10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2005

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from

Commission File Number: 0-26086

YARDVILLE NATIONAL BANCORP

(Exact name of registrant as specified in its charter)

New Jersey (State or other jurisdiction of	22-2670267 (IRS Employer Identification No.)
incorporation or organization)

2465 Kuser Road, Hamilton, New Jersey 08690

(Address of principal executive offices)

(609) 585-5100

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed from last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of August 8, 2005, the following class and number of shares were outstanding:

Common Stock, no par value	10,604,683
Class	Number of shares outstanding

INDEX
YARDVILLE NATIONAL BANCORP AND SUBSIDIARIES

	PAGE NO.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Statements of Condition June 30, 2005 (unaudited) and December 31, 2004		1
Consolidated Statements of Income Three months ended June 30, 2005 and 2004 (unaudited)		2
Consolidated Statements of Income Six months ended June 30, 2005 and 2004 (unaudited)		3
Consolidated Statements of Cash Flows Six months ended June 30, 2005 and 2004 (unaudited)		4
Notes to Consolidated Financial Statements		5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
Item 3. Quantitative and Qualitative Disclosures About Market Risk		36
Item 4. Controls and Procedures		39
PART II OTHER INFORMATION
Item 1. Legal Proceedings		40
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		40
Item 3. Defaults Upon Senior Securities		40
Item 4. Submission of Matters to a Vote of Security Holders		40
Item 5. Other Information		41
Item 6. Exhibits		41
Signatures		42
Index to Exhibits		E-1
EMPLOYMENT AGREEMENT BETWEEN THE BANK AND JOANNE C. O'DONNELL
REAL PROPERTY LEASE BETWEEN THE BANK AND WWM PROPERTIES, LLC
REAL PROPERTY LEASE BETWEEN THE BANK AND MYNB, LLC
RULE 13A-14(A)/15D-14(A) CERTIFICATION OF CHIEF EXECUTIVE OFFICER
RULE 13A-14(A)/15D-14(A) CERTIFICATION OF VICE PRESIDENT & TREASURER
SECTION 1350 CERTIFICATION OF CHIEF EXECUTIVE OFFICER
SECTION 1350 CERTIFICATION OF VICE PRESIDENT AND TREASURER

EXPLANATORY NOTE

KPMG LLP, our independent registered public accounting firm, has advised us that, due to continuing discussions of the accounting treatment of certain employee benefit plans, it is currently unable to complete its review under Statement on Auditing Standards No. 100 (“SAS 100”) of the unaudited consolidated financial statements included in this Form 10-Q. When such review is completed, we will amend this Form 10-Q.

Part I: FINANCIAL INFORMATION

Item 1. Financial Statements

Yardville National Bancorp and Subsidiaries

Consolidated Statements of Condition
(Unaudited)

	June 30,			December 31,
(in thousands)	2005			2004
Assets:
Cash and due from banks	$	33,334		$	32,115
Federal funds sold		75,670			6,769
Cash and Cash Equivalents		109,004			38,884
Interest bearing deposits with banks		23,204			41,297
Securities available for sale		751,536			802,525
Investment securities (market value of $86,095 in 2005 and $79,954 in 2004)		83,588			78,257
Loans		1,895,917			1,782,592
Less: Allowance for loan losses		(21,720	)		(20,116	)
Loans, net		1,874,197			1,762,476
Bank premises and equipment, net		10,318			10,431
Bank owned life insurance		45,306			44,501
Other assets		33,260			27,546
Total Assets	$	2,930,413		$	2,805,917
Liabilities and Stockholders’ Equity:
Deposits
Non-interest bearing	$	218,042		$	202,196
Interest bearing		1,694,921			1,607,808
Total Deposits		1,912,963			1,810,004
Borrowed funds
Securities sold under agreements to repurchase		10,000			10,000
Federal Home Loan Bank advances		750,000			742,000
Subordinated debentures		62,892			62,892
Obligation for Employee Stock Ownership Plan (ESOP)		189			377
Other		1,311			753
Total Borrowed Funds		824,392			816,022
Other liabilities		22,390			19,733
Total Liabilities	$	2,759,745		$	2,645,759
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 10,752,518 shares in 2005 and 10,691,213 shares in 2004		93,078			91,658
Surplus		2,205			2,205
Undivided profits		78,686			69,860
Treasury stock, at cost: 180,594 shares		(3,160	)		(3,160	)
Unallocated ESOP shares		(189	)		(377	)
Accumulated other comprehensive income (loss)		48			(28	)
Total Stockholders’ Equity		170,668			160,158
Total Liabilities and Stockholders’ Equity	$	2,930,413		$	2,805,917

See Accompanying Notes to Unaudited Consolidated Financial Statements.

1

Yardville National Bancorp and Subsidiaries

Consolidated Statements of Income
(Unaudited)

	Three Months Ended
	June 30,
(in thousands, except per share amounts)	2005		2004
INTEREST INCOME:
Interest and fees on loans	$	31,117	$	24,149
Interest on deposits with banks		194		59
Interest on securities available for sale		9,154		8,631
Interest on investment securities:
Taxable		30		32
Exempt from Federal income tax		919		786
Interest on Federal funds sold		155		44
Total Interest Income		41,569		33,701
INTEREST EXPENSE:
Interest on savings account deposits		4,995		2,984
Interest on certificates of deposit of $100,000 or more		1,400		983
Interest on other time deposits		3,692		3,047
Interest on borrowed funds		9,600		8,879
Interest on subordinated debentures		1,156		840
Total Interest Expense		20,843		16,733
Net Interest Income		20,726		16,968
Less provision for loan losses		2,100		1,975
Net Interest Income After Provision for Loan Losses		18,626		14,993
NON-INTEREST INCOME:
Service charges on deposit accounts		687		787
Securities gains, net		283		—
Income on bank owned life insurance		361		491
Other non-interest income		596		438
Total Non-Interest Income		1,927		1,716
NON-INTEREST EXPENSE:
Salaries and employee benefits		7,034		5,643
Occupancy expense, net		1,186		1,077
Equipment expense		757		816
Other non-interest expense		3,263		3,047
Total Non-Interest Expense		12,240		10,583
Income before income tax expense		8,313		6,126
Income tax expense		2,677		1,664
Net Income	$	5,636	$	4,462
EARNINGS PER SHARE:
Basic	$	0.53	$	0.43
Diluted	$	0.51	$	0.41
Weighted average shares outstanding:
Basic		10,552		10,444
Diluted		11,006		10,803

See Accompanying Notes to Unaudited Consolidated Financial Statements.

2

Yardville National Bancorp and Subsidiaries

Consolidated Statements of Income
(Unaudited)

	Six Months Ended
	June 30,
(in thousands, except per share amounts)	2005		2004
INTEREST INCOME:
Interest and fees on loans	$	59,919	$	47,248
Interest on deposits with banks		351		110
Interest on securities available for sale		18,170		16,796
Interest on investment securities:
Taxable		56		75
Exempt from Federal income tax		1,804		1,564
Interest on Federal funds sold		302		126
Total Interest Income		80,602		65,919
INTEREST EXPENSE:
Interest on savings account deposits		9,450		5,552
Interest on certificates of deposit of $100,000 or more		2,593		1,957
Interest on other time deposits		6,886		6,293
Interest on borrowed funds		18,820		17,753
Interest on subordinated debentures		2,263		1,650
Total Interest Expense		40,012		33,205
Net Interest Income		40,590		32,714
Less provision for loan losses		3,600		4,425
Net Interest Income After Provision for Loan Losses		36,990		28,289
NON-INTEREST INCOME:
Service charges on deposit accounts		1,348		1,650
Securities gains, net		476		586
Income on bank owned life insurance		804		977
Other non-interest income		1,016		877
Total Non-Interest Income		3,644		4,090
NON-INTEREST EXPENSE:
Salaries and employee benefits		13,863		11,475
Occupancy expense, net		2,375		2,167
Equipment expense		1,533		1,610
Other non-interest expense		6,327		5,618
Total Non-Interest Expense		24,098		20,870
Income before income tax expense		16,536		11,509
Income tax expense		5,287		3,169
Net Income	$	11,249	$	8,340
EARNINGS PER SHARE:
Basic	$	1.07	$	0.80
Diluted	$	1.02	$	0.77
Weighted average shares outstanding:
Basic		10,535		10,435
Diluted		10,991		10,799

See Accompanying Notes to Unaudited Consolidated Financial Statements.

3

Yardville National Bancorp and Subsidiaries

Consolidated Statements of Cash Flows
(Unaudited)

	Six Months Ended June 30,
(in thousands)	2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	11,249		$	8,340
Adjustments:
Provision for loan losses		3,600			4,425
Depreciation		1,180			1,212
ESOP fair value adjustment		140			54
Amortization of deposit intangible		102			102
Amortization and accretion on securities		104			1,145
Gain on sales of securities available for sale		(476	)		(586	)
Gain on sale of bank branch		—			5
Increase in other assets		(6,661	)		(3,462	)
Increase in other liabilities		2,657			4,928
Net Cash Provided by Operating Activities		11,895			16,163
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in interest bearing deposits with banks		18,093			5,754
Purchase of securities available for sale		(91,276	)		(280,106	)
Maturities, calls and paydowns of securities available for sale		72,342			136,166
Proceeds from sales of securities available for sale		70,411			109,341
Purchase of investment securities		(6,040	)		(6,585	)
Proceeds from maturities and paydowns of investment securities		710			5,411
Net increase in loans		(115,321	)		(188,397	)
Expenditures for bank premises and equipment		(1,067	)		(450	)
Proceeds from sale of bank branch		—			641
Net Cash Used in Investing Activities		(52,148	)		(218,225	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand, money market, and savings deposits		39,547			207,691
Net increase in certificates of deposit		63,412			1,888
Net increase (decrease) in borrowed funds		8,370			(1,145	)
Proceeds from issuance of subordinated debentures		—			15,464
Proceeds from issuance of common stock		1,280			698
Decrease in unallocated ESOP Shares		188			189
Cash dividends paid to stockholders		(2,424	)		(2,404	)
Net Cash Provided by Financing Activities		110,373			222,381
Net increase in cash and cash equivalents		70,120			20,319
Cash and cash equivalents as of beginning of year		38,884			33,155
Cash and Cash Equivalents as of End of Year	$	109,004		$	53,474
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest	$	19,689		$	33,696
Income taxes		9,201			385
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Transfers from loans to other real estate, net of charge offs	$	200		$	—

See Accompanying Notes to Unaudited Consolidated Financial Statements.

4

Yardville National Bancorp and Subsidiaries

Notes to (Unaudited) Consolidated Financial Statements
Three and Six Months Ended June 30, 2005

1. Summary of Significant Accounting Policies

Basis of Financial Statement Presentation

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

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

The consolidated financial data as of and for the three and six months ended June 30, 2005 include in the opinion of management, all adjustments, consisting of only normal recurring accruals, necessary for a fair presentation of such periods. The consolidated financial data for the interim periods presented is not necessarily indicative of the results of operations that might be expected for the entire year ending December 31, 2005.

Consolidation

The consolidated financial statements include the accounts of Yardville National Bancorp and its subsidiary, The Yardville National Bank and the Bank’s wholly owned subsidiaries (collectively the “Corporation”). All significant inter-company accounts and transactions have been eliminated in consolidation. Under Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”) the following formerly consolidated 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.

Critical Accounting Policies and Estimates

Note 1 to our Audited Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2004, contains a summary of our significant accounting policies. We believe our policies with respect to the methodology for our determination of the allowance for loan losses, income tax liabilities and asset impairment judgments, including other than temporary declines in the value of our securities, are critical accounting policies. These policies are deemed 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. Our critical accounting policies and their application are periodically reviewed with our Audit Committee and our Board of Directors.

5

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 U.S. generally accepted accounting principles under which we are required to maintain an adequate allowance 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 specifically identifiable loan losses, as well as estimated losses inherent in our portfolio for which certain losses are probable but not specifically identifiable.

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. For additional information on the methodology for determining the allowance for loan losses see “Allowance for Loan Losses” discussed later in this report.

We account for income taxes by recognizing the amount of taxes payable for the current year and deferred tax liabilities and assets for 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.

Certain of our assets are carried in our consolidated statements of financial condition at fair value or at the lower of cost or fair value. Valuation allowances are established when necessary to recognize impairment of such assets. We periodically perform analyses to test for impairment of various assets. In addition to our impairment analyses related to loans, another significant analysis relates to other than temporary declines in the value of our securities.

Our available for sale portfolio is carried at estimated fair value, with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income or loss in stockholders’ equity. The securities that we have the positive intent and ability to hold to maturity are classified as investment securities and are carried at amortized cost. We conduct a periodic review and evaluation of the securities portfolio to determine if the value of any security has declined below its carrying value and whether such decline is other than temporary. If such decline is deemed other than temporary, we would adjust the carrying value and amount of the security by writing down the security to fair market value through a charge to current period operations. The fair value of our securities are significantly affected by changes in interest rates. In general, as interest rates rise, the fair value of fixed-rate securities will decrease, while, as interest rates fall, the fair value of fixed-rate securities will increase. We evaluate our intent and ability to hold each security to maturity or for a sufficient time to recover the recorded principal balance to determine if the security is impaired. Estimated fair values for securities are based on published or securities dealers’ market values.

6

2. Earnings Per Share

Weighted average shares for the basic net income per share computation for the three months ended June 30, 2005 and 2004 were 10,552,000 and 10,444,000, respectively. For the diluted net income per share computation, common stock equivalents of 454,000 and 359,000 are included for the three months ended June 30, 2005 and 2004, respectively. Common stock equivalents that were antidilutive for the three months ended June 30, 2005 and 2004 were 36,000 and 2,500, respectively.

Weighted average shares for the basic net income per share computation for the six months ended June 30, 2005 and 2004 were 10,535,000 and 10,435,000, respectively. For the diluted net income per share computation, common stock equivalents of 456,000 and 364,000 are included for the six months ended June 30, 2005 and 2004, respectively. Common stock equivalents that were antidilutive for the six months ended June 30, 2005 and 2004 were 42,000 and 2,500, respectively.

3. Stock-Based Compensation

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

	For the three months ended June 30,
(in thousands, except per share amounts)	2005		2004
Net income as reported:	$	5,636	$	4,462
Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards, net of related tax effects		275		134
Pro forma net income	$	5,361	$	4,328
Earnings per share:
Basic:
As reported	$	0.53	$	0.43
Pro forma		0.51		0.41
Diluted:
As reported	$	0.51	$	0.41
Pro forma		0.49		0.40

7

	For the six months ended June 30,
(in thousands, except per share amounts)	2005		2004
Net income as reported:	$	11,249	$	8,340
Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards, net of related tax effects		365		268
Pro forma net income	$	10,884	$	8,072
Earnings per share:
Basic:
As reported	$	1.07	$	0.80
Pro forma		1.03		0.77
Diluted:
As reported	$	1.02	$	0.77
Pro forma		0.99		0.75

The fair value of options granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in the three and six months ended June 30, 2005 and 2004:

	Three months						Six months
	Ended June 30,						Ended June 30,
	2005			2004			2005			2004
Number of options granted		36,000			30,000			52,000			32,500
Expected annual dividend rate	$	0.46		$	0.46		$	0.46		$	0.46
Risk free rate		3.8	%		3.8	%		4.0	%		3.3	%
Expected average option life (yrs)		5.0			4.0			7.0			4.3
Expected volatility		27.9	%		29.0	%		31.3			22.5	%
Fair value of options granted	$	7.92		$	6.76		$	9.02		$	6.71

4. Comprehensive Income (Loss)

Below is a summary of comprehensive income (loss) for the three and six months ended June 30, 2005 and 2004.

	For the three months ended June 30,
(in thousands)	2005		2004
Net income	$	5,636	$	4,462
Other comprehensive income (loss)
Net change in unrealized gain (loss) for the period, net of tax		7,438		(14,952	)
Less reclassification of realized net gain on sale of securities available for sale, net of tax		184		—
Holding gain (loss) arising during the period, net of tax and reclassification		7,254		(14,952	)
Total comprehensive income (loss)	$	12,890	$	(10,490	)

8

	For the six months ended June 30,
(in thousands)	2005		2004
Net income	$	11,249	$	8,340
Other comprehensive income (loss)
Net change in unrealized gain (loss) for the period, net of tax		385		(9,105	)
Less reclassification of realized net gain on sale of securities available for sale, net of tax		309		387
Holding gain (loss) arising during the period, net of tax and reclassification		76		(9,492	)
Total comprehensive income (loss)	$	11,325	$	(1,152	)

5. Relationships and Transactions with Directors and Officers

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

The following table summarizes activity with respect to such loans:

	For the six		For the six
	months ended		months ended
(in thousands)	June 30, 2005		June 30, 2004
Balance as of beginning of period	$	56,863	$	72,888
Additions		5,332		6,740
Reductions		3,497		7,516
Balance as of end of the period	$	58,698	$	72,112

None of these loans were past due or on nonaccrual status as of June 30, 2005 and June 30, 2004.

In addition, the Corporation has had, and expects in the future to have, other transactions in the ordinary course of business with a number of its directors, senior officers and other affiliates (and their associates) on substantially the same terms as those prevailing for comparable transactions with others. No new material relationships or transactions were commenced, and no material changes were made to existing relationships or transactions, during the quarter ended June 30, 2005, other than the two discussed below.

On April 13, 2005 the Bank entered into a lease dated April 6, 2005, with WWM Properties LLC, as landlord, for the lease of certain premises located at Route 571 and Southfield Road, West Windsor, New Jersey. Sidney L. Hofing, a director of the Corporation and the Bank, has an ownership interest in WWM Properties, LLC. The lease provides that the landlord will construct a new bank branch facility at the premises. The Bank’s obligations under the lease are subject to the Office of the Comptroller of the Currency’s approval of a new bank branch at the premises. The lease is for an initial term of fifteen years and includes options for two five-year renewal terms. Over the initial term of the lease, the Bank is obligated to pay an average of approximately $13,850 per month in fixed rent, plus taxes, insurance premiums and common area costs allocated to the premises, as well as utilities and maintenance expenses.

On April 25, 2005 the Bank entered into a lease and lease addendum dated April 1, 2005, with MYNB LLC, as landlord, for the lease of certain premises located at 301 West Trenton Avenue, Falls Township, Pennsylvania, Sidney L. Hofing, a director of the Corporation and the Bank, has an ownership interest in MYNB LLC. The lease and lease addendum provide that the landlord will construct a new bank branch facility at the premises. The landlord will supervise the construction and pay certain construction expenses, including land acquisition, permits, and certain professional fees. The Bank will pay the other construction expenses, including architectural fees and for interior and exterior work. The Bank’s obligations under the lease are subject to the Office of the Comptroller of the Currency’s approval of a new bank branch at the premises. The lease is for an initial term of fifteen years, to commence from the issuance of a temporary or permanent certificate of occupancy, and includes options for two five-year renewal terms. Over the first ten years of the lease, the Bank is obligated to pay an average of approximately $9,892 per month in fixed rent, plus taxes, insurance premiums allocated to the premises as well as utilities, maintenance expenses and other expenses. The rent for the remainder of the initial term, as well as any renewal terms, will be determined based on increases in the Consumer Price Index.

6. Derivative Financial Instruments

As part of our interest rate risk management process, we periodically enter into interest rate derivative contracts. These derivative interest rate contracts may include interest rate swaps, caps and floors and are utilized to modify the repricing characteristics of specific assets and liabilities. During the periods presented we only utilized interest rate swaps.

9

The following table details the interest rate swaps and associated hedged liabilities outstanding as of June 30, 2005 and December 31, 2004:

As of: June 30, 2005
(dollars in thousands)	Hedged	Notional		Swap Fixed			Swap Variable
Maturity	Liability	Amounts		Interest Rates			Interest Rates
Pay Floating Swaps 2006	Time deposits	$	125,000		2.73% - 3.10	%		3.23% - 3.36	%

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		2.73% - 3.10	%		2.26% - 2.41	%

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 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 these certificates of deposit and floating rate commercial loans made by the Corporation in 2004. These swap transactions reduced interest expense by approximately $108,000 in the first six months of 2005 and approximately $33,000 for the same period in 2004. For the three months ended June 30, 2005 these swap transactions increased interest expense by $29,000 and decreased interest expense by $33,000 for the three months ended June 30, 2004. The amount of hedge ineffectiveness, recorded in non-interest expense in the Consolidated Statements of Income, on these transactions for the six months ended June 30, 2005 was less than $1,000. The fair value of the pay floating swaps outstanding at June 30, 2005 was $1.2 million compared to $532,000 outstanding at December 31, 2004 and was recorded in Other Liabilities in the Consolidated Statements of Condition.

7. Recent Accounting Pronouncements

In May 2005, the Financial Accounting Standards Board (FASB) issued SFAS No. 154, “Accounting Changes and Error Corrections – A Replacement of APB Opinion No. 20 and FASB Statement No. 3: (“SFAS 154”). SFAS 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle. It also requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment be made to the opening balance of retained earnings for that period rather than being reported in an income statement. The statement will be effective for accounting changes and corrections of errors made in fiscal years beginning after December 31, 2004. The Corporation does not expect the adoption of SFAS 154 to have a material impact on its financial condition or results of operation.

10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This financial review presents management’s discussion and analysis of the financial condition and results of operations of Yardville National Bancorp. It should be read in conjunction with the 2004 Annual Report to Stockholders and Form 10-K for the fiscal year ended December 31, 2004, as well as the unaudited consolidated financial statements and the accompanying notes in this Form 10-Q. Throughout this report the terms “YNB,” “company,” “we,” “us,” “our,” and “corporation” refer to Yardville National Bancorp, our wholly owned banking subsidiary, The Yardville National Bank (the “Bank”), and other subsidiaries, as a consolidated entity except where noted. The purpose of this discussion and analysis is to assist in the understanding and evaluation of the financial condition, changes in financial condition and results of our operations. Certain reclassifications have been made to prior period financial statements and related information to conform them to the current presentation.

This Form 10-Q contains express and implied statements relating to our future financial condition, results of operations, plans, objectives, performance, and business, which are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These may include statements that relate to, among other things, 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 this report and our other filings with the Securities and Exchange Commission. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

Results of Operations

2005 Overview

Yardville National Bancorp is a $2.93 billion financial holding company headquartered in Hamilton, New Jersey. In celebrating the 80^th anniversary of our founding as a community bank, 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 our customers and to build long-term, sustainable shareholder value by expanding and extending the YNB franchise. We operate 24 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 in Bucks County, Pennsylvania. Our existing and target markets are located in the demographically attractive corridor between New York City and Philadelphia.

11

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. Commercial loan opportunities in our markets have put pressure on our branch network to provide desired 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 ongoing investment of resources in people, facilities, marketing and technology. While we continue to see many positive results, we have not yet fully realized all of the benefits of this ongoing strategic initiative.

In 2005 we plan to open several branches. During the first quarter we aggressively promoted the December 2004 branch opening at our Mountain View branch in Ewing, Mercer County as well as the relocation of our Stelton Road branch in Middlesex County to its permanent expanded and modernized facility. In the second quarter we opened our Pennington Point branch in Hopewell, Mercer County. We are actively developing several branch sites and anticipate additional branch openings in 2005 and 2006 pending required approvals. We expect to open three additional branches in the second half of 2005. Two of these branches are in our core Mercer County market with one in Ewing Township and one in Lawrence Township. Our third branch to be opened in the second half of 2005 is in Morrisville, Bucks County, Pennsylvania located directly across the Delaware River from our core market. The Morrisville office will represent our second Pennsylvania branch. We are also evaluating additional sites in Middlesex County and an extension of our branch network to Ocean and Monmouth Counties in New Jersey. Our plans are to open several branches a year for the next three years. We believe that by expanding into new markets and filling voids in our existing markets we will be able to attract lower cost deposits to fund our growth, further enhance our profitability and the value of the YNB franchise in 2005 and beyond.

Net Income

We earned net income of $11.2 million for the six months ended June 30, 2005, an increase of $2.9 million or 34.9% compared to $8.3 million for the same period in 2004. The increase in net income for the first six months of 2005 compared to the same period in 2004 was primarily attributable to an increase in net interest income and a lower provision for loan losses, partially offset by an increase in non-interest expenses and higher income tax expense. Diluted earnings per share for the six months ended June 30, 2005 increased 32.5% to $1.02 compared to $0.77 for the same period in 2004. The increase in both basic and diluted earnings per share resulted primarily from the aforementioned increase in net income in the first six months of 2005 compared to the same period in 2004.

On a quarterly basis, net income for the second quarter of 2005 was $5.6 million, an increase of approximately $1.2 million or 26.3% compared to $4.5 million for the same period one year ago. The primary reason for the increase in net income was higher net interest income, partially offset by increased non-interest expense and higher income tax expense. Diluted earnings per share increased $0.10 or 24.4% to $0.51 for the second quarter of 2005 compared to $0.41 for the second quarter of 2004. The increase in earnings per share was primarily due to higher net income in the second quarter of 2005 compared to the same period in 2004.

12

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.

Our net interest income for the first six months of 2005 was $40.6 million, an increase of $7.9 million or 24.1% from the same period in 2004. On a quarterly basis, net interest income was $20.7 million, an increase of $3.7 million compared to net interest income of $17.0 million for the second quarter of 2004. The most significant factor relating to the improvement for both periods was an increase in interest and fees on loans, partially offset by higher interest expense.

We present our net interest margin on a tax equivalent basis. We believe that this presentation provides comparability of net interest income from both taxable and non-taxable sources and is consistent with industry practice. For the first six months of 2005, our tax equivalent net interest margin was 3.04%, a 32 basis point or 11.8% increase compared to 2.72% for the same period in 2004. The improvement in the net interest margin resulted primarily from a 54 basis point increase in our yield on earning assets partially offset by the increased cost of interest bearing liabilities. The success in expanding the net interest margin resulted primarily from the implementation of several strategies designed to increase net interest income. By emphasizing our strength as a business-focused lender, we achieved commercial loan growth that increased the percentage of higher yielding loans in our earning asset base. The longer duration of our securities and improved reinvestment rates have improved the securities portfolio yield. The continued execution of our retail strategy has attracted core deposits, which have a lower cost relative to other sources of funds, to support our loan growth and further contribute to our net interest margin improvement. Average non-interest bearing demand deposits increased $29.6 million or 17.1% to $202.4 million at June 30, 2005 compared to $172.8 million at June 30, 2004.

The following tables set 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 three and six months ended June 30, 2005 and 2004. Average yields for each period are derived by dividing annualized income by the average balance of the related assets, and average annualized 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.

13

Financial Summary
Average Balances, Yields and Costs
(Unaudited)

	Three Months Ended								Three Months Ended
	June 30, 2005								June 30, 2004
						Average								Average
	Average					Yield /			Average					Yield /
(in thousands)	Balance			Interest		Cost			Balance			Interest		Cost
INTEREST EARNING ASSETS:
Interest bearing deposits with banks	$	25,177		$	194		3.08	%	$	25,230		$	59		0.94	%
Federal funds sold		21,067			155		2.94			18,146			44		0.97
Securities		857,958			10,103		4.71			879,623			9,449		4.30
Loans (1)		1,859,969			31,117		6.69			1,594,495			24,149		6.06
Total interest earning assets	$	2,764,171		$	41,569		6.02	%	$	2,517,494		$	33,701		5.35	%
NON-INTEREST EARNING ASSETS:
Cash and due from banks	$	31,868							$	28,847
Allowance for loan losses		(21,274	)							(18,488	)
Premises and equipment, net		10,401								11,244
Other assets		76,715								78,071
Total non-interest earning assets		97,710								99,674
Total assets	$	2,861,881							$	2,617,168
INTEREST BEARING LIABILITIES:
Deposits:
Savings, money markets, and interest bearing demand	$	987,686		$	4,995		2.02	%	$	870,158		$	2,984		1.37	%
Certificates of deposit of $100,000 or more		180,410			1,400		3.10			157,867			983		2.49
Other time deposits		479,910			3,692		3.08			453,126			3,047		2.69
Total interest bearing deposits		1,648,006			10,087		2.45			1,481,151			7,014		1.89
Borrowed funds		756,815			9,600		5.07			737,275			8,879		4.82
Subordinated debentures		62,892			1,156		7.35			49,662			840		6.77
Total interest bearing liabilities	$	2,467,713		$	20,843		3.38	%	$	2,268,088		$	16,733		2.95	%
NON-INTEREST BEARING LIABILITIES:
Demand deposits	$	205,839							$	182,637
Other liabilities		22,644								23,387
Stockholders’ equity		165,685								143,056
Total non-interest bearing liabilities and stockholders’ equity	$	394,168							$	349,080
Total liabilities and stockholders’ equity	$	2,861,881							$	2,617,168
Interest rate spread (2)							2.64	%							2.40	%
Net interest income and margin (3)				$	20,726		3.00	%				$	16,968		2.70	%
Net interest income and margin (tax equivalent basis)(4)				$	21,217		3.07	%				$	17,360		2.76	%

(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 a Federal income tax rate of 35% and has the effect of increasing interest income by $491,000 and $392,000 for the three month periods ended June 30, 2005 and 2004, respectively.

14

Financial Summary
Average Balances, Yields and Costs
(Unaudited)

	Six Months Ended								Six Months Ended
	June 30, 2005								June 30, 2004
						Average								Average
	Average					Yield /			Average					Yield /
(in thousands)	Balance			Interest		Cost			Balance			Interest		Cost
INTEREST EARNING ASSETS:
Interest bearing deposits with banks	$	25,304		$	351		2.77	%	$	22,772		$	110		0.97	%
Federal funds sold		22,612			302		2.67			25,814			126		0.98
Securities		854,363			20,030		4.69			863,642			18,435		4.27
Loans (1)		1,829,458			59,919		6.55			1,548,310			47,248		6.10
Total interest earning assets	$	2,731,737		$	80,602		5.90	%	$	2,460,538		$	65,919		5.36	%
NON-INTEREST EARNING ASSETS:
Cash and due from banks	$	31,378							$	27,582
Allowance for loan losses		(20,925	)							(18,072	)
Premises and equipment, net		10,417								11,747
Other assets		76,130								73,190
Total non-interest earning assets		97,000								94,447
Total assets	$	2,828,737							$	2,554,985
INTEREST BEARING LIABILITIES:
Deposits:
Savings, money markets, and interest bearing demand	$	982,877		$	9,450		1.92	%	$	821,177		$	5,552		1.35	%
Certificates of deposit of $100,000 or more		174,735			2,593		2.97			154,604			1,957		2.53
Other time deposits		474,814			6,886		2.90			453,925			6,293		2.77
Total interest bearing deposits		1,632,426			18,929		2.32			1,429,706			13,802		1.93
Borrowed funds		745,537			18,820		5.05			737,450			17,753		4.81
Subordinated debentures		62,892			2,263		7.20			48,545			1,650		6.80
Total interest bearing liabilities	$	2,440,855		$	40,012		3.28	%	$	2,215,701		$	33,205		3.00	%
NON-INTEREST BEARING LIABILITIES:
Demand deposits	$	202,412							$	172,851
Other liabilities		22,725								20,890
Stockholders’ equity		162,745								145,543
Total non-interest bearing liabilities and stockholders’ equity	$	387,882							$	339,284
Total liabilities and stockholders’ equity	$	2,828,737							$	2,554,985
Interest rate spread (2)							2.62	%							2.36	%
Net interest income and margin (3)				$	40,590		2.97	%				$	32,714		2.66	%
Net interest income and margin (tax equivalent basis)(4)				$	41,549		3.04	%				$	33,516		2.72	%

(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 a Federal income tax rate of 35% and has the effect of increasing interest income by $959,000 and $802,000 for the six month periods ended June 30, 2005 and 2004, respectively.

15

On a quarterly basis, the second quarter 2005 tax equivalent net interest margin was 3.07%, an increase of 31 basis points compared to 2.76% for the same period in 2004. The reasons for the increase in the margin are the same as discussed for the six-month period.

On a linked quarter basis our net interest margin increased six basis points to 3.07% for the second quarter of 2005 compared to 3.01% for the first quarter of 2005. There are several trends that could limit our ability to further improve our net interest margin throughout the remainder of 2005. First, slowing commercial loan growth due to competition could limit our ability to increase loans or maintain our current loan yield. Second, we have seen a marked increase in competition for deposits. If this trend continues we could be required to increase our rates on deposits to retain our existing deposit base and attract new depositors. A third factor that could limit margin improvement is the flattening of the yield curve. With long-term rates remaining relatively flat when compared to increasing short-term rates, borrowers are requesting longer term fixed rate loans or shifting floating rate loans into fixed rate product. Meeting the requests of our loan customers could result in lower yields to us, or if we fail to offer competitive rates this could translate to lower than anticipated commercial loans outstanding. In addition, the lower longer-term rates make it more difficult at times for us to reinvest cash flows from our investment portfolio and maintain yields. These trends could limit the growth in the net interest margin or result in a lower margin.

Interest Income

For the first six months of 2005, total interest income was $80.6 million, an increase of $14.7 million or 22.3% when compared to $65.9 million for the same period in 2004. Higher interest income was primarily due to an increase in average loans outstanding and higher yields on loans and securities for the six months ended June 30, 2005 when compared to the same period in 2004. The yield on earning assets for the first six months of 2005 was 5.90%, a 54 basis point increase from 5.36% for the same period in 2004.

Interest and fees on loans for the six months ended June 30, 2005 increased $12.7 million or 26.8% to $59.9 million from $47.2 million for the same period in 2004. The increase in interest and fees on loans resulted from an increase of $281.1 million or 18.2% in average loans outstanding, primarily commercial real estate and commercial and industrial loans, and a higher average yield on loans, which increased 45 basis points to 6.55% for the six months ended June 30, 2005 from 6.10% for the same period in 2004. The higher loan yield in 2005 reflected the higher prime rate of interest in the first six months of 2005 compared to the same period in 2004. Of the total loan portfolio approximately 45% were floating rate principally tied to the prime rate of interest as of June 30, 2005. For the first six months of 2005, the average prime rate of interest was 5.68% compared to 4.00% for the same period in 2004.

Interest on securities increased $1.6 million to $20.0 million for the six months ended June 30, 2005 compared to $18.4 million for the same period in 2004. The primary reason for the increase in interest on securities was a 42 basis point increase in yield to 4.69% for the first six months of 2005 compared to 4.27% for the same period in 2004. The yield improvement resulted from higher overall interest rates, which at times created better reinvestment opportunities, and the modestly longer duration of the investment portfolio.

For the second quarter of 2005, total interest income was $41.6 million, an increase of $7.9 million or 23.3% when compared to $33.7 million for the second quarter of 2004. The increase in interest income was primarily due to the higher average balance of loans outstanding and the improved yield on our loan and securities portfolio.

16

Interest Expense

The principal objective of our retail strategy is to better manage our cost of funds in order to raise our net interest margin. To achieve that objective, we have focused on attracting lower cost core deposits. In addition, our philosophy of relationship banking has resulted in establishing long-term business relationships and higher balances of interest-free demand deposits. We believe that the best opportunity to improve our net interest margin continues to reside on the liability side of our balance sheet. Our ability to manage our deposit costs in a rising rate environment is critical to reaching our profitability goals. Total interest expense increased $6.8 million or 20.5% to $40.0 million for the first six months of 2005, compared to $33.2 million for the same period in 2004. The increase in interest expense resulted from increased average balances of interest bearing liabilities and higher rates paid on each interest bearing liability type. Average interest bearing liabilities were $2.44 billion for the six months ended June 30, 2005 reflecting an increase of $225.1 million or 10.2% when compared to $2.21 billion for the same period in 2004. The average rate paid on interest bearing liabilities for the six months ended June 30, 2005 increased 28 basis points to 3.28% from 3.00% for the same period of 2004.

Interest expense on deposits increased $5.1 million or 37.1% to $18.9 million for the first six months of 2005 compared to $13.8 million for the same period in 2004. The increase in interest expense on deposits accounted for 75.3% of the total increase in interest expense in the first six months of 2005. Higher interest expense on deposits resulted primarily from a $3.9 million increase in interest expense on savings, money markets and interest bearing demand deposits to $9.5 million for the first six months of 2005 compared to $5.6 million for the same period in 2004 due both to increased average balances and higher rates paid. Average time deposits, including certificates of deposit (CDs) of $100,000 or more, increased $41.0 million to $649.5 million for the first six months of 2005 compared to $608.5 million for the same period in 2004. The increase in expense on time deposits resulted from higher average balances and higher average rates paid.

For the first six months of 2005, the average balance of savings, money markets and interest bearing demand deposits increased $161.7 million or 19.7% to $982.9 million compared to $821.2 million for the same period in 2004. The growth in these deposit accounts reflected our ongoing focus on expanding our core deposit base as part of our retail strategy, the positive reception of our new Simply Better Savings^SM product and money market balances acquired through an intermediary that places deposits from brokerage clients with banks (Reserve Funds).

The total cost of interest bearing deposits was 2.32% for the first six months of 2005, a 39 basis point increase when compared to the 1.93% cost for the same period in 2004. The key factors in the increase in the cost of interest bearing deposits were the higher interest rate paid on Simply Better Savings and the higher interest rate environment, which resulted in greater interest expense on all interest bearing deposit types. Average savings, money markets and interest bearing demand deposits for the first six months of 2005 represented 60.2% of total average interest bearing deposits compared to 57.4% for the same period in 2004. The cost of these deposits increased to 1.92% in the first six months of 2005 compared to 1.35% for the same period in 2004 due principally to the attractive rate paid on Simply Better Savings balances.

17

Since June 2004, the Federal Reserve has increased the Federal funds rate nine times, totaling 225 basis points through June 30, 2005, with the likelihood of additional future increases. These rate increases have not significantly impacted our deposit costs. During the second quarter, however, we experienced increased competition for deposit balances. This resulted in an increase in both our core deposit costs and rates on certain certificates of deposit as we selectively increased our rates to retain our existing deposit base and to attract new depositors. In addition, depositors have shifted deposit balances from lower yielding deposit types to higher cost deposit products, which increase our costs. Should these trends continue, our cost of interest bearing deposits would increase and could limit our ability to expand our net interest margin.

Interest expense on borrowed funds increased $1.1 million to $18.8 million for the first six months of 2005 compared to $17.7 million for the same period in 2004. The increased interest expense was the result of replacing floating rate Federal Home Loan Bank (FHLB) advances with higher cost fixed rate advances, the higher rates paid on floating rate advances and a modestly higher average balance of borrowed funds outstanding in the first six months of 2005. The cost of borrowed funds increased 24 basis points to 5.05% for the first six months of 2005 compared to 4.81% for the same period in 2004. The growth in our deposit base has contributed to our reduced reliance on borrowed funds as reflected by borrowed funds as a percentage of total assets declining to 28.1% at June 30, 2005 compared to 30.1% at June 30, 2004. To the extent that our retail strategy continues to attract deposits, borrowed funds are expected to gradually become a less important part of our funding base.

The overall cost of subordinated debentures increased 40 basis points to 7.20% for the first six months of 2005 compared to 6.80% for the same period in 2004. Over the same period, the average balance of subordinated debentures increased approximately $14.3 million to $62.9 million for the first six months of 2005 compared to $48.5 million for the same period in 2004. In June 2004, we issued $15.5 million in additional floating rate subordinated debentures, which accounted for the increased average balance outstanding. Of the outstanding subordinated debentures, approximately $21.7 million are fixed rate with an average rate of 9.69% with the remaining $41.2 million floating rate with an average spread over three month LIBOR of approximately 304 basis points. If three month LIBOR continues to increase, the overall cost of our subordinated debentures will continue to increase.

For the second quarter of 2005, total interest expense increased $4.1 million or 24.6% to $20.8 million when compared to the $16.7 million for the same period in 2004. The overall cost of interest bearing liabilities increased 43 basis points to 3.38% for the second quarter of 2005 compared to 2.95% for the same period in 2004. Contributing to the increase in interest expense was the strong growth in average interest bearing liabilities, which increased $199.6 million to $2.47 billion for the three months ended June 30, 2005 compared to $2.27 billion for the same period in 2004.

We continue to execute our retail strategy with the goal of attracting additional lower cost core deposit and transaction accounts. This may allow us over time to reduce our historical use of higher cost CDs and borrowed funds and improve our net interest margin while generating service fee or non-interest income. To effectively manage our cost of funds as we build our retail network we may use alternative funding sources such as Reserve Funds. We would expect in a gradually increasing interest rate environment to see the costs of CDs continue to rise. We may use interest rate swaps to change the repricing characteristics of certain interest bearing liabilities, particularly CDs. Significant reliance on higher cost funding sources would limit our ability to continue to effectively manage our cost of funds in the future.

18

Provision for Loan Losses

The provision for loan losses for the six months ended June 30, 2005 was $3.6 million, a decrease of $825,000 from the $4.4 million for the same period in 2004. The decrease in the provision for loan losses was due to lower net charge offs and comparably slower loan growth. The provision for loan losses for the second quarter of 2005 was $2.1 million, an increase of $125,000 from the $2.0 million for the same period in 2004. The increase in the provision for loan losses for the quarterly comparison was due to higher loan growth. The allowance for loan losses as a percentage of total loans was 1.15% at June 30, 2005 compared to 1.13% at December 31, 2004. See “Asset Quality” and “Allowance for loan losses” in this report for additional detail and information.

Non-interest Income

Non-interest income consists of service charges on deposit accounts, net securities gains, income on bank owned life insurance and all other non-interest income. Total non-interest income for the first six months of 2005 was $3.6 million, a decrease of $446,000 from the $4.1 million reported for the same period in 2004.

Service charges on deposit accounts decreased $302,000 or 18.3% to $1.3 million for the six months ended June 30, 2005, compared to $1.6 million for the same period in 2004. During the first half of 2005, lower insufficient fund fees primarily contributed to the decrease in service charge income. We have noted an increased use of our Internet banking services, which allow customers to more closely monitor their balances resulting in fewer overdrafts. We are also currently reviewing insufficient fund fee collection procedures as well as our earnings credit rate in relation to peers. To address this decline we continue to conduct targeted marketing campaigns designed to attract lower cost and interest-free demand deposits that generate additional service charge and fee income.

Net gains on the sale of securities totaled $476,000 in the first six months of 2005 compared to $586,000 in net gains on the sale of securities for the same period in 2004. We have continued to reposition securities in 2005 to achieve asset and liability and liquidity objectives, which include enhancing future interest income and managing interest rate risk. The level of net securities gains or losses is dependent upon opportunities presented by changes in interest rates and asset and liability objectives.

Income on bank owned life insurance (BOLI) was $804,000 for the first six months of 2005, a decrease of $173,000 compared to the same period in 2004. The decrease in income on BOLI was due to lower yields on certain BOLI assets. The interest-crediting rate for these assets was determined at the end of 2004 when interest rates were relatively lower. The income earned on these assets is used to offset the benefit costs of deferred compensation programs. Income on BOLI also reduces our overall effective income tax rate. Our BOLI assets are single premium policies. After the initial purchase, there are no additional premiums on those policies.

Other non-interest income includes a variety of fee-based services, including Second Check fees, automated teller machine fees charged to non-customers, safe deposit box rental income and other non-banking service fees. Other non-interest income increased $139,000 to $1.0 million for the six months ended June 30, 2005 from $877,000 for the same period in 2004.

19

For the three months ended June 30, 2005, total non-interest income increased $211,000 or 12.3% to $1.9 million from $1.7 million for the same period in 2004. The increase reflected higher net securities gains and other non-interest income partially offset by lower service charges on deposit accounts and lower income on BOLI.

Non-interest Expense

Non-interest expense consists of salaries and employee benefits, occupancy, equipment and all other non-interest expense we incur. Non-interest expense totaled $24.1 million in the first six months of 2005, an increase of $3.2 million or 15.5% compared to the $20.9 million for the same period in 2004. Salaries and employee benefits represented the largest increase to non-interest expense for the first six months of 2005 compared to the same period of 2004. On an annualized basis, total non-interest expense as a percentage of average assets was 1.70% for the first six months of 2005 compared to 1.63% for the same period of 2004. Our efficiency ratio for the first six months of 2005 was 54.48% compared to 56.71% for the same period in 2004. Excluding net securities gains, the efficiency ratio for the first six months of 2005 was 55.07% compared to 57.62% for the same period in 2004. The efficiency ratio is computed by dividing total non-interest expense by the sum of net interest income and non-interest income. A decrease in the efficiency ratio indicates a more efficient allocation of resources while an increase would indicate more resources are being utilized to generate the same volume of income. The improvement in the efficiency ratio was primarily due to higher net interest income partially offset by higher non-interest expenses and lower non-interest income. Continued improvement to the efficiency ratio will depend on increases in net interest income, non-interest income and the level of increase in non-interest expenses as we grow.

The following table presents the components of non-interest expense for the six months ended June 30, 2005 and 2004.

	Six Months Ended June 30,
(in thousands)	2005		2004
Salaries and employee benefits	$	13,863	$	11,475
Occupancy expense, net		2,375		2,167
Equipment expense		1,533		1,160
Marketing		1,125		750
Outside services and processing		736		582
Communication and postage		502		469
Directors and committee fees		499		785
Audit and examination fees		452		386
Stationery and supplies		443		348
Insurance		288		238
Attorney’s fees		238		212
Amortization of subordinated debenture expense		136		115
FDIC insurance premium		131		115
Deposit intangible amortization		102		102
ORE expense		50		5
Other		1,605		1,511
Total	$	24,098	$	20,870

20

Salaries and employee benefits, which represents the largest portion of non-interest expense, increased $2.4 million or 20.8% to $13.9 million for the first six months of 2005 compared to $11.5 million for the same period in 2004. Full time equivalent employees totaled 389 at June 30, 2005, compared to 364 at December 31, 2004, and 361 at June 30, 2004. Salaries expense increased $1.6 million and accounted for 67.5% of the increase in salaries and employee benefits expense. The primary reasons for the increase in salaries are the continued growth of YNB including new branches and the ongoing need for additional staff to support various compliance and risk management requirements, including Sarbanes-Oxley, and to a lesser extent, the strengthening of executive management. In addition, merit raises contributed to the increase. Employee benefits expense increased $775,000 or 29.2% primarily due to a $561,000 increase in costs associated with executive benefit plans and a $90,000 increase in ESOP expense. These two items accounted for approximately 84% of the increase in employee benefits expense. With the planned opening of new branches and the continued staffing requirements related to compliance with regulatory requirements, we anticipate that both salaries and employee benefits expense will continue to increase in 2005.

Occupancy expense for the first six months of 2005 was $2.4 million, an increase of $208,000 or 9.6%, compared to $2.2 million for the same period in 2004. The increase in occupancy expense was due to the additional costs, including rent expense, associated with the operation of our branch network. We opened one branch late in 2004 and one during the first half of 2005 and with continued planned expansion, we expect occupancy expense to continue to increase.

Equipment expense decreased $77,000 or 4.8% to $1.5 million for the first six months of 2005 from $1.6 million for the same period in 2004. The decrease in equipment expense resulted primarily from a reduction in depreciation expense due to the full depreciation of certain equipment. We anticipate equipment expense will increase as a result of the ongoing expansion of our branch network and our continuing efforts to maintain and upgrade technology and systems in order to provide quality products and services.

Other non-interest expense increased $709,000 or 12.6% to $6.3 million for the first six months of 2005 compared to $5.6 million for the same period in 2004. The increase resulted primarily from increases in two expense categories. Marketing expense increased $375,000 to $1.1 million for the first six months of 2005 compared to $750,000 for the same period in 2004. This increase reflects the ongoing execution of our retail strategy, which includes additional marketing to enhance our brand image, to attract lower cost core deposits and promote our new branches. Outside services and processing, which include consulting fees and outsourced services, increased $154,000 to $736,000 for the first six months of 2005 compared to $582,000 for the same period in 2004. This increase reflected the continued use of outside consultants as well as outside sources, which allow YNB to deliver products and services more efficiently than would otherwise be able. Nearly all other significant expenses increased as a result of the ongoing growth of YNB. Director and committee fees decreased $286,000 or 36.4% to $499,000 for the six months ended June 30, 2005 compared to $785,000 for the same period in 2004. In 2004, director and committee fees included a one-time nonrecurring expense of $479,000 relating to the directors deferred compensation plan. Without that one time expense in 2004, director and committee fees would have been $193,000 higher reflecting the increased number of directors and the higher number of meetings.

21

For the three months ended June 30, 2005, total non-interest expense increased $1.7 million or 15.7% to $12.2 million compared to $10.6 million for the same period in 2004. The primary factor for the increase in non-interest expense for the second quarter of 2005 compared to the same period in 2004 was increased salaries and employee benefits expense, which increased $1.4 million or 24.7%. The increase accounted for approximately 84.0% of the total increase in non-interest expense for the two periods. The increase in salaries and employee benefits expense reflects the continued growth of YNB.

Income Tax Expense

We have identified accounting for income taxes as a critical accounting policy. The provision for income taxes, comprised of Federal and state income taxes, was $5.3 million for the first six months of 2005 compared to $3.2 million for the same period in 2004. The increase in income tax expense was primarily due to the higher level of taxable income in 2005 compared to the same period in 2004 and, to a lesser extent, a higher effective tax rate. The provision for income taxes for the first six months of 2005 and 2004 were at an effective rate of 32.0% and 27.5%, respectively. The increase in the effective tax rate resulted from increased taxable income while tax-free income remained nearly unchanged.

The provision for income taxes was $2.7 million for the second quarter of 2005 compared to $1.7 million for the same period in 2004. The increase in tax expense for the periods was also primarily due to the higher level of taxable income in 2005 compared to the same period in 2004 and to a lesser extent, a higher tax rate. The provision for income taxes for the second quarter of 2005 and 2004 were at an effective rate of 32.2% and 27.2%, respectively. The increase in the effective tax rate resulted from the same reasons described above.

Financial Condition

Assets

Total assets at June 30, 2005 were $2.93 billion, an increase of $124.5 million from $2.81 billion at December 31, 2004. The growth in our asset base during the first six months of 2005 reflected our continuing strength as a business-focused, relationship-oriented community bank, as total loans increased $113.3 million. The growth in loans was principally in commercial real estate and commercial and industrial loans. The funding for this asset growth was provided primarily by interest bearing deposits as a result of the continued successful execution of our retail strategy and cash flows from our securities.

Loans

We emphasize commercial real estate and commercial and industrial loans to individuals and small to mid-sized businesses. We have continued to experience commercial loan demand as a result of the strength of New Jersey’s real estate market, business activity and additional loan opportunities from established relationships. The loan portfolio represents our largest earning asset class and is our primary source of interest income. Total loans increased $113.3 million or 6.4% to $1.90 billion at June 30, 2005 from $1.78 billion at December 31, 2004. Our broader geographic footprint and our strength as a commercial business lender were the primary factors that accounted for the growth for the six months ended June 30, 2005. During the first six months of 2005 we have experienced relatively more commercial loan payoffs, which combined with increased competition, resulted in comparatively slower loan growth versus the first half of 2004. We anticipate that these two trends will continue into the second half of 2005 and that our loan growth rates could be lower than in the past. Our loan portfolio represented 64.7% of total assets at June 30, 2005 compared to 63.5% at December 31, 2004.

22

Continued loan growth is an important part of our strategy to increase our net interest margin and franchise value. In the first half of 2005 we saw increased competition from both bank and non-bank lenders relating to terms and interest rates on fixed rate commercial loans. To date, we have not typically matched these rates and as a result, growth has slowed. Based on trends experienced during the first half of this year, we believe our 2005 loan growth will slow from our historic trends. In addition to the referenced competition, borrowers’ concerns over the economy, real estate prices and interest rates, among other factors, could adversely impact future loan growth. Substantially all of our lending 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. Because a significant portion of our loan portfolio is secured by real estate, the ultimate collectibility of the loan portfolio and the recovery of the carrying amount of real estate collateral are subject to changes in the region’s economic environment and real estate market values.

The table below sets forth YNB’s loan portfolio composition and growth by loan type for the six months ended June 30, 2005.

(in thousands)	06/30/05		12/31/04		Change
Commercial real estate
Investor occupied	$	625,485	$	594,799	$	30,686
Owner occupied		225,176		215,313		9,863
Construction and development		214,296		190,546		23,750
Commercial and industrial
Lines of credit		347,250		301,163		46,087
Term		160,634		169,829		(9,195	)
Demand		460		374		86
Residential
1-4 family		162,162		159,306		2,856
Multi-family		30,704		22,717		7,987
Consumer
Home equity		84,974		86,295		(1,321	)
Installment		32,846		32,149		697
Other		11,930		10,101		1,829
Total loans	$	1,895,917	$	1,782,592	$	113,325

At June 30, 2005, commercial real estate loans and commercial and industrial loans represented 83.0% of total loans compared to 82.6% at year-end 2004. 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, including 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.

23

Commercial real estate loans increased $64.3 million or 6.4% in the first six months of 2005 to $1.06 billion from $1.00 billion at December 31, 2004. Commercial real estate loans consist of investor occupied, owner occupied, and construction and development loans. The growth during the first half of 2005 was primarily in investor occupied loans and construction and development loans, which increased $30.7 million and $23.8 million, respectively as a result of a strengthening economy, our broader geographic footprint and the strong real estate market in New Jersey. Growth in commercial real estate loans accounted for 56.7% of the total loan growth in the period. Construction and development loans include residential and commercial projects and are typically made to experienced residential or commercial construction developers. Residential construction loans include single family, multi-family, and condominium projects. Commercial construction loans include office and professional development, retail development and other commercial projects. Generally, construction loans have terms of one to two years and are interest only, adjustable rate loans indexed to the prime rate of interest.

Commercial and industrial loans include lines of credit, term loans and demand loans. Commercial and industrial loans increased $37.0 million or 7.8% to $508.3 million at June 30, 2005 compared to $471.4 million at year-end 2004. The growth was primarily in lines of credit, which increased $46.1 million. Partially offsetting this growth was a $9.2 million decline in term loans. The increase in commercial and industrial loans resulted primarily from increasing business activity in our market area. Commercial and industrial loans are typically loans made to small and mid-sized businesses and consist of loans used to finance inventory, receivables, and other working capital needs. Typically term loans are provided for equipment needs. In our commercial and industrial loan portfolio, we attempt to maintain diversification of risk within industry classifications with the goal of limiting the risk of loss from any single unexpected event or trend.

Residential loans include 1-4 family and multi-family loans. This segment of our portfolio totaled $192.9 million at June 30, 2005, increasing $10.8 million in the first six months of 2005 from year-end 2004. The increase was primarily due to growth in multi-family loans. Residential 1-4 family loans represented 84.1% of residential loans at June 30, 2005. Our 1-4 family loans are secured by first liens on the underlying real property. We are a participating seller/servicer with the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC) and we generally underwrite our single-family residential mortgage loans to conform to the standards required by these agencies. Multi-family loans increased $8.0 million in the first six months of 2005. Multi family loans consist primarily of loans secured by apartment complexes and have historically not been an area of focus, and represented only 15.9% of total residential loans at June 30, 2005.

Consumer loans increased $1.2 million or 0.9% to $129.7 million at June 30, 2005 compared to $128.5 million at year-end 2004. Consumer loans include fixed rate home equity loans, floating rate home equity lines, indirect auto loans and other types of installment loans. Home equity loans and lines represented 65.5% of total consumer loans at June 30, 2005 compared to 67.1% at year-end 2004. The gradually increasing interest rate environment over the last year is reflected in the modest rate of growth of our consumer loans. The expansion of our retail network into new markets has generated, and should continue to generate, additional opportunities to increase the size of our consumer loan portfolio.

24

While we believe we will continue to see strong loan demand in 2005, several factors could influence the level of actual loan growth. These factors include changes in the region’s economic environment, real estate market conditions, the level of large loan payoffs, competition on both rate and credit terms, and future bank consolidation in our market area. Continued loan growth is a critical part of our strategy to increase net interest income and the net interest margin.

Asset Quality

Over the past several years we have successfully grown our loan portfolio while maintaining high asset quality standards. Nonperforming asset levels have averaged less than $9.0 million during the five years ended December 31, 2004, a period in which our compound annual growth rate exceeded 20%. Nonperforming assets as a percentage of total assets declined to 0.27% at June 30, 2005 compared to 0.36% at December 31, 2004.

In the first six months of 2005, total nonperforming assets declined $2.1 million or 20.9% to $7.9 million at June 30, 2005. This decline was primarily due to a partial paydown and partial charge off on one of our nonperforming loan relationships. Nonperforming loans represented 0.42% of total loans at June 30, 2005 compared to 0.56% at year-end 2004. The improvement in this ratio is due to the loan growth experienced in 2005, as well as the decline in nonperforming loans. Three loan relationships previously disclosed in prior filings accounted for 62.1% of total nonperforming assets at June 30, 2005. We continue to work closely with these borrowers and each loan relationship is in some form of resolution, which includes collection, restructure or charge off. While the ultimate collectibility of each relationship is not known, we do not expect that we will recover the full balance of funds due to us.

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

25

The following table sets forth nonperforming assets in our loan portfolio by type at June 30, 2005, December 31, 2004 and June 30, 2004.

(in thousands)	6/30/05		12/31/04		6/30/04
Nonaccrual loans:
Commercial real estate	$	1,377	$	910	$	1,034
Commercial and industrial		5,281		7,867		8,323
Residential		45		51		357
Consumer		260		281		38
Total		6,963		9,109		9,752
Restructured Loans
Commercial and industrial		—		—		1,257
Total		—		—		1,257
Loans 90 days or more past due:
Residential		914		791		416
Consumer		40		108		401
Total		954		899		817
Total nonperforming loans		7,917		10,008		11,826
Total nonperforming assets	$	7,917	$	10,008	$	11,826

Nonperforming assets consist of nonperforming loans and other real estate. We had no other real estate owned at June 30, 2005 or December 31, 2004. 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 and interest is in doubt. Consumer loans are generally charged off after they become 120 days past due. Residential mortgage loans are not generally placed on nonaccrual status unless the value of the real estate collateral has deteriorated to the point that a potential loss of principal or interest exists. If principal and interest payments on nonaccrual loans 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 otherwise not consider. Restructured loans remain on nonaccrual until collectibility improves and a satisfactory payment history is established, typically after six consecutive monthly payments.

Nonaccrual loans were $7.0 million at June 30, 2005, a decrease of $2.1 million from the December 31, 2004 level of $9.1 million. The decrease in nonaccrual loans resulted primarily from a partial paydown and partial charge off on one loan relationship, partially offset by new loans going into nonacccrual status in the first half of 2005. Nonaccrual commercial and industrial loans accounted for 75.8% of total nonaccrual loans and 66.7% of total nonperforming loans at June 30, 2005. While we continue to work closely with these borrowers to return these loans to performing status, the ultimate collectibility of these nonaccrual loans cannot be determined at this time.

26

Loans 90 days or more past due but still accruing interest were $954,000 at June 30, 2005, an increase of $55,000 compared to the $899,000 in this category at December 31, 2004. The increase resulted from an increase in residential loans 90 days or more past due and a decrease in consumer loans 90 days or more past due.

While the most profitable part of YNB’s business is commercial lending, the risk and complexity of that business is also the greatest. We believe we have a sound credit culture in place, which includes strict underwriting standards, effective risk assessment, strong credit policies and the periodic evaluation of the overall creditworthiness of our borrowers. We continually review and assess the effectiveness of our commercial lending processes and controls. We are currently in the process of further strengthening our risk rating determinations and tightening our credit policies. When issues are identified changes are made in a timely manner. 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. 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 level, 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 loan losses takes place on a quarterly basis.

Our commercial lending staff reviews, evaluates and rates all of our commercial loans based on their respective risk 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 the Audit Committee of our Board of Directors. The Criticized and Classified Asset Committee meets monthly to review criticized and classified assets. At June 30, 2005, this committee included the Chief Financial Officer, the Senior Lending Officer, the Senior Credit Administration Officer, the Senior Risk Management Officer and the Senior Credit Risk Review Manager and two independent Directors. During its regular meetings the committee reviews trends in critized assets, reviews information on classified assets and monitors our efforts to resolve nonperforming loan relationships. This committee also reviews compliance with accounting rules related to loan impairment.

Risk is measured by use of a matrix, which is customized to measure the risk of each loan type. The reserve percentage assigned to each risk-rating category is determined quarterly from historical loan loss rates based on an eight quarter rolling trend using migration analysis. Risk ratings of 1 to 5 are considered to be acceptable and correspond to loans rated as minimal, modest, better than average, average and acceptable. Loans with acceptable risk were reserved at a range of 0.35% to 1.50% at June 30, 2005. Risk ratings of between 6 and 8 are considered higher than acceptable risk and correspond to loans rated as special mention, substandard, or doubtful. Due to the higher level of risk, these loans were reserved at a range of 3.75% to 100% at June 30, 2005. Loans with a risk rating of 9 are considered to be a loss and would be reserved at 100%. At June 30, 2005, there were no 9 rated loans. Residential mortgage loans were assigned an individual risk reserve percentage of 0.03% due to the strong secured nature of these loans and the low level of losses experienced historically. Consumer loans were assigned reserve percentages of 0.01% for the lowest risk to 5.38% for the highest risk depending on the extent and type of collateral.

27

In addition to the methodology discussed above, we use our judgment concerning the anticipated impact on credit risk of economic conditions, real estate values, interest rates, level of business activity and other factors. We closely monitor delinquencies and delinquency trends. All criticized assets, risk rated 6 or higher, are reviewed on a monthly basis. Allocations of the allowance for loan losses, both specific and general, are determined after this review.

The following table provides information regarding the allowance for loan losses for the three and six-month periods ended June 30, 2005 and June 30, 2004.

	Three Months Ended						Six Months Ended
(in thousands)	6/30/05			6/30/04			6/30/05			6/30/04
Allowance balance, beginning of period	$	21,226		$	18,162		$	20,116		$	17,295
Charge offs:
Commercial and industrial		(1,571	)		(1,400	)		(1,859	)		(2,905	)
Residential		—			(158	)		—			(254	)
Consumer		(103	)		(76	)		(244	)		(101	)
Total charge offs		(1,674	)		(1,634	)		(2,103	)		(3,260	)
Recoveries:
Commercial and industrial		6			28			10			52
Residential		43			—			43			—
Consumer		19			13			54			32
Total recoveries		68			41			107			84
Net charge offs		(1,606	)		(1,593	)		(1,996	)		(3,176	)
Provision charged to operations		2,100			1,975			3,600			4,425
Allowance balance, end of period	$	21,720		$	18,544		$	21,720		$	18,544
Allowance for loan losses to total loans								1.15	%		1.14	%
Nonperforming loans to total loans								0.42			0.73
Net charge offs to average loans								0.22			0.41
Allowance for loan losses to nonperforming loans								274.35	%		156.81	%

At June 30, 2005, the allowance for loan losses totaled $21.7 million, an increase of $1.6 million compared to $20.1 million at December 31, 2004. The increase in the allowance reflected the extensive analysis previously discussed. It is our assessment, based on our judgment and analysis, that the allowance for loan losses was appropriate in relation to the credit risk at June 30, 2005. The ratio of the allowance for loan losses to total loans was 1.15% at June 30, 2005 compared to 1.13% at year-end 2004. Another measure of the adequacy of the allowance for loan losses is the ratio of the allowance for loan losses to total nonperforming loans. At June 30, 2005, this ratio was 274.35% compared to 201.00% at December 31, 2004. For the first half of 2005, net charge offs to average total loans declined to 22 basis points compared to 41 basis points for the first half of 2004 and 42 basis points for the entire year of 2004. While we believe that our total net charge offs for 2005 should be less than 2004, actual results are dependent on factors that are uncertain and to a large extent beyond our control.

28

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

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

	As of June 30, 2005								As of December 31, 2004
			Percent			Percent of					Percent			Percent of
	Reserve		of			loans to			Reserve		of			loans to
(in thousands)	Amount		Allowance			Total loans			Amount		Allowance			Total loans
Commercial real estate	$	10,510		48.3	%		56.2	%	$	10,312		51.3	%		56.2	%
Commercial and industrial		9,505		43.8			26.8			8,575		42.6			26.4
Residential		1,208		5.6			10.2			611		3.0			10.2
Consumer		497		2.3			6.8			618		3.1			7.2
Total	$	21,720		100.0	%		100.0	%	$	20,116		100.0	%		100.0	%

Federal funds sold and interest bearing deposits with banks

We have used a number of short-term investment vehicles to invest excess funds. Short-term investment vehicles utilized include Federal funds sold and interest bearing deposits with correspondent banks. We have maintained adequate levels of overnight liquidity to meet potential loan demand and normal deposit fluctuations. At June 30, 2005, Federal funds sold and interest-bearing balances with banks totaled $98.9 million compared to $48.1 million at December 31, 2004. The increase in Federal funds sold and interest bearing deposits in the first six months of 2005 resulted primarily from a smaller investment portfolio and comparatively slower commercial loan growth. Overnight funds levels fluctuate as we manage our liquidity position. We anticipate reducing the current levels of Federal funds sold and interest bearing balances as part of our strategy to increase our net interest margin, while at the same time maintaining adequate liquidity.

29

Securities

Our securities totaled $835.1 million or 28.5% of assets at June 30, 2005 compared to $880.8 million or 31.4% of assets at December 31, 2004. In the first half of 2005, cash flows from the securities portfolio have been used to fund commercial loan growth experienced and to enhance our liquidity position, which resulted in the decline in the size of our securities portfolio. Our portfolio has been structured to provide a reliable earnings stream, 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 based capital weights associated with our securities also have a beneficial impact on our risk-based capital ratios. All of our mortgage-backed securities are agency named. 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 three percent of all securities outstanding at June 30, 2005.

The following tables present the amortized cost and market value of YNB’s securities portfolios as of June 30, 2005 and December 31, 2004.

Securities Available For Sale	June 30, 2005				December 31, 2004
	Amortized		Market		Amortized		Market
(in thousands)	Cost		Value		Cost		Value
U.S. Treasury obligations	$	2,016	$	1,974	$	2,016	$	1,938
U.S. government - sponsored agencies		256,857		255,658		236,846		235,441
Mortgage-backed securities
Issued by FNMA/FHLMC		412,492		412,481		470,993		470,787
Issued by GNMA		17,683		17,740		20,339		20,597
Corporate obligations		21,138		22,407		31,723		33,111
Federal Reserve Bank Stock		3,776		3,776		3,551		3,551
Federal Home Loan Bank Stock		37,500		37,500		37,100		37,100
Total	$	751,462	$	751,536	$	802,568	$	802,525

Investment Securities	June 30, 2005				December 31, 2004
	Amortized		Market		Amortized		Market
(in thousands)	Cost		Value		Cost		Value
Obligations of state and political subdivisions	$	81,750	$	84,209	$	76,142	$	77,785
Mortgage-backed securities, issued by FNMA/FHLMC		1,838		1,886		2,115		2,169
Total	$	83,588	$	86,095	$	78,257	$	79,954

30

The securities available for sale (AFS) portfolio decreased $51.0 million to $751.5 million from $802.5 million at December 31, 2004. The AFS portfolio represented 90.0% of total securities and was principally comprised of mortgage-backed securities (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, to create more attractive returns and to manage liquidity and interest rate risk. We continue to follow a strategy of maintaining a modestly longer duration securities portfolio. The duration of our portfolio at June 30, 2005 was 3.3 years compared to 3.8 years at December 31, 2004 and 4.8 years at June 30, 2004. At June 30, 2005 the portfolio duration shortened due primarily to the decline in longer term rates at the end of the second quarter. This drop in rates resulted in increased prepayment speeds on MBS and increased the probability of callable bonds being called. This shorter duration has contributed to an increase in our interest rate risk exposure to falling rates. Our current investment strategy is to maintain a longer investment portfolio duration than currently exists. We believe that rising rates will lengthen the duration of the portfolio as prepayment speeds slow. We are also evaluating the impact of purchasing additional longer duration securities to extend the portfolio duration. With approximately 50% of our commercial loan assets earning a floating rate of interest at June 30, 2005, that portion of the balance sheet is well positioned for gradually rising interest rates. The effect of the longer duration of our AFS portfolio while longer-term rates have declined and short rates increased is a higher yielding AFS portfolio with consistent cash flows and protection to interest income should rates decline. In addition, MBS purchased over the past year were primarily purchased at or below par, mitigating the risk to the AFS 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 4.69% for the first six months of 2005, compared to 4.27% for the same period in 2004.

AFS securities are reported at market value, with unrealized gains and losses, net of tax, included as a separate component of stockholders’ equity. There was $74,000 in net appreciation in the AFS portfolio at June 30, 2005 compared to net depreciation of $43,000 at December 31, 2004. At June 30, 2005 the AFS portfolio had a net unrealized gain, net of tax, of $48,000 compared to a net unrealized loss of $28,000 at December 31, 2004, which is reported in “Accumulated Other Comprehensive Income (Loss)” in stockholders’ equity.

Investment securities, classified as held to maturity, increased $5.3 million to $83.6 million at June 30, 2005 from $78.3 million at December 31, 2004. Investment securities are carried at book value or amortized cost. The increase was due to a $5.6 million increase in obligations of state and political subdivisions, or municipal bonds, partially offset by a $277,000 decrease in mortgage-backed securities. The municipal bond portfolio consists of primarily longer term fixed rate bonds that reduce our effective tax rate and enhance the tax equivalent yield of our investment securities. We expect to continue to increase our holdings of municipal bonds as part of our strategy to reduce our effective tax rate and increase net income.

In 2005, our strategy for managing our investment portfolio will continue to depend on the overall interest rate environment and YNB’s interest rate risk position, which includes the composition of our other earning assets. We are currently able to maintain a longer duration securities portfolio due to the high level of floating rate commercial loans in our loan portfolio. If the composition of the loan portfolio shifts towards more fixed rate loans, we would shorten the duration of the securities portfolio to mitigate our interest rate risk exposure. In the first half of 2005, our loan portfolio grew modestly faster than our deposit portfolio. The additional funding for loan growth came in part from cash flows from the investment portfolio. Given the increased competition for deposits, if deposit growth continues to lag loan growth we anticipate the securities portfolio to continue to decrease in size. We evaluate all securities with unrealized losses quarterly to determine whether the loss is other than temporary. At June 30, 2005, 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. We believe that the unrealized losses in the securities portfolios were caused by changes in

31

interest rates, market credit spreads, and perceived and actual changes in prepayment speeds on MBS. The evaluation of securities for losses other than temporary is a critical accounting policy.

Deposits

Deposits represent our primary funding source supporting earning asset growth. Over the past several years we have concentrated on the successful implementation and execution of our retail strategy. This has included expanding our branch network into both new and existing markets. We have opened one branch already in 2005 and anticipate opening at least three additional branches in the remaining six months of 2005. The actual timing of branch openings is dependent on many factors including obtaining approval from our primary Federal banking regulator and local governmental authorities. We have found that the time required to obtain all necessary approvals frequently results in a delay in opening branches. Our goal is to open several branches per year for the next three years. This will increase the size of our branch network and we believe enhance the value of our franchise. In addition, we believe by opening new branches in attractive markets we can continue to attract new deposit relationships that will help us profitably fund our loan growth.

Total deposits at June 30, 2005 were $1.91 billion an increase of $103.0 million or 5.7% compared to total deposits of $1.81 billion at December 31, 2004. In the first quarter of 2005 we introduced a new savings product called Simply Better Savings. Simply Better Savings is a tiered product with a competitive interest rate. Through the first six months of 2005 this savings product has been our primary deposit raising vehicle. While we have attracted many new depositors to YNB with this product we have also experienced existing depositors shifting their Simply Better Checking^sm and Premier Money Market deposit balances from those comparatively lower yielding accounts to Simply Better Savings, which has a higher rate. Simply Better Checking is a tiered interest bearing checking account. As a result of the shift and new balances attracted, the cost of savings, money markets and interest bearing checking accounts increased to 1.92% for the first six months of 2005 from 1.35% for the same period in 2004. The cost of all interest bearing deposits for the first six months of 2005 was 2.32%, a 39 basis point or 20.2% increase. Our ability to manage the cost of interest bearing deposits in a rising rate environment will be critical in the continued improvement of our net interest margin.

The following table provides information concerning YNB’s deposit base at June 30, 2005 and December 31, 2004.

(in thousands)	6/30/05		12/31/04
Non-interest bearing demand deposits	$	218,042	$	202,196
Interest bearing demand deposits		416,444		542,186
Money market deposits		304,237		332,072
Savings deposits		270,848		93,571
Certificates of deposit of $100,000 or more		201,553		166,983
Other time deposits		501,839		472,996
Total	$	1,912,963	$	1,810,004

Interest bearing demand deposits decreased $125.7 million or 23.2% to $416.4 million at June 30, 2005 from $542.2 million at year-end 2004. The decline in interest bearing demand deposits is primarily due to the $119.6 million decrease in Simply Better Checking balances, as more interest rate sensitive customers have shifted funds to the higher yielding Simply Better Savings product. Many of these customers have maintained their Simply Better Checking accounts so we have been able to broaden the customer relationship with YNB. We anticipate that as short rates continue to increase additional customers will shift their balances out of lower yielding Simply Better Checking and into higher

32

yielding deposit products. Surrogates’ deposits (i.e., Intermingled Minors Trust Funds) increased $3.1 million from December 31, 2004 to $88.5 million at June 30, 2005. Approximately $55.7 million of these deposits will be rebid in December 2005.

We have experienced a reduction in money market balances of $27.8 million or 8.4% to $304.2 million at June 30, 2005 from $332.1 million at December 31, 2004. The decrease in money market balances resulted primarily from declines in personal money market balances of $43.9 million as depositors shifted balances primarily to higher yielding Simply Better Savings accounts and, to a lesser extent, certificates of deposit. Offsetting the decline in personal money market balances was an increase of $11.3 million in money market balances acquired from Reserve Funds and a modest increase in total business money market balances. At June 30, 2005, funds obtained from Reserve Funds totaled $84.8 million. The cost of these funds is tied to a premium paid over the overnight Federal funds rate. We expect to continue to use this source of funds to support our loan growth and improve our liquidity. We believe these deposits to be stable and less expensive then raising deposits through CDs.

Savings deposits, another source of low cost core deposits, have increased $177.3 million to $270.8 million at June 30, 2005 compared to $93.6 million at December 31, 2004 due to growth in Simply Better Savings balances.

We market our CDs through our branch network, through a computer-based service provided by an independent third party, which enables us to place CDs nationally, and for the first time in June 2005 through CD brokers. Total time deposits, which include CDs of $100,000 or more and other time deposits, increased $63.4 million to $703.4 million at June 30, 2005 from $640.0 million at December 31, 2004. The increase resulted from several factors. First, our retail network was successful in attracting $63.4 million in CD growth including $27.4 million in public fund CDs. Second, to supplement our retail growth we obtained approximately $15.0 million in brokered CDs. Offsetting this growth was a decline of $19.9 million in CDs obtained through the computer-based service. At June 30, 2005 we had approximately $84.9 million in CDs obtained through this service compared to $104.8 million at December 31, 2004. At June 30, 2005 total CDs represented 36.7% of our total deposit base compared to 35.3% at December 31, 2004. This increase reflects the strong competition for time deposits in our market place. We believe that we will be relying on CDs more in 2005 than we did in 2004 to fund our loan growth. We will continue to offer selected CDs in various maturity terms and may use interest rate swaps to change the pricing characteristics of these funds when deemed appropriate.

Non-interest bearing demand deposits increased $15.8 million or 7.8% to $218.0 million at June 30, 2005 compared to $202.2 million at December 31, 2004. During 2004, we redesigned our business checking products to provide accounts to meet the needs of small to mid-sized businesses. These new products have primarily driven growth in non-interest bearing demand deposits. We believe our enhanced product line of business checking products represents an opportunity to increase our non-interest bearing demand balances as our commercial relationships continue to expand.

It is our strategy to fund earning asset growth with deposits. To that end, we continue to promote our Simply Better Savings product throughout our markets and we have continued a targeted marketing campaign to promote our core free checking account products. Both of these campaigns should attract core deposit relationships and continue to contribute to improving our net interest margin. In addition, we continue to market our lower cost interest bearing checking products, Chairman’s Choice and Preferred Choice Checking^SM. Both of these product offerings solidify relationships with our customers. However, due to the increased competition for deposits in our marketplace and the increase in short term interest rates, core deposit costs could increase faster than earning asset yields, which could limit our ability to further increase our net interest margin. Excluding certificates of deposit, core deposits have historically not been adequate to meet loan demand

33

and are not expected to do so in the near term. If interest rates continue to rise, depositors will be attracted to higher cost alternative deposit products such as CDs. While such a shift would potentially have a negative impact on our cost of funds, attracting lower cost core deposits through our retail strategy will remain an ongoing strategic objective.

Borrowed Funds

Our primary funding strategy is to rely on attracting deposits to fund new earning asset growth, and to utilize borrowed funds as a secondary funding source for earning assets as well as for asset and liability management, and liquidity purposes. Borrowed funds consist primarily of Federal Home Loan Bank (FHLB) advances. Borrowed funds totaled $824.4 million at June 30, 2005, an increase of $8.4 million from the $816.0 million outstanding at December 31, 2004. The increase was primarily due to an $8.0 million increase in FHLB advances. With our focus on increasing lower cost core deposits to fund our asset growth, we anticipate that borrowed funds will be a less important source of funding for YNB in the future. At June 30, 2005, borrowed funds represented 28.1% of total assets compared to 29.1% at December 31, 2004. Within approved policy guidelines, we expect to continue to use borrowed funds as an alternative funding source or to meet desired business, asset and liability, or liquidity objectives.

We had FHLB advances outstanding of $750.0 million at June 30, 2005, an increase of $8.0 million from the $742.0 million outstanding at December 31, 2004. Callable borrowings, primarily FHLB advances, totaled $730.0 million or 96.1% of total borrowed funds at June 30, 2005. Callable borrowings have original terms of five to ten years and are callable after periods ranging from three months to five years. As of June 30, 2005, YNB had $556.0 million in callable borrowings with call dates of one year or less. Based on June 30, 2005 interest rate levels, we anticipate there will be $20.0 million in advances called in the next twelve months and an additional $60.0 million in advances called beyond twelve months. Rates would have to increase at least 200 basis points before we would have significant call activity in the next twelve months. At June 30, 2005, there were $26.0 million in FHLB advances maturing in July 2005. We believe, based on our liquidity position and slower loan demand, that we will pay these advances off at their maturity dates.

Starting in December 2004, we began to replace floating rate advances with fixed rate callable advances having lockout periods of one to two years and final maturity dates of five to ten years. Through June 30, 2005 we have replaced $111.0 million in floating rate advances with the following advances: $91.0 million in ten year no call two years, $10.0 million in five year no call two years and $10.0 million in five year no call one year. These advances have an average rate of 3.36% and are less costly than current LIBOR based floating rate borrowings. We believe these advances should provide an immediate earnings benefit and become even more valuable if rates continue to rise. This type of advance, however, has contributed to the increase in our interest rate risk exposure to falling rates as measured by our simulation and Economic Value of Equity (EVE) models. Because of this increased risk we do not anticipate increasing our fixed rate advance position. Management also has strategies available to mitigate the impact to earnings should rates fall. These would include prepaying the advances or using interest rate swaps to change the pricing structure of these borrowings.

34

Subordinated Debentures (Trust Preferred Securities)

At June 30, 2005 there were $62.9 million in subordinated debentures outstanding, unchanged from December 31, 2004. Of the $61.0 million in trust preferred securities issued to third parties outstanding at June 30, 2005, approximately $56.9 million qualifies as Tier 1 capital with the remaining $4.1 million qualifying as Tier 2 capital. The amount of trust preferred securities qualifying as Tier 1 capital is limited to 25% of all Tier 1 capital. As Tier 1 capital increases through the retention of earnings, the amount of trust preferred securities qualifying as Tier 1 capital will also increase.

Equity Capital

Stockholders’ equity at June 30, 2005 totaled $170.7 million, an increase of $10.5 million from the $160.2 million at December 31, 2004. The increase in stockholders’ equity for the first six months of 2005 was primarily due to an increase in undivided profits and, to a lesser extent, increased common stock.

A more detailed breakdown of the change in stockholders’ equity is listed below:

(i)   YNB earned net income of $11.2 million and declared and paid cash dividends of $2.4 million for the six months ended June 30, 2005.

(ii)  The net unrealized gain on securities available for sale was $48,000 at June 30, 2005 compared to a net unrealized loss of $28,000 at December 31, 2004. The shift from an unrealized loss to an unrealized gain resulted in a $76,000 increase in stockholders’ equity.

(iii) Proceeds and related tax benefit of $994,000 was received from the exercise of stock options and $286,000 was received in reinvested dividends and optional purchases associated with our Dividend Reinvestment and Stock Purchase Plan. We also recorded a $140,000 increase in stockholders’ equity associated with the fair market value adjustment related to the allocation of shares to employee accounts in our ESOP.

(iv) Unallocated ESOP shares decreased by $188,000 to $189,000 at June 30, 2005 from $377,000 at December 31, 2004.

35

     The table below presents the actual capital amounts and ratios of Yardville National Bancorp (the “Holding Company”) and The Yardville National Bank (the “Bank”) at June 30, 2005 and December 31, 2004. We experienced improvement in the regulatory capital ratios at the Bank while the Holding Company ratios remained relatively unchanged.

	Amount				Ratios
(amounts in thousands)	6/30/05		12/31/04		6/30/05			12/31/04
Risk-based capital:
Tier 1:
Holding Company	$	225,783	$	211,759		10.1	%		10.1	%
Bank		208,907		190,642		9.5			9.1
Total:
Holding Company	$	251,620	$	239,480		11.3	%		11.4	%
Bank		230,627		210,758		10.5			10.1
Tier 1 leverage:
Holding Company	$	225,783	$	211,759		8.0	%		8.0	%
Bank		208,907		190,642		7.2			6.8

The minimum regulatory capital requirements for financial institutions require institutions to have a Tier 1 leverage ratio of at least 4.0%, a Tier 1 risk-based capital ratio of at least 4.0%, and a total risk-based capital ratio of at least 8.0%. To be considered “well capitalized,” an institution must have a minimum Tier 1 capital and total risk-based capital ratio of 6.0% and 10.0%, respectively, and a minimum Tier 1 leverage ratio of 5.0%. At June 30, 2005, the ratios of the Holding Company and the Bank exceeded the ratios required to be considered well capitalized. It is our goal to maintain adequate capital to continue to support YNB’s asset growth and maintain its status as a well-capitalized institution. In the event that the Bank is required to maintain a specific capital level for any capital measure pursuant to a formal written agreement with the OCC, it may not be deemed to be “well-capitalized” for purposes of the prompt corrective action provisions of Section 38 of the Federal Deposit Insurance Act. Such capital category may not, however, constitute an accurate representation of the Bank’s general financial condition or prospects.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

There have been no material changes in our market risk from December 31, 2004, except as discussed below. For information regarding our market risk, please refer to the Company’s Annual Report on Form 10-K, for the year ended December 31, 2004.

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. The 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 guidelines is monitored on an ongoing basis. Decisions related to the management of interest rate exposure due to changes in balance sheet composition or market interest rates are made when deemed appropriate by ALCO and 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.

36

We manage and control interest rate risk by identifying and quantifying interest rate risk exposures through the use of net interest income simulation analysis, economic value at risk models, and gap analysis. We determine the appropriate risk given our strategic objectives, and manage the risk consistent with Board of Directors’ approved limits and guidelines. These limits and guidelines reflect our tolerance for interest rate risk over both short- and long-term horizons. At June 30, 2005, the cumulative one-year gap was a positive $269.7 million or 9.3% of total assets compared to a positive $117.3 million or 4.2% of total assets at December 31, 2004. The asset sensitive profile of 2004 increased during the first six months of 2005 as our investment portfolio shortened due to falling longer-term treasury rates increasing projected prepayment speeds. We lengthened our liabilities as maturing floating rate FHLB advances were shifted into convertible advances with longer lockout periods. In addition, our deposit base lengthened as much of our deposit growth in the first half of 2005 was in less interest rate sensitive deposit types and two-year certificates of deposit. 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 core deposit rates increase at a slower pace than overall interest rates. To the extent that we are required to increase our core rates faster than our model assumptions, due to market competition or funding needs, our benefit to rising rates could be reduced. In addition, approximately $334.0 million in floating rate commercial loans, tied to the prime rate of interest, have interest rate caps. The weighted average cap rate is 7.51% and the caps have a weighted average life of 23 months. If rates rise above the cap levels, these loans will become fixed rate loans. At June 30, 2005, floating rate commercial loans that had reached their caps totaled approximately $79.0 million.

Simulation analysis involves dynamically modeling our interest income and interest expense over a specified time period under various interest rate scenarios and balance sheet structures. We use simulation analysis primarily to measure the sensitivity of net interest income over 12 and 24-month time horizons within approved policy guidelines. In our base case or static balance sheet sensitivity scenario, the model estimates the variance in net interest income with a change in interest rates of plus and minus 200 basis points over a 12 and 24-month period. The plus and minus base case scenario is measured within a policy guideline of –7% change in net interest income in the first year and –14% change in year two. The following table sets forth the estimated change in net interest income from the base case scenario for a one- and two-year period based on our June 30, 2005 balance sheet:

	Percentage Change in Net Interest Income
Changes in market interest rates (in basis points)	Next 12 months			Next 24 months
As of: June 30, 2005
+200		3.4	%		1.0	%
Flat		—			—
-200		-4.9	%		-10.0	%
As of: December 31, 2004
+200		2.8	%		0.6	%
Flat		—			—
-200		-2.4	%		-1.0	%

The results of our simulation analysis suggest that the greatest risk to net interest income is to falling rates. This risk increased in the first half of 2005 primarily due to the lengthening of our liabilities, primarily FHLB advances and non-maturity deposit accounts and the shortening duration of our asset base primarily due to the shortening of our investment portfolio due to projected faster prepayment speeds. We believe that these results overstate our exposure to falling rates due to the lower longer-term rates at June 30, 2005 compared to December 31, 2004. While we believe the likelihood of falling rates in the short term is small we are taking some actions to address this issue.

37

This includes not increasing our longer-term FHLB position and evaluating strategies related to our investment and loan portfolios. For example, lengthening the duration of future security purchases or generating additional fixed rate loans would provide protection to falling rates. When factoring our 2005 financial projections (Growth Scenario) into our simulation model we see similar results.

We measure longer-term interest rate risk through the Economic Value of Equity (“EVE”) model. This model involves projecting future cash flows from our current assets and liabilities over a long time horizon, discounting those cash flows at appropriate interest rates, and then aggregating the discounted cash flows. Our EVE is the estimated net present value of these discounted cash flows. The variance in the economic value of equity is measured as a percentage of the present value of equity. We use the sensitivity of EVE principally to measure the exposure of equity to changes in interest rates over a relatively long time horizon. The following table lists the percentage change in EVE with a plus or minus 200 basis point rate shock at June 30, 2005 and December 31, 2004. Due to the level of interest rates at December 31, 2004, not all interest rates could be shocked down 200 basis points.

	Percentage Change in EVE
Changes in market interest rates in basis points (Rate Shock)	6/30/05			12/31/04
+200		-9.7	%		-17.2	%
-200		-27.4	%		-21.8	%

At June 30, 2005, our longer-term interest rate risk, as measured by the percentage change in EVE, increased in the minus 200 basis point rate shock scenario compared to December 31, 2004. While the plus 200 basis point rate shock exposure decreased and remains within policy guidelines, the exposure to falling rates increased and was slightly out of compliance with our policy risk limit of –25%. Over the first six months of 2005 our risk to falling rates has increased due to lengthening of our liability structure and the shortening of our asset structure. We believe that the low longer-term rates at June 30, 2005 overstate the degree of exposure to falling rates. As long rates have increased since June 30, 2005, we believe we are within our risk limits relating to longer-term interest rate risk. Regardless, we have taken actions to mitigate this risk. We have restricted the use of 10-year convertible advances and are examining the benefits of strategies to reduce this risk exposure, while at the same time maintaining our favorable profile to rising rates which we believe is a more likely outcome over the near term.

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

38

We believe, based on our simulation results, that as of June 30, 2005, YNB continues to be positioned to increase net interest income during a 12 to 24-month period of gradually increasing interest rates, while increasing our risk to net interest income should rates decline. Over the second half of 2005 we will begin to modestly reduce this risk while maintaining our favorable profile regarding rising rates. We continue to monitor our gap position and rate shock analyses to detect changes in our exposure to fluctuating interest rates. We have the ability, to a certain extent, to shorten or lengthen maturities on assets, sell securities, enter into derivative financial instruments, or seek funding sources with different repricing characteristics, in order to change our asset and liability structure for the purpose of mitigating the effect of short-term and longer-term interest rate risk.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and our 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 June 30, 2005. 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.

Changes to Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the fiscal quarter ended June 30, 2005 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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 cost. 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 controls. 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.

39

PART II: OTHER INFORMATION

Item 1: Legal Proceedings

The Bank is currently in discussions with the Office of the Comptroller of the Currency (“OCC”), its primary federal bank regulator, concerning the resolution of various concerns raised by the OCC in connection with its most recent annual examination of the Bank. On July 28, 2005, management received a draft of a written agreement to be executed by the Bank and the OCC that will formally require the Bank to resolve these concerns. Management and the Board of Directors are currently in discussions with the OCC relating to the terms and conditions of this agreement. At this time, we are unable to determine what impact, if any, the proposed order will have on the financial condition or operations of the Bank.

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

Not Applicable.

Item 3: Defaults Upon Senior Securities

Not Applicable.

Item 4: Submission of Matters to a Vote of Securities Holders

The annual stockholders meeting was held on June 3, 2005

The following nominees were elected to serve as directors of the Company until the 2008 Annual Meeting of shareholders:

	Votes for		Votes against
Jay G. Destribats		7,829,271		1,003,166
James E. Bartolomei		7,885,582		946,855
Gilbert W. Lugossy		7,769,424		1,063,013
Christopher S. Vernon		7,787,117		1,045,320
Robert L. Workman		7,885,082		947,355

The following nominee was elected to serve as a director of the Company until the 2006 Annual Meeting of shareholders:

George D. Muller      7,881,185 951,252

The following directors’ terms continued beyond the annual stockholders meeting:

Elbert G. Basolis, Jr.	Lorraine Buklad
Anthony M. Giampetro, M.D.	Sidney L. Hofing
Samuel D. Marrazzo	Louis R. Matlack, Ph. D.
Patrick M. Ryan	Martin Tuchman
F. Kevin Tylus

The shareholders also approved the Yardville National Bancorp 2005 Equity Incentive Plan:

Votes for: 5,502,576 Votes against 814,077 Abstain 54,661 Non-vote 2,461,133

40

Item 5: Other Information

Not Applicable.

Item 6: Exhibits.

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

41

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	YARDVILLE NATIONAL BANCORP
		(Registrant)
Date: August 15, 2005		Stephen F. Carman
		Stephen F. Carman
		Vice President and Treasurer

42

INDEX TO EXHIBITS

Exhibit
Number	Description
10.1	Employment contract between the Bank and Joanne C. O’Donnell
10.2	Real property lease between the Bank and WWM Properties LLC for our branch to be located at Route 571 and Southfield Road, West Windsor, New Jersey
10.3	Real property lease between the Bank and MYNB LLC for our branch to be located at 301 West Trenton Avenue, Falls Township, Pennsylvania
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Vice President and Treasurer
32.1	Section 1350 Certification of Chief Executive Officer
32.2	Section 1350 Certification of Vice President and Treasurer

E-1

EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT
FOR FIRST SENIOR VICE PRESIDENTS

     THIS AGREEMENT (the “Agreement”), made this 28th day of April, 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 First Senior Vice President/Chief 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 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 $120,750.00per year, payable in accordance with customary payroll practices.

E-2

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.

     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.

E-3

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.
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.

E-4

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;

E-5

     (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.

In that event, the Officer shall be entitled to the Change in Control payment (that is, the lump-sum cash payment equal to two (2) times the Officer’s highest annual rate of base

E-6

salary during the two (2) year period prior to the effective date of the Change In Control, required under Section 12 (b) herein.

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:

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.

E-7

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.

     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.

E-8

     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.

     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.

E-9

     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 A. Fone	Title:	SEVP/Chief Operating Officer
	YARDVILLE NATIONAL BANCORP
	By:	F. Kevin Tylus
Kathleen A. Fone	Title:	Senior Executive Vice President
Witness:
Kathleen A. Fone		Joanne C. O’Donnell
		Joanne C. O’Donnell
		First Senior Vice President

E-10

EX-10.2

Exhibit 10.2

LEASE

from

WWM PROPERTIES, LLC , Landlord

to

YARDVILLE NATIONAL BANK, Tenant

RE:

Route 571 and Southfield Road, Block 113 Lot 1

                                                & Block 28 Lot 1
West Windsor, Mercer County, New Jersey

DATA & EXHIBITS

DATE OF LEASE:	, 2005
LOCATION OF DEMISED PREMISES:	Route 571 and Southfield Road, Block 113 Lot 1 and Block 28 Lot 1
	West Windsor, Mercer County, New Jersey

RENT:	Period	Annual Rent		Monthly Rent
	Years 1 – 2	$	135,000.00	$	11,250.00
	Years 3 – 5	$	150,000.00	$	12,500.00
	Year 6	$	154,500.00	$	12,875.00
	Year 7	$	159,135.00	$	13,261.25
	Year 8	$	163,909.00	$	13,659.08
	Year 9	$	168,826.00	$	14,068.84
	Year 10	$	173,891.00	$	14,490.92
	Year 11	$	179,108.00	$	14,925.67
	Year 12	$	184,481.00	$	15,373.42
	Year 13	$	190,015.00	$	15,834.58
	Year 14	$	195,716.00	$	16,309.67
	Year 15	$	201,588.00	$	16,799.00

LEASE TERM:	Fifteen (15) years.
RENEWAL OPTIONS:	Two (2) renewal options of five (5) years each.
NOTICE FOR RENEWALS:	Twelve (12) Months.

NOTICES:	Landlord:	WWM PROPERTIES, LLC.
		c/o Hofing Management
		928 West State Street
		Trenton, NJ 08618
		with a copy to:
		Edgewood Properties, Inc.
		1260 Stelton Road

1

	Piscataway, NJ 08854
	Attn.: Sheryl Weingarten
	Tenant: YARDVILLE NATIONAL BANK
	Box 8487
	Trenton, New Jersey 08650
	Attn.: Frank Durand
	with a copy to:
	YARDVILLE NATIONAL BANK
	2465 Kuser Road
	Hamilton, New Jersey 08690
	Attn.:Daniel J. O’Donnell, Esq.
EXHIBITS:

A:	Plan showing location of Demised Premises
B:	Landlord’s Work
C:	Signs
D:	Exclusives
E:	Rules and Regulations

2

INDEX TO LEASE

		Page
Article I	Definitions		5
Article II	Lease of Demised Premises		6
Article III	Term		7
Article IV	Rent		7
Article V	Tenant Reimbursements		8
Article VI	Utilities		11
Article VII	Maintenance		12
Article VIII	Tenant’s Insurance		13
Article IX	Limitations on Use; Rules & Regulations; Trade Name		14
Article X	Compliance with Applicable Law		15
Article XI	Preparation of Demised Premises		16
Article XII	Tenant’s Work		16
Article XIII	Landlord’s Entry on Demised Premises		18
Article XIV	Assignment and Subletting		18
Article XV	Indemnification of Landlord		19
Article XVI	Fire and Casualty		20
Article XVII	Condemnation		21
Article XVIII	Events of Default		23
Article XIX	Landlord’s Remedies		24
Article XX	Surrender of Demised Premises		18
Article XXI	Holding Over		18
Article XXII	INTENTIONALLY OMMITTED		18
Article XXIII	Common Areas		18
Article XXIV	Signs		19
Article XXV	Subordination		19
Article XXVI	Nature of Landlord’s Liability		19
Article XXVII	Waiver		20
Article XXVIII	Quiet Enjoyment		20
Article XXIX	INTENTIONALLY OMMITTED		21
Article XXX	Waiver of Subrogation		21

3

		Page
Article XXXI	INTENTIONALLY OMMITTED		21
Article XXXII	Miscellaneous		21
Article XXXIII	Leasehold Mortgages		23
Article XXXIV	Tenant’s Responsibility Regarding Hazardous Substances		25
Article XXXV	ISRA Compliance		26
Article XXXVI	Sorting and Separation of Refuse and Trash		26
Article XXXVII	Removal of Garbage and Debris		27
Article XXXVIII	Renewal Option		27

4

               THIS LEASE, dated the                      day of                     , 2005, between WWM PROPERTIES, LLC., a New Jersey Limited Liability Company, with offices at c/o Hofing Management, 928 West State Street, Trenton, NJ 08618 (hereinafter referred to as the “Landlord”); and YARDVILLE NATIONAL BANK, Box 8487, Trenton, New Jersey 08650 (hereinafter referred to as the “Tenant”).

W I T N E S S E T H:

     In consideration of the agreements contained in this Lease, and for other good and valuable consideration, Landlord and Tenant covenant and agree as follows:

ARTICLE I

Definitions

     For purposes of this Lease, the following terms shall have the indicated meanings:

     Section 1.01. “Additional Rent” shall mean any sums other than Fixed Rent which Tenant is required to pay to Landlord under this Lease.

     Section 1.02. “Applicable Laws” shall mean all present and future laws, ordinances, resolutions, regulations and orders of all governmental entitles at any time having jurisdiction over the Shopping Center.

     Section 1.03. “Commencement Date” shall mean the date of the issuance of a temporary or permanent Certificate of Occupancy for the Demised Premises to be used and occupied only for lawful purposes, more specifically bank branch and office use.

     Section 1.04. “Common Areas” shall mean all areas of the Shopping Center that are designated by Landlord from time to time for the general use and convenience of Tenant and other tenants of the Shopping Center and their respective authorized representatives and invitees. Common Areas include, without limitation, pedestrian walkways and patios, landscaped areas, sidewalks (exclusive of sidewalks in front of the Demised Premises), service corridors, restrooms, stairways, decorative walls, plazas, throughways, loading areas, parking areas and roads.

     Section 1.05. “Demised Premises” shall mean those premises as outlined or designated on the plan attached hereto and marked as Exhibit A, being a part of the Shopping Center. Said Demised Premises containing approximately 3,000 square feet plus drive-thru canopy.

     Section 1.06. “Excusable Delay” shall mean that any time limits required to be met by either party hereunder, whether specifically made subject to Excusable Delay or not, except those related to the payment of Fixed Rent, Percentage Rent, if any, or Additional Rent, shall, unless specifically stated to the contrary elsewhere in this Lease, be automatically extended by the number of days by which any performance called for is delayed due to Excusable Delay. Excusable Delay shall mean and include those situations beyond Landlord’s or Tenant’s control, including by way of example and not by way of limitation, acts of God; accidents, repairs, strikes, shortages of labor, supplies or materials; inclement weather or, where applicable, the passage of time while waiting for an adjustment of insurance proceeds.

     Section 1.07. “Fixed Rent” shall mean the guaranteed fixed rent during the Term of Two Million, Five Hundred Forty Two Thousand, Seven Hundred, Sixty Three ($2,542,763) Dollars, to accrue as follows:

5

RENT:	Period	Annual Rent		Monthly Rent
	Years 1 – 2	$	135,000.00	$	11,250.00
	Years 3 – 5	$	150,000.00	$	12,500.00
	Year 6	$	154,500.00	$	12,875.00
	Year 7	$	159,135.00	$	13,261.25
	Year 8	$	163,909.00	$	13,659.08
	Year 9	$	168,826.00	$	14,068.84
	Year 10	$	173,891.00	$	14,490.92
	Year 11	$	179,108.00	$	14,925.67
	Year 12	$	184,481.00	$	15,373.42
	Year 13	$	190,015.00	$	15,834.58
	Year 14	$	195,716.00	$	16,309.67
	Year 15	$	201,588.00	$	16,799.00

all payable in the manner provided in Section 4.01.

     Section 1.08. “Lease Year” shall mean the period beginning on the Commencement Date and ending one year thereafter.

     Section 1.09. “Permitted Trade Name” shall mean Yardville National Bank or YNB.

     Section 1.10. “Permitted Use” shall mean the use of the Demised Premises by Tenant for the following purposes only: as a financial institution.

     Section 1.11. “Rent” shall mean and include Fixed Rent and Additional Rent.

     Section 1.12. “Rent Commencement Date”: shall mean the Commencement Date.

     Section 1.13. “Shopping Center” shall mean Village Center located at Route 571 and Southfield Road, West Windsor, New Jersey.

     Section 1.14. “State” shall mean the State of New Jersey.

     Section 1.15. “Tenant’s Share” shall mean and be equal to a fraction, the numerator of which is the square footage of the gross floor area of Tenant’s improvements constructed on the Demised Premises and the denominator of which is the square footage of the gross floor area of all buildings in the Shopping Center.

     Section 1.16. “Term” shall mean fifteen years.

ARTICLE II

Lease of Demised Premises

     Section 2.01. Landlord agrees to lease the Demised Premises to Tenant, and Tenant agrees to rent the Demised Premises from Landlord, upon and subject to the conditions hereinafter contained.

6

ARTICLE III

Term

     Section 3.01. The Term shall commence on the Commencement Date and shall expire on the last day of the month fifteen years after the Rent Commencement Date (herein the “Term Expiration Date”).

     Section 3.02. All of the obligations of Landlord are expressly conditioned upon the ability of Landlord to give possession of the Demised Premises to Tenant. Landlord shall have no liability whatsoever by reason of its inability to complete Landlord’s Work, as hereinafter defined.

     Section 3.03. If requested by Landlord, Tenant will execute and return within seven (7) days after presentation by Landlord an agreement confirming the Commencement Date, the Rent Commencement Date and the date established for the expiration of the Term.

     Section 3.04. All of the obligations of Tenant are expressly conditioned upon the Tenant receiving, within ninety (90) days of the full execution of this Lease, all necessary approvals from the Comptroller of the Currency to operate a bank branch at this location.

ARTICLE IV

Rent

     Section 4.01. Tenant agrees to pay to Landlord the Fixed Rent, without notice or demand, in equal monthly installments, in advance, on or before the first day of each and every successive calendar month during the Term hereof, except the first month’s Fixed Rent shall be paid upon the execution of this Lease. The Fixed Rent shall commence on the Rent Commencement Date. The Fixed Rent for any period which is for less than a full month shall be a prorated portion of the Fixed Rent based on a thirty (30) day month.

     Section 4.02. The Fixed Rent shall be paid to Landlord by Tenant, without deduction, counterclaim or setoff, except as expressly provided herein, and at Landlord’s address or at such place as Landlord may from time to time designate in writing.

     Section 4.03. If any payment of Rent is not received by Landlord within five (5) business days of the date when due, Tenant shall pay to Landlord on demand as a late charge, interest on the overdue Rent at the lesser of the maximum rate permitted by law or eighteen (18%) percent per anum from the due date. Acceptance of any late charge shall not constitute a waiver of Tenant’s default with respect to the overdue amount, or prevent Landlord from exercising any of the other rights and remedies available to Landlord.

     Section 4.04. No abatement, diminution or reduction of the Basic Rent, or any additional rent or other charges required to be paid by Tenant pursuant to the terms of this Lease, shall be claimed by, or allowed to, Tenant for any inconvenience, interruption, cessation or loss of business or otherwise, caused directly or indirectly by any present or future laws, ordinances, order, rules, regulations or requirements of any Federal, State, County or Municipal governments, or by priorities, rationing or curtailment of labor or material, or by war, civil commotion strikes or riots, or any matter or thing resulting there from or by any other cause or causes beyond the control of Landlord, including, without limitations, casualty to the Demised Premises, nor shall this Lease in any way be affected by any such causes, except as expressly provided in this Lease.

7

ARTICLE V

Tenant Reimbursements

     Section 5.01. In addition to the Fixed Rent and commencing on the Commencement Date, Tenant shall pay to Landlord as Additional Rent, Tenant’s Share of the following taxes, insurance premiums and Common Area costs (hereinafter called “Reimbursements”):

               (A) All real property taxes and special assessments (the “Real Estate Taxes”) levied or assessed against the Shopping Center. Tenant shall not be required to pay any taxes imposed upon the net income of Landlord or franchise taxes of Landlord, or any estate, succession, inheritance or transfer taxes imposed upon Landlord. If, at any time during the Term, any lawful governing authority levies or assesses against Landlord any tax, fee, or excise, however described, as a direct substitution in whole or in part for, or in addition to, or as the substantial equivalent of any Real Estate Taxes, then Tenant shall pay as provided herein Tenant’s Share of that tax, fee or excise. Tenant shall pay before delinquency all taxes, assessments, license fees, and other charges that are levied or assessed against Tenant’s personal property located on the Demised Premises. On demand by Landlord, Tenant shall furnish Landlord with satisfactory evidence of these payments. If any taxes on Tenant’s personal property are levied against Landlord or Landlord’s property, or if the assessed value of the Shopping Center is increased by the inclusion of a value placed on Tenant’s personal property or as a result of alterations, additions or improvements made to the Demised Premises by or for Tenant, Tenant, on demand, shall immediately pay to Landlord as Additional Rent the sum of the taxes levied against Landlord, or the proportion of the taxes resulting from such increase in Landlord’s assessment caused thereby. Landlord shall be entitled to, in good faith using its reasonable determination, ascertain the value of the tax increase attributable to Tenant’s personal property or alterations, additions or improvements.

                    (1.) If permitted by the appropriate taxing authority without the necessity of a subdivision, Tenant shall make application for the Demised Premises and the improvements erected thereon to be treated as a separate tax lot and, if successful, shall pay real property taxes and special assessments directly to the taxing authority. In this event, real property taxes and assessments will not be paid to Landlord as additional rent.

                    (2.) Nothing herein contained shall require Tenant to pay any Federal or State income taxes assessed against the Landlord, or any gift, estate, succession, inheritance or transfer taxes of Landlord imposed as owner of the fee interest of the Demised Premises or any taxes imposed upon rent as such, payable by Tenant under this Lease; provided, however, that if at any time during the term of this Lease the methods of taxation prevailing at the Commencement Date shall be altered so that in lieu of or as a substitute for the whole or any part of the taxes, assessments, levies, impositions or charges now levied, assessed or imposed on real estate and improvements thereon there shall be levied, assessed and imposed a tax, assessment, levy, imposition or charge, wholly or partially as a capital levy or otherwise, upon the rents received therefrom, or measured by or based in whole or in part upon the Demised Premises and imposed upon Landlord, than all such taxes, assessments, levies impositions, or charges or any part thereof so measured or based shall be deemed to be included within the term “Impositions” for the purposes hereof to the extent that such imposition would be payable if the Demised Premises were the only property of Landlord subject to such Imposition, and Tenant shall pay and discharge the same as herein provided in respect of the payment of Impositions. Subject to the specific exclusions set forth above in this Section 5.01, Tenant shall in addition to the foregoing, pay any new taxes of a nature not presently in effect, but which may be hereafter levied against or imposed upon Landlord or the Demised Premises if such tax shall be based on or arise out of the ownership, use or operation of the Demised Premises.

8

                    (3.) If Tenant pays Real Estate Taxes separately, then Tenant, upon request of Landlord, shall furnish to Landlord, or if requested by Landlord furnish to any fee mortgagee, within ten (10) days after the date when such Imposition will become due, official receipts if available of the appropriate taxing authority, or other evidence satisfactory to Landlord or such mortgagee evidencing the payment thereof. The certificate, receipt or bill of the appropriate official designated by law to make or issue the same shall be prima facie evidence that such Imposition is due and unpaid, or has been paid at the time of the making or issuance of such certificate, receipt or bill.

                    (4.) Landlord appoints Tenant the attorney-in-fact of Landlord for the purpose of making all payments to be made by Tenant pursuant to any of the provisions of this Lease to persons or entities other than Landlord. In case any person or entity to whom any sum is directly paid by Tenant under any of the provisions of this Lease shall refuse to accept payment of such sum from Tenant, Tenant shall thereupon give written notice of such fact to Landlord and shall pay such sum to Landlord at the address specified herein and Landlord shall thereupon pay such sum to such person or entity.

                    (5.) Notwithstanding any other provision herein set forth, Tenant, in addition to being responsible for taxes and insurance as herein set forth, shall be responsible for all fire insurance premiums on buildings and improvements situate on the Demised Premises from the dates when Impositions are first payable by Tenant pursuant to Section 5.01 above through and inclusive of the dates when Basic Rent as herein set forth shall be payable.

                    (6.) Tenant, at its own cost and expense, shall take good care of the Demised Premises, all exclusive rights of way, curbs and appurtenances thereto and maintain and repair any easements used in common with others in accordance with any maintenance and repair obligations relating thereto, and shall keep the same in good order and condition, and reasonably free of any dirt, rubbish, snow, ice and unlawful obstructions. Landlord is responsible for snow removal from Tenant’s drive-thru area.

                    (7.) Tenant has the right to seek a reduction in the valuation of the Demised Premises for tax purposes and to contest in good faith by appropriate proceedings, at Tenant’s expense, the amount of validity in whole or in part of any imposition, tax or assessment affecting the Demised Premises.

                    (8.) Landlord shall not be required to join in any proceedings referred to herein unless the provisions of any law, rule or regulation at the time in effect shall require that such proceedings be brought by or in the name of Landlord or any owner of the Demised Premises, in which event Landlord shall join in such proceedings or permit the same to be brought in its name. Landlord shall not ultimately be subjected to any liability for the payment of any costs or expenses in connection with any such proceedings, and Tenant shall indemnify and save harmless Landlord from any such costs and expenses. Tenant shall be entitled to any refund of any imposition and penalties or interest thereon received by Landlord which have been paid by Tenant or which have been paid by Landlord but previously reimbursed in full by Tenant.

                    (9.) Landlord, in the event Tenant has not filed an appeal, reserves unto itself the right to appeal and seek a reduction in the valuation of the Demised Premises for real estate tax purposes.

9

                    (10.) Tenant is only responsible for its share of Reimbursements and Impositions which come due during Tenant’s Term, and Landlord agrees that any improvement assessments will be paid in the maximum number of permitted installments.

               (B) All insurance premiums incurred by Landlord for policies of insurance maintained on or with respect to the Shopping Center, including but not limited to fire and extended coverage insurance, liability insurance, workmen’s compensation, rent interruption insurance and any other insurance that Landlord deems necessary to be carried on or with respect to the Shopping Center. If the rate of any insurance carried by Landlord is increased as a result of Tenant’s use of the Demised Premises, then Tenant shall pay to Landlord as Additional Rent, upon demand, the full amount of any such increase.

               (C) All customary and reasonable sums expended by Landlord for the maintenance and operation of the Common Areas, and an allowance to Landlord for Landlord’s supervision of maintenance and operation of the Common Areas in an amount equal to 15% times the total Common Area Expenses of the Shopping Center (excluding Real Estate Taxes and insurance). Costs for maintenance and operation of the common areas shall include by way of example and not by way of limitation, the costs of the following: resurfacing, paving, repainting and restriping, roof repairs, exterminating, cleaning, sweeping, and other maintenance and repair services with respect to the Common Areas of the Shopping Center, or any part thereof;; policing and providing for security guards or security patrols; costs for local fire protection; purchasing and maintaining refuse receptacles and costs of trash removal; planting and relandscaping; snow removal; purchasing, constructing, maintaining or repairing car stops, directional signs and other markers; lighting and other utilities; reasonable depreciation allowance on improvements, machinery, and equipment used in connection with the Common Areas; such fees as may be paid to any third party in connection with such maintenance and operation or the management of the Shopping Center (such management fees are to be in lieu of the 5% Landlord’s supervision fee set forth above); and such other costs as the Landlord, in its reasonable discretion, shall deem necessary for the maintenance and operation of the Common Areas. All Capital Expenditures made to the Shopping Center, i.e., expenditures which, in accordance with generally accepted accounting principles, are not fully chargeable to current expense in the year the expenditure is incurred, shall be excluded from Common Area Expenses except the cost of repaving described above, which repaving cost will be amortized over the useful life of the improvement.

     Section 5.02. Landlord may submit to Tenant a statement of anticipated monthly Reimbursements for the period between the Commencement Date and the end of the first Lease Year and for each subsequent Lease Year or fraction thereof. If so, Tenant shall pay such Reimbursements on a pro rata monthly basis concurrent with the payment of the Fixed Rent. Tenant shall continue to make said monthly payments until notified by Landlord of a change thereof. Landlord shall furnish to Tenant a statement showing the total Reimbursements, Tenant’s Share of total Reimbursements for the prior Lease Year, and the payments made by Tenant with respect to such Lease Year, within sixty (60) days after the end of each Lease Year. However, Landlord’s failure to provide such statement of Reimbursements by the date provided hereinabove shall in no way excuse Tenant from its obligation to pay its pro rata share of Reimbursements or constitute a waiver of Landlord’s right to bill and collect such pro rata share of Reimbursements from Tenant in accordance with this Article, provided that Landlord submits a final statement of total reimbursements for a particular calendar year within one year after the end of such calendar year. If Tenant’s Share of Reimbursements for the Lease Year exceeds the payments made by Tenant, Tenant shall pay Landlord the deficiency within ten (10) days after receipt of the statement. If Tenant’s payments made during the Lease Year exceed Tenant’s Share of Reimbursements, Landlord shall credit the sum of such excess toward the monthly Reimbursements next coming due or, if there are insufficient installment periods remaining in Tenant’s term, pay same over to Tenant. The actual Reimbursements of the prior Lease Year may be used for the purpose of calculating the

10

anticipated monthly Reimbursements for the then current Lease Year, subject to the right of Landlord to increase the monthly Reimbursements for anticipated increased costs. . Tenant shall have the right, on an annual basis and at Tenant’s sole cost, to audit all Common Area costs charged by the Landlord.

     Section 5.03. Landlord shall keep full, complete and proper books, records and accounts of Common Area Expenses. No more than once per annum and upon reasonable written notice, Tenant and its agents and employees shall have the right at any time and at all times during regular business hours to examine and inspect all books and records of Landlord pertaining to Common Area Expenses for the purpose of investigating and verifying the accuracy of any statement of Common Area Expenses. Once in any calendar year, Tenant may cause an audit of Common Area Expenses to be made by an independent certified accountant of Tenant’s selection and, if the Common Area Expenses for the accounting period covered by the statement which is the subject of the audit are found to be overstated by more than five percent (5%), Landlord shall immediately pay to Tenant the cost of such audit, not to exceed the lesser of the amount of the discrepancy or One Thousand Dollars ($1,000.00), plus the amount of any overpayment made by Tenant to Landlord, otherwise the cost of such audit shall be paid by Tenant. If the statement of Common Area Expenses which is the subject of the audit is otherwise found to be incorrect, the party found to be owing money shall promptly pay an offsetting sum to the other party.

ARTICLE VI

Utilities

     Section 6.01. Tenant shall pay promptly for all water, gas, heat, light, power, sewer charges, telephone installation utility hookup, connection and service charges, sprinkler standby charges, and for all other services and utilities supplied to the Demised Premises on and after the Commencement Date, together with any tax, excise or surcharge thereon. Within ten (10) days after the expiration or termination of the Term of this Lease, Tenant shall provide Landlord with satisfactory evidence that all such utility charges have been paid through the last day of the Term. Tenant agrees to immediately apply for all applicable utilities to be separately metered and billed to Tenant. If any such services are not separately metered to and paid by Tenant, or if any such services are furnished and paid for by Landlord, Tenant shall pay to Landlord as Additional Rent a reasonable proportion to be determined by Landlord of all charges jointly metered with other premises and all services which are furnished and paid for by Landlord. If Landlord is required to construct new or additional utility installations, including, without limitation, wiring, plumbing, conduits, and mains, resulting from Tenant’s changed or increased requirements, Tenant shall on demand pay to Landlord, in advance of installation, the total cost of such installation. Landlord reserves the right to interrupt the supply of water, gas, electric and also sewer service and any other similar utilities for the Demised Premises when required by reason of accident or of repairs, alterations or improvements, until such repairs, alterations or improvements shall have been completed. Landlord agrees to use its best efforts to limit such interruptions to non-business hours.

     Section 6.02. Landlord can discontinue, without notice to Tenant, any of the utilities or services furnished to the Demised Premises for which Tenant fails to pay and no such discontinuance shall be deemed an actual or constructive eviction.

     Section 6.03. Under no circumstances shall Landlord be liable to Tenant on account of the failure, discontinuance, interruption or quality of the utilities or services furnished to the Demised Premises, regardless of whether such utilities or services are furnished by Landlord or by third parties, nor shall any of the foregoing excuse any payment or performance by Tenant, unless caused by the gross negligence of

11

Landlord, provided, however, if said utilities are discontinued, at no fault of the Tenant, for a consecutive period of 180 days or more, the Tenant shall have the right to terminate this Lease.

ARTICLE VII

Maintenance

     Section 7.01. Tenant, at its sole expense, shall maintain, in good condition and repair, the Demised Premises and every part thereof (except those portions required to be maintained by Landlord as hereinafter provided) including by way of example and not by way of limitation, the maintenance, replacement and repair of all of Tenant’s building, Tenant’s personal property, Tenant’s signs as permitted by the provisions of this Lease, storefronts, doors, window treatments, plate glass and show windows, door and window frames and moldings,, plumbing and pipes (including any damage to plumbing and pipes caused by the introduction of any foreign matter into the plumbing system by Tenant or Tenant’s employees or customers), electrical wiring and conduits, and the roof, to the extent of any installations for vents, skylights or other installations made by Tenant. Tenant shall be liable for any damage to the building on the Demised Premises and other buildings in the Shopping Center, resulting from the acts or omissions of Tenant or its representatives, employees or customers. Tenant shall maintain its store windows in a clean and neat condition and shall keep the sidewalks adjoining the Demised Premises free from ice, snow and rubbish. Tenant shall be responsible for snow removal, cleaning and landscape maintenance in the area depicted on Exhibit A-1.

     Section 7.02. Should Tenant fail to maintain, replace or repair the Demised Premises pursuant to Section 7.01, Landlord shall give Tenant specific, written notice thereof, and Tenant shall have thirty (30) days thereafter to cure such failure, or such longer period as is reasonably necessary. If such failure is not cured within said thirty (30) days, Landlord, at its option, may perform the necessary maintenance, replacement or repair. Should Landlord opt not to perform the foregoing work, it shall not in any way be liable for any damages sustained by Tenant, or any of Tenant’s employees, invitees, licensees etc. Landlord shall bill Tenant directly for all costs associated with the necessary maintenance, replacement or repair including, but not limited to any damage to third parties affected by Tenant’s failure to perform said work, and said amount shall be deemed Additional Rent and due Landlord with the next monthly payment of fixed rent. Failure of Tenant to comply with this Section 7.02 shall be deemed an Event of Default under this lease, but only if Tenant fails to cure such default prior to the expiration of the applicable grace period provided in Article XVIII.

     Section 7.03. Landlord shall maintain in good condition the following with the cost for same to be deemed Reimbursements and the Tenant shall be responsible for Tenant’s Share of such costs in accordance with Article V: The roof and structural parts of the building and other improvements in which the Demised Premises are located, which structural parts include the foundations, bearing and exterior walls (excluding glass and doors and the frames and molding thereof), and the electrical, plumbing and sewage systems lying outside the Demised Premises. Notwithstanding the foregoing, any damage to the roof or structure caused by (i) any negligent act or omission by Tenant, its agents, employees or invitees, (ii) any work done on the roof of the Demised Premises by Tenant, its agents or employees, or (iii) vandalism or theft by Tenant, its agents, employees or invitees shall be paid for in full by Tenant.

     Section 7.04. If Landlord fails to perform any of its obligations under Section 7.03, Tenant shall give Landlord specific, written notice thereof, and Landlord shall have thirty (30) days thereafter to cure such failure; provided, however, that if such cure cannot reasonably be completed within such thirty (30) day period, then Landlord shall, subject to Excusable Delays, commence to cure same within thirty (30) days and diligently and in good faith continue to cure such failure to completion. The failure of Landlord to perform

12

any such repairs shall not impose any liability on Landlord nor excuse any performance or payment by Tenant required by this Lease

ARTICLE VIII

Tenant’s Insurance

     Section 8.01. Tenant, at its sole expense, shall maintain liability insurance with liability limits for injury to persons of not less than Two Million and 00/100 ($2,000,000.00) Dollars per person and Two Million and 00/100 ($2,000,000.00) Dollars per occurrence, and for injury to property of not less than One Million and 00/100 ($1,000,000.00) Dollars per occurrence, insuring against all liability arising out of the use or occupancy of the Demised Premises. All such insurance shall insure performance by Tenant of the indemnity provisions of Article XV and shall name Landlord, Tenant and such other persons with an interest in the Shopping Center as Landlord shall designate as the insureds.

     Section 8.02. Tenant covenants and represents, said representation being specifically designed to induce Landlord to execute this Lease, that Tenant’s personal property and fixtures and any other items which Tenant may bring to the Premises which may be subject to any claim for damages or destruction due to Landlord’s negligence shall be fully insured by a policy of insurance covering all risks with no deductible which policy shall specifically provide for a waiver of subrogation for Landlord and all Shopping Center tenants without regard as to whether or not same shall cost an additional premium and notwithstanding anything to the contrary contained in this Lease. Should Tenant fail to maintain said all risk insurance with the required waiver of subrogation, or fail to maintain the liability insurance, naming Landlord as an additional named insured, then Tenant shall be in default hereunder and shall be deemed to have breached its covenants as set forth herein, and such breach shall constitute an Event of Default, unless Tenant cures such breach within the applicable grace period provided in Article XVIII.

     Section 8.03. Tenant shall insure the improvements on the property in an amount equal to the full replacement value of the improvements. Such replacement value shall be determined from time to time but not more frequently than once in any one sixty (60) consecutive calendar months at the request of Landlord by an appraiser, architect or contractor who shall be mutually and reasonably acceptable to Landlord and Tenant.

               A.Insurance proceeds shall be held in an interest bearing account maintained by the attorneys for Landlord and Tenant or if Tenant’s Mortgagee so requires, then such insurance proceeds shall be held by Tenant’s Mortgagee, The proceeds shall first be used to pay Tenant’s mortgage, if Tenant’s Mortgagee so elects, and the balance shall be used to construct or reconstruct buildings or improvements having value substantially equivalent to or greater than the value of the building(s) or improvement(s) damaged or destroyed. Tenant shall be responsible to provide any additional funds above available insurance proceeds to complete the reconstruction. Progress payments for reconstruction shall be paid to Tenant upon the written request of Tenant which shall be accompanied by reasonable evidence signed by Tenant, or the executive officer of Tenant, or by the architect or engineer in charge of such construction, dated not more than thirty (30) days prior to such request, setting forth the following:

               B. That the sum then requested either has been paid by Tenant, or is justly due to contractors, subcontractors, material men, engineers, architects or other persons who have rendered services or furnished materials for the restoration therein specified, and giving a brief description of such services and materials and the several amounts so paid or due to each of said persons in respect thereof, and stating that no part of such expenditures has been or is being made the basis, in any previous or then

13

pending request, for the payment of such monies or has been made out of the proceeds of such monies received by Tenant, and that the sum then requested does not exceed the value of the services and materials described in the certificate.

               C. That except for the amount, if any, stated pursuant to the foregoing sub clause A in such certificate to be due for services and materials, there is no outstanding indebtedness shown on Tenant’s books or known to the person signing such certificate, after due inquiry, for which payment was made under any prior requisition for labor, wages, materials, supplies or services in connection with such construction work, which if unpaid, might become the basis of a vendor’s, mechanics, laborer’s or material men’s statutory or similar lien upon such construction or upon the Demised Premises or any part thereof.

               D. An official search of the public records or a search of a title insurance company doing business in the State of New Jersey showing that there has not been filed with respect to the Demised Premises, or any part thereof, any vendor’s mechanic’s, laborer’s, material men’s or like lien, which has not been discharged or record, except such as will be discharged by payment of the amount then requested.

               E. If the net money as aforesaid at the time held by the attorneys for Landlord and Tenant, or Tenant’s mortgagee, as the case may be, shall be insufficient to pay the entire cost of such construction, Tenant shall pay the deficiency. If, on the other hand, there are any surplus funds held by such attorneys or mortgagee, as the case may be, after payment of all costs of restoration, such funds shall be paid over to Tenant.

     Section 8.04. All insurance required under this Lease shall be issued by insurance companies of recognized responsibility which are authorized to do business in the State, having a Best Rating of B+ or better. Tenant, prior to entering on the Demised Premises, shall deliver to Landlord each policy or a certificate evidencing such policy, together with evidence of payment of premiums for all policies of insurance required to be maintained by Tenant pursuant to the terms of this Lease. Within thirty (30) days prior to the anniversary date of each policy of insurance required to be maintained by Tenant pursuant to the terms of this Lease, Tenant shall deliver to Landlord evidence of renewal of such policies, together with evidence of payment of premiums for all such policies. Each policy shall be issued as a primary policy not contributing with and not in excess of coverage of any insurance which Landlord may carry, and shall contain an endorsement requiring thirty (30) days’ written notice from the insurance company to Landlord before cancellation or change in the coverage, scope or amount of any policy.

ARTICLE IX

Limitations on Use; Rules and Regulations; Trade Name

     Section 9.01. Tenant shall use the Demised Premises for the Permitted Use only and shall not use or permit the Demised Premises to be used for any other purpose without the prior written consent of Landlord, which consent will not be unreasonably withheld or delayed. Tenant acknowledges that Landlord may covenant with other tenants of the Shopping Center to restrict specific uses elsewhere in the Shopping Center, and Tenant agrees, upon written notice from Landlord, to thereafter immediately refrain from any use of the Demised Premises which is violative of such covenant(s). Any breach of this Article shall constitute an Event of Default, but only if Tenant fails to cure such breach within the applicable grace period provided in Article XVIII. This Section shall not prohibit Tenant from operating a financial institution or other lawful use permitted under this Lease.

14

     Section 9.02. Tenant shall not use or permit the Demised Premises to be used in any manner that will constitute waste, nuisance, unlawful, immoral or objectionable activity, or unreasonable annoyance (including, without limitation the use of loudspeakers or sound or light apparatus that can be heard or seen outside the Demised Premises) to other tenants in the Shopping Center or which will cause an increase in rates or a cancellation of any insurance policy covering the Shopping Center. Tenant shall not use the Demised Premises for the preparation, manufacture or mixing of anything that might emit any objectionable odor or objectionable noises or lights into the Shopping Center. No secondhand store, auction, distress or fire sale, or bankruptcy or going-out-of-business sale may be conducted on the Demised Premises without Landlord’s written consent. Tenant shall not sell or display merchandise outside the confines of the Demised Premises or within the Common Areas. Tenant shall not do anything on the Demised Premises that will in any manner injure, vibrate, or shake the Demised Premises or overload the electrical system. Any exclusive uses afforded to Tenant or restrictions made for the Tenant’s benefit under this Lease shall not be applicable any store containing 8,000 square feet or more of space.

     Section 9.03. Tenant shall open the Demised Premises for the Permitted Use for at least one day. If the Demised Premises are destroyed or partially condemned, and this Lease remains in full force and effect, Tenant shall continue operation of its business at the Demised Premises to the extent reasonably practical from the standpoint of good business judgment during any period of reconstruction. While open, Tenant shall maintain adequate personnel for the efficient serving of its customers. Tenant agrees that Landlord shall have the right to prohibit the continued use by Tenant of any method of business operation, advertising or interior display if, in Landlord’s reasonable opinion, the continued use thereof would impair the reputation of the Shopping Center or is otherwise out of harmony with the general character thereof, and upon notice from Landlord, Tenant shall immediately refrain from or discontinue such activities. Tenant shall employ its best efforts to operate the business conducted on the Demised Premises in a manner consistent with a first class shopping center. Notwithstanding the above, any reduction in the amount of square footage in the Demised Premises, resulting from any partial destruction or condemnation, will in turn cause an equitable adjustment in rent, in proportion to the portion of the Demised Premises destroyed or condemned.

     Section 9.04. Tenant shall comply with the rules and regulations hereinafter set forth in Exhibit E attached hereto and made a part hereof. Landlord shall have the right from time to time to establish reasonable amendments and additional rules in relation thereto. On delivery of a copy of such rules and regulations to Tenant, Tenant shall comply with the rules and regulations and any subsequent amendments thereto. Landlord shall make reasonable efforts to enforce the rules and regulations uniformly against all tenants in the Shopping Center, provided, however, that Landlord shall not be responsible to Tenant for the nonperformance of any of said rules and regulations by any other tenant or occupant of the Shopping Center or for any failure on the part of Landlord to enforce the same.

     Section 9.05. Tenant shall operate the Demised Premises under the Permitted Trade Name and no other, so long as same shall not be held to be in violation of any applicable law; provided, however, that the Permitted Trade Name may be changed if Tenant changes its name, merges with another company or assigns or sublets the Demand Premises with Landlord’s consent, pursuant to Article XIV.

ARTICLE X

Compliance With Applicable Law

     Section 10.01. Tenant shall not use the Demised Premises, or permit anything to be done in or about the Demised Premises, which will in any way conflict with any applicable law. Tenant shall, at its sole expense, promptly comply with all applicable laws, including environmental laws, relating to or affecting the condition, use or occupancy of the Demised Premises. Failure to comply with any laws shall constitute an

15

Event of Default, as hereinafter defined, but only if Tenant fails to cure such failure within the applicable grace period provided in Article XVIII.

ARTICLE XI

Preparation of Demised Premises

     Section 11.01. Landlord, at its expense, shall perform the work set forth on Exhibit B (hereinafter referred to as “Landlord’s Work”). All other work done by Landlord at Tenant’s request shall be at Tenant’s expense and shall be paid for within five (5) days after the presentation to Tenant of a bill for such work. Acceptance of possession by Tenant shall be conclusive evidence that Landlord’s Work has been fully performed in the manner required. Any items of Landlord’s Work which are not completed as of Commencement Date shall be identified by Tenant on a punchlist to be submitted to Landlord at the Commencement Date and Landlord shall thereafter complete the same. Any items of Landlord’s Work which are not timely identified on such punchlist shall be deemed completed.

     Section 11.02. The Landlord will make every effort to complete Landlord’s Work on or before the anticipated Commencement Date of the Term, provided that if there shall be a delay in such completion beyond such date, the Term of this Lease shall be extended by an equal period of time so that this Lease shall continue for the Term of fifteen (15) years after completion of Landlord’s Work. The Landlord and the Tenant shall execute a written instrument to confirm any modification in the dates of the Term by reason of delay in completing Landlord’s Work.

     Section 11.03. The Landlord’s Work shall be deemed completed and the Term of this Lease and Tenant’s obligations hereunder shall commence on the date when the Landlord shall deliver to the Tenant a letter stating that Landlord’s Work is substantially completed, subject only to normal punchlist items and a temporary or permanent Certificate of Occupancy has been issued..

     Section 11.04. The Landlord will perform the Landlord’s Work in a good and workmanlike manner. Landlord may substitute material called for in Exhibit B, provided same is of equal or greater quality.

ARTICLE XII

Tenant’s Work

Section 12.01. Subject to Landlord’s obligations under Article XI, Tenant agrees to accept the Demised Premises in an “AS IS” condition as of the Commencement Date without any representations or warranties on the part of Landlord. Except as otherwise specifically provided in this Lease, Landlord has not made any representations or warranties of any kind to Tenant. No representations or warranties of any kind made by anyone, including without limitation, any real estate broker or agent, shall be binding upon Landlord unless expressly set forth in this Lease. Tenant shall be financially responsible for the following construction activities. All work shall be performed in accordance to architectural plans prepared by Ignarri and Lummis Architects and Tenant shall have rights to any and all warranties provided by sub-contractors and or general contractors.

A.	Architecture Fees for interior work.
B.	Interior Fit-Out including but not limited to paint, carpet/flooring, furniture, fixtures, equipment, Drive-Thru lanes equipment, upgrades to electrical system, vault system, partitions, and doorways.

16

Tenant may, at any time and from time to time, alter, expand, demolish, restore, modify or change any such improvements in whole or in part provided that Tenant shall first obtain Landlord’s written approval, which approval shall not unreasonably be withheld. Tenant’s improvements on the Premises must have a value substantially equivalent to or greater than the improvements which were originally approved by Landlord. All work done which is required to be performed to permit Tenant’s occupancy and use of the Demised Premises for the Permitted Use shall be performed by Tenant, at its sole expense, and Landlord shall not be required to perform or to bear any of the expenses for such work. All of such work shall be performed in a diligent manner.

     Section 12.02. Any Tenant’s Work made shall remain on and be surrendered with the Demised Premises on expiration or termination of the Term.

     Section 12.03. Tenant shall have no power to do any act or make any contract which may create or be the foundation for any lien, mortgage or other encumbrance upon the estate of Landlord in the Shopping Center, or any part thereof. All Tenant’s Work, repairs, materials and labor shall be done at Tenant’s sole expense, and Tenant shall be solely and wholly responsible to contractors, laborers and materialmen and such contractors, laborers and materialmen are hereby charged with notice that they must look solely and wholly to Tenant for the payment of any bills for work done and materials furnished. Landlord reserves the right, before approving any Tenant’s Work, to require Tenant to furnish it a good and sufficient bond to secure Tenant’s liability for payment, for Tenant’s Work.

     Section 12.04. Tenant shall procure and maintain an adequate workmen’s compensation insurance policy and such additional insurance policies as Landlord shall reasonably request to insure against losses, damages or claims arising out of or from Tenant’s Work. Prior to the commencement of such Tenant’s Work, Tenant shall deliver to Landlord each policy, or a certificate evidencing such policy, together with evidence of payment of premiums for all policies of insurance required to be maintained by Tenant pursuant to this Section 12.06.

     Section 12.05. A. On and after the date of this Lease, Tenant may make, from time to time, applications for Permits desired by Tenant; provided, however, (i) that Landlord shall incur no costs or expenses in connection therewith; and (ii) Tenant shall indemnify and save Landlord harmless from any and all expenses, charges, claims or liability with respect thereof. As used herein, Permits shall mean all permits and approvals (including, without limitation, zoning, use, building, site plan and curb cut permits and approvals; permits and approvals required by virtue of any of the federal or state environmental laws as now enacted or hereafter amended or any similar statute, regulation or requirement whether federal, state or local; and such other permits and approvals which may be required to be issued by any local, state or federal governmental body having jurisdiction over the Premises), licenses subdivision and other approvals, certificates, exceptions, authorizations, zoning changes, zoning variances and special exceptions, as may be required or desired by Tenant to permit the lawful construction, installation, maintenance and operation on the Demised Premises of such improvements as Tenant shall from time to time desire. Tenant shall have no obligation to appeal the denial of any Permits but may do so. The granting of any Permit shall not preclude Tenant from reapplying for a similar Permit based upon different plans for the Demised Premises.

               B. Landlord shall fully cooperate with Tenant in connection with all applications for Permits, including when required, the actual signing or submission of any application or consent thereto.

17

     Section 12.06 Such improvements as may from time to time exist or be constructed on the Demised Premises by Tenant shall be owned by Tenant until the Termination Date or the sooner termination of this Lease. Upon such Termination Date or sooner termination, Tenant shall automatically transfer ownership of such improvements to Landlord without further documentation. If requested by Landlord, Tenant shall execute to Landlord by bargain and sale deed without payment of any consideration there for.

ARTICLE XIII

Landlord’s Entry on Demised Premises

     Section 13.01. Landlord and its authorized representatives shall have the right to enter the Demised Premises at all reasonable times, upon reasonable notice, except in the case of an emergency, for any purpose whatsoever, including, without limitation, to post “for rent” or “for lease” signs during the last six (6) months of the Term.

     Section 13.02. Landlord shall not be liable in any manner for any inconvenience, disturbance, loss of business, nuisance, or other damage arising out of Landlord’s entry on the Demised Premises as allowed in this Article XIII. Tenant shall not be entitled to any abatement or reduction of rent if Landlord exercises any rights reserved in this Article, and no such exercise of Landlord’s rights hereunder shall be deemed an eviction or disturbance of Tenant’s use and possession of the Demised Premises. Landlord shall use its best efforts to conduct its activities on the Demised Premises as allowed in this Section in a manner that will not cause unreasonable inconvenience, annoyance, or disturbance to Tenant. Landlord reserves the right to run pipes, lines, feeders or other systems throughout the land area of the Demised Premises, subject to the provisions of this Section 13.02.

ARTICLE XIV

Assignment and Subletting

     Section 14.01. Tenant shall not assign or encumber its interest in this Lease or in the Demised Premises, or sublease all or any part of the Demised Premises, or sublease all or any part of the Demised Premises, or allow any other person or entity (except Tenant’s authorized representatives) to occupy or use all or any part of the Demised Premises without first obtaining Landlord’s prior written consent, which consent shall not be unreasonably withheld or delayed. Any assignment, encumbrance, or sublease without Landlord’s prior written consent shall be void and shall constitute an Event of Default under this Lease. No consent to any assignment, encumbrance, or sublease on any one occasion shall constitute a consent to any subsequent assignment, encumbrance or sublease, it being agreed that Tenant must first obtain Landlord’s prior written consent on each occasion. If Tenant is a partnership, a withdrawal or change, voluntary, involuntary, or by operation of law, or any partner or partners owning fifty (50%) percent or more of the partnership, or the dissolution of the partnership, shall be deemed an assignment and shall require Landlord’s prior written consent. The sale of all or substantially all of the assets or capital stock of the Tenant, by way of merger or acquisition, shall not constitute an assignment requiring the consent of the Landlord..

     Section 14.02. With respect to any proposed sublease or assignment, Tenant shall submit to Landlord all documents, information and agreements concerning the same, and prior to the effective date of any such sublease or assignment, Landlord shall have the option, exercisable in writing to Tenant, to recapture the within Lease so that such prospective sublessee or assignee shall then become the sole tenant of Landlord hereunder, or alternatively to recapture said space, and the within Tenant shall be fully released

18

from any and all obligations hereunder. Landlord may condition its consent to any assignment or subletting upon any matters or things required by Landlord as it shall determine in its reasonable discretion, including without limitation, Landlord’s receipt of a satisfactory attornment from the sublessee. Landlord may further condition its consent to any subletting upon Landlord’s receipt of a covenant by Tenant to pay to Landlord, in addition to the Rent reserved hereunder, fifty percent (50%) of any and all sums which Tenant may receive from such sublessee under the sublease, directly or indirectly, which are in excess of the Rent after deduction of the reasonable costs to Tenant of the subletting. The assignee or sublessee shall assume, by written instrument, all of the obligations of this Lease, and a copy of such assumption agreement shall be furnished to Landlord within ten (10) days of its execution. The Tenant and each assignee shall be and remain liable for the observance of all the covenants and provisions of this Lease, including, but not limited to, the payment of Rent reserved herein, through the entire Term of this Lease, as the same may be renewed, extended or otherwise modified.

     Section 14.03. Tenant hereby immediately and irrevocably assigns to Landlord, as security for Tenant’s obligations under this Lease, any sublease which may be approved by Landlord and all rights and remedies of Tenant under any such sublease. Landlord shall not have any obligations under any such sublease. Tenant agrees to execute and deliver to Landlord any and all documents requested by Landlord to evidence such assignment. Landlord, as assignee and as attorney-in-fact for Tenant, or as a receiver for Tenant appointed on Landlord’s application, may collect the rent under any sublease and apply it toward Tenant’s obligations under this Lease.

     Section 14.04. In any event, the acceptance by the Landlord of any rent from the assignee or from any of the subtenants or the failure of the Landlord to insist upon a strict performance of any of the terms, conditions and covenants herein shall not release the Tenant herein or the Guarantor, if any, nor any assignee assuming this Lease, from any and all of the obligations herein during and for the entire Term of this Lease.

     Section 14.05. Landlord shall have no right of approval or recapture with respect to an assignment resulting from a merger of Tenant or from the sale of 50% or more of the stock or assets of Tenant or from the assignment of this Lease to another financial institution as long as said financial institution has an equal or greater net worth as the Tenant.

ARTICLE XV

Indemnification of Landlord

     Section 15.01. In addition to any and all other obligations of Tenant to indemnify and save Landlord harmless as set forth in this Lease, Tenant will indemnify and save harmless Landlord against and from all liabilities, obligations, damages, penalties, claims, costs, charges and expenses, including, without limitation, any and all architects’ and attorneys’ fees, which may be imposed upon or incurred by or asserted against Landlord by reason of any of the following occurring during the Term of this Lease:

               (A) Any work or thing done in, on or about the Demised Premises, or any part thereof, by or at the direction of Tenant; or

               (B) Any negligence on the part of Tenant, or any of its agents, contractors, servants, employees, licensees or invitees; or

               (C) Any injuries to persons or property occurring on or about the Demised Premises, except if caused by the gross negligence of the Landlord, its employees, agents or invitees; or

19

               (D) Any failure on the part of Tenant to perform or comply with any of the covenants, agreements, terms or conditions contained in this Lease on its part to be performed or complied with.

     Section 15.02. In addition to any and all other obligations of Landlord to indemnify and save Tenant harmless as set forth in this Lease, Landlord will indemnify and save harmless Tenant against and from all liabilities, obligations, damages, penalties, claims, costs, charges and expenses, including, without limitation, any and all architects’ and attorneys’ fees, which may be imposed upon or incurred by or asserted against Tenant by reason of any of the following occurring during the Term of this Lease:

               (A) Any work or thing done in, on or about the Common Areas, or any part thereof, by or at the direction of Landlord; or

               (B) Any negligence on the part of Landlord, or any of its agents, contractors, servants, employees, licensees or invitees; or

               (C) Any injuries to persons or property occurring on or about the Common Areas; or

               (D) Any failure on the part of Landlord to perform or comply with any of the covenants, agreements, terms or conditions contained in this Lease on its part to be performed or complied with.

     Section 15.03. The provisions of this Article XV, and of any and all other provisions in this Lease requiring Tenant to indemnify and save Landlord harmless, shall survive the termination of this Lease. Tenant further covenants and agrees to pay, and to indemnify Landlord against all reasonable costs, expenses and charges, including, but not limited to, attorneys’ fees, incurred in obtaining possession of the Demised Premises after default by Tenant or upon the expiration or earlier rightful termination of the Term or in successfully enforcing any covenant of Tenant herein contained.

ARTICLE XVI

Fire and Casualty

     Section 16.01. If the Demised Premises are damaged by fire or other insurable casualty, then subject to provisions of Section 16.02, this Lease shall remain in full force and effect and, subject to the adequacy and availability of insurance proceeds, Tenant shall promptly repair such damage at its expense (subject to Excusable Delay).

     Section 16.02. If, in the reasonable opinion of Landlord, the Demised Premises are damaged by fire or other casualty within the last two (2) years of the term, to such an extent that the damage cannot be repaired or restored within one hundred twenty (120) days from the date of such occurrence, then Landlord or Tenant shall have the option to terminate this Lease by written notice given within thirty (30) days after such occurrence. If the Lease is terminated as provided for in this Section, Tenant shall remain liable for the Rent and Additional Rent that is due until the date of termination. Additionally, Tenant shall be responsible for the clearing of any remaining structure or debris on the Demised Premises. If Landlord terminates pursuant to this Section, Tenant may, within thirty (30) days of receipt of the Landlord’s notice of termination, negate the Landlord’s termination by exercising a right to renew the Lease. If the Landlord does not terminate the Lease, or if the Tenant negates the termination, as provided above, this Lease shall continue in full force and effect.

     Section 16.03. If the Demised Premises or any portion of the Shopping Center are damaged by fire or other casualty due to any act or failure to act on the part of Tenant, its agents, servants or employees, then,

20

subject to the provisions of Article XXX, Landlord shall have the option to terminate this Lease and shall have and retain any and all rights which it may then have in law or equity against Tenant on account of such damage.

     Section 16.04. Within sixty (60) days following the completion of the Landlord’s Work, Tenant shall complete its work on the Demised Premises.

ARTICLE XVII

Condemnation

     Section 17.01. In the event that the Demised Premises or any part thereof shall be taken in condemnation proceedings or by exercise of any right of eminent domain or by agreement between Landlord, Tenant and those authorized to exercise such right, Landlord, Tenant and any person or entity having an interest in the award or awards shall have the right to participate in any such condemnation proceedings or agreement for the purpose of protecting their interests hereunder. Each party so participating shall pay their own expenses with regard thereto.

     Section 17.02. Subject to Section 17.03, if at any time during the term of this Lease there shall be a taking of unimproved land, then and in that event, Landlord herein shall be entitled to the full award for the land and any and all damages by virtue of such taking, and this Lease shall continue in full force and effect but the rent shall be reduced subsequent to the taking as provided in Section 17.05. All provisions hereof shall continue in full force and effect and the Demised Premises shall consist of that portion of the Demised Premises remaining subsequent to such taking.

     Section 17.03. If at any time during the term of this Lease there shall be a taking of the whole or substantially of all of the Demised Premises, this Lease shall terminate and expire on the date of such taking and the Basic Rent and Additional Rent shall be apportioned and paid as of the date of such taking. For the purposes of this Article, substantially all of the Demised Premises shall be deemed to be (a) a taking which reduces access to the Demised Premises, or parking spaces adjacent to the Demised Premises, to the extent that the business operations on the Demised Premises are materially adversely affected, (b) a taking of all of the structures constructed upon the Demised Premises, or (c) a taking of such portion of the Demised Premises which has a materially adverse effect on the business operations then being conducted upon the Demised Premises.

     Section 17.04. If this Lease shall have been terminated as a result of such taking the award or awards paid pursuant to such condemnation proceedings or agreement shall be distributed as follows:

               A. All awards for unimproved land shall be paid to Landlord.

               B. All awards for buildings, improved lands (e.g., parking lots, buffer areas, roadways and landscaped areas) and other improvements upon the Demised Premises shall (a) first be paid to any leasehold mortgagee of the Demised Premises, and (b) the balance distributed as shall be determined in the condemnation proceedings or if not determined in the condemnation proceedings, then in accordance with the procedure set forth in Section 17.07 below.

     Section 17.05. Notwithstanding any other provision herein set forth, in the event of taking of less than all of the Demised Premises, Landlord shall have the right to elect to continue this Lease with regard to the remaining portions of the Demised Premises subject to all of the terms and

21

conditions hereof, it being understood that the distribution of proceeds of any condemnation award shall be made as hereinabove set forth; provided however;

               A. That the Basic Rent payments hereunder shall be reduced subsequent to the taking and thereafter Tenant shall be required to pay that proportion of the Basic Rent as the area of the remaining land bears to the area of the entire Demised Premises prior to the taking.

               B. Tenant shall, after such taking, at its expense, either restore the remaining building or buildings to a complete architectural unit or construct new buildings or improvements having a value substantially equivalent to or greater than the buildings and improvements (or portions thereof) remaining after such taking, provided the condemnation proceeds payable to Tenant are sufficient to do so.

     Section 17.06. In the event of a taking of an easement or any other taking which shall be of an interest or estate in the land less than a fee simple, which taking shall not materially adversely affect the business operations then being conducted on the Demised Premises, such taking shall be deemed a taking insufficient to terminate this Lease and the award therefore shall be paid fully to Landlord for the taking of unimproved land and for other portions of the Premises shall be distributed as hereinabove set forth.

     Section 17.07. In the event of any dispute between Landlord or Tenant with regard to any issue or fact (other than one determined by condemnation proceeding or condemnation commissioner arising out of a taking set forth herein and other than one to he determined in accordance with clause B of this Section), such dispute shall be resolved by arbitration in the manner hereinafter prescribed.

               A. If Landlord and Tenant are unable to agree upon the distribution to Landlord and Tenant of their respective shares (the “Shares”) of a condemnation award, then same shall be determined in the following manner: Within ten (10) days after the vesting of title pursuant to any such taking, Landlord and Tenant shall each appoint on its behalf a disinterested third person (“Appraiser”) who shall be an appraiser who is a member of the American Institute of Real Estate Appraisers and who shall have at least ten (10) years’ experience dealing with Mercer County, New Jersey commercial real estate, and each party shall give written notice of such appointment to the other party. The two Appraisers thus appointed shall, within fifteen (15) days after appointment of the second appraiser, determine the amount of such award representing the Landlord’s Share and the Tenant’s Share in accordance with the above provisions. If the difference in the determinations by such two Appraisers as to the amount of such award representing the Shares does not exceed ten percent (10%:) of the lower of such determinations, then such Shares shall be the average of the determinations by such two Appraisers. If, however, the difference in the determinations by such two Appraisers as to the amount of such award representing the Shares exceeds ten (10%) percent of the lower of such determinations, then such two Appraisers shall appoint a third Appraiser, and said three Appraisers shall, as promptly as possible, determine the amount of the award representing the Shares. The decision of a majority of the three (3) Appraisers shall be conclusive and binding on Landlord and Tenant and judgment upon the decision may be entered in any court having jurisdiction. If a party who shall have the rights pursuant to the foregoing to appoint an Appraiser fails or neglects to do so, then the other party (or if the two Appraisers appointed by Landlord and Tenant shall fail to appoint a third Appraiser if required to do so under the provisions of this paragraph A, then either Landlord or Tenant) may apply to the Assignment Judge of New Jersey Superior Court, Mercer County, New Jersey, or such other judicial authority to appoint such Appraiser. The expenses of the determination shall be shared equally by Landlord and Tenant, but each party shall be responsible for the fees of its own attorney and Appraiser. Landlord and Tenant agree to sign all documents and to do all other things reasonably necessary to submit any dispute regarding the Shares to a determination in accordance with this paragraph A and further agree to, and hereby do, waive any and all rights they or either of them may at any time have to revoke their agreement to determine the value of the

22

Shares in accordance with this paragraph A and to abide by the decision rendered hereunder. The appraisers shall be bound by the provisions of this article.

     Section 17.08. If the Term of this Lease shall not be terminated as aforesaid, then the Term of this Lease shall continue in full force and effect, and subject to the adequacy and availability of condemnation proceeds, Landlord shall within a reasonable time after possession is physically taken (subject to Excusable Delays) repair or rebuild what may remain of the Demised Premises for the occupancy of Tenant; and a just proportion of the Fixed Rent shall be abated, according to the nature and extent of the injury to the Demised Premises, until what may remain of the Demised Premises shall be repaired and rebuilt as aforesaid; and thereafter a just proportion of the Fixed Rent shall be abated, according to the nature and extent of the Demised Premises acquired or condemned, for the balance of the Term of the Lease.

     Section 17.09. Any damages payable for trade fixtures installed by Tenant at its own cost and expense and which are not part of the realty and for relocation expenses shall belong entirely to Tenant and Landlord shall make no claim thereto.

     Section 17.10. In the event fifty (50%) percent or more of the Shopping Center is taken by condemnation, Tenant, upon thirty (30) days written notice, shall have the right to terminate this Lease.

ARTICLE XVIII

Events of Default

     Section 18.01. Failure to pay Rent or any other payment required to be made by Tenant under the terms of this Lease, when due, and the continuation of such failure for a period of five (5) days after the payment shall be due;

     Section 18.02. Abandonment and vacating of the Demised Premises (failure to occupy and operate the Demised Premises for fifteen [15] consecutive days or more shall be deemed an abandonment and vacating);

     Section 18.03. The failure by Tenant to observe or perform any of the covenants, conditions or provisions of this Lease to be observed or performed by Tenant (other than the failure to pay Rent or make other payments as set forth in Section 18.01), where such failure shall continue for a period of thirty (30) days after written notice to Tenant;

     Section 18.04. The making by Tenant of any general assignment or arrangement for the benefit of creditors; or the filing by or against Tenant of a petition to have Tenant adjudged a bankrupt or a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a petition filed against Tenant, the same is dismissed within sixty [60] days; or unless Landlord has received adequate assurances of future performance as then required under the federal bankruptcy law in connection with shopping center leases); or the appointment of a trustee or a receiver to take possession of substantially all of Tenant’s assets located at the Demised Premises or of Tenant’s interest in this Lease, where possession is not restored to Tenant within thirty (30) days; or the attachment, execution or other judicial seizure of substantially all of Tenant’s assets located at the Demised Premises or of Tenant’s interest in this Lease, where such seizure is not discharged in thirty (30) days;

     Section 18.05. The default by Tenant or any affiliate of Tenant with respect to any other lease or agreement between it and Landlord or any affiliate of Landlord;

23

     Section 18.06. This Lease or any interest therein by operation of law devolves upon or passes to any person or persons other than Tenant, except upon the sale of all or substantially all of the assets or capital stock of the Tenant by way of merger or acquisition;

     Section 18.07. The assignment or subletting of all or any portion of this Lease or the Demised Premises in violation of Article XIV;

     Section 18.08. The failure of Tenant to move into and take possession of the Demised Premises and open for business within thirty (30) days after the Commencement Date; or

     Section 18.09. Any representation or warranty made by Tenant in connection with this Lease shall prove to have been false in any material respect.

ARTICLE XIX

Landlord’s Remedies

     Section 19.01. If an Event of Default shall occur, Landlord may exercise one or more of the following remedies, all of which shall be cumulative and in addition to any remedies available under applicable law:

     (A) Without any further notice or demand, terminate this Lease, and Tenant will forthwith quit and surrender the Demised Premises, but Tenant shall remain liable as hereinafter provided;

     (B) Re-enter and resume possession of the Demised Premises and remove all persons and property by summary dispossess proceedings, by appropriate proceedings, without being liable for any damages therefor, and no re-entry shall be deemed an acceptance of a surrender of this Lease;

     (C) Proceed to collect any Rent from Tenant then due by one or more proceedings;

     (D) Exercise any remedy available at law or in equity to enforce the provisions of this Lease, to recover any damages for a breach of this Lease or to prevent any breach or threatened breach of this Lease; and/or

     (E) Recover from Tenant on demand an amount equal to all expenses, including reasonable attorney’s fees incurred by Landlord as a result of an Event of Default or the exercise of its rights and remedies, all reasonable costs and charges for the care of the Demised Premises while vacant, and all charges and expenses incurred by Landlord in connection with the reletting of the Demised Premises, including broker’s commissions, advertising expenses, and the costs of repairing, renovating or remodeling the Demised Premises.

     Section 19.02. If this Lease shall be terminated, as provided in this Article XIX:

24

     (A) Landlord may relet the whole or any part of the Demised Premises for a period equal to, or greater or less than the remainder of the then Term of this Lease, at such rental and upon such terms and concessions as Landlord shall deem reasonable, to any person which it may deem suitable and satisfactory and for any use and purpose which it may deem appropriate. In no event shall Landlord be liable in any respect for failure to collect the rent thereunder. Any sums or other consideration received by Landlord on a reletting in excess of the rent reserved in this Lease shall belong to Landlord.

     (B) If this Lease shall be terminated and whether or not the Demised Premises shall be relet, Landlord shall be entitled to recover from Tenant an amount equal to all Rent and other charges required to be paid by Tenant under this Lease, less the net rent, if any, collected by Landlord on reletting the Demised Premises. Such amount shall be due and payable by Tenant to Landlord on the several days on which such Rent and other charges would have become due and payable had this Lease not been terminated, and Tenant shall pay to Landlord the amount of any deficiency then existing. The net rent collected by Landlord on reletting shall be computed by deducting from the gross rents collected the expenses, costs and charges referred to in Subsection 19.01(E). Without any previous notice or demand, separate actions may be instituted by Landlord against Tenant from time to time to recover any damages which at the commencement of any such action shall have become due and payable to Landlord under any provisions hereof without waiting until the end of the original Term of this Lease, and neither the institution of suit or suits, nor the entering of judgment therein shall bar Landlord from bringing a subsequent suit for damages of any kind. It is expressly agreed that the forbearance on the part of Landlord in the institution of any suit or entry of judgment for any part of the Rent shall in no way serve as a defense against nor prejudice a subsequent action for such Rent. Tenant hereby expressly waives Tenant’s right to claim a merger of such subsequent action in any previous suit or in the judgment entered therein. Furthermore, it is expressly agreed that claims for Rent may be regarded by Landlord, if it so elects, as separate claims capable of being assigned.

     (C) Landlord, at its election, which shall be exercised by the service of a written notice on Tenant, may collect from Tenant and Tenant shall pay in lieu of the sums becoming due after the service of such notice under the provisions of this Subsection 19.02(C) an amount equal to the difference between the Rent required to be paid by Tenant under this Lease (form the date of the service of such notice to and including the date of the expiration of the Term of this Lease which had been in force immediately prior to any termination effected under this Section) and the then fair and reasonable rental value of the Demised Premises for the same period, discounted to present value at the rate of six (6%) percent per year. In determining the rental value of the Demised Premises, the rental realized by any reletting shall be deemed prima facie evidence thereof.

25

     Section 19.03. Tenant hereby expressly waives any rights of redemption granted by any laws in the event of any eviction or dispossession.

     Section 19.04. The Landlord and the Tenant waive trial by jury in any action, proceeding or counterclaim brought by either the Landlord or the Tenant against the other on any matters whatsoever arising out of or in any way connected with this Lease, the Tenant’s use or occupancy of the Demised Premises, and/or any claim of injury or damage.

     Section 19.05. If Tenant shall fail to pay or perform any of its obligations when due, then Landlord, in addition to any of its rights and remedies under this Lease and without waiving its rights or remedies with regard thereto, may cure such failure on the part of Tenant. Any sums expended by Landlord to effect any such cure shall be payable by Tenant to Landlord within 30 days after demand, as Additional Rent.

ARTICLE XX

Surrender of Demised Premises

     Section 20.01. On expiration or termination of the Term, Tenant shall surrender to Landlord the Demised Premises, in broom clean condition, and all Tenant’s improvements and alterations in good, clean, orderly and undamaged condition (except for ordinary wear and tear occurring after the last necessary maintenance made by Tenant, destruction of the Demised Premises covered by Article XVI and alterations that Tenant has the right to remove or is obligated to remove under the provisions of Article XII). Tenant shall remove all its personal property and shall deliver to Landlord all keys to the Demised Premises within the above stated time. Tenant shall immediately perform all restoration made necessary by the removal of any alterations or Tenant’s personal property. Tenant shall be liable to Landlord for any cost incurred by Landlord to repair any damage to the Demised Premises caused by Tenant.

     Section 20.02. Landlord can elect to retain or dispose of in any manner any alterations or Tenant’s personal property that Tenant does not remove from the Demised Premises on expiration or termination of the Term as allowed or required by this Lease by giving at least ten (10) days’ notice to Tenant. Title to any such alterations or Tenant’s personal property that Landlord elects to retain or dispose of on expiration of the ten (10) day period shall vest in Landlord. Tenant waives all claims against Landlord for any damage to Tenant resulting from Landlord’s retention or disposition of any such alterations or Tenant’s personal property. Tenant shall be liable to Landlord for Landlord’s costs for storing, removing, and disposing of any alterations or Tenant’s personal property.

     Section 20.03. If Tenant fails to surrender the Demised Premises to Landlord on expiration or termination of the Term, Tenant shall hold Landlord harmless from all damages resulting from Tenant’s failure to surrender the Demised Premises, including, without limitation, claims made by a succeeding tenant resulting from Tenant’s failure to surrender the Demised Premises.

ARTICLE XXI

Holding Over

     Section 21.01. If Tenant, with Landlord’s express written consent, remains in possession of the Demised Premises after expiration or termination of the Term, or after the date in any notice given by Landlord to tenant terminating this lease, such possession by Tenant shall be deemed to be a month-to-month

26

tenancy terminable on thirty (30) days’ notice given at any time by either party. During any such month-to-month tenancy, Tenant shall pay all Rent required by N.J.S.A. 2A:42-5.

     Section 21.02. If Tenant, without Landlord’s express written consent, remains in possession of the Demised Premises after expiration or termination of the Term, or after the date in any notice given by Landlord to Tenant terminating this Lease, Tenant shall pay to Landlord Rent as required by N.J.S.A. 2A:42-6 for the time Tenant retains possession of the Demised Premises or any part thereof after termination of the Term by lapse or otherwise.

ARTICLE XXII

INTENTIONALLY OMMITTED

ARTICLE XXIII

Common Areas

     Section 23.01. During the Term of this Lease and any extension thereof, Tenant and its authorized representatives and invitees shall have the nonexclusive right to use the Common Areas, with others who are entitled to use the Common Areas, subject to Landlord’s rights as hereinafter provided. Notwithstanding the aforesaid, Tenant shall not create any disturbance in the Common Areas nor shall Tenant create any noise from loudspeakers or otherwise, or permit any noise to be emanated from the Demised Premises nor shall Tenant distribute any leaflets, advertisements or other materials in the Common Areas.

     Section 23.02. Landlord shall have the right to designate specific parking spaces and loading facilities for use by Tenant and its employees. Where there is a rear entrance, all loading and unloading of goods shall be made at the rear entrance. Upon Landlord’s demand, Tenant shall submit to Landlord a list of the license plate numbers for all motor vehicles owned or operated by Tenant and its employees. Notwithstanding the above, any armored cars that load or unload at this site may do so at any entrance to the Demised Premises.

     Section 23.03. Landlord shall maintain the Common Areas in good condition. Landlord shall have, at any time, the right to establish reasonable rules and regulations as to the Common Areas, close any of the Common Areas, either permanently or temporarily, make changes to the Common Areas in any regard and for any purpose and to hire any person or business to manage and operate the Common Areas on such terms as Landlord shall determine, all in accordance with good shopping center practices. Landlord will not construct additional buildings which will obstruct the visibility of or access to the Demised or which will materially reduce parking adjacent to the Demised Premises in the Shopping Center.

ARTICLE XXIV

Signs

     Section 24.01. Landlord shall have the right to establish policies and standards for the size, location, quality, number, color and type of signs which Tenant may install in or upon the Demised Premises. Such policies and standards are set forth herein as well as in Exhibit “C” attached hereto. Tenant shall comply with all of such policies and standards as they may be changed from time to time and shall install such signs as may be required by Landlord. No signs shall be installed by Tenant in or upon the Demised

27

Premises until after Landlord has approved in writing the construction (including all connections), drawings and specifications pertaining to the signs.

     Section 24.02. Tenant shall pay for all signs, their installation, maintenance and removal. Tenant, at Tenant’s sole cost and expense, shall obtain all necessary permits and approvals from the local governmental agency having jurisdiction thereof. All work must be of good quality. Landlord shall have the right to reject any work judged below standard. All signs shall be constructed and installed by contractors qualified to fabricate and install commercial signs. Tenant shall maintain signs in a neat and attractive condition. The bulbs of all permitted signs and lights, whether an exterior or interior sign, shall be replaced as soon as they become defective or lose their intensity. The signs and supports shall be kept painted to maintain attractive conditions and to prevent rust, rot or deterioration. Landlord shall have the right to remove the signs or any of them, at any time during the term of this Lease, as may be necessary in order to paint or make any other repairs, alterations or improvements in or upon the Building, providing the same be removed and replaced at Landlord’s expense upon completion of said work. Tenant shall keep its signs illuminated from dusk to dawn.

ARTICLE XXV

Subordination; Tenant’s Estoppel Certificate

     Section 25.01. This Lease is and shall be subordinate to any mortgage, encumbrance or ground lease now or hereafter imposed upon or affecting the Shopping Center, or any part hereof. Such subordination is effective without any further act of Tenant. Tenant shall from time to time on request from Landlord execute and deliver any documents or instruments that may be required by a lender or ground lessor to effectuate any subordination. If Tenant fails to execute and deliver any such documents or instruments, Tenant irrevocably constitutes and appoints Landlord as Tenant’s attorney-in-fact, coupled with an interest, to execute and deliver any such documents or instruments. Tenant agrees to execute any subordination agreement referred to above provided the lender simultaneously agrees to a non-disturbance of the tenancy so long as the Tenant is not in default.

     Section 25.02. Within ten (10) days after notice from the other Landlord or Tenant shall execute and deliver to the other a statement in writing certifying such matters as requested by the other, including that this Lease is unmodified and in full force and effect, or in full force and effect as modified, and stating the modifications, the amount of Fixed Rent, the dates to which the Rent has been paid in advance, and the amount of any security deposit or prepaid rent.

     Section 25.03. As a condition to the effectiveness of this Lease, Tenant must receive a nondisturbance agreement from the ground lessor and any existing mortgagee and any subordination to a future mortgage must be subject to such an agreement.

ARTICLE XXVI

Nature of Landlord’s Liability

     Section 26.01. It is specifically understood and agreed by Tenant that there shall be absolutely no personal liability on the part of Landlord or on the part of the members of Landlord, or, if Landlord or any successor in interest shall be an individual, joint venture, tenancy in common, firm or partnership, general or limited, or a trust or a corporation, there shall be no personal liability on such individual or the members of the firm, partnership, joint venture, tenancy in common or the trustee or beneficiaries under any such trust, in

28

each case with respect to any of the terms of this Lease. Tenant shall look solely to the equity, if any, of Landlord in the Demised Premises for the satisfaction of each and every remedy of Tenant in the event of any breach by Landlord of any of the terms of this Lease to be performed by Landlord. The foregoing exculpation of personal liability shall be absolute and without any exception whatsoever.

     Section 26.02. If Landlord sells or transfers all or any portion of the Shopping Center, Landlord, on consummation of the sale or transfer, shall be released from any liability thereafter accruing under this Lease and the transferee shall be automatically responsible for future performance of the Landlord under this Lease.

     Section 26.03. Landlord shall not be liable for failure to furnish any services when such failure is due to Excusable Delay. Landlord shall not be liable, under any circumstances, including, but not limited to, that arising from the negligence of Landlord, its agents, servants or invitees, or from defects, errors or omissions in the construction or design of the Demised Premises and/or the Building, including the structural and nonstructural portions thereof, for loss of or injury to Tenant or to property, however occurring, through or in connection with or incidental to the furnishing of, or failure to furnish, any of the aforesaid services or for any interruption to Tenant’s business however occurring. Landlord and its agents shall not be liable for any loss or damage to property entrusted to their employees or agents, nor for loss of property by theft. Landlord and its agents shall not be liable for any injury or damage to persons or property resulting from falling plaster, or from steam, gas, water or snow which may leak from any part of the Shopping Center, or from the pipes or appliances therein, or from any other part thereof, or from the sub-surface thereunder, or from dampness, or from any other cause. Notwithstanding the above, Landlord shall not be exculpated from any injury or damages to the Tenant or Tenant’s property which is caused by Landlord’s gross negligence or the gross negligence of Landlord’s employees, agents or invitees.

     Section 26.04. This Lease and the obligations of Tenant to pay all Rent and perform all of its obligations shall in no way be impaired, affected or excused because Landlord is unable to fulfill its obligations or unable to or delayed in supplying any service or performing any obligations, including without limitation, any repairs or work to be done by Landlord, subject to the self-help provisions contained within this Lease.

     Section 26.05. It is expressly agreed that nothing in this Lease shall be construed as creating a partnership or joint venture between Landlord and Tenant, or between Landlord or any other party, or cause Landlord to be responsible for any debts or obligations of Tenant.

ARTICLE XXVII

Waiver

     Section 27.01. No delay or omission in the exercise of any right or remedy of Landlord on any default by Tenant shall impair such a right or remedy or be construed as a waiver. The receipt and acceptance by Landlord of delinquent Rent shall not constitute a waiver of any default. No act or conduct of Landlord, including, without limitation, the acceptance of the keys to the Demised Premises, shall constitute an acceptance of the surrender of the Demised Premises by Tenant before the expiration of the Term. Only a written notice from Landlord to Tenant shall constitute acceptance of the surrender of the Demised Premises and accomplish a termination of the Lease. Landlord’s consent to or approval shall not be deemed to waive or render unnecessary Landlord’s consent to or approval of any subsequent act by Tenant. Any waiver by Landlord or Tenant of any default must be in writing and shall not be a waiver of any other default concerning the same or any other provision of the Lease.

29

     Section 27.02. The parties hereto waive a trial by jury of any and all issues arising in any action or proceeding between them or their successors under or connected with this Lease or any of its provisions, any negotiations in connection therewith, or Tenant’s use or occupancy of the Demised Premises.

ARTICLE XXVIII

Quiet Enjoyment

     Section 28.01. Landlord covenants that if, and so long as, Tenant pays the Fixed Rent and any Additional Rent as herein provided, and performs the covenants hereof, Landlord shall do nothing to affect Tenant’s right to peaceably and quietly have, hold and enjoy the Demised Premises for the Term herein mentioned, subject to the provisions of this Lease and to the terms of all covenants, restrictions, easements and encumbrances (but subject to Section 25.03) now or hereafter affecting fee title to, or Landlord’s interest in, the Shopping Center.

ARTICLE XXIX

INTENTIONALLY OMMITTED

ARTICLE XXX

Waiver of Subrogation

     Section 30.01. In the event of any loss or damage to the Shopping Center, the Building, the Demised Premises and/or any contents (herein “property damage”), each party waives all claims against the other for any such loss or damage and each party shall look only to any insurance which it has obtained to protect against such loss (or in the case of Tenant, waives all claims any tenant of the Shopping Center that has similarly waived claims against such Tenant) and each party shall obtain, for each policy of such insurance, provisions waiving any claims against the other party (and against any other tenant(s) in the Shopping Center that has waived subrogation against the Tenant) for loss or damage within the scope of such insurance.

ARTICLE XXXI

INTENTIONALLY OMMITTED

ARTICLE XXXII

Miscellaneous

     Section 32.01. Time of Essence. Time is of the essence of each provision of this Lease and for the performance of any obligation hereunder.

30

     Section 32.02. Binding on Successors. Subject to the provisions hereof with respect to assignment and subletting, this Lease shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, assigns, subtenants and successors in interest.

     Section 32.03. Notice. Any notice, demand, request, consent, approval, or communication that either party desires or is required to give to the other party or any other person shall be in writing and either served personally or sent by certified mail, return receipt requested, express mail or overnight courier, and addressed to the other party at the address set forth at the beginning of this Lease. Either party may change its address by giving a notice thereof to the other party in accordance with this Section.

     Section 32.04. Commissions. Landlord and Tenant each represents to the other, knowing that the other shall rely upon same, that neither has dealt with any real estate broker, finder of other person in connection with this Lease, the Shopping Center or the Demised Premises and no such real estate broker is entitled to a commission as a result of this Lease. Each shall hold harmless the other, its employees, agents and assigns, from and against all claims, demands, actions and liabilities, expenses and other damages, including attorneys’ fees incurred, resulting from any claims that may be asserted against Landlord or Tenant by any broker, finder or other person with whom Landlord or Tenant has or purportedly has dealt and any claim of, or right to lien under the Statutes of the State of New Jersey relating to real estate broker liens, with respect to any such broker.

     Section 32.05. Governing Law. This Lease shall be construed and interpreted in accordance with the laws of the State of New Jersey.

     Section 32.06. Entire Agreement. This Lease contains the entire agreement of the parties and cannot be amended or modified except by a written agreement. Neither Landlord nor anyone acting on its behalf has made any statement, promise or agreement which in any way modifies, varies, alters, enlarges or invalidates the provisions of this Lease, or the obligations of Landlord or Tenant hereunder.

     Section 32.07. Construction. The Landlord and the Tenant agree that each party and its counsel have reviewed and revised this Lease and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Lease or any amendments, exhibits or schedules hereto.

     Section 32.08. Captions. The captions of this Lease shall have no effect on its interpretation.

     Section 32.09. Severability. The unenforceability, invalidity or illegality of any provision of this Lease shall not render the other provisions unenforceable, invalid or illegal.

     Section 32.10. Section References. All references to Articles shall refer to articles of this Lease.

     Section 32.11. Memorandum of Lease. This Lease shall not be recorded, except that if either party requests that the other do so, it shall execute a Memorandum of Lease in recordable form.

     Section 32.12. Authority of Corporate Tenant. If Landlord or Tenant is a corporation, each individual executing this Lease on behalf of said corporation represents and warrants that (i) he is duly authorized to execute and deliver this Lease on behalf of said corporation in accordance with the by-laws and pursuant to a duly enacted resolution of said corporation; (ii) that this Lease is valid and binding upon said corporation and enforceable against Landlord or Tenant in accordance with its terms; (iii) the execution and delivery of this Lease will not, with or without the passage of time, violate any other agreement, lease or mortgage by which the corporation is bound or by which the corporation’s property is encumbered.

31

     Section 32.13. Tenant’s Financial Condition. Tenant represents and warrants that all financial statements and other information submitted by, or on behalf of, Tenant to Landlord in connection with this Lease are true and complete in all material respects.

     Section 32.14. Execution of Lease. The submission of this Lease to Tenant for examination does not constitute an offer on the part of Landlord. This Lease shall be effective only upon execution by Landlord and Tenant. Upon execution of this Lease by Tenant and delivery of the executed Lease to Landlord, this Lease shall constitute an option to Landlord for thirty (30) days to execute and deliver this Lease, and said option may not be withdrawn during such thirty (30) day period after delivery to Landlord. If Landlord shall not execute this Lease within such thirty (30) day period, then the option shall be deemed withdrawn.

     Section 32.15. Shopping Center Exclusives. Tenant acknowledges that as of the date hereof, Landlord has granted a number of exclusives which are set forth in Exhibit “D”” attached hereto. Tenant agrees not to violate any of the exclusives, as long as Landlord is obligated to honor them.

     Section 32.16. Net Lease. It is the intention of these presents that Landlord shall receive the Basic Rent herein reserved and all sum or sums which shall or may become payable hereunder by Tenant under any contingency, free from all taxes, charges, expenses, damages and deductions of every kind or sort whatsoever except as otherwise expressly stated herein, and the Tenant shall and will and hereby expressly agree to pay all such other sums which, except for the execution and delivery of these presents, would have been chargeable against the Demised Premises and payable by Landlord. Tenant, however, shall not be under any obligation to pay any principal or interest on any mortgage which may be a lien against the fee simple interest of Landlord on the Demised Premises, or Landlord’s estate or interest therein, or any franchise tax which is or may become payable to Landlord or any gift, inheritance, transfer, estate or succession tax by reason of any existing law or any law which may hereafter be enacted or any judgments, liens, claims or demands asserted against Landlord which are not specified as the obligation of Tenant herein and which do not arise out of the use and occupancy of the Demised Premises by Tenant.

     Section 32.18. No oral Modification All prior understandings and agreements between the parties are merged within this Lease, which alone fully and completely sets forth the understanding of the parties; and this Lease may not be changed or terminated orally or in any manner other than by an agreement in writing and signed by the party against whom enforcement of the change or termination is sought.

     Section 32.19. Extermination. INTENTIONALLY OMMITTED

     Section 32.20. Attorneys’ Fees. If either party hereto be made or becomes a party to any litigation commenced by or against the other party involving the enforcement of any of the rights and remedies of such party, or arising on account of the default of the other party in the performance of such party’s obligations hereunder, then the prevailing party in any such litigation, or the party becoming involved in such litigation because of a claim against such other party, as the case may be, shall receive from the other party all costs and reasonable attorneys’ fees incurred by such party in such litigation.

32

ARTICLE XXXIII

Leasehold Mortgages

     Section 33.01. Tenant and every successor and assign of Tenant (including, but not limited to, any sublessee of Tenant, but only with Tenant’s prior consent) is hereby given the right by Landlord in addition to any other rights herein granted, without Landlord’s prior written consent, to mortgage its interest in this Lease(s), or any part or parts thereof, and any sublease(s) under one or more leasehold Mortgage(s), and assign this Lease, or any part or parts thereof, and any sublease(s) as collateral security for such Mortgage (s), upon the condition that all rights acquired under such Mortgage(s) shall be subject to each and all of the covenants, conditions and restrictions set forth in this Lease, and to all rights and interest of Landlord herein, none of which covenants, conditions or restrictions is or shall be waived by Landlord by reason of the right given so to mortgage such interest in this Lease, except as expressly provided herein. If Tenant and/or Tenant’s successors and assigns (including, but not limited to, any sublessee of Tenant, but only with Tenant’s prior consent) shall mortgage this leasehold, or any part or parts thereof, and if the holder(s) of such Mortgage(s) shall, within thirty (30) days of its execution, send to Landlord a true copy thereof, together with written notice specifying the name and address of the Mortgagee and the pertinent recording date with respect to such Mortgage(s), Landlord agrees that so long as any such leasehold Mortgage(s) shall remain unsatisfied of record or until written notice of satisfaction is given by the holder(s) to Landlord, the following provisions shall apply:

A.	There shall be no cancellation, surrender or modification of this Lease by joint action of Landlord and Tenant without the prior consent in writing of the leasehold Mortgagee(s).
B.	Landlord shall, upon serving Tenant with any notice of default, simultaneously serve a copy of such notice upon the holder(s) of such leasehold Mortgage(s). The leasehold Mortgagee(s) shall thereupon have the same period, after services of such notice upon it, to remedy or cause to be remedies the defaults complained of, and Landlord shall accept such performance by or at the instigation of such leasehold Mortgagee(s) as if the same had been done by Tenant.
C.	Anything herein contained notwithstanding, while such leasehold Mortgage(s) remains unsatisfied of record, or until written notice of satisfaction is given by the holder(s) to Landlord, if any default shall occur which, pursuant to any provision of this Lease, entitled Landlord to terminate this Lease, and if before the expiration of thirty (30) days from the date of service of notice or termination upon such leasehold Mortgagee(s) such leasehold Mortgagee(s) shall have notified Landlord of its desire to nullify such notice and shall have paid to Landlord all Basic Rent and additional rent and other payments herein provided for, and then in default, and shall have complied or shall commence the work of complying with all of the other requirements of this Lease, if any are then in default, and shall prosecute the same to completion with reasonable diligence, then in such event Landlord shall not be entitled to terminate this Lease and any notice of termination theretofore given shall be void and of not effect.
D.	If the Landlord shall elect to terminate this Lease by reason of any default of Tenant, the leasehold Mortgagee(s) shall not only have the right to nullify and notice of termination by curing such default, as aforesaid, but shall also have

33

	the right to postpone and extend the specified date for the termination of this Lease as fixed by Landlord in its notice of termination, for a period of not more than six (6) months, provided that such leasehold Mortgagee(s) shall cure or cause to be cured any then existing money defaults and meanwhile pay the other terms, conditions and provisions of this Lease on Tenant’s part to be complied with and performed, other than past non-monetary defaults, and provided further that the leasehold Mortgagee(s) shall forthwith take steps to acquire or sell Tenant’s interest in this Lease by foreclosure of the Mortgage(s) or otherwise and shall prosecute the same to completion with all due diligence. If at the end of said six (6) month period the leasehold Mortgagee(s) shall be actively engaged in steps to acquire or sell Tenant’s interest herein, the time of said Mortgagee to comply with the provisions of this Article 33 (except Section 33.01 (C) shall be extended for such period as shall be reasonably necessary to complete such steps with reasonable diligence and continuity.
E.	Landlord agrees that the name of the leasehold Mortgagee(s) may be added to the “Loss Payable Endorsement” of any and all insurance policies required to be carried by Tenant hereunder on condition that the insurance proceeds are to be applied in the manner specified in this Lease and that the leasehold Mortgage(s) or collateral document shall so provide.
F.	Landlord agrees that in the event of termination of this Lease by reason of any default by Tenant other than for nonpayment of Rent or Additional Rent and other payments herein provided for, that Landlord will enter into a new lease of the Demised Premises with the leasehold Mortgagee(s) or its nominee(s), for the remainder of the term, effective as of the date of such termination, at the Basic Rent and additional rent and upon the terms, provisions, covenants and agreements as herein contained and subject only to the same conditions of title as this Lease is subject to on the date of the execution hereof, and to the rights, if any, of any parties then in possession of any part of the Demised Premises, provided:

(1) Said Mortgagee(s) or its nominee shall make written request upon Landlord for such new lease within fifteen (15) days after the date of such termination and such written request is accompanied by payment to Landlord of sums then due to Landlord under this Lease.

(2) Said Mortgagee(s) or its nominee(s) shall pay to Landlord at the time of the execution and delivery of said new lease, any and all sums which would at the time of the execution and delivery thereof, be due pursuant to this Lease but for such termination, and in addition thereto, any expenses, including reasonable attorney’s fees to which Landlord shall have been subjected by reason of such default.

(3) Said Mortgagee(s) or its nominee(s) shall perform and observe all covenants herein contained on Tenant’s part to be performed and shall further remedy any other conditions which Tenant under the terminated lease was obligated to perform under the terms of this Lease; and upon execution and delivery of such new lease, any subleases which may have theretofore been assigned and transferred by Tenant to Landlord, as security

34

under this Lease, shall thereupon be deemed to be held by Landlord as security for the performance of all of the obligations of Tenant under the new lease.

(4) Landlord shall not warrant possession of the Demised Premises to Tenant under the new lease.

(5) Such new lease shall be expressly made subject to the rights, if any, of Tenant under the terminated lease.

(6) The Tenant under such new lease shall have the same right, title, and interest in and to the buildings and improvements on the Demised Premises as Tenant had under the terminated lease.

G.	Landlord agrees promptly after submission to execute, acknowledge and deliver any agreements modifying this Lease requested by any leasehold Mortgagee(s), provided that such modification does not decrease Tenant’s obligations or decrease Landlord’s rights pursuant to this Lease.
H.	The proceeds from any insurance policies or arising from a condemnation are to be held by any leasehold Mortgagee(s) and distributed pursuant to the provisions of this Lease, but the leasehold Mortgagee(s) may reserve its rights to apply to the mortgage debt all, or an part, of Tenant’s are of such proceeds pursuant to such Mortgage(s).
I.	The leasehold Mortgagee(s) shall be given notice of any arbitration proceedings by the parties hereto, and shall have the right to intervene therein and be made a party to such proceedings, and the parties hereto do hereby consent to such intervention. In the event that the leasehold Mortgagee(s) shall not elect to intervene or become a party to such proceedings, the leasehold Mortgagee(s) shall receive notice of, and a copy of any award or decision made in said arbitration proceedings.
J.	Landlord shall, upon request, execute, acknowledge and deliver to each leasehold Mortgagee (s), an agreement prepared at the sole cost and expense of Tenant, in form satisfactory to such leasehold Mortgagee(s), between Landlord, Tenant and leasehold Mortgagee(s), agreeing to all of the provisions herein. The term “Mortgage”, whenever used herein, shall include whatever security instruments are used in the locale of the Demised Premises, such as, without limitations, deeds of trust, security deeds and conditional deeds, as well as financing statements, security agreements and other documentation required pursuant to the Uniform Commercial Code. The term “Mortgage” whenever used herein, shall also include any instruments required in connection with a sale-leaseback transaction.

ARTICLE XXXIV

Tenant’s Responsibility Regarding Hazardous Substances

     Section 34.01. Hazardous Substances. The term “Hazardous Substances” as used in this Lease, shall include, without limitation, flammable, explosives, radioactive materials, asbestos, polychlorinated

35

biphenyls (PCS’s), chemicals known to cause cancer or reproductive toxicity, pollutants, contaminants, hazardous wastes, toxic substances or related materials, petroleum and petroleum products, and substances declared to be hazardous or toxic under the Industrial Site Recovery Act, N.J.S.A. 13:1k-6, as amended, and the Spill Compensation and Control Act, N.J.S.A. 58:10-12.1, and any law or regulation now or hereafter enacted or promulgated by any governmental authority.

     Section 34.02. Tenant’s Restrictions. Tenant shall not cause to permit or occur:

          (A) Any violation of any federal, state or local law, ordinance, or regulation now or hereafter enacted, related to environmental conditions, on, under, or about the Demised Premises, or arising from Tenant’s use or occupancy of the Demised Premises, including, but not limited to, soil and ground water conditions; or

          (B) The use, generation, release, manufacture, refining, production, processing, transport, handling, treatment, storage, or disposal of any hazardous substance on, under, or about the Demised Premises, or the transportation to or from the Demised Premises of any hazardous substance, except for de minimus amounts of oils, greases, and cleaning products providing same is in conformance with all environmental laws or as specifically disclosed on Schedule G of this Lease.

Section 34.03. Environmental Cleanup.

     (A) Tenant shall, at Tenant’s own expense, comply with all laws regulating the use, generation, storage, transportation, or disposal of hazardous substances (“Laws”).

     (B) Tenant shall, at Tenant’s own expense, make all submissions to, provide all information required by, and comply with all requirements of all governmental authorities (the “Authorities”) under the laws.

     (C) Should any Authority or any third party demand that a clean-up plan be prepared and that a clean-up be undertaken because of any deposit, spill, discharge, or other release of hazardous substances that occurs during the term of this Lease, at or from the Demised Premises, or which arises at any time from Tenant’s use or occupancy of the Demised Premises, then Tenant shall, at Tenant’s own expense, prepare and submit the required plans and all related bonds and other financial assurances; and Tenant shall carry out all such clean-up plans.

     (D) Tenant shall promptly provide all information regarding the use, generation, storage, transportation, or disposal of hazardous substances that is requested by Landlord. If Tenant fails to fulfill any duty imposed under this Section 34.03 within a reasonable time, Landlord may do so; and in such case, Tenant shall cooperate with Landlord in order to prepare all documents Landlord deems necessary or appropriate to determine the applicability of the Laws to the Demised Premises and Tenant’s use thereof, and for compliance therewith, and Tenant shall execute all documents promptly upon Landlord’s request. No such action by Landlord and no attempt made by Landlord to mitigate damages under any laws shall constitute a waiver of any of Tenant’s obligations under this Section 34.03.

Section 34.04. Tenant’s Indemnity.

     (A) Tenant shall indemnify, defend, and hold harmless Landlord, Landlord’s Mortgagee, the manager of the property, and their respective officers, directors,

36

beneficiaries, shareholders, members, partners, agents and employees from all fines, suits, procedures, claims, and actions of every kind, and all costs associated therewith (including attorneys’ and consultants’ fees) arising out of or in any way connected with any deposit, spill, discharge, or other release of hazardous substances that occurs during the term of this Lease, at or from the Demised Premises, or which arises at any time from Tenant’s use or occupancy of the Demised Premises, or from Tenant’s failure to provide any information, make all submissions, and take all steps required by all Authorities under the Laws and all other environmental laws.

     (B) Landlord shall indemnify, defend, and hold harmless Tenant, Tenant’s Mortgagee, the manager of the Demised Premises, and their respective officers, directors, beneficiaries, shareholders, members, partners, agents and employees from all fines, suits, procedures, claims, and actions of every kind, and all costs associated therewith (including attorneys’ and consultants’ fees) arising out of or in any way connected with any deposit, spill, discharge, or other release of hazardous substances that occurred prior to Tenant’s occupancy of the Demised Premises, or which arose at any time prior to Tenant’s use or occupancy of the Demised Premises, or from Landlord’s failure to provide any information, make all submissions, and take all steps required by all Authorities under the Laws and all other environmental laws.

     (C) Landlord’s and Tenant’s obligations and liabilities under this Section 34.04 shall survive the expiration of this Lease.

     Section 34.05. Tenant represents that its SIC Number is                     .

ARTICLE XXXV

ISRA Compliance

     Section 35.01. Tenant acknowledges the existence of the New Jersey Industrial Site Recovery Act (“ISRA”). Tenant represents to Landlord that Tenant’s Standard Industrial Classification (SIC) Number as used on Tenant’s Federal Tax Return will not subject the Demised Premises to ISRA applicabilityunder current laws and regulations. Any change by Tenant to an operation with an SIC number subject to ISRA shall require Landlord’s written consent, which consent will not be unreasonably withheld. Any such proposed change shall be noticed in writing to Landlord sixty (60) days prior to the proposed change. Landlord, at its sole option, may deny consent to the change.

          Tenant agrees to execute such documents as Landlord reasonably deems necessary and to make such applications as Landlord reasonably requires to assure compliance with ISRA. Tenant shall bear all costs and expenses incurred by Landlord associated with any required ISRA compliance resulting from Tenant’s use of the Demised Premises including but not limited to, state agency fees, engineering fees, clean-up costs, filing fees and suretyship expenses. As used in this Lease, ISRA compliance shall include applications for determinations of nonapplicability by the appropriate governmental authority. The foregoing undertaking shall survive the termination or sooner expiration of the Lease and surrender of the Demised Premises and shall also survive sale, or lease or assignment of the Demised Premises by Landlord. Tenant agrees to indemnify and hold Landlord harmless from the violation of ISRA occasioned by Tenant’s use of the Demised Premises.

37

ARTICLE XXXVI

Sorting and Separation of Refuse and Trash

     Section 36.01. Compliance by Tenant. Tenant covenants and agrees, at its sole cost and expense, to comply with all present and future laws, orders, and regulations of all state, federal, municipal, and local governments, departments, commissions, and boards regarding the collection, sorting, separation, and recycling of waste products, garbage, refuse and trash. Tenant shall sort and separate such waste products, garbage, refuse, and trash into such categories as provided by law. Each separately sorted category of waste products, garbage, refuse, and trash shall be placed in separate receptacles. Such separate receptacles may, at Landlord’s option, be removed from the Demised Premises in accordance with a collection schedule prescribed by law.

     Section 36.02. Landlord’s Rights in Event of Noncompliance. Landlord reserves the right to refuse to collect or accept from Tenant any waste products, garbage, refuse or trash that is not separated and sorted as required by law, and to require Tenant to arrange for such collection at Tenant’s sole cost and expense, utilizing a contractor satisfactory to Landlord. Tenant shall pay all costs, expenses, fines, penalties or damages that may be imposed on Landlord or Tenant by reason of Tenant’s failure to comply with the provisions of this article, and, at Tenant’s sole cost and expense, shall indemnify, defend and hold harmless (including legal fees and expenses) from and against any actions, claims, and suits arising from such noncompliance, utilizing counsel reasonably satisfactory to Landlord.

ARTICLE XXXVII

Removal of Garbage and Debris

     Section 37.01. Tenant agrees to remove all garbage and debris from Tenant’s Demised Premises. Tenant shall not permit its garbage or debris to be placed or remain outside the Demised Premises.

     Section 37.02. For purposes of this Section, garbage and debris shall refer to waste generated by Tenant’s business facilities, except for any hazardous substances as defined in Article XXXIV hereinabove.

     Section 37.03. Removal of all such garbage and debris shall be at Tenant’s expense in accordance with Article XXXVI set forth above.

     Section 37.04. In the event Tenant is specifically permitted to use, generate, release, manufacture, refine, produce, process, transport, handle, treat, store or dispose of any hazardous substance in accordance with the provisions of Article XXXIV herein, Tenant shall not dispose of said hazardous substances in the common garbage receptacles and/or containers provided by Landlord for the tenants. Tenant shall dispose of said hazardous substances in accordance with all applicable laws at its own cost and expense.

     Section 37.05. In the event Tenant produces garbage and debris for disposal in the common garbage receptacles and/or containers provided by Landlord for Tenant, that is in excess of Tenant’s share of the aggregate garbage and debris for the entire Shopping Center, Landlord may assess Tenant and Tenant shall be responsible for the disposal costs associated with said excess.

38

ARTICLE XXXVIII

Renewal Option

     Section 38.01. Tenant is hereby granted two (2) options to renew this Lease upon the following terms and conditions:

(A)	It is expressly understood and agreed that the Tenant’s option to renew, as hereinafter set forth shall be personal to Tenant, and may not be exercised by any permitted assignee or subtenant hereunder, except an assignee permitted by the terms of Section 14.05. It is understood and agreed that Tenant’s Option to Renew shall be null and void in the event that fifty (50%) percent or more of the Demised Premises have been sublet by the Tenant prior to the date set for the exercise by Tenant of the Renewal Option hereinafter set forth.
(B)	At the time of the exercise of the option to renew and at the time of the said renewal, the Tenant shall not have committed an uncured Event of Default, and shall be in possession of the Demised Premises pursuant to this Lease.
(C)	Notice of the exercise of the option shall be sent to the Landlord in writing at least six (6) months before the expiration of the Term of this Lease.
(D)	Each renewal term shall be for the term of five years, to commence at the expiration of the Term of this Lease or first renewal and all of the terms and conditions of this Lease, other than the Fixed Rent, shall apply during any such renewal term.
(E)	The Fixed Rent to be paid during each year of the renewal term shall be the Fixed Rent payable during the previous year times a fraction the numerator of which is the Consumer Price Index (C.P.I.) of December 31st of the previous year and the denominator of which is the Consumer Price Index of January 1st of the previous year. In no event shall the Fixed Rent for any year of the renewal term be less that the Fixed Rent for the previous year. The Consumer Price index to be utilized in determining the Fixed Rent for the renewal years shall be the Consumer Price Index for the Northern New Jersey and Greater New York Region.

     The aforesaid monthly rents shall be payable in advance on the first day of each calendar month, except that a proportionately lesser sum may be paid for the first month following the Term Expiration Date if said date falls on a date other than the first of the month.

39

     IN WITNESS WHEREOF, the parties hereto execute this Lease on the date set forth above.

WWM PROPERTIES, LLC.
By
	Sidney Hofing
	Managing Member

By
	Jack Morris
	Managing Member

YARDVILLE NATIONAL BANK
By
	Patrick M. Ryan
	President - CEO

40

41

42

EXHIBIT B

LANDLORD’S WORK

1. The Landlord shall provide the following work as its scope of services.

A.	Land acquisition.
B.	All Professional Fees excluding interior architectural
C.	Construction Permits.
D.	Building Shell: The Landlord shall provide a building shell in accordance to architectural plans prepared by Ignarri-Lummis architecture firm and shall include the following.

1.	All exterior construction including drive thru lanes
2.	HVAC Equipment (As per code)
3.	Electrical Equipment (As per code)
4.	All Utility Lines (As per code)
5.	Bathrooms (As per code)
6.	Drop Ceiling and Lighting (As per code)
7.	The sheetrocking of perimeter walls

E.   Site Work (As per Schoor DePalma’s Engineering Drawings)

All of the specifications and the Landlord’s work shall be subject to the Tenant’s approval, which shall not be unreasonably withheld, conditioned or delayed.

43

EXHIBIT C

SIGNS

1.	All signs visible to the outside are to be submitted for approval by Landlord, which approval shall not be unreasonably withheld.
2.	The sign(s) shall not be moving or flashing.

All tenant signage must conform to any local requirements or restrictions as established by local ordinances. Copies of the approved permits must be posted in the front windows of the building before installation of any sign commences.

44

EXHIBIT D

EXCLUSIVES

CVS EXCLUSIVE:

31. (a) (i) Landlord warrants and agrees that Landlord will not lease any space in the Shopping Center (excluding the Premises), or permit the use of any such space, for a health and beauty aids store, a drug store, a vitamin store, and/or a pharmacy.

          (ii) Landlord warrants and agrees that Landlord will not lease any space in the Shopping Center (excluding the Premises), or permit the use of any such space, for the primary purpose of: a greeting card and gift store; a candy store or a photo processing store, nor shall Landlord lease, or permit the use of, more than 2,000 square feet in the aggregate of space in the Shopping Center, for use as a retail operation which sells or offers for sale a majority of its merchandise at or around the same price (e.g., a so-called “dollar store”).

          (iii) If Landlord or any of its officers, directors, trustees, individual members, or partners, hold or acquire any interest in any land immediately adjacent to the Shopping Center or at the same intersection as the Shopping Center (whether accomplished directly by direct ownership, or indirectly through the use of leases, cross-easement agreements or similar documents), during the Term, Landlord agrees that (unless any premises on said land are already so leased and/or used) Landlord shall not allow any of the premises on such land to be leased or to be used for the purpose of a health and beauty aids store, a drug store, a vitamin store and/or a pharmacy.

     (b) As used in this Lease: the term “operation of a pharmacy “ shall mean the dispensing, distribution or furnishing of prescription drugs for a fee or profit. The distribution or furnishing of free samples of prescription drugs by physicians, dentists, other health care practitioners, or entities such as clinics or health maintenance organizations shall not be deemed the “operation of a pharmacy”; and a “health and beauty aids store” shall mean a store which devotes more than 10% of its retail selling space to the display and sale of health and beauty aids.

YARDVILLE EXCLUSIVE:

Landlord agrees that it will not permit any other financial institution, such as a commercial bank, savings bank or credit union to be operated in the Shopping Center during the Term.

45

EXHIBIT E

RULES AND REGULATIONS

     1. All loading and unloading shall be done only in the areas, and through the entrances, designated for such purposes by Landlord.

     2. INTENTIONALLY OMMITTED

     3. No loudspeakers, televisions, phonographs, radios or other devices shall be used in a manner so as to be heard or seen outside of the Demised Premises without the prior written consent of the Landlord.

     4. If the Demised Premises are equipped with heating facilities separate from those in the remainder of the Shopping Center, Tenant shall keep the Demised Premises at a temperature sufficiently high to prevent freezing of water pipes and fixtures.

     5. Tenant shall, at Tenant’s cost, contract the services of an exterminator in compliance with the Lease requirements.

     6. Tenant shall not burn any trash or garbage of any kind in or about the Demised Premises, the Shopping Center, or within one mile of the outside property lines of the Shopping Center.

     7. Tenant and Tenant’s employees and agents shall not conduct or solicit business in the parking area or other common areas, nor shall Tenant distribute any handbills or other advertising matter in automobiles parked in the parking area or in other common areas, including “For Sale” signs in car windows.

     8. Tenant is not permitted to use any space heaters, including but not limited to kerosene, propane or electric.

     9. The plumbing facilities shall not be used for any other purpose than that for which they were constructed, and no foreign substance of any kind shall be thrown therein, and the expense of any breakage, stoppage, or damage resulting from a violation of this provision shall be borne by Tenant, who shall, or whose employees, agents or invitees shall, have caused it.

     10. Tenant shall not install any coin operated vending machine, video game machine, coin telephone, or similar devise, nor any stand for display of goods for sale upon the sidewalk area or outside wall or any portion of the Shopping Center without written consent of the Landlord.

     11. No buses shall be operated by any tenant in this Shopping Center. Should any tenant wish to charter or otherwise arrange for a bus to be present on the Shopping Center property, he must first obtain written permission from the Landlord. The request for permission to have a bus enter the property should contain particulars of the bus’ operation noting as to its location of parking, picking up and discharging of passengers, and the like.

     12. Tenant shall promptly comply with all laws, orders, directions, rules and requirements of governmental authorities and cognizant insurance carriers.

     13. Maintain the Demised Premises and all equipment within it in good repair and appearance and in neat, clean, safe and sanitary condition free of all garbage.

46

     14. Use all electric, plumbing and other facilities in the rental space safely.

     15. Promptly notify Landlord when there are conditions that require repair by Landlord.

     16. Comply with all rules and regulations made by Landlord from time to time, respecting the delivery or shipment of merchandise, supplies and fixtures to and from the rental space.

     17. Immediately notify Landlord of any accident, fire or damage occurring to the rental space.

     18. Install anything on the roof without the prior written consent of Landlord.

     19. Do anything or permit anything to be done which tends to destroy the peace and quiet of the Landlord, other tenants, invitees of the Shopping Center, or persons in the neighborhood.

     20. Throw or permit any foreign substance to be thrown into the plumbing facilities.

     21. Permit any vehicle or trailers to remain parked overnight in the Shopping Center.

     22. Obstruct any part of the Shopping Center outside the rental space.

     23. Use or operate any equipment that, in Landlord’s sole judgment, is or may be harmful to the rental space of the building which the rental space is a part.

     24. Attach any awning or other projection to the outside of the rental space, or the building of which the rental space is a part.

     25. Conduct any auction, fire sale, bankruptcy sale, going-out-of business sale, or lost-our-lease sale, in or about the rental space.

     26. Tenant’s employees may not park in front of the other tenant’s stores.

     27. Permit trash or debris to accumulate outside the Demised Premises.

     Failure of Tenant to comply with the rules and regulations of this section constitutes an Event of Default under this Lease, subject to a Fifty and 00/100 ($50.00) Dollar per day fine, after giving Tenant notice of such default and an opportunity to cure the same within the time provided by this Lease.

47

EX-10.3

Exhibit 10.3

OFFICE LEASE

Between

MYNB, LLC , Landlord

And

Yardville National Bank, Tenant

Premises:	Yardville National Bank
	301 West Trenton Avenue
	Falls Township, Pennsylvania
	Tax Map: 13-035-074-001
Date:	April 1, 2005

INDEX

To Lease Between MYNB, L.L.C., as Landlord,
and Yardville National Bank, a National Bank, as Tenant

Dated: April 1, 2005

Article	Caption	Page No.
1	Premises - Term of Lease and Use	1
2	Basic Rent	1
3	Repair Obligation of Tenant	1
4	Compliance with Statutes, Ordinances, etc.	1
5	Landlord’s Right to Perform Tenant’s Covenants	2
6	Assignment or Subletting	2
7	Alterations or Improvements by Tenant	3
8	Damage or Destruction	3
9	Landlord’s Right of Entry	3
10	Vacancy or Eviction	4
11	Replacement of Glass and Damage Due to Tenant’s Negligence	4
12	Obstruction of Premises	4
13	Signs	4
14	Landlord’s Non-Liability for Damages	5
15	Subordination	5
16	Security Deposit	5
17	Impossibility of Insurance Coverage	6
17B	Tenant’s Insurance	7
18	Default	7
19	Abatement of Trade Fixtures	11
20	Strict Performance	11
21	Re-Entry of Landlord	11
22	Condemnation	12
23	Delay in Performance	12
24	Limitation of Liability	12
25	Delivery of Possession	12

-i-

Article	Caption	Page No.
26	Real Estate Broker	13
27	Indemnification of Landlord	13
28	Termination of Landlord’s Liability	13
29	Triple Net - Additional Rent	14
30	Tenant’s Additional Obligation	15
30A	Tenant’s Services	15
31	Notices	15
32	Right to Lock Premises on Default	15
33	Proration of Rent	16
34	Quiet Enjoyment	16
35	Covenants to Bind Parties	16
36	Notification of Default to Mortgage	17
37	Waiver of Subrogation	17
38	Mechanic’s Liens	17
39	Certificates by Tenant and Landlord	18
40	Cumulative Remedies - No Waiver - No Oral Change	18
41	Change of Terms	18
42	Attornment	19
43	Applicable Law	19
44	Holding Over	19
45	Memorandum and Recording	20
46	Utility Easements	20
47	Rules and Regulations	20
48	Building Improvements	20
49	Renewal Option	20
50	Notice Requirement	21
51	Management and Operation of Common Areas	21

-ii-

Exhibits

A     Location — Project Description

B     Basic Rent

-iii-

     THIS AGREEMENT, dated the 1st day of April , 2005, between MYNB, L.L.C. as Landlord and Yardville National Bank, a National Bank, as Tenant.

WITNESSETH:

ARTICLE 1
Premises — Term of Lease and Use

     The said Landlord has let unto the said Tenant and the said Tenant has hired from said Landlord the following premises: Yardville National Bank, 301 West Trenton Avenue, Tax Map 13-035-074-001, Township of Falls, State of Pennsylvania for the term of Fifteen (15) years to commence from the issuance of a temporary or permanent Certificate of Occupancy, to be used and occupied only for lawful purposes, more specifically bank branch and office use, only.

Upon the conditions and covenants following:

ARTICLE 2
Basic Rent

     For rent specifications see Lease Addendum. The square footage for the building is estimated at 2,600 sq. ft. Said rent to be paid in equal monthly payments in advance on the 1st day of each and every month during the term aforesaid in the amount of $9,421.39 per month (year 1), said rent to be paid without benefit of offset or deduction. This is a triple net lease, and Tenant will pay additional rent as set forth in Paragraph 29 and is in addition to the basic rent. The rental Schedule is set forth in Exhibit “B”. All rent not received by the 10th of the month will incur a late charge of five (5%) percent.

ARTICLE 3
Repair Obligations of Tenant

     That the Tenant shall take good care of the premises and shall at the Tenants own cost and expense make all repairs, that Tenant is required to make under this lease, and at the end or other expiration of the term shall deliver up the demised premises in good order or condition, damages caused by the elements and ordinary wear and tear excepted. Tenant shall provide chair pads under all movable chairs in the demises premises, or otherwise be responsible for all damage to flooring and carpet resulting from the absence of the use of chair pads. Tenant will not overload the electrical wiring serving the leased premises or within the leased premises, and will install at its own expense, but only after obtaining Landlord’s approval, any additional electrical wiring which may be required in connection with Tenant’s apparatus.

ARTICLE 4
Compliance with Statutes, Ordinances, Etc.

     That the Tenant shall promptly execute and comply with all statutes, ordinances, rules, orders, regulations and requirements of the Federal, State and City Government and of any and all their

Departments and Bureaus applicable to said premises, for the correction, prevention, and abatement of nuisances, violations or other grievances, in, upon or connected with said premises during said term, and which are directly related to Tenant’s use of the said premises; shall also promptly comply with and execute all rules, orders, and regulations of the Board of Fire Underwriters, or any other similar body, for the prevention of fires, at the Tenant’s own cost and expense.

ARTICLE 5
Landlord’s Right to Perform Tenant’s Covenants

     That in case the Tenant shall fail or neglect to comply with the aforesaid statutes, ordinances,

rules, orders, regulations and requirements or any of them, or in case the Tenant shall fail or neglect to make any necessary repairs, then if Tenant fails to remediate within thirty (30) days after Landlord’s written notice to remediate, the Landlord or the Landlord’s Agency may enter said premises and make said repairs and comply with any and all of the said statutes, ordinances, rules, orders, regulations or requirements, at the cost and expense of the Tenant and in case of the Tenant’s failure to pay therefore, the said cost and expense shall be added to the next month’s rent and be due and payable as such, or the Landlord may deduct the same from the balance of any sum remaining in the Landlord’s hands. This provision is in addition to the right of the Landlord to terminate this lease by reason of any default on the part of the Tenant.

ARTICLE 6
Assignment or Subletting

     That should the Tenant desire to assign this agreement or underlet said premises, it shall first offer same to Landlord at the rental set forth herein. Should Landlord not accept the assignment or underletting offered or not respond within twenty (20) days of receipt of Tenant’s written offer, then Tenant shall be allowed to assign this agreement or underlet the premises provided that the Tenant shall not (a) assign this agreement, or underlet or underlease the premises or any part thereof without the prior written consent of Landlord, which consent will not be unreasonably withheld or delayed; provided, however, that notwithstanding such assignment, Tenant shall not thereby be relieved from responsibility hereunder, or (b) permit or suffer the premises or any part thereof to be occupied for any business or purpose deemed disreputable or extra-hazardous on account of fire, under penalty of damages and forfeiture. Tenant shall be permitted to assign this lease or sublet the premises without Landlord’s consent and without first offering the premises to Landlord if the proposed sublease or assignee is an entity owned by, controlled by, affiliated with, or is the Parent Company of the Tenant.

          In the event that the Tenant enters into an agreement to sell all of its stock of Yardville National Bank, it is permissible under the Lease Agreement.

2

ARTICLE 7
Alterations or Improvements by Tenant

     That except for the planned improvements made in accordance with plans and specifications no alterations, additions or improvements, painting or decorating shall be made in or to the premises without the consent of the Landlord in writing, which consent shall not be unreasonably withheld or delayed, under penalty of damages and forfeiture, and all additions and improvements made by the Tenant shall become the property of the Landlord and shall remain on and be surrendered with the demised premises. Landlord hereby consents to the installation of paint and carpet throughout the premises and of sheetrock or glass on the cubicles contained in the premises. At Landlord’s request all such alterations and improvements shall be restored to their original condition at Tenant’s expense at the termination of the Lease, provided Landlord notifies Tenant, in writing, prior to the end of the term of its desire to have the premises restored.

ARTICLE 8
Damage or Destruction

     In case of damage, by fire or other cause, to the building in which the leased premises are located, without the fault of the Tenant or of Tenant’s agent or employees, if the damage is so extensive as to amount practically to the total destruction of the leased premises or of the building, or if the Landlord shall within a reasonable time decide not to rebuild, the lease shall cease and come to an end, and the rent shall be apportioned to the time of the damage. In all other cases where the leased premises are damaged by fire without the fault of the Tenant or of Tenant’s agents or employees the Landlord shall repair the damage with reasonable dispatch after notice of damage, and if the damage has rendered the premises untenantable, in whole or in part, there shall be no abatement, diminution or reduction of fixed rent or other charges payable by Tenant under this lease.

ARTICLE 9
Landlord’s Right of Entry

     (a) That said Tenant agrees that the said Landlord and Landlord’s Agents, and other representatives, shall have the right to enter into and upon said premises, or any part thereof, at all reasonable hours upon prior written notice to the Tenant except where an emergency exists and the Landlord is obligated to take immediate action for the purpose of examining the same, or making such repairs or alterations therein as may be necessary for the safety and preservation thereof provided such entry shall not unreasonably interfere with Tenant’s business.

     (b) The Tenant also agrees to permit the Landlord or Landlord’s Agents to show the premises at all reasonable hours, upon prior written notice to Tenant, to persons wishing to hire or purchase the same; and the Tenant further agrees that during the six months next prior to the expiration of the term, the Landlord or Landlord’s Agents shall have the right to place notices on the front of said premises, or any part thereof, offering the premises “to Let” or “For Sale”, and the Tenant hereby agrees to permit the same to remain thereon without hindrance or molestation.

3

ARTICLE 10
Vacancy or Eviction

     That if the said premises, or any part thereof, shall become vacant during the said term, or should Tenant be evicted by summary proceedings or otherwise, the Landlord or Landlord’s representatives may re-enter the same, either by force or otherwise, without being liable to prosecution therefor; and re-let the said premises as the Agent of the said Tenant and receive the rent thereof; applying the same, first to the payment of such expenses as the Landlord may be put to in re-entering and then to the payment of the rent due by these presents; it being understood that the Tenant shall remain liable for any deficiencies.

ARTICLE 11
Replacement of Glass and Damage Due to Tenant’s Negligence

     Tenant shall replace any and all broken glass in and about the demised premises. Landlord may insure, and keep insured, all plate glass in the demised premises for and in the name of Landlord. Damage and injury to the said premises, caused by the carelessness or improper conduct on the part of the said Tenant or the Tenant’s agents or employees shall be repaired as speedily as possible by the Tenant at the Tenant’s own cost and expense.

ARTICLE 12
Obstruction of Premises

     That the Tenant shall neither encumber, nor obstruct the sidewalk in front of, entrance to or hall and stairs of said building, other common areas, parking areas or driveways, nor allow the same to be obstructed or encumbered in any manner without Landlord’s written consent.

ARTICLE 13
Signs

     The Tenant shall neither place, nor cause, nor allow to be placed, any sign or signs of any kind whatsoever at, in or about the entrance to said premises nor any other part of same except in or at such place or places as may be indicated by the said Landlord and consented to by Landlord in writing. Landlord hereby consents to the placement of a sign on the outside door of the premises which sign shall be of the same type as those signs used by other Tenants and in case the Landlord or Landlord’s representatives shall deem it necessary to remove any such sign or signs in order to paint or to make any other repairs, alterations or improvements in or upon said premises or the building wherein same is situated or any part thereof, the Landlord shall have the right to do so, providing the same be removed and replaced at the Landlord’s expense whenever the said repairs, alterations or improvements shall have been completed. Landlord will provide a Directory of Tenants in an appropriate place on the property which the demised premises are located.

4

ARTICLE 14
Landlord’s Non-Liability for Damages

     It is expressly agreed and understood by and between the parties to this agreement, that the Landlord shall not be liable for any damage or injury to person or property caused by or resulting from steam, electricity, gas, water, rain, ice or snow, or any leak or flow from or into any part of said building, except as may be caused by the negligence of Landlord or its Agents or Employees. Landlord shall not be liable for any damage or injury resulting or arising from any other cause or happening whatsoever that is not caused by the negligence or other acts or omissions of Landlord or its Agents or Employees.

ARTICLE 15
Subordination

     That this lease shall not be a lien against said premises in respect to any mortgages that are now on or that hereafter may be placed against said premises, and that the recording of such mortgage or mortgages shall have preference and precedence and be superior and prior in lien of this lease irrespective of the date of recording and the Tenant agrees to execute any instrument without cost, which may be deemed necessary or desirable to further effect the subordination of this lease to any such mortgage or mortgages, and a refusal to execute such instruments shall entitle the Landlord, or the Landlord’s assigns and legal representatives to the option of cancelling this lease without incurring any expense or damage, and the term hereby granted is expressly limited accordingly. In the event that Landlord procures mortgage loans or recasts the existing mortgage loan on said premises, Tenant agrees to furnish to Landlord on request, copies of its most recent financial statements prepared by the Certified Public Accountant regularly retained by it.

ARTICLE 16
Security Deposit

     16.1 The Landlord hereby acknowledges receipt of $ N/A which it is to be placed in an interest bearing account and is to be retained as security for the faithful performance of all of the covenants, conditions and agreements to this lease, but in no event shall Landlord be obliged to apply same on rents or other charges in arrears or damages for the Tenant’s failure to perform said covenants, conditions and agreements; the Landlord may so apply the security at its option; and the Landlord’s right to the possession of the premises for non-payment of rent or for any other reason shall not in any event be affected by reason of the fact that Landlord holds this security. The said sum if not applied toward the payment of rent in arrears or toward the payment of damages suffered by Landlord by reason of the Tenant’s breach of the covenants, conditions and agreements of this lease is to be returned to the tenant when this lease is terminated, according to these terms, and in no event is the said security to be returned until the Tenant has vacated the premises and delivered possession to the Landlord.

     16.2 In the event that the Landlord repossesses itself of said premises because of the Tenant’s default or because of the Tenant’s failure to carry out the covenants, conditions and agreements of this lease, the Landlord may apply the said security on all damages suffered to the date of repossession and may retain the said security to apply on such damages as may be suffered or

5

shall accrue thereafter by reason of the Tenant’s default or breach. The Landlord shall keep the said security as a separate fund. The security deposited under this lease shall not be mortgaged, assigned, pledged, or encumbered by Tenant without the written consent of Landlord. In the event of filing by or against Tenant of a petition in bankruptcy or assignment for the benefit of creditors, or upon the insolvency of Tenant, title to the monies paid over to Landlord as security shall vest in the Landlord free and clear of any claims of the Trustees in bankruptcy, assignee for the benefit of creditors or Receiver that may be appointed for the insolvent Tenant.

     16.3 In the event of a bona fide sale, subject to this lease, the Landlord shall have the right to transfer the security to the vendee for the benefit of the Tenant upon such transfer and Landlord shall be considered released by the Tenant of all liability for the return of said security, and it is agreed that this shall apply to every transfer or assignment made of the security to the new Landlord.

ARTICLE 17
Impossibility of Insurance Coverage

     17.1 It is expressly understood and agreed that if for any reason it shall be impossible to obtain fire insurance and extended coverage on the buildings and improvements on the demised premises in an amount, and in the form, and in fire insurance companies acceptable to the Landlord the Landlord may, if the Landlord so elects, at any time thereafter terminate this lease and the term thereof, on giving to the Tenant three days’ notice in writing of Landlord’s intention so to do and upon the giving of such notice, this lease and the term thereof shall terminate and come to an end. In the event that Tenant’s occupancy causes any increase in premium for the fire and extended coverage insurance rates on the demised premises or the balance of the building in which Tenant’s demised premises are located, Tenant shall pay, as additional rent, the additional premium on said fire and extended coverage insurance. Bills for such additional premiums, if any, shall be rendered by Landlord to Tenant at such time as Landlord shall elect, and shall be due and payable by Tenant when rendered; and the amount thereof shall be deemed to be and paid as additional rent.

     17.2 That the Tenant will not nor will the Tenant permit other tenants or other persons to do anything in said premises or bring anything into said premises, or permit anything to be brought into said premises or to be kept therein, which will in any way increase the rate of fire insurance on said demised premises, nor use the demised premises or any part thereof, nor suffer or permit their use for any business or purpose which would cause an increase in the rate of fire insurance on said building, and the Tenant agrees to pay on demand any such increase.

6

ARTICLE 17B
Tenant’s Insurance

     At all times after the execution of this lease, Tenant shall take out and keep in force, at its expense:

     17B.1. Tenant’s Insurance

     A. Public liability insurance, including insurance against assumed or contractual liability with respect to the premises, to afford protection to the limit, for each occurrence, of not less than one million dollars ($1,000,000) with respect to personal injury or death, and five hundred thousand dollars ($500,000) with respect to property damages; and

     B. All-risk casualty insurance, written at replacement cost value and with replacement cost endorsement, covering all of Tenant’s personal property in the premises (including, without limitation, inventory, trade fixtures, floor coverings, furniture and other property removable by Tenant under the provisions of this lease) and all leasehold improvements installed in the premises by Tenant; and

     C. If and to the extent required by law, worker’s compensation or similar insurance in form and amounts required by law.

     17B.2. Tenant’s Contractor’s Insurance

     A. Comprehensive general liability insurance, including contractor’s liability coverage, contractual liability coverage, completed operations coverage, broad form property damage endorsement and contractor’s protective liability coverage, to afford protection to the limit, of each occurrence, with respect to property damage; and

     B. Worker’s compensation or similar insurance in form and amounts required by law.

     17.B.3. Policy Requirements

     A. The company or companies writing any insurance which Tenant is required to take out and maintain shall be licensed to do business in New Jersey. Each policy evidencing such insurance shall name Landlord or its designee as additional insured and shall also contain a provision by which the insurer agrees that such policy shall not be cancelled except after thirty (30) days written notice to Landlord or its designee. Each such policy, or a certificate thereof, shall be deposited with Landlord by Tenant promptly upon commencement of Tenant’s obligation to procure the same. If Tenant shall fail to perform any of its obligations under this Article, Landlord may perform the same and the cost of same shall be deemed additional rental and shall be payable by Tenant upon Landlord’s demand.

ARTICLE 18
Conditional Limitations and Default

     18.1 If at any time during the term of this Lease:

     (a) If Tenant shall file a petition in bankruptcy or insolvency or for reorganization or arrangement or for the appointment of a receiver of all or a portion of Tenant’s property or, such filing shall continue for a period of ten days.

7

     (b) Any involuntary petition of the kind referred to in subdivision (a) of this section shall be filed against Tenant and such petition shall not be calcite or withdrawn within ninety (90) days after the date of filing thereof, or

(c) Tenant shall be adjudicated a bankrupt by any court, or

(d) Tenant shall make an assignment for the benefit of creditors, or

     (e) A permanent receiver shall be appointed for the property of Tenant by order of a court of competent jurisdiction by reason of the insolvency of Tenant (except where such receiver shall be appointed in an involuntary proceeding, if he shall not be withdrawn within ninety (90) days after the date of his appointment), or

     (f) The operation of Tenant’s business shall be suspended by any authority having jurisdiction thereover or the conduct and operation of Tenant’s business shall be taken over by (i) a receiver appointed by order of a court of competent jurisdiction or (ii) an agency or governmental authority having jurisdiction thereover, then Landlord, at Landlord’s option may terminate this Lease on ten (10) days’ notice to Tenant, and upon such termination, Tenant shall quit and surrender the Leased Premises to Landlord. The word “Tenant” as used in this section shall be deemed to mean the Tenant herein named, or in the event of an assignment of this Lease in accordance with the provisions of Article VIII, such word shall be deemed to also mean the ten assignee.

     18.2 If this Lease shall terminate pursuant to the provisions of Section 18.1:

     (a) Landlord shall be entitled to receive from Tenant arrears in Basic Annual Rent and Additional Rent and, in addition thereto as liquidated damages, an amount equal to the balance of rentals due under the remaining term of the Lease, the remaining rentals shall be accelerated hereby plus any other damages to which Landlord may be entitled including, but not limited to, reasonable legal fees. Tenant shall receive a credit for any monies including, but not limited to, all rents received by Landlord in mitigation of such default and Landlord shall make best efforts to re-let the premises. All funds received shall first go to pay Landlord’s costs and expenses of mitigating the damages, then towards Tenant’s credit.

     18.3 (a) If Tenant shall fail to pay any Basic Annual Rent or Additional Rent when due and payable hereunder, and any such default shall continue for a period of ten (10) days after such payment is due; or

          (b) If Tenant shall be in default in the performance of any of the other terms, covenants, and conditions of this Lease:

               (i) and such default shall not have been remedied within ten (10) days after notice by Landlord to Tenant specifying such default and requiring it to be remedied; or

8

               (ii) where such default reasonably cannot be remedied within such period of ten (10) days, if Tenant shall not have commenced the remedying thereof with such period of time and shall not be proceeding with due diligence to remedy it;

          Then Landlord, at its election, may terminate this Lease on ten (10) days’ notice to Tenant, and upon such termination Tenant shall quit and surrender the Leased Premises to Landlord.

     18.4 If this Lease shall terminate as provided in Section 18.3, or if Tenant shall be in default in the payment of Basic Annual Rent or Additional Rent when due and payable and such default shall continue for a period of ten (10) days after such payment is due:

          (a) Landlord may re-enter and resume possession of the Leased Premises and remove all persons and property therefrom either by summary dispossess proceedings or by a suitable action or proceeding at law or in equity or by peaceable self-help or otherwise, without being liable for any damages therefor; and

     (b) Landlord may relet the whole or any part of the Leased Premises for a period equal to, greater or less than the remainder of the then term of this Lease at such rental and upon such terms and conditions as Landlord shall deem reasonable to any tenant it may deem suitable and for any use and purpose it may deem appropriate. Landlord shall use its best efforts in re-letting the premises, and, provided Landlord uses such best efforts. Landlord shall not be liable in any respect for failure to relet the Leased Premises or, in the event of such reletting, for failure to collect the rent thereunder and any sums received by Landlord on a reletting in excess of the rent reserved in this Lease shall belong to Landlord.

     18.5 If this Lease shall terminate as provided in this Article or by summary dispossess proceedings (except as to any termination under Section 33.1), Landlord shall be entitled to recover from Tenant as damages in addition to arrears in Basic Annual Rent and Additional Rent,

          (a) (i) amounts equal to all expenses reasonably incurred by Landlord in recovering possession of the Leased Premises and in connection with the reletting of the Leased Premises including, without limitation, reasonable legal fees, the cost of repairing, renovating or remodeling the Leased Premises, and to the condition they were in at the inception of the Lease, reasonable wear and tear excepted;

               (ii) broker’s commissions incurred by Landlord in reletting the Leased Premises, which amounts set forth in this subsection shall be due and payable by Tenant to Landlord at such time or times as they shall have been incurred; and

9

          (b) amounts equal to the deficiency between the Basic Annual Rent and Additional Rent which would have become due and payable had this Lease not terminated and the net amount, if any, of rent and Additional Rent collected by Landlord on reletting the Leased Premises. The amounts specified in this subsection shall be due and payable by Tenant on the several days on which such Basis Annual Rent and Additional Rent would have become due and payable had this Lease not terminated. Tenant consents that Landlord shall be entitled to institute separate suits or actions or proceedings and hereby waives the right to enforce or assert the rule against splitting a cause of an action as a defense thereto. Landlord, at its election, which shall be exercised by the service of a notice on Tenant, may collect from Tenant as damages and Tenant shall pay in lieu of the sums becoming due under the provisions of subsection (b) hereof after the service of such notice, an amount equal to the difference between the Basic Annual Rent and Additional Rent which would become due and payable had this Lease not terminated (from the date of the service of such notice to the end of the term of this Lease which would have been in effect if it had not terminated) and the maximum allowed by statute or rule or law in effect at the time when in governing the proceedings in which such damages are to be proved. Tenant shall be credited with any rental received from a new tenant.

     18.6 The words “re-enter” and “re-entry” as used in this Article are not restricted to their technical legal meaning.

     18.7 Tenant hereby waives the service of any notice in writing by Landlord of its intention to re-enter except as otherwise provided in this Lease.

     18.8 If this Lease shall terminate as provided in this Article or by summary proceedings or otherwise, Landlord, in addition to any other rights under this Article, shall be entitled to recover as damages;

          (a) the cost of performing any work required to be done by Tenant under this Lease and all damages resulting from Tenant’s default in performing such work, and

          (b) the cost of replacing the Leased Premises in the same condition as that in which Tenant is required to surrender them to Landlord under this lease.

     18.9 At any time (a) within fifteen (15) days prior to the expiration of the term of this Lease or (b) after Landlord shall have served any notice of termination of this Lease, as provided in this Lease, but prior to the date of termination, or (c) after Landlord shall have commenced a summary dispossess proceeding or an appropriate action or proceeding to recover possession of the Leased Premises but prior to the termination of this Lease by reason of the issuance of a

10

warrant in the dispossess proceeding or the entry of a judgment in such other action or proceeding, any or all subleases theretofore executed by Tenant and the rent payable thereunder shall, at the option of Landlord (such option to be exercised by notice to Tenant), be assigned by Tenant to Landlord as of the date of the service of such notice. Such assignment shall be deemed to be and shall be effected as of the date of service of such notice without execution by Tenant of any instrument. However, Tenant, at Landlord’s request, shall execute, acknowledge and deliver to Landlord an instrument in recordable form, confirming such assignment and, in the event that Tenant shall fail or refuse to execute, acknowledge or deliver such instrument, Landlord in addition to all other rights and remedies it may have by reason of such failure or refusal, may, as the agent or attorney-in-fact of Tenant, execute, acknowledge and deliver it and Tenant hereby irrevocably nominates, constitutes and appoints Landlord as Tenant’s proper and legal attorney-in-fact for such purpose, as coupled with an interest, hereby ratifying all that Landlord may do as such attorney-in-fact of Tenant, and such assignment shall recall that it has made pursuant to this article.

ARTICLE 19
Abatement of Trade Fixtures

     If after default in payment of rent or violation of any other provision of this lease, or upon the expiration of this lease or upon abandonment of the premises by Tenant, the Tenant moves out or is dispossessed, Tenant shall not be permitted to remove any trade fixtures or other property from said premises until said default or violation is cured. Should said default or violation not be cured within one month of its occurrence, or upon abandonment of the premises said fixtures shall become the property of Landlord.

ARTICLE 20
Strict Performance

     The failure of the Landlord to insist upon strict performance of any of the covenants or conditions of this lease or to exercise any option herein conferred in any one or more instances, shall not be construed as a waiver or relinquishment for the future of any such covenants, conditions or options, but the same shall be and remain in full force and effect.

ARTICLE 21
Re-Entry of Landlord

     In the event that the relation of the Landlord and Tenant may cease or terminate by reason of the re-entry of the Landlord under the terms and covenants contained in this lease or by the ejectment of the Tenant by summary proceedings or otherwise, or after the abandonment of the premises by the Tenant, it is hereby agreed that the Tenant shall remain liable for all unpaid sums covering the balance of said term and shall pay said amounts promptly.

11

ARTICLE 22 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 public taking.

ARTICLE 23
Delay in Performance

     This lease and the obligation of Tenant to pay rent hereunder and perform all of the other covenants and agreements hereunder on part of Tenant to be performed shall in no way be affected, impaired or excused because Landlord is unable to supply or is delayed in supplying any service expressly or implied to be supplied or is unable to make, or is delayed in making any repairs, addition, alterations, or decorations or is unable to supply or is delayed in supplying any equipment or fixtures if Landlord is prevented or delayed from so doing by reason of governmental preemption in connection with a national Emergency declared by the President of the United States or in connection with any rule, order or regulation of any department or subdivision thereof of any governmental agency or by reason of the conditions of supply and demand which have been or are affected by war or other emergency.

ARTICLE 24
Limitation of Liability

     Landlord shall be under no personal liability with respect to any of the provisions of this lease, and if it is in breach or default with respect to his obligations or otherwise, under this lease, Tenant shall look solely to the equity of Landlord in the premises for the satisfaction of Tenant’s remedies. It is expressly understood and agreed that Landlord’s liability under the terms, covenants, conditions, warranties and obligations of this lease shall in no event exceed the loss of its equity in the premises.

ARTICLE 25
Delivery of Possession
DELETED

12

ARTICLE 26
Real Estate Broker

     Tenant represents that it has not contacted or dealt with any real estate broker, agent or salesman regarding the within lease other than NOT APPLICABLE and that should any other broker, agent or salesman make claim to a commission in connection with this transaction, Tenant shall save and hold harmless Landlord from any such claim and shall, at Tenant’s cost and expense defend against any such claims.

ARTICLE 27
Indemnification of Landlord and Tenant

     Landlord and Tenant agree to protect, defend, indemnify and save harmless each other against and from any and all claims arising from any breach or default on the part of either party in the performance of any covenant or agreement on their part to be performed, pursuant to the terms of this lease, or arising from any act of negligence of either party, or any of its agents, contractors, servants, employees or licensees, or arising from any accident, injury or damage whatsoever caused to any person (other than through the fault of the other party or its agents) occurring during the term of this lease in or about the demised premises or upon or under the sidewalks and the land adjacent thereto, and from and against all costs, expenses and liabilities incurred in or about any such claim or act or proceeding brought thereon, but only to the extent the losses or liabilities are not covered by insurance; and in case any action or proceeding be brought against either party by reason of any such claim, the responsible party upon notice from the responsible party covenants to resist or defend such action or proceeding by counsel reasonably satisfactory at the responsible party’s sole cost and expense.

ARTICLE 28
Termination of Landlord’s Liability

     If after Landlord delivers possession of the demised premises to Tenant, the Landlord conveys the demised premises during the term hereof, the Landlord shall not thereafter be liable for the covenants and agreements to be observed and performed by the Landlord hereunder, provided that the grantee of Landlord has assumed and become liable for the observance and performance of said covenants and agreements. Nothing herein contained, however, shall relieve Landlord of any liability which may have been incurred or which may have accrued prior to any such conveyance.

13

ARTICLE 29
Triple Net — Additional Rent

Tenant shall pay, as additional rent, its “proportionate share”, as hereinafter defined, of “triple nets” over the “basic rent”, as hereinafter defined; due and payable with respect to the building in which the demised premises are located (hereinafter called “Office Building”) and the land underlying said Office Building.

     Landlord’s “operating costs” shall be those of operating and maintaining the Office Building in a manner deemed by Landlord reasonable and appropriate and for the best interests of the tenants in the Office Building, including without limitation, the following:

     1. Real estate taxes or any other tax imposed in lieu of real estate taxes assessed on the Office Building and the land underlying same.

     2. All costs and expenses directly related to the Office Building of managing, operating, repairing, lighting, cleaning, insurance, removing snow, ice and debris, policing and regulating traffic in the area immediately adjacent to the Office Building Project and depreciation of machinery and equipment used for such operation.

     3. All costs and expense of replacing paving, curbs, walkways, landscaping (including replanting and replacing flowers and other planting), drainage and lighting facilities in the Office Building Project and area immediately adjacent thereto.

     4. Electricity used in lighting common areas of the Office Building Project, water including water used in fire prevention equipment and sewer.

     5. Maintenance, replacement, repair of mechanical and electrical equipment including heating, ventilating and air-conditioning equipment in the Office Building Project.

     6. Maintenance of common areas of the Office Building Project.

     7. Painting, decoration and carpeting of all common areas in the Office Building Project.

     8. All other expenses which would be considered as an expense of maintaining, operating or repairing the Office Building under sound accounting principals.

     9. Tenant’s proportionate share of operating costs for any fiscal year of Landlord shall be determined as follows: the amount shall be multiplied by a fraction, the numerator of which is the total number of square feet of the leased premises and the denominator of which is the total number of square feet of the leased premises plus Tenant’s pro rata share of common areas, and the denominator of which is the total number of square feet of the office building and the result shall the percentage of all operating costs payable by Tenant including electrical and utilities.

14

     The Landlord shall bill Tenant for 100% of the real estate taxes, operating costs, insurance and maintenance as well as the electrical and utilities and Tenant shall pay the same to Landlord as part of its monthly rent which shall be billed separately.

          10. Irrespective of the language contained in Article 29, the Tenant shall assume the total obligation in connection with the maintenance of the building including the replacement of any and all equipment in connection with the operation of the building. In the event any equipment is required to be replaced including the HVAC, electrical, plumbing, roof, windows, the total obligation shall be that of the Tenant.

     11. Tenant shall have the right to audit the operating cost of the Landlord on a yearly basis to determine if they are reasonable and customary.

ARTICLE 30
Tenant’s Additional Obligation

     Tenant shall as an incident to the within demise at Tenant’s cost and expense, furnish, supply and maintain the following: (a) Water, (b) Sewer, (c) Exterior Building and Common Area Maintenance, (d) Painting and cleaning, stripping, sealing, repairing, replacing and remarking paved and unpaved surfaces, curbs, sidewalks and parking areas and bumpers, (e) sign lighting, maintenance and repair, (f) trash removal, (g) Maintenance, repair and replacement costs of the retention ponds located on the project property, (h) maintenance, repair and replacement of all utilities; pipes, conduit, lines etc. on the project property, (i) public liability insurance, (j) all risk insurance (fire and other hazards) including rental abatement insurance in the amount of one (1) year’s minimum rental for the office project, (k) maintenance of HVAC equipment.

ARTICLE 30A
Tenant’s Services

     Tenant agrees to provide and pay for electric and gas utilities; and maintain temperature at levels to prevent freezing or boiling of any parts of the demised premises. Tenant will pay for and utilize a janitorial service for interior maintenance and removal of trash to Landlord’s designated receptacles. Tenant shall provide on a regular basis all interior maintenance and decorating.

ARTICLE 31
Notices

     The receipt by Landlord of a written notice and/or demand and/or request sent by Registered or Certified Mail in a sealed, postpaid envelope, addressed to the Landlord, MYNB, L.L.C. at c/o Hofing Management, 928 West State Street, Trenton, New Jersey 08618, and the receipt by Tenant of a written notice and/or demand and/or request sent by Registered or Certified Mail in a sealed, post paid envelope, addressed to Tenant at Yardville National Bank, Attn: Mr.

15

     Frank Durand, Box 8487, Trenton, New Jersey 08650 and a written notice and/or demand and/or request sent by Registered or Certified Mail in a sealed, post paid envelope, addressed to Daniel J. O’Donnell, Esquire, Yardville National Bank, 2465 Kuser Road, Hamilton, New Jersey 08690 shall be sufficient notice and/or demand and/or request in any case arising under this lease. The return receipt shall be conclusive evidence of the receipt by Landlord or Tenant, as the case may be, of such notice demand or request.

     The above addresses may be changed at any time hereafter by giving notice in the manner provided.

ARTICLE 32
Right to Lock Premises on Default

     In the event that the relation of Landlord and Tenant shall cease or terminate by reason of the re-entry of the Landlord under the terms and covenants contained in this lease or by the eviction or ejectment of Tenant on summary proceedings, or otherwise, or after abandonment of the premises by Tenant, Landlord, in addition to his other rights hereunder shall have the right to lock said premises and at Landlord’s option may keep same locked until said default is cured and Landlord shall have the right to sell all fixtures, goods and materials of Tenant at said premises and apply the proceeds thereof against unpaid rent. No action under this paragraph shall be deemed to waive Landlord’s rights as set forth in other paragraphs of this lease.

ARTICLE 33
Proration of Rent

     In the event that this lease commences on other than the first day of a month, Tenant shall, together with the second month’s rent pay to the Landlord the prorated rent for the portion of the month, if any, preceding the first full calendar month of the term of this lease.

ARTICLE 34
Quiet Enjoyment

     And the said Landlord both covenant that the said Tenant on paying the said yearly rent, and performing the covenants aforesaid, shall and may peacefully and quietly have, hold and enjoy the said demised premises for the term aforesaid, provided however, that this covenant shall be conditioned upon the retention of title to the premises by the Landlord.

ARTICLE 35
Covenants to Bind Parties

     And it is further understood and agreed, that the covenants and agreements herein contained are binding on the parties hereto and upon their respective successors, heirs, executors, administrators and assigns.

16

     It is further expressly agreed that the words used in the singular shall include words in the plural where the text of this instrument so requires.

ARTICLE 36
Notification of Default to Mortgagee

     In the event of a default by the Lessor hereunder, the Mortgagee will be notified in writing, and it is understood that the Mortgagee will have the right to cure said default within thirty (30) days of notification by the Lessee.

ARTICLE 37
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 therefore, each party shall notify the other party therefore and of the amount of the extra cost, and the other party shall be obligated to pay the extra cost unless, within ten (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.

ARTICLE 38
Mechanic’s Liens

     Tenant shall not suffer or permit any mechanic’s liens to be filed against the fee of the demised premises, nor against the Tenant’s leasehold interest therein by reason of work, labor services or materials supplied or claimed or have been supplied to Tenant or anyone holding the demised premises or any part thereof through or under Tenant and Tenant agrees to indemnify Landlord against such liens. If any such mechanic’s lien shall at any time be filed against the demised premises, Tenant shall with 15 days after notice of the filing thereof, cause the same to be discharged of record; provided, however, that the Tenant shall have the right to contest the amount or validity, in whole or in part, of any such lien by appropriate proceedings but in such event, Tenant shall notify Landlord in writing and if requested by Landlord shall promptly bond

17

such lien with a responsible surety company. Tenant shall prosecute such proceedings with all due diligence and dispatch.

     Nothing herein contained shall be construed as a consent on the part of Landlord to subject the estate of the Landlord to liability under the Mechanic’s Lien Law of the State of New Jersey, it being expressly understood that the Landlord’s estate shall not be subject to such liability.

ARTICLE 39
Certificates by Tenant and Landlord

     Tenant agrees at any time and from time to time upon not less than 15 days’ notice by Landlord to execute, acknowledge and deliver to Landlord a statement in writing certifying (1) that this lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified and stating the modification, (2) whether or not there are then existing any offsets or defenses against the enforcement of any of the terms, covenants or conditions hereof upon the part of Tenant to be performed (and is so specifying the same), and (3) the dates to which the basic rent and other charges have been paid in advance, if any, it being intended that any such statement delivered pursuant to this Section may be relied upon by any prospective purchaser or mortgagee of the fee of the demised premises or any assignee of any such mortgagee.

ARTICLE 40
Cumulative Remedies — No Waiver — No Oral Change

     The specific remedies to which Landlord or Tenant may resort under the terms of this lease are cumulative and are not intended to be exclusive of any other remedies or means of redress to which they may be lawfully entitled in case any breach or threatened breach by either of them of any provision of this lease. The failure of Landlord to insist in any one or more cases upon the strict performance of any of the covenants of this lease, or to exercise any option herein contained, shall not be construed as a waiver or relinquishment for the future of such covenant or option. A receipt by Landlord of basic rent with knowledge of the breach of any covenant hereof shall not be deemed a waiver of such breach, and no waiver, change, modification or discharge by either party hereto of any provision in this lease shall be deemed to have been made or shall be effective unless expressed in writing and signed by both Landlord and Tenant. In addition to the other remedies in this lease provided, Landlord and Tenant shall be entitled to the restraint by injunction of the violation, or attempted or threatened violation of any of the covenants, conditions or provisions of this lease, or to a decree compelling performance of any of such covenants, conditions or provisions.

ARTICLE 41
Change of Terms

     In the event that a prospective mortgagee of the demised premises shall request a change in the language or terms of the lease, or the execution of any paper in connection therewith, the

18

Tenant shall agree to such change provided the same shall not materially and adversely affect rights of the Tenant under this lease or increase Tenant’s cost for Basic Rent or Additional Rent.

ARTICLE 42
Attornment

     Tenant shall, if requested by a first mortgagee of the premises at any time, or in the event of any proceedings are brought for the foreclosure of, or in the event of exercise of the power of sale under any mortgage made by the Landlord covering the demised premises, attorn to the purchaser upon any such foreclosure or sale and recognize such purchaser as the Landlord under this lease.

ARTICLE 43
Applicable Law

     This Lease shall be governed by and construed under the laws of the State of New Jersey.

ARTICLE 44
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, or having exercised its option to renew in accordance with Article 49, 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 pursuant to statute for such case made and provided that the holdover rent shall not be less than 120% of the last month’s rent covered under the base and or option term of the lease. Landlord shall give Tenant six (6) months notice, in writing of its intention to charge Tenant hold over rent on the premises. Should Tenant fail to give Landlord acknowledgment of Tenant’s lease termination, within sixty (60) days of receipt of said notice, Tenant shall be liable to Landlord for an additional month’s rental or proportionate part thereof for every month or proportionate part thereof that Tenant fails to give the aforesaid notice, at one hundred twenty (120%) percent of it’s last month’s rent.

19

ARTICLE 45
Memorandum and Recording

     This lease shall not be recorded under penalty of damages and forfeiture. At the request of either party, the other party shall execute a memorandum of lease setting forth a description of the demised premises and the term.

ARTICLE 46
Utility Easements

     Unless such easements reduce Tenant’s useable space, Landlord shall have the right to grant easements and/or utilize areas of the demised premises for the installation of utilities, provided, however, that the use of said easement areas for said purposes does not substantially interfere with the operation of Tenant’s business. Tenant shall not be entitled to any compensation or abatement of rent in regard thereto.

     If the leased property consists of one or more floors, or portions thereof, of a building, and at the time of the making of this lease there are upon any such floors, or portions thereof, hallways, passageways, stairways, elevators, or other means of access, although within the leased property, shall be reserved for the use of the Landlord and all tenants in the building and shall not be considered a portion of the leased property.

ARTICLE 47
Rules and Regulations
DELETED

ARTICLE 48
Building Improvements
See Attached Exhibit C

ARTICLE 49
Renewal Option

     The Tenant shall have the right to renew this Lease Agreement for an additional (see Lease Addendum) beyond the initial (see Lease Addendum) term. The option shall commence provided the following conditions have been complied with:

     1. The Tenant is not then in default with all terms and conditions of this Lease Agreement; and

     2. The Tenant shall notify the Landlord in writing not later then six months prior to the expiration of the initial Lease Agreement of its desire to renew, and agrees to sign a new lease upon the same terms and conditions as contained in the original Lease Agreement, except as to the duration dates and the exclusion of any further option to renew.

20

ARTICLE 50
Notice Requirement

1. Sending of Notices

     Any notice, request, demand, approval or consent given, or required to be given, under this lease shall be in writing and shall be deemed to have been given on the (3rd) day following the day on which the same shall have been mailed by United States registered or certified mail, return receipt requested, with all postal charges prepaid, or if hand delivered shall be deemed given upon delivery. All notices shall be addressed, if intended for Landlord, to c/o Hofing Management, 928 West State St., Trenton, New Jersey 08618 or, if intended for the Tenant, to Yardville National Bank, PO Box 8487, Trenton, New Jersey . Either party may, at any time, change its address for the above purposes by sending a notice to the other party stating the change of and setting forth the new address.

     2. Notice to Mortgagees

     If any mortgagee shall notify Tenant that it is the holder of a mortgage affecting the premises, no notice, request or demand thereafter sent by Tenant to Landlord shall be effective unless and until a copy of the same shall also be sent to such mortgagee at such address as such mortgagee shall designate.

ARTICLE 51
Common Areas

     A. Management and Operation of Common Areas

     Tenant will operate and maintain or will cause to be operated and maintained the common areas including all parking areas in a manner deemed by Landlord to be reasonable and appropriate and in the best interest of the building. Landlord shall have the right (i) to establish, modify and enforce reasonable rules and regulations with respect to the common areas; (ii) to enter into, modify and terminate easement and other agreements pertaining to the use and maintenance of the parking areas and common areas; (iii) to close temporarily any or all portions of the common areas; (iv) to discourage non-customer parking; and (v) to do and perform such other acts in and to said areas and improvements as, in the exercise of good business judgment, Landlord shall determine to be advisable. Landlord agrees that it shall use its best efforts to make available to Tenant’s employees convenient parking facilities in reasonable proximity to the premises.

[THIS SECTION INTENTIONALLY LEFT BLANK]
LEASE ADDENDUM

          This lease addendum shall supplement the lease agreement between MYNB, LLC and the Yardville National Bank dated April 1, 2005 for the premises located at 301 West Trenton Avenue, Falls Township, Pennsylvania, Tax Map Parcel 13-035-074-001. In the event of a conflict between the lease addendum and the lease agreement, the lease addendum shall prevail.

21

1.	The term of the lease agreement shall be for fifteen (15) years with two (2) five (5) year options.
2.	Schedule of Base Rental and Increases:

Initial Term

Years 1-5: $9,421.39/Month or $113,056.68 Annually
Years 6-10: $10,363.53/Month or $124,362.36 Annually
Years 11-15: Annual CPI Increase with 3% minimum and 5% maximum.

Options

Years 16-20: Annual CPI Increase
Years 21-25: Annual CPI Increase
*The Philadelphia region CPI index shall be utilized.*

3.	Triple Net Lease: The lease is triple net and tenant in addition to base rental shall be obligated to pay 100% of all operating expenses including but not limited to real estate taxes, common area maintenance, insurance, (building and exterior general liability) and any and all repairs or replacements to the building or property.
	Provided the Tenant has complied with all of its obligations under this Lease and provided the Lease is in the last two years of any lease term (or extended term) set forth herein, then any capital improvements that are paid for by the Landlord and charged to the Tenant as operating costs shall be amortized over the useful life of the improvement. Said capital improvements shall include, but not limited to, all structural repairs or replacements, replacement of the roof, replacement of the parking lot, or replacement of the plumbing, cooling, heating or electrical systems.
4.	Landlords Work: The Landlord shall provide the following work as its scope of services.

A.	Land acquisition including closing costs.
B.	All Professional Fees with the exception of architectural fees.
C.	Construction Permits.

5.   Tenants Work: Tenant shall be financially responsible for the following construction activities. All work shall be performed in accordance to architectural plans prepared by Pazdera and Associates and tenant shall have rights to any and all warranties provided by sub-contractors and or general contractors.

A.	Architecture Fees (estimated at $25,000.00)
B.	Building Shell including but not limited to exterior renovations, HVAC, electrical service, bathrooms, windows, partitions, ceiling and lighting, utility services, drive-thru lanes and related equipment.
C.	Interior Fit-Out including but not limited to paint, sheetrocking, carpentry, carpet/flooring, furniture, fixtures, and equipment.
D.	Site work (as per plan dated 9/21/2004 prepared by JG Park and Associates)
E.	Off site work (as per plan dated 3/3/2005 prepared by JG Park and Associates)
F.	Any interior or exterior signage.

6. Construction Management: MYNB, LLC shall be responsible for supervising all construction activities at its expense. MYNB, LLC shall segregate all invoices from selected contractors and invoice the responsible parties. All invoices shall be paid with ten (10) days of receipt.

22

7. Off Site Improvements: In order to obtain the necessary permits and approvals from Falls Township to construct a bank branch at the location, it was required that off site improvements be installed in accordance to JG Park Associates plans dated March 3, 2005. As a part of the requirements by the township, a segment of side walk has to be installed on the opposite side of West Trenton Avenue to offer safer passage for pedestrian’s. The side walk specifications are detailed on March 3, 2005 JG Park engineering drawings. In addition to its routine maintenance duties, Yardville National Bank shall be obligated at its expense to repair, replace, maintain (including snow removal and tree damage caused by the side walk (installation) the
specified sidewalk. Copies of the easements entered into with the property owners shall be supplied to Yardville National Bank.

8.   Rental Commencement: The rent shall commence upon the issuance of a Temporary or permanent certificate of occupancy.

9.   All of the obligations of Tenant are expressly conditioned upon the Tenant receiving all necessary approvals from the Office of the Comptroller of the currency to operate a bank branch at this location. Tenant shall diligently pursue said approvals at its expense.

Witness/Attest:	Landlord: MYNB, LLC., a
			PA Corporation
		By:	Sidney L. Hofing
			Managing Member
Witness/Attest:	Tenant: Yardville National Bank,
			A NJ National Bank
		By:	Patrick M. Ryan,
			President-CEO

23

EX-31.1

Exhibit 31.1

CERTIFICATION

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

1. I have reviewed this quarterly report on Form 10-Q of Yardville National Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

E-11

a.	All significant deficiencies and material weaknesses in the design or operation of internal control 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 control over financial reporting.

Date: August 15, 2005	By: Patrick M. Ryan
	Name: Patrick M. Ryan
	Title: President and Chief Executive Officer

E-12

EX-31.2

Exhibit 31.2

CERTIFICATION

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

1. I have reviewed this quarterly report on Form 10-Q of Yardville National Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d–15(f) for the registrant and have:

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

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

E-13

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 15, 2005	By: Stephen F. Carman
	Name: Stephen F. Carman
	Title: Vice President and Treasurer

E-14

EX-32.1

Exhibit 32.1

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

In connection with the Quarterly Report of Yardville National Bancorp (the “Company”) on Form 10-Q for the period ending June 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Patrick M. Ryan, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

Patrick M. Ryan
Patrick M. Ryan
President and Chief Executive Officer
August 15, 2005

E-15

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 June 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen F. Carman, Vice President and Treasurer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

Stephen F. Carman
Stephen F. Carman
Vice President and Treasurer
August 15, 2005

E-16