Target Benefit (with the Target Benefit to be determined based on the Final Average Earnings of the Participant as of the date of termination). Such retirement benefit shall be paid in accordance with the provisions of Section 3.2 of this Plan effective as of the first month following the Participant’s termination. Notwithstanding anything in this Plan to the contrary, if, during the three-year period described in the first sentence of this paragraph the Participant’s employment terminates (i) by reason of his death or Disability, (ii) for Cause or (iii) if the Participant terminated employment on a voluntary basis without grounds for constructive termination, then the Participant shall be limited to the other compensation and benefits payable under Articles 4, 5 and 6 of this Plan. The special rules applicable under this Section 10.2 shall expire following the third anniversary of the event constituting a Change in Control.

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     10.3 Constructive Termination of Employment. A Participant’s employment shall be deemed to be constructively terminated on or after the effective date of a Change in Control if there occurs any one of the following:

(a)	The assignment to him of any duties inconsistent in any respect with his position (including status, offices, titles and reporting relationships), authority, duties or responsibilities immediately prior to the Change in Control or any other action by the Company which results in a diminution in any respect in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Participant
(b)	A reduction by the Company in his annual base salary as in effect immediately prior to the Change in Control;
(c)	The Company’s requiring him to be based at any office or location that is more than 35 miles from his office or location immediately prior to the Change in Control;
(d)	The failure by the Company, without his consent, to pay to him any portion of his current compensation, or to pay to him any portion of an installment of deferred compensation under any deferred compensation program of the Company within seven (7) days of the date such compensation is due;
(e)	The failure by the Company to continue in effect any compensation plan in which he participates immediately prior to the Change in Control which is material to his total compensation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan is substituted therefore, or the failure by the Company to continue the Participant’s participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of his participation relative to other participants, as existed immediately prior to the Change in Control; or
(f)	The failure by the Company to continue to provide him with benefits substantially similar to those enjoyed by him under any of the Company’s pension, life insurance, medical, health and accident, disability or other welfare plans in which he was participating at the time of the Change in Control.

     10.4 Special Distribution Rule. Notwithstanding anything in this Plan to the contrary, a Participant who terminates employment in accordance with Section 10.2 may elect to receive a lump sum payment which is the Actuarial Equivalent to the monthly benefit otherwise payable pursuant to Section 3.2; provided, however, that such election must be made within ninety (90) days following the Participant’s termination of employment during the three-year period following a Change in Control.

ARTICLE 11
Other Benefits and Agreements

     11.1 Coordination with Other Benefits. The benefits under this Plan for a Participant and his or her Beneficiary, if any, are in addition to any other benefits available under any other plan or program for employees of the Company. This Plan shall supplement and shall not supersede, modify or amend any other such plan or program.

ARTICLE 12
Restrictions on Alienation of Benefits

     12.1 Nonassignability. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey, in advance of

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actual receipt, the amounts, if any, payable hereunder, or any part thereof. No part of the amounts payable hereunder shall, prior to actual payment, be subject to any claims of creditors and, in particular, they shall not be subject to attachment, garnishment, seizure or sequestration by any creditor for the payment of any debts, judgments, obligations, alimony or separate maintenance owed by a Participant or his or her Beneficiary, if any.

ARTICLE 13
Administration of Plan

     13.1 Committee Administration. The general administration of this Plan, as well as construction and interpretation hereof, shall be the responsibility of the Committee, the number of members of which shall be designated from time to time by the Board and the members of which shall be appointed from time to time by, and shall serve at the pleasure of, the Board.

     13.2 Committee Authority. The Committee shall have the exclusive right and authority:

(a)	To from time to time establish rules, forms and procedures for the administration of this Plan;
(b)	To interpret this Plan and to correct any defect, supply any information and reconcile any inconsistency in such manner and to such extent as the Committee, in its sole and absolute discretion, shall deem necessary or advisable to carry out the purpose of this Plan; and
(c)	To make all other determinations that the Committee, in its sole and absolute discretion, shall deem necessary or advisable in connection with the administration of this Plan, including, without limitation, determination of (i) the benefit amounts to which a Participant is entitled (and the appropriate Final Average Earnings, Disability Offset Amount, Years of Participation to be used in determining such benefit amounts); (ii) whether Cause existed for the termination of employment of a Participant; (iii) whether a Participant’s employment has been constructively terminated (within the meaning of Section 10.3) and (iv) whether benefits are to be withheld or terminated pursuant to Section 7.4.

     Subject to the claims procedures set forth in Article 14, all rules, procedures, interpretations and determinations made by the Committee in good faith shall be final, conclusive and binding upon all persons having or claiming to have any right or interest under this Plan.

     13.3 Committee Indemnity. No member of the Committee shall be liable for any act or omission of any other member of the Committee, nor for any act or omission on his or her own part, excepting his or her own gross negligence. The Company shall indemnify and save harmless each member of the Committee against any and all expenses and liabilities arising out of his or her membership on the Committee, with the exception of expenses and liabilities arising out of his or her own gross negligence.

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ARTICLE 14
Claims Procedures

     14.1 Presentation of Claim. Any Participant or the surviving Beneficiary, if any, of a deceased Participant (such Participant or Beneficiary being referred to below as a “Claimant”) may deliver to the Committee a written claim for a determination with respect to the amounts distributable to such Claimant from this Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant. The claim must state with particularity the determination desired by the Claimant.

     14.2 Notification of Decision. The Committee shall consider a Claimant’s claim within a reasonable time and shall notify the Claimant in writing:

(a)	that the Claimant’s requested determination has been made, and that the claim has been allowed in full; or
(b)	that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant’s requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant;

(i)	the specific reason(s) for the denial of the claim, or any part of it;
(ii)	specific reference(s) to pertinent provisions of this Plan upon which such denial was based;
(iii)	a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and
(iv)	an explanation of the claim review procedure set forth in Section 14.3.

     14.3 Review of Denied Claim. Within sixty (60) days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant’s duly authorized representative) may file with the Committee a written request for a review of the denial of the claim. Thereafter, but not later than thirty (30) days after filing of the written request for review, the Claimant (or the Claimant’s duly authorized representative):

(a)	may review pertinent documents;
(b)	may submit written comments or other documents; and/or
(c)	may request a hearing, which request the Committee, in its sole and absolute discretion, may grant.

     14.4 Decision on Review. The Committee shall render its decision on review promptly, and not later than sixty (60) days after the filing of a written request for review of the denial, unless a hearing is held or other special circumstances require additional time, in which case the Committee’s decision must be rendered within one hundred twenty (120) days after such date. Such decision must be written in a manner calculated to be understood by the Claimant, and it must contain:

(a)	specific reasons for the decision;
(b)	reference to the specific Plan provisions on which the decision is based; and
(c)	such other matters as the Committee deems relevant.

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     Any decision on review made by the Committee in good faith shall be final, conclusive and binding upon the Claimant, unless the decision is determined to have been arbitrary and capricious.

ARTICLE 15
Grantor Trust

     15.1 Funding of Trust. The Company may from time to time transfer to the trustee of the Trust such assets as the Committee determines, in its sole and absolute discretion, should be transferred thereto.

     15.2 Interrelationship of the Plan and the Trust. The provisions of this Plan shall govern the rights of a Participant and his or her Beneficiary to distributions pursuant to this Plan. The provisions of the Trust shall govern the rights of the Company, Participants and their Beneficiaries and the creditors of the Company to the assets, if any, transferred to the Trust. The Company shall at all times remain liable to carry out its obligations under this Plan. The Company’s obligations under the Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust.

ARTICLE 16
Miscellaneous

     16.1 Notice. Any notice required or permitted to be given under this Plan by a Participant or a Claimant shall be in writing and shall be hand delivered against receipt, or mailed via registered or certified mail return receipt requested, to:

Board of Directors
Yardville National Bank
2465 Kuser Road
Hamilton, NJ 08690

     Any notice to a Participant or his or her Beneficiary, if any, required or permitted to be given under this Plan by the Committee or the Board shall be in writing and shall be hand delivered to the Participant or Beneficiary, or mailed via registered or certified mail, return receipt requested, to the last known address for the Participant or Beneficiary as shown on the records of the Company.

     16.2 Successors. This Plan shall be binding upon the Company and its successors and assigns, and upon a Participant, the Participant’s Beneficiary, if any, and their permitted assigns, heirs, executors and administrators.

     16.3 Governing Law. This Plan shall be governed by and construed under the laws of the State of New Jersey to the extent such laws are not superseded by federal law.

     16.4 Pronouns. Masculine pronouns wherever used shall include feminine pronouns and the singular shall include the plural.

     16.5 Headings. The headings of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions.

     16.6 Validity. In the event any provision of this Plan shall be illegal or invalid for any reason, the illegality or invalidity of that provision shall not affect the remaining provisions hereof, but this Plan shall be construed and enforced as if such illegal and invalid provision had never been inserted herein.

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     16.7 Incapacity of Recipient. If any person entitled to a benefit under the Plan is deemed by the Company to be incapable of personally receiving and giving a valid receipt for such payment, then, unless and until claim therefore shall have been made by a duly appointed guardian or other legal representative of such person, the Company may provide for such benefit or any part thereof to be made to any other person or institution then contributing toward or providing for the care and maintenance of such person. Any such payment shall be a payment for the account of such person and a complete discharge of any liability of the Company and the Plan therefore.

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APPENDIX A

     The Company has designated the following persons as Participants in its Supplemental Executive Retirement Plan as of the Effective Date with (i) Years of Participation measured from the Eligibility Date and (ii) the Target Benefit equal to the percentage of Final Average Earnings as noted below

1. Jay G. Destribats	Eligibility Date:	December 31, 1994
	Target Benefit:	60% of Final Average Earnings
	Normal Retirement Age:	70
2. Patrick M. Ryan	Eligibility Date:	October 28, 1994
	Target Benefit:	60% of Final Average Earnings
	Normal Retirement Age:	65
3. Stephen F. Carman	Eligibility Date:	January 22, 1996
	Target Benefit:	40% of Final Average Earnings
	Normal Retirement Age:	60
4. Timothy J. Losch	Eligibility Date:	January 1, 1998
	Target Benefit:	40% of Final Average Earnings
	Normal Retirement Age:	65
5. Stephen R. Walker	Eligibility Date:	December 22, 2004
	Target Benefit:	20% of Final Average Earnings
	Normal Retirement Age:	65

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EX-10.21

EXHIBIT 10.21

     L E A S E   A G R E E M E N T

     This AGREEMENT, made this  day of  1998, between CRESTWOOD CONSTRUCTION, LLC, hereinafter designated as the Landlord, and YARDVILLE NATIONAL BANK, hereinafter designated as the Tenant.

     For and in consideration of the covenants herein contained, and upon the terms and conditions herein set forth, Landlord and Tenant agree as follows:

     1. PREMISES. The Landlord does hereby lease to the Tenant and the Tenant does hereby rent from the Landlord, the following described premises, hereinafter referred to as “leased premises” or “premises”: Bank/office building at the corner of Yardville-Hamilton Sq. and Kuser Roads in Hamilton Square, New Jersey and is to be constructed by the Landlord on Block 2575, Lot 184 in Hamilton Township, Mercer County, New Jersey. The subject property is shown on the Hamilton Township Tax Map as Block 2575, Lot 184. Said building shall be approximately 100 feet by 150 feet totaling approximately 45,000 square feet, as measured from outside exterior walls together with parking all as set forth on the approved site plan dated December 11, 1997 referred to as Exhibit A.

     2. TERM. The term of this lease shall be fourteen (14) years. The term of this lease and Tenant’s obligation to pay rent shall commence 60 days after substantial completion or upon occupancy by Tenant whichever is earlier. Substantial completion shall be deemed to have occurred upon the issuance of a Certificate of Occupancy for any and all of Landlord’s work so as to allow the Tenant or the Tenant’s contractor to commence interior finishes. It is estimated that construction will be completed 18 months after the approval and execution of all plans by local governmental authorities and the issuance of permits and Landlord agrees to expeditiously pursue such execution of plans and permits to proceed with construction. If construction has not commenced by June 1, 1998, or if construction is not completed eighteen months following execution of plans and issuance of permits, Tenant shall have the right to cancel this Lease by giving Landlord written notice of intent to cancel if construction is not commenced within 30 days of the date of the Notice. Notice by Landlord to the Tenant of substantial completion of Landlord’s work on the leased premises as set forth above, punch list items, and work contingent upon completion of Tenant’s own work excepted, shall constitute delivery hereunder. If Tenant fails to renew the Lease as provided in Paragraph #52, then and in that event, the Tenant shall pay to the Landlord, on a monthly basis for up to one year following termination of this Lease, a sum equal to the monthly rent Tenant would have been required to pay during the first year of the renewal period. This obligation shall terminate if Landlord replaces Tenant with another Tenant during that one year period.

     3. BASIC RENT. The Tenant shall pay to the Landlord, as basic rent for and during the term as follows: Upon completion and delivery as set forth above and upon mutual determination of square footage between Landlord’s architect and Tenant’s architect for each use, rent shall be calculated as follows to determine the initial annual basis:

Branch Bank Facility $22.00 per sq. foot
General Office Space $15.00 per sq. foot
Storage Space   $ 8.00 per sq. foot

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     Once the first year’s rent is determined as aforesaid, that amount shall constitute the base annual rent payable as set forth below. (If delivery occurs on a day other than the first day of a month the Tenant shall pay a proportionate rent for such partial month.) The base annual rent shall be adjusted once every five years by increasing it, if necessary, to equal the average increase in the Consumer Price Index for the New York area for the prior five years, provided, however, the increase shall not exceed 3% for any adjustment period.

     All rent is due and payable in advance on the first day of each and every month during the term of the lease. Tenant shall pay basic rent, and any additional rent as hereinafter provided, to Landlord at Landlord’s above stated address, or at such other place as Landlord may designate in writing, without demand, counterclaim, deduction or setoff.

     4. USE. Tenant shall use and occupy the leased premises only for lawful purposes permitted by local ordinance and for no other purpose.

     5. CARE. The Tenant shall take good care of the premises and shall at the Tenant’s own cost and expense, make all repairs, including painting and decorating, and shall maintain the premises in good condition and state of repair. The Tenant shall neither encumber nor obstruct the sidewalks, parking areas and entrances, but shall keep and maintain the same in a clean condition, free from debris, refuse, snow and ice. Notwithstanding the above, Landlord shall be responsible for the following:

     1. Maintain the roof and exterior walls in good condition;

     2. Make all structural repairs unless the repairs are made necessary by the act or neglect of the Tenant; and

     3. Make necessary replacements of the plumbing, cooling, heating, electrical and sewer systems, except when made necessary by the act or neglect of the Tenant.

     6. SURRENDER. On the last day, or earlier permitted termination of the lease term, Tenant shall quit and surrender the leased premises in good order and condition, ordinary wear and tear excepted. Prior to the expiration of the lease term, the Tenant shall remove all of its personal property, trade fixtures and equipment from the premises, and shall repair any damage caused by such removal. Any property of the Tenant remaining on the premises after the last day of the term of this lease or after the earlier permitted termination of the lease term shall be conclusively deemed abandoned and may be removed or disposed of by Landlord. Tenant shall reimburse Landlord for the cost of such removal. Notwithstanding the above, this paragraph does not require Tenant to restore the leased premises to its original condition.

     7. COMPLIANCE WITH LAWS. The Tenant shall comply with all laws, regulations, requirements and directives of the federal, state, county and municipal authorities applicable to the business to be conducted by the Tenant in the leased premises. Landlord has obtained site plan approval for the operation of a bank/office building on the premises and agrees to comply with any conditions contained in said approval. Prior to the commencement of opening for business, the Tenant shall, at its expense, obtain from the municipality (if required) a Tenant’s C of O or use permit. The Tenant shall promptly comply with all requests, orders, regulations and directives of the Board of Fire Underwriters or insurance companies covering the leased premises for the prevention of fire or other casualty at Tenant’s own cost and expense after commencement of the Lease. Tenant represents that it shall not violate any rules or regulations of the occupational safety and health administration. The Tenant shall conduct its business in such a manner, both as regards noise and other nuisances, as will not interfere with, annoy, or disturb any other Tenant in the conduct of its business or the Landlord in the management of the shopping center (as shown on the proposed site plan attached hereto as Exhibit “B”). Landlord will likewise use its best efforts to make sure that no other Tenant will interfere with, annoy or disturb the Tenant under this Lease Agreement.

     8. ASSIGNMENT. The Tenant shall not assign, mortgage or encumber this lease, nor sublet or sublease the premises or any part thereof, without the prior written consent of the Landlord, which consent shall not be unreasonably withheld or delayed. If Tenant is being released from the Lease Agreement, then Landlord may require posting of a security deposit or any other reasonable security as a condition of approving any assignment. This lease shall be binding upon Tenant and any acquirer or successor of Tenant. Notwithstanding the above, Tenant does not need Landlord’s consent or approval for the sale of Tenant’s stock.

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     9. NOTICES. All notices required under the terms of this lease shall be given and shall be complete by mailing such notices by certified or registered mail, return receipt requested, to the address of the parties as shown at the head of this lease, or to such other address as may be designated in writing, which notice of change of address shall be given in the same manner. All notices to Tenant may be mailed to the leased premises once Tenant has occupied the premises. The parties may designate counsel to whom copies of notices shall be sent and may, by consent, agree to alternative methods of delivery of notices.

     10. SEVERABILITY. The terms, conditions, covenants and provisions of this lease shall be deemed to be severable. If any clause or provision herein contained shall be adjudged to be invalid or unenforceable, it shall not affect the validity of any other clause or provision herein, but such other clauses or provisions shall remain in full force and effect.

     11. INSPECTION. The Tenant agrees that the Landlord and the Landlord’s agents, shall have the right to enter into and upon the said premises or any part thereof, during regular business hours, upon reasonable notice to Tenant, while accompanied by a representative of Tenant, for the purpose of examining the same or making such repairs or alterations therein as may be necessary for the safety and preservation thereof. The clause shall not be deemed to be a covenant by the Landlord nor be construed to create an obligation on the part of the Landlord to make such inspection or repairs. Landlord recognizes that the nature of Tenant’s business may require security so as to deny Landlord access to portions of the premises except in emergency situations under controls acceptable to Tenant.

     12. NET RENT. (The phrase “Tenant’s proportionate share” shall apply only if Landlord receives a single bill for any such items which bill covers land buildings or operations of other Tenants otherwise Tenant’s share shall be one hundred percent (100%).) Tenant agrees to pay as additional rent, promptly and without demand, its proportionate share of all real estate taxes, common area expenses and insurance affecting the real estate (land and building) of which the leased premises form a part. It is the intention of the parties that this shall be a triple net lease. The Landlord and Tenant agree that the proportionate share of the above taxes, common area expenses and insurance to be paid by the Tenant, under the terms of this paragraph, shall be computed on the basis that the total area of the leased premises bears to the total area of the entire premises. Landlord and Tenant further agree that Tenant shall pay its proportionate share of the above common area expenses and insurance monthly by paying one-twelfth the estimated amount with each basic monthly rent installment in a manner similar to the escrow system used by banks in connection with residential mortgages. Annually Landlord, upon submission of the tax, common area expense and insurance bills, shall compute any differences from the estimated monthly payments, notify Tenant of same, and the adjustment of the difference shall be made with the next due installment of the basic monthly rent. Photocopies of the tax bill, common area expense bills and insurance bills, submitted by the Landlord to the Tenant, shall be sufficient evidence of the amount of taxes, common area expenses and insurance. So long as Tenant is responsible for one hundred percent of such expenses Tenant may make arrangements to pay those expenses when due provided Landlord agrees and Tenant provides adequate proof of timely payment of such expenses.

     If at any time during the term of this Lease the methods of taxation prevailing at the commencement of the term hereof shall be altered, so that in lieu of or as a supplement to or a substitute for the whole or any part of the real estate taxes now assessed or charged there is an alternate assessment or charge or tax, then such alternate assessment or charge or tax shall be deemed to be included in the real estate taxes payable by the Tenant pursuant to this paragraph and the Tenant shall pay and discharge the same as herein provided in respect to the payment of real estate taxes. The common area expenses herein referred to are the Landlord’s costs of operating, maintaining, replacing and repairing the common areas of the premises (land) of which the leased premises form a part. Such expenses to include, but not limited to, lighting, cleaning, snow removal, policing, landscaping, repairing and patching of the common roadways. The insurance herein is the rental, fire and liability coverage under a policy issued by a commercial insurer licensed to provide insurance in New Jersey. (Any reference to common areas shall apply only if other tenants are sharing use of the demised premises with Tenant.

     The Landlord and Tenant shall delineate on the attached site plan (Exhibit “B”) those areas which shall be considered “common areas” for the purpose of this Lease Agreement. Landlord also agrees that Tenant may pay its portion of the tax bill to Landlord within ten (10) days notice from Landlord of the amount of the bill. Tenant shall pay all of the tax for improvements (so long as it is the only building on the taxed property) and its proportionate share of the land until such time as the Tenant’s portion of the property is subdivided out. Landlord agrees that it will

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use its best efforts to subdivide out Tenant’s portion of the property and, if successful, further agrees that upon completion of the subdivision and the issuance of a separate tax bill to Tenant’s property, Tenant may pay said bill directly to the Township of Hamilton and provide proof of said payment to Landlord within ten (20) days of said payment. Tenant reserves the right to audit any common area expenses and all expenses should be reasonable and customary.

     13. QUIET ENJOYMENT. The Landlord represents that the Landlord is the owner of the premises herein leased and has the right and authority to enter into, execute and deliver this lease; and does further covenant that the Tenant on paying the rent and performing the conditions and covenants herein contained, shall and may peaceably and quietly have, hold and enjoy the leased premises for the term aforementioned.

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     14. MORTGAGE PRIORITY. This lease shall not be a lien against the said premises in respect to any mortgages that may hereafter be placed upon said premises. The recording of such mortgage shall have preference and precedence and be superior and prior in lien to this lease, irrespective of the date of recording. The Tenant agrees to execute any instruments, without cost, which may be deemed necessary or desirable, to effect the subordination of this lease to any such mortgage provided said mortgagee executes a subordination, nondisturbance and attornment agreement in a form satisfactory to Tenant. A refusal by the Tenant to execute such instruments shall entitle the Landlord to cancel this lease. The term hereof is expressly limited accordingly.

     15. SIGNS. The Tenant shall not place nor allow to be placed any signs of any kind whatsoever, upon, in or about the leased premises without the prior written consent of the Landlord which consent shall not be unreasonably withheld. Tenant agrees, if required by Landlord, to attach at Tenant’s own cost and expense an illuminated sign onto a free standing sign that may be erected by Landlord. Tenant further agrees to erect at Tenant’s own cost and expense an illuminated sign on the exterior of the leased premises. All signs herein erected shall be approved, before erection, by the Landlord in writing as to size, location. Any signs permitted by the Landlord shall at all times conform with all municipal ordinances or other laws and regulations applicable thereto. Notwithstanding the above, any signs that the Landlord requires the Tenant to erect herein shall be limited to a cost of $2,500.00 to the Tenant.

     16. PARKING. Shall be available as shown on the approved Site Plan—Exhibit A. The parking areas shown on Exhibit A shall be for the exclusive use of the Bank and its customers.

     17. UTILITIES. The Tenant shall pay when due all the rents or charges for water or other utilities exclusively used by the Tenant, which are or may be assessed or imposed upon the leased premises, and if not paid, such rents or charges shall be added to and become payable as additional rent with the installment of rent next due. Tenant to pay for all utilities. Landlord shall not be responsible for the interruption in service of any utility. Notwithstanding the above, if the utility services are interrupted due to no fault of the Tenant but due to the fault of the Landlord for a period of more than ten (10) days, then Tenant will be entitled to an abatement of rent until such time as the utilities are returned to service. Tenant and Landlord agrees to use its best efforts to have the utilities returned to service as soon as possible. In the event the utility or utilities are not restored for a period of six months, then Tenant shall have the right to cancel this Lease Agreement unless non-restoration results from Tenant’s fault.

     18. LANDLORD’S EXCULPATION. The Landlord shall not be liable for any damage or injury which may be sustained by the Tenant or any other person, as a consequence of the failure, breakage, leakage or obstruction of the water, plumbing, steam, sewer, waste or soil pipes, roof, drains, leaders, gutters, valleys, downspouts or the like or of the electrical, gas, power, refrigeration, sprinkler, air-conditioning or heating systems; or by reason of the elements; or resulting from the carelessness, negligence or improper conduct on the part of any other Tenant or of the Landlord or this or any other Tenant’s agents, employees, guests, licensees, invitees, subtenants, assignees or successors; or attributable to any interference with, interruption of or failure, beyond the control of the landlord, of any services to be furnished or supplied by the Landlord. Notwithstanding the, above, Landlord shall not be exculpated from (1) any gross negligence or willful and wanton acts of the Landlord, (2) any of the remedies provided to tenant under Paragraph 17 herein, and (3) any of the warranties provided to Tenant under Paragraph 54 herein.

     19. LIABILITY INSURANCE. Tenant shall keep in force at its own expense, so long as this Lease remains in effect, public liability insurance in companies acceptable to the Landlord with respect to the premises, in form satisfactory to Landlord covering both Landlord and Tenant with minimum limits of $1,000,000 per person and $2,000,000 per accident and in which the property damage liability shall be not less than $100,000. Tenant will deposit the policy of such insurance or certificates thereof with Landlord within 15 days of occupying said premises. Tenant shall also maintain at Tenant’s expense to “all risk” property insurance, business/rent interruption insurance and commercial general liability insurance naming Landlord as an additional insured.

     20. PLATE GLASS. Tenant shall be obligated to maintain, repair and replace all plate and other glass in the leased premises.

     21. NON-PERFORMANCE BY LANDLORD. This lease and the obligation of the Tenant to pay the rent hereunder and to comply with the covenants and conditions hereof, shall not be affected, curtailed, impaired or excused because of the Landlord’s inability to supply any service, by reason of any rule, order regulation or

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preemption by any governmental entity, authority, department, agency or subdivision or for any delay which may arise by reason of negotiations for the adjustment of any fire or other casualty loss or because of strikes or other labor trouble or, for any cause beyond the control of the Landlord. This paragraph does not apply to Tenant’s remedies following any interruption of utility services provided in Paragraph 17 and Tenant’s remedies for Landlord’s failure to make construction deadlines set forth in Paragraph 2.

     22. REIMBURSEMENT OF LANDLORD. If the Tenant shall fail or refuse to comply with or perform any conditions and covenants of the within lease, the Landlord may, if the Landlord so elects, carry out and perform such conditions and covenants, at the cost and expense of the Tenant, and the said cost and expense shall be payable on demand, or at the option of the Landlord, shall be added to the installment of rent due immediately thereafter, but in no case later than one month after such demand. This remedy shall be in addition to such other remedies as the Landlord may have hereunder by reason of the breach by the Tenant. Landlord’s rights hereunder shall apply only after giving Tenant reasonable notice to cure the covenant or condition alleged to have not been complied with. Likewise, if the Landlord shall fail or refuse to comply or perform any conditions and covenants of the within Lease, the Tenant may, if the Tenant so elects, carry out and perform such conditions and covenants, at the cost and expense of the Landlord and the said cost and expense shall be deducted from any future rent payable to the Landlord. This remedy shall be in addition to such other remedies as the Tenant may have hereunder by reason of the breach of the Landlord. Tenant’s rights hereunder shall apply only after giving Landlord reasonable notice to cure the covenant or condition alleged to have not been complied with.

     23. CONDEMNATION. In the event that the premises shall be taken for public use by the city, state, federal government, public authority or other corporation having the power of eminent domain, then this Lease shall terminate as of the date on which possession thereof shall be taken for such public use, or, at the option of the Tenant, as of the date on which the premises shall become unsuitable for Tenant’s regular business by reason of such taking; provided, however, that if only a part of the leased premises shall be so taken, such termination shall be at the option of Tenant only. If such a taking of only a part of the leased premises occurs, and Tenant elects not to terminate the Lease, there shall be a proportionate reduction of the Basic Rent and Additional Rent to be paid under this Lease from and after the date such possession is taken for public use. Tenant shall have the right to participate, directly or indirectly, in any award for such public taking to the extent that it may have suffered compensable damage as a Tenant on account of such publictaking.

     24. ALTERATION. No alterations, installations, additions, or improvements shall be made, installed or attached to the leased premises, without the written consent of the Landlord which consent shall not be unreasonably withheld. Unless otherwise provided herein, all such alterations, additions or improvements and installations, when made, permanently installed or attached to the said premises, shall belong to and become the property of the Landlord and shall be surrendered with the premises and as part thereof upon the expiration or termination of this Lease. Notwithstanding the above, Tenant is permitted to make any nonstructural improvement inside the building without the Landlord’s consent.

     25. FIXTURES. It is agreed that the Tenant shall have the right to install whatever trade equipment, fixtures and inventory as may be deemed necessary by the Tenant for the conduct of the business for which the premises have been leased, subject to compliance with applicable rules and regulations of governmental boards having jurisdiction thereof. Any trade equipment, fixtures or inventory of the Tenant, not removed by the Tenant upon the termination of this Lease, or upon any quitting, vacating or abandonment of the premises by the Tenant, or upon the Tenant’s eviction, shall be considered as abandoned and the Landlord shall have the right, without notice to the Tenant, to sell or otherwise dispose of the same and shall not be accountable to the Tenant for any part of the proceeds of such sale, if any.

     26. FIRE OR OTHER CASUALTY. In case of fire or other casualty, the Tenant shall give immediate notice to the Landlord. If the premises shall be partially damaged by fire, the elements or other casualty, the Landlord shall repair the same as speedily as practicable, but the Tenant’s obligation to pay the rent hereunder shall not cease. If the premises be so extensively and substantially damaged as to render them untenantable, then the rent shall cease until such time as the premises shall be made tenantable by the Landlord. However, if the premises be totally destroyed or so extensively and substantially damaged as to require practically a rebuilding thereof, then the rent shall be paid up to the time of such destruction and then and from thenceforth this lease shall come to an end. If the Tenant shall have been insured against any of the risks herein covered, then the proceeds of such insurance shall be paid over to

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the Landlord to the extent of the Landlord’s cost and expenses to make the repairs hereunder. Notwithstanding the above, if Landlord cannot repair the damages to the property within a six-month period, then the Tenant shall have the right to terminate this Lease and rent shall be due and owing only up until the date of the fire or casualty.

     27. REFUSE. Tenant shall at its own cost and expense maintain a refuse container as designated on the approved site plan (Exhibit A). Such container shall be adequate in size and structure and kept in good and secure condition. Such container shall be located in an area designated on the approved site plan. Tenant: shall not permit undue accumulations of trash, rubbish and other refuse. Tenant shall cause any used cartons, containers, refuse, debris, litter and garbage to be picked up from the parking areas, sidewalks and grounds, of the Landlord, where same have been deposited, dropped or discarded by the Tenant or it customers. Tenant herein also agrees to maintain a refuse container in front of the leased premises and to be periodically emptied by Tenant, if Landlord so requests. Tenant shall bag all garbage placed in container which has been removed from their premises.

     28. CLEANLINESS. Tenant agrees to maintain the lease premised, at its own expense, in a clean, orderly and sanitary condition and free of insects, rodents, vermin and other pests. Tenant also agrees not to cause or permit objectionable odors to emanate or be dispelled from the leased premises.

     29. LANDLORD REPAIRS. The repairs required of the Landlord in Paragraph 5 herein shall be done at the Landlord’s expense and shall not become part of or added to the common area expenses. Furthermore, if Landlord does not make a repair required in this Lease within a reasonable period of time following notice from the Tenant, then Tenant can make the repair and offset the cost of the repair against any future rent due to the Landlord.

     30. SITE REVISIONS. The Landlord herein reserves the right at any time to make changes or revisions in the parking areas, to make alterations thereof, additions thereto, and to construct additional buildings as permitted by applicable land use laws and regulations, so long as such revisions have no adverse impact on Tenant’s use of the demised premises. This paragraph shall apply only to those areas specifically designated and agreed to by Landlord and Tenant on the site plan attached as Exhibit A.

     31. DAMAGE. In case of the destruction of or damage of any kind whatsoever to the said premises, caused by the carelessness, negligence or improper conduct on the part of the Tenant or the Tenant’s agents, employees, or invitees, the Tenant shall repair the said damage or replace or restore any destroyed parts of the premises, as speedily as possible, at the Tenant’s own cost and expense or from insurance proceeds.

     32. INDEMNITY. Tenant agrees to indemnify the Landlord against and save it harmless from and against any and all claims, actions, damages, liability and expense in connection with loss of life, personal injury and/or damage to property arising from or out of any occurrence in or about the leased premises, and/or which result from the occupancy or use by Tenant of the leased premises or any part thereof and/or which may be occasioned wholly or in part by any act or omission of Tenant, its agents or employees, except if caused by Landlord or Landlord’s employees, agents or contractors. In case Landlord shall, without fault on its part, be made a party to any litigation commenced by or against the Tenant, then Tenant shall protect and hold Landlord harmless and shall pay all costs, expenses and reasonable attorney’s fees that may be incurred or paid by Landlord in connection with such litigation.

     33. LATE PENALTY. Any rent due under the terms of this Lease and not received by the Landlord by the fifth day of the month in which it is due will be subject to a late penalty of the maximum amount permitted by law, but not to exceed five (5%) percent. The late penalty shall be imposed at the discretion of the Landlord and if so imposed shall be payable by the Tenant on demand of the Landlord. Landlord’s failure to impose penalty shall not constitute any waiver of this paragraph. The late penalty shall be deemed additional rent. Tenant shall be entitled to one five (5) day notice per year of the imposition of the first late penalty in that year.

     34. REMEDIES UPON TENANT’S DEFAULT. If there should occur any default on the part of the Tenant in the performance of any conditions and covenants herein contained beyond any cure period, or should the Tenant be evicted by summary proceedings or otherwise, the Landlord, in addition to any other remedies herein contained or as may be permitted by law, may either by force or otherwise, without being liable for prosecution therefor, or for damages, re-enter the said premises and the same have and again possess and enjoy; and as agent for the Tenant or otherwise, re-let the premises and receive the rents therefore and apply the same, first to the payment of such expenses, reasonable

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attorney fees and costs, as the Landlord may have been put to in re-entering and repossessing, the same and in making such repairs and alterations as may be necessary; and second to the payment of the rents due hereunder. The Tenant shall remain liable for such rents as may be in arrears and also the rents as may accrue subsequent to the reentry by the Landlord, to the extent of the difference between the rents reserved hereunder and the rents, if any, received by the Landlord during the remainder of the unexpired term hereof, after deducting the aforementioned expenses, fees and costs; the same to be paid as such deficiencies arise and are ascertained each month.

     Any non-monetary defaults shall require 30 days’ notice to Tenant of Tenant’s right to cure which right shall continue so long as Tenant is diligently pursuing the cure. Landlord shall also only be allowed possession of the property in accordance with the law of New Jersey.

     35. TERMINATION ON DEFAULT. Upon the occurrence of any of the contingencies set forth in the preceding clause, or should the Tenant be adjudicated a bankrupt, insolvent or placed in receivership, or should proceedings be instituted by or against the Tenant for bankruptcy, insolvency, receivership, agreement of composition or assignment for the benefit of creditors, or if this lease or the estate of the Tenant hereunder shall pass to another by virtue of any court proceedings, writ or execution, levy, or by operation of law, the Landlord may, if the Landlord so elects, at any time thereafter, terminate this lease and the term hereof, upon giving to the Tenant or to any trustee, receiver, assignee or other person in charge of or acting as custodian of the assets or property of the Tenant, five days notice in writing, of the Landlord’s intention so to do. Upon the giving of such notice, this lease and the term hereof shall end on the date fixed in such notice as if the said date was the date originally fixed in this lease for the expiration hereof; and the Landlord shall have the right to remove all persons, goods, fixtures, and chattels therefrom, by force or otherwise, without liability for damages. In the event that the relationship of Landlord and Tenant may cease or terminate by reason of the default by the Tenant or by the ejectment of the Tenant by judicial proceedings, or after the abandonment of the premises by the Tenant, it is hereby agreed that the Tenant shall remain liable for rent and costs as stated in above paragraph 3.

     36. NON-WAIVER. The various rights, remedies, options and elections of the parties, expressed herein, are cumulative, and the failure of the either party to enforce strict performance by the other of the conditions and covenants of this lease or to exercise any election or option or to resort or have recourse to any remedy herein conferred or the acceptance by the Landlord of any installment of rent after any breach by the Tenant, in any one or more instances, shall not be construed or deemed to be a waiver or a relinquishment for the future by the Landlord of any such conditions and covenants, options, elections or remedies, but the same shall continue in full force and effect. Likewise, payment of rent by Tenant shall not act as a waiver of Tenant’s right to insist on performance of any of the terms hereof.

     37. RIGHT TO EXHIBIT. The Tenant agrees to permit the Landlord and the Landlord’s agents to show the premises to persons wishing to rent or purchase the same during regular business hours and while accompanied by a representative of Tenant, and Tenant agrees that on and after 180 days next preceding the expiration of the term hereof, the Landlord or the Landlord’s agents shall have the right to place notices on the front of said premises or any part thereof, offering the premises for rent or for sale; and the Tenant hereby agrees to permit the same to remain thereon without hindrance. Said right to exhibit shall be upon reasonable notice to Tenant.

     38. ABANDONMENT. Tenant shall throughout the term of this Lease conduct and carry on the type of business for which the premises have been leased. Tenant shall not allow the leased premises to become vacant or deserted for a period of more than six months.

     39. WAIVER OF JURY TRIAL. Landlord and Tenant do hereby waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other on any matter whatsoever arising out of or in connection with this Lease, the relationship of Landlord and Tenant, Tenant’s use or occupancy of the premises, and/or claim, injury or damage.

     40. ENFORCEMENT. Tenant shall pay, upon demand, all of Landlord’s costs, charges and expenses, including the fees of counsel, agents and others retained by Landlord, incurred in enforcing Tenant’s obligation to pay the basic and additional rents due under this lease. In actions to enforce any other provision of this lease, the losing party, shall be responsible for the other party’s reasonable costs, charges, expenses and counsel, expert and other fees, incurred in such actions.

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     41. LOSS OF PROPERTY. Landlord shall not be liable for any loss of property by Tenant from any cause whatsoever, including but not limited to theft or burglary from the leased premises, and Tenant covenants and agrees to make no claim for any such loss at any time.

     42. ENTIRE AGREEMENT. This lease contains the entire agreement between the parties, no representative, agent or employee of the Landlord has been authorized to make any representation or promises with reference to the within letting or to vary, alter or modify the terms hereof. No additions, changes or modifications, renewals or extensions hereof, shall be binding unless reduced to writing and signed by the Landlord and the Tenant.

     43. ADDITIONAL RENT. Any payments required to be made by Tenant, whether to Landlord or otherwise, under this lease shall be deemed to be additional rent, whether or not so designated in the lease. Landlord shall be entitled to all remedies available to Landlord of non-payment of rent in the event that, Tenant fails to pay any such payment.

     44. BROKER. The parties warrant and represent that they have not dealt or negotiated with any real estate broker or salesperson in connection with this Lease agreement and that they shall indemnify and hold each other harmless from any costs, claims or damages successfully asserted by any other person or firm claiming to have negotiated or brought about this Lease.

     45. PHOTOCOPIES. Photocopies bearing original signatures of the parties shall be deemed to be original documents, and the parties hereto and lending institutions may rely upon said photocopies bearing original signatures as such originals.

     46. EXECUTION. The submission of this Lease for examination does not constitute a reservation of or option for the premises. This Lease agreement shall become effective, only upon execution by both Landlord and Tenant.

     47. HEADINGS. The headings contained in the body of this lease agreement are for purposes of identification only, and are not a part of the agreement between the parties.

     48. PERSONAL LIABILITY. Notwithstanding anything to the contrary provided in this lease, it is specifically understood and agreed, such agreement being a primary consideration for the execution of this lease by Landlord, that there shall be absolutely no personal liability on the part of Landlord, its Partners, nor their successors with respect to any of the terms and conditions of this lease. The Tenant shall look solely to the equity of the Landlord in the Premises for the satisfaction of each and every remedy of Tenant in the event of any breach by Landlord of any of the terms and conditions of this lease to be performed by Landlord, such exculpation of liability to be absolute and without any exceptions whatsoever.

     49. LANDLORD INSTALLATION. Leased premises shall be provided the following by Landlord: Landlord’s work is described in detail in Exhibit B.

     50. CONSTRUCTION. Landlord agrees that construction of the building, designated by the Landlord to contain the leased premises, shall commence, before the expiration of 120 days after the date the Landlord shall have procured a building permit from the appropriate authority and Landlord further agrees to thereafter diligently proceed with the construction of the premises.

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If for any reason construction has not commenced by the above date either party here-to may terminate this lease by written notice to the other party, sent certified mail return receipt requested, prior to the commencement of construction. Upon such notice this lease shall become null and void without any liability of either party to the other, with the exception of the refund of the security deposit. Landlord shall construct the building in accordance with architectural plans submitted to and approved by Tenant and attached hereto as Exhibit C all in a good and workmanlike manner in compliance with all applicable laws and regulations. Warranties shall be assigned to Tenant. Landlord agrees that everything will be warranted for one year, the roof warranted for 20 years and all mechanical, water penetration and site work warranted for 2 years. Landlord further agrees to provide Tenant with a construction schedule and communicate with Tenant on the status of construction on a regular basis.

     51. TENANT WORK. Tenant is permitted to enter the leased premises prior to commencement of the lease term in order to prepare the premises, provided however, that such entry does not interfere, impede or disrupt the Landlord nor violate any township ordinances. Landlord agrees to use its best efforts to allow Tenant side-by-side access for completion of Tenant’s work.

     52. RENEWAL. Tenant shall have the option of renewing this lease for two (2) additional five (5) year periods provided the Tenants give to the Landlord Notice of Intent to Renew at least nine (9) months prior to the expiration of the initial term or renewal period being renewed. Rent for the renewal term shall be at least the existing rent increased to the fair market value (FMV) as of the commencement date of each renewal. If the parties cannot agree on the FMV increase or a mutually agreeable appraiser to determine the same, then each party will hire an appraiser and the FMV shall be determined by taking an average of the two appraisals provided the difference between the two is 10% or less. If the difference between the two appraisals is greater than 10%, then the two hired appraisers shall pick a third appraiser, and the FMV determined by the third appraiser shall be binding.

     53. EXCLUSIVE USE. Landlord agrees that Landlord will not rent to another banking facility within the shopping center anticipated to be constructed on the same lot occupied by the building leased to Tenant.

     54. ROOFTOP ANTENNA/MODIFICATIONS, Tenant, with prior review and approval by the Landlord, which approval shall not be unreasonably withheld or delayed, is permitted to install antenna/satellite dishes and related equipment on the roof of the building or on the site provided, however, that Tenant shall comply with any and all governmental restrictions and regulations and obtain all necessary permits and, in addition, Tenant shall be responsible for any damage or defect created in the roof by reason of the installation of such materials and shall appropriately screen such equipment and materials from view.

     55. OPTION TO PURCHASE. Tenant shall have the continuing option to purchase the premises after the end of the fifth lease year at a price equal to the then current fair market value (FMV) of the premises. If the parties cannot agree on the fair market value or a mutually agreeable appraiser to determine same, then each party will hire an appraiser and the FMV shall be determined by taking an average of the two appraisals provided the difference between the two is 10% or less. If the difference between the two appraisals is greater than 10%, then the two hired appraisers shall pick a third appraiser, and the FMV determined by the third appraiser shall be binding. If, pursuant to Paragraph #64, Tenant has paid outside of Lease payments for Lease Hold Improvements, then and in that event, if Tenant exercises this option to purchase during the term of the Lease, Tenant shall receive a credit for a portion of the monies so paid, calculated by dividing the total payment made for Lease Hold Improvements by 14 years and crediting Tenant with the sum equal to that figure times the number of years remaining on the Lease. In the event Landlord has not subdivided out the Tenant’s portion of the property consistent with an agreed upon division by the end of the fifth lease year, the Tenant shall have the further option to proceed with the application for said subdivision at Tenant’s expense and, if approval is received, exercise this option. Alternatively, if subdivision is impractical, the parties will explore alternatives such as land lease or condominium association and Landlord will pursue one of those courses in order to permit Tenant to exercise this option.

     56. RIGHT OF FIRST REFUSAL. Should the Landlord, during the original or any renewal term of the Lease, decide to sell the building and property to any other person, corporation or company, the Landlord shall first offer the building and/or property for sale to Tenant at the same price as the Landlord’s best offer. Tenant shall have thirty (30) days from the date of receipt of written notice of the other offer to match that offer in order to exercise Right of First Refusal to purchase the premises hereunder. Tenant’s offer must match not only terms of price but, also, all terms including payment method and any and all contingencies.

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     57. CHOICE OF LAW. This Lease Agreement shall be governed by the law of the State of New Jersey and the parties agree to make Mercer County the venue of any legal action resulting from this Lease.

     58. SUCCESSORS AND ASSIGNS. This Lease Agreement shall be binding on all successors and assigns to either party’s interests herein.

     59. MEMORANDUM OF LEASE. A memorandum of this Lease Agreement shall be filed simultaneously upon execution with the clerk of Mercer County, New Jersey.

     60. HOLDING OVER. In the event that the Tenant shall remain in the demised premises after the expiration of the term of this Lease without having executed a new written Lease with the Landlord, such holding over shall not constitute a renewal or extension of this Lease. The Landlord may, at its option, elect to treat the Tenant as one who has not removed at the end of its term, and thereupon be entitled to all the remedies against the Tenant provided by law in that situation, or the Landlord may elect, at its option, to construe such holding over as a tenancy from month to month, subject to all the terms and conditions of this Lease, except as to duration thereof, and rent shall be due at 125% of the last month’s rent covered under the base and/or option term of the Lease.

     61. WAIVER OF SUBROGATION. Landlord and Tenant hereby releases the other from any and all liability or responsibility (to the other or anyone claiming through or under them by the way of subrogation or otherwise) under fire and extended coverage or supplementary contract casualties, if such fire or other casualty shall have been caused by the fault or negligence of the other party, or anyone for whom such party may be responsible; provided, however, that, except as otherwise provided in this Lease, this release shall be applicable and in force and effect only with respect to loss or damage occurring during such time as the releasor’s policies shall contain a clause or endorsement to the effect that any such release shall not adversely affect or impair said policies or prejudice the right of the releasor to recover thereunder. Each of Landlord and Tenant agrees that its policies will include such a clause or endorsement so long as the same shall be obtainable without extra cost, or if such cost shall be charged therefore, so long as the other party pays such extra cost, if extra cost shall be chargeable therefor, each party shall notify the other party therefore and of the amount of the extra cost, and the other party shall be obligated to pay the extra cost unless, within ten (10) days after such notice, it elects not to be obligated so to do by written notice to the original party. If such clause or endorsement is not available, or if either party should not desire the coverage at extra cost to it, then the provisions of this Article shall not apply to the policy or policies in question.

     62. BANKING APPROVAL. This Lease Agreement is contingent upon the Tenant obtaining all necessary approvals to operate a banking facility at this location from the Office of the Comptroller of the currency within ninety (90) days from the execution of this Lease Agreement. Tenant agrees to apply for this approval immediately following execution of this Lease Agreement. Tenant agrees that if Tenant cancels this Lease Agreement because the relocation is not approved by the Comptroller of the currency as required hereunder, then and in that event, Tenant agrees to reimburse the Landlord for any and all expenses incurred by the Landlord in preparing the premises including engineering, site work and any other work done after the execution of the Lease and until the date of cancellation.

     63. ARBITRATION

          (a) All disputes which may arise between the parties hereto out of or in relation to or in connection with this Agreement, shall be settled by arbitration in accordance with the provisions set forth in the New Jersey Arbitration Act, N.J.S.A. 2A:24-1 et seq. The decision of such arbitration shall be binding on both parties, and a judgment on an award rendered shall be entered pursuant to paragraph (b).

          (b) Exclusive jurisdiction over entry of judgment on any arbitration award rendered pursuant to paragraph (a) or over any dispute, action or suit arising therefrom shall be in any court of appropriate subject matter jurisdiction located in New Jersey, and the parties by this Agreement expressly subject themselves to the personal jurisdiction of said court for the entry of any such judgment and for the resolution of any dispute, action or suit arising in connection with the entry of such judgment.

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     64. LEASEHOLD IMPROVEMENTS. Tenant agrees to pay Landlord a maximum of $35.00 per foot for any and all Tenant improvements based upon the existing estimating plans and provided any changes thereto are reasonable in scope. (A copy of said estimating plans are attached hereto as Exhibit “D”.) Landlord further agrees to competitively bid-out all Tenant improvements on the leased premises and to allow Tenant to accept or reject the bids for the leasehold improvements. In the event that Tenant does not accept any of the bids submitted for the leasehold improvements, then Tenant reserves the right for the Landlord to deliver to Tenant a shell of the building and then Tenant will have the right and responsibility to finish all leasehold improvements. The shell of the building is defined and set forth in the attached plans submitted as Exhibit “D”. Tenant further agrees to pay a mark-up of 3% to the Landlord for supervision of the leasehold improvements if the Tenant accepts the bids submitted to Landlord and Landlord is responsible for completing the leasehold improvements. Payment to the Landlord hereunder shall be made in accordance with a separate contract between Landlord and Tenant regarding said leasehold improvements.

     The parties hereto have executed this Lease Agreement on the day and year first above written.

As to Landlord:	As to Tenant:
CRESTWOOD CONSTRUCTION, LLC	YARDVILLE NATIONAL BANK
By: John J. Klein, III	By: Patrick M. Ryan
JOHN J. KLEIN, III	PATRICK M. RYAN
	President/CEO
Dated: 5-25—98	Dated: 4/2/98

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ADDENDUM TO LEASE AGREEMENT

LANDLORD: CRESTWOOD CONSTRUCTION, LLC

TENANT: YARDVILLE NATIONAL BANK

PROPERTY: Block 2575, Lot 184, Hamilton Township, NJ

The contents of this Addendum are an Integral part of the Lease Agreement dated May 8, 1998 and wherever the contents of the Lease Agreement and this Addendum differ, the Addendum shall govern.

     1. In addition to the common areas delineated in yellow on Exhibit B, Tenant shall be responsible for its proportionate share of the maintenance expenses for the detention basin. Tenant’s proportionate share shall be based on total acreage of land allocated to each user of the detention basin. The Tenant shall be entitled to an easement for use of the detention basin throughout the term of the loan.

     2. Omitted from Exhibit B is a proposed 21,000 square foot retail center to be on the remainder of the site outside of the dotted red line. Landlord shall supply Tenant with a copy of the revised plans including the proposed shopping center once those plans are completed.

     3. Paragraph 30 of the Lease Agreement is modified to change the reference to Exhibit A to Exhibit B. All other terms and conditions of Paragraph 30 remain the same.

     4. The date of Exhibit A referred to in Paragraph 1 of the Lease Agreement is changed to September 15, 1997 as revised on November 5, 1997.

     5. Paragraph 49 of the Lease Agreement is modified to change the reference to Exhibit B to Exhibit C, C1, D, D1, D2 and D3.

     6. Paragraph 50 of the Lease Agreement is modified to change the reference to Exhibit C to Exhibit C, C1, D, D1, D2 and D3.

     7. Paragraph 54 of the Lease Agreement is modified to change the reference to Exhibit D (in the 5th line of said paragraph) to Exhibit C. The reference to Exhibit D (in the 15th line of said paragraph) shall be changed to Exhibit D, D1, D2 and D3.

     8. The Tenant shall be entitled to a credit of $25,000 for the architectural staircase which was originally proposed as part of the base building and since eliminated by the Tenant.

     9. Any discrepancies in the plans and specifications prepared by The Aztec Corporation and Steven S. Cohen, Architect, PC, shall be controlled by what is in The Aztec Corporation plans and specifications, with the exception that all dimensions in said plans and specifications shall be governed by the Steven S. Cohen, Architect, PC, plans and specifications.

     10. Paragraph 2 of the Lease Agreement is modified to change the number 60 to 120 in the third line if the Tenant elects to have the Landlord deliver only the shell of the building in accordance with Paragraph 64 of the Lease Agreement.

     11. The word “replacing” shall be deleted from the 12th line of the second paragraph of Paragraph 12 of the Lease Agreement.

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     12. Paragraph 64 of the Lease is modified to state that if the Tenant elects to have the Landlord provide only a shell of the building, then Tenant has the further option of removing certain items from the shell and be reimbursed on a dollar-for-dollar credit for the items removed.

     13. Tenant reserves the right to make any and all changes to the plans and specifications attached as Exhibits to this Lease without charge to the Tenant provided said changes are in materials of equal value, the changes do not impede the construction timetable and there is no direct increase in cost to the Landlord.

     14. The Exhibits attached to the Lease Agreement shall be as follows:

Exhibit	Description
A	Preliminary and Final Site Plan prepared by Crucili-Dolci, Inc. dated 9/30/97 as Revised on 11/5/97 (1 sheet).
B	Preliminary and Final Site Plan prepared by Crucili-Dolci, Inc. dated 9/30/97 as Revised on 11/5/97 with a dotted red line delineating the proposed subdivision line and yellow highlighted area delineating the common areas (1 sheet).
C	Estimating Package consisting of First Floor Plan, Second Floor Plan and Third Floor Plan prepared by The Aztec Corporation and dated 9/22/97 as revised on 12/5/97 (3 sheets).
C1	Interior Construction Estimating Package prepared by The Aztec Corporation dated 11/19/97 and revised 12/8/97 (37 pages).
D	Base Building Exhibit consisting of First Floor Plan, Second Floor Plan and Third Floor Plan prepared by The Aztec Corporation dated 9/22/97 as revised on 12/15/97 and 3/18/98 (3 sheets) along with Interior Construction Estimating Package prepared by The Aztec Corporation dated 11/19/97 as revised on 12/8/97 and edited on 3/17/98 (40 pages).
D1	Set of Drawings prepared by Steven S. Cohen, Architect, PC, dated 2/16/98, consisting of 12 sheets labeled A.0 to A.11.
D2	Letter from John J. Klein III to Randy J. Csik dated 4/2/98 with paragraphs 2 and 3 deleted and initialed by John J. Klein III (1 page).
D3	Specification book prepared by Steven S. Cohen, Architect, PC, dated November 19,1997, revised December 8, 1997 and edited for base building on February 17, 1998.

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AGREED & ACCEPTED:

	CRESTWOOD CONSTRUCTION, LLC
	LANDLORD
By:	John Klein
	John Klein, Manager Member
	YARDVILLE NATIONAL BANK
	TENANT
By:	Patrick Ryan
	Patrick Ryan, President/CEO

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EX-10.29

Exhibit 10.29

YARDVILLE NATIONAL BANK
CHANGE IN CONTROL SEVERANCE COMPENSATION PLAN

A. Purpose.

     The purpose of the Yardville National Bank Change in Control Severance Compensation Plan (the “Plan”) is to ensure the successful continuation of the business of Yardville National Bank (the “Bank”) and the fair and equitable treatment of the Bank’s employees following a Change in Control (as defined below)

B. Covered Employees.

     Subject to Paragraph C below, any employee of the Bank with at least one year of service as of his or her termination date shall be eligible to receive a Change in Control Severance Benefit (as defined below) if, within the period beginning on the effective date of a Change in Control and ending on the first anniversary of such date, (i) the employee’s employment with the Bank is involuntarily terminated or (ii) the employee terminates employment with the Bank voluntarily after being offered continued employment in a position that is not a Comparable Position (as defined below).

C. Limitations on Eligibility for Change in Control Severance Benefits.

     1. No employee shall be eligible for a Change in Control Severance Benefit if (a) his or her employment is terminated for “Cause”, (b) he or she is offered a Comparable Position within the Bank and declines to accept such position or (c) the employee is, at the time of termination of employment, a party to an individual employment agreement with the Bank and/or Yardville National Bancorp (the “Company).

     2. For purposes of this Plan, a termination of employment for “Cause” shall include termination because of the employee’s personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or violation of any final cease-and desist order, or material breach of any provision of the plan.

     3. For purposes of this Plan, a “Comparable Position” shall mean a position that would (i) provide the employee with base compensation and benefits that are comparable in the aggregate to those provided to the employee prior to the Change in Control, (ii) provide the employee with an opportunity for variable bonus compensation that is comparable to the opportunity provided to the employee prior to the Change in Control, (iii) be in a location that would not require the employee to increase his or her daily one way commuting distance by more than twenty-five (25) miles as compared to the employee’s commuting distance immediately prior to the Change in Control and (iv) have job skill requirements and duties that are comparable to the requirements and duties of the position held by the employee prior to the Change in Control.

D. Definition of Change in Control.

     For purposes of this Plan, “Change in Control” means the occurrence of any one of the following events:

(1)   Merger: The Company merges into or consolidates with another corporation, or merges another corporation into the Company, and, as a result, less than a majority of the

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	combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company immediately before the merger or consolidation.
(2)	Acquisition of Significant Share Ownership: a report on Schedule 13D or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of a class of the Company’s voting securities, but this clause (b) shall not apply to beneficial ownership of Company voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns fifty percent (50%) or more of its outstanding voting securities;
(3)	Change in Board Composition: During any period of two consecutive years, individuals who constitute the Company’s Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Company’s Board of Directors; provided, however, that for purposes of this clause (iii), each director who is first elected by the board (or first nominated by the board for election by the stockholders) by a vote of at least two-thirds (?) of the directors who were directors at the beginning of the two-year period shall be deemed to have also been a director at the beginning of such period; or
(4)	Sale of Assets: The Company sells to a third party all or substantially all of its assets.

E. Determination of the Change in Control Severance Benefit.

     The Change in Control Severance Benefit payable to an eligible employee under this Plan shall be determined as follows:

(1)   An eligible employee who becomes entitled to receive a Change in Control Severance Payment under the Plan shall receive a benefit determined under the following schedule:

(a)	The basic benefit under the Plan shall be determined as the product of (i) the employee’s years of service from his or her hire date (including partial years) through the termination date and (ii) one (1) month of the employee’s Base Compensation (as defined below). A “year of service” shall mean each 12-month period of service following an employee’s hire date determined without regard to the number of hours worked during such period(s).
(b)	An eligible employee who was a Vice President of the Bank immediately prior to the Change in Control shall receive a minimum benefit of six (6) months of Base Compensation or, if greater, a benefit determined under clause (a) above.
(c)	Notwithstanding anything in this Plan to the contrary, the minimum payment to an eligible employee under this Plan shall be one (1) month of Base Compensation and the maximum payment to an eligible employee shall not exceed 199% of the employee’s Base Compensation.

(2)   The Change in Control Severance payment shall be made in a lump sum not later than five (5) business days after the date of the employee’s termination of employment.

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(3)   For purpose of determinations under this Paragraph E, “Base Compensation” shall mean:

(a)	for salaried employees, the employee’s annual base salary at the rate in effect on his or her termination date or, if greater, the rate in effect on the date immediately preceding the Change in Control.
(b)	for employees whose compensation is determined in whole or in part on the basis of commission income, the employee’s base salary at termination (or, if greater, the base salary on date immediately preceding the effective date of the Change in Control), if any, plus the commissions earned by the employee in the twelve (12) full calendar months preceding his or her termination date (or, if greater, the commissions earned in the twelve (12) full calendar months immediately preceding the effective date of the Change in Control).
(c)	for hourly employees, the employee’s total hourly wages for the twelve (12) full calendar months preceding his or her termination date or, if greater, the twelve (12) full calendar months preceding the effective date of the Change in Control.

F. Withholding.

     All payments will be subject to customary withholding for federal, state and local tax purposes.

G. Parachute Payment.

     Notwithstanding anything in this Plan to the contrary, if a benefit to a employee who is a “Disqualified Individual” shall be in an amount which includes an “Excess Parachute Payment” taking into account payments under this Plan and otherwise, the benefit under this Plan to that employee shall be reduced to the maximum amount which does not include an Excess Parachute Payment. The terms “Disqualified Individual” and “Excess Parachute Payment” shall have the same meanings as under Section 280G of the Internal Revenue Code of 1986, as amended, or any successor provision thereto.

H. Adoption by Affiliates.

     Upon approval by the Board of Directors of the Bank, this Plan may be adopted by any “Subsidiary” or “Parent” of the Bank. Upon such adoption, the Subsidiary or Parent shall become an Employer hereunder and the provisions of the Plan shall be fully applicable to the Employees of that Subsidiary or Parent. The term “Subsidiary” means any corporation in which the Bank, directly or indirectly, holds a majority of the voting power of its outstanding shares of capital stock. The term “Parent” means any corporation which holds a majority of the voting power of the Bank’s outstanding shares of capital stock.

I. Administration.

     The Plan is administered by the Board of Directors of the Bank, which shall have the discretion to interpret the terms of the Plan and to make all determinations about eligibility and payment of benefits. All decisions of the Board, any action taken by the Board with respect to the Plan and within the powers granted to the Board under the Plan, and any interpretation by the Board of any term or condition of the Plan, are conclusive and binding on all persons, and will be given the maximum possible deference allowed by law. The Board may delegate and reallocate any authority and responsibility with respect to the Plan.

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J. Source of Payments.

     All amounts payable under the Plan will be paid in cash from the general funds of the Bank; no separate fund will be established under the Plan; and the Plan will have no assets.

K. Inalienability.

     In no event may any Employee sell, transfer, anticipate, assign or otherwise dispose of any right or interest under the Plan. At no time will any such right or interest be subject to the claims of creditors, nor liable to attachment, execution or other legal process.

L. Governing Law.

     The provisions of the Plan will be construed, administered and enforced in accordance with the laws of the State of New Jersey, except to the extent that federal law applies.

M. Severability.

     If any provision of the Plan is held invalid or unenforceable, its invalidity or unenforceability will not affect any other provision of the Plan, and the Plan will be construed and enforced as if such provision had not been included.

N. No Employment Rights.

     Neither the establishment nor the terms of this Plan shall be held or construed to confer upon any employee the right to a continuation of employment by the Bank, nor constitute a contract of employment, express or implied. The Bank reserves the right to dismiss or otherwise deal with any employee to the same extent and on the same basis as though this Plan had not been adopted. Nothing in this Plan is intended to alter the at-will status of the Bank’s employees, it being understood that, except to the extent otherwise expressly set forth to the contrary in an individual employment-related agreement, the employment of any employee may be terminated at any time by either the Bank or the employee with or without cause.

O. Amendment and Termination.

     The Plan may be terminated or amended in any respect by resolution adopted by a majority of the Board of Directors of the Bank, unless a Change in Control has previously occurred. If a Change in Control occurs, the Plan no longer shall be subject to amendment, change, substitution, deletion, revocation or termination in any respect whatsoever. The form of any proper amendment or termination of the Plan shall be a written instrument signed by a duly authorized officer or officers of the Bank, certifying that the amendment or termination has been approved by the Board of Directors. A proper amendment of the Plan automatically shall effect a corresponding amendment to each Participant’s rights hereunder. A proper termination of the Plan automatically shall effect a termination of all employees’ rights and benefits hereunder.

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EX-10.30

Exhibit 10.30

CONSULTING AGREEMENT

1. Identification

     This Consulting Agreement (the “Agreement”), dated February 18, 2005, is entered into by and between Yardville National Bancorp, a New Jersey-chartered corporation (“Company”), and Lawrence Seidman, an independent contractor (“Consultant”).

2. Recitals

     2.1. Consultant has experience in the businesses in which the Company and its wholly owned subsidiary, The Yardville National Bank (the “Bank”), are engaged.

     2.2. The Company desires to engage Consultant as an independent contractor to render advice and guidance in connection with the business of the Company.

3. Term

     3.1. Subject to the terms and conditions set forth in Article 7 and elsewhere herein, Consultant’s service under this Agreement shall commence on the date hereof and expire at the close of business on January 31, 2006 (the “Term”).

4. General Terms

     4.1. Nature of Agreement. The parties acknowledge and agree that Consultant will be retained by the Company as an independent contractor, and not as an employee. Consultant’s duties will be limited to those assigned to him by the Company’s management. Consultant shall be subject to all securities laws and regulations applicable to consultants of this nature, which includes, but is not limited to, disclosure and insider trading laws and regulations.

     4.2. Duties and Services. During the Term and on a non-exclusive basis, Consultant agrees to perform such reasonable consulting services in the areas of acquisition and growth opportunities, as requested by management of the Company. Consultant shall not be entitled to attend meetings with the Company’s management or the Board of Directors unless Consultant’s presence is requested by the Company. The Company shall provide Consultant with such information and documentation that it deems, in its sole discretion, applicable to the services requested of the Consultant. The contact individuals at the Company for the Consultant shall be Patrick M. Ryan, President/CEO and, in his absence, Patrick L. Ryan, SVP/Strategic Planning Officer. Except as specifically set forth herein, or as directed by the Company, it is agreed that Consultant shall have no authority to act on behalf of the Company or the Bank.

     4.3. Board Seat. The Company will consider Consultant for a future Board seat in accordance with Company policies regarding nominations and nomination criteria.

5. Compensation

     5.1. Compensation for Services. Subject to Consultant’s adherence to the terms and conditions of this Agreement, Consultant shall be paid a retainer amount equal to $20,000 payable in installments of $5,000 at the end of each quarter of fiscal 2005. Additionally, subject to the terms and conditions of this Agreement, Consultant shall be paid a monthly fee of $1,000 during the twelve (12) months of the Term. The first monthly payment shall be due on the effective date of this Agreement and subsequent payments shall be made on the first day of the next eleven (11) months thereafter (or the first business day next following such date) until a total of twelve (12) payments are made to Consultant.

Notwithstanding any other provision of this Agreement, if the Agreement is terminated prior to the expiration of the Term, Consultant shall only be entitled to compensation to the extent provided in Article 7.

     5.2. No Withholding. Because Consultant is retained as the Company’s independent contractor and not as an employee, the Company and Consultant acknowledge and agree that no federal or state taxes, social security contributions or other deductions shall be made by the Company from the payments made to Consultant pursuant to

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this Article 5, and that Consultant will remain solely liable for the payment of all such taxes. Consultant further acknowledges that the Company will report compensation paid pursuant to this Agreement on a Form 1099 at the end of each year in which Consultant’s services were provided. Consultant expressly covenants to make such tax payments as may be required by applicable law and to indemnify and hold the Company and the Bank harmless from and against any liability the Company or the Bank may incur as a consequence of Consultant’s failure to make such payments.

6. Benefits

     6.1. No Additional Benefits. Consultant shall receive no additional benefits hereunder, and Consultant acknowledges that the Company shall not be responsible for providing Consultant with health insurance, pension benefits or any other benefits.

7. Termination

     7.1. This Agreement shall terminate in the following circumstances:

(a) Upon the death of Consultant;
(b) Upon the termination of Consultant by the Company with Cause; or
(c) By mutual agreement of the parties hereto.

     7.2. For purposes of this Agreement, termination for “Cause” shall mean termination of Consultant’s services by the Company on account of (i) fraud, misappropriation or embezzlement by Consultant in connection with the business of the Company; (ii) violation of any law, rule or regulation (other than traffic offenses or similar offenses) that would reflect adversely on the Company, any felony conviction, any violation of law involving moral turpitude, or any violation of securities law; or (iii) a breach of the provisions of this Agreement.

     7.3. Upon the termination of this Agreement, Consultant shall be entitled only to compensation paid through such date, and to no other payments or benefits.

8. Confidential Information; Non-Use; Restrictions

     8.1. Non-Disclosure of Confidential Information. As used herein, “Confidential Information” means any and all information affecting or relating to the business of the Company or the Bank, including without limitation, financial data, customer lists and data, licensing arrangements, business strategies, pricing information or product development materials. “Confidential Information” does not include information that is in the public domain, information that is generally known in the trade, or information that Consultant can prove he acquired wholly independently of his relationship with the Company. Consultant shall not, at any time during the Term or thereafter, directly or indirectly, disclose or furnish to any other person, firm or corporation any Confidential Information, except as required by a subpoena (in which event Consultant shall give prior written notice to the Company and shall cooperate with the Company and Company’s counsel in complying with such legal requirements). Promptly upon the expiration or termination of Consultant’s engagement hereunder for any reason or whenever the Company so requests, Consultant shall surrender to the Company all documents, drawings, work papers, lists, memoranda, records and other data (including all copies) constituting or pertaining in any way to any of the Confidential Information.

     8.2. Non-Use. Consultant shall not, during the Term or thereafter, solicit or cause to be solicited the disclosure of, or use or disclose, any Confidential Information for any purpose whatsoever.

     8.3. Restrictions. During the Term, Consultant will not support, initiate or participate in any litigation or proxy contest against the Company or the Bank.

9. Obligation Regarding Voting

     9.1. Obligation Regarding Voting. To the extent permitted by law, Consultant must vote or cause to be voted Company stock beneficially owned by Consultant in favor of Company proposals and Company nominees during the Term. The obligations of this Section 9.1 shall terminate upon termination of this Agreement.

10. Publicity

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     10.1 Publicity. Promptly upon the execution and delivery of this Agreement, the Company shall issue a press release disclosing the material terms and provisions of this Agreement, which press release shall be subject to the prior review and comment of the Consultant.

11. Public Statements; Litigation

     11.1. Public Statements; Litigation. Unless required by law or court order, from and after the date hereof, until and through the Term, Consultant shall not, directly or indirectly:

     (a) make any statement (except as to capital or equity raises in excess of $15,000,000.00), public or otherwise, in opposition to, or that would reflect negatively against, the Company or the Bank, the Board of Directors of the Company or the Bank, or any of the officers of the Company or the Bank;

     (b) cause, discuss, cooperate or otherwise aid in the preparation of any press release or other publicity other than filings required by securities laws concerning the Company or the Bank or its operations without prior approval of the Company unless required by law, in which case notice of such requirement shall be given to the Company;

     (c) directly or indirectly participate or act in concert with any affiliate, group or other person to participate, by encouragement or otherwise, in any litigation against the Company or the Bank, or any of their respective officers or directors; or

     (d) provide, or act in concert with any person to provide, any funds or services, to any person in support of any activity by such person that would be a violation of the provisions of this Section 11 if undertaken by the Consultant.

12. Breach; Restriction

     12.1. Breach of Provisions. In the event that Consultant shall breach any of the provisions of this Agreement, or in the event that any such breach is threatened by Consultant, in addition to and without limiting or waiving any other remedies available to the Company at law or in equity, the Company shall be entitled to immediate injunctive relief in any court, domestic or foreign, having the capacity to grant such relief, without the necessity of posting a bond, to restrain any such breach or threatened breach and to enforce the provisions of this Agreement. Consultant acknowledges and agrees that there is no adequate remedy at law for any such breach or threatened breach and, in the event that any action or proceeding is brought seeking injunctive relief, Consultant shall not use as a defense thereto that there is an adequate remedy at law. If such action for injunctive relief is brought by the Company, the prevailing party in such action shall be entitled to reimbursement of its reasonable attorney’s fees and court costs from the other party.

     12.2. Reasonable Restrictions. The parties acknowledge that the foregoing restrictions, as set forth in Articles 8, 9, 10 and 11 are under all of the circumstances reasonable and necessary for the protection of the Company and its businesses.

13. Miscellaneous

     13.1. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, heirs, distributees, successors and assigns; provided that the rights and obligations of the parties hereto shall not be assignable.

     13.2. Notices. Any notice provided for herein shall be in writing and shall be deemed to have been given or made when personally delivered or three (3) days following deposit for mailing by first class registered or certified mail, return receipt requested, or if delivered by facsimile transmission, upon confirmation of receipt of the transmission, to the Consultant, at his address maintained in the records of the Company, or, to the Company, at its executive offices.

     13.3. Severability. If any provision of this Agreement, or portion thereof, shall be held invalid or unenforceable by a court of competent jurisdiction, such invalidity or unenforceability shall attach only to such provision or portion thereof, and shall not in any manner affect or render invalid or unenforceable any other provision of this Agreement or portion thereof, and this Agreement shall be carried out as if any such invalid or unenforceable provision or portion thereof were not contained herein. In addition, any such invalid or unenforceable provision or portion thereof shall be deemed, without further action on the part of the parties hereto, modified, amended or limited to the extent necessary to render the same valid and enforceable.

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     13.4. Enforcement. The parties may seek, from a court of competent jurisdiction, provisional remedies or injunctive relief in support of their respective rights and remedies hereunder.

     13.5. Waiver. No waiver by a party hereto of a breach or default hereunder by the other party shall be considered valid unless in writing signed by such first party, and no such waiver shall be deemed a waiver of any subsequent breach or default of the same or any other nature.

     13.6. Entire Agreement. This Agreement sets forth the entire agreement between the parties with respect to the subject matter hereof, and supersedes any and all prior agreements or understanding between the Company and Consultant, whether written or oral, fully or partially performed relating to any or all matters covered by and contained or otherwise dealt with in this Agreement.

     13.7. Amendment. No modification, change or amendment of this Agreement or any of its provisions shall be valid unless in writing and signed by the party against whom such claimed modification, change or amendment is sought to be enforced.

     13.8. Applicable Law. This Agreement, and all of the rights and obligations of the parties in connection with the employment relationship established hereby, shall be governed by and construed in accordance with the substantive laws of the State of New Jersey without giving effect to principles relating to conflicts of law. If there is a lawsuit, the parties agree to submit to the jurisdiction of the Courts of Mercer County, New Jersey.

     13.9. Counterparts. Thus Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

Attest:		YARDVILLE NATIONAL BANCORP
Daniel J. O’Donnell	By:	Patrick M. Ryan
	Title:	President/CEO

	CONSULTANT
Sonia Seidman	Lawrence Seidman
Witness	Lawrence Seidman

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EX-10.31

Exhibit 10.31

THIS LEASE (“Lease”) made as of the 24^th day of January 2005, by

Lalor Storage LLC,
c/o Mercer Management and Development, Inc.
PO Box 5471
Trenton, New Jersey 08638
          hereinafter called “Landlord”

-and-

YARDVILLE NATIONAL BANK
2465 Kuser Road
Hamilton, New Jersey 08690
          hereinafter called “Tenant”

ARTICLE I
Basic Lease Provisions

     In consideration of the rents, covenants and agreements hereafter reserved and contained on the part of the Tenant to be observed and performed, the Landlord leases to the Tenant, and the Tenant rents from Landlord, 17,800 square feet (“Leased Premises”) in the first floor and basement floor of the building located at 40 Mott Place, Trenton, New Jersey (“Building”).

     All facilities furnished by Landlord and which are part of the Building, but not part of the Leased Premises, including without limitation sidewalks, parking areas and landscaping are under the sole control of Landlord and may be changed or reconfigured by Landlord. Tenant only has a license to use such common areas, which Landlord may revoke at any time without liability to Tenant, provided that Landlord will provide adequate nonexclusive parking during the entire term of this Lease and any renewal term.

     The term of this Lease shall be for 5 years commencing on January 24, 2005. Tenant will take possession on January 24, 2005. The term shall end 5 years after the Commencement Date. The Tenant shall have the option to renew the term of this Lease as hereinafter provided.

ARTICLE II
Rent

     Rent. The monthly rent shall be for the amounts set forth and for the periods set forth in the rent schedule marked as Exhibit “A” attached hereto and made a part hereof. The monthly rent set forth in the rent schedule shall be paid by the Tenant on or before the first day of each month in advance, at the office of the Landlord or at such other place designated by Landlord on Exhibit “A”, without any deduction or set-off whatsoever.

     Utilities & Maintenance.

a.

Utilities. The following utilities shall be available to the Tenant in conjunction with Tenant’s leased area: gas, electricity, water and sewer. Landlord consents and agrees that all such utilities shall be available to the demised premises at the commencement date, and shall provide Tenant with separate meters where possible for Tenant’s leased area. Landlord shall pay all utilities used by Tenant in conjunction with Tenant’s leased area except for gas and electricity, which shall be paid by Tenant.

b.

Maintenance. Tenant shall be responsible for all nonstructural maintenance of the leased area, including the interior of the building. Landlord shall maintain the public areas, roof and exterior walls in good condition; make all structural repairs unless these repairs are made necessary by the act or neglect of the Tenant or Tenant’s employees; make necessary replacements of the plumbing, cooling, heating and electrical systems, except when made necessary by the act or neglect of Tenant or Tenant’s employees; and maintain the elevators in the building, if any.

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ARTICLE III
Construction of Leased Premises

     Tenant’s Work. Tenant may not make any changes, modifications, alterations or improvements to the Leased Premises or to the exterior of the Leased Premises, including installation of signs, awnings, advertising material and/or exterior lighting without first obtaining the approval of the Landlord.

     Changes and Additions to Building. Landlord hereby reserves the right at any time to perform maintenance operations and to make repairs, alterations, or additions to the Building in which the Leased Premises are contained and to any building adjoining or adjacent to the same. Landlord also reserves the right to construct other buildings or improvements, including, but not limited to, structures for motor vehicle parking from time to time and to make alterations thereof or additions thereto and to build additional stories on any such building or buildings and to build adjoining same. Tenant agrees to cooperate with Landlord permitting Landlord to accomplish any such maintenance, repairs, alterations, additions or construction, all of the same with no abatement or reduction of rent provided such repairs, alterations, additions or construction do not interfere with Tenant’s business.

ARTICLE IV
Conduct of Business by Tenant

Tenant shall use the Leased Premises for the purpose of storage and maintenance work. If
the City disallows this use, the Lease is null and void.

ARTICLE V
Insurance

     Liability Insurance. Tenant shall, during the entire term hereof, keep in full force and effect, property damage and comprehensive public liability insurance with respect to the Leased Premises for the combined single coverage of not less than $1,000,000. The policy shall name Tenant as insured and Landlord as additional insured, and shall contain a clause that the insurer will not cancel or change the insurance without first giving the Landlord thirty (30) days prior written notice. The insurance shall be placed with an insurance company rated by Best, as B or better and a copy of the policy or a certificate of insurance shall be delivered to the Landlord prior to commencement of this lease. The policy shall contain a provision stating that the insurer may not deny coverage or payment to Landlord or Tenant, as applicable, due to the negligent acts of the other.

Property Insurance.

a.

Tenant agrees to carry insurance against fire, vandalism, malicious mischief and other such perils as are from time to time included in a standard extended coverage endorsement, insuring Tenant’s merchandise, trade fixtures, furnishings, equipment and all other items of personal property of Tenant located on or within the Leased Premises, in an amount equal to but not less than eighty percent (80%) of the actual replacement cost thereof and to furnish Landlord with a certificate evidencing such coverage. The policy shall have a provision whereby the insurer waives subrogation against Landlord.

b.

Tenant shall not carry any stock of goods or do anything in or about the Leased Premises, which will in any way tend to increase the insurance rates on the Leased Premises and/or the Building of which they are a part. If Tenant installs any electrical equipment that overloads the lines in the Leased Premises, Tenant shall, at its own expense, make whatever changes are necessary to comply with the requirements of the insurance underwriters and governmental authorities having jurisdiction.

ARTICLE VI

Attornment, Subordination

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     Tenant agrees that its rights hereunder are subordinate to the lien of any mortgage, ground lease or any other method of financing or refinancing now or hereafter placed against the land and/or the Leased Premises and to any and all advances made or to be made hereunder and to the interest thereon and to all renewals, replacements, consolidations and extensions thereof. This paragraph shall be self-operative and no further instrument of subordination shall be required. Tenant agrees that Tenant will attorn to any mortgages or ground lessor or purchaser at a foreclosure sale if requested to do so.

ARTICLE VIII

Assignment and Subletting

     Tenant agrees not to assign, mortgage, pledge or encumber this Lease, in whole or in any part or any interest therein, or sublet the whole or any part of the Leased Premises or permit the use of the whole or any part of the Leased Premises by any licensee or concessionaire or any other occupant, without first obtaining the written consent of Landlord, which consent shall not be unreasonably withheld. If Tenant is a corporation, and if ownership of fifty-one (51%) percent or more of its voting stock changes at any time during the term hereof, or Tenant merges with or is acquired by a third party, such events shall be deemed to be an assignment which is permitted under this Agreement.

ARTICLE VIII

Destruction of Leased Premises

If the Building and/or Leased Premises shall be damaged by fire, the elements, unavoidable
accident or other casualty, in such a way which makes the Lease Premises untenable, Landlord shall
have the right, to be exercised by notice to Tenant within six (6) months after said occurrence, to
elect not to repair such damage and to cancel and terminate this Lease effective and retroactive to
the date of the casualty. Should the Leased Premises be rendered wholly or partially untenable by
reason of such occurrence, the fixed gross rent shall be abated in whole or in proportion pursuant
to such untenability until the Leased Premises are again tenable.

ARTICLE IX
Eminent Domain

     If the whole or any part of the Premises shall be taken under the power of eminent domain, this Lease Agreement shall terminate as to the part so taken on the date Tenant is required to yield possession thereof to the condemning authority. If twenty-five (25%) percent or more of the total rentable floor area of the Building or the parking areas located on the common areas is taken as aforesaid, then Landlord or Tenant may terminate this Lease Agreement as of the date of the taking. All compensation awarded for any taking of the leasehold and/or the improvements thereon shall belong to and be the property of Landlord; provided however, that nothing contained herein shall prevent Tenant from applying for reimbursement from the condemning authority (if permitted by law) for relocation expenses, or removal of Tenant’s furniture, business equipment and such fixtures as Tenant is permitted to remove hereunder, if and only if such action shall not reduce the amount of compensation otherwise recoverable by Landlord from the condemning authority.

ARTICLE X

Default of Tenant

Events of Default. Upon the happening of one or more of the events as expressed below in
a. or b., the Landlord shall have any right and all rights and remedies hereinafter set forth and
as are available at law:

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a.	In the event Tenant should fail to pay one or more of said monthly installments of rent, or any other sums required to be paid hereunder, as and when same become due, after a ten (10) day grace period.
b.	In the event Tenant fails to keep, observe or perform any of the other terms, conditions or covenants on the part of the Tenant herein to be kept, observed, and performed for more than thirty (30) days after written notice thereof is given by Landlord to Tenant specifying the nature of such default.

     Remedies of Landlord. Upon Tenant’s default, Landlord shall have, in addition to any other remedies available at law, the following remedies, all of which are cumulative:

a.	Landlord may take possession of the Premises without notice, which will not be deemed an acceptance of surrender of this Lease or a waiver of any rights or remedies of Landlord. Landlord shall be deemed to have used reasonable efforts to sublet the Premises, if Landlord leases the whole or any part of the Premises, separately or with other property, for any period equal to or less than, or extending beyond, the remainder of the term, for any sum, or to any person, or for use Landlord deems reasonable, satisfactory or appropriate.
b.	In the event of such default or material breach, the Landlord shall have the right, at its option, to declare the Lease terminated, and shall have the right, at its option, to request payment in full of all unpaid rent to the date of default. Landlord shall be obligated, however, to attempt to mitigate damages and shall only be entitled to bring suit for unpaid rent of the difference between the amount, which Tenant would have owed under the terms of this Lease Agreement, and the amount which Landlord receives from a new tenant.
c.	Landlord may bring suit against Tenant for specific performance by Tenant of all of Tenant’s obligations and responsibilities hereunder.
d.	The Landlord, in addition to other rights and remedies it may have, shall have the right to remove all or any part of the Tenant’s property from the Leased Premises. Tenant hereby waives any and all loss, destruction and/or damage or injury, which may be occasioned by any of the aforesaid acts.

     Waiver. The Landlord’s failure to act on any breach of any term, condition or covenant herein contained shall not be a waiver of such term, condition or covenant, or any subsequent breach of the same of any term, condition or covenant herein contained. The consent or approval by Landlord to or any act by Tenant requiring Landlord’s consent to approval shall not be deemed to waive or render unnecessary Landlord’s consent to or approval of any subsequent similar act by Tenant. No re-entry hereunder shall bar the recovery of rents or damages for the breach of any of the terms, conditions or covenants on the part of Tenant herein contained. The receipt of rents after breach or condition broken, or delay on the part of the Landlord to enforce any right hereunder, shall not be deemed a waiver of forfeiture, or a waiver of the right of Landlord to annul this Lease or to re-enter said Leased Premises or to re-let same.

     Legal Expenses. Should suit be brought by Landlord for the recovery of possession of the Leased Premises, or for rent or any other sum due Landlord under this Lease, or for the collection of unpaid rent due Landlord under this Lease, Tenant shall pay the Landlord all expenses of such suit and any appeal thereof, including a reasonable attorney’s fee.

ARTICLE XI
Access by Landlord

     Landlord and Landlord’s agent shall have the right to enter the Leased Premises during normal business hours (except for emergency situations when entry shall be permitted during non-business hours as well) to examine the same and to show them to prospective purchasers or lessees of the Building and to make such repairs, or

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alterations, improvements or additions as Landlord may deem necessary or desirable. Nothing herein contained, however, shall be deemed or construed to impose upon Landlord any obligation, responsibility or liability whatsoever, for the care, maintenance or repair of the Building or any part thereof except as otherwise herein specifically provided.

ARTICLE XII
Options to Extend Term

     Provided no event of default has occurred and not been cured within any applicable notice and/or cure period, Tenant shall have two options to extend the term of this lease for additional periods of five years, with rents increasing in accordance with the schedule set forth on Exhibit A. Landlord shall receive notice of exercise of the option at least three (3) months prior to the expiration of the then current term of this Lease. These options are an integral portion of this Lease and may not be assigned without assignment of lease. If the Tenant chooses not to exercise the first option to extend the term, the lease will terminate on January 24, 2010.

ARTICLE XIII
Holding Over Successors

     All rights and liabilities herein given to or imposed upon the respective parties hereto shall extend to and bind any heirs, executors, administrators, successors, and assigns of the said parties: and if there shall be more than one Tenant, they shall be bound jointly and severally by the terms, covenants and agreement herein. No rights, however, shall inure to the benefits of any assignee of Tenant, unless Landlord has approved the assignment to such assignee in writing as provided in this Lease. Nothing contained in this Lease shall in any manner restrict Landlord’s right to assign or encumber this Lease, and in the event Landlord sells or transfers its interest in the Building and the purchaser or transferee assumes the Landlord’s obligation and covenants, Landlord shall thereupon be relieved of all further obligations hereunder.

ARTICLE XIV
Quiet Enjoyment

     Upon payment by the Tenant of the rents herein provided, and upon the observance and performance of all the covenants, terms and conditions on Tenant’s part to be observed and performed, Tenant shall peaceably and quietly hold and enjoy the Leased Premises for the term hereby demised without hindrance or interruption by Landlord or any other person or persons lawfully or equitably claiming by, through or under the Landlord, subject nevertheless to the terms and conditions of this Lease.

ARTICLE XV
Miscellaneous

     Accord and Satisfaction. No payment by Tenant or receipt by Landlord of a lesser amount than the monthly rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement on any check or any letter accompanying the check or payment as rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such rent or pursue any other remedy in the Lease provided.

     Entire Agreement. This Lease and the exhibits and rider, if any, attached hereto and forming a part hereof, set forth all covenants, promises, agreements, conditions, and understandings between Landlord and Tenant concerning the Leased Premises and there are no covenants, promises, conditions or understandings, either oral or written, between them other than are herein set forth. Except as herein otherwise provided, no subsequent alteration, change or addition to this Lease shall be binding upon Landlord or Tenant unless reduced to writing and signed by them.

     Notices.

a.   All notices shall be in writing.

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b.   Any notice by Tenant to Landlord must be served by certified mail, postage prepaid, addressed to Landlord at the following address:

Lalor Storage, LLC
c/o Mercer Management
PO Box 5471
Trenton, New Jersey 08638

     Any notice by Landlord to Tenant must be served by certified mail, postage prepaid, addressed to Tenant at the following address:

Yardville National Bank
2465 Kuser Road
Hamilton, New Jersey 08690
Attn: Frank Durand

     Captions and Section Numbers. The captions, section numbers, article numbers and index appearing in this Lease are inserted only as a matter of convenience and in no way define, limit, construe or describe the scope or intent of such sections or articles of this Lease nor in any way affect this Lease.

     Recording. Tenant shall not record this Lease or any memorandum thereof without the written consent of Landlord.

     Estoppel Statement. Tenant shall, within ten (10) days after written request from Landlord, execute, acknowledge and deliver to Landlord a statement in writing as may be requested by Landlord certifying (i) that this Lease is unmodified and in full force and effect (or, modified, stating the nature of such modification and certifying that this Lease, as so modified is in full force and effect); (ii) confirming the commencement and expiration dates of the term of the Lease; (iii) the dates to which the rental and other charges are paid in advance, if any; and (iv) that there are not, to Tenant’s knowledge, any uncured defaults on the part of Landlord hereunder, or specifying such defaults if any are claimed. In addition, such statement shall provide whatever other information and facts Landlord may reasonably require. Any prospective purchaser, ground lessor or encumbrancer of all or any portion of the Building as well as may rely upon any such statement by any of their assignees.

     Corporate Authority. If Tenant or Landlord is a corporation, each individual executing this Lease on behalf of said corporation represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of said corporation, in accordance with a duly adopted resolution of the Board of Directors of said corporation, and that this Lease is binding upon said corporation in accordance with its terms.

     Attachments. Exhibit “A” which is attached to the Lease is a part of this Lease and is incorporated as if fully set forth herein.

     IN WITNESS WHEREOF, Landlord and Tenant have signed and sealed this Lease as of the day and year first above written.

ATTEST:	LANDLORD:
	Lalor Storage, L.L.C.
Mark Corcoran	By:		Christopher S. Vernon
Mark Corcoran		Christopher S. Vernon. Managing Member
WITNESS/ATTEST	TENANT:

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	YARDVILLE NATIONAL BANK
Daniel J. O’Donnell	By:	Patrick M. Ryan
Daniel J. O’Donnell, Secretary		Patrick M. Ryan, President/CEO

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EXHIBIT “A” – BASE RENT

     The monthly rent set forth below shall be paid by the Tenant on or before the first day of each month, at the following address:

Mercer Management and Development Co.
PO Box 5471
Trenton, New Jersey 08638

BASE RENTAL:

Years	$/S.F.		Monthly Rent		Annual Rent
1-5	$	3.36/S.F.	$	4,984.00	$	59,808.00
6-10	$	3.696/S.F.	$	5,482.40	$	65,788.80
11-15	$	4.0656/S.F.	$	6,030.64	$	72,367.68

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EX-21

Exhibit 21

Yardville National Bancorp Subsidiaries

1.	The Yardville National Bank, a national banking association organized under the laws of the United States (the “Bank”)
2.	Yardville Capital Trust, a Delaware business trust
3.	Yardville Capital Trust II, a Delaware business trust
4.	Yardville Capital Trust III, a Delaware business trust
5.	Yardville Capital Trust IV, a Delaware business trust
6.	Yardville Capital Trust V, a Delaware business trust
7.	Yardville Capital Trust VI, a Delaware business trust
8.	Yardville National Investment Corporation, a New Jersey corporation (wholly-owned subsidiary of the Bank)
9.	YNB Real Estate Holding Co., Inc., a New Jersey corporation (wholly-owned subsidiary of the Bank)
10.	Brendan, Inc., a New Jersey corporation (wholly-owned subsidiary of the Bank)
11.	YNB Financial Services, Inc., a New Jersey corporation (wholly-owned subsidiary of the Bank)
12.	Nancy Beth, Inc., a New Jersey corporation (wholly-owned subsidiary of the Bank)
13.	YNB Realty, Inc., a New Jersey corporation (wholly-owned subsidiary of the Bank)
14.	Jim Mary, Inc., a New Jersey corporation (wholly-owned subsidiary of the Bank)
15.	YNB Capital Development, Inc., a New Jersey corporation (wholly-owned subsidiary of the Bank)

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EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

The Board of Directors
Yardville National Bancorp:

We consent to the incorporation by reference in registration statements (No. 333-98076, No. 333-28193, No. 333-71741, No. 333-102932 and No. 333-115891) on Form S-8 and registration statements (No. 333-109706 and No. 333-104478) on Form S-3 of Yardville National Bancorp of our report dated March 31, 2005 with respect to the consolidated statements of condition of Yardville National Bancorp and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2004, which report is incorporated by reference in the Annual Report on Form 10-K of Yardville National Bancorp for the year ended December 31, 2004.

KPMG LLP

Short Hills, New Jersey
March 31, 2005

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EX-31.1

Exhibit 31.1

CERTIFICATION

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

1.		I have reviewed this annual report on Form 10-K 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)) 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.	(Intentionally omitted)
	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 (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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: March 31, 2005	By:	Patrick M. Ryan
	Name:	Patrick M. Ryan
	Title:	President and Chief Executive Officer

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EX-31.2

Exhibit 31.2

CERTIFICATION

		I, Stephen F. Carman, Vice President and Treasurer, certify that:
1.		I have reviewed this annual report on Form 10-K 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)) 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.	(Intentionally omitted)
	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 (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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: March 31, 2005	By:	Stephen F. Carman
	Name:	Stephen F. Carman
	Title:	Vice President and Treasurer

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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 Annual Report of Yardville National Bancorp (the “Company”) on Form 10-K for the fiscal year ended December 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.

	By:	Patrick M. Ryan
		Patrick M. Ryan
		President and Chief Executive Officer
March 31, 2005

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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 September 30, 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.

	By:	Stephen F. Carman
		Stephen F. Carman
		Vice President and Treasurer
March 31, 2005

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