-----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, JRQPgChiGHL5rlELWBz4E6VzeVS3Hf14RsC/17ZpLHQ+SkOl8tXODBAtooc2pufB s3X/ED95k0E7m0SWUX/mdg== 0000950116-98-001638.txt : 19980812 0000950116-98-001638.hdr.sgml : 19980812 ACCESSION NUMBER: 0000950116-98-001638 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980810 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: YARDVILLE NATIONAL BANCORP CENTRAL INDEX KEY: 0000787849 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 222670267 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26086 FILM NUMBER: 98680369 BUSINESS ADDRESS: STREET 1: 3111 QUAKERBRIDGE RD CITY: MERCERVILLE STATE: NJ ZIP: 08619 BUSINESS PHONE: 6095855100 MAIL ADDRESS: STREET 1: 3111 QUAKERBRIDGE RD CITY: MERCERVILLE STATE: NJ ZIP: 08619 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10 Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES ACT OF 1934 For the quarterly period ended June 30, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES ACT OF 1934 For transition period from Commission File Number: 0-26086 YARDVILLE NATIONAL BANCORP ------------------------------------------------------ (Exact name of registrant as specified in its charter) New Jersey 22-2670267 ------------------------------- --------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 3111 Quakerbridge Road, Mercerville, New Jersey 08619 ----------------------------------------------------- (Address of principal executive offices) (609) 585-5100 ---------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed from last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( ) Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of July 31, 1998 Common Stock, no par value 4,971,174 - -------------------------- ---------------------------- Class Number of shares outstanding 1 INDEX YARDVILLE NATIONAL BANCORP AND SUBSIDIARIES PART 1 FINANCIAL INFORMATION PAGE NO. - ------ --------------------- -------- Item 1. Financial Statements Consolidated Statements of Condition June 30, 1998 and December 31, 1997 3 Consolidated Statements of Income Three and six months ended June 30, 1998 and 1997 4 Consolidated Statements of Cash Flows Six months ended June 30, 1998 and 1997 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Item 3. Quantitative and Qualitative Disclosures About Market Risk 24 PART 2 OTHER INFORMATION Item 1. Legal Proceedings 25 Item 2. Changes in Securities and Use of Proceeds 25 Item 3. Defaults Upon Senior Securities 25 Item 4. Submission of Matters to a Vote of Securities Holders 25 Item 5. Other Information 26 Item 6. Exhibits and Reports on Form 8-K 26 SIGNATURES 30 Exhibit 27.1 Financial Data Schedule 27 2 Item 1. Financial Statements Yardville National Bancorp and Subsidiaries Consolidated Statements of Condition (Unaudited)
June 30, December 31, - -------------------------------------------------------------------------------------------------------------- (in thousands, except for share data) 1998 1997 - -------------------------------------------------------------------------------------------------------------- Assets: Cash and due from banks $ 14,772 $ 18,923 Federal funds sold 13,865 1,500 - -------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents 28,637 20,423 - -------------------------------------------------------------------------------------------------------------- Interest bearing deposits 2,144 2,219 Securities available for sale 176,499 159,724 Investment securities (market value of $27,261 in 1998 and $26,848 in 1997) 27,254 26,912 Loans 439,234 385,751 Less: Allowance for loan losses (6,103) (5,570) - -------------------------------------------------------------------------------------------------------------- Loans, net 433,131 380,181 Bank premises and equipment, net 5,950 5,192 Other real estate 3,216 3,171 Other assets 21,544 16,864 - -------------------------------------------------------------------------------------------------------------- Total Assets $ 698,375 $614,686 - -------------------------------------------------------------------------------------------------------------- Liabilities and Stockholders' Equity Deposits Non-interest bearing $ 71,253 $ 66,560 Interest bearing 404,538 356,384 - -------------------------------------------------------------------------------------------------------------- Total Deposits 475,791 422,944 - -------------------------------------------------------------------------------------------------------------- Borrowed funds Securities sold under agreements to repurchase 120,470 100,050 Other 45,437 34,266 - -------------------------------------------------------------------------------------------------------------- Total Borrowed Funds 165,907 134,316 Company - obligated Mandatorily Redeemable Trust Preferred Securities of Subsidiary Trust Holding Solely Junior Subordinated Debentures of the Company 11,500 11,500 Other liabilities 6,364 6,181 - -------------------------------------------------------------------------------------------------------------- Total Liabilities $ 659,562 $ 574,941 - -------------------------------------------------------------------------------------------------------------- Stockholders' equity Preferred stock: no par value Authorized 1,000,000 shares, none issued Common Stock: no par value Authorized 12,000,000 shares Issued and outstanding 4,971,174 in 1998 And 5,082,050 shares in 1997 20,392 17,703 Surplus 2,205 2,205 Undivided profits 19,359 19,713 Common stock in treasury, at cost: 167,300 shares in 1998 (2,965) -- Accumulated other comprehensive income (178) 124 - -------------------------------------------------------------------------------------------------------------- Total Stockholders' Equity 38,813 39,745 - -------------------------------------------------------------------------------------------------------------- Total Liabilities and Stockholders' Equity $ 698,375 $614,686 - --------------------------------------------------------------------------------------------------------------
Shares and related amounts adjusted for two-for-one stock split declared December 23, 1997 and 2.5% stock dividend declared March 25, 1998. See Accompanying Notes to Unaudited Consolidated Financial Statements. 3 Yardville National Bancorp and Subsidiaries Consolidated Statements of Income (Unaudited)
Three Months Ended June 30, - --------------------------------------------------------------------------------------------------------------- (in thousands, except for share data) 1998 1997 - --------------------------------------------------------------------------------------------------------------- INTEREST INCOME: Interest and fees on loans $ 9,394 $ 7,751 Interest on deposits with banks 28 16 Interest on securities available for sale 2,614 1,760 Interest on investment securities: Taxable 181 329 Exempt from Federal income tax 135 100 Interest on Federal funds sold 69 72 - --------------------------------------------------------------------------------------------------------------- Total Interest Income 12,421 10,028 - --------------------------------------------------------------------------------------------------------------- INTEREST EXPENSE: Interest on savings account deposits 1,247 1,288 Interest on certificates of deposit of $100,000 or more 339 339 Interest on other time deposits 2,931 2,414 Interest on borrowed funds 2,060 1,059 Interest on trust preferred securities 266 -- - --------------------------------------------------------------------------------------------------------------- Total Interest Expense 6,843 5,100 - --------------------------------------------------------------------------------------------------------------- Net Interest Income 5,578 4,928 Less provision for loan losses 500 300 - --------------------------------------------------------------------------------------------------------------- Net Interest Income After Provision for Loan Losses 5,078 4,628 - --------------------------------------------------------------------------------------------------------------- NON-INTEREST INCOME: Service charges on deposit accounts 314 287 Gains on sales of mortgages, net 8 9 Securities gains, net 37 7 Other non-interest income 373 331 - --------------------------------------------------------------------------------------------------------------- Total Non-Interest Income 732 634 - --------------------------------------------------------------------------------------------------------------- NON-INTEREST EXPENSE: Salaries and employee benefits 1,997 1,852 Occupancy expense, net 262 241 Equipment 322 278 Other non-interest expense 1,092 959 - --------------------------------------------------------------------------------------------------------------- Total Non-Interest Expense 3,673 3,330 - --------------------------------------------------------------------------------------------------------------- Income before income tax expense 2,137 1,932 Income tax expense 755 677 - --------------------------------------------------------------------------------------------------------------- Net Income $ 1,382 $ 1,255 - --------------------------------------------------------------------------------------------------------------- EARNINGS PER SHARE: Basic $ 0.27 $ 0.25 Diluted $ 0.27 $ 0.25 - --------------------------------------------------------------------------------------------------------------- Weighted average shares outstanding: Basic 5,059 5,057 Diluted 5,083 5,114 - ---------------------------------------------------------------------------------------------------------------
Shares and related amounts adjusted for two-for-one stock split declared December 23, 1997 and 2.5% stock dividend declared March 25, 1998. See Accompanying Notes to Unaudited Consolidated Financial Statements. 4 Yardville National Bancorp and Subsidiaries Consolidated Statements of Income (Unaudited)
Six Months Ended June 30, - -------------------------------------------------------------------------------------------------------------- (in thousands, except for share data) 1998 1997 - -------------------------------------------------------------------------------------------------------------- INTEREST INCOME: Interest and fees on loans $ 18,142 $ 15,096 Interest on deposits with banks 83 32 Interest on securities available for sale 5,054 3,329 Interest on investment securities: Taxable 458 671 Exempt from Federal income tax 237 202 Interest on Federal funds sold 138 236 - -------------------------------------------------------------------------------------------------------------- Total Interest Income 24,112 19,566 - -------------------------------------------------------------------------------------------------------------- INTEREST EXPENSE: Interest on savings account deposits 2,502 2,518 Interest on certificates of deposit of $100,000 or more 640 644 Interest on other time deposits 5,604 4,642 Interest on borrowed funds 3,977 2,216 Interest on trust preferred securities 532 -- - -------------------------------------------------------------------------------------------------------------- Total Interest Expense 13,255 10,020 - -------------------------------------------------------------------------------------------------------------- Net Interest Income 10,857 9,546 Less provision for loan losses 900 575 - -------------------------------------------------------------------------------------------------------------- Net Interest Income After Provision for Loan Losses 9,957 8,971 - -------------------------------------------------------------------------------------------------------------- NON-INTEREST INCOME: Service charges on deposit accounts 620 570 Gains on sales of mortgages, net 25 9 Securities gains, net 46 7 Other non-interest income 729 654 - -------------------------------------------------------------------------------------------------------------- Total Non-Interest Income 1,420 1,240 - -------------------------------------------------------------------------------------------------------------- NON-INTEREST EXPENSE: Salaries and employee benefits 3,940 3,669 Occupancy expense, net 495 475 Equipment 618 528 Other non-interest expense 2,124 1,737 - -------------------------------------------------------------------------------------------------------------- Total Non-Interest Expense 7,177 6,409 - -------------------------------------------------------------------------------------------------------------- Income before income tax expense 4,200 3,802 Income tax expense 1,484 1,335 - -------------------------------------------------------------------------------------------------------------- Net Income $ 2,716 $ 2,467 - -------------------------------------------------------------------------------------------------------------- EARNINGS PER SHARE: Basic $ 0.54 $ 0.49 Diluted $ 0.53 $ 0.49 - -------------------------------------------------------------------------------------------------------------- Weighted average shares outstanding: Basic 5,067 5,029 Diluted 5,091 5,086 - --------------------------------------------------------------------------------------------------------------
Shares and related amounts adjusted for two-for-one stock split declared December 23, 1997 and 2.5% stock dividend declared March 25, 1998. See Accompanying Notes to Unaudited Consolidated Financial Statements. 5 Yardville National Bancorp and Subsidiaries Consolidated Statements of Cash Flows (Unaudited)
Six months ended June 30 - --------------------------------------------------------------------------------------------------------------- (in thousands) 1998 1997 - --------------------------------------------------------------------------------------------------------------- Cash Flows from Operating Activities: Net Income $ 2,716 $ 2,467 Adjustments: Provision for loan losses 900 575 Depreciation 448 420 Amortization and accretion 411 216 Gains on sales of securities available for sale (46) (7) Loss on sales of other real estate 1 -- Writedown of other real estate 278 8 (Increase) in other assets (4,502) (651) Increase in other liabilities 183 591 - --------------------------------------------------------------------------------------------------------------- Net Cash Provided by Operating Activities 389 3,619 - --------------------------------------------------------------------------------------------------------------- Cash Flows From Investing Activities: Net increase in interest bearing deposits 75 484 Purchase of securities available for sale (79,838) (25,970) Maturities, calls, and paydowns of securities available for sale 35,731 11,734 Proceeds from sales of securities available for sale 26,562 2,011 Proceeds from maturities and paydowns of investment securities 3,821 2,113 Purchase of investment securities (4,238) -- Net increase in loans (54,257) (22,438) Expenditures for bank premises and equipment (1,207) (309) Proceeds from sale of other real estate 84 -- - --------------------------------------------------------------------------------------------------------------- Net Cash Used in Investing Activities (73,267) (32,375) - --------------------------------------------------------------------------------------------------------------- Cash Flows from Financing Activities: Net increase in non-interest bearing demand, money market, and savings deposits 12,627 28,755 Net increase in certificates of deposit 40,220 21,630 Net increase (decrease) in borrowed funds 31,591 (18,200) Proceeds from issuance of common stock 323 379 Treasury shares acquired (2,965) -- Dividends paid (704) (589) - --------------------------------------------------------------------------------------------------------------- Net Cash Provided by Financing Activities 81,092 31,975 - --------------------------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 8,214 3,219 Cash and cash equivalents as of beginning of period 20,423 17,150 - --------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents as of End of Period $ 28,637 $ 20,369 - --------------------------------------------------------------------------------------------------------------- Supplemental Disclosure of Cash Flow Information: Cash paid during period for: Interest expense 12,279 9,131 Income taxes 2,035 2,301 - --------------------------------------------------------------------------------------------------------------- Supplemental Schedule of Non-cash Investing and Financing Activities: Transfers to other real estate from loans, net of charge offs 407 486 - ---------------------------------------------------------------------------------------------------------------
See Accompanying Notes to Unaudited Consolidated Financial Statements. 6 Yardville National Bancorp and Subsidiaries Notes to Consolidated Financial Statements Three and Six Months Ended June 30, 1998 (Unaudited) 1. Summary of Significant Accounting Policies Basis of Financial Statement Presentation: The consolidated financial statements have been prepared in conformity with generally accepted accounting principles. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenue and expenses for the period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for loan losses and the valuation reserve of real estate acquired in connection with foreclosures or in satisfaction of loans. In connection with the determination of the allowance for loan losses and other real estate, management obtains independent appraisals for significant properties. The consolidated financial data as of and for the three and six months ended June 30, 1998 includes, in the opinion of management, all adjustments, consisting of only normal recurring accruals necessary for a fair presentation of such periods. The consolidated financial data for the interim periods presented is not necessarily indicative of the result of operations that might be expected for the entire year ending December 31, 1998. Consolidation The consolidated financial statements include the accounts of Yardville National Bancorp (the "Holding Company") and its subsidiaries, Yardville Capital Trust (the "Trust") and Yardville National Bank (the "Bank") and the Bank's wholly owned subsidiaries, Yardville National Investment Corporation, Brendan Inc., Nancy Beth Inc., Yardville Real Estate Corporation, and YNB Financial Services, Inc., (collectively, "YNB"). All significant inter-company accounts and transactions have been eliminated. Brendan Inc. and Nancy Beth Inc. are utilized for the control and disposal of other real estate properties. Yardville Real Estate Corporation is utilized to hold Bank branch properties and YNB Financial Services, Inc., provides alternative investment services. Allowance for Loan Losses For financial reporting purposes, the provision for loan losses charged to operating expense is determined by management and based upon a periodic review of the loan portfolio, past experience, the economy, and other factors that may affect a borrower's ability to repay the loan. This provision is based on management's estimates, and actual losses may vary from these estimates. These estimates are reviewed and adjustments, as they become necessary, are reported in the periods in which they become known. Management believes that the allowance 7 for loan losses is adequate. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions, particularly in New Jersey. In addition, various regulatory agencies, as an integral part of their examination process periodically review the Bank's allowance for loan losses and the valuation of other real estate. Such agencies may require the Bank to recognize additions to the allowance or adjustments to the carrying value of other real estate based on their judgement about information available at the time of their examination. Company - Obligated Mandatorily Redeemable Trust Preferred Securities of Subsidiary Trust Holding Solely Junior Subordinated Debentures of the Company (Trust Preferred Securities) On October 16, 1997, Yardville Capital Trust, (the Trust) a statutory business trust, and a wholly owned subsidiary of the Holding Company, issued $11,500,000 of 9.25% Trust Preferred Securities and $356,000 of 9.25% Common Securities to the Holding Company. Proceeds from the issuance of the Trust Preferred Securities were immediately used by the Trust to purchase $11,856,000 of 9.25% Subordinated Debentures maturing November 1, 2027 from the Holding Company. The Trust exists for the sole purpose of issuing Trust Preferred Securities and investing the proceeds into Subordinated Debentures of the Holding Company. These subordinated Debentures constitute the sole assets of the Trust. 2. Earnings Per Share Weighted average shares for the basic net income per share calculation for the three months ended June 30, 1998 and 1997 were 5,059,000 and 5,057,000 respectively. For the diluted net income per share computation, potential common stock of 24,000 and 57,000 are included for the three months ended June 30, 1998 and 1997, respectively. Weighted average shares for the basic net income per share calculation for the six months ended June 30, 1998 and 1997 were 5,067,000 and 5,029,000 respectively. For the diluted net income per share computation, potential common stock of 24,000 and 57,000 are included for the six months ended June 30, 1998 and 1997, respectively. 3. Recently Issued Accounting Standards SFAS No. 130 FASB Statement No. 130 "Reporting Comprehensive Income" (Statement 130) establishes standards for reporting and display of comprehensive income and its components (revenue, expenses, gains and losses) in a full set of general-purpose financial statements. Statement 130 requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. Statement 130 does not require a specific format for that financial statement but requires that an enterprise display an amount representing total comprehensive income for the period in that financial statement. 8 Statement 130 requires an enterprise to (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. This statement is effective for fiscal years beginning after December 15, 1997. Reclassification of financial statements for earlier periods provided for comparative purposes are required. YNB adopted Statement No. 130 on January 1, 1998 and the disclosure is contained in the table below.
Comprehensive Net Income Three Months Ended June 30, ---------------------------------------------------------------------------------------------------------- (in thousands) 1998 1997 ---------------------------------------------------------------------------------------------------------- Net Income $ 1,382 $ 1,255 ---------------------------------------------------------------------------------------------------------- Other comprehensive income Net change in unrealized gain (loss) for the period, net of tax (53) 673 Reclassification of realized net gain on sale of securities available for sale, net of tax 24 5 ---------------------------------------------------------------------------------------------------------- Holding gain (loss) arising during the period, net of tax and reclassification (29) 678 Reclassification adjustment for realized net gains, net of tax (24) (5) ---------------------------------------------------------------------------------------------------------- Other comprehensive income for the period net of tax (53) 673 ---------------------------------------------------------------------------------------------------------- Total comprehensive income $ 1,329 1,928 ---------------------------------------------------------------------------------------------------------- Comprehensive Income For the Six months ended June 30, 1998 ---------------------------------------------------------------------------------------------------------- (in thousands) 1998 1997 ---------------------------------------------------------------------------------------------------------- Net Income $ 2,716 $ 2,467 ---------------------------------------------------------------------------------------------------------- Other comprehensive income Net change in unrealized gain (loss) for the period, net of tax (302) (142) Reclassification of realized net gain on sale of securities available for sale, net of tax 30 5 ---------------------------------------------------------------------------------------------------------- Holding gain (loss) arising during the period, net of tax and reclassification (272) (137) Reclassification adjustment for realized net gains, net of tax (30) (5) ---------------------------------------------------------------------------------------------------------- Other comprehensive income for the period net of tax (302) (142) ---------------------------------------------------------------------------------------------------------- Total comprehensive income $ 2,414 2,609 ----------------------------------------------------------------------------------------------------------
SFAS No. 133 In June 1998, the FASB issued SAS No. 133 "Accounting for Derivative Instruments and Hedging Activities." This Statement establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet, either as an asset, or as a liability, measured at its fair value. The Statement requires that changes in the derivative's fair 9 value shall be recognized in current earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. SAS No. 133 is effective for fiscal years beginning after June 15, 1999. A company may also implement the Statement as of the beginning of any fiscal quarter after issuance but the statement cannot be applied retroactively. SAS No. 133 must be applied to derivative instruments and certain derivative instruments embedded in hybrid contracts that were issued, acquired or substantively modified after December 31, 1997. YNB does not currently have derivative or hedged instruments and management does not anticipate the statement having a material impact on the its financial position or results of operations. However, management continues to closely evaluate the use of derivative to reduce interest rate risk. 10 YARDVILLE NATIONAL BANCORP AND SUBSIDIARIES Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations This financial review presents management's discussion and analysis of the financial condition and results of operation. It should be read in conjunction with the 1997 Annual Report to stockholders and Form 10-K for the fiscal year ended December 31, 1997 as well as with the unaudited consolidated financial statements and the accompanying notes. This Form 10-Q report contains express and implied statements relating to the future financial condition, results of operations, plans, objectives, performance, and business of YNB, which are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements that relate to, among other things, profitability, liquidity, loan loss reserve adequacy, plans for growth, interest rate sensitivity, market risk, and year 2000 issues. Actual results may differ materially from those expected or implied as a result of certain risks and uncertainties, including, but not limited to, changes in economic conditions, interest rate fluctuations, continued levels of loan quality and origination volume, successful implementation of year 2000 technology changes by YNB, its vendors and suppliers, competitive product and pricing pressures within YNB's markets, continued relationships with major customers including sources for loans and deposits, personal and corporate customers' bankruptcies, legal and regulatory barriers and structure, inflation, and technological changes, as well as other risks and uncertainties detailed from time to time in the filings of YNB with the Securities and Exchange Commission. Financial Condition Assets Total consolidated assets at June 30, 1998 were $698,375,000 an increase of $83,689,000 or 13.6% compared to $614,686,000 at December 31, 1997. The growth in YNB's asset base, during the first six months of 1998 was primarily due to increases in loans, available for sale securities and Federal funds sold. YNB's commercial loan portfolio continued to expand during this time period. The increase in the loan portfolio was the product of an ongoing consistent strategy to improve the profitability of the organization through relationship banking. In the last quarter of 1997, $7,500,000 was contributed to the Bank as a result of YNB's Trust Preferred Securities Offering. The increase in the Bank's legal lending limit allows management to establish larger loan relationships. The pace of consolidation in YNB's market place continues at a rapid rate. Management anticipates continued loan opportunities due to this consolidation. YNB's asset base includes investments of approximately $137,739,000 purchased utilizing primarily repurchase agreements and Federal Home Loan Bank advances (Investment Growth Strategy). The Investment Growth Strategy at June 30, 1998 increased $29,538,000 or 27.3% from the reported total of $108,200,000 at December 31, 1997. The primary goals of the Investment Growth Strategy of improving return on equity and earnings per share continue to be achieved. 11 Cash and due from banks Cash and due from bank balances decreased $4,151,000 at June 30, 1998 when compared to the $18,923,000 balance at December 31, 1997. In April of 1998, YNB began a reserve requirement reduction program. This program allows the Bank to reduce the amount of demand and interest bearing demand balances subject to reserve requirements. Prior to starting the program, the Bank maintained non-interest bearing reserve balances at the Federal Reserve Bank of Philadelphia of between $3,000,000 and $4,000,000. With the implementation of the program, the bank has been able to reduce to zero the amount of funds required to be maintained at the Federal Reserve Bank of Philadelphia, for reserve requirements. These funds are now available to be invested in earning assets. Federal funds sold At June 30, 1998 Federal funds sold totaled $13,865,000 compared to $1,500,000 at December 31, 1997. Average Federal funds sold for the first six months was $4,996,000. The Federal funds sold level experienced at June 30, 1998 was due to increased certificate of deposit (CD) balances and, to a lesser extent, slower than anticipated net new loan growth. Management remains focused on maintaining adequate liquidity to fund loan growth and to meet daily liquidity requirements. It is anticipated that the Federal funds position will decline from the current level. Securities The following table present the amortized cost and market values of YNB's securities portfolios as of June 30, 1998 and December 31, 1997.
Available For Sale Securities June 30, 1998 December 31, 1997 - ----------------------------------------------------------------------------------------------------------------- Amortized Market Amortized Market (in thousands) Cost Value Cost Value - ----------------------------------------------------------------------------------------------------------------- U.S. Treasury and other US government agency securities $ 57,833 $ 57,884 $ 62,465 $ 62,540 Mortgage-backed securities 115,656 115,326 91,193 91,316 Corporate obligations 255 260 3,297 3,306 All other securities 3,029 3,029 2,562 2,562 - ----------------------------------------------------------------------------------------------------------------- Total $ 176,773 $ 176,499 $ 159,517 $ 159,724 - ----------------------------------------------------------------------------------------------------------------- Investment Securities June 30, 1998 December 31, 1997 - ----------------------------------------------------------------------------------------------------------------- Amortized Market Amortized Market (in thousands) Cost Value Cost Value - ----------------------------------------------------------------------------------------------------------------- Obligations of state and political subdivisions $ 12,290 $ 12,402 $ 8,819 $ 8,957 Mortgage-backed securities 14,964 14,859 18,093 17,891 - ----------------------------------------------------------------------------------------------------------------- Total $ 27,254 $ 27,261 $ 26,912 $ 26,848 - -----------------------------------------------------------------------------------------------------------------
12 Total securities increased $17,117,000 or 9.2% at June 30, 1998 to $203,753,000 compared to $186,636,000 at year-end 1997. The available for sale portfolio represents 86.6% of the total investment holdings of YNB at June 30, 1998, compared to 85.6% at year-end 1997. Unpledged available for sale securities represent a secondary source of liquidity for YNB. Securities represent 29.2% of total assets at June 30, 1998 compared to 30.4% of total assets at December 31, 1997. The net unrealized loss on available for sale securities as of June 30, 1998 was $274,000, compared to a net unrealized gain of $207,000 at December 31, 1997. Net unrealized losses, net of tax effect, totaling $178,000 were reported in Accumulated Other Comprehensive Income in Stockholders' Equity at June 30, 1998, compared to a net unrealized gain of $124,000 reported at December 31, 1997. Securities available for sale increased $16,775,000 or 10.5% at June 30, 1998, when compared to the December 31, 1997 balance of $159,724,000. The increase was primarily due to the purchase of fixed and floating rate mortgage backed securities related to the Investment Growth Strategy. Offsetting this increase, were the sales of securities that either due to their small size, prepayment outlook, or risk profile, were no longer a benefit to YNB. A secondary factor limiting the growth in available for sale securities, were increased prepayment speeds on both fixed and floating rate mortgage related securities. Management anticipates principal paydowns in its mortgage-related securities to continue at the current high levels, unless overall interest rates increase. To mitigate the impact of prepayments, management has sold higher coupon fixed rate mortgage backed securities and purchased lower coupon fixed rate mortgage backed securities that should prepay at slower speeds. The Investment Growth Strategy was increased $29,532,000 over the year-end 1997 level. The growth was in fixed and adjustable rate mortgage backed securities, which increased $23,811,000 and $9,529,000 respectively. Offsetting these increases, were declines of $2,000,000 in callable bonds and $1,858,000 in floating rate collateralized mortgage obligations. Investment securities increased $342,000 or 1.3% to $27,254,000 at June 30, 1998 from $26,912,000 at December 31, 1997. The increase resulted from the purchases of longer term fixed rate tax-free municipal bonds that increased $3,471,000 to $12,290,000 at June 30, 1998 compared to $8,819,000 at December 31, 1997. Offsetting this increase, was a decline in mortgage backed securities of $3,129,000 to $14,964,000 at June 30, 1998 from $18,093,000. This decrease was due to principal payments. Loans Total loans, net of unearned income increased $53,483,000 or 13.9% at June 30, 1998 to $439,234,000 from $385,751,000 at December 31, 1997. YNB's loan portfolio represented 62.9% of total assets at June 30, 1998 compared to 62.8% at December 31, 1997. YNB's lending focus continues to be on commercial loans and commercial real estate loans. The consolidation in YNB's market place, the emphasis placed on customer service, and relationship banking are key factors in continued strong loan growth. Strong competition from both bank and nonbank competitors coupled with a flat yield curve could result in comparatively lower yields 13 on new and established lending relationships. In addition, borrowers concerns over the economy, real estate prices and interest rates could all be factors in future loan growth levels. Continued profitable loan growth is a key factor in meeting earnings growth goals.
- ------------------------------------------------------------------------------------------------------------------ (in thousands) 6/30/98 12/31/97 Change % change - ------------------------------------------------------------------------------------------------------------------ Real Estate - mortgage Residential $ 88,206 $ 85,754 $ 2,452 2.9% - ------------------------------------------------------------------------------------------------------------------ Commercial 146,808 134,499 12,309 9.2 - ------------------------------------------------------------------------------------------------------------------ Home equity 23,093 23,805 (712) 3.0 - ------------------------------------------------------------------------------------------------------------------ Commercial and agricultural 112,945 88,228 24,717 28.0 - ------------------------------------------------------------------------------------------------------------------ Real estate - construction 35,578 28,182 7,396 26.2 - ------------------------------------------------------------------------------------------------------------------ Consumer 23,413 18,519 4,894 26.4 - ------------------------------------------------------------------------------------------------------------------ Other loans 9,191 6,764 2,427 35.9 - ------------------------------------------------------------------------------------------------------------------ Total loans $ 439,234 $ 385,751 $ 53,483 13.9% - ------------------------------------------------------------------------------------------------------------------
The table above lists the loan growth by component for the period of December 31, 1997 to June 30, 1998. Commercial and agricultural loans had the greatest growth increasing $24,717,000 in the period and accounting for nearly half of the total increase in outstanding totals. Real estate - commercial loans had the second greatest growth increasing $12,309,000. This is a reflection on management's focus on these markets. All other loan components increased with the exception of home equity loans. To address the declining home equity loan portfolio, YNB lowered its rates on all home equity products on March 1, 1998. In the short term, the home equity portfolio continues to decrease but management believes that in the long term this strategy should make YNB's home equity product more competitive in the marketplace. Liabilities The following table provides information concerning YNB' deposit base at June 30, 1998 and December 31, 1997.
- ------------------------------------------------------------------------------------------------------------------ (in thousands) 6/30/98 12/31/97 Change % Change - ------------------------------------------------------------------------------------------------------------------ Noninterest bearing demand deposits $ 71,253 $ 66,560 $ 4,693 7.1% - ------------------------------------------------------------------------------------------------------------------ Interest bearing demand deposits 49,846 44,520 5,326 12.0 - ------------------------------------------------------------------------------------------------------------------ Money market deposits 42,752 39,937 2,815 7.0 - ------------------------------------------------------------------------------------------------------------------ Savings deposits 74,840 75,047 (207) 0.3 - ------------------------------------------------------------------------------------------------------------------ Certificates of deposit of $100,000 or over 26,873 21,556 5,317 24.7 - ------------------------------------------------------------------------------------------------------------------ Other time deposits 210,227 175,324 34,903 19.9 - ------------------------------------------------------------------------------------------------------------------ Total $ 475,791 $ 422,944 $ 52,847 12.5% - ------------------------------------------------------------------------------------------------------------------
YNB's deposit base is the principal source of funds supporting interest-bearing assets. Total deposits increased $52,847,000 or 12.5% to $475,791,000 at June 30, 1998 compared to $422,944,000 at December 31, 1997. Certificates of deposit were competitively priced throughout the first six months of 1998 to fund net new loan growth. Growth in YNB's deposit base in 1998 continued to be principally in higher costing certificates of deposit, which account 14 for 76.1% of the increase in deposits. In June, YNB began to market its certificates of deposit through a nationwide computer based service. This service allows YNB to have access to a wider market to raise needed funding. YNB has raised approximately $10,000,000 from this market. YNB continued to show strong growth in noninterest bearing demand deposit accounts, which increased $4,693,000 or 7.1%. Sustained growth was also reflected in the lower cost funding sources of interest bearing checking and money market deposit accounts. This growth resulted from YNB's overall philosophy of building and maintaining long-term customer relationships and remains the key to further expanding the core deposit base, which, in turn, presents opportunities for YNB to cross-sell its services. However, lower cost deposit growth levels are not adequate to meet current or projected loan demand. This has resulted in an increased reliance on higher rate certificates of deposit to provide the required funding. As a result, certificates of deposit, the most expensive deposit funding source, available to YNB, increased to 49.8% of total deposit at June 30, 1998 from 46.5% at December 31, 1997. YNB continues to seek lower cost funding sources. One source is opening new branches to serve a wider market area. Management anticipates opening its 10th branch in August 1998 in Pennington, New Jersey. Management believes this will be a strong market for both deposit and loan products. With the continued consolidation in the market place, additional branch opportunities are possible. Borrowed Funds Borrowed funds totaled $165,907,000 at June 30, 1998 compared to $134,316,000 at December 31, 1997. The increase for the first six months of 1998 was $31,591,000 or 23.5%. The majority of the increase was in repurchase agreements relating to the Investment Growth Strategy, which increased $20,420,000 or 20.4% to $120,470,000 at June 30, 1998 compared to $100,050,000 at December 31, 1997. As shorter-term repurchase agreements have matured, management has utilized attractively priced callable repurchase agreements to reduce interest expense. These repurchase agreements typically have a maturity of five to ten years and can be called after a lock out period ranging from one to two years. At June 30, 1998, $61,500,000 or 51.1% of the repurchase agreements were in callable repurchase agreements compared to $10,000,000 or 10.0% at year-end 1997. YNB had Federal Home Loan Bank of New York (FHLB) advances outstanding of $44,327,000 at June 30, 1998. As advances have matured, management has shifted FHLB advances from shorter-term advances into callable advances. At June 30, 1998 callable advances outstanding totaled $33,500,000 as compared to $10,000,000 at December 31, 1997. Callable FHLB advances have terms of ten years and call dates ranging from one to five years. The callable FHLB Advances and repurchase agreements have allowed YNB to lower its borrowing costs, while at the same time extending the terms. In the event that rates rise, the callable borrowings will be called. In the event of falling interest rates, callable borrowings will not be called and could remain outstanding until maturity. 15 YNB has the ability to borrow up to $32,684,000 from the FHLB through it line of credit program, subject to collateral requirements. In addition, YNB is eligible to borrow up to 30% of assets under the FHLB advance program subject to FHLB stock requirements, collateral requirements and other restrictions. YNB also maintains unsecured federal funds lines with four commercial banks totaling $23,000,000 for daily funding needs. YNB's funding strategy is to rely on deposits to fund new loan growth whenever possible and to rely on borrowed funds as a secondary funding source for loans. Company - Obligated Mandatorily Redeemable Trust Preferred Securities of Subsidiary Trust Holding Solely Junior Subordinated Debentures of the Company (Trust Preferred Securities) On October 16, 1997, YNB through its subsidiary Yardville Capital Trust completed the sale of $11,500,000, 9.25%, Trust Preferred Securities. For regulatory capital purposes the entire amount of the issue is treated at Tier 1 capital at the holding company level. Approximately $7,500,000 of the proceeds was invested in earning assets and an additional $2,965,000 was used to fund the stock repurchase program. The remaining funds were used for various corporate purposes. Capital Stockholders' equity at June 30, 1998 totaled $38,813,000, a decrease of $932,000 or 2.3% compared to $39,745,000 at December 31, 1997. This decrease resulted from the following factors: (i) Net income of $2,716,000 less cash dividend payment of $704,000. (ii) The unrealized gain on available for sale securities were $124,000 at December 31, 1997 compared to an unrealized loss of $178,000 at June 30, 1998. This shift resulted in a $302,000 reduction in stockholders' equity. (iii) Proceeds of $323,000 from exercised options. (iv) Repurchase of 167,300 shares of YNB stock, which are listed as treasury stock in the amount of $2,965,000. The decline in the capital ratios from December 31, 1998 to June 30, 1998 was caused by the combination of strong asset growth and declining Stockholders' equity. The primary cause for the decline in Stockholders' Equity was the repurchase of 167,300 shares at a total cost of $2,965,000. Because the stock repurchase program is nearly completed, its impact on future capital formation rates will be far less than the impact for the first six months of 1998. Management remains committed to keeping YNB a well-capitalized institution under the prompt corrective action rules. 16 The following table sets forth regulatory capital ratios for the Holding Company and the Bank as of June 30, 1998 and December 31, 1997
Amount Ratios - ------------------------------------------------------------------------------------------------------------------ dollars in thousands 6/30/98 12/31/97 6/30/98 12/31/97 - ------------------------------------------------------------------------------------------------------------------ Risk-based capital: Tier 1 the Holding Company $ 50,419 $ 51,121 10.8% 12.2% the Bank 48,899 46,496 10.5 11.2 Total the Holding Company 56,260 56,346 12.0 13.5 the Bank 54,661 51,675 11.7 12.5 - ------------------------------------------------------------------------------------------------------------------ Tier 1 leverage: the Holding Company 50,419 51,121 7.8 9.5 the Bank $ 48,899 $ 46,496 7.2% 8.7% - ------------------------------------------------------------------------------------------------------------------
The minimum regulatory capital requirements for financial institutions require institutions to have a Tier 1 leverage ratio of 4.0%; a Tier 1 risk-based asset capital ratio of 4.0% and a total risked based capital ratio of 8.0%. To be considered "well capitalized" an institution must have a minimum Tier 1 capital and total risk-based capital ratio of 6.0% and 10.0%, respectively, and a minimum Tier 1 leverage ratio of 5.0%. At June 30, 1998, YNB and the bank both exceeded the above ratios required to be considered well capitalized. On October 28, 1997, Yardville National Bancorp's Board of Directors authorized management to repurchase up to 172,000 shares of YNB's common shares in the open market in compliance with Rule 10b-18 under the Securities Exchange Act of 1934. As of June 30, 1998, as part of an overall capital plan, 167,300 shares were repurchased at an average price of $17.72 per share. The stock repurchase program is part of an overall plan to effectively manage capital. 17 Credit Quality The following table sets forth nonperforming assets and risk elements in YNB's loan portfolio by type as of June 30, 1998 and December 31, 1997.
Nonperforming Assets - ------------------------------------------------------------------------------------------------- (in thousands) 6/30/98 12/31/97 - ------------------------------------------------------------------------------------------------- Nonaccrual loans: - ------------------------------------------------------------------------------------------------- Commercial and agricultural $ 1,232 $ 515 - ------------------------------------------------------------------------------------------------- Real estate - mortgage 459 384 - ------------------------------------------------------------------------------------------------- Real estate - construction 2,106 2,106 - ------------------------------------------------------------------------------------------------- Consumer 31 38 - ------------------------------------------------------------------------------------------------- Other 312 312 - ------------------------------------------------------------------------------------------------- Total 4,140 3,355 - ------------------------------------------------------------------------------------------------- Restructured loans -- 969 - ------------------------------------------------------------------------------------------------- Loans 90 days or more past due: - ------------------------------------------------------------------------------------------------- Commercial 4 -- - ------------------------------------------------------------------------------------------------- Real estate - mortgage 606 886 - ------------------------------------------------------------------------------------------------- Consumer 185 105 - ------------------------------------------------------------------------------------------------- Total 795 991 - ------------------------------------------------------------------------------------------------- Total nonperforming loans 4,935 5,315 - ------------------------------------------------------------------------------------------------- Other real estate 3,216 3,171 - ------------------------------------------------------------------------------------------------- Total nonperforming assets $ 8,151 $ 8,486 - -------------------------------------------------------------------------------------------------
At June 30, 1998, nonperforming loans, consisting of loans 90 days and more past due, restructured loans and nonaccrual loans, totaled $4,935,000 compared to $5,315,000 at December 31, 1997. Other real estate at June 30, 1998 totaled $3,216,000 compared to $3,171,000 at December 31, 1997. Total nonperforming assets at June 30, 1998 were $8,151,000 a $335,000 or 3.9% decrease over nonperforming asset levels at December 31, 1997. Nonperforming assets as a percentage of total assets were 1.17% at June 30, 1998 compared to 1.38% at December 31, 1997. Nonperforming assets as a percentage of total loans and other real estate were 1.8% at June 30, 1998 compared to 2.2% at December 31, 1997. The improvement in these ratios is due to both strong asset and loan growth rates, and a decrease in nonperforming assets. YNB continues to actively manage nonperforming assets with the goal of reducing these assets in relationship to the total loan portfolio. Whenever possible, existing loan relationships are being restructured in an effort to return these loans to performing status. The allowance for loan losses increased to $6,103,000 or 1.39% of total loans at June 30, 1998 compared to $5,570,000 or 1.44% at December 31, 1997. The provision for loan losses for the first six months of 1998 was $900,000 with net charge-offs totaling $367,000. The allowance for loan losses as a percentage of nonperforming loans was 123.7% at June 30, 1998 compared to 104.80% at December 31, 1997. At June 30, 1998 the allowance for loan losses in management's judgement is considered adequate in relation to credit risk exposure levels. 18 Results of Operations Net Income YNB reported net income of $2,716,000 for the six months ended June 30, 1998 an increase of $249,000 or 10.1% over the same period in 1997. The increase in net income for the six months ended June 30, 1998, compared to the same period in 1997, is primarily attributed to higher net interest income and improved non-interest income, offset by a higher provision for loan losses due to increased loan volume, and increased non-interest expense. On a per share basis, basic and diluted earnings per share were $0.54 and $0.53 respectively for the six months ended June 30, 1998 compared to $0.49 for both basic and diluted earnings per share for the six months ended June 30, 1997. On a quarterly basis, net income for the second quarter of 1998 was $1,382,000 and represents a $127,000 or 10.1% increase over net income for the same period of 1997. On a per share basis, basic and diluted earnings per share for the second quarter of 1998 were both $0.27 compared to basic and diluted earnings per share for the same period of 1997 of $0.25. The increase in net income and earnings per share for the quarter is due to the same reasons discussed above. Net Interest Income YNB's net interest income for the first six months of 1998 was $10,857,000 an increase of $1,311,000 or 13.7% from the same period in 1997. The principal factors contributing to this increase were an increase in interest income of $4,546,000 resulting from increased loan and investment balances offset by an increase of $3,235,000 in interest expense. This increase in interest expense was due to higher volume of and higher costs on CDs, a higher level of borrowed funds and the interest associated with YNB's Trust Preferred Securities. The net interest margin (tax equivalent basis) between the yield on average earning assets and the cost of average funding liabilities, for the six months ended June 30, 1998, was 3.66% a 33 basis point or 8.3% decline compared to 3.99% for the same period in 1997. The principal factors causing the narrowing of the net interest margin were lower yields on securities and loans, and higher cost of certificates of deposit and trust preferred securities. On a quarterly basis, net interest income was $5,078,000 an increase of $150,000 or 3.0% when compared to the same period in 1997. The net interest margin (tax equivalent basis) for the three months ended June 30, 1998 was 3.64% a 44 basis point or 10.8% decrease for the same period of 1997. The reasons for the decline were the same as discussed above. The net interest margin for all 1998 and 1997 comparative periods is negatively impacted by YNB's Investment Growth Strategy. This strategy involves purchasing investments utilizing repurchase agreements or other funding sources. The targeted spread on this strategy is 75 basis points after tax. Because of the narrow targeted spread on this strategy, there will be a negative impact to the net interest margin and return on assets. The balance outstanding in the Investment Growth Strategy at June 30, was approximately $137,739,000 compared to $57,100,000 at June 30, 1997. 19 Conversely, this strategy increases both return on equity and earnings per share, the primary goals of the strategy. Interest Income For the six months ended June 30, 1998 total interest income was $24,112,000 an increase of $4,546,000 or 23.2% when compared to interest income of $19,566,000 for the same period in 1997. The increase is due to higher average balances in both loans and securities, which is partially offset by lower yields on both asset types. Average loans increased $70,120,000 or 20.5% while the yield declined 2 basis points to 8.79% from 8.81%. The decline in loan yields reflects strong competition for loans in YNB's market. The higher average levels and lower yields resulted in interest and fees on loans for the six months ended June 30, 1998 increasing $3,046,000 or 20.2% to $18,142,000 from $15,096,000 for the same period in 1997. Average securities outstanding for the six months ended June 30, 1998 increased $51,091,000 or 38.6% to $183,461,000 when compared to the $132,370,000 the same period of 1997. Over the same period, the yield on the securities portfolio decreased 8 basis points to 6.27% from 6.35%. These factors resulted in interest on securities increasing $1,547,000 to $5,749,000 for the six months ended June 30, 1998 compared to $4,202,000 for the same period in 1997. Overall, the yield on YNB's interest earning asset portfolio decreased 9 basis points to 7.97% for the six months ended June 30, 1998 from the 8.06% for the same period in 1997. For the second quarter of 1998, total interest income was $12,421,000 an increase of $2,393,000 or 23.9% when compared to the $10,028,000 for the second quarter of 1997. The increase was due to higher outstanding balances in both investments and loans offset by lower yields on both asset types. Overall yield on earnings assets for the second quarter of 1998 was 7.96% a 19 basis point drop from the 8.15% yield for the same period in 1997. Interest Expense Total interest expense increased $3,235,000 or 32.3% to $13,255,000 for the first six months of 1998 compared to $10,020,000 for the same period in 1997. The increase in interest expense for the comparable time period resulted from a larger deposit base; an increase in other borrowed funds, the interest costs associated with the Trust Preferred Securities, and higher certificate of deposit costs. Offsetting these factors were lower cost on the core savings, money market and interest bearing checking accounts and lower cost on other borrowed funds. The average rate paid on interest bearing liabilities for the six months ended June 30, 1998 increased 19 basis points to 4.96% from 4.77% for the same period of 1997. A major factor in the increase in the cost of interest bearing liabilities is the interest costs associated with the Trust Preferred Securities that account for 10 basis points or 52.6% of the 19 basis points of increase for the period. Interest on time deposits under $100,000 increased $962,000 to $5,604,000 for the six months ended June 30, 1998 from $4,642,000 for the same period in 1997. This increase was caused by an increase in the average outstanding balance of $33,084,000 to $195,663,000 for the six months ended June 30, 1998, when compared to the average balance of $162,579,000 for the six 20 months ended June 30, 1997. During the first six months of 1998, YNB offered attractive rates on CDs to fund loan growth. Interest expense on borrowed funds increased $1,761,000 to $3,977,000 for the first six months of 1998 when compared to the $2,216,000 for the same period in 1997. The increase was caused by a $64,635,000 increase in the average balance outstanding for the six months ended June 30, 1998 when compared to the same period in 1997. The rate paid on borrowed funds declined 14 basis points for the six months ended June 30, 1998 to 5.61% from the 5.75% for the same period last year. The primary cause for the increase in interest expense on borrowed funds is the higher level of borrowings used to fund the investment growth strategy. The overall decrease in rate was caused by the shifting of borrowed funds out of fixed term products into convertible products at lower interest rates. Total interest expense for the second quarter of 1998 increased $1,743,000 or 34.2% to $6,843,000 from $5,100,000 for the same period in 1997. The overall cost of interest bearing liabilities increased 18 basis points to 4.97% from 4.79% in the second quarter of 1997. Approximately 8 basis points or 44.4% of the increase resulted from the interest expense associated with the Trust-Preferred Securities. The other factors contributing to higher interest expense was an increase of $124,994,000 or 29.4% in the average balance of interest bearing liabilities for the three months ended June 30, 1998 to $550,830,000 compared to $425,836,000 for the same period in 1997. Offsetting the increase in the outstanding balances, were lower yields on savings, money markets and interest bearing checking accounts. In addition, the overall costs of borrowed funds declined due to the factors listed above. While YNB desires to fund asset growth with lower cost savings, money markets, interest bearing checking and non-interest bearing demand deposits, this is not always possible as asset growth rates continue to exceed the growth rate in these deposit types. To meet the funding needs, YNB anticipates continued reliance on higher cost retail CDs and, to a lesser extent, borrowed funds. Provision for Loan Losses YNB provides for possible loan losses by a charge to current operations. The provision for loan losses for the six months ended June 30, 1998 was $900,000, a 56.5% increase over the $575,000 provision recorded for the same period of 1997. For the three months ended June 30, 1998, the provision for loan losses was $500,000, a 66.7% increase over the $300,000 for the same period in 1997. The increase in the provision was primarily due to the strong loan growth recorded in both the first quarter and first six months of 1998. Management believes that the reserve for loan losses is adequate in relation to the credit risk exposure levels. Non-interest Income Total non-interest income for the first six months of 1998 was $1,420,000 an increase of $180,000 or 14.5% over non-interest income of $1,240,000 for the same period in 1997. The increase is primarily due to increases in service charges on deposit accounts and other non-interest income. Service charges on deposit accounts increased $50,000 or 8.8% for the first six 21 months of 1998 compared to the same period in 1997. The increase in service charges is primarily due to both growth in the deposit base for the comparable periods and an increased effort to collect charges and fees on existing deposit relationships. YNB also recorded gains on sale of available for sale securities and mortgages totaling $71,000 for the first six months of 1998 compared to $16,000 for the same period last year. The increase in these gains represent 30.6% of the total increase in non-interest income. These gains reflect routine sales. Other non-interest income increased $75,000 or 11.5% for the first six months of 1998 compared to the same 1997 period. The increase is principally due to additional income derived from life insurance assets which totaled $342,000 a $72,000 or 26.7% increase over the $270,000 for the same period last year. The increase is due to higher average balance of life insurance assets at a lower comparative yield. In the second quarter, YNB began offering its customers the ability to purchase annuities and mutual funds through its YNB Financial Services subsidiary. Total income from the sale of mutual funds and annuities totaled $11,000 and represents one month of revenue. Management believes that this service can be developed into a valuable contributor of non-interest income. Management continues to closely evaluate both traditional and non-traditional sources of new non-interest income as part of a longer-term strategy to increase earnings. For the three months ended June 30, 1998, total non-interest income increased $98,000 or 15.5% based on the factors discussed above. Of particular importance were a $29,000 increase in gain on sale of mortgages and securities, $11,000 earned from the sale of mutual funds and annuities and the factors discussed above. Non-interest Expense Total non-interest expense increased $768,000 or 12.0% to $7,177,000 for the first six months of 1998 compared to $6,409,000 for the same period in 1997. The increase in non-interest expenses was primarily due to increases in salary and employee benefits, equipment expense and other non-interest expense. Total non-interest expenses, on an annualized basis, as a percentage of average assets, were 2.23% for the first six months of 1998 compared to 2.50% for the same period of 1997. YNB's efficiency ratio for the first six months of 1998 was 58.5% an improvement over the 59.4% for the same period in 1997. The efficiency ratio is computed by dividing total operating expenses by net interest income and other income. An increase in the efficiency ratio indicates that more resources are being utilized to generate the same or greater volume of income while a decrease would indicate a more efficient allocation of resources. Salary and employee benefits increased $271,000 or 7.4% to $3,940,000 for the first six months of 1998 compared to $3,669,000 for the same period in 1997. Salary expense increased $310,000 reflecting increased staffing levels and normal salary increases. Benefit expense decreased $39,000 due to reduction in the expenses associated with post retirement benefits. Equipment expense increased $90,000 or 17.0% to $618,000 for the first six months of 1998 from $528,000 for the same period in 1997. The equipment costs increase reflects the continuing efforts of YNB to maintain and upgrade technology in order to provide the highest quality service as well as resolving Year 2000 issues. YNB is in the process of two purchases, which will further increase equipment expense. The first is a $323,000 purchase of new and more 22 powerful main frame computer. The new system will allow YNB to offer new products and services and to continue to expand its customer base. The second is the $200,000 purchase of a new reader sorter. The new machine will replace the older machine that was not year 2000 compliant. Management believes that the purchase of a new reader sorter represents the largest equipment purchase associated with year 2000 issues. This continued investment in upgraded technology allows YNB to operate in a more efficient manner. Better technology increases the productivity of YNB staff and helps to control salary and benefit costs. Occupancy expense for the first six months of 1998 was $495,000 an increase of $20,000 or 4.2% compared to $475,000 for the same period in 1997. The increase was due to the leasing of additional space for the East Windsor branch and routine rent increases. Occupancy expense will increase in the third quarter when the Pennington branch opens in August. In the second quarter, YNB signed a lease for a 45,000 square foot corporate headquarters building. This new location will include a full service bank branch as well as it will bring together all senior management in one location. The major benefits of the corporate headquarters include, room for expansion and improved communication among the various function areas of YNB. Total overhead associated with the new headquarters is estimated to be approximately $1,000,000 per year. Management anticipates occupying the new headquarter in October 1999. Other non-interest expenses increased $387,000 or 22.3% to $2,124,000 for the six months ended June 30, 1998 when compared to the $1,737,000 for the same period in 1997. Most of the expense increase was related to higher costs associated with the higher volumes and larger size of YNB. The most significant increases in other non-interest expense include the following. First, amortization of the issuance costs of Yardville Capital Trust were $80,000 in the six months ended June 30, 1998 and account for 20.7% of the total increase in other non-interest expenses. New Jersey State corporate income tax increased $89,000 due to the improved earnings of YNB. This increase accounts for 23.0% of the total increase in non-interest expenses. Outside fees, including audit, examination and consulting fees increased $104,000 and account for 26.9% of the total increase. This increase reflects the use of consultants on various projects that YNB is involved. One project involves restructuring certain checking and interest bearing checking accounts so that these deposits will no longer be subject to reserve requirements under the Federal Reserve Bank's Regulation D. This project was successfully completed in April 1998 as discussed earlier. A key focus of YNB remains controlling the increase in non-interest expenses. For the three months ended June 30, 1998 total non-interest expense increased $343,000 or 10.3% to $3,673,000 from $3,330,000 for the same period in 1997. Total non-interest expenses, on an annualized basis, as a percentage of average assets were 2.21% for the three months ended June 30, 1998 compared to 2.56% for the same period of 1997. YNB's efficiency ratio for the three months ended June 30, 1998 was 58.2% an improvement over the 59.9% for the same period in 1997. Salary and employee benefits increased $145,000 or 7.8% to $1,997,000 from $1,852,000 for the same period in 1997. Occupancy expense increased $21,000 or 8.7% to $262,000 from $241,000 for the same period in 1997. Other non-interest expense increased $133,000 or 13.9% to $1,092,000 from $959,000 for the same period in 1997. The causes for these increases were discussed above. 23 Item 3: Quantitative and Qualitative Disclosure about Market Risk There have been no material changes in YNB's market risk from December 31, 1997 except as discussed below. For information regarding YNB's market risk refer to the Company's 1997 Annual Report to stockholders. Changes in Earning Risk Net interest income over the next twelve-month period indicates a larger risk to lower rates (-300 basis points) at June 30, 1998 than reported at December 31, 1997. Comparing the simulation results of this low rate scenario to the flat rate interest rate scenario indicates a -9.4% change in net interest income compared to -4.4% at year end 1997. The cumulative one-year negative closed to - -2.6% of assets at June 30, 1998 compared to -13.3% at year-end. The dollar change in the gap was $63,000,000. The reasons for this change in short term earnings risk profile include: 1) The origination of floating rate commercial loans of $24,000,000. 2) An increase in overnight Federal funds of $12,400,000. 3) The addition of $79,000,000 of fixed rate and convertible borrowings, which are non-rate sensitive in lower interests rate environments. 4) An increase in certificates of deposit of $19,300,000 with maturities greater than one year. At the same time as liability durations extended, the investment portfolio duration decreased with expected repricing beyond one year increasing $10,000,000. Prepayment speeds on mortgage backed securities has increased and this has shorten investment cash flows considerably. Management has taken steps to sell faster paying mortgage pools and purchase lower coupon mortgage backed securities with slower prepayment speeds. Changes in Market risk With the addition of callable repurchase agreements and FHLB advances, the market risk profile of YNB has changed. Management measures market risk by changes in the Economic Value of Portfolio Equity (EVPE) as a percentage of total assets with rate shifts of +/- 200 basis points. EVPE analysis is an indication of long-term market risks in the balance sheet. It measures the present value of asset and liability cash flows based on current inventory and market rates to determine the present value of equity. The present value of equity is subsequently measured by shifting interest rates by +/- 200 basis points to observe the variances as a percentage of total assets. It is management's intention to maintain modest changes in this measure with a target of below 3%. At June 30, 1998, the EVPE changes by -2.17% for rate shifts of +200 and -1.17% for rate shifts of -200 basis points. The non-symmetry of the results is indicative of the callable funding 24 booked in the quarter. This compares to changes of -1.80% and 0.00% respectively at December 31, 1997. PART II: OTHER INFORMATION Item 1: Legal Proceedings Not Applicable. Item 2: Changes in Securities and Use of Proceeds Not Applicable. Item 3: Defaults Upon Senior Securities Not Applicable. Item 4: Submission of Matters to a Vote of Securities Holders The annual stockholders meeting of Yardville National Bancorp was held Tuesday, April 28, 1998. The following matter was submitted to a vote at the meeting: The election of the following nominees as directors, the vote with respect to each nominee was as followed: - ------------------------------------------------------------------------------ Nominee Votes for Votes withheld - ------------------------------------------------------------------------------ Anthony M. Giampetro 4,077,025 7,791 - ------------------------------------------------------------------------------ Patrick M. Ryan 4,078,925 5,891 - ------------------------------------------------------------------------------ F. Kevin Tylus 4,080,825 3,991 - ------------------------------------------------------------------------------ Elbert G. Basolis, Jr. 4,081,025 3,791 - ------------------------------------------------------------------------------ Directors whose terms continue beyond this Annual Stockholders Meeting. C. West Ayres Jay G. Destibats, Chairman of the Board Gilbert W. Lugossy Weldon J. McDaniel, Jr. Lorraine Buklad Sidney L. Hofing James J. Kelly Louis R. Matlack 25 Item 5: Other Information Not Applicable Item 6: Exhibits and Reports on Form 8-K See attached exhibits. There were no Form 8-K reports filed during the quarter for which this report is filed. 26 INDEX TO EXHIBITS Exhibit Number Description Page --------- ---------------------------------------------------------------- (H) 3.1 Restated Certificate of Incorporation of the Company, as amended by the Certificate of Amendment thereto filed on March 6, 1998. (B) 3.2 By-Laws of the Company (B) 4.1 Specimen Share of Common Stock (I) 4.2 See Exhibits 3.1 and 3.2 for the Registrant's Certificate of Incorporation and By-Laws, which contain provisions defining the rights of stockholders of the Registrant. (I) 4.3 Amended and Restated Trust Agreement dated October 16, 1997, among the Registrant, as depositor, Wilmington Trust Company, as property trustee, and the Administrative Trustees of Yardville Capital Trust. (I) 4.4 Indenture dated October 16, 1997, between the Registrant and Wilmington Trust Company, as trustee, relating to the Registrant's 9.25% Subordinated Debentures due 2027. (I) 4.5 Preferred Securities Guarantee Agreement dated as of October 16, 1997, between the Registrant and Wilmington Trust Company, as trustee, relating to the Preferred Securities of Yardville Capital Trust. (D) 10.1 Employment Contract between Registrant and Patrick M. Ryan. (D) 10.2 Employment Contract between Registrant and Jay G. Destribats (G) 10.3 Employment Contract between Registrant and Stephen F. Carman (G) 10.4 Employment Contract between Registrant and James F. Doran (G) 10.5 Employment Contract between Registrant and Richard A. Kauffman (G) 10.6 Employment Contract between Registrant and Mary C. O'Donnell (G) 10.7 Employment Contract between Registrant and Frank Durand III (G) 10.8 Salary Continuation Plan for the Benefit of Patrick M. Ryan 27 INDEX TO EXHIBITS (continued) Exhibit Number Description Page ---------- ---------------------------------------------------------------- (D) 10.9 Salary Continuation Plan for the Benefit of Jay G. Destribats (E) 10.10 1988 Stock Option Plan (A) 10.11 1994 Stock Option Plan (A) 10.12 Directors' Deferred Compensation Plan (B) 10.13 Lease Agreement between Jim Cramer and the Bank dated November 3, 1993 (A) 10.14 Lease between Richardson Realty Company and the Bank dated November 18, 1994 (A) 10.15 Agreement between the Lalor Urban Renewal Limited Partnership and the Bank dated October, 1994 (C) 10.16 Survivor Income Plan for the Benefit of Stephen F. Carman (C) 10.17 Lease Agreement between Devon Inc. and the Bank dated as of February 9, 1996 (F) 10.18 1997 Stock Option Plan (G) 10.19 Employment contract between Registrant and Howard N. Hall (G) 10.20 Employment contract between Registrant and Sarah J. Strout (G) 10.21 Employment contract between Registrant and Nina D. Melker (G) 10.22 Employment contract between Registrant and Timothy J. Losch (G) 10.23 Survivor Income Plan for the Benefit of Timothy J. Losch (G) 10.24 Lease Agreement between the Ibis Group and the Bank dated July 1997 (H) 10.25 Lease agreement between Hilton Realty Co. of Princeton and the bank dated March 31, 1998. 28 INDEX TO EXHIBITS (continued) Exhibit Number Description Page ---------- ---------------------------------------------------------------- (H) 10.26 Amendments to the 1994 Stock Option Plan. 10.27 Lease agreement between Crestwood Construction and the Bank dated May 25, 1998 26 10.28 Lease addendum between Gardeners Property Partnership and the bank dated March 1998. 47 27.1 Financial Data Schedule 56 (A) Incorporated by reference to the Registrant's Annual Report on Form 10-KSB/A filed on July 25, 1995 (B) Incorporated by reference to the Registrant's Registration Statement on Form SB-2 (Registration No. 33-78050) (C) Incorporated by reference to the Registrant's Annual Report on Form 10-KSB for fiscal year ended December 31, 1995 (D) Incorporate by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 (E) Incorporated by reference 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 (F) Incorporated by reference to the Registrant's Registration Statement on Form S-8 (Registration NO. 333-28193) (G) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (H) Incorporated by reference 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 (I) Incorporated by reference to the Registrant's Registration Statement on Form S-2 (Registration Nos. 333-35061 and 333-35061-01) 29 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. YARDVILLE NATIONAL BANCORP -------------------------- (Registrant) Date: August 10, 1998 By: /s/ Stephen F. Carman -------------------- -------------------------- Stephen F. Carman Executive Vice President and Chief Financial Officer 30 EX-10 2 EXHIBIT 10.27 L E A S E A G R E E M E N T ----------------------------- This AGREEMENT, made this day of 1998, between CRESTWOOD CONSTRUCTION, LLC, hereinafter designated as the Landlord, and YARDVILLE NATIONAL BANK, hereinafter designated as the Tenant. For and in consideration of the covenants herein contained, and upon the terms and conditions herein set forth, Landlord and Tenant agree as follows: 1. PREMISES. The Landlord does hereby lease to the Tenant and the Tenant does hereby rent from the Landlord, the following described premises, hereinafter referred to as "leased premises" or "premises": Bank/office building at the corner of Yardville-Hamilton Sq. and Kuser Roads in Hamilton Square, New Jersey and is to be constructed by the Landlord on Block 2575, Lot 184 in Hamilton Township, Mercer County, New Jersey. The subject property is shown on the Hamilton Township Tax Map as Block 2575, Lot 184. Said building shall be approximately 100 feet by 150 feet totaling approximately 45,000 square feet, as measured from outside exterior walls together with parking all as set forth on the approved site plan dated December 11, 1997 referred to as Exhibit A. 2. TERM. The term of this lease shall be fourteen (14) years. The term of this lease and Tenant's obligation to pay rent shall commence 60 days after substantial completion or upon occupancy by Tenant whichever is earlier. Substantial completion shall be deemed to have occurred upon the issuance of a Certificate of Occupancy for any and all of Landlord's work so as to allow the Tenant or the Tenant's contractor to commence interior finishes. It is estimated that construction will be completed 18 months after the approval and execution of all plans by local governmental authorities and the issuance of permits and Landlord agrees to expeditiously pursue such execution of plans and permits to proceed with construction. If construction has not commenced by June 1, 1998, or if construction is not completed eighteen months following execution of plans and issuance of permits, Tenant shall have the right to cancel this Lease by giving Landlord written notice of intent to cancel if construction is not commenced within 30 days of the date of the Notice. Notice by Landlord to the Tenant of substantial completion of Landlord's work on the leased premises as set forth above, punch list items, and work contingent upon completion of Tenant's own work excepted, shall constitute delivery hereunder. If Tenant fails to renew the Lease as provided in Paragraph #52, then and in that event, the Tenant shall pay to the Landlord, on a monthly basis for up to one year following termination of this Lease, a sum equal to the monthly rent Tenant would have been required to pay during the first year of the renewal period. This obligation shall terminate if Landlord replaces Tenant with another Tenant during that one year period. 3. BASIC RENT. The Tenant shall pay to the Landlord, as basic rent for and during the term as follows: Upon completion and delivery as set forth above and upon mutual determination of square footage between Landlord's architect and Tenant's architect for each use, rent shall be calculated as follows to determine the initial annual basis: Branch Bank Facility $22.00 per sq. foot General Office Space $15.00 per sq. foot Storage Space $ 8.00 per sq. foot Once the first year's rent is determined as aforesaid, that amount shall constitute the base annual rent payable as set forth below. (If delivery occurs on a day other than the first day of a month the Tenant shall pay a proportionate rent for such partial month.) The base annual rent shall be adjusted once every five years by increasing it, if necessary, to equal the average increase in the Consumer Price Index for the New York area for the prior five years, provided, however, the increase shall not exceed 3% for any adjustment period. All rent is due and payable in advance on the first day of each and every month during the term of the lease. Tenant shall pay basic rent, and any additional rent as hereinafter provided, to Landlord at Landlord's above stated address, or at such other place as Landlord may designate in writing, without demand, counterclaim, deduction or setoff. 4. USE. Tenant shall use and occupy the leased premises only for lawful purposes permitted by local ordinance and for no other purpose. 5. CARE. The Tenant shall take good care of the premises and shall at the Tenant's own cost and expense, make all repairs, including painting and decorating, and shall maintain the premises in good condition and state of repair. The Tenant shall neither encumber nor obstruct the sidewalks, parking areas and entrances, but shall keep and maintain the same in a clean condition, free from debris, refuse, snow and ice. Notwithstanding the above, Landlord shall be responsible for the following: 1. Maintain the roof and exterior walls in good condition; 2. Make all structural repairs unless the repairs are made necessary by the act or neglect of the Tenant; and 3. Make necessary replacements of the plumbing, cooling, heating, electrical and sewer systems, except when made necessary by the act or neglect of the Tenant. 6. SURRENDER. On the last day, or earlier permitted termination of the lease term, Tenant shall quit and surrender the leased premises in good order and condition, ordinary wear and tear excepted. Prior to the expiration of the lease term, the Tenant shall remove all of its personal property, trade fixtures and equipment from the premises, and shall repair any damage caused by such removal. Any property of the Tenant remaining on the premises after the last day of the term of this lease or after the earlier permitted termination of the lease term shall be conclusively deemed abandoned and may be removed or disposed of by Landlord. Tenant shall reimburse Landlord for the cost of such removal. Notwithstanding the above, this paragraph does not require Tenant to restore the leased premises to its original condition. 7. COMPLIANCE WITH LAWS. The Tenant shall comply with all laws, regulations, requirements and directives of the federal, state, county and municipal authorities applicable to the business to be conducted by the Tenant in the leased premises. Landlord has obtained site plan approval for the operation of a bank/office building on the premises and agrees to comply with any conditions contained in said approval. Prior to the commencement of opening for business, the Tenant shall, at its expense, obtain from the municipality (if required) a Tenant's C of O or use permit. The Tenant shall promptly comply with all requests, orders, regulations and directives of the Board of Fire Underwriters or insurance companies covering the leased premises for the prevention of fire or other casualty at Tenant's own cost and expense after commencement of the Lease. Tenant represents that it shall not violate any rules or regulations of the occupational safety and health administration. The Tenant shall conduct its business in such a manner, both as regards noise and other nuisances, as will not interfere with, annoy, or disturb any other Tenant in the conduct of its business or the Landlord in the management of the shopping center (as shown on the proposed site plan attached hereto as Exhibit "B"). Landlord will likewise use its best efforts to make sure that no other Tenant will interfere with, annoy or disturb the Tenant under this Lease Agreement. 8. ASSIGNMENT. The Tenant shall not assign, mortgage or encumber this lease, nor sublet or sublease the premises or any part thereof, without the prior written consent of the Landlord, which consent shall not be unreasonably withheld or delayed. If Tenant is being released from the Lease Agreement, then Landlord may require posting of a security deposit or any other reasonable security as a condition of approving any assignment. This lease shall be binding upon Tenant and any acquirer or successor of Tenant. Notwithstanding the above, Tenant does not need Landlord's consent or approval for the sale of Tenant's stock. 9. NOTICES. All notices required under the terms of this lease shall be given and shall be complete by mailing such notices by certified or registered mail, return receipt requested, to the address of the parties as shown at the head of this lease, or to such other address as may be designated in writing, which notice of change of address shall be given in the same manner. All notices to Tenant may be mailed to the leased premises once Tenant has occupied the premises. The parties may designate counsel to whom copies of notices shall be sent and may, by consent, agree to alternative methods of delivery of notices. 10. SEVERABILITY. The terms, conditions, covenants and provisions of this lease shall be deemed to be severable. If any clause or provision herein contained shall be adjudged to be invalid or unenforceable, it shall not affect the validity of any other clause or provision herein, but such other clauses or provisions shall remain in full force and effect. 11. INSPECTION. The Tenant agrees that the Landlord and the Landlord's agents, shall have the right to enter into and upon the said premises or any part thereof, during regular business hours, upon reasonable notice to Tenant, while accompanied by a representative of Tenant, for the purpose of examining the same or making such repairs or alterations therein as may be necessary for the safety and preservation thereof. The clause shall not be deemed to be a covenant by the Landlord nor be construed to create an obligation on the part of the Landlord to make such inspection or repairs. Landlord recognizes that the nature of Tenant's business may require security so as to deny Landlord access to portions of the premises except in emergency situations under controls acceptable to Tenant. 12. NET RENT. (The phrase "Tenant's proportionate share" shall apply only if Landlord receives a single bill for any such items which bill covers land buildings or operations of other Tenants otherwise Tenant's share shall be one hundred percent (100%).) Tenant agrees to pay as additional rent, promptly and without demand, its proportionate share of all real estate taxes, common area expenses and insurance affecting the real estate (land and building) of which the leased premises form a part. It is the intention of the parties that this shall be a triple net lease. The Landlord and Tenant agree that the proportionate share of the above taxes, common area expenses and insurance to be paid by the Tenant, under the terms of this paragraph, shall be computed on the basis that the total area of the leased premises bears to the total area of the entire premises. Landlord and Tenant further agree that Tenant shall pay its proportionate share of the above common area expenses and insurance monthly by paying one-twelfth the estimated amount with each basic monthly rent installment in a manner similar to the escrow system used by banks in connection with residential mortgages. Annually Landlord, upon submission of the tax, common area expense and insurance bills, shall compute any differences from the estimated monthly payments, notify Tenant of same, and the adjustment of the difference shall be made with the next due installment of the basic monthly rent. Photocopies of the tax bill, common area expense bills and insurance bills, submitted by the Landlord to the Tenant, shall be sufficient evidence of the amount of taxes, common area expenses and insurance. So long as Tenant is responsible for one hundred percent of such expenses Tenant may make arrangements to pay those expenses when due provided Landlord agrees and Tenant provides adequate proof of timely payment of such expenses. If at any time during the term of this Lease the methods of taxation prevailing at the commencement of the term hereof shall be altered, so that in lieu of or as a supplement to or a substitute for the whole or any part of the real estate taxes now assessed or charged there is an alternate assessment or charge or tax, then such alternate assessment or charge or tax shall be deemed to be included in the real estate taxes payable by the Tenant pursuant to this paragraph and the Tenant shall pay and discharge the same as herein provided in respect to the payment of real estate taxes. The common area expenses herein referred to are the Landlord's costs of operating, maintaining, replacing and repairing the common areas of the premises (land) of which the leased premises form a part. Such expenses to include, but not limited to, lighting, cleaning, snow removal, policing, landscaping, repairing and patching of the common roadways. The insurance herein is the rental, fire and liability coverage under a policy issued by a commercial insurer licensed to provide insurance in New Jersey. (Any reference to common areas shall apply only if other tenants are sharing use of the demised premises with Tenant. The Landlord and Tenant shall delineate on the attached site plan (Exhibit "B") those areas which shall be considered "common areas" for the purpose of this Lease Agreement. Landlord also agrees that Tenant may pay its portion of the tax bill to Landlord within ten (10) days notice from Landlord of the amount of the bill. Tenant shall pay all of the tax for improvements (so long as it is the only building on the taxed property) and its proportionate share of the land until such time as the Tenant's portion of the property is subdivided out. Landlord agrees that it will use its best efforts to subdivide out Tenant's portion of the property and, if successful, further agrees that upon completion of the subdivision and the issuance of a separate tax bill to Tenant's property, Tenant may pay said bill directly to the Township of Hamilton and provide proof of said payment to Landlord within ten (20) days of said payment. Tenant reserves the right to audit any common area expenses and all expenses should be reasonable and customary. 13. QUIET ENJOYMENT. The Landlord represents that the Landlord is the owner of the premises herein leased and has the right and authority to enter into, execute and deliver this lease; and does further covenant that the Tenant on paying the rent and performing the conditions and covenants herein contained, shall and may peaceably and quietly have, hold and enjoy the leased premises for the term aforementioned. 14. MORTGAGE PRIORITY. This lease shall not be a lien against the said premises in respect to any mortgages that may hereafter be placed upon said premises. The recording of such mortgage shall have preference and precedence and be superior and prior in lien to this lease, irrespective of the date of recording. The Tenant agrees to execute any instruments, without cost, which may be deemed necessary or desirable, to effect the subordination of this lease to any such mortgage provided said mortgagee executes a subordination, nondisturbance and attornment agreement in a form satisfactory to Tenant. A refusal by the Tenant to execute such instruments shall entitle the Landlord to cancel this lease. The term hereof is expressly limited accordingly. 15. SIGNS. The Tenant shall not place nor allow to be placed any signs of any kind whatsoever, upon, in or about the leased premises without the prior written consent of the Landlord which consent shall not be unreasonably withheld. Tenant agrees, if required by Landlord, to attach at Tenant's own cost and expense an illuminated sign onto a free standing sign that may be erected by Landlord. Tenant further agrees to erect at Tenant's own cost and expense an illuminated sign on the exterior of the leased premises. All signs herein erected shall be approved, before erection, by the Landlord in writing as to size, location. Any signs permitted by the Landlord shall at all times conform with all municipal ordinances or other laws and regulations applicable thereto. Notwithstanding the above, any signs that the Landlord requires the Tenant to erect herein shall be limited to a cost of $2,500.00 to the Tenant. 16. PARKING. Shall be available as shown on the approved Site Plan--Exhibit A. The parking areas shown on Exhibit A shall be for the exclusive use of the Bank and its customers. 17. UTILITIES. The Tenant shall pay when due all the rents or charges for water or other utilities exclusively used by the Tenant, which are or may be assessed or imposed upon the leased premises, and if not paid, such rents or charges shall be added to and become payable as additional rent with the installment of rent next due. Tenant to pay for all utilities. Landlord shall not be responsible for the interruption in service of any utility. Notwithstanding the above, if the utility services are interrupted due to no fault of the Tenant but due to the fault of the Landlord for a period of more than ten (10) days, then Tenant will be entitled to an abatement of rent until such time as the utilities are returned to service. Tenant and Landlord agrees to use its best efforts to have the utilities returned to service as soon as possible. In the event the utility or utilities are not restored for a period of six months, then Tenant shall have the right to cancel this Lease Agreement unless non-restoration results from Tenant's fault. 18. LANDLORD'S EXCULPATION. The Landlord shall not be liable for any damage or injury which may be sustained by the Tenant or any other person, as a consequence of the failure, breakage, leakage or obstruction of the water, plumbing, steam, sewer, waste or soil pipes, roof, drains, leaders, gutters, valleys, downspouts or the like or of the electrical, gas, power, refrigeration, sprinkler, air-conditioning or heating systems; or by reason of the elements; or resulting from the carelessness, negligence or improper conduct on the part of any other Tenant or of the Landlord or this or any other Tenant's agents, employees, guests, licensees, invitees, subtenants, assignees or successors; or attributable to any interference with, interruption of or failure, beyond the control of the landlord, of any services to be furnished or supplied by the Landlord. Notwithstanding the, above, Landlord shall not be exculpated from (1) any gross negligence or willful and wanton acts of the Landlord, (2) any of the remedies provided to tenant under Paragraph 17 herein, and (3) any of the warranties provided to Tenant under Paragraph 54 herein. 19. LIABILITY INSURANCE. Tenant shall keep in force at its own expense, so long as this Lease remains in effect, public liability insurance in companies acceptable to the Landlord with respect to the premises, in form satisfactory to Landlord covering both Landlord and Tenant with minimum limits of $1,000,000 per person and $2,000,000 per accident and in which the property damage liability shall be not less than $100,000. Tenant will deposit the policy of such insurance or certificates thereof with Landlord within 15 days of occupying said premises. Tenant shall also maintain at Tenant's expense to "all risk" property insurance, business/rent interruption insurance and commercial general liability insurance naming Landlord as an additional insured. 20. PLATE GLASS. Tenant shall be obligated to maintain, repair and replace all plate and other glass in the leased premises. 21. NON-PERFORMANCE BY LANDLORD. This lease and the obligation of the Tenant to pay the rent hereunder and to comply with the covenants and conditions hereof, shall not be affected, curtailed, impaired or excused because of the Landlord's inability to supply any service, by reason of any rule, order regulation or preemption by any governmental entity, authority, department, agency or subdivision or for any delay which may arise by reason of negotiations for the adjustment of any fire or other casualty loss or because of strikes or other labor trouble or, for any cause beyond the control of the Landlord. This paragraph does not apply to Tenant's remedies following any interruption of utility services provided in Paragraph 17 and Tenant's remedies for Landlord's failure to make construction deadlines set forth in Paragraph 2. 22. REIMBURSEMENT OF LANDLORD. If the Tenant shall fail or refuse to comply with or perform any conditions and covenants of the within lease, the Landlord may, if the Landlord so elects, carry out and perform such conditions and covenants, at the cost and expense of the Tenant, and the said cost and expense shall be payable on demand, or at the option of the Landlord, shall be added to the installment of rent due immediately thereafter, but in no case later than one month after such demand. This remedy shall be in addition to such other remedies as the Landlord may have hereunder by reason of the breach by the Tenant. Landlord's rights hereunder shall apply only after giving Tenant reasonable notice to cure the covenant or condition alleged to have not been complied with. Likewise, if the Landlord shall fail or refuse to comply or perform any conditions and covenants of the within Lease, the Tenant may, if the Tenant so elects, carry out and perform such conditions and covenants, at the cost and expense of the Landlord and the said cost and expense shall be deducted from any future rent payable to the Landlord. This remedy shall be in addition to such other remedies as the Tenant may have hereunder by reason of the breach of the Landlord. Tenant's rights hereunder shall apply only after giving Landlord reasonable notice to cure the covenant or condition alleged to have not been complied with. 23. CONDEMNATION. In the event that the premises shall be taken for public use by the city, state, federal government, public authority or other corporation having the power of eminent domain, then this Lease shall terminate as of the date on which possession thereof shall be taken for such public use, or, at the option of the Tenant, as of the date on which the premises shall become unsuitable for Tenant's regular business by reason of such taking; provided, however, that if only a part of the leased premises shall be so taken, such termination shall be at the option of Tenant only. If such a taking of only a part of the leased premises occurs, and Tenant elects not to terminate the Lease, there shall be a proportionate reduction of the Basic Rent and Additional Rent to be paid under this Lease from and after the date such possession is taken for public use. Tenant shall have the right to participate, directly or indirectly, in any award for such public taking to the extent that it may have suffered compensable damage as a Tenant on account of such public taking. 24. ALTERATION. No alterations, installations, additions, or improvements shall be made, installed or attached to the leased premises, without the written consent of the Landlord which consent shall not be unreasonably withheld. Unless otherwise provided herein, all such alterations, additions or improvements and installations, when made, permanently installed or attached to the said premises, shall belong to and become the property of the Landlord and shall be surrendered with the premises and as part thereof upon the expiration or termination of this Lease. Notwithstanding the above, Tenant is permitted to make any nonstructural improvement inside the building without the Landlord's consent. 25. FIXTURES. It is agreed that the Tenant shall have the right to install whatever trade equipment, fixtures and inventory as may be deemed necessary by the Tenant for the conduct of the business for which the premises have been leased, subject to compliance with applicable rules and regulations of governmental boards having jurisdiction thereof. Any trade equipment, fixtures or inventory of the Tenant, not removed by the Tenant upon the termination of this Lease, or upon any quitting, vacating or abandonment of the premises by the Tenant, or upon the Tenant's eviction, shall be considered as abandoned and the Landlord shall have the right, without notice to the Tenant, to sell or otherwise dispose of the same and shall not be accountable to the Tenant for any part of the proceeds of such sale, if any. 26. FIRE OR OTHER CASUALTY. In case of fire or other casualty, the Tenant shall give immediate notice to the Landlord. If the premises shall be partially damaged by fire, the elements or other casualty, the Landlord shall repair the same as speedily as practicable, but the Tenant's obligation to pay the rent hereunder shall not cease. If the premises be so extensively and substantially damaged as to render them untenantable, then the rent shall cease until such time as the premises shall be made tenantable by the Landlord. However, if the premises be totally destroyed or so extensively and substantially damaged as to require practically a rebuilding thereof, then the rent shall be paid up to the time of such destruction and then and from thenceforth this lease shall come to an end. If the Tenant shall have been insured against any of the risks herein covered, then the proceeds of such insurance shall be paid over to the Landlord to the extent of the Landlord's cost and expenses to make the repairs hereunder. Notwithstanding the above, if Landlord cannot repair the damages to the property within a six-month period, then the Tenant shall have the right to terminate this Lease and rent shall be due and owing only up until the date of the fire or casualty. 27. REFUSE. Tenant shall at its own cost and expense maintain a refuse container as designated on the approved site plan (Exhibit A). Such container shall be adequate in size and structure and kept in good and secure condition. Such container shall be located in an area designated on the approved site plan. Tenant: shall not permit undue accumulations of trash, rubbish and other refuse. Tenant shall cause any used cartons, containers, refuse, debris, litter and garbage to be picked up from the parking areas, sidewalks and grounds, of the Landlord, where same have been deposited, dropped or discarded by the Tenant or it customers. Tenant herein also agrees to maintain a refuse container in front of the leased premises and to be periodically emptied by Tenant, if Landlord so requests. Tenant shall bag all garbage placed in container which has been removed from their premises. 28. CLEANLINESS. Tenant agrees to maintain the lease premised, at its own expense, in a clean, orderly and sanitary condition and free of insects, rodents, vermin and other pests. Tenant also agrees not to cause or permit objectionable odors to emanate or be dispelled from the leased premises. 29. LANDLORD REPAIRS. The repairs required of the Landlord in Paragraph 5 herein shall be done at the Landlord's expense and shall not become part of or added to the common area expenses. Furthermorel, if Landlord does not make a repair required in this Lease within a reasonable period of time following notice from the Tenant, then Tenant can make the repair and offset the cost of the repair against any future rent due to the Landlord. 30. SITE REVISIONS. The Landlord herein reserves the right at any time to make changes or revisions in the parking areas, to make alterations thereof, additions thereto, and to construct additional buildings as permitted by applicable land use laws and regulations, so long as such revisions have no adverse impact on Tenant's use of the demised premises. This paragraph shall apply only to those areas specifically designated and agreed to by Landlord and Tenant on the site plan attached as Exhibit A. 31. DAMAGE. In case of the destruction of or damage of any kind whatsoever to the said premises, caused by the carelessness, negligence or improper conduct on the part of the Tenant or the Tenant's agents, employees, or invitees, the Tenant shall repair the said damage or replace or restore any destroyed parts of the premises, as speedily as possible, at the Tenant's own cost and expense or from insurance proceeds. 32. INDEMNITY. Tenant agrees to indemnify the Landlord against and save it harmless from and against any and all claims, actions, damages, liability and expense in connection with loss of life, personal injury and/or damage to property arising from or out of any occurrence in or about the leased premises, and/or which result from the occupancy or use by Tenant of the leased premises or any part thereof and/or which may be occasioned wholly or in part by any act or omission of Tenant, its agents or employees, except if caused by Landlord or Landlord's employees, agents or contractors. In case Landlord shall, without fault on its part, be made a party to any litigation commenced by or against the Tenant, then Tenant shall protect and hold Landlord harmless and shall pay all costs, expenses and reasonable attorney's fees that may be incurred or paid by Landlord in connection with such litigation. 33. LATE PENALTY. Any rent due under the terms of this Lease and not received by the Landlord by the fifth day of the month in which it is due will be subject to a late penalty of the maximum amount permitted by law, but not to exceed five (5%) percent. The late penalty shall be imposed at the discretion of the Landlord and if so imposed shall be payable by the Tenant on demand of the Landlord. Landlord's failure to impose penalty shall not constitute any waiver of this paragraph. The late penalty shall be deemed additional rent. Tenant shall be entitled to one five (5) day notice per year of the imposition of the first late penalty in that year. 34. REMEDIES UPON TENANT'S DEFAULT. If there should occur any default on the part of the Tenant in the performance of any conditions and covenants herein contained beyond any cure period, or should the Tenant be evicted by summary proceedings or otherwise, the Landlord, in addition to any other remedies herein contained or as may be permitted by law, may either by force or otherwise, without being liable for prosecution therefor, or for damages, re-enter the said premises and the same have and again possess and enjoy; and as agent for the Tenant or otherwise, re-let the premises and receive the rents therefore and apply the same, first to the payment of such expenses, reasonable attorney fees and costs, as the Landlord may have been put to in re-entering and repossessing, the same and in making such repairs and alterations as may be necessary; and second to the payment of the rents due hereunder. The Tenant shall remain liable for such rents as may be in arrears and also the rents as may accrue subsequent to the reentry by the Landlord, to the extent of the difference between the rents reserved hereunder and the rents, if any, received by the Landlord during the remainder of the unexpired term hereof, after deducting the aforementioned expenses, fees and costs; the same to be paid as such deficiencies arise and are ascertained each month. Any non-monetary defaults shall require 30 days' notice to Tenant of Tenant's right to cure which right shall continue so long as Tenant is diligently pursuing the cure. Landlord shall also only be allowed possession of the property in accordance with the law of New Jersey. 35. TERMINATION ON DEFAULT. Upon the occurrence of any of the contingencies set forth in the preceding clause, or should the Tenant be adjudicated a bankrupt, insolvent or placed in receivership, or should proceedings be instituted by or against the Tenant for bankruptcy, insolvency, receivership, agreement of composition or assignment for the benefit of creditors, or if this lease or the estate of the Tenant hereunder shall pass to another by virtue of any court proceedings, writ or execution, levy, or by operation of law, the Landlord may, if the Landlord so elects, at any time thereafter, terminate this lease and the term hereof, upon giving to the Tenant or to any trustee, receiver, assignee or other person in charge of or acting as custodian of the assets or property of the Tenant, five days notice in writing, of the Landlord's intention so to do. Upon the giving of such notice, this lease and the term hereof shall end on the date fixed in such notice as if the said date was the date originally fixed in this lease for the expiration hereof; and the Landlord shall have the right to remove all persons, goods, fixtures, and chattels therefrom, by force or otherwise, without liability for damages. In the event that the relationship of Landlord and Tenant may cease or terminate by reason of the default by the Tenant or by the ejectment of the Tenant by judicial proceedings, or after the abandonment of the premises by the Tenant, it is hereby agreed that the Tenant shall remain liable for rent and costs as stated in above paragraph 3. 36. NON-WAIVER. The various rights, remedies, options and elections of the parties, expressed herein, are cumulative, and the failure of the either party to enforce strict performance by the other of the conditions and covenants of this lease or to exercise any election or option or to resort or have recourse to any remedy herein conferred or the acceptance by the Landlord of any installment of rent after any breach by the Tenant, in any one or more instances, shall not be construed or deemed to be a waiver or a relinquishment for the future by the Landlord of any such conditions and covenants, options, elections or remedies, but the same shall continue in full force and effect. Likewise, payment of rent by Tenant shall not act as a waiver of Tenant's right to insist on performance of any of the terms hereof. 37. RIGHT TO EXHIBIT. The Tenant agrees to permit the Landlord and the Landlord's agents to show the premises to persons wishing to rent or purchase the same during regular business hours and while accompanied by a representative of Tenant, and Tenant agrees that on and after 180 days next preceding the expiration of the term hereof, the Landlord or the Landlord's agents shall have the right to place notices on the front of said premises or any part thereof, offering the premises for rent or for sale; and the Tenant hereby agrees to permit the same to remain thereon without hindrance. Said right to exhibit shall be upon reasonable notice to Tenant. 38. ABANDONMENT. Tenant shall throughout the term of this Lease conduct and carry on the type of business for which the premises have been leased. Tenant shall not allow the leased premises to become vacant or deserted for a period of more than six months. 39. WAIVER OF JURY TRIAL. Landlord and Tenant do hereby waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other on any matter whatsoever arising out of or in connection with this Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the premises, and/or claim, injury or damage. 40. ENFORCEMENT. Tenant shall pay, upon demand, all of Landlord's costs, charges and expenses, including the fees of counsel, agents and others retained by Landlord, incurred in enforcing Tenant's obligation to pay the basic and additional rents due under this lease. In actions to enforce any other provision of this lease, the losing party, shall be responsible for the other party's reasonable costs, charges, expenses and counsel, expert and other fees, incurred in such actions. 41. LOSS OF PROPERTY. Landlord shall not be liable for any loss of property by Tenant from any cause whatsoever, including but not limited to theft or burglary from the leased premises, and Tenant covenants and agrees to make no claim for any such loss at any time. 42. ENTIRE AGREEMENT. This lease contains the entire agreement between the parties, no representative, agent or employee of the Landlord has been authorized to make any representation or promises with reference to the within letting or to vary, alter or modify the terms hereof. No additions, changes or modifications, renewals or extensions hereof, shall be binding unless reduced to writing and signed by the Landlord and the Tenant. 43. ADDITIONAL RENT. Any payments required to be made by Tenant, whether to Landlord or otherwise, under this lease shall be deemed to be additional rent, whether or not so designated in the lease. Landlord shall be entitled to all remedies available to Landlord of non-payment of rent in the event that, Tenant fails to pay any such payment. 44. BROKER. The parties warrant and represent that they have not dealt or negotiated with any real estate broker or salesperson in connection with this Lease agreement and that they shall indemnify and hold each other harmless from any costs, claims or damages successfully asserted by any other person or firm claiming to have negotiated or brought about this Lease. 45. PHOTOCOPIES. Photocopies bearing original signatures of the parties shall be deemed to be original documents, and the parties hereto and lending institutions may rely upon said photocopies bearing original signatures as such originals. 46. EXECUTION. The submission of this Lease for examination does not constitute a reservation of or option for the premises. This Lease agreement shall become effective, only upon execution by both Landlord and Tenant. 47. HEADINGS. The headings contained in the body of this lease agreement are for purposes of identification only, and are not a part of the agreement between the parties. 48. PERSONAL LIABILITY. Notwithstanding anything to the contrary provided in this lease, it is specifically understood and agreed, such agreement being a primary consideration for the execution of this lease by Landlord, that there shall be absolutely no personal liability on the part of Landlord, its Partners, nor their successors with respect to any of the terms and conditions of this lease. The Tenant shall look solely to the equity of the Landlord in the Premises for the satisfaction of each and every remedy of Tenant in the event of any breach by Landlord of any of the terms and conditions of this lease to be performed by Landlord, such exculpation of liability to be absolute and without any exceptions whatsoever. 49. LANDLORD INSTALLATION. Leased premises shall be provided the following by Landlord: Landlord's work is described in detail in Exhibit B. 50. CONSTRUCTION. Landlord agrees that construction of the building, designated by the Landlord to contain the leased premises, shall commence, before the expiration of 120 days after the date the Landlord shall have procured a building permit from the appropriate authority and Landlord further agrees to thereafter diligently proceed with the construction of the premises. If for any reason construction has not commenced by the above date either party here-to may terminate this lease by written notice to the other party, sent certified mail return receipt requested, prior to the commencement of construction. Upon such notice this lease shall become null and void without any liability of either party to the other, with the exception of the refund of the security deposit. Landlord shall construct the building in accordance with architectural plans submitted to and approved by Tenant and attached hereto as Exhibit C all in a good and workmanlike manner in compliance with all applicable laws and regulations. Warranties shall be assigned to Tenant. Landlord agrees that everything will be warranted for one year, the roof warranted for 20 years and all mechanical, water penetration and site work warranted for 2 years. Landlord further agrees to provide Tenant with a construction schedule and communicate with Tenant on the status of construction on a regular basis. 51. TENANT WORK. Tenant is permitted to enter the leased premises prior to commencement of the lease term in order to prepare the premises, provided however, that such entry does not interfere, impede or disrupt the Landlord nor violate any township ordinances. Landlord agrees to use its best efforts to allow Tenant side-by-side access for completion of Tenant's work. 52. RENEWAL. Tenant shall have the option of renewing this lease for two (2) additional five (5) year periods provided the Tenants give to the Landlord Notice of Intent to Renew at least nine (9) months prior to the expiration of the initial term or renewal period being renewed. Rent for the renewal term shall be at least the existing rent increased to the fair market value (FMV) as of the commencement date of each renewal. If the parties cannot agree on the FMV increase or a mutually agreeable appraiser to determine the same, then each party will hire an appraiser and the FMV shall be determined by taking an average of the two appraisals provided the difference between the two is 10% or less. If the difference between the two appraisals is greater than 10%, then the two hired appraisers shall pick a third appraiser, and the FMV determined by the third appraiser shall be binding. 53. EXCLUSIVE USE. Landlord agrees that Landlord will not rent to another banking facility within the shopping center anticipated to be constructed on the same lot occupied by the building leased to Tenant. 54. ROOFTOP ANTENNA/MODIFICATIONS, Tenant, with prior review and approval by the Landlord, which approval shall not be unreasonably withheld or delayed, is permitted to install antenna/satellite dishes and related equipment on the roof of the building or on the site provided, however, that Tenant shall comply with any and all governmental restrictions and regulations and obtain all necessary permits and, in addition, Tenant shall be responsible for any damage or defect created in the roof by reason of the installation of such materials and shall appropriately screen such equipment and materials from view. 55. OPTION TO PURCHASE. Tenant shall have the continuing option to purchase the premises after the end of the fifth lease year at a price equal to the then current fair market value (FMV) of the premises. If the parties cannot agree on the fair market value or a mutually agreeable appraiser to determine same, then each party will hire an appraiser and the FMV shall be determined by taking an average of the two appraisals provided the difference between the two is 10% or less. If the difference between the two appraisals is greater than 10%, then the two hired appraisers shall pick a third appraiser, and the FMV determined by the third appraiser shall be binding. If, pursuant to Paragraph #64, Tenant has paid outside of Lease payments for Lease Hold Improvements, then and in that event, if Tenant exercises this option to purchase during the term of the Lease, Tenant shall receive a credit for a portion of the monies so paid, calculated by dividing the total payment made for Lease Hold Improvements by 14 years and crediting Tenant with the sum equal to that figure times the number of years remaining on the Lease. In the event Landlord has not subdivided out the Tenant's portion of the property consistent with an agreed upon division by the end of the fifth lease year, the Tenant shall have the further option to proceed with the application for said subdivision at Tenant's expense and, if approval is received, exercise this option. Alternatively, if subdivision is impractical, the parties will explore alternatives such as land lease or condominium association and Landlord will pursue one of those courses in order to permit Tenant to exercise this option. 56. RIGHT OF FIRST REFUSAL. Should the Landlord, during the original or any renewal term of the Lease, decide to sell the building and property to any other person, corporation or company, the Landlord shall first offer the building and/or property for sale to Tenant at the same price as the Landlord's best offer. Tenant shall have thirty (30) days from the date of receipt of written notice of the other offer to match that offer in order to exercise Right of First Refusal to purchase the premises hereunder. Tenant's offer must match not only terms of price but, also, all terms including payment method and any and all contingencies. 57. CHOICE OF LAW. This Lease Agreement shall be governed by the law of the State of New Jersey and the parties agree to make Mercer County the venue of any legal action resulting from this Lease. 58. SUCCESSORS AND ASSIGNS. This Lease Agreement shall be binding on all successors and assigns to either party's interests herein. 59. MEMORANDUM OF LEASE. A memorandum of this Lease Agreement shall be filed simultaneously upon execution with the clerk of Mercer County, New Jersey. 60. HOLDING OVER. In the event that the Tenant shall remain in the demised premises after the expiration of the term of this Lease without having executed a new written Lease with the Landlord, such holding over shall not constitute a renewal or extension of this Lease. The Landlord may, at its option, elect to treat the Tenant as one who has not removed at the end of its term, and thereupon be entitled to all the remedies against the Tenant provided by law in that situation, or the Landlord may elect, at its option, to construe such holding over as a tenancy from month to month, subject to all the terms and conditions of this Lease, except as to duration thereof, and rent shall be due at 125% of the last month's rent covered under the base and/or option term of the Lease. 61. WAIVER OF SUBROGATION. Landlord and Tenant hereby releases the other from any and all liability or responsibility (to the other or anyone claiming through or under them by the way of subrogation or otherwise) under fire and extended coverage or supplementary contract casualties, if such fire or other casualty shall have been caused by the fault or negligence of the other party, or anyone for whom such party may be responsible; provided, however, that, except as otherwise provided in this Lease, this release shall be applicable and in force and effect only with respect to loss or damage occurring during such time as the releasor's policies shall contain a clause or endorsement to the effect that any such release shall not adversely affect or impair said policies or prejudice the right of the releasor to recover thereunder. Each of Landlord and Tenant agrees that its policies will include such a clause or endorsement so long as the same shall be obtainable without extra cost, or if such cost shall be charged therefore, so long as the other party pays such extra cost, if extra cost shall be chargeable therefor, each party shall notify the other party therefore and of the amount of the extra cost, and the other party shall be obligated to pay the extra cost unless, within ten (10) days after such notice, it elects not to be obligated so to do by written notice to the original party. If such clause or endorsement is not available, or if either party should not desire the coverage at extra cost to it, then the provisions of this Article shall not apply to the policy or policies in question. 62. BANKING APPROVAL. This Lease Agreement is contingent upon the Tenant obtaining all necessary approvals to operate a banking facility at this location from the Office of the Comptroller of the currency within ninety (90) days from the execution of this Lease Agreement. Tenant agrees to apply for this approval immediately following execution of this Lease Agreement. Tenant agrees that if Tenant cancels this Lease Agreement because the relocation is not approved by the Comptroller of the currency as required hereunder, then and in that event, Tenant agrees to reimburse the Landlord for any and all expenses incurred by the Landlord in preparing the premises including engineering, site work and any other work done after the execution of the Lease and until the date of cancellation. 63. ARBITRATION. (a) All disputes which may arise between the parties hereto out of or in relation to or in connection with this Agreement, shall be settled by arbitration in accordance with the provisions set forth in the New Jersey Arbitration Act, N.J.S.A. 2A:24-1 et seq. The decision of such arbitration shall be binding on both parties, and a judgment on an award rendered shall be entered pursuant to paragraph (b). (b) Exclusive jurisdiction over entry of judgment on any arbitration award rendered pursuant to paragraph (a) or over any dispute, action or suit arising therefrom shall be in any court of appropriate subject matter jurisdiction located in New Jersey, and the parties by this Agreement expressly subject themselves to the personal jurisdiction of said court for the entry of any such judgment and for the resolution of any dispute, action or suit arising in connection with the entry of such judgment. 64. LEASEHOLD IMPROVEMENTS. Tenant agrees to pay Landlord a maximum of $35.00 per foot for any and all Tenant improvements based upon the existing estimating plans and provided any changes thereto are reasonable in scope. (A copy of said estimating plans are attached hereto as Exhibit "D".) Landlord further agrees to competitively bid-out all Tenant improvements on the leased premises and to allow Tenant to accept or reject the bids for the leasehold improvements. In the event that Tenant does not accept any of the bids submitted for the leasehold improvements, then Tenant reserves the right for the Landlord to deliver to Tenant a shell of the building and then Tenant will have the right and responsibility to finish all leasehold improvements. The shell of the building is defined and set forth in the attached plans submitted as Exhibit "D". Tenant further agrees to pay a mark-up of 3% to the Landlord for supervision of the leasehold improvements if the Tenant accepts the bids submitted to Landlord and Landlord is responsible for completing the leasehold improvements. Payment to the Landlord hereunder shall be made in accordance with a separate contract between Landlord and Tenant regarding said leasehold improvements. The parties hereto have executed this Lease Agreement on the day and year first above written. As to Landlord: As to Tenant: CRESTWOOD CONSTRUCTION, LLC YARDVILLE NATIONAL BANK By: /s/ John J. Klein, III By: /s/ Patrick M. Ryan --------------------------- ------------------------ JOHN J. KLEIN, III PATRICK M. RYAN President/CEO Dated: 5-25--98 Dated: 4/2/98 -------------------------- --------------------- ADDENDUM TO LEASE AGREEMENT --------------------------- LANDLORD: CRESTWOOD CONSTRUCTION, LLC - --------- TENANT: YARDVILLE NATIONAL BANK - ------- PROPERTY: Block 2575, Lot 184, Hamilton Township, NJ - --------- ================================================================================ The contents of this Addendum are an Integral part of the Lease Agreement dated May 8, 1998 and wherever the contents of the Lease Agreement and this Addendum differ, the Addendum shall govern. 1. In addition to the common areas delineated in yellow on Exhibit B, Tenant shall be responsible for its proportionate share of the maintenance expenses for the detention basin. Tenant's proportionate share shall be based on total acreage of land allocated to each user of the detention basin. The Tenant shall be entitled to an easement for use of the detention basin throughout the term of the loan. 2. Omitted from Exhibit B is a proposed 21,000 square foot retail center to be on the remainder of the site outside of the dotted red line. Landlord shall supply Tenant with a copy of the revised plans including the proposed shopping center once those plans are completed. 3. Paragraph 30 of the Lease Agreement is modified to change the reference to Exhibit A to Exhibit B. All other terms and conditions of Paragraph 30 remain the same. 4. The date of Exhibit A referred to in Paragraph 1 of the Lease Agreement is changed to September 15, 1997 as revised on November 5, 1997. 5. Paragraph 49 of the Lease Agreement is modified to change the reference to Exhibit B to Exhibit C, C1, D, D1, D2 and D3. 6. Paragraph 50 of the Lease Agreement is modified to change the reference to Exhibit C to Exhibit C, C1, D, D1, D2 and D3. 7. Paragraph 54 of the Lease Agreement is modified to change the reference to Exhibit D (in the 5th line of said paragraph) to Exhibit C. The reference to Exhibit D (in the 15th line of said paragraph) shall be changed to Exhibit D, D1, D2 and D3. 8. The Tenant shall be entitled to a credit of $25,000 for the architectural staircase which was originally proposed as part of the base building and since eliminated by the Tenant. 9. Any discrepancies in the plans and specifications prepared by The Aztec Corporation and Steven S. Cohen, Architect, PC, shall be controlled by what is in The Aztec Corporation plans and specifications, with the exception that all dimensions in said plans and specifications shall be governed by the Steven S. Cohen, Architect, PC, plans and specifications. 10. Paragraph 2 of the Lease Agreement is modified to change the number 60 to 120 in the third line if the Tenant elects to have the Landlord deliver only the shell of the building in accordance with Paragraph 64 of the Lease Agreement. 11. The word "replacing" shall be deleted from the 12th line of the second paragraph of Paragraph 12 of the Lease Agreement. 12. Paragraph 64 of the Lease is modified to state that if the Tenant elects to have the Landlord provide only a shell of the building, then Tenant has the further option of removing certain items from the shell and be reimbursed on a dollar-for-dollar credit for the items removed. 13. Tenant reserves the right to make any and all changes to the plans and specifications attached as Exhibits to this Lease without charge to the Tenant provided said changes are in materials of equal value, the changes do not impede the construction timetable and there is no direct increase in cost to the Landlord. 14. The Exhibits attached to the Lease Agreement shall be as follows: Exhibit Description ------- ----------- A Preliminary and Final Site Plan prepared by Crucili-Dolci, Inc. dated 9/30/97 as revised on 11/5/97 (1 sheet). B Preliminary and Final Site Plan prepared by Crucili-Dolci, Inc. dated 9/30/97 as revised on 11/5/97 with a dotted red line delineating the proposed subdivision line and yellow highlighted area delineating the common areas (1 sheet). C Estimating Package consisting of First Floor Plan, Second Floor Plan and Third Floor Plan prepared by The Aztec Corporation and dated 9/22/97 as revised on 12/5/97 (3 sheets). C1 Interior Construction Estimating Package prepared by The Aztec Corporation dated 11/19/97 and revised 12/8/97 (37 pages). D Base Building Exhibit consisting of First Floor Plan, Second Floor Plan and Third Floor Plan prepared by The Aztec Corporation dated 9/22/97 as revised on 12/15/97 and 3/18/98 (3 sheets) along with Interior Construction Estimating Package prepared by The Aztec Corporation dated 11/19/97 as revised on 12/8/97 and edited on 3/17/98 (40 pages). D1 Set of Drawings prepared by Steven S. Cohen, Architect, PC, dated 2/16/98, consisting of 12 sheets labeled A.0 to A.11. D2 Letter from John J. Klein III to Randy J. Csik dated 4/2/98 with paragraphs 2 and 3 deleted and initialed by John J. Klein III (1 page). D3 Specification book prepared by Steven S. Cohen, Architect, PC, dated November 19, 1997, revised December 8, 1997 and edited for base building on February 17, 1998. AGREED & ACCEPTED: CRESTWOOD CONSTRUCTION, LLC LANDLORD By: /s/ John Klein ---------------------------------------- John Klein, Manager Member YARDVILLE NATIONAL BANK TENANT By: /s/ Patrick Ryan ---------------------------------------- Patrick Ryan, President/CEO ADDENDUM TO LEASE AGREEMENT Landlord: CARDUNERS PROPERTY PARTNERSHIP c/o Carduner's Liquor Store Carduner Shopping Center Rts. 130 & 571 East Windsor, NJ, 08520 Tenant: YARDVILLE NATIONAL BANK 3111 Quakerbridge Road Mercerville, NJ, 08619 Property: 18 Princeton-Hightstown Road Hightstown, NJ, 08520 =============================================================================== The contents of this Addendum shall be an integral part of the Lease Agreement between Landlord and the Tenant dated March , 1998 and wherever the contents of this Addendum and the Lease Agreement differ, this Addendum shall govern. 1. The Lease Term on the Summary of Basic Lease Provisions shall be modified to state six years, 8 months. 2. Under the "Minimum Rent To Be Paid During Lease Term" in the Summary of Basic Lease Provisions, the first line should be modified to change "8 mos" within the ( ) to "21 mos". 3. The Security Deposit in the Summary of Basic Lease Provisions should be changed from $5,000.00 to 0. 4. The Rent In The Renewal Term should be modified to adjust the column headings of "Annual" and "Monthly" to coincide with the appropriate numbers and a second renewal term of an additional five years should be inserted to allow for the tenant's second 5-year option to renew at increases in annual rent equal to 3% each year. 1 5. Paragraph 1.1 is hereby modified to state the following: That in consideration of the rents and covenants herein set forth, Landlord hereby leases to Tenant, and Tenant hereby rents from Landlord, a portion of the real estate designated on the Tax Map of East Windsor Township as Lot 15, Block 6, consisting of the existing building known as 18 Princeton-Hightstown Road, East Windsor, NJ, together with the right to use the driveway to Route 571 and parking area in total being approximately 37% of the square footage of land identified as Lot 15, Block 6, East Windsor Township, and set forth on Exhibit A attached hereto. It is agreed, however, that Landlord and any future Tenants of the Landlord existing on Lot 15, Block 6, of the current East Windsor Tax Map shall have the right in common with the Tenant to use the existing driveway of the Demised Premises provided that Tenant maintains, during the term of this lease, and any extensions thereof, the same number of parking spaces which it is leasing from Landlord hereunder and Tenant's use of the existing parking area remains the same. 6. Paragraph 3.1 of the Lease is modified to add the following: "Notwithstanding the above, Landlord shall not unreasonably withhold its consent to any alterations or improvements and any non-structural improvements to the interior of the premises may be made by Tenant without the consent of the Landlord." 7. Paragraph 4.6 of the Lease is modified to add before the word, "day", in the fourth line of this paragraph, the word: "tenth". 8. Paragraph 5.1 of the Lease should be modified to delete the word, "continuously" in the first line of that paragraph. 9. Paragraph 6.2 of the Lease should be deleted in its entirety and substituted with the following: The Operation and Maintenance Costs shall include maintaining and repairing the common areas of the premises of which the leased premises form a part. Such expenses shall include lighting, cleaning, snow removal, policing, landscaping, repairing and patching of the common roadways, and Landlord's insurance for covering fire and such other risks as are from time to time involved in standard extended coverage endorsements and special broad 2 form coverages, insuring not less than 90% of the full insurable value of the Demised Premises and improvements installed by Landlord or others within same, in addition to rent loss insurance in amounts acceptable to Landlord. 10. Paragraph 6.5 is hereby modified to add the following: Notwithstanding the above, Landlord hereby agrees that Tenant is permitted to pay the fire and liability insurance coverage directly to the appropriate insurance company. Tenant shall provide Landlord proof of said payment within ten days of said payment and Tenant shall be fully responsible for any interest or penalties resulting from late payments of the same. Tenant shall be responsible for paying one hundred percent (100%) of the tax on the improvements for Lot 15, Block 6, East Windsor Township, and thirty-seven percent (37%) of the tax assessment for the land. The Landlord shall be responsible for the remaining sixty-three percent (63%) of the tax on the land. Tenant's portion of the tax bill will be paid by Tenant to Landlord within ten (10) days of Tenant's receipt of the tax bill from Landlord. 11. Paragraph 6.7 to the Lease Agreement should be added stating the following: "Tenant reserves the right to audit once a year any common area operation and maintenance costs and said costs should be reasonable and customary." 12. Paragraph 7.1 of the Lease Agreement should be deleted since no rules and regulations presently exist. 13. Article 9 of the Lease Agreement should be modified to state Tenant's and Landlord's Maintenance and Repairs. Paragraph 9.1 should be deleted and replaced with the following: Tenant shall take good care of the premises and shall at the Tenant's own cost and expense, make all repairs, including painting and decorating, and shall maintain the premises in good condition and state of repair. The Tenant shall neither encumber nor obstruct the sidewalks, parking areas and entrances, but shall maintain the same in clean condition, free from debris, refuse, snow and ice. Tenant shall be responsible for the first $2,500.00 per year of the following: 3 a. Maintenance of the roof and exterior walls in good condition; b. All structural repairs; and c. All necessary replacements of the plumbing, cooling, heating, electrical and sewer systems. In the event the repairs listed in (a), (b) or (c) above exceed $2,500.00 in any given year, during the initial lease term or the first renewal term, then Landlord shall pay the difference in the cost of the repair above $2,500.00. Tenant's obligation for the repairs in (a), (b) or (c) above shall also be capped at $7,500.00 during the initial lease term and $7,500.00 during the first renewal term. If the cumulative cost of the repairs listed in (a), (b) or (c) above exceed $7,500.00 in the initial lease term, then Landlord shall pay the balance of said costs above $7,500.00. The same shall apply for the costs of said repairs in the first renewal term. If Tenant decides to exercise its option to renew the lease for the second renewal term, then Tenant shall be obligated for all costs and expenses of the repairs referred to in (a), (b) or (c) above during the remaining term of the lease. 14. Paragraph 10.1 is hereby modified to add the following: "Notwithstanding the above, if the utility services are interrupted due to no fault of the Tenant but due to the fault of the Landlord for a period of more than ten days, then Tenant will be entitled to an abatement of rent until such time as the utilities are returned to service. Tenant agrees to use its best efforts to have the utilities returned to service as soon as possible. In the event that the utility or utilities are not restored for a period of six months, then Tenant shall have the right to cancel this Lease Agreement. 15. Paragraph 12.1(e) is hereby deleted. However, Tenant does agree to be obligated to maintain, repair and replace all plate and other glass in the leased premises. Also, the last paragraph of 12.1 is hereby deleted. 16. Paragraph 13.1 is hereby modified to add the following: "Notwithstanding the above, Landlord shall not be exculpated of liability for claims, demands or injuries resulting from the negligent act or failure to act or perform any duty or obligation required of Landlord, its officers, employees, agents and contractors or otherwise. 4 17. Paragraph 14.1 is hereby deleted and replaced with the following: In the event of the total destruction of the Demised Premises by fire or other casualty during the lease term hereof or in the event of such partial destruction thereof as to render the Demised Premises wholly untenable or unfit for occupancy, then in either event, unless such damage can be repaired within one hundred eighty (180) days after the occurrence, this lease and the term hereby created, shall at either party's option, to be exercised within fifteen (15) days after notice from one to the other, as hereinafter provided, cease from the date of such damage or such destruction and Tenant shall upon written notice from Landlord immediately surrender the Demised Premises to Landlord and Tenant shall pay rent within said term only to the time of such damage or destruction. If, however, the damage as aforesaid can be repaired within one hundred eighty (180) days from the occurrence thereof, Landlord shall repair the Demised Premises with all reasonable speed, this lease shall continue in full force and effect and there shall be an abatement of rent. Landlord shall notify Tenant within thirty (30) days from the occurrence of the destruction as to whether or not the damage can be repaired within one hundred eighty days after the occurrence thereof. Tenant's rights hereunder shall not apply if the fire or other casualty is caused by the willful act of the Tenant. 18. Paragraph 14.2 of the Lease is hereby deleted and substituted with the following: In the event of the partial destruction of the Demised Premises by fire or other casualty during the lease term hereof, which such partial destruction does not render the Demised Premises wholly untenable or unfit for occupancy for more than one hundred eighty (180) days, Landlord shall repair the damage with all reasonable speed, this lease shall continue in full force and effect and there shall be an abatement of rent. If such damage cannot be repaired within one hundred eighty (180) days after the occurrence, this lease and the term hereby created shall at either party's 5 option, to be exercised within fifteen (15) days after notice from the other party as hereinafter provided shall cease from the date of such damage or destruction as provided in Section 14.1. Landlord shall notify Tenant within thirty (30) days from the occurrence of the destruction as to whether or not the damage can be repaired within one hundred eighty (180) days after either occurrence thereof. Tenant's rights hereunder shall not apply if the fire or other casualty is caused by the willful act of the Tenant. 19. Paragraph 15.2 of the lease shall be deleted and substituted with the following: In the event that only part of the leased premises is taken, then Tenant shall have the option of terminating this lease if said taking materially interferes with Tenant's operation of its business. If the Tenant does not terminate this lease, there shall be a proportionate reduction of the basic rent and additional rent to be paid under this lease from and after the date such possession is taken for public use provided said taking applies to a portion of Tenant's building or parking spaces. Tenant shall have the right to participate, directly or indirectly, in any award for such public taking to the extent that it may have suffered compensable damage as a Tenant on account of such public taking, and provided Tenant's claim does not decrease Landlord's award. 20. Paragraph 17.1 is hereby modified to state that said entries onto the Demised Premises shall be made only upon reasonable notice to Tenant and during reasonable business hours except in an emergency. 21. Paragraph 18.5 should be modified to state that in the event of a holdover, the monthly minimum rent shall be 150% of the then existing minimum monthly rent and additional rent. 22. Paragraph 19.1 is hereby modified to state that in the event of a holdover, Tenant shall pay 150% of the then minimum monthly rent and additional rent. 6 23. Paragraph 20.1(c) is modified to change the number "10" to "30" in the second to last sentence. 24. Paragraph 20.1(e) is modified to add after the words, "Demised Premises", the following language: "for a period of 30 days or more". 25. Paragraph 20.1(f) is hereby modified to add after "course of business", the following: ", except for the sale of the stock of the Tenant". 26. Paragraph 20.1(g) is hereby deleted. 27. At the end of Paragraph 20.1, the following paragraph should be added: Notwithstanding the above, Landlord shall also only be allowed possession of the property in accordance with NJ law. Any non-monetary defaults shall require 30 days' written notice to Tenant of Tenant's right to cure which right to cure shall be extended so long as Tenant is diligently pursuing a cure in good faith. 28. Paragraph 23.1 is hereby deleted and substituted with the following: Whenever, under this lease, provision is made for Tenant securing the written consent or approval by Landlord, such consent or approval shall not be unreasonably withheld. 29. Paragraph 24.1 is hereby modified to add the following language: "Notwithstanding the above, Tenant consents to the above provided mortgagee signs a Subordination, Non-Disturbance and Attornment Agreement in a form satisfactory to Tenant. 30. Paragraph 24.2 is hereby modified to delete the last sentence of said paragraph. 31. Paragraph 29.1 is hereby modified to add after the words, "ten percent (10%) per annum from", the following: "the tenth day following". 7 32. Paragraph 32.1 should be modified to add the following: "Notwithstanding the above, Landlord shall be responsible for any interruptions in utility services as set forth in the modification to Paragraph 10.1 of the lease." 33. Paragraph 33.1 of the lease should be deleted. 34. Paragraph 38.1 should be modified to change "one (1) year" in the fifth line to "six (6) months". 35. The following additional paragraphs should be added to the lease: EXCLUSIVE USE. Landlord agrees that Landlord will not rent to any other banking facility within a one mile radius of the leased premises. ARBITRATION. (a) All disputes which may arise between the parties hereto out of or in relation to or in connection with this agreement, shall be settled by arbitration in accordance with the provisions set forth in the NJ Arbitration Act, N.J.S.A. 2A:24-1 et seq. The decision of such arbitration shall be binding upon both parties and a judgment on an award rendered shall be entered pursuant to Paragraph (b). (b) Exclusive jurisdiction over entry of judgment on any arbitration award rendered pursuant to Paragraph (a) or over any dispute,, action or suit arising therefrom shall be in any Court of appropriate subject matter jurisdiction located in NJ, County of Mercer, and the parties by this agreement expressly subject themselves to the personal jurisdiction of said Court for the entry of any such judgment and for the resolution of any dispute, action or suit arising in connection with the entry of such judgment. WAIVER OF SUBROGATION. Landlord and Tenant hereby release the other from any and all liability or responsibility (to the other or anyone claiming through or under them by the way of subrogation or otherwise) under fire and extended coverage or supplementary contract casualties, if such fire or other 8 casualties shall have been caused by the fault or negligence of the other party, or anyone for whom such party may be responsible; provided, however, that, except as otherwise provided in this lease, this release shall be applicable and in force and effect only with respect to loss or damage occurring during such time as the releasor's policies shall contain a clause or endorsement to the effect that any such release shall not adversely affect or impair such policies or prejudice the right of the releasor to recover thereunder. Each of Landlord and Tenant agrees that its policies will include such a clause or endorsement so long as the same shall be obtainable without extra cost or if costs shall be charged therefore so long as the other party pays such extra cost. If extra costs shall be chargeable therefore, each party shall notify the other party therefore and of the amount of the extra cost and the other party shall be obligated to pay the extra cost unless, within ten days after such notice, it elects not to be obligated so to do by written notice to the original party. If such clause or endorsement is not available, or if either party should not desire the coverage at extra cost to it, then the provisions of this paragraph shall not apply to the policy or policies in question. ROOFTOP ANTENNA/MODIFICATIONS. Tenant, with prior review and approval by the Landlord, which approval shall not be unreasonably withheld, is permitted to install antenna/satellite dishes and related equipment on the roof of the building or on the site provided, however, that Tenant shall comply with any and all governmental restrictions and regulations and obtain all necessary permits and, in addition, Tenant shall be responsible for any damage or defect created in the roof by reason of the installation, removal or existence of such materials and shall appropriately screen such equipment and materials from view. LANDLORD: CARDUNERS PROPERTY PARTNERSHIP By: /s/ Robert Carduner ----------------------------------- Robert Carduner, General Partner TENANT: YARDVILLE NATIONAL BANK By: /s/ Patrick Ryan ------------------------------------ Patrick Ryan, President, CEO 9 EX-27 3 FINANCIAL DATA SCHEDULE
9 6-MOS DEC-31-1998 JUN-30-1998 28,637 2,144 13,865 0 176,499 27,254 27,261 439,234 6,103 698,375 475,791 165,907 6,364 11,500 0 0 20,392 18,421 698,375 18,142 5,749 221 24,112 8,746 13,255 10,857 900 46 7,177 4,200 4,200 0 0 2,716 0.54 0.53 7.96 4,931 795 0 0 5,570 394 27 6,103 6,103 0 0
-----END PRIVACY-ENHANCED MESSAGE-----