-----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, JyHKJoljuJXGm07NtsQVsEtB5lxaKT36/5vWv8VSySvsL6fNsUPxa2IgQfx/IaTD 2yh7xcN155uATvnKM2FOWA== 0000950116-97-001002.txt : 19970520 0000950116-97-001002.hdr.sgml : 19970520 ACCESSION NUMBER: 0000950116-97-001002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: YARDVILLE NATIONAL BANCORP CENTRAL INDEX KEY: 0000787849 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 222670267 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26086 FILM NUMBER: 97609578 BUSINESS ADDRESS: STREET 1: 4569 SOUTH BROAD STREET CITY: YARDVILLE STATE: NJ ZIP: 08620 BUSINESS PHONE: 6095812767 MAIL ADDRESS: STREET 1: 4569 SOUTH BROAD ST CITY: YARDVILLE STATE: NJ ZIP: 08620 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, l997 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For transition period from to Commission File Number: 0-26086 YARDVILLE NATIONAL BANCORP -------------------------- (Exact name of registrant as specified in its charter) NEW JERSEY 22-2670267 ------------------------------ ---------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3111 Quakerbridge Road, Mercerville, New Jersey 08619 - ------------------------------------------------ ---------- (Address of principal executive offices) (Zip Code) (609) 585-5100 --------------- (Registrant's telephone number, including area code) Not Applicable -------------- (Former name, former address and former fiscal year, if changed from last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No( ) Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of May 1, 1997 Common Stock, no par value 2,470,299 - ------------- ------------ --------- Class Number of shares outstanding INDEX YARDVILLE NATIONAL BANCORP AND SUBSIDIARY PART I FINANCIAL INFORMATION PAGE NO. - ------ --------------------- -------- Item 1. Financial Statements Consolidated Statements of Condition March 31, 1997 and December 31, 1996 3 Consolidated Statements of Income Three months ended March 31, 1997 and 1996 4 Consolidated Statements of Cash Flows Three months ended March 31, 1997 and 1996 5 Notes to Consolidated Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-14 PART II OTHER INFORMATION - ------- ----------------- Item 6. Exhibits and Reports on Form 8-K 15 SIGNATURES 16 Exhibit 27.1 Financial Data Schedule 17 Yardville National Bancorp and Subsidiary Consolidated Statements of Condition (unaudited)
March 31, December 31, - -------------------------------------------------------------------------------------------------- (in thousands, except share data) 1997 1996 - -------------------------------------------------------------------------------------------------- Assets: Cash and due from banks $ 14,042 $ 13,110 Federal funds sold 5,310 4,040 - -------------------------------------------------------------------------------------------------- Cash and Cash Equivalents 19,352 17,150 - -------------------------------------------------------------------------------------------------- Interest bearing deposits 2,489 1,357 Securities available for sale 104,855 93,671 Investment securities 30,525 31,296 Loans 344,065 331,237 Less: Allowance for loan losses (5,103) (4,957) - -------------------------------------------------------------------------------------------------- Loans, net 338,962 326,280 Bank premises and equipment, net 5,265 5,418 Other real estate 855 395 Other assets 15,272 14,978 - -------------------------------------------------------------------------------------------------- Total Assets $ 517,575 $ 490,545 ================================================================================================== Liabilities and Stockholders' Equity: Deposits Non-interest bearing $ 52,073 $ 55,519 Interest bearing 342,782 308,926 - -------------------------------------------------------------------------------------------------- Total Deposits 394,855 364,445 Borrowed funds Securities sold under agreements to repurchase 64,340 64,185 Other 17,138 22,154 - -------------------------------------------------------------------------------------------------- Total Borrowed Funds 81,478 86,339 Other liabilities 5,450 4,531 - -------------------------------------------------------------------------------------------------- Total Liabilities $ 481,783 $ 455,315 - -------------------------------------------------------------------------------------------------- Stockholders' equity Preferred stock: no par value Authorized 1,000,000 shares, none issued Common stock: no par value Authorized 6,000,000 shares Issued and outstanding 2,450,378 shares in 1997 and 2,430,414 shares in 1996 17,421 17,246 Surplus 2,205 2,205 Undivided Profits 16,858 15,940 Unrealized loss - securities available for sale (692) (161) - -------------------------------------------------------------------------------------------------- Total Stockholders' Equity 35,792 35,230 - -------------------------------------------------------------------------------------------------- Total Liabilities and Stockholders' Equity $ 517,575 $ 490,545 ==================================================================================================
See Accompanying Notes to Unaudited Consolidated Financial Statements. Yardville National Bancorp and Subsidiary Consolidated Statements of Income (unaudited)
Three Months Ended March 31, - --------------------------------------------------------------------------------------------- (in thousands, except per share amounts) 1997 1996 - --------------------------------------------------------------------------------------------- INTEREST INCOME: Interest and fees on loans $ 7,345 $ 5,887 Interest on deposits with banks 16 34 Interest on securities available for sale 1,569 1,403 Interest on investment securities: Taxable 342 410 Exempt from Federal income tax 102 96 Interest on Federal funds sold 164 57 - --------------------------------------------------------------------------------------------- Total Interest Income 9,538 7,887 - --------------------------------------------------------------------------------------------- INTEREST EXPENSE: Interest on savings account deposits 1,230 972 Interest on certificates of deposit of $100,000 or more 305 203 Interest on other time deposits 2,228 1,617 Interest on borrowed funds 1,157 975 - --------------------------------------------------------------------------------------------- Total Interest Expense 4,920 3,767 - --------------------------------------------------------------------------------------------- Net Interest Income 4,618 4,120 Less provision for loan losses 275 265 - --------------------------------------------------------------------------------------------- Net Interest Income After Provision for Loan Losses 4,343 3,855 - --------------------------------------------------------------------------------------------- NON-INTEREST INCOME: Service charges on deposit accounts 283 290 Securities losses, net -- (21) Other non-interest income 323 241 - --------------------------------------------------------------------------------------------- Total Non-Interest Income 606 510 - --------------------------------------------------------------------------------------------- NON-INTEREST EXPENSE: Salaries and employee benefits 1,817 1,581 Occupancy expense, net 234 220 Equipment 250 177 Other non-interest expense 778 840 - --------------------------------------------------------------------------------------------- Total Non-Interest Expense 3,079 2,818 - --------------------------------------------------------------------------------------------- Income before income tax expense 1,870 1,547 Income tax expense 658 555 - --------------------------------------------------------------------------------------------- Net Income $ 1,212 $ 992 ============================================================================================= EARNINGS PER SHARE: Primary $ 0.49 $ 0.40 Fully diluted $ 0.49 $ 0.40 - --------------------------------------------------------------------------------------------- Weighted average shares outstanding 2,489 2,530 - --------------------------------------------------------------------------------------------- Consolidated book value $ 14.61 $ 13.51 =============================================================================================
See Accompanying Notes to Unaudited Consolidated Financial Statements. Yardville National Bancorp and Subsidiary Consolidated Statements of Cash Flows (unaudited)
Three months ended March 31, - ------------------------------------------------------------------------------------------------------------- (in thousands) 1997 1996 - ------------------------------------------------------------------------------------------------------------- Cash Flows from Operating Activities: Net Income $ 1,212 $ 992 Adjustments: Provision for loan losses 275 265 Depreciation 206 173 Amortization and accretion 100 130 Securities losses, net -- 21 Writedown of other real estate 2 25 (Increase)/decrease in other assets 59 (676) Increase in other liabilities 919 597 - ------------------------------------------------------------------------------------------------------------- 1,561 535 - ------------------------------------------------------------------------------------------------------------- Net Cash Provided by Operating Activities 2,773 1,527 - ------------------------------------------------------------------------------------------------------------- Cash Flows from Investing Activities: Net increase in interest bearing deposits (1,132) (3,121) Purchase of securities available for sale (19,969) (28,153) Maturities, calls, and paydowns of securities available for sale 7,838 10,612 Proceeds from sales of securities available for sale -- 24,049 Proceeds from maturities and paydowns of investment securities 734 767 Net increase in loans (13,419) (18,008) Expenditures for bank premises and equipment (53) (1,111) - ------------------------------------------------------------------------------------------------------------- Net Cash Used by Investing Activities (26,001) (14,965) - ------------------------------------------------------------------------------------------------------------- Cash Flows from Financing Activities: Net increase in non-interest bearing demand, money market, and saving deposits 18,803 6,477 Net increase in certificates of deposit 11,607 1,033 Net increase/(decrease) in borrowed funds (4,861) 10,049 Proceeds from issuance of common stock 175 461 Dividends paid (294) (258) - ------------------------------------------------------------------------------------------------------------- Net Cash Provided by Financing Activities 25,430 17,762 - ------------------------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 2,202 4,324 Cash and cash equivalents as of beginning of period 17,150 12,835 - ------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents as of End of Period $ 19,352 $ 17,159 - ------------------------------------------------------------------------------------------------------------- Supplemental Disclosure of Cash Flow Information: Cash paid during the period for: Interest expense $ 4,310 $ 3,789 Income taxes 600 150 - ------------------------------------------------------------------------------------------------------------- Supplemental Schedule of Non-cash Financing Activities: During the three month period ended March 31, 1997 the Corporation transferred $462,000, net of charge offs, from loans to other real estate.
See Accompanying Notes to Unaudited Consolidated Financial Statements. Yardville National Bancorp and Subsidiary Notes to Consolidated Financial Statements Three Months Ended March 31, 1997 (Unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Financial Statement Presentation The consolidated financial statements have been prepared in conformity with generally accepted accounting principles. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. The consolidated financial data as of and for the three months ended March 31, 1997 and 1996 includes, in the opinion of management, all adjustments, consisting of only normal recurring accruals, necessary for a fair presentation of such periods. The consolidated financial data for the interim periods presented is not ncessarily indicative of the results of operations that might be expected for the entire year ending December 31, 1997. Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for loan losses and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans. In connection with the determination of the allowances for loan losses and other real estates, management obtains independent appraisals for significant properties. Consolidation The consolidated financial statements include the accounts of Yardville National Bancorp (the "Corporation") and its sole subsidiary, the Yardville National Bank (the "Bank") and Yardville's wholly owned subsidiary, The Yardville National Investment Corporation. All significant intercompany accounts and transactions have been eliminated. Allowance for Loan Losses For financial reporting purposes, the provision for loan losses charged to operating expense is determined by management and is based upon a periodic review of the loan portfolio, past experience, the economy, and other factors that may affect the borrower's ability to repay the loan. This provision is based on management's estimates, and actual losses may vary from these estimates. These estimates are reviewed and, as adjustments become necessary, they are reported in the periods in which they become known. Management believes that the allowance for losses on loans is adequate. While management uses available information to recognize losses on loans and other real estate, future additions to the allowance may be necessary based on changes in economic conditions, particularly in New Jersey. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for losses on loans and other real estate. Such agencies may require the Bank to recognize additions to the allowance or adjustments to the carrying value of other real estate based on their judgments about information available to them at the time of their examination. YARDVILLE NATIONAL BANCORP AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This financial review presents Management's discussion and analysis of financial condition and results of operations. It should be read in conjunction with the consolidated financial statements and the accompanying notes. The term "Yardville" as used herein refers to the Company together with its sole subsidiary, the Bank. FINANCIAL CONDITION Assets Total consolidated assets at March 3l, 1997 totaled $517,575,000, an increase of $27,030,000 or 5.5%, compared to $490,545,000 at December 31, 1996. The growth in Yardville's asset base during the first quarter of 1997 was due primarily to an increase in loans and securities. The increase in loans was the product of a strategy to improve the profitability of the organization through relationship banking and the continued consolidation in Yardville's marketplace, which has solidified Yardville's competitive position in the small and middle markets. Yardville's asset base includes investments of approximately $59,100,000 purchased utilizing repurchase agreements (investment growth strategy) at March 31, 1997, an increase of $8,000,000 compared to approximately $51,000,000 at December 31, 1996. Securities Total securities increased by $10,413,000 at March 31, 1997 compared to year end 1996. The growth in the securities portfolio was due to the purchase of short term treasuries to enhance short-term liquidity and the increase in the investment growth strategy offset by principal paydowns on mortgage backed securities. At March 3l, 1997 the amortized cost of investment securities classified as held to maturity was $30,525,000, compared to $31,296,000 at December 31, 1996, a decrease of $771,000 or 2.5%. Net unrealized losses as of March 31, 1997 in Yardville's available for sale securities portfolio were $l,l53,000. Net unrealized losses of $692,000, net of tax effect, were reported as a reduction of stockholders' equity at March 31, 1997. The available for sale portfolio represented 77.5% of the entire portfolio. The available for sale portfolio, except those securities purchased utilizing repurchase agreements, provides a secondary source of liquidity. Federal Funds At March 31, 1997 Federal funds sold totaled $5,310,000, an increase of $1,270,000 as compared to $4,040,000 at December 31, 1996. The amount of federal funds sold reflect management's determination of an adequate level of short term funding sources. Loans Total loans, net of unearned discounts, increased by $12,828,000 or 3.9% to $344,065,000 at March 31, 1997 compared to $331,237,000 at year end 1996. Yardville's loan portfolio represented 66.5% of assets at March 31, 1997 compared to 67.5% of assets at December 31, 1996. Yardville's lending focus continues to be centered on commercial loans, owner-occupied commercial mortgage loans and tenanted commercial real estate loans. Yardville showed positive results throughout its loan portfolio for the three months ended March 31, 1997 as a result of the continued consolidation in Yardville's marketplace and management's emphasis on establishing relationships has solidified Yardville's competitive position in the small and middle markets. On a component basis, for the three month period ended March 31, 1997, commercial loan and real estate-construction loan balances increased $7,700,000 and $2,600,000 respectively or 12.1% and 10.0% respectively. Real estate - commercial mortgages and real estate - residential mortgages increased .48% and .29%, respectively, for the first quarter of 1997. Consumer loan balances increased $2,100,000 or 14.0% through the first three months of 1997. The increase is principally from loans transferred from the commercial loan portfolio. Liabilities Yardville's deposit base is the principal source of funds supporting interest earning assets. Total deposits amounted to $394,855,000 at March 31, 1997 compared to $364,445,000 at December 31, 1996, an increase of $30,410,000 or 8.3%. Yardville was successful in bidding for Mercer County Surrogate's deposits which netted Yardville $15,000,000 in deposits in early January 1997. Growth in Yardville's deposit base also continues in higher yielding certificate's of deposit (CD's) and premium money market accounts, both higher cost funding sources. Average interest bearing deposits, including CD's of $100,000 or more, increased $56,467,000 or 20.4% to total $333,437,000 for the three month period ended March 31, l997 as compared to $276,970,000 for the year ended December 31, 1996. Interest bearing deposits have increased 11.0% while non-interest bearing deposits have decreased 6.2% in the first three months of 1997. At March 31, 1997 interest bearing and non-interest bearing deposits totaled $342,782,000 and $52,073,000, respectively. Borrowed funds totaled $81,478,000 at March 31, 1997 compared to $86,339,000 at December 31, 1996, a decrease of $4,861,000 or 5.6%. Average borrowed funds decreased $5,465,000 to total $81,600,000 for the three month period ended March 31, 1997 as compared to $87,065,000 for the year ended December 31, 1996. Borrowed funds decreased in the first quarter of 1997 principally due to the retirement of repurchase agreements. Borrowed funds at March 31, 1997 totaled approximately $15,800,000 in FHLB advances ($10,000,000 with a maturity of less than 1 year), approximately $59,100,000 in repurchase agreements utilized to purchase investments and approximately $11,400,000 in repurchase agreements supporting earning asset growth were outstanding. Yardville has the availability to borrow up to $20,000,000 from the FHLB through its line of credit program. In addition, the bank is eligible to borrow up to 30% of assets under the FHLB advance program subject to FHLB stock level requirements, collateral requirements and individual advance proposals based on FHLB credit standards. Yardville also has the ability to borrow at the Federal Reserve discount window along with agreements to use two unsecured federal funds lines of credit with two of its correspondent banks for daily funding needs. Management's strategy is to further build the bank's core deposit base to fund asset growth. However, borrowed funds will be utilized to meet short term liquidity needs and as an additional source of funding for the loan and investment portfolios. Capital Total stockholders' equity of $35,792,000 at March 31, 1997 increased $562,000 or 1.6% from $35,230,000 at December 31, 1996. This increase resulted from (i) earnings of $1,212,000 over the first three months of 1997 (less dividend payments of $294,000) and a negative equity adjustment of $531,000 for the unrealized loss on securities available for sale, (ii) and proceeds of $175,000 from exercised options. Yardville's leverage ratio was 7.10% at March 31, 1997 compared to 7.80% at December 31, l996. At March 31, 1997 tier I and total tier I and II capital to risk weighted assets were 9.94% and 11.20%, respectively. The risk based capital levels at year end 1996 were 10.17% an 11.43% for tier I and total risk based capital, respectively. The minimum regulatory requirements require financial institutions to have a tier one leverage ratio of 4.0%, a tier I risk-based ratio of 4.0% and a total tier I and tier II ratio of 8.0%. A bank is considered "well capitalized" if it has a minimum Tier I and total risk-based capital ratios of 6% and 10%, respectively, and a minimum Tier I leverage ratio of 5%. Credit risk At March 31, 1997, nonperforming loans, consisting of loans 90 days or more past due and nonaccruing loans, totaled $7,602,000 compared to $8,140,000 at December 31, 1996. Other real estate owned at March 31, 1997 totaled $855,000 compared to $395,000 at December 31, 1996. The increase in other real estate is the result of transferring two properties into other real estate during the first quarter of 1997. Total nonperforming assets decreased to $8,457,000 at March 31, 1997 compared to $8,535,000 at year end l996. Nonperforming assets as a percentage of total loans were 2.5% at March 31, l997. Management remains committed to reducing the level of nonperforming assets and improving asset quality. The allowance for loan losses increased to $5,103,000, or 1.48% of total loans, at March 31, 1997 compared to $4,957,000, or 1.50% of total loans at year end 1996. The provision for loan losses through March 31, 1997 was $275,000. Yardville had net loan charge-offs of $129,000 for that time period. At March 31, 1997 the allowance for loan losses covered 67.1% of nonperforming loans and 60.3% of nonperforming assets. The allowance for loan losses, in management's judgment, is adequate to provide for potential losses. RESULTS OF OPERATIONS Net Income Yardville reported net income of $1,212,000 for the three months ended March 31, 1997, an increase of $220,000 or 22.2%, from net income of $992,000 reported for the same tine period in 1996. The increase in net income for the three months ended March 31, 1997 compared to the same period of 1996 was primarily attributable to an increase in net interest income partially offset by an increase in non-interest expenses. On a fully diluted per share basis, net income was $.49 for the first three months of 1997 compared to $.40 for the first three months of 1996. As net income rose by 22.2% in the first quarter of 1997 compared to the first quarter of 1996, earnings per share increased by $.09 during this time period. Earnings per share amounts for the three months ended March 31, 1997 were calculated using the treasury stock method while earnings per share for the same period of 1996 were calculated utilizing the modified treasury stock method. Net Interest Income Yardville's net interest income for the three months ended March 31, l997 was $4,618,000, an increase of 12.1% or $498,000 over the $4,120,000 for the comparable 1996 period. The principal factor contributing to the increase in net interest income for the three months ended March 31, l997 was an increase in interest income of $1,651,000 resulting principally from an increase in commercial loan volume, offset by an increase in interest expense of $1,153,000 due to higher levels of time deposits and borrowed funds. The net interest margin (tax equivalent basis) between yields on average interest earning assets and costs of average funding sources was 3.90% for the three month period ended March 31, 1997 compared to 4.31% for the three month period ended March 31, 1996. The decrease in the net interest margin for the comparable period was principally due to the factors discussed below. Continuing into 1997, management's strategy is to increase net interest income by purchasing investments using repurchase agreements. At March 31, 1997 approximately $59,100,000 had been purchased utilizing this strategy. The targeted spread on this strategy is 75 basis points after tax. This strategy, while successful in increasing net interest income, has a negative impact on the net interest margin. Also contributing to the decrease in the net interest margin of 41 basis points for the comparable periods was the increased competition and the subsequent decrease in loan yields. Interest Income For the three month period ended March 31, 1997 total interest income of $9,538,000 increased $1,651,000 or 20.9% as compared to the same period a year earlier. The increase in interest income is principally due to the higher volume of average loan assets and to a lesser extent securities assets. Average loans and securities increased $81,967,000 and $3,039,000 or 32.0% and 2.4%, respectively, for the three months ended March 31, 1997 compared to the same 1996 period. The average yield on the loan portfolio decreased 51 basis points for the comparable period in a lower rate competitive marketplace. The average yield on the securities portfolio, conversely, increased 18 basis points. Interest on Federal funds sold increased $107,000 for the three month period ended March 31, 1997 due to increases in average balances of $8,388,000 to $12,652,000 for the three month period ended March 31, 1997 compared to $4,264,000 for the three month period ended March 31, 1996. Offsetting the effect of this increase the average yield on Federal Funds sold decreased 17 basis points during this comparative period from 5.35% to 5.18%. Overall, the yield on Yardville's interest earning assets decreased 19 basis points to 7.96% for the three month period ended March 31, 1997 from 8.15% for the three month period ended March 31, 1996 for the reasons discussed above. Interest Expense Total interest expense increased $1,153,000 or 30.6% to $4,920,000 for the three months ended March 31, 1997 compared to $3,767,000 reported for the three months ended March 31, 1996. The increase in interest expense for the comparable time periods is the result of a larger deposit base, higher market interest rates and greater levels of borrowed funds. The average rate paid on interest bearing liabilities increased 11 basis points for the time period discussed. Deposit products continue to be competitively priced to increase the bank's deposit base and provide a source of funds for asset growth. Average interest bearing liabilities amounted to $333,437,000 at March 31, 1997 compared to $258,982,000 at March 31, 1996. Increases in deposit account relationships, attributable in part to increased commercial loan activity and community presence, are reflected in the results. Average time deposits, a higher costing funding source, increased $50,926,000 or 39.3% for the first quarter of 1997 compared to the first quarter a year earlier. Interest expense on borrowed funds increased $182,000 during the first quarter of 1997 compared to the same period in 1996 as a result of average balances being higher by $14,882,000. As of March 31, 1997 management has purchased investments for its growth strategy utilizing repurchase agreements totaling approximately $59,100,000. While core deposits are strategically desired to fund current and projected asset growth, borrowed funds will be utilized to support Yardville's core deposits to meet short-term liquidity needs and to fund asset growth. Provision For Loan Losses Yardville provides for possible loan losses by a charge to current operations. The provision for loan losses for the three month period ended March 31, 1997 was $275,000 compared to $265,000 for the three months ended March 31, 1996. Management believes that the allowance for loan losses is adequate in relation to credit risk exposure levels. Non-Interest Income Total non-interest income was $606,000 for the first three months of 1997 compared to $510,000 for the same period in 1996. The increase of $96,000 or 18.8% is primarily attributable to an increase of $82,000 in other non-interest income principally due to additional fee income derived from life insurance assets and other fee income. Service charges on deposit accounts decreased $7,000 or 2.4% for the first three months of 1997 as compared to the same period a year earlier. The decrease in service charge income resulted from a reduction in insufficient fund fees offset by an increase in service charges on deposit accounts. Yardville had no net losses on the sale of securities in the first quarter of 1997 versus $21,000 in net losses on the sale of securities, in the first quarter of 1996. The increase in other non-interest income when comparing the first quarter of 1997 to 1996 is due to a combination of factors discussed below. During the latter half of 1996, Yardville National Bank began an assessment for use of "others on us" Automated Teller Machine (ATM) card usage. Through the first three months of March 1997 the Bank earned $55,000 through the implementation of this "others on us" fee. In addition, income earned on life insurance assets increased during the first quarter of 1997 compared to 1996. Offsetting these two increases was the elimination of the annual ATM fees for Yardville National Bank cardholders in January 1997. Non-Interest Expense Total non-interest expense increased $261,000 or 9.3% to $3,079,000 for the first three months of 1997 compared to $2,818,000 for the first three months of 1996. The increase in non-interest expense was primarily the result of increases in salaries and employee benefits and equipment expense associated with the installation and upgrading of personal computers throughout the organization offset by decreases in other non-interest expenses. Salaries and employee benefits were $1,817,000 for the first three months of 1997, an increase of $236,000 or 14.9% compared to $1,581,000 for same three month period of 1996. The increase resulted from increased staffing required as Yardville has grown for the comparable time periods through the opening of two additional branches during the second and third quarter of 1996 and normal annual salary increases. Employee benefits also increased 21.3% to $415,000 compared to $342,000 for the comparable time periods. Full time equivalent staff increased to 164 at March 31, 1997 from 151 at March 31, 1996. Net occupancy expenses increased $14,000 or 6.4% for the first three months of 1997 to $234,000 as compared to $220,000 for the same period in 1996 due to additional occupancy costs associated with new branch offices offset by decreases in snow removal costs due to a milder winter. Equipment expense increased $73,000 or 41.2% for the same comparable period primarily due to increased depreciation costs associated with furniture and fixtures in Yardville's new branches and computer hardware and software associated with Yardville's in-house computer system. Other non-interest expenses totaled $778,000 for the three months ended March 31, 1997, a decrease of $62,000 or 7.4%, from the comparable 1996 period. The decrease in other non-interest expense is principally the result of the conversion to an in-house computer system in late February 1996 and the decrease in associated fees that were previously paid to an outside servicer. This decrease was partially offset by increases in professional fees, marketing costs, and loan related expenses. Recently Issued Accounting Pronouncements In February 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings Per Share." SFAS 128 supersedes APB Opinion No. 15, "Earnings Per Share," and specifies the computation, presentation and disclosure requirements for earnings per share for entities with publicly held common stock or potential common stock. This statement is effective for financial statements for periods ending after December 15, l997. The adoption of this Statement should not have a material effect on the consolidated financial statements of Yardville. In February 1997, the Financial Accounting Standards Board issued SFAS No. 129, "Disclosure of Information about Capital Structure." SFAS 129 lists required disclosures about capital structure that have been included in a number of separate statements and opinions. This statement is effective for financial statements for periods ending after December 15, 1997. The adoption of the Statement should not have a material effect on the consolidated financial statements of Yardville. PART II OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K A. The following exhibits are filed with this Form lO-Q for the fiscal quarter ended March 31, 1997 by Yardville National Bancorp: INDEX TO EXHIBITS No. Exhibits Page --- -------- ---- * 3.1 Restated Certificate of Incorporation of the Registrant ++ 3.2 By-Laws of the Registrant ++ 4.l Specimen of Share of Common Stock ++ 4.2 Form of Class A Warrant ++ ll Statement re: Computation of Per Share Earnings 27.1 Financial Data Schedule 17 * Incorporated by reference to the Issuer's Annual Report on Form 10-KSB the Fiscal Year Ended December 31, 1994, as amended by Form 10-KSB/A filed on July 25, 1995. ++ Incorporated by reference to the Issuer's Registration Statement on Form SB-2 (Registration No. 33-78050) B. No reports on FORM 8-K were filed by the registrant during the quarter ended March 31, 1997. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. YARDVILLE NATIONAL BANCORP ---------------------------- (Registrant) Date: May 15, 1997 By: ------------------------ Stephen F. Carman Executive Vice President and Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE
9 3-MOS DEC-31-1996 MAR-31-1997 14,042 52,073 5,310 0 104,855 30,525 29,281 344,065 5,103 517,575 394,855 11,329 5,809 0 0 0 17,421 19,063 517,575 7,345 2,013 180 9,538 3,763 4,920 4,618 275 0 3,079 1,870 1,870 0 0 1,212 .49 .49 7.96 6,951 434 0 0 4,957 143 14 5,103 5,103 0 0
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