-----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, Mju+lDNcaYRc7EHlAeeLvXDzNkyliRNzHYi1pu9g8WczFf2daJ39Zk9laySQ7X6D wSZ8VWqU5wr3yNPNVWPasQ== 0000950116-02-002329.txt : 20021015 0000950116-02-002329.hdr.sgml : 20021014 20021015172942 ACCESSION NUMBER: 0000950116-02-002329 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20021015 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: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-99269 FILM NUMBER: 02789808 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 S-3/A 1 s-3a.txt FORM S-3/A As filed with the Securities and Exchange Commission on October 15, 2002 Registration Number 333-99269 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------------- Amendment No. 1 to FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------------------- YARDVILLE NATIONAL BANCORP (Exact Name of Registrant as Specified in its Charter) NEW JERSEY 22-2670267 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) 2465 Kuser Road Hamilton, New Jersey 08690 (609) 585-5100 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Patrick M. Ryan President and Chief Executive Officer Yardville National Bancorp 2465 Kuser Road Hamilton, New Jersey 08690 (609) 585-5100 (Name, address, including zip code, and telephone number, including area code, of agent for service) With copies to: J. Bradley Boericke, Esquire Joanne R. Soslow, Esquire Steven J. Feder, Esquire Morgan, Lewis & Bockius LLP Pepper Hamilton LLP 1701 Market Street 3000 Two Logan Square Philadelphia, PA 19103 18th and Arch Streets (215) 963-5000 Philadelphia, PA 19103 (215) 981-4000 Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, check the following box. / / If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 (the "Securities Act"), other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. / / If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / ----------------------------- The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine. The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED OCTOBER __, 2002 PROSPECTUS 1,500,000 Shares [YNB LOGO] Common Stock We are selling shares of our common stock. Our common stock is listed on the Nasdaq National Market under the symbol "YANB." On October ____, 2002, the last sale price of our common stock as reported by the Nasdaq National Market was $___ per share. Investing in our common stock involves significant risks. You should read the "Risk Factors" section beginning on page 8 before investing. Neither the Securities and Exchange Commission nor any state securities commission or regulatory body has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. These securities are not deposits or accounts or obligations of any bank and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency. Per Share Total --------- -------- Public offering price .................................. $_______ $_______ Underwriting discount .................................. $_______ $_______ Proceeds, before expenses, to Yardville National Bancorp............................................... $_______ $_______ We have granted to the underwriters, Legg Mason Wood Walker, Incorporated and Sandler O'Neill & Partners, L.P., a 30-day option to purchase up to 225,000 additional shares to cover over-allotments, if any. The underwriters expect to deliver the shares on or about _______, 2002, subject to customary closing conditions. Legg Mason Wood Walker Sandler O'Neill & Partners, L.P. Incorporated The date of this Prospectus is _______, 2002 Existing branch locations Branch location expected to open in 2002 (MAP OMITTED) Corporate headquarters and branch Regional headquarters and branch Operations center (MAP OMITTED) YNB LOGO TABLE OF CONTENTS Page ---- ABOUT THIS PROSPECTUS ................................................... i PROSPECTUS SUMMARY ...................................................... 1 RISK FACTORS ............................................................ 8 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS ............... 12 USE OF PROCEEDS ......................................................... 13 MARKET FOR COMMON STOCK AND DIVIDENDS ................................... 13 CAPITALIZATION .......................................................... 14 MANAGEMENT .............................................................. 15 STOCK OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS ................ 17 DESCRIPTION OF CAPITAL STOCK ............................................ 19 UNDERWRITING ............................................................ 22 LEGAL MATTERS ........................................................... 24 EXPERTS ................................................................. 24 WHERE YOU CAN FIND MORE INFORMATION ..................................... 25 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ......................... 25 ABOUT THIS PROSPECTUS You should rely only on the information contained in this prospectus or incorporated by reference into this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of common stock. Unless otherwise indicated, all information in this prospectus assumes that the underwriters will not exercise their option to purchase additional shares of common stock to cover over-allotments. We sometimes refer to The Yardville National Bank as the "Bank." To understand this offering fully, you should read this entire document carefully, including particularly the "Risk Factors" section, as well as the documents identified in the section titled "Where You Can Find More Information." i PROSPECTUS SUMMARY This summary highlights information contained elsewhere in, or incorporated by reference into, this prospectus. Because this is a summary, it may not contain all of the information that is important to you. Therefore, you also should read carefully the more detailed information set forth in this prospectus, our financial statements and the other information that is included in this prospectus or incorporated by reference in this prospectus, before making a decision to invest in our common stock. Our Company We are a registered financial holding company headquartered in Mercer County, New Jersey with total assets of $2.1 billion, total deposits of $1.2 billion and total stockholders' equity of $103.8 million at June 30, 2002. We conduct a general commercial and retail banking business through our principal operating subsidiary, The Yardville National Bank, which commenced operations as a commercial bank in 1925. We provide a broad range of lending, deposit and other financial products and services with an emphasis on commercial real estate and commercial and industrial lending to small to mid-sized businesses and individuals. Our existing and target markets are located in the corridor between New York City and Philadelphia. We currently operate 18 full-service branches, including 13 branches in our primary market of Mercer County, where we have the largest bank and thrift deposit market share of any New Jersey based financial or bank holding company of 13.0%. As part of our expansion strategy, we have opened three branches in Hunterdon County, New Jersey, one branch in Burlington County, New Jersey and one branch in Bucks County, Pennsylvania. From December 31, 1997 to June 30, 2002, we achieved substantial growth without any acquisitions, while improving our asset quality: o We increased our total loans from $385.8 million to $1.1 billion for a 25.5% compound annual growth rate; o Our ratio of nonperforming assets to total loans and other real estate owned decreased from 2.18% to 0.68%; o We increased our total assets from $614.7 million to $2.1 billion; and o We doubled our branch network from nine branches to 18 branches. Due to consolidation, we continue to see opportunities to grow our asset base both in our existing markets and by expanding into contiguous markets in New Jersey and Pennsylvania. We believe these regions have customers with banking needs that can no longer be adequately served by smaller local institutions but who still desire the personalized service that larger institutions typically do not offer. We believe that the key differentiating factors between us and our larger competitors are our philosophy of relationship banking and our in-market expertise, while our ability to enter into larger loan relationships enables us to effectively compete against smaller institutions. Key Operating Strengths We believe the following operating strengths set us apart from our competitors and position us for further growth: o Relationship Banking. We target small to mid-sized businesses and individuals that value long-term banking relationships and personal service. Our senior managers directly interact with our customers, strengthening our ability to develop long-term relationships, maintain high quality service and respond quickly to customer needs. This senior level approach to serving and understanding our customers' needs enables us to personalize our products and services. We believe the continued 1 consolidation of national and regional banks in our existing and target markets has increased the opportunities for us to attract customers with our relationship banking approach. o Loan Growth. Historically, we have emphasized making commercial real estate and commercial and industrial loans to small to mid-sized businesses and individuals. Our commercial loan portfolio has grown from $255.2 million at December 31, 1997 to $823.8 million at June 30, 2002. By establishing our niche as a strong commercial lender and expanding geographically, we have taken advantage of consolidation in our markets to increase commercial loan volume solely through internal growth. At June 30, 2002, 76.8% of our loans were commercial real estate and commercial and industrial loans. o Asset Quality. We have successfully grown our loan portfolio while at the same time maintaining high credit quality. Our significant lending experience and our hands-on, collateral based approach to developing and managing our commercial lending relationships has resulted in low levels of nonperforming assets and net charge-offs. o The ratio of annualized net loan charge-offs as a percent of average total loans was 0.01% for the six months ended June 30, 2002 and has averaged 0.18% for the five year period ended December 31, 2001. o The ratio of nonperforming assets to total assets was 0.35% at June 30, 2002, and has averaged 0.80% for the five year period ended December 31, 2001 (based on the ratios at year end). o The ratio of nonperforming loans to total loans was 0.57% at June 30, 2002 and has averaged 0.80% for the five year period ended December 31, 2001 (based on the ratios at year end). o The ratio of allowance for loan losses to nonperforming loans was 247.75% at June 30, 2002 and has averaged 198.10% for the five year period ended December 31, 2001 (based on the ratios at year end). o In-Market Expertise. We believe our management team has the leadership and experience to enable us to compete effectively. Our commercial lending officers have an average of over 20 years of commercial banking experience. We hire talented and experienced local bankers who understand their communities and are given the flexibility to make decisions. We have maintained strong community relationships by, among other things, supporting the active participation of our employees in local charitable, civic, school, religious and community development activities. Members of our business development board are local business leaders with significant ties to the communities we serve who, in addition to our experienced loan officers, provide insight and guidance for our business development strategies. o Competitive Position. We were ranked 4th in our primary market of Mercer County with a bank and thrift deposit market share of 13.0% according to FDIC rankings dated June 30, 2001. Both Mercer County, where the majority of our business currently is generated, and Hunterdon County, where we have most recently focused our expansion efforts, have higher household incomes than the national average. We believe that the strength of our markets, our relationship banking philosophy and our experienced management team, combined with industry consolidation, provide us with continued opportunities to expand our market share. Retail Strategy Our goals are to further develop the earnings power and increase the value of our franchise. In order to achieve these goals, we plan to reduce our cost of funds and increase our non-interest income by attracting lower cost transaction and other core deposit accounts. Specifically, we are implementing our retail strategy by expanding our branch network, enhancing our brand image and upgrading our technology infrastructure. However, we can make no assurances that we will achieve these goals. 2 o Branch Expansion. We have opened eight new branches since 1999, including our first branches in Burlington County, Hunterdon County and Bucks County. Our focus has been expansion in Mercer County and Hunterdon County, and we intend to continue our expansion in these counties. We also plan to add branches in contiguous counties. For example, we recently received regulatory approval for a branch in Middlesex County, New Jersey and expect to open this branch by the end of 2002. We currently have strong business relationships in Middlesex County, and we believe this new branch will help us capture the lower cost deposit and fee-based business of these customers and attract new customers. We believe our relationship-oriented approach to community banking fills a void left by the consolidation of the financial services industry in these markets. We believe our branch expansion will strengthen our retail position in our markets, helping to accelerate deposit growth. In addition, from time to time, we may explore opportunities to expand through acquisitions. Currently, we have no understanding, agreement or definitive plans relating to any specific acquisitions. o Brand Image. While we historically have focused on commercial lending, we intend to strengthen our retail brand image in our markets. We believe expanding our branch network and upgrading our current facilities, while delivering personalized community banking services, will develop our retail brand image as a local bank for local businesses and individuals. We also plan to expand our marketing efforts to increase awareness of our broad range of products and services. We believe these improvements to our brand image will increase customer loyalty, attract new customers and improve the profitability of our business. o Technological Improvements. As we have grown, we have continued to strengthen our technological capabilities. By the end of 2002, we intend to complete an upgrade of our technological infrastructure so that we can improve service to existing customers and support the internal demands of our growing franchise. Our new systems will enhance our capabilities to provide financial products and services such as internet banking, including bill payment and cash management, and will enhance our ability to provide quicker service, faster updating of account statements and other detailed information to our customers. Our new systems will strengthen our internal reporting and management information systems to provide senior management access to more timely and detailed data on our operations. Further, our new systems will have the capacity to support significant growth, which we believe will enable us to continue to develop our retail banking franchise. Portfolio Management We manage a portion of our investment portfolio with the primary objective of enhancing return on equity and earnings per share. We refer to this as our Investment Growth Strategy. The income generated from this Investment Growth Strategy has offset the costs associated with the growth of our infrastructure and enhanced total net interest income. In connection with the Investment Growth Strategy, we utilize asset liability simulation models to analyze risk and reward relationships in different interest rate environments based on the composition of investments in the portfolio and our overall interest rate risk position. The Investment Growth Strategy includes United States agency mortgage backed securities and bonds, which are funded through Federal Home Loan Bank advances and other borrowings. While the Investment Growth Strategy has minimal credit risk, it does increase our overall interest rate risk. The amount of securities managed in the Investment Growth Strategy totaled $362.7 million at June 30, 2002, or 17.1% of our total assets, and we have capped it at $380.0 million for 2002. We believe the Investment Growth Strategy, as a percentage of our total assets, will decline over time as our asset base continues to grow and the Investment Growth Strategy remains capped. 3 Market Area We have existing and targeted markets in Central New Jersey and Eastern Pennsylvania. Our primary market of Mercer County ranks 6th among the 21 counties in New Jersey with an average household income of $91,269. Hunterdon County, where we have opened three branches since November 2000, including two branches in 2002, ranks 3rd among counties in New Jersey with an average household income of $118,670. Burlington County, where we opened a branch in 2001, ranks 11th among counties in New Jersey with an average household income of $76,879. Bucks County, where we opened a branch in 1999, with an average household income of $83,501 ranks 3rd among the 67 counties in Pennsylvania. We have recently received regulatory approval to open our first branch in Middlesex County, which ranks 8th among counties in New Jersey with an average household income of $86,109. We also have targeted Somerset County, which ranks 1st among counties in New Jersey with an average household income of $124,337. All of these markets currently exceed the national average household income of $64,338. All market data and rankings are as of June 30, 2002. Our principal and executive offices are located at 2465 Kuser Road, Hamilton, New Jersey 08690. Our telephone number is (609) 585-5100 and our website address is www.yanb.com. 4 The Offering
Common Stock Offered................................................... 1,500,000 shares Common Stock Outstanding After the Offering ......................................................... 9,576,343 shares Use of Proceeds........................................................ We intend to use the net proceeds from this offering for general corporate and working capital purposes. Promptly following this offering, we intend to contribute substantially all of the net proceeds to the Bank. Dividends.............................................................. Our annualized dividend over the past four quarters has been $0.44 per share. Nasdaq National Market Symbol.......................................... YANB
The number of shares of common stock offered assumes the underwriters' over- allotment option is not exercised. If the over-allotment option is exercised in full, we will offer, issue and sell an additional 225,000 shares, and the common stock outstanding after this offering will be 9,801,343 shares. In addition, the number of shares outstanding after this offering excludes 1,117,430 shares reserved for issuance under our stock option plans (of which options to purchase 977,280 shares at an average option price of $13.50 were outstanding at June 30, 2002), 68,500 shares reserved for issuance upon exercise of outstanding stock warrants exercisable at a price of $12.00 per share, which expire on June 23, 2010, and 172,000 shares held in our treasury. 5 Financial Summary The following table sets forth certain historical financial data of YNB and its subsidiaries on a consolidated basis. This table should be read in conjunction with our historical consolidated financial statements and related notes.
At or For the Six Months Ended June 30, At or For the Year Ended December 31, ----------------------- ------------------------------------------------------------ 2002 2001 2001 2000 1999 1998 1997 ---------- ---------- ---------- ---------- ---------- -------- -------- (in thousands, except per share data and ratios) Statement of Income: Interest income....................... $ 58,790 $ 59,358 $ 118,948 $ 100,389 $ 69,719 $ 50,923 $ 40,768 Interest expense...................... 36,554 41,373 82,813 62,654 39,645 28,392 21,100 ---------- ---------- ---------- ---------- ---------- -------- -------- Net interest income................... 22,236 17,985 36,135 37,735 30,074 22,531 19,668 Provision for loan losses............. 1,625 1,575 3,925 3,700 3,175 1,975 1,125 Securities gains (losses), net........ 1,626 1,128 3,182 46 (301) 151 24 Other non-interest income............. 2,594 2,352 4,855 3,380 3,066 2,851 2,520 Non-interest expense.................. 15,125 12,947 26,835 22,861 18,457 15,337 13,341 ---------- ---------- ---------- ---------- ---------- -------- -------- Income before income tax expense and extraordinary item .............. 9,706 6,943 13,412 14,600 11,207 8,221 7,746 Income tax expense.................... 2,679 1,815 3,395 4,259 3,187 2,639 2,740 ---------- ---------- ---------- ---------- ---------- -------- -------- Income before extraordinary item...... 7,027 5,128 10,017 10,341 8,020 5,582 5,006 Extraordinary loss on early retirement of debt, net of tax benefit ......... - - (1,464) - - - - ---------- ---------- ---------- ---------- ---------- -------- -------- Net income............................ $ 7,027 $ 5,128 $ 8,553 $ 10,341 $ 8,020 $ 5,582 $ 5,006 ========== ========== ========== ========== ========== ======== ======== Balance Sheet: Assets................................ $2,119,795 $1,754,259 $1,943,389 $1,619,312 $1,123,598 $757,666 $614,686 Loans................................. 1,073,070 882,811 1,007,973 818,289 646,737 491,649 385,751 Securities............................ 858,052 751,957 812,236 675,638 417,465 221,688 186,636 Deposits.............................. 1,219,529 952,218 1,092,690 950,318 743,807 519,643 422,944 Borrowed funds........................ 746,825 667,127 707,113 545,223 298,689 177,888 134,316 Stockholders' equity.................. 103,767 82,230 93,245 78,237 58,825 40,756 39,745 Allowance for loan losses............. 15,098 11,449 13,542 10,934 8,965 6,768 5,570 Per Share Data (1): Basic earnings per share Income before extraordinary item...... $ 0.88 $ 0.69 $ 1.32 $ 1.47 $ 1.33 $ 1.11 $ 0.99 Extraordinary loss, net of tax benefit - - (0.19) - - - - ---------- ---------- ---------- ---------- ---------- -------- -------- Net income............................ $ 0.88 $ 0.69 $ 1.13 $ 1.47 $ 1.33 $ 1.11 $ 0.99 ========== ========== ========== ========== ========== ======== ======== Diluted earnings per share Income before extraordinary item...... $ 0.86 $ 0.69 $ 1.30 $ 1.47 $ 1.33 $ 1.10 $ 0.98 Extraordinary loss, net of tax benefit.............................. - - (0.19) - - - - ---------- ---------- ---------- ---------- ---------- -------- -------- Net income............................ $ 0.86 $ 0.69 $ 1.11 $ 1.47 $ 1.33 $ 1.10 $ 0.98 ========== ========== ========== ========== ========== ======== ======== Cash dividends........................ $ 0.22 $ 0.22 $ 0.44 $ 0.40 $ 0.34 $ 0.29 $ 0.24 Stockholders' equity (tangible book value) .............................. 12.90 11.14 11.68 10.64 8.88 8.20 7.82 Other Share Data (1): Average shares outstanding - basic.... 8,018 7,384 7,601 7,022 6,015 5,017 5,052 Average shares outstanding - diluted.. 8,170 7,460 7,678 7,039 6,041 5,059 5,117 Period end shares outstanding......... 8,076 7,446 8,043 7,445 6,746 4,968 5,082 Financial Ratios: Return on average assets.............. 0.70% 0.61% 0.48% 0.79% 0.83% 0.82% 0.93% Return on average stockholders' equity 14.41 12.66 9.86 15.64 15.34 13.96 13.32 Net interest margin FTE (2)........... 2.35 2.28 2.17 3.07 3.33 3.55 3.95 Efficiency ratio (3).................. 57.17 60.32 60.75 55.54 56.20 60.07 60.06 Total loans to total assets........... 50.62 50.32 51.87 50.53 57.56 64.89 62.76 (See footnotes on following page)
6
At or For the Six Months Ended June 30, At or For the Year Ended December 31, ------------------------ ---------------------------------------------- 2002 2001 2001 2000 1999 1998 1997 ------ ------ ------ ------ ------ ------ ------ (in thousands, except per share data and ratios) Capital Ratios: Average stockholders equity to average assets ................................ 4.84% 4.79% 4.85% 5.05% 5.39% 5.84% 7.00% Dividend payout ratio .......................... 24.19 31.20 39.06 27.46 25.40 25.96 24.63 Tier 1 leverage ratio (4) ...................... 6.52 6.67 6.92 8.13 7.90 7.68 9.53 Tier 1 capital as a percentage of risk-weighted assets .......................... 10.04 10.39 10.03 10.56 10.26 9.91 12.24 Total capital as a percentage of risk-weighted assets .......................... 11.16 11.90 11.25 11.65 11.46 11.17 13.49 Asset Quality Ratios: Allowance for loan losses to total loans. ...... 1.41% 1.30% 1.34% 1.34% 1.39% 1.38% 1.44% Net loan charge offs to average total loans ......................................... 0.01 0.25 0.15 0.24 0.17 0.18 0.14 Nonperforming loans (5) to total loans ......................................... 0.57 0.60 0.51 0.86 0.48 0.79 1.38 Nonperforming assets (6) to total loans and other real estate owned ............. 0.68 0.92 0.74 1.11 0.87 1.78 2.18 Nonperforming assets (6) to total assets ........................................ 0.35 0.47 0.38 0.56 0.50 1.17 1.38 Allowance for loan losses to nonperforming assets .......................... 205.39 140.25 181.67 120.50 158.31 76.65 65.64 Allowance for loan losses to nonperforming loans (5) ....................... 247.75 215.69 264.23 155.47 291.26 174.75 104.80
- --------------- (1) All share and per share data have been restated to reflect the 2.5% stock dividend declared in March 1998 and the two-for-one stock split effected in the form of a stock dividend declared in December 1997. (2) Tax equivalent based on a 34% Federal tax rate for all periods presented (FTE = Federal tax equivalent basis). (3) Efficiency ratio is equal to non-interest expense divided by the sum of the net interest income and non-interest income. (4) Tier 1 leverage ratio is Tier 1 capital to average assets. (5) Nonperforming loans include nonaccrual loans, restructured loans and loans 90 days past due or greater and still accruing. (6) Nonperforming assets include nonperforming loans and other real estate owned. 7 RISK FACTORS You should carefully consider the risk factors listed below. These risk factors may cause our future earnings or our financial condition to be less favorable than we expect. This list includes only the risk factors that we believe are most important and is not a complete list of risks. Other risks may be significant, and the risks listed below may affect us to a greater extent than indicated. You should read this section together with the other information in this prospectus and the documents that are incorporated into this prospectus by reference. We may not be able to continue to grow our business, which may adversely impact our results of operations. During the last five years, our total assets have grown substantially from $614.7 million at December 31, 1997 to $2.1 billion at June 30, 2002. Our business strategy calls for continued expansion, but we do not anticipate growth to continue at this rate. Our ability to continue to grow depends, in part, upon our ability to open new branch locations, successfully attract deposits to existing and new branches and identify favorable loan and investment opportunities. In the event that we do not continue to grow, our results of operations could be adversely impacted. We may not be able to manage our growth, which may adversely impact our financial results. As part of our expansion strategy, we plan to open new branches in our existing and target markets. However, we may be unable to identify attractive locations on terms favorable to us or to hire qualified management to operate the new branches, and the organizational and overhead costs may be greater than we anticipated. In addition, we may not be able to obtain the regulatory approvals necessary to open new branches. The new branches may take longer than expected to reach profitability, and we cannot assure you they will become profitable. The additional costs of starting new branches may adversely impact our financial results. Our ability to manage growth successfully will depend on whether we can continue to fund this growth while maintaining cost controls and asset quality, as well as on factors beyond our control, such as national and regional economic conditions and interest rate trends. If we are not able to control costs and maintain asset quality, such growth could adversely impact our earnings and financial condition. Loss of our key personnel or an inability to hire and retain qualified personnel could adversely affect our business. Our future operating results are substantially dependent on the continued service of Patrick M. Ryan, our President and Chief Executive Officer, Jay G. Destribats, our Chairman of the Board, and other key personnel. The loss of the services of Mr. Ryan would have a negative impact on our business because of his lending expertise and years of industry experience. In addition, the loss of the services of Mr. Ryan or Mr. Destribats could have a negative impact on our business because of their business development skills and community involvement. Our success also depends on the experience of our branch managers and our lending officers and on their relationships with the communities they serve. The loss of these or other key persons could negatively impact our banking operations. Although we have employment agreements with Mr. Ryan, Mr. Destribats and our other key personnel, our employees may voluntarily terminate their employment at any time. We cannot assure you that we will be able to retain our key personnel or attract the qualified personnel necessary for the management of our business. Our exposure to credit risk, because we focus on commercial lending, could adversely affect our earnings and financial condition. There are certain risks inherent in making loans. These risks include interest rate changes over the time period in which loans may be repaid, risks resulting from changes in the economy, risks inherent in dealing with borrowers and, in the case of a loan backed by collateral, risks resulting from uncertainties about the future value of the collateral. 8 Commercial loans are generally viewed as having a higher credit risk than residential real estate or consumer loans because they usually involve larger loan balances to a single borrower and are more susceptible to a risk of default during an economic downturn. Commercial and industrial loans and commercial real estate loans, which comprise our commercial loan portfolio, were 76.8% of our total loan portfolio at June 30, 2002. Construction loans, which are included as part of our commercial real estate loans, were 9.1% of our total loan portfolio at June 30, 2002. Construction financing typically involves a higher degree of credit risk than commercial mortgage lending. Risk of loss on a construction loan depends largely on the accuracy of the initial estimate of the property's value at completion of construction compared to the estimated cost (including interest) of construction. If the estimated property value proves to be inaccurate, the loan may be undersecured. Because our loan portfolio contains a significant number of commercial real estate loans and commercial and industrial loans with relatively large balances, the deterioration of one or a few of these loans may cause a significant increase in nonperforming loans. An increase in nonperforming loans could cause an increase in the provision for loan losses and an increase in loan charge-offs which could adversely impact our results of operations and financial condition. If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings would decrease. In an attempt to mitigate any loan losses which we may incur, we maintain an allowance for loan losses based on, among other things, national and regional economic conditions and historical loss experience and delinquency trends among loan types. However, we cannot predict loan losses with certainty and we cannot assure you that charge-offs in future periods will not exceed the allowance for loan losses. In addition, regulatory agencies, as an integral part of their examination process, review our allowance for loan losses and may require additions to the allowance based on their judgment about information available to them at the time of their examination. Factors that require an increase in our allowance for loan losses could reduce our earnings. Changes in interest rates may adversely affect our earnings and financial condition. Our net income depends primarily upon our net interest income. Net interest income is the difference between interest income earned on loans, investments and other interest-earning assets and the interest expense incurred on deposits and borrowed funds. Different types of assets and liabilities may react differently, and at different times, to changes in market interest rates. We expect that we will periodically experience "gaps" in the interest rate sensitivities of our assets and liabilities. That means either our interest-bearing liabilities will be more sensitive to changes in market interest rates than our interest- earning assets, or vice versa. When interest-bearing liabilities mature or reprice more quickly than interest-earning assets, an increase in market rates of interest could reduce our net interest income. Likewise, when interest- earning assets mature or reprice more quickly than interest-bearing liabilities, falling interest rates could reduce our net interest income. We are unable to predict changes in market interest rates, which are affected by many factors beyond our control, including inflation, recession, unemployment, money supply, domestic and international events and changes in the United States and other financial markets. We use an Investment Growth Strategy to increase net interest income by purchasing securities with borrowed funds. Although this Investment Growth Strategy has minimal credit risk, it does increase our overall interest rate risk. We attempt to manage risk from changes in market interest rates, in part, by controlling the mix of interest rate sensitive assets and interest rate sensitive liabilities. However, interest rate risk management techniques are not exact. A rapid increase or decrease in interest rates could adversely affect our results of operations and financial performance. Adverse economic and business conditions in our market area may have an adverse effect on our earnings. Substantially all of our business is with customers located within Mercer County and contiguous counties. Generally, we make loans to small to mid-sized businesses whose success depends on the regional 9 economy. These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities. Adverse economic and business conditions in our market area could reduce our growth rate, affect our borrowers ability to repay their loans and, consequently, adversely affect our financial condition and performance. Further, we place substantial reliance on real estate as collateral for our loan portfolio. A sharp downturn in real estate values in our market area could leave many of our loans undersecured. If we are required to liquidate the collateral to satisfy the debt securing a loan during a period of reduced real estate values, our earnings could be adversely affected. Competition from other financial institutions in originating loans and attracting deposits may adversely affect our profitability. We face substantial competition in originating loans. This competition comes principally from other banks, savings institutions, mortgage banking companies and other lenders. Many of our competitors enjoy advantages, including greater financial resources and higher lending limits, a wider geographic presence, more accessible branch office locations, the ability to offer a wider array of services or more favorable pricing alternatives, as well as lower origination and operating costs. This competition could reduce our net income by decreasing the number and size of loans that we originate and the interest rates we may charge on these loans. In attracting deposits, we face substantial competition from other insured depository institutions such as banks, savings institutions and credit unions, as well as institutions offering uninsured investment alternatives, including money market funds. Many of our competitors enjoy advantages, including greater financial resources, more aggressive marketing campaigns and better brand recognition and more branch locations. These competitors may offer higher interest rates than we do, which could decrease the deposits that we attract or require us to increase our rates to retain existing deposits or attract new deposits. Increased deposit competition could adversely affect our ability to generate the funds necessary for lending operations which would increase our cost of funds. We also compete with non-bank providers of financial services, such as brokerage firms, consumer finance companies, insurance companies and governmental organizations which may offer more favorable terms. Some of our non-bank competitors are not subject to the same extensive regulations that govern our operations. As a result, such non-bank competitors may have advantages over us in providing certain products and services. This competition may reduce or limit our margins on banking services, reduce our market share and adversely affect our earnings and financial condition. We continually encounter technological change, and we may have fewer resources than many of our competitors to continue to invest in technological improvements, which could reduce our ability to effectively compete. The financial services industry is undergoing rapid technological changes with frequent introduction of new technology-driven products and services. In addition to better serving customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs. Our future success will depend, in part, upon our ability to address the needs of our customers by using technology to provide products and services to enhance customer convenience, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements. We cannot assure you that we will be able to effectively implement new technology-driven products and services, which could reduce our ability to effectively compete. Our hardware and software systems are vulnerable to damage that could harm our business. We rely upon our existing information systems for operating and monitoring all major aspects of our business, including deposit and loan information, as well as various internal management functions. These systems and our operations are vulnerable to damage or interruption from natural disasters, power loss, network failure, improper operation by our employees, security breaches, computer viruses or intentional attacks by third parties. Any disruption in the operation of our information systems could adversely impact our operations, which may affect our results of operations and financial condition. 10 Government regulation significantly affects our business. The banking industry is extensively regulated. Banking regulations are intended primarily to protect depositors, consumers and the Federal deposit insurance funds, not stockholders. We are subject to regulation and supervision by the Board of Governors of the Federal Reserve System. The Bank is subject to regulation and supervision by the Office of the Comptroller of the Currency. Regulatory requirements affect our lending practices, capital structure, investment practices, dividend policy and growth. The bank regulatory agencies possess broad authority to prevent or remedy unsafe or unsound practices or violations of law. We are subject to various regulatory capital requirements, which involve both quantitative measures of our assets and liabilities and qualitative judgments by regulators regarding risks and other factors. Failure to meet minimum capital requirements or comply with other regulations could result in actions by regulators that could adversely affect our ability to pay dividends or otherwise adversely impact operations. In addition, changes in laws, regulations and regulatory practices affecting the banking industry, including New Jersey's recent change in corporate income taxes, may limit the manner in which we may conduct our business. Such changes may adversely affect us, including our ability to offer new products and services, obtain financing, attract deposits, make loans and achieve satisfactory spreads and impose additional costs on us. As a public company, we are also subject to the corporate governance standards set forth in the recently enacted Sarbanes-Oxley Act of 2002, as well as any rules or regulations promulgated by the Securities and Exchange Commission (the "SEC") or The Nasdaq Stock Market, Inc. Complying with these standards, rules and regulations may impose administrative costs and burdens on us. In addition, our employees' 401(k) savings plan includes an option for our employees to invest a portion of their plan accounts in a fund that acquires shares of our common stock in the open market. In connection with the addition to the plan of this common stock fund option, we inadvertently did not register the plan or the shares of common stock and may not have distributed certain information to plan participants on a timely basis as required by securities laws. Promptly after recently being advised of these requirements, we completed the registration and have distributed the required information to our plan participants. While it is possible that we have liability based on these requirements, we do not believe that any such liabilities or claims, if asserted, would have a material adverse effect on our financial condition or results of operations. Changes in New Jersey's unclaimed property law may adversely affect our financial condition. The State of New Jersey recently changed its unclaimed property law. The new law reduces the dormancy period from 10 years to three years after which the Bank will be required to remit abandoned property to the state. If an account has been inactive for at least three years, it will be presumed to be abandoned and must be remitted to the state. The law, which became effective on July 1, 2002, does not phase in or grandfather existing accounts. We are in the process of notifying customers who may be affected by this change and intend to comply fully with the new law. At this point, we cannot be certain of the impact, if any, this law will have on our operations. We do not expect it to materially affect our income; however, it may adversely affect our financial condition and available cash. There is a limited trading market for our common stock; you may not be able to resell your shares at or above the price you pay for them. Although our common stock is listed for trading on the National Market of the Nasdaq Stock Market, the trading in our common stock has substantially less liquidity than many other companies quoted on the Nasdaq National Market. A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the market of willing buyers and sellers of our common stock at any given time. This presence depends on the individual decisions of investors and general economic and market conditions over which we have no control. We cannot provide any assurance that the offering will increase the volume of trading in our common stock. Future sales of shares of our common stock in the public market, or the perception that such sales may occur, may depress our stock price. If our existing stockholders sell substantial amounts of our common stock in the public market following this offering, or if there is a perception that these sales may occur, the market price of our common stock 11 could decline. Following completion of this offering, we will have outstanding 9,576,343 shares of common stock (assuming the underwriters' over-allotment option is not exercised) that are tradable in the public market. All of our directors and executive officers and certain of our stockholders, owning in the aggregate approximately 2,400,000 shares, have agreed not to sell their shares of common stock for a period of 180 days from the effective date of the registration statement of which this prospectus is a part. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This prospectus and the documents incorporated by reference in this prospectus contain 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, regulatory compliance and financial and other goals. These forward- looking statements are subject to risks, uncertainties and assumptions, including, among other things: o the results of our efforts to implement our retail strategy; o adverse changes in our loan portfolio and the resulting credit risk- related losses and expenses; o interest rate fluctuations and other economic conditions; o continued levels of our loan quality and origination volume; o our ability to attract core deposits; o continued relationships with major customers; o competition in product offerings and product pricing; o adverse changes in the economy that could increase credit-related losses and expenses; o compliance with laws and regulatory requirements of federal and state agencies; o other factors, including those matters discussed in the section titled "Risk Factors"; and o other risks and uncertainties detailed from time to time in our filings with the SEC. We are under no duty to update any of the forward-looking statements after the date of this prospectus to conform such statements to actual results. 12 USE OF PROCEEDS We will receive net proceeds of approximately $ __________ ($__________ if the underwriters' over-allotment option is exercised in full), at an assumed public offering price of $_____ per share in this offering, after deduction of estimated offering expenses of $600,000 and underwriting discounts and commissions. Promptly following this offering, we intend to contribute substantially all of the net proceeds from this offering to the Bank. We intend to use the net proceeds for general corporate and working capital purposes, which may include funding loans. We may also use a portion of the net proceeds for possible acquisitions of businesses or branch locations in the future. However, we have no present understanding or agreement or definitive plans relating to any specific acquisitions. We have not yet determined the amount of net proceeds to be used specifically for each of the foregoing purposes. Accordingly, our management will have significant flexibility in applying the net proceeds from this offering. Pending their use as described above, we may invest the net proceeds from this offering in bank qualified investments. MARKET FOR COMMON STOCK AND DIVIDENDS Our common stock is listed for quotation on the Nasdaq National Market under the symbol YANB. As of September 30, 2002, there were 676 stockholders of record of our common stock. Set forth below are the high and low last sale prices for our common stock (as reported by The Nasdaq Stock Market, Inc.) for each quarter of 2000, 2001 and 2002 (through October __), as well as the amount of cash dividends per share we declared in each quarter.
Period ------ High Low Dividend ------- ------- -------- 2000 First Quarter..................................................................................... $ 11.13 $ 8.81 $ 0.10 Second Quarter.................................................................................... 10.75 8.56 0.10 Third Quarter..................................................................................... 12.19 10.31 0.10 Fourth Quarter.................................................................................... 12.25 10.88 0.10 2001 First Quarter..................................................................................... 14.25 12.06 0.11 Second Quarter.................................................................................... 14.45 13.56 0.11 Third Quarter..................................................................................... 14.10 11.00 0.11 Fourth Quarter.................................................................................... 12.80 10.96 0.11 2002 First Quarter..................................................................................... 13.45 12.26 0.11 Second Quarter.................................................................................... 19.94 12.89 0.11 Third Quarter..................................................................................... 21.20 16.05 0.11 Fourth Quarter (through October __, 2002).........................................................
Dividends. In 2000, we declared four quarterly cash dividends on our common stock of $0.10 per share, for an aggregate amount of approximately $2.8 million. In 2001, we declared four quarterly cash dividends on our common stock of $0.11 per share, for an aggregate amount of approximately $3.3 million. We declared a cash dividend in the amount of $0.11 per share on our common stock in the first, second and third quarters of 2002, for an aggregate amount of approximately $2.7 million. We expect to declare a quarterly cash dividend in the fourth quarter of 2002 to holders of common stock, subject to our financial condition. Cash dividends are generally declared and paid quarterly. Because substantially all of the funds available for the payment of cash dividends are derived from the Bank, future cash dividends will depend primarily upon the Bank's earnings, financial condition, need for funds, and government policies and regulations applicable to both the Bank and us. As of December 31, 2001, the net profits of the Bank available for distribution to us as dividends without regulatory approval were approximately $11.5 million. If required payments on outstanding trust preferred securities issued by three of our subsidiaries are not made, we will be prohibited from paying dividends on our common stock. 13 CAPITALIZATION The following table sets forth our historical consolidated capitalization at June 30, 2002 and as adjusted to give effect to our sale of 1,500,000 shares of common stock at an assumed offering price of $________ per share in this offering. For this table, we have assumed that our net proceeds will be approximately $__________ after deducting estimated offering expenses and underwriting discounts and commissions and that these proceeds will be invested initially in assets with a 20% risk weighting for regulatory capital purposes. If the underwriters' over-allotment option is exercised in full, 1,725,000 shares would be sold, resulting in net proceeds of approximately $__________ (based on an assumed offering price of $_______) after deducting estimated offering expenses and underwriting discounts and commissions. The following data should be read in conjunction with the financial information appearing elsewhere in this prospectus, as well as financial information and the other documents incorporated by reference into this prospectus.
June 30, 2002 ----------------------------------------------- Actual As Adjusted -------- ----------- (in thousands, except per share data and ratios) Company Obligated Mandatorily Redeemable Trust Preferred Securities of Subsidiary Trust Holding Solely Junior Subordinated Debentures of the Company .......................... $ 32,500 $ Stockholders' Equity: Preferred stock, no par value, 1,000,000 shares authorized, none issued ..................................................... -- Common stock, no par value, 12,000,000 shares authorized, 8,248,343 shares issued, 9,748,343 as adjusted .................. 54,760 Surplus........................................................... 2,205 Undivided profits................................................. 45,432 Treasury stock, at cost, 172,000 shares........................... (3,030) Unallocated ESOP shares........................................... (600) Accumulated other comprehensive income............................ 5,000 -------- Total Stockholders' Equity........................................ 103,767 -------- Total Capitalization ................................................ $136,267 ======== Book Value Per Share ................................................ $ 12.90 Capital Ratios: Tier 1 leverage ratio............................................. 6.5% % Tier 1 capital to risk-weighted assets............................ 10.0% Total capital to risk-weighted assets............................. 11.2%
14 MANAGEMENT The following table lists our executive officers and directors, and the directors and senior executive officers of the Bank.
Name Age Positions ---- --- --------- Jay G. Destribats .............. 67 Chairman of the Board of YNB and the Bank Patrick M. Ryan ................ 58 President, Chief Executive Officer and Director of YNB and the Bank Stephen F. Carman .............. 45 Treasurer of YNB, Executive Vice President and Chief Financial Officer of the Bank Timothy J. Losch ............... 52 Executive Vice President and Chief Operating Officer of the Bank James F. Doran ................. 59 First Senior Vice President and Senior Lending Officer of the Bank Frank Durand, III .............. 52 First Senior Vice President and Bank Administrator of the Bank Howard N. Hall ................. 42 Assistant Treasurer of YNB, First Senior Vice President and Controller of the Bank Eugene C. McCarthy ............. 41 First Senior Vice President and Market Manager, Hunterdon Region, of the Bank Stephen R. Walker .............. 59 First Senior Vice President and Chief Information Officer of the Bank C. West Ayres .................. 74 Director of YNB and the Bank Elbert G. Basolis .............. 41 Director of YNB and the Bank Lorraine Buklad ................ 66 Director of YNB and the Bank Anthony M. Giampetro, M.D ...... 66 Director of YNB and the Bank Sidney L. Hofing ............... 68 Director of YNB and the Bank Gilbert W. Lugossy ............. 66 Director of YNB and the Bank Louis R. Matlack Ph.D. ......... 67 Director of YNB and the Bank Martin Tuchman ................. 61 Director of YNB and the Bank F. Kevin Tylus ................. 47 Director of YNB and the Bank Christopher S. Vernon .......... 38 Director of YNB and the Bank
Jay G. Destribats has served as the Chairman of the Board of both YNB and the Bank since 1990. He also was a Partner in the law firm of Destribats, Campbell, DeSantis and Magee until July 1999 and is now of Counsel. Mr. Destribats also is a Commissioner of the Mercer County Improvement Authority. Patrick M. Ryan has served as a director and as President and Chief Executive Officer of both YNB and the Bank since November 1992. Mr. Ryan also is a member of the Federal Reserve Bank of Philadelphia's Community Bank Advisory Council and serves on the Board of Trustees of the New Jersey Bankers Association. Mr. Ryan has approximately 33 years of commercial banking experience. Stephen F. Carman has served as Treasurer of YNB and as Executive Vice President and Chief Financial Officer of the Bank since November 1992 and served as Secretary of YNB from December 1993 to April 2002. Mr. Carman has approximately 23 years of commercial banking experience. Timothy J. Losch has served as Executive Vice President and Chief Operating Officer of the Bank since June 1997. Mr. Losch has approximately 30 years of commercial banking experience. James F. Doran has served as First Senior Vice President and Senior Loan Officer of the Bank since April 1996. Mr. Doran has approximately 37 years of commercial banking experience. Frank Durand, III has served as First Senior Vice President and Bank Administrator of the Bank since December 2000 and as Senior Vice President and Bank Administrator of the Bank from February 1995 to December 2000. Mr. Durand has approximately 32 years of commercial banking experience. Howard N. Hall has served as Assistant Treasurer of YNB since April 2002 and as First Senior Vice President and Controller of the Bank since February 2000 and as Senior Vice President and Controller of the Bank from November 1997 to February 2000. Prior to joining the Bank in 1997, he served as Vice President 15 and Chief Financial Officer of Commonwealth State Bank from April 1992 to October 1997. Mr. Hall has approximately 16 years of commercial banking experience. Eugene C. McCarthy has served as First Senior Vice President of the Bank since October 2001 and as Market Manager, Hunterdon Region, since February 2001. After joining YNB in February 2001, Mr. McCarthy served as Senior Vice President - Lending until September 2001. Prior to joining the Bank in 2001, he served as Senior Vice President and Underwriting Site Manager for First Union National Bank from March 1998 to January 2001 and Vice President and Regional Manager from March 1995 to March 1998. Mr. McCarthy has approximately 19 years of commercial banking experience. Stephen R. Walker has served as First Senior Vice President and Chief Information Officer of the Bank since June 2002. Prior to joining the Bank, he served at Merrill Lynch as First Vice President and Chief Technology Officer from 2000 to 2002 and as First Vice President and Director of Core Applications Technology from 1995 to 2000. Prior to joining Merrill Lynch, in 1993 Mr. Walker had approximately 11 years of commercial banking experience. C. West Ayres has served as a director of YNB and the Bank since 1978. He has been President of Ayres Pontiac-Cadillac Company, Inc. since 1968. We have a mandatory retirement policy for members of the Board of Directors. Mr. Ayres will reach the mandatory retirement age of 75 on October 28, 2002. Elbert G. Basolis has served as a director of YNB and the Bank since 1996. He also owns and has served as President for Aqua Controls Inc., a water consulting business, since 1985. Lorraine Buklad has served as a director of YNB and the Bank since 1988. She has served as Funeral Director and President of Buklad Memorial Homes, since 1981. Anthony M. Giampetro, M.D. has served as a director of YNB and the Bank since 1994. He also is a physician in private practice. Sidney L. Hofing has served as a director of YNB and the Bank since 1997. He serves as President and Chief Executive Officer of The Eagle Group, Inc., a real estate development and management company. Mr. Hofing also served as Chairman of General Packaging Services, Inc. from November 1986 to December 1998. Mr. Hofing also is a director of Admiralty Bancorp, a bank holding company. Gilbert W. Lugossy has served as a director of YNB and the Bank since 1991. He served as a member of the New Jersey State Parole Board from April 1990 to April 1997 and is now retired. Louis R. Matlack has served as a director of YNB and the Bank since 1997. He has been a Principal of Matlack Mediation, a mediation services firm, since 1988. Martin Tuchman has served as a director of YNB and the Bank since 2000. He also has served as the Chairman of the Board and Chief Executive Officer of Interpool, Inc., a container and leasing corporation, since 1988. F. Kevin Tylus has served as a director of YNB and the Bank since 1992. He has served as President of CIGNA Dental and Corporate Senior Vice President since November 1999. Mr. Tylus also served as Vice President/Director of Prudential Health Care Group from July 1995 to November 1999. Christopher S. Vernon has served as a director of YNB and the Bank since 2002. He also has been the owner and President of Mercer Management, a real estate development and management company specializing in distressed properties, since 1983. 16 STOCK OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS The table below sets forth the beneficial ownership of our common stock as of August 1, 2002, by each person we know to beneficially own 5% or more of the common stock, each of our directors, the executive officers named individually in our most recent proxy statement and all of our directors and executive officers as a group. The number of beneficially owned shares includes shares over which the named person, directly or indirectly through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote, or direct the voting of, such security; or investment power, which includes the power to dispose of, or to direct the disposition of, such security. All shares of a named person are deemed to be subject to that person's sole voting and investment power unless otherwise indicated. Shares subject to stock options are included as outstanding shares of common stock, except if these options are not exercisable within 60 days.
Name of Beneficial Owner Number of Shares Percent of ------------------------ Beneficially Owned Common Stock ------------------ ------------ FMR Corporation(1) .......................................... 743,619 9.25% Jay G. Destribats(2) ........................................ 346,269 4.26% Patrick M. Ryan(3) .......................................... 318,055 3.91% Stephen F. Carman(4) ........................................ 64,942 * Timothy J. Losch(5) ......................................... 56,702 * Howard N. Hall(6) ........................................... 9,864 * C. West Ayres(7) ............................................ 85,435 1.06% Elbert G. Basolis, Jr.(8) ................................... 32,677 * Lorraine Buklad(9) .......................................... 144,802 1.79% Anthony M. Giampetro M.D.(10) ............................... 88,656 1.10% Sidney L. Hofing(11) ........................................ 198,999 2.43% Gilbert W. Lugossy(12) ...................................... 19,604 * Louis R. Matlack(13) ........................................ 55,063 * Martin Tuchman(14) .......................................... 569,375 7.01% F. Kevin Tylus(15) .......................................... 224,867 2.78% Christopher S. Vernon(16) ................................... 64,025 * Directors and Executive Officers as a group (19 persons)..... 2,330,240(17) 26.21%
- --------------- * Less than 1% (1) Information with respect to beneficial ownership is based on a Schedule 13F filed with the SEC on August 14, 2002. FMR Corporation's address is 82 Devonshire Street, Boston, Massachusetts 02109. (2) Includes 42,800 shares issuable upon exercise of options held by Mr. Destribats under our 1997 Stock Option Plan (the "1997 Plan"), 52,000 shares held in the Destribats Family Trust under which Mr. Destribats is the Trustee, 3,000 shares held by Mr. Destribats' spouse, 9,921 shares in The Yardville National Bank 401(k) Plan (the "401(k) Plan"), 2,288 shares in the Yardville National Bank Employee Stock Ownership Plan Trust (the "ESOP") for Mr. Destribats' account, 62,136 shares in the ESOP over which Mr. Destribats, as a trustee, shares voting rights with Mr. Ryan and Mr. Tylus, and 164,376 shares and 6,748 shares issuable upon the exercise of options under our 1994 Stock Option Plan (the "1994 Plan") held by the estate of James J. Kelly of which Mr. Destribats is the executor. (3) Includes 60,600 shares issuable upon exercise of options held by Mr. Ryan under the 1997 Plan, 3,619 shares in the 401(k) Plan, 387 shares held by Mr. Ryan as custodian for his children, 1,000 shares held by Mr. Ryan's spouse as to which Mr. Ryan disclaims beneficial ownership, 2,288 shares in the ESOP for Mr Ryan's account and 62,136 shares held in the ESOP over which Mr. Ryan, as a trustee, shares voting rights with Mr. Destribats and Mr. Tylus. (4) Includes 50,740 shares issuable upon exercise of options held by Mr. Carman under our 1988 Stock Option Plan (the "1988 Plan") and the 1997 Plan, 1,790 shares held in the ESOP for Mr. Carman's 17 account, 3,037 shares held jointly with Mr. Carman's wife and 225 shares held by Mr. Carman as custodian for his child. (5) Includes 40,490 shares issued upon the exercise of options held by Mr. Losch under the 1997 Plan, 4,156 shares in the 401(k) Plan, 1,790 shares in the ESOP for Mr. Losch's account and 131 shares held by Mr. Losch as custodian for his son. (6) Includes 8,560 shares issuable upon exercise of options held by Mr. Hall under the 1997 Plan and 1,253 shares held in the ESOP for Mr. Hall's account. (7) Includes 2,152 shares held by Mr. Ayres' spouse and 6,748 shares issuable upon exercise of options held by Mr. Ayres under the 1994 Plan. (8) Includes 9,100 shares held by Aqua Control Inc., 90 shares held by Mr. Basolis and his spouse as custodians for their children and 6,748 shares issuable upon exercise of options held by Mr. Basolis, Jr. under the 1994 Plan. (9) Includes 6,748 shares issuable upon exercise of options held by Ms. Buklad under the 1994 Plan. (10) Includes 6,748 shares issuable upon exercise of options held by Dr. Giampetro under the 1994 Plan, 26,908 shares held as custodian for his children, 16,400 shares held in the name of Bellarmino-Giampetro Profit Sharing Fund, 24,190 shares held in the name of Bellarmino-Giampetro Pension Voluntary Contribution Plan and 11,540 shares held in the name of Bellarmino-Giampetro-Scheurman profit sharing plan. (11) Includes 178,403 shares held by Mr. Hofing's spouse, 12,208 shares held in the Hofing Family Limited Partnership and 6,748 shares issuable upon exercise of options held by Mr. Hofing under the 1994 Plan. (12) Includes 6,748 shares issuable upon exercise of options held by Mr. Lugossy under the 1994 Plan and 3,062 shares held jointly with Mr. Lugossy's wife. (13) Includes 6,748 shares issuable upon exercise of options held by Mr. Matlack under the 1994 Plan and 6,199 shares held in the Matlack Family Trust under which Mr. Matlack is a co-trustee. (14) Includes 1,500 shares issuable upon the exercise of options held by Mr. Tuchman under the 1994 Plan, 33,000 shares held by Warren Martin Associates, 2,000 shares held by the Tuchman Foundation, 15,300 shares in a retirement account in the name of Mr. Tuchman's spouse and 50,000 shares issuable upon exercise of stock purchase warrants held by Warren Martin Associates and Mr. Tuchman. Mr. Tuchman's address is 211 College Road East, Princeton, New Jersey 08540. (15) Includes 5,248 shares issuable upon exercise of options held by Mr. Tylus under the 1994 Plan, 22,605 shares held jointly with Mr. Tylus' spouse, 91,744 shares owned by Mr. Tylus' spouse as to which Mr. Tylus disclaims beneficial ownership, 3,200 shares held by Mr. Tylus as custodian for his children, 37,634 held by the estates of Mrs. Tylus' parents of which Mrs. Tylus is the executrix and 62,136 shares held in the ESOP over which Mr. Tylus, as a trustee of the ESOP, shares voting rights with Mr. Destribats and Mr. Ryan. (16) Includes 25 shares held jointly with Mr. Vernon's spouse and 3,000 shares issuable upon exercise of stock purchase warrants held by Mr. Vernon. (17) Includes an aggregate of 237,202 shares issuable upon exercise of options held by such persons under the 1988 Plan, the 1994 Plan, and the 1997 Plan, 53,000 shares issuable upon exercise of stock purchase warrants beneficially owned by Mr. Tuchman and Mr. Vernon and 62,136 ESOP shares over which Mr. Destribats, Mr. Ryan and Mr. Tylus have shared voting rights as trustees. 18 DESCRIPTION OF CAPITAL STOCK The following summary description of our capital stock is qualified in its entirety by reference to our Restated Certificate of Incorporation and By- Laws. Capital Stock We are authorized to issue 13,000,000 shares of stock, consisting of 12,000,000 shares of common stock, no par value per share, and 1,000,000 shares of preferred stock, no par value per share, with presently unspecified rights. As of August 14, 2002, there were 8,076,343 shares of common stock outstanding and 989,580 shares reserved for issuance upon exercise of outstanding stock options with a weighted average price of $13.50 and 68,500 warrants to purchase common stock exercisable at a price of $12.00 per share with an expiration date of June 23, 2010. No shares of preferred stock have been issued. Preferred Stock Under the terms of our Restated Certificate of Incorporation, our Board of Directors may, without stockholder approval, issue shares of preferred stock from time to time. The Board of Directors may determine the relative rights, preferences and limitations of the preferred stock including, without limitation, stated value, dividend rights, rights to convert such shares into shares of another class or series (such as common stock or another class or series of preferred stock), voting rights, liquidation preference, redemption rights, division into classes and into series within any class or classes, sinking fund provisions and similar matters, and generally to determine all the characteristics of such preferred stock, other than the total number of shares of preferred stock which the Board of Directors has authority to issue. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. The issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions, financings and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from acquiring, a controlling interest in YNB. We have no present plans to issue any shares of preferred stock. Rights of Holders of Common Stock Dividend Rights. The holders of our common stock are entitled to receive dividends when, as and if declared by our Board of Directors, subject to the rights of holders of then outstanding shares, if any, having preferences with respect to dividends. Dividends must be paid out of funds legally available for the payment of dividends. The only statutory limitation is that such dividends may not be paid when YNB is insolvent and may be paid only out of statutory surplus. If we do not make required payments on outstanding trust preferred securities, we will be prohibited from paying dividends on our common stock. In addition, funds for the payment of dividends by YNB must come primarily from the earnings of the Bank. As a practical matter, any dividend restrictions on the subsidiaries of YNB act as restrictions on the amount of funds available for the payment of dividends which can be paid by YNB itself. See "Market for Common Stock and Dividends" on page 12. Voting Rights. Each holder of common stock is entitled to one vote per share. The quorum for stockholders' meetings is a majority of the outstanding shares entitled to vote represented in person or by proxy. Provisions Regarding Certain Business Combinations. Article VIII of the Restated Certificate of Incorporation requires the affirmative vote of the holders of at least 80% of the outstanding shares of our capital stock entitled to vote generally in the election of directors to approve certain mergers and other business combinations. Such business combinations include those involving YNB and any holder of 10% or more of the common stock (an "Interested Stockholder"). There are two exceptions to this provision. First, if a majority of the Board of Directors who are unaffiliated with an Interested Stockholder and who were directors before the Interested Stockholder became an Interested Stockholder approve the transaction, the supermajority stockholder vote is not required. Second, if certain minimum price, form of consideration and procedural requirements are met, the supermajority stockholder vote is not required. If either of these 19 exceptions are met, only a simple majority vote is required for approval, unless otherwise required by law or another provision of our Restated Certificate of Incorporation. As of August 1, 2002, our directors and executive officers possessed sole or shared voting power with respect to approximately 26% of the outstanding common stock. The sole or shared voting power ownership of our directors and executive officers as of August 1, 2002, will represent approximately 22% of the outstanding common stock after the completion of this offering. In addition, as of August 1, 2002, our directors and officers had the right to acquire an additional 346,762 shares of common stock under options and warrants that are exercisable within 60 days of the date of this prospectus. See "Stock Ownership of Management and Principal Stockholders" on page 16. Consequently, the directors and executive officers possess sufficient voting power to significantly affect the vote on, and perhaps prevent, certain mergers and other business combinations. Election, Classification and Removal of Directors. Our Restated Certificate of Incorporation provides for a classified Board of Directors, with approximately one-third of the entire Board of Directors being elected each year and with directors serving for terms of three years. Directors are elected by a plurality of votes cast. Holders of common stock do not have cumulative voting rights. Our Restated Certificate of Incorporation provides that any director, or the entire Board of Directors, may be removed at any time by our stockholders, with or without cause, by the affirmative vote of the holders of at least 80% of the shares entitled to vote for the election of directors. These provisions, coupled with the Board of Director's authority to issue preferred stock, may have the effect of deterring hostile takeovers, enhancing the ability of current management to remain in control of YNB, and generally making the acquisition of a controlling interest in YNB more difficult. Approval of Major Transactions. Except for mergers and certain business combinations with Interested Stockholders and the adoption of any plan or proposal for the liquidation or dissolution of YNB proposed by or on behalf of an Interested Stockholder or any affiliate of any Interested Stockholder, we are able to amend our Restated Certificate of Incorporation (except as otherwise stated in that document), to merge or consolidate with other corporations, to make a bulk sale of our assets not in the regular course of business and to dissolve, if the majority of the votes cast at the stockholders meeting (at which a quorum is present) called for the purpose of considering any such action are cast in favor of the proposal. Liquidation Rights. In the event of liquidation, dissolution or winding up of YNB, holders of our common stock are entitled to receive equally and pro rata per share any assets distributable to stockholders, after payment of debts and liabilities and after the distribution to holders of any outstanding preferred stock or any other outstanding shares hereafter issued which have prior rights upon liquidation. Other Matters. Holders of common stock do not have preemptive rights or conversion rights with respect to any securities of YNB. Except in connection with certain business combinations and except as noted below, we can issue new shares of authorized but unissued common stock and/or preferred stock without stockholder approval. The bylaws of The Nasdaq Stock Market, Inc. governing the Nasdaq National Market, on which our common stock is quoted, require issuers to obtain stockholder approval for the issuance of securities in connection with the acquisition of a business, company, assets, property, or securities representing such interests where the present or potential issuance of common stock or securities convertible into common stock in connection with such acquisition could result in an increase of 20% or more in the outstanding shares of common stock. Accordingly, the future issuance of common stock or a series of preferred stock convertible into common stock may require stockholder approval under those rules. Anti-Takeover Effects of the New Jersey Shareholders Protection Act We are subject to the provisions of Section 14A-10A of the New Jersey Business Corporation Act, which is known as the "New Jersey Shareholders Protection Act." Under the New Jersey Shareholders Protection Act, we are prohibited from engaging in any "business combination" with any "interested shareholder" for a period of five years following the time at which that shareholder becomes an "interested shareholder" unless the business combination is approved by our Board of Directors before that shareholder became an "interested shareholder." Covered business combinations include certain mergers, dispositions of assets or shares and recapitalizations. An "interested shareholder" is (1) any person that directly or indirectly 20 beneficially owns 10% or more of the voting power of our outstanding voting stock; or (2) any of our affiliates or associates (as such terms are defined in the New Jersey Shareholders Protection Act) that directly or indirectly beneficially owned 10% or more of the voting power of our then-outstanding stock at any time within a five-year period immediately prior to the date in question. In addition, under the New Jersey Shareholders Protection Act, we may not engage in a business combination with an interested shareholder at any time unless: o our Board of Directors approved the business combination prior to the time the shareholder became an interested shareholder; o the holders of two-thirds of our voting stock not beneficially owned by the interested shareholder affirmatively vote to approve the business combination at a meeting called for that purpose; or o the consideration received by the non-interested shareholders in the business combination meets the standards of the statute, which is designed to ensure that all other shareholders receive at least the highest price per share paid by the interested shareholder. Transfer Agent First City Transfer Company, Iselin, New Jersey, serves as the transfer agent of our issued and outstanding common stock. 21 UNDERWRITING Legg Mason Wood Walker, Incorporated and Sandler O'Neill & Partners, L.P. have entered into an underwriting agreement with us to purchase shares of our common stock from us and to offer the shares to the public as described below. Legg Mason Wood Walker, Incorporated and Sandler O'Neill & Partners, L.P. are referred to in this section as the "underwriters." Subject to the terms of the underwriting agreement, each of the underwriters has agreed to purchase from us the number of shares of common stock shown opposite its name below.
Underwriters Number of Shares of Common Stock ------------ -------------------------------- Legg Mason Wood Walker, Incorporated ........ Sandler O'Neill & Partners, L.P. ............ --------- Total .................................... 1,500,000 =========
The underwriting agreement provides that the obligations of the underwriters to purchase shares of common stock depend on the satisfaction of certain conditions contained in the underwriting agreement, and that if any of the shares of common stock are purchased by the underwriters under the underwriting agreement, then all of the shares of common stock which the underwriters have agreed to purchase must be purchased (other than those covered by the over-allotment option described below). The conditions contained in the underwriting agreement include, among others, the requirement that the representations and warranties made by us to the underwriters are true, that we have performed certain agreements that we have made with respect to this offering and that there is no material adverse change in the financial markets or our operations. The underwriters have advised us that they propose to offer the shares of common stock directly to the public at the public offering price set forth on the cover page of this prospectus, and to certain dealers at such public offering price less a selling concession not in excess of $_____ per share. The underwriters may allow, and these dealers may re-allow, a concession not in excess of $_____ per share to other brokers and dealers. After the commencement of this offering, the underwriters may change the offering price and other selling terms. We have granted to the underwriters an option to purchase up to an aggregate of 225,000 additional shares of common stock, exercisable solely to cover over-allotments, if any, at the public offering price less the underwriting discounts and commissions shown on the cover page of this prospectus. The underwriters may exercise this option at any time until 30 days after the date of this prospectus. If this option is exercised, each underwriter will be committed, so long as the conditions of the underwriting agreement are satisfied, to purchase a number of additional shares of common stock proportionate to the initial commitment of that underwriter as indicated in the preceding table, and we will be obligated to sell the shares of common stock to the underwriters in accordance with that over-allotment option. We have agreed that, without the prior consent of the underwriters, we will not directly or indirectly, offer, sell or otherwise dispose of any shares of common stock or any securities which may be converted into common stock for a period of 180 days after the effective date of the registration statement of which this prospectus is a part, subject to certain exceptions. All of our executive officers and directors and certain other stockholders have agreed that, without the prior written consent of the underwriters, they will not, directly or indirectly, offer, sell or otherwise dispose of any shares of common stock or any securities which may be converted into or exchanged for such shares for a period ending 180 days after the effective date of the registration statement of which this prospectus is a part subject to certain exceptions. The following table shows the public offering price, underwriting discount and proceeds before expenses to YNB. The information assumes either no exercise or full exercise by the underwriters of their over-allotment option.
Per share Without option With option --------- -------------- ----------- Public Offering Price....................................................... $ $ $ Underwriting Discount....................................................... Proceeds, before expenses, to YNB...........................................
22 In addition to the underwriting discounts and commissions shown on the cover page of this prospectus, we will reimburse the underwriters for their legal expenses in an amount not to exceed $50,000. The expenses of the offering, not including the underwriting discount, are estimated at $600,000 and are payable by YNB. In connection with this offering, the underwriters may purchase and sell shares of common stock in the open market. These transactions may include short sales, syndicate covering transactions and stabilizing transactions. Short sales involve syndicate sales of common stock in excess of the number of shares to be purchased by the underwriters in this offering, which creates a syndicate short position. "Covered" short sales are sales of shares made in an amount up to the number of shares represented by an underwriters' over- allotment option. In determining the source of shares to close out the covered syndicate short position, an underwriter will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which it may purchase shares through the over-allotment option. Transactions to close out the covered syndicate short position involve either purchases in the open market after the distribution has been completed or the exercise of the over-allotment option. The underwriters may also make "naked" short sales of shares in excess of the over-allotment option. An underwriter must close out any naked short position by purchasing shares of common stock in the open market. A naked short position is more likely to be created if an underwriter is concerned that there may be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in this offering. Stabilizing transactions consist of bids for, or purchases of, shares in the open market while the offering is in progress. The underwriters also may impose a penalty bid. Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the underwriters repurchase shares originally sold by that syndicate member in order to cover syndicate short positions or make stabilizing purchases. Any of these activities may have the effect of preventing or retarding a decline in the market price of the common stock. They may also cause the price of the common stock to be higher than the price that would otherwise exist on the open market in the absence of these transactions. The underwriters may conduct these transactions on the Nasdaq National Market, in the over-the- counter market or otherwise. Neither we nor either of the underwriters makes any representation or prediction as to the direction or magnitude of any affect that the transactions described above may have on the price of the common stock. In addition, neither we nor either of the underwriters makes any representation that the underwriters will engage in any such transactions or that such transactions, once commenced, will not be discontinued without notice. In connection with this offering, the underwriters and any selling group members who are qualified market makers on the Nasdaq National Market may also engage in passive market making transactions in our common stock on the Nasdaq National Market. Passive market making consists of displaying bids on the Nasdaq National Market limited by the prices of independent market makers and effecting purchases limited by those prices in response to order flow. Rule 103 of Regulation M promulgated by the SEC limits the amount of net purchase that each passive market maker may make and the displayed size of each bid. Passive market making may stabilize the market price of our common stock at a level above that which might otherwise prevail in the open market and, if commenced, may be discontinued at any time. We have agreed to indemnify the underwriters and persons who control the underwriters against liabilities, including liabilities under the Securities Act of 1933 (the "Securities Act") and liabilities arising from breaches of the representations and warranties contained in the underwriting agreement, and to contribute to payments that the underwriters may be required to make for these liabilities. The underwriters have in the past and may in the future, from time to time, engage in transactions and perform services for us, including underwritings, private placements and general investment banking services. 23 LEGAL MATTERS The validity of the shares of common stock offered hereby will be passed upon for us by Pepper Hamilton LLP, Philadelphia, Pennsylvania. Certain matters in connection with this offering will be passed upon for the underwriters by Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania. EXPERTS The consolidated financial statements of YNB and its subsidiaries as of December 31, 2001 and 2000, and for each of the years in the three-year period ended December 31, 2001, have been incorporated by reference herein and in the registration statement in reliance upon the report of KPMG LLP, independent accountants, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. 24 WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information that we file with the SEC at the SEC's public reference room at 450 Fifth Street, NW, Washington, D.C. 20549. Please call the SEC at 1-800- SEC-0330 for further information on the public reference room. The SEC maintains a website at "www.sec.gov" that contains reports, proxy and information statements, and other information regarding companies that file electronically with the SEC, including YNB. You may also find copies of reports, proxy and information statements we file electronically with the SEC via a link to "Investor News" from our website at "www.yanb.com." We have filed a Registration Statement on Form S-3 to register the common stock to be sold by us in this offering. This prospectus is a part of that Registration Statement. As allowed by SEC rules, this prospectus does not contain all the information you can find in the Registration Statement or the exhibits to that Registration Statement. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE SEC regulations allow us to "incorporate by reference" information into this prospectus, which means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered part of this prospectus. Information incorporated by reference from earlier documents is superseded by information set forth herein and information that has been incorporated by reference from more recent documents. The following documents filed by YNB with the SEC are incorporated in this prospectus by reference: o Our Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2001; o The information required by Part III, Items 10 through 13, of Form 10-K, which is incorporated by reference to our definitive proxy statement for our 2002 annual meeting of stockholders; o Our Quarterly Report on Form 10-Q for the Fiscal Quarter Ended March 31, 2002; o Our Quarterly Report on Form 10-Q for the Fiscal Quarter Ended June 30, 2002; o Our Registration Statement on Form 8-A filed on May 17, 1995 describing the terms, rights and provisions applicable to the common stock, including any amendments or reports filed for the purpose of updating such description; and o In addition, all documents subsequently filed by YNB pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, after the date of the initial registration statement and prior to effectiveness of the registration statement shall be deemed incorporated by reference herein from their respective dates of filing. You can obtain any of the documents incorporated by reference from the SEC or the SEC's Internet web site as described above. Documents incorporated by reference also are available from us without charge, including any exhibits specifically incorporated by reference therein. You may obtain documents incorporated by reference in this prospectus by requesting them in writing or by telephone from YNB at the following address: Mr. Stephen F. Carman Treasurer Yardville National Bancorp 2465 Kuser Road Hamilton, NJ 08690 Telephone: (609) 631-6222 You should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized anyone to provide you with information that is different from what is contained in this prospectus. This prospectus is dated _______, 2002. You should not assume that the information contained in this prospectus is accurate as of any date other than that date. 25 =============================================================================== 1,500,000 SHARES [YNB LOGO] Common Stock ___________________ PROSPECTUS ___________________ Legg Mason Wood Walker Sandler O'Neill & Partners, L.P. Incorporated _______, 2002 =============================================================================== PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. The estimated expenses payable by the registrant in connection with the issuance and distribution of the securities being registered are estimated (except for the SEC and NASD filing fees) as follows: SEC Registration Fee........................................ $3,041 Nasdaq Additional Listing Fee............................... $17,250 NASD Filing Fee............................................. $3,806 Legal Fees.................................................. $450,000 Printing.................................................... $25,000 Accounting Fees and Expenses................................ $75,000 Miscellaneous .............................................. $25,903 Total....................................................... $600,000 ======== Item 15. Indemnification of Directors and Officers. Statutory Indemnification. We refer you to Section 14A:3-5 of the New Jersey Business Corporation Act, as amended (the "Act"), which sets forth the extent to which a corporation may indemnify its directors, officers, employees and agents. More specifically, such law empowers a corporation to indemnify a corporate agent against his or her expenses and liabilities incurred in connection with any proceeding (other than a derivative law suit) involving the corporate agent by reason of his or her being or having been a corporate agent if (a) the corporate agent acted in good faith or in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and (b) with respect to any criminal proceeding, the corporate agent had no reasonable cause to believe his or her conduct was unlawful. For purposes of such law, the term "corporate agent" means any person who is or was a director, officer, employee or agent of the indemnifying corporation or of any constituent corporation absorbed by the indemnifying corporation in a consolidation or merger and any person who is or was a director, officer, trustee, employee or agent of any other enterprise, serving as such at the request of the indemnifying corporation, or of any such constituent corporation, or the legal representative of any such director, officer, trustee, employee or agent. For purposes of this section, "proceeding" means any pending, threatened or completed civil, criminal, administrative or arbitrative action, suit, or proceeding, and any appeal therein and any inquiry or investigation which could lead to such action, suit or proceeding. With respect to any derivative action, the corporation is empowered to indemnify a corporate agent against his or her expenses (but not his or her liabilities) incurred in connection with any proceeding involving the corporate agent by reason of his or her being or having been a corporate agent if the agent acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation. However, only a court can empower a corporation to indemnify a corporate agent against expenses with respect to any claim, issue or matter as to which the agent was adjudged liable to the corporation. II-1 The corporation may indemnify a corporate agent against his or her expenses in a specific case under Section 14A:3-5(2) of the Act and, unless ordered by a court, under Section 14A:3-5(3) of the Act if a determination is made by any of the following that the applicable standard of conduct was met by such corporate agent: (i) the Board of Directors, or a committee thereof, acting by a majority vote of a quorum consisting of disinterested directors; (ii) by independent legal counsel, if there is not a quorum of disinterested directors or if the disinterested quorum empowers counsel to make the determination; or (iii) by the stockholders. A corporate agent is entitled to mandatory indemnification to the extent that the agent is successful on the merits or otherwise in any proceeding, or in defense of any claim, issue or matter in the proceeding. If a corporation fails or refuses to indemnify a corporate agent, whether the indemnification is permissive or mandatory, the agent may apply to a court to grant him or her the requested indemnification. In advance of the final disposition of a proceeding, the Board of Directors may direct the corporation to pay an agent's expenses if the agent agrees to repay the expenses in the event that it is ultimately determined that he or she is not entitled to indemnification. The indemnification and advancement of expenses provided by or granted pursuant to the statute do not exclude any other rights, including the right to be indemnified against liabilities and expenses incurred in proceedings by or in the right of the corporation, to which a corporate agent may be entitled under a certificate of incorporation, bylaw, agreement, vote of shareholders, or otherwise; provided that no indemnification may be made to or on behalf of a corporate agent if a judgment or other final adjudication adverse to the corporate agent establishes that his acts or omissions (a) were in breach of his duty of loyalty to the corporation or its shareholders, as defined in Section 14A:2-7(3) of the Act, (b) were not in good faith or involved a knowing violation of law or (c) resulted in receipt by the corporate agent of an improper personal benefit. Indemnification Pursuant to Restated Certificate of Incorporation of the Registrant. In accordance with the foregoing statutory provision, Article VI of our Restated Certificate of Incorporation provides as follows: "The Corporation shall indemnify its officers, directors, employees, and agents and former officers, directors, employees and agents, and any other persons serving at the request of the Corporation as an officer, director, employee or agent of another corporation, association, partnership, joint venture, trust, or other enterprise, against expenses (including attorneys' fees, judgments, fines, and amounts paid in settlement) incurred in connection with any pending or threatened action, suit, or proceeding, whether civil, criminal, administrative or investigative, with respect to which such officer, director, employee, agent or other person is a party, or is threatened to be made a party, to the full extent permitted by the New Jersey Business Corporation Act. The indemnification provided herein shall not be deemed exclusive of any other right to which any person seeking indemnification may be entitled under any by-law, agreement, or vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity; and shall inure to the benefit of the heirs, executors, and the administrators of any such person. The Corporation shall have the power to purchase and maintain insurance on behalf of any persons enumerated above against any liability asserted against him and incurred by him in any such capacity, arising out of his status as such, whether or not the Corporation could have the power to indemnify him against such liability under the provisions under this Article VI." II-2 Item 16. Exhibits 1.1 Form of Underwriting Agreement 4.1 See Exhibits 3.1 and 3.2 for YNB's Certificate of Incorporation and By-Laws, which contain provisions defining the rights of shareholders of YNB. (Exhibit 3.1 is incorporated by reference to Exhibit 3.1 to YNB's Annual Report on Form 10-K for the fiscal year ended December 31, 1997.) (Exhibit 3.2 is incorporated by reference to Exhibit 3.2 to the 1996 SB-2.) 5.1 Opinion of Pepper Hamilton LLP *10.1 Real property lease between the Bank and BYN, LLC for our branch located at 1041 Route 206, Bordentown, New Jersey. *10.2 Real property lease between the Bank and FYNB, LLC for our branch located in Raritan, New Jersey. *10.3 Real property lease between the Bank and Union Properties, LLC for our branch located at 1575 Brunswick Avenue, Lawrence, New Jersey. *10.4 Real property lease between the Bank and The Lalor Urban Renewal Limited Partnership for our branch located in the Lalor Plaza in Trenton, New Jersey. 10.5 Employment Contract between Registrant and Stephen F. Carman (Exhibit 10.5 is incorporated by reference to Exhibit 10.3 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2000) 10.6 Employment Contract between Registrant and James F. Doran (Exhibit 10.6 is incorporated by reference to Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2000) 10.7 Employment Contract between Registrant and Eugene C. McCarthy. (Exhibit 10.7 is incorporated by reference to Exhibit 10.5 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2001) 10.8 Employment Contract between Registrant and Mary C. O'Donnell . (Exhibit 10.8 is incorporated by reference to Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the fiscal year ended by December 31, 2000) 10.9 Employment Contract between Registrant and Frank Durand III. (Exhibit 10.9 is incorporated by reference to Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended by December 31, 2000) 10.10 Supplemental Executive Retirement Plan Summary for the benefit of Patrick M. Ryan. (Exhibit 10.8 is incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2001) 10.11 Supplemental Executive Retirement Plan Summary for the Benefit of Jay G. Destribats. (Exhibit 10.11 is incorporated by reference to Exhibit 10.9 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2001) *Previously filed II-3 10.12 1988 Stock Option Plan. (Exhibit 10.12 is incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997, as amended by Form 10-Q/A filed on August 15, 1997) 10.13 Supplemental Executive Retirement Plan (Exhibit 10.13 is incorporated by reference to Exhibit 10.11 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2001) 10.14 Directors' Deferred Compensation Plan (Exhibit 10.14 is incorporated by reference to the Registrant's Annual Report on Form 10-KSB/A filed July 25, 1995) *10.15 Supplemental Executive Retirement Plan Summary for the Benefit of Stephen F. Carman. 10.16 1997 Stock Option Plan (Exhibit 10.16 is incorporated by reference to the Registrant's Registration Statement on Form S-8 (Registration No. 333-28193)) 10.17 Employment contract between Registrant and Howard N. Hall (Exhibit 10.17 is incorporated by reference to Exhibit 10.15 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2000) 10.18 Employment contract between Registrant and Timothy J. Losch (Exhibit 10.18 is incorporated by reference to Exhibit 10.16 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2000) 10.19 Supplemental Executive Retirement Plan Summary for the Benefit of Timothy J. Losch. (Exhibit 10.19 is incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2001) 10.20 1994 Stock Option Plan (Exhibit 10.20 is incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1998, as amended by Form 10-Q/A filed June 9, 1998) 10.21 Lease agreement between Crestwood Construction and the Bank dated May 25, 1998. (Exhibit 10.21 is incorporated by reference to Exhibit 10.27 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1998) 10.22 Yardville National Bank Employee Stock Ownership Plan, as amended. (Exhibit 10.22 is incorporated by reference to the Registrant's Statement on Form S-8 (Registration No. 333-71741)) 10.23 Employment contract between Registrant and Stephen R. Walker (Exhibit 10.23 is incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002) 23.1 Consent of KPMG LLP 23.2 Consent of Pepper Hamilton LLP (included in Exhibit 5.1) *24.1 Power of Attorney II-4 Item 17. Undertakings Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes that: (i) for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bona fide offering thereof. (ii) for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (iii) for purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-5 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the Hamilton Township, State of New Jersey on October 15, 2002. YARDVILLE NATIONAL BANCORP By: /s/ Patrick M. Ryan --------------------------------------- Patrick M. Ryan, President and Chief Executive Officer
Name Title Date - ---------------------------- -------------------------------------- ------------------- /s/Jay G. Destribats Chairman of the Board October 15, 2002 --------------------------- Jay G. Destribats /s/Patrick M. Ryan President, Chief Executive Officer and October 15, 2002 --------------------------- Director (Principal Executive Officer) Patrick M. Ryan /s/Stephen F. Carman Treasurer (Principal Financial Officer October 15, 2002 --------------------------- and Principal Accounting Officer) Stephen F. Carman * Director October 15, 2002 --------------------------- C. West Ayres * Director October 15, 2002 --------------------------- Elbert G. Basolis, Jr. * Director October 15, 2002 --------------------------- Lorraine Buklad * Director October 15, 2002 ----------------------------- Anthony M. Giampetro, M.D.
II-6
* Director October 15, 2002 --------------------------- Sidney L. Hofing * Director October 15, 2002 --------------------------- Gilbert W. Lugossy * Director October 15, 2002 --------------------------- Louis R. Matlack * Director October 15, 2002 --------------------------- Martin Tuchman * Director October 15, 2002 --------------------------- F. Kevin Tylus * Director October 15, 2002 --------------------------- Christopher S. Vernon * By: /s/ Patrick M. Ryan --------------------------- Patrick M. Ryan Attorney-in-Fact
II-7 Exhibit Index 1.1 Form of Underwriting Agreement 5.1 Opinion of Pepper Hamilton LLP 23.1 Consent of KPMG LLP 23.2 Consent of Pepper Hamilton LLP (included in Exhibit 5.1) II-8 EX-1 3 ex1-1.txt FORM OF UNDERWRITING AGREEMENT 1,500,000 Shares YARDVILLE NATIONAL BANCORP Common Stock UNDERWRITING AGREEMENT ________, 2002 Legg Mason Wood Walker, Incorporated Sandler O'Neill & Partners, L.P. c/o Legg Mason Wood Walker, Incorporated 100 Light Street, 31st Floor Baltimore, MD 21202-1476 Dear Ladies and Gentlemen: Yardville National Bancorp, a New Jersey corporation (the "Company"), proposes to sell to you as the underwriters named in Schedule I hereto (the "Underwriters") an aggregate of 1,500,000 shares (the "Firm Stock") of the Company's common stock, no par value per share (the "Common Stock"). In addition, the Company proposes to grant to the Underwriters an option to purchase up to an additional 225,000 shares of Common Stock on the terms and for the purposes set forth in Section 2 hereof (the "Option Stock"). The Firm Stock and the Option Stock, if purchased, are hereinafter called the "Stock." This is to confirm the agreement concerning the purchase of the Stock from the Company by the Underwriters. 1. Company Representations and Warranties. The Company represents, warrants and agrees that: (a) A Registration Statement (as defined below) on Form S-3 (File No. 333-99269), with respect to the Stock (i) has been prepared by the Company in conformity with the requirements of the Securities Act of 1933, as amended (the "Act"), and the Rules and Regulations (as defined below) of the Securities and Exchange Commission (the "Commission") thereunder, (ii) has been filed by the Company with the Commission under the Act and (iii) has become effective under the Act. If any post-effective amendment to such Registration Statement has been filed with the Commission prior to the execution and delivery of this Agreement, the most recent such amendment has been declared effective by the Commission. Copies of such Registration Statement as amended to date (including all forms of the Preliminary Prospectus (as defined below) heretofore delivered to you) have been delivered by the Company to you. The Commission has not issued any order suspending the effectiveness of the Registration Statement or preventing or suspending the use of any Preliminary Prospectus or Prospectus (as defined below), and no proceedings for that purpose have been instituted or, to the Company's knowledge, threatened. The Company has complied in all material respects with all requests of the Commission for additional information to be included in the Registration Statement or in any Preliminary Prospectus or the Prospectus. As used in this Agreement, "Effective Time" means the date and the time as of which such Registration Statement, or the most recent post-effective amendment thereto, if any, was declared effective by the Commission; "Effective Date" means the date of the Effective Time; "Preliminary Prospectus" means each prospectus included in such Registration Statement, or amendments thereto, before the Effective Time and any Prospectus filed with the Commission by the Company with the consent of the Underwriters pursuant to Rule 424(a) of the Rules and Regulations; "Registration Statement" means such registration statement, including all exhibits and financial schedules thereto and any documents incorporated by reference therein, as amended at the Effective Time, including all information deemed to be a part thereof as of the Effective Time pursuant to paragraph (b) of Rule 430A of the Rules and Regulations; "Rules and Regulations" means the rules and regulations adopted by the Commission under either the Act or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as applicable; and "Prospectus" means the form of prospectus relating to the Stock as first filed with the Commission by the Company with the consent of the Underwriters pursuant to Rule 424(b) ("Rule 424(b)") of the Rules and Regulations. Reference made herein to any Preliminary Prospectus or to the Prospectus, as amended or supplemented, shall include all documents and information incorporated by reference therein. If the Company has filed an abbreviated registration statement to register additional Common Stock pursuant to Rule 462(b) under the Act (the "Rule 462 Registration Statement"), then any reference herein to the term "Registration Statement" shall be deemed to include such Rule 462 Registration Statement. -1- (b) The Registration Statement contains, and any post-effective amendment to the Registration Statement filed with the Commission after the Effective Time, the Prospectus and the Prospectus as amended or supplemented will contain, in all material respects, all statements which are required by the Act and the Rules and Regulations. On the Effective Date, the Registration Statement did not, and any post-effective amendment to the Registration Statement filed with the Commission after the Effective Time, the Prospectus and the Prospectus as amended or supplemented will not, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; provided that the Company makes no representation or warranty as to information contained in or omitted from the Registration Statement or the Prospectus in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Underwriter specifically for use in the preparation thereof. The documents which are incorporated by reference in the Registration Statement or any Preliminary Prospectus or the Prospectus or from which information is so incorporated by reference, when they became effective or were filed with the Commission, as the case may be (or, if an amendment with respect to any such documents was filed or became effective, when such amendment was filed or became effective), complied in all material respects with the requirements of the Act or the Exchange Act, as applicable, and the Rules and Regulations and did not contain any untrue statement of material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (c) Neither the Company nor any of its subsidiaries (as defined in Section 11) is, or with the giving of notice or lapse of time or both, will be, in violation of its corporate charter or by-laws or in default under any agreement, indenture or instrument to which the Company or any of its subsidiaries is a party or to which any of them is bound, or in violation of any law, rule or regulation, the effect of which violation or default would be material to the Company and its subsidiaries taken as a whole; the execution, delivery and performance of this Agreement will not conflict with, result in the creation or imposition of any lien, charge or encumbrance upon any of the assets of the Company or any of its subsidiaries pursuant to the terms of, or constitute a default under, any agreement, indenture or instrument, or result in a violation of the corporate charter or by-laws of the Company or any of its subsidiaries or any order, rule or regulation of any court or governmental agency having jurisdiction over the Company, any of its subsidiaries or any of their properties, the effect of which conflict, lien, default or violation would be material to the Company and its subsidiaries taken as a whole; and except as required by the Act, the Exchange Act, applicable state securities laws, The Nasdaq Stock Market, Inc. and the National Association of Securities Dealers, Inc., no consent, authorization or order of or filing or registration with, any court or governmental agency (including the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and any state regulatory agency having jurisdiction over the Company or any of its subsidiaries) is required for the execution, delivery and performance of this Agreement by the Company. -2- (d) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus and except as described therein, neither the Company nor its subsidiaries has incurred any material liability or obligation, direct or contingent, or entered into any material transaction, whether or not in the ordinary course of its business (other than loans made in the ordinary course of business), and there has not been any material change on a consolidated basis in the capital stock, or any increase in the short-term and long-term debt, or any issuance of options, warrants, convertible securities or other rights to purchase capital stock of the Company or its subsidiaries (except for options granted under the Company's existing stock option plans) or any material adverse change in, or any adverse development which materially affects, the business, franchises, assets, properties, condition (financial or other), results of operations or prospects of the Company or the Company and its subsidiaries taken as a whole. (e) Each of the Company and its subsidiaries holds good and marketable title to, or valid and enforceable leasehold interests in, all items of real and personal property which are material to the business of the Company and its subsidiaries taken as a whole, free and clear of all liens, encumbrances and claims which might materially interfere with the conduct of the business of the Company or the Company and its subsidiaries taken as a whole, and the Company and its subsidiaries own or have the right to use in accordance with the terms thereof all licenses, permits, consents, approvals or authorizations of and certificates from any public or governmental authority that are necessary for the ownership, maintenance and operation of the properties, assets and business operations of the Company or the Company and its subsidiaries taken as a whole, and that, if not obtained, could have a material adverse effect on the business, franchises, assets, properties, condition (financial or other), results of operations or prospects of the Company or the Company and its subsidiaries taken as a whole. Except as described in the Prospectus, each of the foregoing is valid and in full force and effect and no event has occurred and is continuing which permits, or after notice or lapse of time or both would permit, modifications or terminations of the foregoing which, in the aggregate, would have a material adverse effect on the business, franchises, assets, properties, condition (financial or other), results of operations or prospects of the Company or the Company and its subsidiaries taken as a whole. -3- (f) KPMG LLP, whose report appears in the Prospectus, are independent public accountants as required by the Act and the Rules and Regulations. (g) At the date or dates indicated in the Prospectus, the Company had the duly authorized and outstanding capitalization set forth under the caption "Capitalization" in the Prospectus and will have, as of the issuance of the Firm Shares on the First Delivery Date (as defined below), the as adjusted capitalization set forth under that heading. All the authorized shares of Common Stock, including the Stock, have been duly authorized, and all the issued and outstanding shares of Common Stock are, and all the shares of the Stock, when issued, delivered and paid for in the manner described in the Prospectus on the First Delivery Date and the Second Delivery Date (as defined below), if any (each as hereinafter defined), will be, validly issued and outstanding, fully paid and nonassessable with no personal liability attaching to the ownership thereof. None of the shares of the Stock to be sold by the Company when issued, sold and delivered in accordance with this Agreement will be subject to any lien, claim, encumbrance, preemptive rights or any other claim of any third party; and the Stock will conform to the description thereof contained in the Registration Statement under the caption "Description of Capital Stock." On the Effective Date, the First Delivery Date and Second Delivery Date, if any, there will be no options or warrants or other outstanding rights to purchase, agreements or obligations to issue or agreements or other rights to convert or exchange any obligation or security into, capital stock of the Company or securities convertible into or exchangeable for capital stock of the Company, except as described in the Prospectus or the grant of options after the date of the Prospectus under option plans of the Company. The information in the Prospectus insofar as it relates to all outstanding options and other rights to acquire securities of the Company as of the Effective Date is, and immediately prior to the First Delivery Date and the Second Delivery Date, if any, will be, complete and correct in all material respects. All previous offers and sales of the outstanding shares of capital stock of the Company were made in conformity with applicable federal, state or foreign securities laws (except where the failure to so conform would not, in the aggregate, have a material adverse effect on the business, franchises, assets, properties, condition (financial or other), results of operations or prospects of the Company or the Company and its subsidiaries taken as a whole). The certificates representing the Stock are in proper legal form under, and conform in all material respects to the requirements of, New Jersey corporate law. (h) The Common Stock (including the Stock) is registered pursuant to Section 12(g) of the Exchange Act. The issued and outstanding shares of Common Stock are included for quotation on the Nasdaq National Market. Neither the Company nor, to the knowledge of the Company, any other person has taken any action designed to cause, or likely to result in, the termination of the registration of the Common Stock under the Exchange Act. The Company has not received any notification from the Commission or The Nasdaq Stock Market, Inc. that either that agency or entity is contemplating terminating such registration or inclusion. -4- (i) Each of the Company and its subsidiaries has been duly incorporated, and is validly existing and in good standing under the laws of its respective jurisdiction of incorporation. Each of the Company and its subsidiaries is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which its ownership of property or the conduct of its business requires such qualification (except where the failure so to qualify would not have a material adverse effect on the business, franchises, assets, properties, condition (financial or other), results of operations or prospects of the Company or the Company and its subsidiaries taken as a whole) and has all power and authority necessary to own or hold its properties and to conduct the business in which it is engaged. All of the outstanding shares of capital stock of the subsidiaries of the Company have been duly authorized and validly issued, are fully paid and nonassessable, and are owned by the Company directly, or indirectly through wholly-owned subsidiaries, free and clear of any lien, pledge or encumbrance; provided, however, Yardville Capital Trust, Yardville Capital Trust II, Yardville Capital Trust III and YNB Realty, Inc. are owned in part by third parties other than the Company or any of its subsidiaries. The Yardville National Bank (the "Bank"), Yardville Capital Trust, Yardville Capital Trust II, Yardville Capital Trust III, Yardville National Investment Corporation, YNB Real Estate Holding Co., Inc., Brendan, Inc., YNB Financial Services, Inc., Nancy-Beth, Inc., YNB Realty, Jim Mary, Inc. and YNB Capital Development, Inc. are the only direct or indirect subsidiaries of the Company. The Company is duly registered as a financial holding company under the Gramm-Leach-Bliley Act. The deposit accounts of the Bank are insured up to the applicable limits by the Federal Deposit Insurance Corporation (the "FDIC") to the fullest extent permitted by law and the rules and regulations of the FDIC, and no proceeding for the revocation or termination of such insurance is pending or, to the knowledge of the Company or the Bank, threatened. (j) Except as described in the Registration Statement and the Prospectus, there is no material litigation or governmental proceeding, action or order pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries which might result in any material adverse change in the business, franchises, assets, properties, condition (financial or other), results of operations or prospects of the Company or the Company and its subsidiaries taken as a whole or which is required to be disclosed in the Registration Statement and the Prospectus. (k) The consolidated financial statements and schedules (including the related notes) of the Company and its subsidiaries included or incorporated by reference in the Registration Statement, any Preliminary Prospectus or the Prospectus present fairly, in all material respects, the financial condition and results of operations of the Company and its consolidated subsidiaries, at the dates and for the periods indicated, and have been prepared in conformity with generally accepted accounting principles applied, except as set forth in the Registration Statement and the Prospectus, on a consistent basis throughout the periods involved except as specified therein. The financial information included in the Prospectus under the caption "Financial Summary" presents fairly the information shown therein and has been compiled on a basis consistent with that of the audited financial statements incorporated by reference in the Prospectus. -5- (l) There is no contract or other document which is required by the Act or by the Rules and Regulations to be described in the Registration Statement, any Preliminary Prospectus or the Prospectus, to be filed as an exhibit to the Registration Statement, or to be incorporated by reference into the Prospectus which has not been described, filed or incorporated by reference as required. (m) There are no holders of securities of the Company who, by reason of the filing of the Registration Statement under the Act or the execution by the Company of this Agreement, have the right (other than a right which has been waived or satisfied) to request or demand that the Company register under the Act securities held by them except as set forth in the Registration Statement and the Prospectus. (n) The Company has not taken within the 90 day period preceding the date of this Agreement, and agrees that during the 90 day period following the date of this Agreement it will not take, directly or indirectly, any action which might reasonably be expected to cause or result in stabilization or manipulation of the price of the Common Stock of the Company. (o) The Company has all corporate power and authority necessary to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement has been duly authorized, executed and delivered by the Company and constitutes the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors' rights generally or by equitable principles (whether considered in an action at law or in equity) and except as the rights to indemnification or contribution hereunder may be limited by federal or state securities laws. (p) The conditions for use of Form S-3, set forth in the General Instructions thereto, have been satisfied, with respect to the offering of the Stock. (q) The documents incorporated or deemed to be incorporated by reference in the Registration Statement and Prospectus at the time they were filed with the Commission complied in all material respects with the requirements of the Exchange Act and the Rules and Regulations and did not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, not misleading. (r) The documents incorporated or deemed to be incorporated by reference in the Registration Statement and Prospectus when read together with the other information in the Prospectus and at the time the Registration Statement became effective, did not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, not misleading. (s) The Company and its subsidiaries have timely and properly prepared and filed all necessary federal, state, local and foreign tax returns which are required to be filed and have paid all taxes shown as due thereon and have paid all other taxes and assessments to the extent that the same shall have become due, except such as are being contested in good faith. The Company has no knowledge of any tax deficiency which has been or might be assessed against the Company or any of its subsidiaries which, if the subject of an unfavorable decision, ruling or finding, would have a material adverse effect on the business, franchises, assets, properties, condition (financial or otherwise), results of operations or prospects of the Company or the Company and its subsidiaries taken as a whole. -6- (t) Other than as contemplated by this Agreement and as disclosed in the Prospectus, the Company has not incurred any liability for any finder's or broker's fee or agent's commission in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated herein. (u) None of the Company or any of its subsidiaries, or any other person, if any, who controls the Company or any of its subsidiaries, within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, has, directly or indirectly, while acting on behalf of such Company or subsidiary (i) used any corporate funds for unlawful contributions, gifts, entertainment, or other unlawful expenses relating to political activity; (ii) made any unlawful contribution to any candidate for foreign or domestic office, or to any foreign or domestic government officials or employees or other persons charged with similar public or quasi-public duties, other than payments required or permitted by the laws of the United States or any jurisdiction thereof or to foreign or domestic political parties or campaigns from corporate funds, or failed to disclose fully any contribution in violation of law; (iii) violated any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any other payment of funds of the Company or any of its subsidiaries or retained any funds which (1) constitute a violation of any law, rule or regulation, (2) was or is required to be disclosed in the Prospectus pursuant to the requirements of the Act or the applicable Rules and Regulations and (3) would have a material adverse effect on the business, franchises, assets, properties, condition (financial or other), results of operations or prospects of the Company or the Company and its subsidiaries taken as a whole. (v) The Company and its subsidiaries maintain insurance covering in all respects their properties, personnel and business. Such insurance insures against such losses and risks as are adequate to protect in all material respects the Company and its subsidiaries and their businesses. Neither the Company nor any of its subsidiaries has received notice from any insurer or agent of such insurer that substantial capital improvements or other expenditures shall have to be made in order to continue such insurance. All such insurance is outstanding and duly in force and with such exceptions as would not have a material adverse effect on the business, franchises, assets, properties, condition (financial or other), results of operations or prospects of the Company or the Company and its subsidiaries taken as a whole. (w) Neither the Company nor any entity that, together with the Company, is or was at any time treated as a single employer under Section 414 of the Internal Revenue Code of 1986, as amended (the "Code") or Section 4001 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") (collectively, an "ERISA Affiliate") has any liability under any "employee benefit plan" as defined in Section 3(3) of ERISA or any other benefit arrangement, obligation or practice, including employment agreements, severance policies, bonus plans, stock option plans or agreements, stock grants or stock purchase plans (the "Employee Plans"), other than liability for contributions to, provision of benefits under and/or administration of such Employee Plans in the ordinary course of business or liability that would not, in the aggregate, have a material adverse effect on the business, franchises, assets, properties, condition (financial or other), results of operations or prospects of the Company or the Company and its subsidiaries taken as a whole. The Employee Plans of the Company and each of its ERISA Affiliates, if any, have been operated in compliance with the applicable provisions of ERISA, the Code, all regulations, rulings and announcements promulgated or issued thereunder and all other applicable governmental laws and regulations (the "Authorities"), except where the failure to be in compliance would not, in the aggregate, have a material adverse effect on the business, franchises, assets, properties, condition (financial or other), results of operations or prospects of the Company or the Company and its subsidiaries taken as a whole, or may be brought into compliance with such Authorities without having a material adverse effect on the business, franchises, assets, properties, condition (financial or other), results of operations or prospects of the Company or the Company and its subsidiaries taken as a whole. No reportable event under Section 4043(c) of ERISA has occurred with -7- respect to any Employee Plan of the Company or any of its ERISA Affiliates for which the reporting requirements have not been waived by the Pension Benefit Guaranty Corporation. Neither the Company nor any of its ERISA Affiliates have contributed to or had any liability with respect to a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA. No prohibited transaction under Section 406 of ERISA or Section 4975 of the Code, for which an exemption does not apply or which has not been corrected in accordance with procedures promulgated by the Internal Revenue Service and the Department of Labor, has occurred with respect to any Employee Plan of the Company or any of its ERISA Affiliates. There are no pending or, to the knowledge of the Company, threatened claims by or on behalf of any Employee Plan, by any employee or beneficiary covered under any such Employee Plan or by any governmental authority or otherwise involving such Employee Plans or any of their respective fiduciaries (other than for routine claims for benefits). All Employee Plans that are group health plans have been operated in material compliance with the group health plan continuation coverage requirements of Section 4980B of the Code. (x) No labor dispute with the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is imminent or has been threatened, which may reasonably be expected to result in a material adverse effect on the business, franchises, assets, properties, condition (financial or other), results of operations or prospects of the Company or the Company and its subsidiaries taken as a whole, or which is required to be disclosed in the Prospectus. None of the Company's or any of its subsidiaries' employees is covered by a collective bargaining agreement and, to the Company's knowledge, no union organizing activity exists with respect to such employees. (y) Neither the Company nor any of its subsidiaries is an "investment company" or an entity "controlled" by an "investment company" within the meaning of such terms under the Investment Company Act of 1940 and the rules and regulations thereunder. (z) The Company and each of its subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurances that in all material respects (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. -8- (aa) The Company and each of its subsidiaries each own or possess the right to use all patents, patent rights, trademarks, trade names, service marks, service names, copyrights, license rights, know-how (including trade secrets and other unpatented and unpatentable proprietary or confidential information, systems or procedures) and other intellectual property rights ("Intellectual Property") necessary to carry on each of their businesses as currently conducted. Neither the Company nor any of its subsidiaries has received notice of violation of any Intellectual Property of any other person or entity, and, to the Company's knowledge, neither the Company nor any of its subsidiaries has infringed any Intellectual Property of any other person or entity. The Company and its subsidiaries have taken all reasonable steps necessary to protect the Company's and its subsidiaries' interest in their trade secrets and confidential information, except for the failure to take reasonable steps that would not have a material adverse effect on the business, franchises, assets, properties, condition (financial or other), results of operations or prospects of the Company or the Company and its subsidiaries taken as a whole. There are no outstanding options, licenses or agreements of any kind relating to the Intellectual Property of the Company and its subsidiaries that are required to be described in the Prospectus and are not so described. The Company and its subsidiaries are not a party to or bound by any options, licenses or agreements with respect to the Intellectual Property of any other person or entity that are required to be set forth in the Prospectus and are not so set forth. No technology employed by the Company or any of its subsidiaries has been obtained or is being used by the Company or any of its subsidiaries in material violation of any contractual obligation binding the Company or any of its subsidiaries or, to the Company's knowledge, binding any of the Company's or its subsidiaries' officers, directors or employees or, to the Company's knowledge, does such use violate in any material respects the rights of any third parties. None of the Company or any of its subsidiaries have received any written or oral communications alleging that the Company or any subsidiary has violated, infringed or conflicted with, or, by conducting its business as currently conducted, would violate, infringe or conflict with, any of the Intellectual Property of any other person or entity. The Company knows of no infringement by others of the Intellectual Property owned by the Company or any of its subsidiaries. 2. Purchase of the Stock by the Underwriters. On the basis of the representations and warranties contained in, and subject to the terms and conditions of, this Agreement, the Company agrees to sell the Firm Stock to the Underwriters, and each of the Underwriters, severally and not jointly, agrees to purchase the number of shares of the Firm Stock set forth opposite that Underwriter's name in Schedule I hereto. In addition, the Company grants to the Underwriters, solely for the purpose of covering over-allotments in the sale of the Firm Stock, an option to purchase all or any portion of the Option Stock exercisable as provided in Section 4 hereof. Shares of Option Stock shall be purchased severally for the account of each Underwriter in the proportion that the number of shares of Firm Stock set forth opposite the name of such Underwriter in Schedule I hereto bears to the total number of shares of the Firm Stock to be purchased by the Underwriters pursuant to this Agreement, except that the respective purchase obligations of each Underwriter shall be adjusted so that no Underwriter shall be obligated to purchase Option Stock other than in full share amounts. The price of both the Firm Stock and the Option Stock to be paid by the Underwriters to the Company shall be $______ per share. -9- The Underwriters are to make a public offering of the Firm Stock and such of the Option Stock as the Underwriters may determine on or as soon after the Effective Date as the Underwriters deem it advisable for the Underwriters so to do. The Stock is to be initially offered to the public at the public offering price set forth on the cover page of the Prospectus (such price being hereinafter called the "public offering price"). The Underwriters may from time to time increase or decrease the public offering price after the initial public offering to such extent as the Underwriters, in their sole discretion, deem advisable. The Underwriters may enter into one or more agreements as the Underwriters, in their sole discretion deem advisable, with one or more broker-dealers who shall act as dealers in connection with such public offering. 3. Default by the Underwriters. If, on the First Delivery Date or the Second Delivery Date, as the case may be, any Underwriter defaults in the performance of its obligations under this Agreement and the total number of shares of the Firm Stock or Option Stock, as the case may be, which the defaulting Underwriter or Underwriters agreed but failed to purchase does not exceed 15% of the number of shares of Firm Stock or Option Stock, as the case may be, covered hereby, the remaining non-defaulting Underwriters shall be obligated, severally, to purchase the Firm Stock or the Option Stock, as the case may be, which the defaulting Underwriter agreed but failed to purchase on such date in the respective proportions which the number of shares of the Firm Stock set forth opposite the name of each remaining non-defaulting Underwriter in Schedule I hereto bears to the total number of shares of the Firm Stock set forth opposite the names of all the remaining non-defaulting Underwriters in Schedule I hereto. If the aggregate number of shares of Firm Stock or Option Stock, as the case may be, with respect to which such default shall occur exceeds 15% of the Firm Stock or Option Stock, as the case may be, covered hereby, the remaining non-defaulting Underwriters, or those other underwriters satisfactory to the non-defaulting Underwriters who so agree, shall have the right, but shall not be obligated, to purchase, in such proportion as may be agreed upon among them, all the Firm Stock or all the Option Stock, as the case may be, to be purchased under this Agreement on such date. If the remaining Underwriters or other underwriters satisfactory to the remaining Underwriters do not elect to purchase the Stock which the defaulting Underwriter or Underwriters agreed but failed to purchase, then this Agreement shall terminate without liability on the part of any non-defaulting Underwriter or the Company (except that the Company will continue to be liable for the payment of expenses as set forth in Section 5(l) and the indemnity and contribution provisions contain in Section 6), unless the Company and the remaining non-defaulting Underwriters make an election in writing within 24 hours after the First Delivery Date or the Second Delivery Date, as the case may be, to proceed with the offering contemplated by this Agreement notwithstanding such default. In the event that the Company and the remaining non-defaulting Underwriters so elect, each such remaining non-defaulting Underwriter shall continue to be obligated, upon the conditions set forth in this Agreement and subject to the provisions of the next paragraph, to purchase (severally and not jointly) the number of shares of Firm Stock and Option Stock, as the case may be, provided for by Section 2 hereof. -10- Nothing contained herein shall relieve a defaulting Underwriter of any liability it may have to the Company for damages caused by its default. If other underwriters are obligated or agree to purchase the Stock of a defaulting or withdrawing Underwriter, or the Company and the remaining non-defaulting Underwriters elect to proceed with the offering contemplated hereby notwithstanding such default, either the remaining Underwriters or the Company may postpone the First Delivery Date or the Second Delivery Date, as the case may be, for up to seven full business days in order to effect any changes that, in the opinion of counsel for the Company or counsel for the Underwriters, may be necessary in the Registration Statement, the Prospectus or in any other document or agreement, and to file promptly any necessary amendments or supplements to the Registration Statement or the Prospectus. 4. Delivery of Stock. Payment for the Firm Stock shall be made in Federal (Same day) funds to an account designated by the Company against delivery of certificates therefor to the Underwriters. Such payments and delivery are to be made through the facilities of The Depository Trust Company at 10:00 a.m., New York time, on the third business day after the date of this Agreement, such date and time are sometimes referred to as the "First Delivery Date". Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligation of each Underwriter hereunder. Notwithstanding any other provision to the contrary, the First Delivery Date and the place of delivery of and payment for the Firm Stock may be varied by agreement between the Company and the Underwriters. At any time on or before the thirtieth day after the date on which this Agreement becomes effective, the option granted in Section 2 may be exercised by written notice being given by the Underwriters to the Company. Such notice shall set forth the aggregate number of shares of Option Stock as to which the option is being exercised, the names in which the shares of Option Stock are to be registered, the denominations in which the shares of Option Stock are to be issued and the date and time, as determined by the Underwriters, when the shares of Option Stock are to be delivered (the "Second Delivery Date"); provided, however, that the Second Delivery Date shall not be earlier than the First Delivery Date nor earlier than the second business day after the date on which the option shall have been exercised nor later than the third business day after the date on which the option shall have been exercised. Delivery of and payment for the Option Stock shall be made in Federal (Same day) funds to an account designated by the Company against delivery of certificates therefor to the Underwriters through the facilities of The Depository Trust Company at 10:00 a.m., New York time, on the Second Delivery Date. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligation of each Underwriter hereunder. Notwithstanding any other provision to the contrary, the Second Delivery Date and the place of delivery of and payment for the Option Stock may be varied by agreement between the Company and the Underwriters. -11- 5. Covenants. The Company covenants and agrees with the Underwriters: (a) To furnish promptly to each of the Underwriters and to counsel for the Underwriters a signed copy of the Registration Statement as originally filed, and each amendment thereto filed with the Commission, including all consents and exhibits filed therewith and any document filed under the Exchange Act and deemed to be incorporated by reference into any Preliminary Prospectus or the Prospectus; (b) To deliver promptly to the Underwriters and to each Underwriter such number of conformed copies of the Registration Statement as originally filed and each amendment thereto (in each case excluding exhibits other than this Agreement), and of each Preliminary Prospectus, the Prospectus and any amended or supplemented Prospectus as the Underwriters may reasonably request; (c) To file promptly with the Commission the Prospectus pursuant to Rule 424(b)(l) of the Rules and Regulations (or, if consented to by the Underwriters, pursuant to Rule 424(b)(4)) and any amendment to the Registration Statement or the Prospectus or any supplement to the Prospectus and file any document under the Exchange Act before the termination of the offering of the Stock by the Underwriters if such document would be deemed to be incorporated by reference into any Preliminary Prospectus or the Prospectus that may, in the reasonable judgment of the Company and the Underwriters, be required by the Act or requested by the Commission and approved by the Underwriters; (d) Prior to filing with the Commission any Preliminary Prospectus, any amendment to the Registration Statement, any supplement to the Prospectus, any Prospectus pursuant to Rule 424 of the Rules and Regulations, or any other document under the Exchange Act if such document would be deemed to be incorporated by reference into any Preliminary Prospectus or the Prospectus, to furnish a copy thereof to the Underwriters and counsel for the Underwriters and obtain the consent of the Underwriters to the filing, which consent shall not be unreasonably withheld; (e) To advise the Underwriters promptly (i) when any post-effective amendment to the Registration Statement becomes effective, (ii) of any request or proposed request by the Commission for an amendment to the Registration Statement, a supplement to the Prospectus or for any additional information, (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or preventing or suspending the use of any Preliminary Prospectus or the Prospectus or the initiation or threat of any stop order proceeding, (iv) of receipt by the Company of any notification with respect to the suspension of the qualification of the Stock for sale in any jurisdiction or the initiation or threat of any proceeding for that purpose, and (v) during the period when the Prospectus is required to be delivered under the Act or the Exchange Act, of the happening of any event which makes untrue any statement of a material fact made in the Registration Statement or the Prospectus, or which requires the making of a change in the Registration Statement or the Prospectus in order to make any material statement therein not misleading; (f) If the Commission shall issue a stop order suspending the effectiveness of the Registration Statement, to make every reasonable effort to obtain the lifting of that order at the earliest possible time; -12- (g) As soon as practicable after the Effective Date, but not later than the 45th day following the end of the fiscal quarter first occurring after the first anniversary of the Effective Date, to make generally available to its security holders and to deliver to the Underwriters an earning statement, conforming with the requirements of Section 11(a) of the Act, covering a period of at least twelve months beginning after the effective date of the Registration Statement; (h) For a period of five years from the Effective Date, to furnish to the Underwriters copies of all reports and financial statements filed with the Commission pursuant to the Exchange Act or any rule or regulation of the Commission thereunder; (i) To apply the net proceeds of the sale of the Stock as set forth in the Prospectus; (j) To cause each officer and each director of the Company and use its best efforts to cause each shareholder who owns beneficially two percent or more of the outstanding Common Stock of the Company to furnish to you, on or prior to the date of this Agreement, a letter or letters, substantially in the form attached hereto as Exhibit 1 hereto (the "Lock-up Letters"); (k) Without the prior written consent of the Underwriters (which consent shall not be unreasonably withheld), not to sell or otherwise dispose of, or offer or contract to sell any shares of Common Stock or sell or grant any rights, options, warrants or securities convertible with respect to Common Stock within 180 days after the Effective Date except for (i) the sale of the Stock to the Underwriters pursuant to this Agreement, (ii) the sale of shares of Common Stock and/or the grant or exercise of options pursuant to the Company's stock option and other employee benefit plans, (iii) the issuance of shares of Common Stock in connection with the exercise of outstanding warrants to purchase Shares of Common Stock and (iv) the issuance by the Company of its securities in connection with a merger, acquisition or similar transaction; and (l) To pay (i) the costs incident to the authorization, issuance, sale and delivery of the Stock and any taxes payable in that connection; (ii) the costs incident to the preparation, printing and filing under the Act, and mailing and delivery, of the Registration Statement and any amendments and exhibits thereto, including fees payable to the Commission; (iii) the costs of printing and distributing the Registration Statement as originally filed and each amendment and post-effective amendment thereof (including exhibits), any Preliminary Prospectus, the Prospectus and any amendment or supplement to the Prospectus as provided in this Agreement and the costs of printing and distributing this Agreement and other underwriting documents, including Underwriters' Questionnaires, Underwriters' Powers of Attorney, Agreements Among Underwriters and Selected Dealer Agreements; (iv) the costs of the listing or qualification of the Stock on the Nasdaq National Market and related filing fees with the National Association of Securities Dealers, Inc. (excluding fees and disbursements of counsel to the Underwriters); (v) the expenses associated with the issuance, transfer and delivery of the Stock including issue and transfer taxes, if any; (vi) the travel expenses of the Company in connection with informational meetings and presentations for the brokerage community and institutional investors; (vii) reimbursement of the legal fees and expenses of -13- counsel to the Underwriters in an amount not to exceed $50,000; (viii) the costs associated with settlement in same day funds, if desired by the Company; (ix) registrar and transfer agent costs and fees; (x) the fees and expenses, if any, of qualifying the Stock under the securities laws of the states or other jurisdictions where the Stock is to be offered or sold (including the costs of preparing, printing and mailing the "Blue Sky" surveys and the fees and disbursements of counsel to the Underwriters in connection therewith); (xi) the costs of printing certificates for the Stock; (xii) the reasonable costs of advertising the offering, including the placement of "tombstone" advertisements; and (xiii) all other costs and expenses incident to the performance of the Company's obligations under this Agreement. It is understood, however, that, except as provided in this Section and in Section 6 hereof, the Underwriters shall pay their own costs and expenses, including the fees and expenses of their counsel. If the sale of the Stock provided for herein is not consummated (x) by reason of acts of the Company, or the Underwriters with cause, pursuant to Section 7(a) hereof which prevent this Agreement from becoming effective, (y) by reason of any failure, refusal or inability on the part of the Company to perform any agreement on its part to be performed pursuant to this Agreement or (z) for any other reason, including the nonfulfillment of any condition of the Underwriters' obligations set forth in Section 7(b) or Section 8 of this Agreement (unless such failure to perform such agreement or fulfill such condition is due to the default without cause of any Underwriter or its counsel), then the Company shall reimburse the several Underwriters for all reasonable, accountable out-of-pocket expenses (including reasonable fees and expenses of their counsel as set forth above in this paragraph) incurred by them in connection with this Agreement and the proposed purchase of the Stock, but in an amount not to exceed $100,000 in the aggregate. (m) During the period when the Prospectus is required to be delivered under the Act or the Exchange Act, the Company will cooperate with the Underwriters in endeavoring to qualify the Stock for sale under the securities laws of such jurisdictions as the Underwriters may reasonably have designated in writing and will make such applications, file such documents, and furnish such information as may be reasonably required for that purpose, provided that the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction where it is not now so qualified or required to file such a consent. During the period when the Prospectus is required to be delivered under the Act or the Exchange Act, the Company will, from time to time, prepare and file such statements, reports and other documents, as are or may be required to continue any such qualifications in effect for so long as the Underwriters may reasonably request for distribution of the Stock. 6. Indemnification and Contribution. (a) The Company and the Bank, jointly and severally, shall indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of the Act from and against any loss, claim, damage or liability, joint or several, and any action in respect thereof, to which that Underwriter or controlling person may become subject, under the Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, any breach of the Company's representations and warranties made in this Agreement or any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement, the Prospectus or the Registration Statement or Prospectus as amended or supplemented, or in any blue sky application or other document filed in any state or other jurisdiction in order to qualify any or all of the Stock under the securities laws thereof (any such application, document or information being hereinafter referred to as a "Blue Sky Application"), or any failure of the Company or its subsidiaries to take all reasonable steps to protect (i) the Company's and its subsidiaries' Intellectual Property and (ii) all confidential information of customers of the Company or its subsidiaries, or any failure to comply with any federal, state or foreign laws or regulations that has occurred, or arises out of, or is based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse each Underwriter and each such controlling person for any legal and other expenses reasonably incurred by that Underwriter or controlling person in investigating or defending or preparing to defend against any such loss, -14- claim, damage, liability or action, notwithstanding the possibility that payments for such expenses might later be held to be improper in which case the person receiving them shall promptly refund them; provided, that neither the Company nor the Bank shall be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Prospectus or in the Registration Statement or the Prospectus or any amendment or supplement thereto or in any Blue Sky Application in reliance upon and in conformity with written information furnished to the Company through the Underwriters by or on behalf of any Underwriter specifically for inclusion therein; and provided further, that, as to any Preliminary Prospectus, this indemnity agreement shall not inure to the benefit of any Underwriter or any person controlling that Underwriter on account of any loss, claim, damage, liability or action arising from the sale of Stock to any person by that Underwriter if that Underwriter failed to send or give a copy of the Prospectus, as the same may be amended or supplemented, to that person within the time required by the Act, and the untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact in such Preliminary Prospectus was corrected in the Prospectus, unless such failure resulted from noncompliance by the Company with Section 5(b), 5(c) or 5(d) hereof. The foregoing indemnity agreement is in addition to any liability which the Company or the Bank may otherwise have to any Underwriter or any controlling person of that Underwriter. (b) Each Underwriter, severally but not jointly, shall indemnify and hold harmless the Company, each of its directors, each of its officers who signed the Registration Statement, and any person who controls the Company within the meaning of the Act, from and against any loss, claim, damage or liability, or any action in respect thereof to which the Company or any such director, officer or controlling person may become subject, under the Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement, the Prospectus or the Registration Statement or Prospectus as amended or supplemented, or in any Blue Sky Application, or arises out of, or is based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of that Underwriter specifically for inclusion therein, and shall reimburse the Company for any legal and other expenses reasonably incurred by the Company or any such director, officer or controlling person in investigating or defending or preparing to defend against any such loss, claim, damage, liability or action, notwithstanding the possibility that payments for such expenses might later be held to be improper, in which case the person receiving them shall promptly refund them. The foregoing indemnity agreement is in addition to any liability which any Underwriter may otherwise have to the Company, or any of its directors, officers or controlling persons. -15- (c) Promptly after receipt by an indemnified party under this Section 6 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 6, notify the indemnifying party in writing of the claim or the commencement of that action, provided that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 6. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein, and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 6 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided that the Underwriters shall have the right to employ separate counsel to represent those Underwriters and their respective controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Underwriters against the Company and/or the Bank under this Section 6 if, in the reasonable judgment of the Underwriters, it is advisable for those Underwriters and controlling persons to be represented by separate counsel, and in that event the fees and expenses of such separate counsel shall be paid by the Company. It is understood, however, that the Company shall not, in connection with any one such claim or action (or separate but substantially similar or related claims or actions in the same jurisdiction) arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one such separate firm of attorneys for all such Underwriters and their respective controlling persons. Such firm shall be designated in writing by the Underwriters. An indemnifying party shall not be obligated to reimburse an indemnified party hereunder for any amount paid to effect settlement of any action or claim unless such settlement shall have been consented to in writing by the indemnifying party, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. (d) If the indemnification provided for in this Section 6 shall for any reason be unavailable to an indemnified party under Section 6(a) or 6(b) in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Stock or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Underwriters on the other with respect to the statements or omissions which resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Stock (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriters with respect to such offering, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged -16- omission to state a material fact relates to information supplied by the Company or the Underwriters, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section were to be determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof referred to above in this Section shall be deemed to include, for purposes of this Section, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Stock underwritten by it and distributed to the public was offered to the public exceeds that amount of any damages which such Underwriter has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute as provided in this Section are several in proportion to their respective underwriting obligations and not joint. Each party entitled to contribution agrees that upon the service of a summons or other initial legal process upon it in any action instituted against it in respect to which contribution may be sought, it shall promptly give written notice of such service to the party or parties from whom contribution may be sought, but the omission to so notify such party or parties of any such service shall not relieve the party from whom contribution may be sought for any obligation it may have otherwise than under this Section. (e) The indemnity and contribution agreements contained in this Paragraph and the representations, warranties and agreements of the Company in Sections 1 and 5 shall survive the delivery of the Stock and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party. 7. Effective Date and Termination. (a) This Agreement shall become effective at 10:00 A.M., New York City time, on the first full business day following the date on which this Agreement is executed, or at such earlier time after the Registration Statement becomes effective as the Underwriters shall release the Firm Stock for public offering. The Underwriters shall notify the Company immediately after they have taken any action which causes this Agreement to become effective. Until this Agreement is effective, it may be terminated by the Company by notice to the Underwriters or by the Underwriters by notice to the Company. For purposes of this Agreement, the release of the public offering of the Firm Stock shall be deemed to have been made when the Underwriters make, by telegram or otherwise, firm offers of the Firm Stock to securities dealers or release for publication a newspaper advertisement relating to the Firm Stock, whichever occurs first. -17- (b) The obligations of the Underwriters hereunder may be terminated by the Underwriters, in their absolute discretion, by notice given to and received by the Company prior to delivery of and payment for the Stock, if prior to that time (i) there has been a material adverse change in the business, franchises, assets, properties, condition (financial or other), results of operations or prospects of the Company or the Company and its subsidiaries taken as a whole, (ii) trading in securities generally on the New York Stock Exchange, the American Stock Exchange, the Nasdaq National Market, or the over-the-counter market shall have been suspended, or trading in the Common Stock is suspended for two consecutive hours or more, or minimum prices shall have been established on either of such exchanges or such market, (ii) a general banking moratorium shall have been declared by federal or New Jersey state authorities, (iii) the United States becomes engaged in hostilities or there is a significant escalation of existing hostilities involving the United States or there is a declaration of a national emergency or war by the United States, (iv) there shall have occurred any material adverse change in the general economic, political or financial conditions in the United States or elsewhere or any other substantial national or international calamity or emergency and, in the reasonable judgment of the Underwriters, the effect of any such adverse change, calamity or emergency makes it impractical or inadvisable to proceed with the payment for and delivery of the Stock, (v) the enactment, publication, decree or other promulgation of any federal or state statute, regulation, rule or order of any court or other governmental authority which in the opinion of the Underwriters materially and adversely affects or will materially and adversely affect the business, franchises, assets, properties, condition (financial or other), results of operations or prospects of the Company or the Company and its subsidiaries taken as a whole; (vi) the Company shall have failed, refused or been unable, at or prior to the First Delivery Date or the Second Delivery Date, to perform any agreement on its part to be performed hereunder, or (vii) any other condition of the obligation of the Underwriters hereunder is not fulfilled. (c) Any termination of this Agreement pursuant to this Section 7 shall be without liability of any party to any other party, except as provided in Sections 5(l) and 6 hereof. 8. Additional Terms and Conditions. The respective obligations of the Underwriters hereunder are subject to the accuracy, when made and on the First Delivery Date and the Second Delivery Date, if any, of the representations and warranties of the Company contained herein, to performance by the Company of its obligations hereunder, and to each of the following additional terms and conditions: (a) The Prospectus shall have been timely filed with the Commission in accordance with Section 5(c) of this Agreement; at or before the First Delivery Date and the Second Delivery Date, if any, no stop order suspending effectiveness of the Registration Statement shall have been issued and prior to that time no stop order proceeding shall have been initiated or threatened by the Commission; any request of the Commission for inclusion of additional information in the Registration Statement or the Prospectus or otherwise shall have been complied with to the reasonable satisfaction of counsel to the Underwriters; and the Company shall not have filed with the Commission the Prospectus or any amendment or supplement to the Registration Statement or the Prospectus without the consent of the Underwriters. -18- (b) No Underwriter shall have discovered and disclosed to the Company on or prior to the First Delivery Date or the Second Delivery Date, if any, that the Registration Statement or the Prospectus or any amendment or supplement thereto contains an untrue statement of a fact which, in the reasonable opinion of Morgan, Lewis & Bockius LLP, counsel for the Underwriters, is material or omits to state a fact which, in the opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading. (c) All corporate proceedings and other legal matters incident to the authorization, form and validity of this Agreement, the Stock and the form of the Registration Statement and the Prospectus, other than financial statements and other financial data, and all other legal matters relating to this Agreement and the transactions contemplated hereby shall be reasonably satisfactory in all respects to Morgan, Lewis & Bockius LLP, counsel for the Underwriters, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters. (d) Pepper Hamilton LLP, counsel for the Company, shall have furnished to the Underwriters their opinion addressed to the Underwriters (and stating that it may be relied upon by the Underwriters) and dated the First Delivery Date and the Second Delivery Date, if any, as counsel to the Company to the effect that: (i) The Company is a registered financial holding company under the Gramm-Leach-Bliley Act, and each of the Company and its subsidiaries listed on Exhibit A to such counsel's opinion (the "Subsidiaries"), other than the Bank and Yardville Capital Trust, Yardville Capital Trust II and Yardville Capital Trust III (collectively, the "Trusts"), is an active business and is in good standing under the laws of the State of New Jersey, and to such counsel's knowledge, each of the Company and such Subsidiaries has all corporate power and authority necessary to own its properties and conduct the business in which it is engaged as described in the Prospectus; (ii) The Bank is a national banking association authorized to transact the business of banking under the laws of the United States of America, and to such counsel's knowledge, the Bank has all requisite power and authority necessary to own its properties and conduct the business in which it is engaged as described in the Prospectus; (iii) Each of the Trusts is a statutory business trust duly formed and in good standing under the laws of the State of Delaware, and to such counsel's knowledge, each of the Trusts has all trust power and authority necessary to own its properties and conduct the business in which it is engaged as described in the Prospectus. -19- (iv) To such counsel's knowledge, the Subsidiaries are the only subsidiaries of the Company, and except as may be disclosed in the Registration Statement and the Prospectus, all outstanding shares of capital stock of the Subsidiaries are, to such counsel's knowledge, owned, directly or indirectly, by the Company, free and clear of any lien, pledge and encumbrance or any claim of any third party and are duly authorized, validly issued, fully paid and non-assessable; provided, however, (x) the Trusts and YNB Realty, Inc. are each owned in part by third parties other than the Company or any of the Subsidiaries and (y) the capital stock of the Bank is assessable in accordance with the National Bank Act, 12 U.S.C. ss.55; (v) The Company and each of the Subsidiaries are duly qualified to transact business in all jurisdictions in which the conduct of their business, to such counsel's knowledge, requires such qualifications, or in which the failure to qualify would have a material adverse effect on the business of the Company or any of the Subsidiaries. (vi) The Stock has been duly authorized; upon payment for the Stock pursuant to the terms of this Agreement, the Stock, will be validly issued, fully paid and non-assessable, with no personal liability attaching to the ownership thereof; (vii) Other than (A) shares of Common Stock and/or options granted under the Company's stock option or other employee benefit plans, (B) shares of Common Stock and/or warrants to purchase shares of Common Stock issued to investors in private placements by the Company on June 23, 2000 and August 22, 2001, (C) transfer restrictions imposed by the Lock-up Letters, (D) transfer restrictions imposed by the Act and (E) the option of the Underwriters to purchase the Option Stock, there are no preemptive or other rights to subscribe for or to purchase, nor is there any restriction upon the voting or transfer of, any shares of the Common Stock, including the Stock, pursuant to the Company's Restated Certificate of Incorporation, as amended, or By-laws or any agreement or other instrument known to such counsel; (viii) The Stock conforms as to legal matters to the statements concerning the Common Stock of the Company contained in the Prospectus under the caption "Description of Capital Stock;" (ix) The Registration Statement and all post-effective amendments thereto, if any, filed prior to the date of such counsel's opinion are effective under the Act; any required filing of the Prospectus pursuant to Rule 424(b) has been made within the time period required by Rule 424(b); to such counsel's knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceeding for that purpose is pending or threatened by the Commission; (x) The Registration Statement and the Prospectus (excluding the financial statements, notes thereto and schedules therein and other financial and statistical information, as to which we express no opinion) comply as to form in all material respects with the requirements of the Act and the Rules and Regulations, and the conditions for use of Form S-3, set forth in the General Instructions thereto, have been satisfied, with respect to the offering of the Stock; -20- (xi) Such counsel has no knowledge of any litigation or any governmental proceeding pending or threatened against the Company or any of the Subsidiaries or the results of any governmental audit, review or survey which would adversely affect the transactions contemplated by this Agreement or which is required to be disclosed in the Prospectus which is not disclosed and correctly summarized therein; (xii) Such counsel has no knowledge of any contracts or other documents which are required by the Act or the Rules and Regulations to be described in the Registration Statement or Prospectus, to be filed as exhibits to the Registration Statement or to be incorporated by reference into the Registration Statement or Prospectus which have not been described, filed or incorporated by reference as required; (xiii) Neither the Company nor any of the Subsidiaries is in violation of its corporate charter, by-laws, articles of association, certificate of trust or trust agreement, as applicable, or to such counsel's knowledge, neither the Company nor any of the Subsidiaries is in default under any agreement, indenture or instrument, or in violation of any law, rule or regulation, other than any violation described in the Prospectus, the effect of which violation or default would have a material adverse effect on the Company or the Company and the Subsidiaries taken as a whole; (xiv) The Company has full corporate power and authority to execute, deliver and perform this Agreement; this Agreement has been duly authorized, executed and delivered by the Company and constitutes the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors' rights generally or by equitable principles (whether considered in an action at law or in equity) and except as the rights to indemnification or contribution hereunder may be limited by federal or state securities laws; the execution, delivery and performance of this Agreement by the Company will not conflict with, or result in the creation or imposition of any lien, charge or encumbrance upon any of the assets of the Company or any of the Subsidiaries pursuant to the terms of or constitute a default under, any material agreement, indenture or instrument actually known to such counsel, or result in a violation of the corporate charter, by-laws, articles of association, certificate of trust or trust agreement, as applicable, of the Company or any of the Subsidiaries or any order, law, rule or regulation normally applicable to transactions of this type of any court or governmental agency having jurisdiction over the Company or any of the Subsidiaries or their property; and no consent, authorization or order of, or filing or registration with, any court or governmental agency is required for the execution, delivery and performance of this Agreement by the Company, except such as may be required by the Act, the Exchange Act, state securities laws, the Nasdaq Stock Market, Inc. or the National Association of Securities Dealers, Inc.; -21- (xv) To such counsel's knowledge, each of the Company and its subsidiaries has such licenses, permits, consents, approvals, authorizations and certificates from any public or governmental authorities that are necessary for the conduct of its business and owns, or possesses adequate rights to use, all rights necessary for the conduct of such business and without which there would be a material adverse effect on the business or financial condition of the Company or the Company and the Subsidiaries taken as a whole and neither the Company nor any of the Subsidiaries received any notice of conflict with the asserted rights of others in respect thereof; (xvi) Except as set forth in the Registration Statement and Prospectus, there are no holders of securities of the Company who, by reason of the filing of the Registration Statement under the Act or the execution by the Company of this Agreement, have the right pursuant to the Company's Restated Certificate of Incorporation, as amended, By-laws or any agreement, instrument or other document of which such counsel has knowledge (other than a right which has been waived or satisfied) to request or demand that the Company register under the Act securities of the Company held by them; and (xvii) The Company is not an "investment company" or an entity "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder. In addition, such counsel shall state that such counsel has participated in conferences with the Underwriters, officers and other representatives of the Company and representatives of the independent accountants of the Company at which the contents of the Registration Statement and Prospectus and the documents incorporated by reference therein and related matters were discussed and, although such counsel is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement and Prospectus (except as provided above with respect to clause (viii) of this Section 8(d)), on the basis of the foregoing, no facts have come to the attention of such counsel which lead such counsel to believe that the Registration Statement or any amendment thereto when such Registration Statement or amendment became effective contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or that on the First Delivery Date and Second Delivery Date, if any, the Prospectus, as amended or supplemented (including any document filed under the Exchange Act and deemed to be incorporated by reference into the Prospectus) contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no opinion with respect to the financial statements, the notes thereto and schedules therein and other financial and statistical information included in the Registration Statement or Prospectus). (e) The Company shall have furnished to the Underwriters on each of the First Delivery Date and the Second Delivery Date, if any, a certificate, dated such delivery date, of its President and its Treasurer stating that: -22- (i) The representations, warranties and agreements of the Company in Section 1 are true and correct as of such delivery date; the Company has complied with all the agreements and satisfied all the conditions herein on its part to be performed or satisfied at or prior to such delivery date; (ii) No stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for such purpose have been instituted or, to the Company's knowledge, threatened; and (iii) They have carefully examined the Registration Statement and the Prospectus and, in their opinion, (A) as of the Effective Date, the Registration Statement did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and on such delivery date, the Prospectus (including any documents filed under the Exchange Act and deemed to be incorporated by reference into the Prospectus) does not include any untrue statement of a material fact and does not omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (B) since the Effective Date, no event has occurred which should have been set forth in the Prospectus or a supplement thereto or amendment thereof which has not been set forth in such a supplement or amendment and there has been no document required to be filed under the Exchange Act and the Rules and Regulations that upon such filing would be deemed to be incorporated by reference into the Prospectus that has not been so filed. (f) The Company shall have furnished to the Underwriters on each of the First Delivery Date and the Second Delivery Date, if any, a letter of KPMG LLP, addressed to the Underwriters and dated such delivery date, confirming that they are independent public accountants within the meaning of the Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission, stating, as of the date of such letter (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Prospectus, as of a date not more than five days prior to the date of such letter), the conclusions and findings of such firm with respect to the financial information and other matters covered by its letter delivered to the Underwriters concurrently with the execution of this Agreement and confirming in all material respects the conclusions and findings set forth in such prior letter. (g) The Underwriters shall have received from Morgan, Lewis & Bockius LLP, counsel for the Underwriters, an opinion dated the First Delivery Date and the Second Delivery Date, if any, relating to such matters as may be agreed upon by the Underwriters and Morgan, Lewis & Bockius LLP. (h) Since the Effective Date, neither the Company nor any of its subsidiaries shall have sustained any loss by fire, flood, accident or other calamity, or shall have become a party to or the subject of any litigation, which would have a material adverse effect on the Company or the Company and its subsidiaries taken as a whole, nor shall there have been a material adverse change in the general affairs, prospects, business, key personnel, capitalization, financial position or net worth of the Company and its subsidiaries, whether or not arising in the ordinary course of business, which loss, litigation or change, in the reasonable judgment of the Underwriters, shall render it inadvisable to proceed with the delivery of the Stock. -23- (i) The Lock-up Letters described in Section 5(i) are in full force and effect. All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to Morgan, Lewis & Bockius LLP, counsel for the Underwriters. 9. Notice. The Company shall be entitled to act and rely upon any request, consent, notice or agreement given or made by Legg Mason Wood Walker, Incorporated and Sandler O'Neill & Partners, L.P. on behalf of the Underwriters. Any notice to the Underwriters shall be sufficient if given in writing or by telefax or telecopy addressed to (a) Legg Mason Wood Walker, Incorporated, 100 Light Street, 31st Floor, Baltimore, Maryland 21202, Attention: Mark C. Micklem (telecopy no. 410-454-5299), and (b) Sandler O'Neill & Partners, L.P., 919 3rd Avenue, 6th Floor, New York, New York 10022, Attention: Patricia A. Murphy (telecopy no. 212-466-7711); any notice to the Company shall be sufficient if given in writing or by telefax or telecopy addressed to the Company at 2465 Kuser Road, Hamilton Township, New Jersey 08690, Attention: Patrick M. Ryan (telecopy no. 609-584-5984). 10. Parties. This Agreement shall inure to the benefit of and be binding upon the Underwriters, the Company and their respective successors. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except that (a) the representations, warranties, indemnities and agreements of the Company contained in this Agreement shall also be deemed to be for the benefit of the person or persons, if any, who control any Underwriter within the meaning of Section 15 of the Act, and (b) the indemnity agreement of the Underwriters contained in Section 6 of this Agreement shall be deemed to be for the benefit of directors of the Company, officers of the Company who have signed the Registration Statement and any person controlling the Company. Nothing in this Agreement is intended or shall be construed to give any person, other than the persons referred to in this section, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. 11. Definition of "Business Day" and "Subsidiary". For purposes of this Agreement, (a) "business day" means any day on which the New York Stock Exchange, Inc. is open for trading, and (b) "subsidiary" has the meaning set forth in Rule 405 of the Rules and Regulations. 12. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey, without giving effect to the choice of law or conflicts of laws principles thereof. This Agreement may be executed in one or more counterparts, and if executed in more than one counterpart, the executed counterparts shall together constitute a single instrument. -24- 13. Counterparts. This Agreement may be signed in one or more counterparts, each of which shall constitute an original and all of which together shall constitute one and the same Agreement. 14. Information Furnished by Underwriters. The statements set forth in [specific paragraphs to be inserted] under the caption "Underwriting" constitute the only written information furnished by reference or on behalf of any Underwriter referred to in paragraph (b) of Section 1 hereof and in paragraphs (a) and (b) of Section 6 hereof. [SIGNATURE PAGE TO FOLLOW] -25- If the foregoing correctly sets forth the agreement among the Company, the Bank and the Underwriters, please indicate your acceptance in the space provided for that purpose below. Very truly yours, Yardville National Bancorp By: __________________________ Patrick M. Ryan President and Chief Executive Officer Confirmed and accepted as of the date first above mentioned: Legg Mason Wood Walker, Incorporated By: _______________________________ Mark C. Micklem Managing Director Sandler O'Neill & Partners, L.P. By: Sandler O'Neill & Partners Corp., the sole general partner By: _______________________________ Vice President The Yardville National Bank hereby agrees to and accepts its obligations under Section 6 hereof as of the date first above mentioned. The Yardville National Bank By: _______________________________ Patrick M. Ryan President and Chief Executive Officer -26- SCHEDULE I Number of Underwriters Shares ------------ ------ Legg Mason Wood Walker, Incorporated Sandler O'Neill & Partners, L.P. _________ Total 1,500,000 -27- [FORM OF LOCK-UP AGREEMENT] AGREEMENT REGARDING THE SALE OF YARDVILLE NATIONAL BANCORP SECURITIES August ___, 2002 Reference is made to the registration statement on Form S-3 of Yardville National Bancorp (the "Company") (as the same may hereafter be amended, the "Registration Statement") pursuant to which shares (the "Securities") of common stock of the Company, no par value per share (the "Common Stock"), are being registered under the Securities Act of 1933, as amended (the "Act") for public sale through Legg Mason Wood Walker, Incorporated and Sandler O'Neill & Partners, L.P. (the "Underwriters") pursuant to the terms of a Purchase Agreement (the "Purchase Agreement") by and among the Company and the Underwriters. The undersigned hereby agrees that the undersigned will not, directly or indirectly, sell or otherwise dispose of, or offer or contract to sell any shares of Common Stock or any securities convertible into, or exercisable for, shares of the Common Stock, owned of record or beneficially by the undersigned on the date hereof or on the effective date of the Registration Statement (the "Effective Date") for 180 days after the Effective Date (the "Lock-up Period") without first obtaining the prior written consent of Legg Mason Wood Walker, Incorporated (which consent shall not be unreasonably withheld). Notwithstanding the foregoing, nothing herein shall prevent or prohibit (1) bona fide gifts by the undersigned, (2) transfers by the undersigned to his or her family members or related trusts for the benefit of his or her family members, or (3) transfers by the undersigned to its affiliates (as defined in the rules and regulations of the Act), provided that in the case of each of (1), (2) and (3) the transferee agrees in writing to the terms of this letter. The undersigned acknowledges that the Company at the request of the Underwriters may instruct the transfer agent of the Company to place stop transfer instructions against shares of the Common Stock so owned by the undersigned during such Lock-up Period, which will require the transfer agent to notify the Company and obtain the Company's approval prior to any transfer of record during the Lock-up Period. It is understood that, if the Company notifies the Underwriters that it does not intend to proceed with the Offering, if the Purchase Agreement does not become effective, or if the Purchase Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Securities, the undersigned will be released from his, her or its obligations under this Lock-Up Letter Agreement. The undersigned represents and acknowledges that this Agreement is being executed in order to induce the Underwriters to enter into the Purchase Agreement, and that the Underwriters will not enter into the Purchase Agreement in the absence of this Agreement. -28- EX-5 4 exh5-1.txt OPINION OF PEPPER HAMILTON LLP October 15, 2002 Yardville National Bancorp 2465 Kuser Road Hamilton, NJ 08690 Re: Registration Statement on Form S-3 ---------------------------------- Ladies and Gentlemen: We have acted as counsel for Yardville National Bancorp, a New Jersey corporation (the "Company"), in connection with the registration pursuant to the Securities Act of 1933, as amended (the "Act"), of a public offering by the Company (the "Offering") of up to 1,725,000 shares (the "Shares") of the Company's common stock, no par value per share (the "Common Stock"). In our capacity as counsel, you have requested that we render the opinion set forth in this letter and we are furnishing this opinion letter pursuant to Item 601(b)(5) of Regulation S-K under the Act. We have examined originals or copies, certified or otherwise identified to our satisfaction, of (i) the Company's Registration Statement on Form S-3 originally filed by the Company under the Act with the U.S. Securities and Exchange Commission (the "Commission") on September 6, 2002, Amendment No. 1 thereto filed on October 15, 2002 (as so amended, the "Registration Statement"), (ii) the form of underwriting agreement, filed as Exhibit 1 to the Registration Statement (the "Underwriting Agreement"), to be entered into by the Company and by Legg Mason Wood Walker, Incorporated and Sandler O'Neill & Partners, L.P. (the "Underwriters"), (iii) the Company's Restated Certificate of Incorporation, as amended, (iv) the Company's By-Laws, (v) certain resolutions of the Board of Directors of the Company relating to the Offering, and (vi) such other documents as we have deemed necessary or appropriate for purposes of rendering the opinion set forth herein. In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such latter documents. As to any facts material to the opinion expressed herein that were not independently established or verified, we have relied upon statements and representations of officers and other representatives of the Company and others. Yardville National Bancorp Page 2 October 15, 2002 The law covered by this opinion letter is limited to the laws of the State of New Jersey and the Federal laws of the United States of America. Based upon and subject to the foregoing, we are of the opinion, as of the date hereof, that the Shares will be duly authorized, legally issued, fully paid and nonassessable when (i) the Board of Directors of the Company or the Pricing Committee duly appointed by the Board of Directors authorizes the price per Share, (ii) the duly appointed officers of the Company and the Underwriters execute and deliver the Underwriting Agreement, and (iii) the Shares are issued and delivered against payment therefor in accordance with the terms of the Underwriting Agreement. We hereby consent to the use of this opinion letter as an exhibit to the Registration Statement and to the reference to this firm under the caption "Legal Matters" in the prospectus filed as part of the Registration Statement. In giving this consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission thereunder. As counsel to the Company, we have furnished this opinion letter to you in connection with the filing of the Registration Statement. This opinion letter may also be relied upon by any investor purchasing Shares in the Offering. Except as otherwise set forth herein, this opinion letter may not be used, circulated, quoted or otherwise referred to for any purpose or relied upon by any other person without the express written permission of this firm. Very truly yours, /s/ PEPPER HAMILTON LLP EX-23 5 ex23-1.txt CONSENT OF KPMG LLP Exhibit 23.1 Independent Auditors' Consent The Board of Directors Yardville National Bancorp: We consent to the use of our report dated January 29, 2002, with respect to the consolidated statements of condition of Yardville National Bancorp and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2001, incorporated herein by reference and to the reference to our firm under the heading "Experts" in the prospectus. /s/ KPMG LLP Short Hills, New Jersey October 15, 2002 -----END PRIVACY-ENHANCED MESSAGE-----