-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MgKVA1FkkzHUaqtJri+g8yQ+msQpHeX6MQEzEnQWgAEL3YudLOgNZOeCk+BIqFrT ebm4dA37+xvD26rofeQYpQ== 0000950116-98-001147.txt : 19980518 0000950116-98-001147.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950116-98-001147 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: YARDVILLE NATIONAL BANCORP CENTRAL INDEX KEY: 0000787849 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 222670267 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26086 FILM NUMBER: 98622937 BUSINESS ADDRESS: STREET 1: 3111 QUAKERBRIDGE RD CITY: MERCERVILLE STATE: NJ ZIP: 08619 BUSINESS PHONE: 6095855100 MAIL ADDRESS: STREET 1: 3111 QUAKERBRIDGE RD CITY: MERCERVILLE STATE: NJ ZIP: 08619 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10 Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES ACT OF 1934 For the quarterly period ended March 31, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES ACT OF 1934 For transition period from Commission File Number: 0-26086 YARDVILLE NATIONAL BANCORP ---------------------------------------------------- (Exact name of registrant as specified in its charter) New Jersey 22-2670267 - ------------------------------- --------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 3111 Quakerbridge Road, Mercerville, New Jersey 08619 ----------------------------------------------------- (Address of principal executive offices) (609) 585-5100 ---------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable ---------------------------------------------------- (Former name, former address and former fiscal year, if changed from last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( ) Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of April 30, 1998. Common Stock, no par value 5,138,883 - -------------------------- ---------------------------- Class Number of shares outstanding 1 INDEX YARDVILLE NATIONAL BANCORP AND SUBSIDIARIES PART 1 FINANCIAL INFORMATION PAGE NO. - ------------------------------------------------------------------------------- Item 1. Financial Statements Consolidated Statements of Condition March 31, 1998 and December 31, 1997 3 Consolidated Statements of Income Three months ended March 31, 1998 and 1997 4 Consolidated Statements of Cash Flows Three months ended March 31, 1998 and 1997 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Quantitative and Qualitative Disclosures about Market Risk 16 PART 2 OTHER INFORMATION - -------------------------------------------------------------------------------- Item 1. Legal Proceedings 16 Item 2. Changes in Securities and Use of Proceeds 17 Item 3. Defaults Upon Senior Securities 17 Item 4. Submission of Matters to a Vote of Securities Holders 17 Item 5. Other Information 17 Item 6. Exhibits and Reports on Form 8-K 17 SIGNATURES 18 Exhibit 27.1 Financial Data Schedule 19 2 Item 1. Financial Statements Yardville National Bancorp and Subsidiaries Consolidated Statements of Condition (Unaudited)
March 31, December 31, - ----------------------------------------------------------------------------------------------------------- (in thousands, except for share data) 1998 1997 - ----------------------------------------------------------------------------------------------------------- Assets: Cash and due from banks $ 24,465 $ 18,923 Federal funds sold 16,998 1,500 - ----------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents 41,463 20,423 - ----------------------------------------------------------------------------------------------------------- Interest bearing deposits 4,122 2,219 Securities available for sale 151,330 159,724 Investment securities (market value of $26,076 in 1998 and $26,848 in 1997) 26,099 26,912 Loans 409,094 385,751 Less: Allowance for loan losses (5,902) (5,570) - ----------------------------------------------------------------------------------------------------------- Loans, net 403,192 380,181 Bank premises and equipment, net 5,405 5,192 Other real estate 3,492 3,171 Other assets 19,989 16,864 - ----------------------------------------------------------------------------------------------------------- Total Assets $ 655,092 $614,686 - ----------------------------------------------------------------------------------------------------------- Liabilities and Stockholders' Equity Deposits Non-interest bearing $ 65,917 $ 66,560 Interest bearing 385,859 356,384 - ----------------------------------------------------------------------------------------------------------- Total Deposits 451,776 422,944 - ----------------------------------------------------------------------------------------------------------- Borrowed funds Securities sold under agreements to repurchase 109,790 100,050 Other 35,856 34,266 - ----------------------------------------------------------------------------------------------------------- Total Borrowed Funds 145,646 134,316 Company - obligated Mandatorily Redeemable Trust Preferred Securities of Subsidiary Trust holding solely junior Subordinated Debentures of the Company 11,500 11,500 Other liabilities 6,233 6,181 - ----------------------------------------------------------------------------------------------------------- Total Liabilities $ 615,155 $574,941 - ----------------------------------------------------------------------------------------------------------- Stockholders' equity Preferred stock: no par value Authorized 1,000,000 shares, none issued Common Stock: no par value Authorized 12,000,000 shares Issued and outstanding 5,073,767 in 1998 And 5,082,050 shares in 1997 20,249 17,703 Surplus 2,205 2,205 Undivided profits 18,331 19,713 Common stock in treasury, at cost: 39,800 shares in 1998 (723) -- Accumulated other comprehensive income (125) 124 - ----------------------------------------------------------------------------------------------------------- Total Stockholders' Equity 39,937 39,745 - ----------------------------------------------------------------------------------------------------------- Total Liabilities and Stockholders' Equity $ 655,092 $614,686 - -----------------------------------------------------------------------------------------------------------
Shares and related amounts adjusted for two-for-one stock split declared December 23, 1997 and 2.5% stock dividend declared March 25, 1998. See Accompanying Notes to Unaudited Consolidated Financial Statements. 3 Yardville National Bancorp and Subsidiaries Consolidated Statements of Income (Unaudited)
Three Months Ended March 31, - -------------------------------------------------------------------------------------------- (in thousands, except for share data) 1998 1997 - -------------------------------------------------------------------------------------------- INTEREST INCOME: Interest and fees on loans $ 8,748 $ 7,345 Interest on deposits with banks 55 16 Interest on securities available for sale 2,440 1,569 Interest on investment securities: Taxable 277 342 Exempt from Federal income tax 102 102 Interest on Federal funds sold 69 164 - -------------------------------------------------------------------------------------------- Total Interest Income 11,691 9,538 - -------------------------------------------------------------------------------------------- INTEREST EXPENSE: Interest on savings account deposits 1,255 1,230 Interest on certificates of deposit of $100,000 or more 301 305 Interest on other time deposits 2,673 2,228 Interest on borrowed funds 1,917 1,157 Interest on trust preferred securities 266 -- - -------------------------------------------------------------------------------------------- Total Interest Expense 6,412 4,920 - -------------------------------------------------------------------------------------------- Net Interest Income 5,279 4,618 Less provision for loan losses 400 275 - -------------------------------------------------------------------------------------------- Net Interest Income After Provision for Loan Losses 4,879 4,343 - -------------------------------------------------------------------------------------------- NON-INTEREST INCOME: Service charges on deposit accounts 306 283 Gains on sales of mortgages, net 17 -- Securities gains, net 9 -- Other non-interest income 356 323 - -------------------------------------------------------------------------------------------- Total Non-Interest Income 688 606 - -------------------------------------------------------------------------------------------- NON-INTEREST EXPENSE: Salaries and employee benefits 1,943 1,817 Occupancy expense, net 233 234 Equipment 296 250 Other non-interest expense 1,032 778 - -------------------------------------------------------------------------------------------- Total Non-Interest Expense 3,504 3,079 - -------------------------------------------------------------------------------------------- Income before income tax expense 2,063 1,870 Income tax expense 729 658 - -------------------------------------------------------------------------------------------- Net Income $ 1,334 $ 1,212 - -------------------------------------------------------------------------------------------- EARNINGS PER SHARE: Basic $ 0.26 $ 0.24 Diluted $ 0.26 $ 0.24 - -------------------------------------------------------------------------------------------- Weighted average shares outstanding: Basic 5,073 5,000 Diluted 5,117 5,080 - --------------------------------------------------------------------------------------------
Shares and related amounts adjusted for two-for-one stock split declared December 23, 1997 and 2.5% stock dividend declared March 25, 1998. See Accompanying Notes to Unaudited Consolidated Financial Statements. 4 Yardville National Bancorp and Subsidiaries Consolidated Statements of Cash Flows (Unaudited)
Three months ended March 31, - --------------------------------------------------------------------------------------------- (in thousands) 1998 1997 - --------------------------------------------------------------------------------------------- Cash Flows from Operating Activities: Net Income $ 1,334 $ 1,212 Adjustments: Provision for loan losses 400 275 Depreciation 226 206 Amortization and accretion 144 100 Gains on sales of securities available for sale (9) -- Loss on sales of other real estate 1 -- Writedown of other real estate 3 2 (Increase) decrease in other assets (2,975) 59 Increase in other liabilities 51 919 - --------------------------------------------------------------------------------------------- Net Cash (Used in) Provided by Operating Activities (825) 2,773 - --------------------------------------------------------------------------------------------- Cash Flows From Investing Activities: Net decrease in interest bearing deposits (1,903) (1,132) Purchase of securities available for sale (22,287) (19,969) Maturities, calls, and paydowns of securities available for sale 18,021 7,838 Proceeds from sales of securities available for sale 12,161 -- Proceeds from maturities and paydowns of investment securities 1,278 734 Net increase in loans (23,819) (13,419) Expenditures for bank premises and equipment (439) (53) Proceeds from sale of other real estate 83 -- - --------------------------------------------------------------------------------------------- Net Cash Used in Investing Activities (17,405) (26,001) - --------------------------------------------------------------------------------------------- Cash Flows from Financing Activities: Net increase in non-interest bearing demand, money market, and savings deposits 1,557 18,803 Net increase in certificates of deposit 27,275 11,607 Net increase (decrease) in borrowed funds 11,330 (4,861) Proceeds from issuance of common stock 178 175 Dividends paid (347) (294) - --------------------------------------------------------------------------------------------- Net Cash Provided by Financing Activities 39,270 25,430 - --------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 21,040 2,202 Cash and cash equivalents as of beginning of period 20,423 17,150 - --------------------------------------------------------------------------------------------- Cash and Cash Equivalents as of End of Period $ 41,463 $ 19,352 - --------------------------------------------------------------------------------------------- Supplemental Disclosure of Cash Flow Information: Cash paid during period for: Interest expense 6,551 4,310 Income taxes 1,309 600 - --------------------------------------------------------------------------------------------- Supplemental Schedule of Non-cash Investing and Financing Activities: Transfers to other real estate from loans, net of charge offs 407 462 - ---------------------------------------------------------------------------------------------
See Accompanying Notes to Unaudited Consolidated Financial Statements. 5 Yardville National Bancorp and Subsidiaries Notes to Consolidated Financial Statements Three Months Ended March 31, 1998 (Unaudited) 1. Summary of Significant Accounting Policies Basis of Financial Statement Presentation: The consolidated financial statements have been prepared in conformity with generally accepted accounting principles. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenue and expenses for the period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for loan losses and the valuation reserve of real estate acquired in connection with foreclosures or in satisfaction of loans. In connection with the determination of the allowance for loan losses and other real estate, management obtains independent appraisals for significant properties. The consolidated financial data as of and for the three months ended March 31, 1998 includes, in the opinion of management, all adjustments, consisting of only normal recurring accruals necessary for a fair presentation of such periods. The consolidated financial data for the interim periods presented is not necessarily indicative of the result of operations that might be expected for the entire year ending December 31, 1998. Consolidation The consolidated financial statements include the accounts of Yardville National Bancorp (the "Company")and its subsidiaries, Yardville Capital Trust (the "Trust") and Yardville National Bank (the "Bank") and the Bank's wholly owned subsidiaries, Yardville National Investment Corporation, Brendan Inc., Nancy Beth Inc., and Yardville Real Estate Corporation (collectively "YNB"). All significant inter-company accounts and transactions have been eliminated. Brendan Inc. and Nancy Beth Inc. are utilized for the control and disposal of other real estate properties. Yardville Real Estate Corporation is utilized to hold Bank branch properties. Allowance for Loan Losses For financial reporting purposes, the provision for loan losses charged to operating expense is determined by management and based upon a periodic review of the loan portfolio, past experience, the economy, and other factors that may affect a borrower's ability to repay the loan. This provision is based on management's estimates, and actual losses may vary from these estimates. These estimates are reviewed and adjustments, as they become necessary, are reported in the periods in which they become known. Management believes that the allowance for loan losses is adequate. While management uses available information to recognize losses on loans, future additions to the allowance may 6 be necessary based on changes in economic conditions, particularly in New Jersey. In addition, various regulatory agencies, as an integral part of their examination process periodically review the Bank's allowance for loan losses and the valuation of other real estate. Such agencies may require the Bank to recognize additions to the allowance or adjustments to the carrying value of other real estate based on their judgement about information available at the time of their examination. 2. Earnings Per Share Weighted average shares for the basic net income per share calculation for the three months ended March 31, 1998 and 1997 were 5,073,000 and 5,000,000 respectively. For the diluted net income per share computation common stock equivalents of 44,000 and 80,000 are included for the three months ended March 31, 1998 and 1997, respectively. 3. Recently Issued Accounting Standards SFAS No. 130 FASB Statement No. 130 "Reporting Comprehensive Income" (Statement 130) establishes standards for reporting and display of comprehensive income and its components (revenue, expenses, gains and losses) in a full set of general-purpose financial statements. Statement 130 requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. Statement 130 does not require a specific format for that financial statement but requires that an enterprise display an amount representing total comprehensive income for the period in that financial statement. Statement 130 requires an enterprise to (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. This statement is effective for fiscal years beginning after December 15, 1997. Reclassification of financial statements for earlier periods provided for comparative purposes are required. YNB adopted Statement No. 130 on January 1, 1998 and the disclosure is contained in the table below. 7
Comprehensive Net Income Three Months Ended March 31, - -------------------------------------------------------------------------------------- (in thousands) 1998 1997 - -------------------------------------------------------------------------------------- Net Income $ 1,334 $ 1,212 Other comprehensive income Unrealized (loss) gain on securities available for sale, net of taxes (249) 285 - -------------------------------------------------------------------------------------- Other comprehensive income (249) 285 - -------------------------------------------------------------------------------------- Total comprehensive income $ 1,085 1,497 - --------------------------------------------------------------------------------------
SFAS No. 132 In February 1998, the FASB issued SAS No. 132 "Employer Disclosures about Pensions and Other Post Retirement Benefits." This statement standardizes the disclosure requirements for pensions and other postretirement benefits by requiring additional information that will facilitate financial analysis and eliminating certain disclosures that are considered no longer useful. SFAS No. 132 supersedes the disclosure requirements in SFAS Nos. 87, 88 and 106. This statement is effective for fiscal years beginning after December 15, 1997. Restatement of disclosure for earlier periods provided for comparative purposes are required unless information is not readily available. YARDVILLE NATIONAL BANCORP AND SUBSIDIARIES Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations This financial review presents management's discussion and analysis of the financial condition and results of operation. It should be read in conjunction with the Company's 1997 Annual Report to stockholders and Annual Report on Form 10-K for the fiscal year ended December 31, 1997 as well as with the unaudited consolidated financial statements and the accompanying notes. This Form 10-Q report contains express and implied statements relating to the future financial condition, results of operations, plans, objectives, performance, and business of YNB, which are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements that relate to, among other things, profitability, liquidity, loan loss reserve adequacy, plans for growth, interest rate sensitivity, market risk, and year 2000 issues. Actual results may differ materially from those expected or implied as a result of certain risks and uncertainties, including, but not limited to, changes in economic conditions, interest rate fluctuations, continued levels of loan quality and origination volume, successful implementation of year 2000 technology changes by YNB, its vendors and suppliers, competitive product and pricing pressures within YNB's markets, continued relationships with major customers including sources for loans and deposits, personal and corporate customers' bankruptcies, legal and regulatory barriers and structure, inflation, and technological changes, as well as other risks and uncertainties detailed from time to time in the filings of YNB with the Securities and Exchange Commission. 8 Assets Total consolidated assets at March 31, 1998 totaled $655,092,000 an increase of $40,406,000 or 6.6% compared to $614,686,000 at December 31, 1997. The growth in YNB's asset base during the first three months of 1998 was primarily due to increases in loans and Federal funds sold. YNB's commercial loan portfolio continued to expand during this time period. The increase in the loan portfolio was the product of an ongoing consistent strategy to improve the profitability of the organization through relationship banking. In the last quarter of 1997 $7,500,000 was contributed to the Bank as a result of YNB's Trust Preferred Securities Offering. The increase in the Bank's legal lending limit allows management to establish larger loan relationships. The pace of consolidation in YNB's market place continues at a rapid rate. Management anticipates continued loan opportunities due to this consolidation. YNB's asset base includes investments of approximately $111,200,000 purchased utilizing primarily repurchase agreements (Investment Growth Strategy). The Investment Growth Strategy at March 31, 1998 increased $3,000,000 from the reported total of $108,200,000 at December 31, 1997. The primary goals of the Investment Growth Strategy of improving return on equity and earnings per share continue to be achieved. Securities Total securities decreased by $9,207,000 at March 31, 1998 to $177,429,000 compared to $186,636,000 at year-end 1997. Securities available for sale decreased $8,394,000 or 5.3% at March 31, 1998 when compared to the December 31, 1997 balance of $159,724,000. The decrease was primarily caused by selected sales of securities that either due to their small size, prepayment outlook, or risk profile no longer was a benefit to YNB. A secondary factor in the declining available for sale portfolio was increased prepayment speeds on both fixed and floating rate mortgage related securities. Management anticipates increased principal paydowns in its mortgage-related securities in the second quarter and throughout the year if interest rates continue to fall. Conversely, the Investment Growth Strategy was increased by $3,000,000 in the first quarter. The available for sale portfolio represents 85.3% of the total investment holdings of YNB. Unpledged available for sale securities represent a secondary source of liquidity for YNB. The net unrealized loss on available for sale securities as of March 31, 1998 was $192,000. Net unrealized losses, net of tax effect, totaling $125,000 were reported as a component of Stockholders' Equity at March 31, 1998. Federal Funds Sold At March 31, 1998 Federal funds sold totaled $16,998,000 compared to $1,500,000 at December 31, 1997. Average Federal funds sold for the first three months was $4,992,000. The Federal funds sold levels experienced at quarter end were due to increased certificate of deposit (CD) balances and, to a lesser extent, decreases in the investment portfolio. Management remains focused on maintaining adequate liquidity to fund loan growth and to meet daily liquidity requirements. 9 Loans Total loans, net of unearned income increased $23,343,000 or 6.1% at March 31, 1998 to $409,094,000 from $385,751,000 at December 31, 1997. YNB's loan portfolio represented 62.5% of total assets at March 31, 1998 compared to 62.8% at December 31, 1997. YNB's lending focus continues to be on commercial loans and commercial real estate loans. The consolidation in YNB's market place and the emphasis placed on customer service and relationship banking are key factors in the first quarter loan growth. Strong competition from both bank and nonbank competitors coupled with a stable lower interest rate environment could result in comparatively lower yields on new and established lending relationships. In addition, borrowers concerns over the economy, real estate prices and interest rates could all be factors in future loan growth levels. Continued profitable loan growth is a key factor in meeting earnings growth goals. - -------------------------------------------------------------------------------- (in thousands) 3/31/98 12/31/97 Change % change - -------------------------------------------------------------------------------- Real Estate - mortgage Residential 85,287 85,754 73 0.1% Commercial 141,097 134,499 6,598 4.9% Home equity 22,622 23,805 (1,183) 5.0% Commercial and agricultural 102,335 88,228 14,107 16.0% Real estate - construction 29,523 28,182 1,341 4.8% Consumer 19,828 18,519 1,309 7.1% Other loans 7,862 6,764 1,098 16.2% Total loans 409,094 385,751 23,343 6.1% The table above lists the loan growth by component for the period of December 31, 1997 to March 31, 1998. Commercial and agricultural loans had the greatest growth increasing $14,107,000 in the period. Real estate - commercial loans had the second greatest growth increasing $6,598,000. This is a reflection on management's focus on these markets. All other loan components increased with the exception of home equity loans. To address the declining home equity loan portfolio, YNB lowered its rates on all home equity products on March 1, 1998. In the short term, the home equity portfolio continues to decrease but management believes that in the long term this strategy should make YNB's home equity product more competitive in the marketplace. Liabilities YNB's deposit base is the principal source of funds supporting interest-bearing assets. Total deposits increased $28,832,000 or 6.8% to $451,776,000 at March 31, 1998 compared to $422,944,000 at December 31, 1997. Certificates of deposit were competitively priced throughout the quarter to fund projected loan growth. Growth in YNB's deposit base in 1998 continued to be principally in higher costing certificates of deposit. Interest bearing deposits increased $29,475,000 or 8.3% at March 31, 1998 compared to December 31, 1997. 10 Interest bearing deposits, including certificates of deposits $100,000 and over, increased $29,205,000 to $385,859,000 compared to $356,384,000 at December 31, 1997. Total certificates of deposits under $100,000 increased $24,185,000 to $199,509,000 compared to $175,324,000 at December 31, 1997. Retail certificates of deposit were competitively priced to fund the loan demand in the first quarter. Non-interest bearing deposits decreased $643,000 or 1.0%to $65,917,000 at March 31, 1997 compared to $66,560,000 at December 31, 1997. YNB's overall philosophy of building and maintaining long-term customer relationships is the key to further expanding the core deposit base, which, in turn, presents opportunities for YNB to cross-sell its services. However, in the near term, trends indicate that YNB will be dependent on higher costing retail certificates of deposits to fund new lending opportunities. On March 31, 1998, YNB signed a lease to open its tenth branch in Pennington, New Jersey. This branch is projected to be open for business in the third quarter of 1998. Borrowed Funds Borrowed funds totaled $145,646,000 at March 31, 1998 compared to $134,316,000 at December 31, 1997. The increase for the first three months of 1998 was $11,330,000 or 8.4%. The majority of the increase was in repurchase agreements relating to the Investment Growth Strategy, which increased $9,740,000 or 9.7% to $109,790,000 at March 31, 1998 compared to $100,050,000 at December 31, 1997. As shorter-term repurchase agreements have matured, management has utilized attractively priced callable repurchase agreements to reduce interest expense. These repurchase agreements typically have a maturity of five to ten years and can be called after a lock out period ranging from one to two years. At March 31, 1998, $41,500,000 or 37.8% of the repurchase agreements were in callable repurchase agreements. There were no callable repurchase agreements outstanding at year-end 1997. YNB had Federal Home Loan Bank of New York (FHLB) advances outstanding of $29,333,000 at March 31, 1998. As advances have matured management has shifted FHLB advances from shorter-term advances into callable advances. At March 31, 1998 callable advances outstanding totaled $22,500,000 as compared to $10,000,000 at December 31, 1997. Callable FHLB advances have terms of ten years and call dates starting after the fifth year. The callable FHLB Advances and repurchase agreements have allowed YNB to lower its borrowing costs while at the same time extending the terms. In the event that rates rise, the callable borrowings will be called. In the event of falling interest rates, callable borrowings will not be called and could remain outstanding until maturity. YNB has the ability to borrow up to $24,500,000 from the FHLB through it line of credit program, subject to collateral requirements. In addition, YNB is eligible to borrow up to 30% of assets under the FHLB advance program subject to FHLB stock requirements, collateral requirements and other restrictions. YNB also maintains unsecured federal funds lines with four commercial banks totaling $21,000,000 for daily funding needs. YNB's funding strategy is to rely on deposits to fund new loan growth whenever possible and to rely on borrowed funds as a secondary funding source for loans. 11 Company - Obligated Mandatorily Redeemable Trust Preferred Securities of Subsidiary Trust Holding Solely Junior Subordinated Debentures of the Company (Trust Preferred Securities) On October 16, 1997, YNB through its subsidiary Yardville Capital Trust completed the sale of $11,500,000, 9.25%, Trust Preferred Securities. For regulatory capital purposes the entire amount of the issue is treated at Tier 1 capital at the holding company level. Capital Stockholders' equity at March 31, 1998 totaled $39,937,000, an increase of $192,000 or 0.5% compared to $39,745,000 at December 31, 1997. This increase resulted from the following factors: (i) Net income of $1,334,000 less dividend payment of $348,000. (ii) The unrealized gain on available for sale securities were $124,000 at December 31, 1997 compared to an unrealized loss of $125,000 at March 31, 1998. This shift resulted in a $249,000 reduction in stockholders' equity for the quarter. (iii) Proceeds of $178,000 from exercised options to purchase the Company's common stock under the Company's employee and director stock option plans. (iv) Repurchase of 39,800 shares of the Company's stock, which are listed as treasury stock in the amount of $723,000. YNB's Tier 1 leverage ratio was 8.3% at March 31, 1998 compared with 9.5% at December 31, 1997. At March 31, 1998 the Tier 1 risk based capital ratio was 11.8% compared with 12.2% at December 31, 1997 and the total risk based capital ratio was 13.0% compared to 13.5% at December 31, 1997. The minimum regulatory capital requirements for financial institutions require institutions to have a Tier 1 leverage ratio of 4.0%, a Tier 1 risk-based asset capital ratio of 4.0% and a total risked based capital ratio of 8.0%. To be considered "well capitalized" an institution must have a minimum Tier 1 capital and total risk-based capital ratio of 6.0% and 10.0%, respectively, and a minimum Tier 1 leverage ratio of 5.0%. At March 31, 1998, YNB exceeded the above ratios required to be well capitalized. On October 28, 1997, Yardville National Bancorp's Board of Directors authorized management to repurchase up to 172,000 shares of YNB's common shares in the open market in compliance with Rule 10b-18 under the Securities Exchange Act of 1934. As of March 31, 1998, as part of an overall capital plan, 39,800 shares were repurchased at an average price of $18.17 per share. The stock repurchase program is part of an overall plan to effectively manage capital. 12 Credit Quality At March 31, 1998, nonperforming loans, consisting of loans 90 days and more past due and nonaccruing loans, totaled $5,069,000 compared to $5,315,000 at December 31, 1997. Other real estate at March 31, 1998 totaled $3,492,000 compared to $3,171,000 at December 31, 1997. Total nonperforming assets at March 31, 1998 were $8,561,000, a $75,000 increase over nonperforming asset levels at December 31, 1997. Nonperforming assets as a percentage of total assets were 1.31% at March 31, 1998 compared to 1.38% at December 31, 1997. Nonperforming assets as a percentage of total loans and other real estate were 2.1% at March 31, 1998 compared to 2.2% at December 31, 1997. The improvement in these ratios is due to the fact that asset growth and loan growth exceeded the growth in nonperforming assets for the quarter. YNB continues to actively manage nonperforming assets with the goal of reducing these assets in relationship to the total loan portfolio. Whenever possible, existing loan relationships are being restructured in an effort to return these loans to performing status. The allowance for loan losses increased to $5,902,000 or 1.44% of total loans compared to $5,570,000 or 1.44% at December 31, 1997. The provision for loan losses for the first three months of 1998 was $400,000 with net charge-offs totaling $68,000. The allowance for loan losses as a percentage of nonperforming loans was 116.43% at March 31, 1998 compared to 104.80% at December 31, 1997. At March 31, 1998 the allowance for loan losses in management's judgement is considered adequate in relation to credit risk exposure levels. Results of Operations Net Income YNB reported net income of $1,334,000 for the three months ended March 31, 1998 an increase of $122,000 or 10.1% over the same period in 1997. The increase in net income for the three months ended March 31, 1998 compared to the same period in 1997 is primarily attributed to higher net interest income and improved non-interest income offset by a higher provision for loan losses due to increased loan volume and increased non-interest expense. On a per share basis, basic and diluted earnings per share were $0.26 for the three months ended March 31, 1998 compared to $0.24 per share for the same period in 1997 Net Interest Income YNB's net interest income for the first three months of 1998 was $5,279,000 an increase of $661,000 or 14.3% from the same period in 1997. The principal factors contributing to this increase were an increase in interest income of $2,153,000 resulting from increased loan and investment balances offset by an increase of $1,492,000 in interest expense. This increase in interest expense was due to higher volume of and higher costs on CDs, a higher level of borrowed funds and the interest associated with YNB's Trust Preferred Securities. The net interest margin (tax equivalent basis) between the yield on average earning assets and the cost of average funding liabilities was 3.67% for the three months ended March 31, 1998 compared to 3.90% for the same period in 1997. The principal factor causing the narrowing of the net interest margin was the increased costs of interest bearing liabilities. 13 In order to fund the loan growth experienced in the first quarter 1998, YNB aggressively marketed higher costing CDs. YNB's 15-month CD was the featured product in the first quarter. Comparatively, average CDs under $100,000 increased $29,529,000 for the three months ended March 31, 1998 compared to March 31, 1997. Over the same period, the average interest rate increased to 5.71% compared to 5.66% for the first three months of 1997. The reliance on higher cost CDs to fund new loan growth will continue to exert a downward pressure on the net interest margin. The net interest margin for both the 1998 and 1997 comparative periods is negatively impacted by YNB's Investment Growth Strategy. This strategy involves purchasing investments utilizing repurchase agreements or other funding sources. The targeted spread on this strategy is 75 basis points after tax. Because of the targeted spread on this strategy there will be a negative impact to the net interest margin and return on assets. The balance outstanding in the Investment Growth Strategy at March 31, 1998 was approximately $111,200,000 compared to $59,100,000 at March 31, 1997. Conversely, this strategy increases both return on equity and earnings per share, the primary goals of the strategy. Interest Income For the three months ended March 31, 1998 total interest income of $11,691,000 increased $2,153,000 or 22.6% compared to three months ended March 31, 1997. The increase is principally due to increases in both the yield and amount outstanding of both loans and investments. Average loans increased $62,812,000 and the yield improved 4 basis points to 8.73% from 8.69% for the first three months of 1997. This resulted in interest and fees on loans increasing $1,403,000 or 19.1% to $8,748,000 for the three months ended March 31, 1998 when compared to the $7,345,000 for the three months ended March 31, 1997. Average securities outstanding for the three month ended March 31, 1998 increased $47,748,000 to $175,226,000 when compared to the $127,478,000 for the three months ended March 31, 1997. Over the same period, the yield on the securities portfolio increased 12 basis points and combined with the increased outstandings resulted in interest on securities increasing $806,000 to $2,819,000 at March 31, 1998 compared to March 31, 1997. Overall, the yield on YNB's interest earning asset portfolio increased 3 basis points to 7.99% for the three months ended March 31, 1998 when compared to the 7.96% for the same period in 1997. Interest Expense Total interest expense increased $1,492,000 or 30.3% to $6,412,000 for the first three months of 1998 compared to $4,920,000 for the same period in 1997. The increase in interest expense for the comparable time period resulted from a larger deposit base, higher rates on CDs, a higher level of borrowed funds and the interest expense associated with the trust preferred securities issued in October 1997. The average rate paid on interest bearing liabilities increased 22 basis points to 4.96% for the three months ended March 31, 1998 compared to 4.74% for the same period in 1997. 14 Interest on time deposits increased $441,000 to $2,974,000 for the three months ended March 31, 1998 from $2,533,000 for the same period in 1997. This increase was caused by an increase in the average outstanding balance of $28,712,000 to $209,380,000 for the three months ended March 31, 1998, when compared to the average balance of $180,668,000 for the three months ended March 31, 1997, and a 7 basis point increase in cost over the same period. During the quarter, YNB offered attractive rates CDs to fund loan growth. Interest expense on borrowed funds increased $760,000 to $1,917,000 for the first three months of 1998 when compared to the $1,157,000 for the same period in 1997. The increase was caused by a $53,751,000 increase in the average balance outstanding for the three months ended March 31, 1998 when compared to the same period in 1997. The rate paid on borrowed funds remained unchanged at 5.67% for the comparative periods. The primary cause for the increase in borrowed funds outstanding was the funding of securities in the Investment Growth Strategy. A second factor contributing to the increase in interest expense was the trust preferred securities issued in October 1997. Total interest expense associated with this issue was $266,000 for the first three months of 1998. While YNB desires to fund asset growth with lower cost savings, money markets, interest bearing checking and non-interest bearing demand deposits, this is not always possible as asset growth rates often exceed the growth rate in these deposit types. To meet the funding needs, YNB anticipates continued reliance on higher cost retail CDs and, to a lesser extent, borrowed funds. Provision for Loan Losses YNB provides for possible loan losses by a charge to current operations. The provision for loan losses for the three months ended March 31, 1998 was $400,000 a 45.5% increase over the $275,000 provision recorded for the same period of 1997. The increase in the provision was primarily due to the strong loan growth recorded in the first quarter of 1998. Management believes that the reserve for loan losses is adequate in relation to the credit risk exposure levels. Non-interest Income Total non-interest income for the first three months of 1998 was $688,000 an increase of $82,000 or 13.5% over non-interest income of $606,000 for the same period in 1997. The increase is primarily due to increases in service charges on deposit accounts and other non-interest income. Service charges on deposit accounts increased $23,000 or 8.1% for the first three months of 1998 compared to the same period in 1997. The increase in service charges is primarily due to growth in the deposit base for the comparable periods. YNB also recorded gains on sale of available for sale securities and mortgages totaling $26,000 for the first three months of 1998. These gains reflect routine sales. Other non-interest income increased $33,000 or 10.2% for the first three months of 1998 compared to the same 1997 period. The increase is principally due to additional fee income derived from life insurance assets. In the second quarter, YNB will offer its customers the ability to purchase annuities and mutual funds. Management expects this new service to improve non-interest income. 15 Non-interest Expense Total non-interest expense increased $425,000 or 13.8% to $3,504,000 for the first three months of 1998 compared to $3,079,000 for the same period in 1997. The increase in non-interest expenses was primarily due to increases in salary and employee benefits, equipment expense and other non-interest expense. Total non-interest expenses, on an annualized basis, as a percentage of average assets were 2.25% for the first quarter compared to 2.43% for the same period of 1997. Salary and employee benefits increased $126,000 or 6.9% for the first three months of 1998 compared to the same period in 1997. This increase reflects increases to staffing due to YNB's growth as well as normal increases in salary and benefit costs. Equipment expense increased $46,000 or 18.4% to $296,000 from $250,000 for the same period in 1997. The equipment costs increase reflects the continuing efforts of YNB to maintain and upgrade technology in order to provide the highest quality service as well as resolving Year 2000 issues. Occupancy expense for the first three months of 1998 was $233,000 and compared to $234,000 for the same period in 1997. Other non-interest expenses increased $254,000 to $1,032,000 for the three months ended March 31, 1998 when compared to the $778,000 for the same period in 1997. The components with the most significant increases are discussed below. Outside consulting fees increased $140,000 or 53.4% to $402,000 from $262,000 for the same period in 1997. This increase reflects the use of consultants on various projects that YNB is involved. One project involves restructuring certain checking and interest bearing checking accounts so that these deposits will no longer be subject to reserve requirements under the Federal Reserve Bank's Regulation D. Management estimates that approximately $4,000,000 in balances on deposit with the Federal Reserve for reserve requirement purposes could be available to invest in interest earning assets. The interest earned on these funds will more than cover the costs associated with the project. The amortization of the organizational costs associated with the Trust Preferred Securities was $39,900 for the period. Telephone expense increased $19,000 or 45.24% to $67,000 for the first three months of 1998 from $42,000 for the same period in 1997. The increase reflects costs associated with YNB's help center as well as increased levels of activity. A key focus of YNB remains controlling the increase in non-interest expenses. Item 3: Quantitative and Qualitative Disclosure about Market Risk There have been no material changes in YNB's market risk from December 31, 1997. For information regarding YNB's market risk refer to the Company's 1997 Annual Report to stockholders. PART II: OTHER INFORMATION Item 1: Legal Proceedings Not Applicable. 16 Item 2: Changes in 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 Not Applicable Item 5: Other Information Not Applicable Item 6: Exhibits and Reports on Form 8-K See attached exhibits. There were no Form 8-K Reports filed during the quarter for which this report is filed. INDEX TO EXHIBITS No. Exhibits Page - ------------------------------------------------------------------------------ * 3.1 Restated Certificate of Incorporation of the Registrant ++ 3.2 By-laws of the Registrant ++ 4.1 Specimen of Share of Common Stock 10.1 Lease agreement between Yardville National Bank and Hilton Realty Co. of Princeton 22 10.2 Amendments to 1994 Stock Option Plan 50 27.1 Financial Data Schedule 56 * Incorporated by reference to the Issuer's Annual Report on Form 10-KSB for the Fiscal Year Ended December 31, 1994, as amended by Form 10-KSB/A filed on July 25, 1995. ++ Incorporated by reference to the Issuer's Registration Statement on Form SB-2 (Registration No. 33-78050) 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. YARDVILLE NATIONAL BANCORP -------------------------- (Registrant) Date: May 14, 1998 By: /s/ Stephen F. Carman ------------ --------------------------------- Stephen F. Carman Executive Vice President and Chief Financial Officer 18 EX-10.1 2 EXHIBIT 10.1 THIS LEASE, dated the 31st day of March 1998 Between HILTON REALTY CO. OF PRINCETON 194 Nassau Street, Princeton, New Jersey 08542 hereinafter referred to as the Landlord, and Parties YARDVILLE NATIONAL BANK 3111 Quakerbridge Road Mercerville, NJ 08619 hereinafter referred to as the Tenant, WITNESSETH: That the Landlord hereby demises and leases unto the Tenant, and the Tenant hereby hires and takes from the Landlord for the term and upon the rentals hereinafter specified, the premises described as follows, situated in the Township of Hopewell County of Mercer and State of New Jersey. Space consisting of 1,432 square feet using exterior dimensions* and being located in the Pennington Shopping Center on the southeast corner of Route 31 and West Delaware Avenue. *See Paragraph 55th of Addendum "A" to Lease. Premises SEE ADDENDUM "B" FOR LOCATION OUTLINED IN RED. Term The term of this demise shall be for five (5) years beginning on or about May 1, 1998 and ending on or about April 30, 2003. See Paragraph 50th of Addendum "A" to Lease. Rent The rent for the demised term shall be ONE HUNDRED TEN THOUSAND AND NINE HUNDRED SEVENTY-NINE AND 96/100 DOLLARS ---- ($110,979.96), which shall accrue at the yearly rate of $20,763.96 for the first lease year; $21,480.00 for the second lease year; $22,196.04 for the third lease year; $22,911.96 for the fourth lease year; $23,628.00 for the fifth lease year. The said rent is to be payable monthly in advance on the first day of each calendar month for the term hereof, in installments as follows: Payment $1,730.33 per month for the first lease year; of Rent $1,790.00 per month for the second lease year; $1,849.67 per month for the third lease year; $1,909.33 per month for the fourth lease year; $1,969.00 per month for the fifth lease year. at the office of Hilton Realty Co. of Princeton, 194 Nassau Street, Princeton, NJ 08542 or as may be otherwise directed by the Landlord in writing. THE ABOVE LETTING IS UPON THE FOLLOWING CONDITIONS: Peaceful First. -- The Landlord covenants that the Tenant, on Possession paying the said rental and performing the covenants and conditions in this Lease contained, shall and may peaceably and quietly have, hold and enjoy the demised premises for the term aforesaid. Purpose Second. -- The Tenant covenants and agrees to use the demised premises as a bank and agrees not to use or permit the premises to be used for any other purpose without the prior written consent of the Landlord endorsed hereon. Third. -- The Tenant shall, without any previous demand Default in therefor, pay to the Landlord, or its agent, the said rent at Payment of the times and in the manner above provided. In the event of Rent the non-payment of said rent, or any installment thereof, at the times and in the manner above provided, and if the same shall remain in default for ten days after becoming due, of if the Tenant shall be dispossessed for non-payment of rent, or if the leased premises shall be deserted or vacated, the Landlord or its agents shall have the right to and may enter Abandonment the said premises as the agent of the Tenant, either by force of Premises or otherwise, without being liable for any prosecution or damages therefor, and may relet the premises as the agent of the Tenant, and receive the rent therefor, upon such terms as shall be satisfactory to the Landlord, and all rights of the Re-entry and Tenant to repossess the premises under this lease shall be Reletting by forfeited. Such re-entry by the Landlord shall not operate to Landlord release the Tenant from any rent to be paid or covenants to be performed hereunder during the full term of this lease. For the purpose of reletting, the Landlord shall be authorized to make such repairs or alterations in or to the leased premises as may be necessary to place the same in good order and condition. The Tenant shall be liable to the Landlord for the cost of such repairs or alterations, and all expenses of such reletting. If the sum realized or to be realized from the reletting is insufficient to satisfy the monthly or term rent Tenant Liable provided in this lease, the Landlord, at its option, may for Deficiency require the Tenant to pay such deficiency month by month, or may hold the Tenant in advance for the entire deficiency to be realized during the term of the reletting. The Tenant shall not be entitled to any surplus accruing as a result of the reletting. The Landlord is hereby granted a lien, in addition Lien of to any statutory lien or right to distrain that may exist, on Landlord to all personal property of the Tenant in or upon the demised Secure premises, to secure payment of the rent and performance of the covenants and conditions of this lease. The Landlord shall have the right, as agent of the Tenant, to take possession of any furniture, fixtures or other personal property of the Tenant found in or about the premises, and sell the same at public or private sale and to apply the proceeds thereof to the payment of any monies becoming due under this lease, the Tenant hereby waiving the benefit of all laws exempting Performance property from execution, levy and sale on distress or Attorney's Fees judgment. The Tenant agrees to pay, as additional rent, all attorney's fees and other expenses incurred by the Landlord in enforcing any of the obligations under this lease. Sub-letting and Fourth. -- The Tenant shall not sub-let the demised Assignment premises nor any portion thereof, nor shall this lease be assigned by the Tenant without the prior written consent of the Landlord endorsed hereon, which consent shall not be unreasonably withheld. Condition of Fifth. -- The Tenant has examined the demised premises, and Premises, accepts them in their present condition (except as otherwise Repair expressly provided herein) and without any representations on the part of the Landlord or its agents as to the present or future condition of the said premises. The Tenant shall keep the demised premises in good condition, and shall redecorate, paint and renovate the said premises as may be necessary to keep them in repair and good appearance. The Tenant shall quit and surrender the premises at the end of the demised term in as good condition as the reasonable use thereof will permit. The Tenant shall not make any alterations, additions, or improvements to said premises without the Alterations and prior written consent of the Landlord. All erections, Improvements alterations and improvements, whether temporary or permanent in character, which may be made upon the premises either by the Landlord or the Tenant, except furniture or movable trade fixtures installed at the expense of the Tenant, shall be the property of the Landlord and shall remain upon and be surrendered with the premises as a part thereof at the termination of this Sanitation, Lease, without compensation to the Tenant. The Tenant Inflammable further agrees to keep said premises and all parts thereof Materials in a clean and sanitary condition and free from trash, inflammable material and other objectionable matter. If this lease covers premises, all or a part of which are on Sidewalks the ground floor, the Tenant further agrees to keep the sidewalks in front of such ground floor portion of the demised premises clean and free of obstructions, snow and ice. Mechanics' Sixth.--In the event that any mechanics' lien is Liens filed against the premises as a result of alterations, additions or improvements made by the Tenant, the Landlord, at its option, after thirty days' notice to the Tenant, may terminate this lease and may pay the said lien, without inquiring into the validity thereof, and the Tenant shall forthwith reimburse the Landlord the total expense incurred by the Landlord in discharging the said lien, as additional rent hereunder. Glass Seventh.--The Tenant agrees to replace at the Tenant's expense any and all glass which may become broken in and on the demised premises. Plate glass and mirrors, if any, shall be insured by the Tenant at their full insurable value in a company satisfactory to the Landlord. Said policy shall be of the full premium type, and shall be deposited with the Landlord or its agent. Liability of Eighth.--The Landlord shall not be responsible for Landlord the loss of or damage to property, or injury to persons, occurring in or about the demised premises, by reason of any existing or future condition, defect, matter or thing in said demised premises or the property of which the premises are a part, or for the acts, omissions or negligence of other persons or tenants in and about the said property. The Tenant agrees to indemnify and save the Landlord harmless from all claims and liability for losses of or damage to property, or injuries to persons occurring in or about the demised premises. Services and Ninth.--Utilities and services furnished to the Utilities demised premises for the benefit of the Tenant shall be provided and paid for as follows: water and sewer by the Tenant; gas by the Tenant; electricity by the Tenant; heat by the Tenant; refrigeration by the Tenant; hot water by the Tenant. Electric, gas, equipment maintenance, replacement of equipment and yearly service of equipment which supplies heat, air and electric to the demised premises covered by this lease are to be paid for by the Tenant with no portion thereof to be reimbursed or paid for by the Landlord. The Landlord shall not be liable for any interruption or delay in any of the above services for any reason. Right to Inspect Tenth.--The Landlord, or its agents, shall have the and Exhibit right to enter the demised premises at reasonable hours in the day or night to examine the same, or to run telephone or other wires, or to make such repairs, additions or alterations as it shall deem necessary for the safety, preservation or restoration of the improvements, or for the safety or convenience of the occupants or users thereof (there being no obligation, however, on the part of the Landlord to make any such repairs, additions or alterations), or to exhibit the same to prospective purchasers and put upon the premises a suitable "For Sale" sign. For three months prior to the expiration of the demised term, the Landlord, or its agents, may similarly exhibit the premises to prospective tenants, and may place the usual "To Let" signs thereon. Damage by Fire, Eleventh.--In the event of the destruction of the Explosion, demised premises or the building containing the said The Elements premises by fire, explosion, the elements or otherwise or Otherwise during the term hereby created, or previous thereto, or such partial destruction thereof as to render the premises wholly untenantable or unfit for occupancy, or should the demised premises be so badly injured that the same cannot be repaired within ninety days from the happening of such injury, then and in such case the term hereby created shall, at the option of the Landlord, cease and become null and void from the date of such damage or destruction, and the Tenant shall immediately surrender said premises and all the Tenant's interest therein to the Landlord, and shall pay rent only to the time of such surrender, in which event the Landlord may re-enter and re-possess the premises thus discharged from this lease and may remove all parties therefrom. Should the demised premises be rendered untenantable and unfit for occupancy, but yet be repairable within ninety days from the happening of said injury, the Landlord may enter and repair the same with reasonable speed, and the rent shall not accrue after said injury or while repairs are being made, but shall recommence immediately after said repairs shall be completed. But if the premises shall be so slightly injured as not to be rendered untenantable and unfit for occupancy, then the Landlord agrees to repair the same with reasonable promptness and in that case the rent accrued and accruing shall not cease or determine. The Tenant shall immediately notify the Landlord in case of fire or other damage to the premises. Observation Twelfth.--The Tenant agree to observe and comply with of Laws, the laws, ordinances, rules and regulations of the Federal, Ordinances, State, County and Municipal authorities applicable to the Rules and business to be conducted by the Tenant in the demised Regulations premises. The Tenant agrees not to do or permit anything to be done in said premises, or keep anything therein, which will increase the rate of fire insurance premiums on the improvements or any part thereof, or on property kept therein, or which will obstruct or interfere with the rights of other tenants, or conflict with the regulations of the Fire Department or with any insurance policy upon said improvements or any part thereof. In the event of any increase in insurance premiums resulting from the Tenant's occupancy of the premises, or from any act or omission on the part of the Tenant, the Tenant agrees to pay said increase in insurance premiums on the improvements or contents thereof as additional rent. Signs Thirteenth.--No sign, advertisement or notice shall be affixed to or placed upon any part of the demised premises by the Tenant, except in such manner, and of such size, design and color as shall be approved in advance in writing by the Landlord. Subordination Fourteenth.--This lease is subject and is hereby to Mortgages subordinated to all present and future mortgages, deeds of and Deeds trust and other encumbrances affecting the demised premises of Trust or the property of which said premises are a part. The Tenant agrees to execute, at no expense to the Landlord, any instrument which may be deemed necessary or desirable by the Landlord to further effect the subordination of this lease to any such mortgage, deed of trust or encumbrance. Sale of Fifteenth.-- Premises Rules and Sixteenth.--The rules and regulations regarding the Regulations of demised premises, affixed to this lease, if any, as well as Landlord any other and further reasonable rules and regulations which shall be made by the Landlord, shall be observed by the Tenant and the Tenant's employees, agents and customers. The Landlord reserves the right to rescind any presently existing rules applicable to the demised premises, and to make such other and further reasonable rules and regulations as, in its judgment, may from time to time be desirable for the safety, care and cleanliness of the premises, and for the preservation of good order therein, which rules, when so make and notice thereof given to the Tenant, shall have the same force and effect as if originally made a part of this lease. Such other and further rules shall not, however, be inconsistent with the proper and rightful enjoyment by the Tenant of the demised premises. Violation of Seventeenth.--In case of violation by the Tenant of Covenants, any of the covenants, agreements and conditions of this Forfeiture of lease, or of the rules and regulations now or hereafter to Lease, Re-entry be reasonably established by the Landlord, and upon failure by Landlord to discontinue such violation within ten days after notice thereof given to the Tenant, this lease shall thenceforth, at the option of the Landlord, become null and void, and the Landlord may re-enter without further notice or demand. The rent in such case shall become due, be apportioned and paid on and up to the day of such re-entry, and the Tenant shall be liable for all loss or damage resulting from such Non-waiver violation as aforesaid. No waiver by the Landlord of any of Breach violation or breach of condition by the Tenant shall constitute or be construed as a waiver of any other violation or breach of condition, nor shall lapse of time after breach of condition by the Tenant before the Landlord shall exercise its option under this paragraph operate to defeat the right of the Landlord to declare this lease null and void and to re-enter upon the demised premises after the said breach or violation. Notices Eighteenth.--All notices and demands, legal or otherwise, incidental to this lease, or the occupation of the demised premises, shall be in writing. If the Landlord or its agent desires to give or serve upon the Tenant any notice or demand, it shall be sufficient to send a copy thereof by registered mail, addressed to the Tenant at the demised premises, or to leave a copy thereof with a person of suitable age found on the premises, or to post a copy thereof upon the door to said premises. Notices from the Tenant to the Landlord shall be sent by registered mail or delivered to the Landlord at the place hereinbefore designated for the payment of rent, or to such party or place as the Landlord may from time to time designate in writing. Bankruptcy, Nineteenth.--It is further agreed that if at any time Insolvency, during the term of this lease the Tenant shall make any Assignment for assignment for the benefit of creditors, or be decreed Benefit of insolvent or bankrupt according to law, or if a receiver Creditors shall be appointed for the Tenant, then the Landlord may, at its option, terminate this lease, exercise of such option to be evidenced by notice to that effect served upon the assignee, receiver, trustee or other person in charge of the liquidation of the property of the Tenant or the Tenant estate, but such termination shall not release or discharge any payment of rent payable hereunder and then accrued, or any liability then accrued by reason of any agreement or convenant herein contained on the part of the Tenant, or the Tenant's legal representatives. Holding Over Twentieth.--In the event that the Tenant shall remain in by Tenant the demised premises after the expiration of the term of this lease without having executed a new written lease with the Landlord, such holding over shall not constitute a renewal or extension of this lease. The Landlord may, at its option, elect to treat the Tenant as one who has not removed at the end of his 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 in that event the Tenant shall pay monthly rent in advance at two times the rate provided herein as effective during the and double rent last month of the demised term. Eminent Twenty-first.--If the property or any part thereof Domain, wherein the demised premises are located shall be taken by Condemnation public or quasi-public authority under any power or eminent domain or condemnation, this lease, at the option of the Landlord, shall forthwith terminate and the Tenant shall have no claim or interest in or to any award of damages for such taking. Security Twenty-second.--The Tenant has this day deposited with the Landlord the sum of $3,460.66 as security for the full and faithful performance by the Tenant of all the terms, convenants and conditions of this lease upon the Tenant's part to be performed, which said sum shall be returned to the Tenant after the time fixed as the expiration of the term herein, provided the Tenant has fully and faithfully carried out all of said terms, covenants and conditions on Tenant's part to be performed. 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 and the Landlord shall be considered released by the Tenant from all liability for the return of such security; and the Tenant agrees to look to the new Landlord solely for the return of the said security, and it is agreed that this shall apply to every transfer or assignment made of the security to a new Landlord. The security deposited under this lease shall not be mortgaged, assigned or encumbered by the Tenant without the written consent of the Landlord. Arbitration Twenty-third.--Any dispute arising under this lease shall be settled by arbitration. Then Landlord and Tenant shall each choose an arbitrator, and the two arbitrators thus chosen shall select a third arbitrator. The findings and award of the three arbitrators thus chosen shall be final and binding on the parties hereto. Delivery of Twenty-fourth.--No rights are to be conferred upon the Lease Tenant until this lease has been signed by the Landlord, and an executed copy of the lease has been delivered to the Tenant. Lease Twenty-fifth.--The foregoing rights and remedies are not Provisions Not intended to be exclusive but as additional to all rights Exclusive and remedies the Landlord would otherwise have by law. Lease Binding Twenty-sixth.--All of the terms, convenants and on Heirs conditions of this lease shall inure to the benefit of and Successors, Etc. be binding upon the respective heirs, executors, administrators, successors and assigns of the parties hereto. However, in the event of the death of the Tenant, if an individual, the Landlord may, at its option, terminate this lease by notifying the executor or administrator of the Tenant at the demised premises. Twenty-seventh.--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 nowise be affected, impaired or excused because Landlord is unable to supply or is delayed in supplying any service expressly or impliedly to be supplied or is unable to make, or is delayed in making any repairs, additions, 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 the 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 the war. Twenty-eighth.--This instrument may not be changed orally. Twenty-ninth.--See Addendum "A" attached hereto and made a part hereof. Thirtieth.--See Addendum "B" and "C" attached hereto and made a part hereof. IN WITNESS WHEREOF, the said Parties have hereunto set their hands and seals the day and year first above written. Witness: HILTON REALTY CO. OF PRINCETON (SEAL) ------------------------------------- Landlord ------------------- By __________________________________ Jeffrey H. Sands YARDVILLE NATIONAL BANK (SEAL) ------------------------------------- Attest: Tenant ------------------- By __________________________________ President/CEO ADDENDUM "A" TO LEASE --------------------- BETWEEN: HILTON REALTY CO. OF PRINCETON (LANDLORD) AND: YARDVILLE NATIONAL BANK (TENANT) 13th - (continued) - The Tenant understands and agrees that he may display only one sign which will be placed on the space provided by the Landlord in the sign box. The design, color, style, and size must be approved by the Landlord and be in conformity with the now existing signs. It is understood that it is required that the sign insert be constructed of a bronze colored face and white letters. The Tenant shall pay the cost of the sign insert and installation of same. Signs with blinking or flashing lights will not be permitted. It is further understood by the Tenant that it shall be his responsibility to obtain all necessary permits that may or may not be required by the Township, Borough, or governing body, and that should a variance be required, then in that event, the Tenant shall pursue using due diligence in obtaining said variance and shall pay all costs pertaining to the sign, including application fees, with no reimbursement whatsoever from the Landlord. Taxes, 31st - It is understood and agreed that the Tenant will pay Insurance, any and all real estate taxes or any taxes in the future that and Common may be considered real estate taxes or sales tax levied on Area rents based upon the store's square foot area in direct Maintenance relation to the total floor area of the shopping center. The Tenant also agrees to pay any and all insurance the Landlord decides to place upon the property which shall include but not be limited to fire, liability, boiler, rent insurance, etc. The total insurance bill for the shopping center shall be paid for on a square footage pro rata basis by the Tenant. Further, the Tenant agrees to pay for any and all common area maintenance including but not limited to parking lot and driveway maintenance (including patching and resurfacing), exterior maintenance, septic systems maintenance or replacement, snow removal, electric, lawn and landscape maintenance, maintenance and management personnel's salaries including payroll taxes, and all other expenses and capital improvements necessary to maintain the shopping center in good working order and a management fee based upon the minimum rent and all additional rent due under this Lease. The total common area maintenance amount for the shopping center shall be paid for on a square footage pro rata basis by the Tenant. The above real estate taxes, insurance, and common area maintenance charges ("TIM") will be added to the monthly rental and paid monthly and will be considered part of that month's rent under the terms of this lease. Premises 32nd - It is understood and agreed that the Tenant will and Area provide for his own janitorial service for the area leased and Maintenance to obtain and pay for the cost of a dumpster to remove all trash from the leased premises. The Tenant agrees to clean, keep in a clean condition, and maintain or replace the windows and door including aluminum when required. The Tenant further agrees to clean the sidewalk directly in front of the premises and remove any snow or ice which may accumulate. Should the Tenant not maintain the premises or remove the trash, the Landlord is hereby authorized to do same and add the cost of same plus 25% to the following month's rent which will be considered part of that month's rent under the terms of this lease. Tenant will be given ten (10) days written notice by Landlord in situations other than emergencies. ADDENDUM "A" (Continued) ------------------------ Net Lease 33rd - It is understood and agreed that this is a net, net lease in all respects and further that the Tenant upon vacating the demised premises will leave the premises as he found them subject to normal wear and tear. Roof 34th Landlord and Tenant agree that the roof and exterior of the demised premises is presently in satisfactory condition. The Tenant hereby agrees to maintain the above named area and be responsible for the maintenance, repairs or replacements during the life of this lease or any options or extensions thereof. Prior to any repairs, Tenant agrees to notify Landlord of work to be done and by which roof contractor. Should the Tenant not repair the roof as needed, then the Landlord has the option of repairing it and charging the Tenant the cost plus 25%. Default 35th - Tenant agrees to pay as rent in addition to the minimum rental herein reserved, any and all sums which may become due by reason of the failure of Tenant to comply with all the covenants of this lease and to pay any and all damages, costs and expenses which the Landlord might suffer or incur by reason of any default of the Tenant, or failure on his part to comply with the covenants of this lease. Further, the Tenant agrees to pay for any and all damages to the demised premises or to any other portion of the shopping center caused by any act or neglect of the Tenant or any of his patrons. Late Charge 36th - It is understood and agreed that a late charge of 5% of the current month's rent will be paid by the Tenant should his rent not be received by the Landlord on or before the 5th day of the month for which the rent covers; further, a second late charge of 5% of the current month's rent will be paid by the Tenant if his rent is not received by the 10th day of the month for which the rent covers; thus making a total of 10% and the Landlord reserves the right to cancel this lease. Display of 37th - The Tenant agrees not to display any merchandise on Merchandise the sidewalk in front of the demised premises. Certificate 38th - If required by the Township, it is the responsibility of of the Tenant to obtain the Certificate of Occupancy including Occupancy any costs thereof. Tenant shall supply to Landlord a copy of the permanent Certificate of Occupancy. Fire 39th - Tenant agrees, at its cost, to furnish all required Extinguishers, fire extinguishers, maintain them and any exit signs for Exit Signs internal traffic flow in the premises and pay for any inspection fees and permits for same if required by applicable government authorities with jurisdiction over the premises. Games 40th - It is understood and agreed that the Tenant will not place or cause to be placed any coin operated machines, commonly known as pin ball or video machines in the demised premises. Workers' 41st - The Tenant will secure a Workers' Compensation Insurance Compensation Policy, covering all employees of the Tenant and provide Insurance the Landlord with a copy thereof. In the event that it is contemplated that the Tenant shall have no employees, then in that event, the Tenant will secure a minimum workers' compensation insurance policy, and provide the Landlord with a copy thereof. Sublet 42nd - Tenant will neither assign this lease nor sublet the premises or any part thereof without the written approval of 2 ADDENDUM "A" (Continued) ------------------------ Landlord not to be unreasonably withheld. If Tenant desires to assign this lease or to sublet all or part of the premises, it must, prior to entering into such assignment or sublease, serve notice upon Landlord of its intention to make such assignment or subletting which notice will contain (i) the name and address of the proposed assignee or subtenant, (ii) the full and complete terms and conditions of the assignment or subletting and in the case of subletting the exact space to be sublet, (iii) a financial statement from the proposed assignee or subtenant, (iv) the nature of the proposed assignee's or subtenant's business and its proposed use of the premises, and (v) a copy of plans and specifications for any required alterations to the premises. If Landlord approves the assignment or sublet, same is conditioned upon Tenant's delivery to Landlord, in recordable form and within ten days after its execution, of a duplicate original of the assignment or sublease and, in the event of an assignment, an agreement reasonably acceptable to Landlord wherein the assignee assumes and agrees to keep, observe and perform all the covenants, conditions and obligations of Tenant under the lease. Notwithstanding any assignment, sublease or other occupancy, with or without Landlord's consent, Tenant will remain primarily liable on this lease unless expressly agreed by the Landlord to the contrary, in writing. Landlord may require as a condition to its consent to an assignment or sublease that the then current rent and any future rent be increased by up to 25%. Broker 43rd - Tenant agrees that if any claim should be made for commissions by any broker by reason of any act of Tenant or its representatives, Tenant will indemnify, defend and hold Landlord free and harmless from any and all loss, liabilities and expenses in connection therewith. Landlord will give prompt notice to Tenant after any such claim is made by any broker. Tenant will have the right to defend such claim and Landlord will not pay or settle such claim as long as Tenant is defending same. Extermina- 44th - Tenant understands and agrees that he is responsible tion for ordering and paying the cost of any extermination of bugs or insects found in the premises. Assessments 45th - Tenant understands and agrees to pay his pro rata share of any assessments to the shopping center from any governmental authority including but not limited to the federal, state, county or municipal government. It is understood and agreed that the Tenant is to pay this cost only if the assessment and work is established after the commencement of this lease. The pro rata share of the Tenant shall be the product of (1) the amount of any cost, fee, assessment or other levy or expenditure as hereinabove recited and (2) a fraction of the numerator of which is the square footage of the floor area of the demised premises and the denominator of which is the total square footage of the floor area in the shopping center as may be determined from time to time. Business 46th - The Tenant is obligated to keep the business open from Operational 9:00 a.m. to 5:00 p.m. six days a week. Should the Tenant Hours not maintain the minimum hours stated above and after receiving written notice giving him fifteen (15) days to satisfy the above terms, the Landlord reserves the right to terminate the lease. Further, should the premises be closed at any time for more than ten (10) days, for reasons other than health, or "act of God", without the written approval of the Landlord, then in that event, the Landlord reserves the right to cancel this lease, and the sole obligation of the Landlord 3 ADDENDUM "A" (Continued) ------------------------ is to return the security deposit, if no damage exists, and any prorated rent if the Tenant had paid in advance. The above is designed to keep the stores open during the required hours and is an option granted to the Landlord for the benefit of the shopping center as well as the Tenants leasing space in the Center. Application 47th - All monies received from a Tenant shall be applied of Monies first to late charges (if any), and the TIM charge, other Received monies due and owing the Landlord (if any), and lastly applied to the rent. The Tenant agrees that should any monies be more than twenty (20) days in arrears, the Tenant is to pay by money order, certified check, or in cash. A personal check will not be accepted. The Tenant agrees that should a check ever "bounce" for any reason whatsoever, a return check fee will be paid the Landlord in the amount of $75.00. Plans, 48th - If Tenant is performing any work in its premises, Permits & within fifteen (15) days of signing this lease, Tenant shall Start of furnish to Landlord four (4) sets of final plans and specifi- Improvements cations sealed by a registered architect. Landlord shall have five (5) days to either approve or reject the plans. Tenant shall have ten (10) days to make any revisions requested by Landlord if necessary. Upon approval of plans by Landlord, Tenant shall make application to the Township for building permits within five (5) days. Tenant will begin improvements on the demised space within ten (10) days of receipt of building permits. Commencement 49th - When the commencement date occurs, Landlord and Tenant Date shall execute an agreement memorializing the commencement date and expiration date, which agreement shall be attached hereto and made a part hereof. Delivery 50th - The Tenant will have thirty (30) days from Landlord's Date delivery of the premises to Tenant to fit out the premises and rent will commence the earlier of Tenant's opening for business or the expiration of such thirty (30) day period even if Tenant is not open for business. Landlord and Tenant each acknowledge that the commencement date is based upon Landlord's present best estimate of said date but shall in no manner be construed as a firm date, and Landlord's inability to deliver possession on or about the date set forth herein shall not give rise to Tenant having any right to claim any damages whatsoever that may result from a postponement of the anticipated commencement date. Tenant 51st - Tenant covenants and agrees to promptly complete its Improvements work and installation of fixtures with all due diligence and thereupon to open its doors for business. If Tenant should fail or refuse to commence and diligently proceed with its work promptly after the premises are ready for Tenant's improvements, Landlord, after thirty (30' days notice, may complete Tenant's work at Tenant's expense or declare this lease cancelled and of no effect. Store Key 52nd - Tenant understands and agrees to supply Landlord with a key should the locks be changed for any reason whatsoever. Landlord shall require a working key to the demised premises at all times in case of emergency. Should Tenant fail to supply Landlord with a working key to the demiaed space, then in that event, Tenant shall hold Landlord harmless for any and all damages should Landlord be required to forcibly enter the demised space due to an emergency situation: 4 ADDENDUM "A" (Continued) ------------------------ Condition 53rd - Tenant agrees to accept the premises called for in of Premises this lease "AS IS". Delivery 54th - The Tenant agrees that all deliveries and pickups are & Pickup to be from the rear of the premises. In addition, all of Tenant's delivery trucks shall be parked to the rear of the shopping center and at no time should said delivery truck(s) be parked to the front of the shopping center. Area 55th - Tenant understands that the square foot figures quoted Dimensions in this lease are determined by measuring the area using exterior dimensions. Front to rear dimensions are measured from outside wall to outside wall and side to side dimensions are middle of wall to middle of wall, except in circumstances where a side wall is an exterior wall and measurements are then taken from the outside of the walls. Financial 56th - Tenant agrees to supply Landlord with its most current Statements financial statements at the time of or prior to the full execution of this lease. Landlord has five (5) days to review the financial statements and either terminate or continue with this lease. If the Landlord does not respond within the five (5) day period, the Landlord's option to terminate this lease, based on the financial statements, is voided. Lease 57th - Tenant shall obtain and keep in full force and effect Insurance during the term of this lease at its own cost and expense Commercial General Liability Insurance, such insurance to afford protection in an amount of not less than $1,000,000. for injury or death to any one person, $1,000,000. for injury or death arising out of any one occurrence, and $1,000,000. for damage to property, protecting and naming the Landlord and the Tenant as insureds against any and all claims for personal injury, death or property damage occurring in, upon, adjacent, or connected with the Demised Premises and any part thereof. Tenant shall pay all premiums and charges therefore and upon failure to do so Landlord may, but shall not be obligated to, make such payments and in such latter event the Tenant agrees to pay the amount thereof to Landlord on demand and said sums shall be deemed to be additional rent and in each instance collectible on the first day of any month following the date of notice to Tenant in the same manner as though it were rent originally reserved hereunder, together with interest thereon at the rate of three points in excess of the prime rate from the Chase Manhattan Bank, N.A., as same may change from time to time (the "Interest Rate"). Tenant will use its best efforts to include in such commercial general liability insurance policy a provision to the effect that same will be non-cancelable, except upon reasonable advance written notice to Landlord. The original insurance policies or appropriate certificates shall be deposited with the Landlord together with any renewals, replacements or endorsements to the end that said insurance shall be in full force and effect for the benefit of the Landlord during the term of this lease. In the event Tenant shall fail to procure and place such insurance, the Landlord may, but shall not be obligated to, procure and place same, in which event the amount of the premium paid shall be refunded by Tenant to the Landlord upon demand and shall in each instance be collectible on the first day of the month or any subsequent month following the date of payment by Landlord, in the same manner as though said sums were additional rent reserved hereunder together with interest thereon at the rate of three points in excess of the prime rate of the Chase Manhattan Bank, NA., as same may change from time to time. 5 ADDENDUM "A" (Continued) ------------------------ Noise and 58th - No Tenant shall make, or permit to be made, any unseemly Odor odor, disturbing noises, objectionable odors or disturb or interfere with occupants of this or neighboring premises or those having business with them. No Tenant shall permit animals to be brought or kept on the premises. Employee 59th - The Tenant agrees that its employees shall park to Parking the rear of the leased premises and at no time to the front of the premises. Restrictions 60th - Tenant, its successors, assigns and those taking under Tenant are prohibited from engaging in or selling the following: 1. Sporting goods; 2. Fine jewelry and fine jewelry repair; 3. Sale or rental of new or used video tapes; 4. Sale or rental of old or new CD's or cassettes; 5. Greeting, occasional, boxed or any other type of cards; 6. Toys; 7. Any candles; 8. Computer or computer software; 9. Books; 10. Operation of a drug store, or a drug department, or the operation of any store primarily engaged in the sale of health and/or beauty aids. 11. Party goods, including all paper items such as paper plates, paper cups, plastic utensils, wrapping paper; 12. Items sold in the grocery store or customarily sold in a retail food store; 13. For the primary operation of Chinese, Japanese or Italian sit-down or take-out restaurant; 14. Primary operation of a fast-food business for the sale of fast food wherein the primary product(s) to be offered is/are hamburgers, hot dogs and other similar beef-based sandwiches. By way of example, the primary operations as conducted by a MacDonald's, Wendy's or Hardee's would be prohibited; 15. Operation of a retail store primarily selling bagels. Prevailing 61st - The Landlord and Tenant agree that should a suit be Party/Venue commenced by either party, the prevailing party will be reimbursed its legal fees, costs, etc., by the other party. The Landlord and Tenant further agree that the venue shall be Mercer County, New Jersey, should any litigation be commenced with respect to this lease. Liability 62nd - Notwithstanding anything to the contrary provided in this Lease, if Landlord or any successor in interest of Landlord shall be a mortgagee, or an individual, joint venture, tenancy in common, firm or partnership, general or limited, or limited liability company, it is specifically understood and agreed that there shall be absolutely no personal liability on the part of the Landlord or such mortgagees or such individual or on the part of the members of such firm, partnership, joint venture or limited liability company with respect to any for the terms, covenants, and conditions of this Lease, and that Tenant shall look solely to the equity of the Landlord or such successor in interest in the premises and the building of which the premises is a part and not to any other assets of Landlord or any successor in interest for the satisfaction each and every remedy of Tenant in the event of any breach by Landlord or by such successor in interest of any of the terms, covenants and conditions of this Lease to be performed by Landlord, such exculpation of personal liability to be absolute and without any exception whatsoever. 6 ADDENDUM "A" (Continued) ------------------------ Option to 63rd- The Tenant is granted one (1) five (5) year option Renew to renew the lease under the same terms and conditions as set forth herein, except that the rent shall be increased as set forth below. The option period shall automatically commence five (5) years from the commencement date of the above referenced lease and terminate five (5) years from the commencement date of the option period. If Tenant does not desire to renew the lease, the Tenant must serve written notice by certified mail, return receipt requested, on the Landlord nine (9) months prior to the expiration date of the above lease, TIME BEING OF THE ESSENCE. If notice is not received by such time, the lease will automatically renew. Landlord may void Tenant's option to renew this lease at its option if Tenant has not fulfilled completely and in a timely manner all terms and conditions of this lease. The rent for the five (5) year option period shall be as follows: Year 1 - $24,344.04 per year or $2,028.67 per month Year 2 - $25,059.96 per year or $2,088.33 per month Year 3 - $25,776.00 per year or $2,148.00 per month Year 4 - $26,492.04 per year or $2,207.67 per month Year 5 - $27,207.96 per year or $2,267.33 per month The rents for the option period shall be paid in 1/12 equal monthly installments due on the first of each month. Tenant agrees that the demised space is accepted during the renewal period(s) in an "AS IS" condition. Tenant further understands that the above figures do not include the taxes, insurance and maintenance (TIM) reimbursements, as called for in Paragraph 31st of the above lease, which shall continue to be due and payable in addition to the rent. Tenant's 64th - At any time during the first five (5) years of the Obligation term of this Lease not later than sixty (60) days after Tenant to Relocate receives notice from Landlord ("Relocation Notice"), Tenant shall relocate out of its premises ("Relocation Date") and into substantially similar space but of an area of approximately 4,636 rentable square feet ("New Space") in the "Egomatic" building (the "Building") located in Block 66 Lot 8 as shown on the Official Tax Map of the Township of Hopewell if Landlord obtains the necessary governmental approvals from any governmental authority having jurisdiction thereof to permit a bank use in the Building and make the improvements to the site pursuant to the approved site plan (the "Approvals"). Tenant will pay for any certificate of occupancy or other governmental permit in connection with the use of the New Space at its sole cost and expense. A new ten (10) year lease term will commence for the New Space upon the Relocation Date. The Relocation Notice shall specify the rents Tenant shall pay and the commencement and expiration dates of the new ten (10) year term pursuant to this Paragraph 64th. If the Relocation Date occurs within three (3) years of the commencement date of the Lease, the rent for the New Space will be calculated at the rate of $15.50 per rentable square foot with $.50 increases per year for the remainder of the new ten (10) year term of the Lease. If the Relocation Date occurs on or after the fourth (4th) lease year, then the cost per square foot per year shall increase $.50 per rentable square foot for each lease year or portion thereof after the third lease year for the remainder of the new ten (10) year term of this Lease. For example, if the Relocation Date 7 ADDENDUM "A" (Continued) ------------------------ occurs during the fourth (4th) year of the term of this Lease, rent for the New Space for the first year of the new ten (10) year term will be $16.00 per rentable square foot with $.50 per rentable square foot increases each lease year thereafter. Tenant understands that the above figures do not include the taxes, insurance and maintenance (TIM) reimbursements, as called for in Paragraph 31st of the above lease, which shall continue to be due and payable in addition to the rent. Landlord's 65th - Premises - Landlord will deliver the 1,432 rentable Work square foot premises to Tenant "AS IS". Tenant will be responsible for all improvements to the premises at its sole cost. New Space - Landlord will deliver the New Space to Tenant "AS IS" except Landlord for the New Space only, at its cost, shall: a. replace any stained or damaged ceiling tiles and light lenses, as necessary; b. install one or two bathrooms as required by code; c. install a separate 200 amp three phase electric service; d. install a separate gas meter for the HVAC system; e. deliver the HVAC system in good working condition. Except as set forth above, Tenant will be responsible for all other improvements to the New Space, at its sole cost, with no reimbursements by Landlord whatsoever including the construction of the drive-up facility including any pneumatic tubing systems, canopies, bollards and the like provided any of the foregoing shall be subject to the Landlord's approval, not to be unreasonably withheld or delayed. Option to 66th - Landlord or Tenant are each granted an option to Terminate terminate the Tenant's obligation to relocate to the New Space if Landlord does not obtain the necessary Approvals within five (5) years from the commencement date of the term of this Lease (the "Termination Date"), upon at least ninety (90) days' prior written notice to Landlord or Tenant, respectively, TIME BEING MADE OF THE ESSENCE. If Landlord or Tenant fail to give such ninety (90) day prior written notice prior to the expiration of the fifth lease year, Tenant's obligation to relocate will remain in full force and effect. Landlord's 67th - Notwithstanding anything to the contrary in this Option to Lease, Landlord shall have the right to terminate the Terminate Tenant's obligation to relocate to the New Space if the Approvals for the bank use at the Building are subject to Landlord's having to perform any additional site work beyond what would have been required had the Approvals been based on a non-bank use. 8 ADDENDUM "B" [DIAGRAM OF PENNINGTON SHOPPING CENTER] ADDENDUM "C" TO LEASE --------------------- LANDLORD: HILTON REALTY CO. OF PRINCETON 194 Nassau Street Princeton, NJ, 08542 TENANT: YARDVILLE NATIONAL BANK 3111 Quakerbridge Road Mercerville, NJ, 08619 PROPERTY: 1,432 square feet of rental space located in the Pennington Shopping Center on the southeast corner of Rt. 31 & West Delaware Avenue, Pennington, NJ ============================================================================== The contents of this Addendum are an integral part of the Lease between Landlord and Tenant dated March 31, 1998, and wherever the contents of this Addendum and the Lease differ, the Addendum shall govern. 1. Beginning in the third to the last line of the Third paragraph of the Lease, the following language shall be deleted: "the Tenant hereby waiving the benefit of all laws exempting property from execution, levy and sale on distress or judgment." 2. The Fifth paragraph is hereby modified to state that any consent of the Landlord required for erections, alterations, additions and improvements shall not be unreasonably withheld. Further, at the expiration or earlier termination of the term, if requested by Landlord, Tenant shall remove, at its own cost, any safes, vaults and bullet proof windows in the premises. 3. Beginning in the second line of the Sixth paragraph, the following language shall be deleted: "may terminate this lease and". In the fourth line of the sixth paragraph after the word "lien" add "together with interest at the Wall Street Journal prime rate plus 4% until paid in full." 1 4. Delete the second and third sentence in paragraph Seventh. 5. Add to the end of paragraph Eighth, the following language: "Notwithstanding the above, Landlord shall not be exculpated from personal injury liability resulting from the negligent act or failure to act or perform any duty or obligation required herein of Landlord, its officers, employees, agents or contractors. 6. The Ninth paragraph is hereby modified to state the following: The Tenant shall take good care of the premises and shall at the Tenant's own cost and expense, make all repairs, including painting and decorating and shall maintain the premises in good condition and state of repair. The Tenant shall neither encumber nor obstruct the sidewalks, parking areas and entrances, but shall keep and maintain the same in a clean condition, free from debris, refuse, snow and ice. Landlord will guaranty the roof, HVAC and plumbing systems for a period of one year after delivery of the premises to the Tenant, except if any repairs or replacements of same are due to the negligent acts or omissions of Tenant. The Landlord's costs associated with the repair or replacement under the above guaranty will not be included in the TIM charges referred to in the lease. This paragraph is also modified to state that if the utility services are interrupted due to no fault of the Tenant, but due to the fault of the Landlord for a period of more than ten days, then Tenant will be entitled to an abatement of rent until such time as the utilities are returned to service. Tenant agrees to use its best efforts to have the utilities returned to service as soon as possible. In the event the utility or utilities are not restored for a period of six months, regardless of who's fault, then Tenant shall have the right to cancel this Lease Agreement. 7. The Tenth paragraph is hereby modified to state that Landlord's right to inspect herein shall be upon reasonable notice to Tenant and during normal business hours except in emergency situations. 8. The Thirteenth paragraph is hereby modified to state that the Tenant shall be entitled to signage on the front of the building similar to other tenants in the shopping center and the approval for the signage shall not be unreasonably withheld by the Landlord. Landlord further agrees to allow Tenant to install a lighted sign in the Tenant's existing colors on the front of the building, provided the background of the signage matches the existing bronze color background, the size and design of which are subject to the Landlord's approval, which approval may not be unreasonably withheld. 2 9. The Fourteenth paragraph is modified to state that the Tenant agrees to sign said Subordination Agreement provided the mortgagee executes a Subordination, Non-Disturbance and Attornment Agreement in a form reasonably acceptable to Tenant. 10. The Seventeenth paragraph is modified to change in the third line the words, "ten days" to "thirty days". Also, the thirty-day period shall be extended if Tenant is diligently pursuing a cure of the breach in good faith. The last sentence of this paragraph shall be deleted and replaced with the following: No waiver by Landlord or Tenant of any violation or breach of condition by the Landlord or Tenant shall constitute or be construed as a waiver of any other violation or breach of condition, nor shall lapse of time after breach of condition by the Landlord or Tenant before the Landlord or Tenant shall exercise its option under this paragraph operate to defeat the right of the Landlord or Tenant to pursue their rights under the lease and Landlord's right to re-enter upon the demises premises after the said breach or violation. 11. The Twentieth paragraph is hereby modified to state that the Landlord may charge the Tenant 150% of the last month's rent in the event of a holding over instead of double the rent. 12. Paragraph Twenty-First is hereby replaced with the following language: If the entire property or a material part thereof wherein the demised premises are located shall be taken by public or quasi-public authority under any power of eminent domain or condemnation, such as to have a material effect on Tenant's business, this lease, at the option of the Tenant, shall forthwith terminate and the Tenant shall have the right to pursue a separate award for such public taking to the extent that it may have suffered compensable damage as a Tenant or on account of such public taking, excluding any damages for the loss of its leasehold interest. 3 13. Paragraph Twenty-Second shall be deleted. 14. Paragraph Twenty-Seventh shall be modified to state the following at the end of this paragraph: "Notwithstanding the above, Landlord shall not be exculpated from liability resulting from interruption of utility services as set forth in the Ninth paragraph. 15. Paragraph 31st of Addendum "A" shall be modified to state that: Landlord and Tenant acknowledge that Tenant's percentage of the taxes and maintenance expenses equals 1.5% and 2.69% for insurance (collectively referred to as "TIM"), based on Tenant's percentage of the rentable square footage of the entire shopping center, which is subject to adjustment if the size of the premises is expanded or the size of the shopping center changes or upon Tenant's relocation to the new space as referenced in Paragraph 30th below. Landlord further represents that this percentage of the TIM charges in 1997 equaled $3.40 per square foot, excluding the management fee. This paragraph is further modified to add the following: That portion of any capital improvement in excess of $20,000.00 in any calendar year shall be amortized on a straight line basis over a period of five (5) years with interest on the unpaid balance at ten percent (10%) per year. Any capital improvement less than $20,000.00, or if any capital improvement is greater than $20,000.00, that portion which is less than $20,000.00 will be passed through on a pro rata basis to the tenants in the calendar year in which such expense is incurred by Landlord. Upon termination of this lease, Tenant's obligation to pay any unamortized portion of the amortized payments referred to above will cease. 16. Paragraph 32nd of Addendum "A" shall be modified to delete the following language in the first sentence: "and to obtain and pay for the cost of a dumpster to remove all trash from the leased premises." 17. Paragraph 35th of Addendum "A" is hereby modified to delete the following language in the last sentence: "or any of his patrons." 18. Paragraph 36th of Addendum "A" is hereby deleted and replaced with the following: It is understood and agreed that a late charge of 5% of the current month's rent will be paid by the Tenant should his rent not be postmarked or received by the Landlord on or before the tenth day of the month 4 for which the rent covers. A second late charge of 5% of the current month's rent will be paid by the Tenant if his rent is not postmarked or received by the Landlord on or before the twentieth day of the month for which the rent covers. 19. Paragraph 42nd of Addendum "A" is hereby modified to delete the words "up to 25%" in the last sentence and replace them with "the fair market value of the rentable space." This paragraph is also modified to add the following language to the end of this paragraph: "Notwithstanding the above, Tenant does not need the Landlord's consent or approval for the sale of Tenant's stock." 20. Paragraph 43rd of Addendum "A" is hereby deleted and replaced with the following: The parties warrant and represent that they have not dealt or negotiated with any real estate broker or sales person in connection with this Lease Agreement and that they shall indemnify and hold each other harmless from any costs, claims or damages successfully asserted by any other person or firm claiming to have negotiated or brought about this lease. 21. Paragraph 46th of Addendum "A" is hereby modified to state that the Tenant is obligated to keep the business open during normal banking hours. The third sentence of this paragraph is deleted and replaced with the following: "Further, should the premises be closed at any time for more than twenty (20) days, for any reason whether or not beyond the control of the Tenant, without the written approval of the Landlord, then in that event, the Landlord reserves the right to cancel this lease, and the sole obligation of the Landlord is to return any prorated rent if the Tenant had paid in advance. This right of cancellation shall not apply to interruption in Tenant's operation due to the relocation contemplated in Paragraph 64. 22. Paragraph 48th of Addendum "A" is hereby modified to add the following to the end of the paragraph: "Notwithstanding the above, Tenant may make any non-structural repairs to the interior of the leased premises without the consent of the Landlord, provided said repairs do not require the removal of any walls or barriers upon the termination of the lease. 23. Paragraph 50th of Addendum "A" is hereby modified to change the words, "thirty (30)" in the first and fourth line to "sixty (60)". 24. Paragraph 51st of Addendum "A" is hereby modified to delete the second sentence and replace it with the following: "If Tenant should fail or 5 refuse to commence and diligently proceed with its work promptly after the premises are ready for Tenant's improvements, Landlord, after 30 days' written notice and Tenant's continued failure to commence Tenant's improvements on the leased premises during said 30-day period, may complete Tenant's work at Tenant's expense or declare this lease cancelled and of no effect." 25. Paragraph 54th of Addendum "A" is hereby modified to add to the end of this paragraph the following language: ", except for armored motor company deliveries which may be delivered in the front of the building for security purposes." 26. Paragraph 59th of Addendum "A" is hereby deleted and replaced with the following: The Tenant agrees to instruct its employees to park to the rear of the premises whenever possible. For security purposes, however, some bank employees will be required to park in the front of the building in an area approved by Landlord (which approval will not be unreasonably withheld) and enter through the front of the building. 27. (deleted) 28. Paragraph 63rd of Addendum "A" shall be deleted and substituted with the following: 63rd - The Tenant is granted three (3) five (5) year options to renew the lease for the initial space under the same terms and conditions as set forth herein, except that the rent shall be increased as set forth below. The option period shall automatically commence five years from the commencement date of the above-referenced lease and terminate five years from the commencement date of the option period. If Tenant does not desire to renew the lease, Tenant must serve written notice by certified mail, return receipt requested, on the Landlord six months prior to the expiration date of the above lease. If notice is not received by such time, the lease will automatically renew. Landlord may void Tenant's option to renew this lease at its option if Tenant has not fulfilled completely and in a timely manner all terms and conditions of this lease. 6 The rent for the first five year option period shall be as follows: Year 1 - $24,344.04/yr. or $2,028.67/mo. Year 2 - $25,059.96/yr. or $2,088.33/mo. Year 3 - $25,776.00/yr. or $2,148.00/mo. Year 4 - $26,492.04/yr. or $2,207.67/mo. Year 5 - $27,207.96/yr. or $2,267.33/mo. The rent for the second five year option period shall be as follows: Year 1 - $28,281.96/yr. or $2,356.83/mo. Year 2 - $29,355.96/yr. or $2,446.33/mo. Year 3 - $30,429.96/yr. or $2,535.83/mo. Year 4 - $31,503.96/yr. or $2,625.33/mo. Year 5 - $32,577.96/yr. or $2,714.83/mo. The rent for the third five year option period shall be at the then fair market value (FMV) of the leased premises. If the parties cannot agree on the FMV or a mutually agreeable appraiser to determine same, each party at its own cost will then hire an appraiser and the FMV shall be determined by taking an average of the two appraisals provided the difference between the two is 10% or less. If the difference between the two appraisals is greater than 10%, then the two hired appraisers shall pick a third appraiser, and the FMV determined by the third appraiser shall be binding. The parties shall equally share the cost of the third appraiser. The rents for the option period shall be paid in one/twelve equal monthly installments due on the first of each month. Tenant agrees that the demised space is accepted during the renewal periods in "as is" condition. Tenant further understands that the above figures do not include the taxes, insurance and maintenance (TIM) reimbursements, as called for in Paragraph 31st of the above lease, which shall continue to be due and payable in addition to the rent. 30. Paragraph 64th of Addendum "A" is modified to delete the first paragraph and replace it with the following: 7 At any time during the first five years of the term of this lease not later 60 days after Tenant receives notice from Landlord ("Relocation Notice"), Tenant shall relocate out of its premises ("Relocation Date") and into substantially similar space but at an area of approximately 4,636 rental square feet ("New Space") in the "Egomatic" building (the "Building") located in Block 66, Lot 8, as shown on the official Tax Map of the Township of Hopewell, if Landlord obtains the necessary governmental approvals from any governmental authority having jurisdiction thereof to permit a bank use in the Building and make the improvements to the site pursuant to the approved site plan (the "Approvals"). However, Tenant acknowledges that Landlord has not guaranteed that the proposed entryways and stoplight off of Route 31 can or will be obtained by Landlord. Further, Tenant acknowledges that the location of the drive-through lanes may change if required by the Township or any other governmental authority having jurisdiction over the property during the approvals. Rent under the new leased premises shall commence on the ninetieth day following said Relocation Notice. Said relocation is contingent upon Tenant using good faith efforts to obtain all approvals from the office of the Comptroller of Currency for a branch bank site at the new location within sixty (60) days of receiving the Relocation Notice, time being of the essence. The following paragraph should be added to the end of Paragraph 64: The Tenant shall be entitled to two five (5) year options to renew following the ten year term of the new space under the same terms and conditions as set forth herein, except that the rent shall be increased as set forth below. If Tenant does not desire to renew the lease, Tenant must serve written notice by certified mail, return receipt requested, on the Landlord six months prior to the expiration date of the above lease. If notice is not received by such time, the lease will automatically renew. Landlord may void Tenant's option to renew this lease at its option if Tenant has not fulfilled completely and in a timely manner all terms and conditions of this lease. 8 The rent for the first year of the first option period if elected by Tenant shall increase $.75 per rentable square foot (RSF) in excess of the rent payable by Tenant during the tenth year of the term for the new space and each year thereafter shall increase by $.75 per RSF over the prior year's RSF rate. The rent for the second five year option period for the relocation premises shall be the then current fair market value (FMV) of the leased premises. If the parties cannot agree on the FMV or a mutually agreeable appraiser to determine same, each party will then hire an appraiser and the FMV shall be determined by taking an average of the two appraisals provided the difference between the two is 10% or less. If the difference between the two appraisals is greater than 10%, then the two hired appraisers shall pick a third appraiser, and the FMV determined by the third appraiser shall be binding. In the event the rent payable for the second option period has not been determined prior to the date the option period commences, then Tenant shall pay the rent in effect for the last lease year of the preceding term plus fifteen (15%) percent. Once the rent payable during the second option period has been determined, such rent shall be payable as of the date such option period commenced and an adjustment will be made in the amounts previously paid as of that date. If Tenant has overpaid its actual rent, Landlord will credit Tenant with such amounts towards subsequent rent due, of whatever nature. If Tenant has underpaid its actual rent, Tenant will pay Landlord the balance due within thirty (30) days of receipt of a bill for same. 31. Paragraph 66th of Addendum "A" is hereby modified to delete the last sentence and replace it with the following: If Landlord or Tenant fail to give such ninety (90) day written notice during the first ninety (90) days following the fifth year anniversary date of this lease, then Tenant's obligation to relocate will remain in full force and effect. 32. Paragraph 67 is modified to add after the words "at the Building are" in the fourth line the words "prior to the Termination Date not obtained or are". 9 33. The additional paragraphs on the attached Exhibit A shall be added to the lease. AGREED & ACCEPTED: HILTON REALTY CO. OF PRINCETON By: Jeffrey H. Sands --------------------------- Jeffrey H. Sands YARDVILLE NATIONAL BANK By: Patrick M. Ryan --------------------------- Patrick M. Ryan President/CEO 10 EXCLUSIVE USE. The Tenant covenants and agrees to use the demised premises as a bank only. Subject to the rights of other tenants under leases executed prior to the full execution of this Lease ("Prior Lease"), or any extensions or renewals of such Prior Lease or a new lease executed by a tenant in occupancy under an expired Prior Lease and specifically reserving the right of any current or future supermarket and/or convenience store occupant of the Shopping Center to have a banking facility during the initial term and any renewal term, provided Tenant is current under this Lease and not in default of any terms, conditions, covenants and provisions of this Lease beyond the applicable cure period, LANDLORD SHALL NOT LEASE TO ANY OTHER TENANT OR SUBTENANT ANY OTHER SPACE IN THE SHOPPING CENTER OR IN ANY OTHER PREMISES OWNED OR LEASED WITHIN A RADIUS OF ONE (1) MILE OF THE SHOPPING CENTER FOR THE PRIMARY OPERATION OF A BANK ("EXCLUSIVE USE"). Notwithstanding the foregoing, the above restriction/exclusive shall automatically become null and void in the event Tenant or anyone taking under Tenant ceases to use the Premises primarily for the Exclusive Use (eighty (80%) percent or more of Tenant's floor area of the Premises is devoted to the Exclusive Use). Tenant further agrees that this Exclusive Use shall not apply to any after acquired or leased property even within the one (1) mile radius restriction if same is purchased and/or leased with a bank use existing thereon at the time of the purchase and/or lease by Landlord in locations other than the Shopping Center as set forth on Addendum B. In the event of a breach by Landlord under the terms of this Section, Landlord and Tenant acknowledge and agree that Tenant does not have an adequate remedy at law for breach of this provision and that Tenant's sole remedy in lieu of any action at law including but not limited to damages or torts shall be limited to injunctive relief only and the Landlord and Tenant agree that should a suit be commenced by either party, the prevailing party will be reimbursed its legal fees, costs, etc., by the other party. ROOFTOP ANTENNA/SATELLITE DISH. Tenant, subject to the prior review and approval of the Landlord of plans and specifications for same, which approval shall not be unreasonably withheld, is permitted to install antenna/satellite dishes and related equipment on the roof of the building or on the site provided, however: 1. The Tenant shall comply with any and all governmental restrictions and regulations and obtain all necessary permits. 2. The Tenant agrees that the installation of the satellite dish will not pierce the roof in any fashion or be visible from the street and parking lot and that Tenant shall otherwise appropriately screen such equipment and materials from view. 3. Tenant agrees to the extent reasonably possible to connect the satellite dish to its meter servicing the demised premises. If the satellite cannot be connected to the same meter as the demised premises, Tenant agrees to the installation of a separate electrical meter or submeter to monitor the electrical uses of Tenant's equipment and agrees to pay to Landlord, upon demand, the charges of the utility company for such electrical service to Tenant's equipment. The cost and expense of installation of the meter shall be the responsibility of the Tenant. 4. Tenant understands and agrees that Landlord has previously signed leases with other tenants and further that Landlord cannot prohibit these existing tenants from placing any telecommunications antennae and/or related equipment on or about the property. Tenant shall take such actions as may reasonably be required in order to prevent interference by Tenant's equipment with other communications equipment installed on the roof by any other tenant or by Landlord. 5. Tenant agrees to have its satellite dish included under its current policy of insurance for the demised premises. Tenant shall indemnify, defend and save Landlord harmless from any and all cost, expense, claim, injury or liability in any way arising or relating to the installation, operation or removal of Tenant's equipment or cabling throughout the building, including, without limitation, expenses related to damage to the roof of the building, and claims, injury or damages of any other tenants in the building, their employees, agents and invitees except to the extent that same results from negligent acts or omissions of Landlord, its employees, agents and invitees. BANKING APPROVAL. Tenant is hereby granted an option to terminate the lease within sixty (60) days' of the full execution of the Lease by written notice to Landlord, TIME BEING MADE OF THE ESSENCE, (the "Effective Date") if Tenant fails to obtain all necessary approvals to operate a banking facility at the premises from the Office of the Comptroller of the Currency. If Tenant fails or elects not to terminate the Lease within such sixty (60) day period, Tenant's right to terminate the Lease set forth herein will be null and void. If Tenant gives Landlord such timely notice, the lease will be terminated as if said date were originally set forth in the lease as the termination date of the term therein. Except for third party claims accruing prior to the Effective Date, Landlord and Tenant will on the Effective Date remise, release and forever discharge each other and their respective heirs, executors, administrators, legal representatives, successors and assigns of and from all actions or causes of action, sums of money, acts, damages, judgments, claims, liability and demands whatsoever of every name and nature, in law or in equity which Landlord or Tenant can, will or may have, upon or by reason of any matter, cause or thing whatsoever, directly or indirectly, arising out of or connected in any way with the Lease or arising out of or in any way connected with the use and occupancy of the Premises; provided, however, that this shall not be deemed to release Tenant for sums due Landlord that accrued prior to the Effective Date under the terms of the Lease. The above obligations of Landlord and Tenant shall survive the surrender of the lease on the Effective Date. WALK-UP ATM. Landlord agrees to allow the Tenant to install a walk-up ATM machine on the exterior of the leased premises provided Tenant, at its cost, obtains all governmental approvals and necessary permits for same. The design and location of which are subject to Landlord's approval, not to be unreasonably withheld, however, the ATM machine must be flush with the front of the building and Tenant will remove one glass windowpane to insert the ATM flush with the building. Further, the Tenant will replace the windowpane when it relocates to the other building or at the expiration or earlier termination of the Lease. Tenant shall be responsible for repairing any damage or defect created in the premises resulting from the installation of said ATM machine. 2 EX-10.2 3 EXHIBIT 10.2 YARDVILLE NATIONAL BANCORP 1994 STOCK OPTION PLAN 1. Purposes of Plan. This 1994 Stock Option Plan (the "Plan") is designed to assist Yardville National Bancorp (the "Company") in attracting and retaining highly qualified persons as non-employee directors of the Board of Directors of the company and to provide such directors with incentives to contribute to the growth and development of the business of the Company. This Plan will effected through the granting of stock options on the terms and conditions hereinafter provided, which options are not intended to qualify as "incentive stock options: within the meaning of section 422 of the Internal Revenue Code of 1986, as amended. 2. Definitions. Unless the context otherwise indicates the following terms have the following meanings: "Board" - means the Board of Directors of the Company. "Code" - means the Internal Revenue Code of 1986, as the same may from time to time be amended. "Committee" - means the Committee referred to in Section 4 hereof. "Common Stock" - means the Common Stock, no par value, of the Company. "Designated Beneficiary" - means the person designated by an optionee to be entitled on his death to any remaining rights arising out of an option, such designation to be made in accordance with such regulations as the Committee may implement from time to time. "Director" - means a non-employee member of the Board. "Fair Market Value" - means the fair market value of Common Stock as determined by the Committee in a manner consistent with the Code and any regulations thereunder. "Stock Option Agreement" - means a stock option agreement entered into pursuant to the Plan substantially in the form of Exhibit A hereto. 3. Stock Subject to Plan. The shares to be issued upon exercise of the options granted under the Plan shall be Common Stock. The maximum number of shares of Common Stock for which options may be granted under the Plan shall be 105,600 shares (subject to adjustment as provided in section 8 hereof). The Common Stock to be issued upon exercise of the options may be authorized but unissued shares or treasury shares, as determined from time to time by the Committee. If any option granted under the Plan expires or terminates for any reason whatsoever without having been exercised in full, the unpurchased shares of Common Stock previously subject to such option shall become available for new options. 4. Administration. (a) The Plan shall be administered by a Stock Option Committee of not less than two directors who are not eligible for options under this Plan. The Board shall annually appoint the members of the Stock Option Committee at the annual meeting of the Board. (b) The Board shall fill all vacancies on the Committee and may remove any member of the Committee and may remove any member of the Committee at any time with or without cause. The Committee shall select its own chairman and shall adopt, after or repeal such rules and procedures as it may deem proper and shall hold its meetings at such times and places as it may determine. The Committee shall keep minutes of its meetings. Action by a majority of the Committee members present at any meeting at which a quorum is present or action approved in writing by all members of the Committee without a meeting, shall constitute the acts of the Committee. (c) Subject to the provisions of the Plan, the Committee shall have the full and final authority to (I) determine the Directors to whom, and the times at which, options shall be granted and the number of shares subject to each option; (ii) prescribe, amend and rescind rules and regulations relating to the Plan; (iii) determine the provisions of options granted under the Plan (which need not be identical) and, with the consent of the holder thereof, amend or modify any option; (iv) interpret the Plan and the respective options; and (v) make all other determinations necessary or advisable for administering the Plan. All determinations and interpretations by the Committee shall be binding upon all parties. No member of the Committee or the Board shall be liable for any action or determination made in good faith in respect of the Plan or any option granted under it. (c) The provisions of this Section 4 shall survive any termination of the Plan. 5. Eligibility for Award of Options. (a) Options may be granted only to members of the Board who are not employees of the Company (i.e. "Directors"). (b) More than one option may be granted to any eligible Director. 2 6. Option Price. (a) The purchase price of the Common Stock under each option shall be determined by the Committee. The purchase price shall be at least 100% of the fair market value of the Common Stock on the date of grant of the option. (b) It is anticipated that the purchase price of the Common Stock under the option will be 100% of the fair market value. The fair market value is expected to be the price most recently quoted by the market makers in the Common Stock. If there is no asked quotation, the fair market value is expected to be the bid quotation. If there is both a bid and asked quotation, the fair market value is expected to be the average of the bid and asked quotations. This paragraph shall not be binding upon the Committee. The Committee in its discretion may issue stock options with a purchase price in excess of the fair market value and may utilize a different measure of the fair market value than that set forth here. 7. Terms and Exercise of Option. (a) Maximum 10-Year Termination Date. Each option shall expire no later than 10 years after the date on which it is granted, but the Committee in its discretion may prescribe a shorter period for any individual option or options. The date of termination pursuant to this paragraph is referred to hereinafter as the "termination date of the option." (b) Vesting. (i) Options shall be exercisable at such times and in such installments, if any, as the Committee may determine. In the event any option is exercisable in installments, any shares which may be purchased during any year or other period which are not purchased during such year or other period may be purchased at any time or from time to time during any subsequent year or period during the term of the option unless otherwise provided in the Stock Option Agreement. (ii) While the Committee may set any vesting schedule which it wishes, it is the expectation of the Board in adopting this Plan that the options vest during a period of up to five years after the date of grant. For example, the Committee may provide that only 25% of the shares granted under the option may be purchased during the first year after the date of grant, an additional 25% of the shares may be purchased commencing two years after the date of grant, an additional 25% of the shares may be purchased at any time three years after the date of grant and 100% of the stock may be purchased only four years after the date of the grant. (iii) In connection with any proposed sale or conveyance of all or substantially all of the assets of the company or of any proposed consolidation or merger of the Company or of any proposed change in control of the Company or recently accomplished change in control of the Company, the Board in its discretion may accelerate the vesting schedule of any or all options and may immediately vest 100% of any or all options. In the event the Board determines to accelerate the vesting schedule, it shall notify each holder of an option whose vesting schedule has been accelerated. 3 (c) Means of Exercise of Option. An option shall be exercised by written notice to the Secretary or Treasurer of the Company at its then principal office. The notice shall specify the number of shares as to which the option is being exercised and shall be accompanied by payment in full of the Common Stock already owned, with a fair market value (on the date of exercise) equal to the purchase price for such shares. An optionee at his discretion may, in lieu of cash payment, deliver Common Stock already owned, with a fair market value (on the date of exercise) equal to the purchase option. The fair market value of such Common Stock shall be determined by the Committee in accordance with Section 6(b) hereof. In the event an option is being exercised in whole or in part, pursuant to section 7(f) or (g) hereof by any person other than the optionee, a notice of election shall be accompanied by proof satisfactory to the Company of the rights of such person to exercise said option. An optionee shall not, by virtue of the granting of an option be entitled to any rights of a shareholder in the Company and he shall not be considered a record holder of shares purchased by him until the date on which he is recorded as the holder of such shares upon the stock records of the Company. The Company shall not be required to pay to the person exercising the option the cash equivalent of any fractional interest unless so determined by the Committee. (d) Options are Non-Transferable. No option may be transferred by the optionee (except in connection with death or disability as provided in sections 7(f) and (g)). (e) Options Lapse 3 Months After Termination of Employment. In the event an optionee ceases to be a Director at any time for any reason (excluding disability or death), his option and all rights thereunder shall be exercisable by him at any time within three months thereafter but only to the extent exercisable by him on the date of termination of his employment and in no event later than the termination date of the option. (f) Option Exercisable 12 Months After Termination in Event of Disability. In the event a Director is permanently and totally disabled (within the meaning of Section 105(d)(4), or any successor section, of the Code) his option and all rights thereunder shall be exercisable by him (or his legal representative) at any time within 12 months of his termination of employment, but in no event later than the termination date of the option. (g) Option Exercisable 12 Months After Date of Death. If an optionee dies while a Director, his option may be exercised by his Designated Beneficiary (or if none have been effectively designated, by his executor, administrator or the person to whom his rights under his option shall pass by his will or by the laws of descent and distribution) at any time within 12 months after the date of his death, but only to the extent exercisable by the optionee at his death and option may not be exercised later than the termination date of the option. (h) Options Must Be Evidenced by Writing. Each Option granted pursuant to the Plan shall be evidenced by a written Stock Option agreement, duly executed by the Company and the optionee, in such form and containing such provisions as the Committee or Board may from time to time authorize or approve. 4 8. Adjustments. The Stock Option Agreement shall contain appropriate provisions for the adjustment of the kind and number of shares subject to each outstanding option in the event of any changes in the outstanding Common Stock of the Company by reason of stock dividends, stock splits, recapitalizations, reorganizations, mergers, consolidations, combinations or exchanges of shares, and the like. In the event of any such change or changes in the outstanding Common Stock, and as often as the same shall occur, the kind and aggregate number of shares available under the Plan shall be appropriately adjusted by the Committee or Board, whose determination shall be binding and conclusive. 9. Amendment and Termination. (a) Except as otherwise hereinafter provided, no alteration, suspension or termination of the Plan may, without the consent of the Director to whom any option shall have theretofore been granted (or the person or persons entitled to exercise such option under section 7(f) or (g) of the Plan), terminate his option or adversely affect his rights thereunder. (b) Anything herein to the contrary notwithstanding, in the event that the Board at any time declares it advisable to do so in connection with any proposed sale or conveyance of all or substantially all of the assets of the Company or of any proposed consolidation or merger of the Company, the Company may give written notice to the holder of any option that his option may be exercised only within 30 days after the date of such notice but not thereafter, and all rights under said option which shall not have been so exercised shall terminate at the expiration of such 30 days, provided that the proposed sale, conveyance, consolidation or merger to which such notices shall relate is consummated within 6 months after the date of such notice. In the event such notice has been given, any such option may be exercised either in whole or in part notwithstanding the vesting period required under the terms of the option for the exercise thereof. If such proposed sale, conveyance, consolidation or merger is not consummated within the said time period, no unexercised rights under any option shall be affected by such notice except that such option may not be exercised between the date of expiration of such 30 days and the date of the expiration of such 6 months. 10. Indemnification. Any member of the Committee or the Board who is made, or threatened to be made, a party to any action or proceeding, whether civil or criminal, by reason of the fact that he is or was a member of the Committee or the Board insofar as relates to the Plan shall be indemnified by the Company, and the Company, may advance his related expenses, to the full extent permitted by law and/or the Bylaws of the Company. 11. Effective Date of the Plan. The Plan shall become effective on, and options may be granted thereunder after April 27, 1994. 12. Expenses. The Company shall pay all fees and expenses incurred in connection with the establishment and administration of the Plan. 5 13. Government Regulations, Registration and Listing of Stock. (a) The Plan, and the grant and exercise of options thereunder, and the Company's obligation to sell and deliver stock under such options, shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any regulatory or governmental agency as may be required. (b) Unless a registration statement under the Securities Act of 1933 and the applicable rules and regulations thereunder (collectively the "Act") is then in effect with respect to shares issued upon exercise of any option (which registration shall not be required), the Company shall require that the offer and sale of such shares be exempt from the registration provisions of the said Act. In furtherance of such exemption, the Company may require, as a condition precedent to the exercise of any option, that the person exercising the option give to the Company a written representation and undertaking, satisfactory in form and substance to the Company, that his is acquiring the shares for his own account for investment and not with a view to the distribution or resale thereof and otherwise establish to the company's satisfaction that the offer or sale of the shares issuable upon exercise of the option will not constitute or result in any breach or violation of the Act or any similar state act or statute or any rules or regulations thereunder. In the event a Registration Statement under the Act is not then in effect with respect to the shares of Common Stock issued upon exercise of an option, the Company shall place upon any stock certificate an appropriate legend referring to the restrictions on disposition under the Act. (c) In the event the class of shares issuable upon the exercise of any option is listed on any national securities exchange, the Company shall not be required to issue or deliver any certificate for shares upon the exercise of any option prior to the listing of the shares so issuable on such national securities exchange and prior to the registration of the same under the Securities Exchange Act of 1934 or any similar act or statute. As Amended and Approved by The Yardville National Bancorp Board of Directors, February, 1998. 6 EX-27 4
9 3-MOS DEC-31-1998 MAR-31-1998 24,265 4,122 16,998 0 151,330 26,099 26,076 409,094 5,902 655,092 451,776 145,646 6,233 11,500 0 0 20,249 19,688 39,937 8,748 2,819 124 11,691 4,229 6,412 5,279 400 17 3,504 2,063 2,063 0 0 1,334 0.26 0.26 7.99 5,069 4,100 969 0 5,570 85 17 5,902 5,902 0 0
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