Yardville National Bancorp Cites Deposit Growth and Retail Expansion in Third Quarter Earnings

HAMILTON, N.J., Oct. 20 /PRNewswire-FirstCall/ -- Successful execution of its retail banking strategy helped Yardville National Bancorp surpass $3 billion in total assets this quarter, as the company announced solid growth in both net income and earnings per share for the first nine months of 2005. YNB's net income increased to $16.6 million for the first nine months of 2005, up 20.4 percent from the $13.8 million earned for the same period of 2004. Earnings per share for the first nine months were also up, increasing 18.9 percent to $1.51 per diluted share from $1.27 per diluted share for the first nine months of 2004.

A combination of factors affected YNB's results for the third quarter. While net interest income rose 12.8 percent, this improvement was partially offset by decreases in net securities gains and by an increase in non-interest expenses. These expenses primarily supported YNB's retail growth and regulatory compliance efforts. Net income for the third quarter of 2005 was $5.35 million, compared to $5.45 million for the third quarter of 2004, a slight decrease of 1.8 percent or $97,000. Earnings per share on a diluted basis for the third quarter of 2005 were $0.48 compared to $0.50 for the third quarter of last year.

"The combination of a flattening yield curve and increased competition for commercial loans and retail deposits caused a compression of our net interest margin in the third quarter," explained YNB President and CEO Patrick M. Ryan. "As a result, our tax equivalent net interest margin for the quarter was down six basis points from the second quarter of 2005. Year to year, however, our net interest margin increased 25 basis points to 3.03 percent," Mr. Ryan said.

Retail banking continued to fuel YNB's growth. In keeping with the bank's retail banking focus, YNB saw total deposits increase 13.4 percent to $2.01 billion at September 30, 2005, compared to $1.78 billion at September 30, 2004. Much of the deposit growth can be attributed to YNB's successes with several products, including the "Simply Better Savings" account and an enhanced menu of business checking services. In addition, YNB has opened two new branches this year to bring its total to 25, with two more planned to open before year end.

"Expansion of YNB's footprint to support our core Mercer County presence and to further penetrate the attractive markets in contiguous counties is proving to be a successful strategy," noted F. Kevin Tylus, YNB Senior Executive Vice President and Chief Operating Officer. "We have just opened a branch on Olden Avenue in Ewing, Mercer County, and our 26th branch at Quakerbridge West in Mercer is scheduled to open in November," he added. "We recently received regulatory approval for our next new branch, in Morrisville, Bucks County, Pennsylvania, and we are anticipating approval for our first Ocean County, New Jersey branch shortly," he said. "Our strategic objective is to increase our branch presence in Middlesex County, New Jersey next year, and we are looking into other opportunities for ongoing branch growth in 2006 and beyond," Mr. Tylus concluded.

YNB's growth is not limited to the retail sector, as commercial loans continued to grow in the third quarter despite a highly competitive market. At September 30, 2005, total loans outstanding, led by commercial loans, increased 15.9 percent, reaching $1.97 billion compared with $1.70 billion at the same date in 2004. Total non-performing loans increased to $14.0 million, or 0.47 percent of total assets at September 30, 2005, compared to $9.4 million or 0.34 percent of total assets at September 30, 2004, primarily due to the movement of three commercial loan relationships to nonperforming status in the quarter. YNB's allowance for loan losses to total loans was 1.15 percent of total loans and covered 162.00 percent of total nonperforming loans at September 30, 2005. Net loan chargeoffs dropped to $3.1 million for the first nine months of 2005 compared to $4.5 million for the same period last year, and YNB believes overall credit quality remains sound.

YNB's Executive Vice President and Chief Financial Officer Stephen F. Carman provided further explanation of YNB's third quarter results as well as guidance for the remainder of the year. "Net interest margin compression, increased nonperforming asset levels, and higher-than-projected non-interest expenses associated with our regulatory compliance efforts resulted in lower than expected third quarter results," Mr. Carman said. "Based on the third quarter, we expect our net interest margin to range between 3.00 and 3.05 percent in the fourth quarter and loan growth for 2005 to be in the area of 9- 12 percent. We believe that we can achieve solid earnings growth of 17-20 percent for 2005, although this is below our earlier earnings guidance of 25 percent," he concluded.

At September 30, 2005, YNB's total risk-based capital was 11.2 percent, Tier 1 capital to risk-weighted assets was 10.1 percent, and Tier 1 capital to average assets was 7.9 percent. In the first three quarters of 2005, YNB paid total cash dividends of $0.345 per share. The third quarter of 2005 marks the 47th consecutive period in which YNB has paid shareholders a cash dividend.

YNB had $3.01 billion in assets as of September 30, 2005, with 25 branches serving individuals and businesses in Mercer, Hunterdon, Burlington, Middlesex and Somerset counties in New Jersey and Bucks County in Pennsylvania. Located in the corridor between New York City and Philadelphia, YNB offers a broad range of lending, deposit and other financial products and services to business and individual banking customers throughout the region.

Note regarding forward-looking statements

This press release and other statements made from time to time by our management contain express and implied statements relating to our future financial condition, results of operations, plans, objectives, performance, and business, which are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These may include statements that relate to, among other things, profitability, liquidity, loan loss reserve adequacy, plans for growth, interest rate sensitivity, market risk, regulatory compliance, and financial and other goals. Actual results may differ materially from those expected or implied as a result of certain risks and uncertainties, including, but not limited to, the results of our efforts to implement our retail strategy, adverse changes in our loan portfolio and the resulting credit risk-related losses and expenses, interest rate fluctuations and other economic conditions, our ability to attract core deposits, continued relationships with major customers, competition in product offerings and product pricing, adverse changes in the economy that could increase credit-related losses and expenses, compliance with laws and regulatory requirements of federal and state agencies, other risks and uncertainties detailed from time to time in our filings with the SEC, as well as other risks and uncertainties detailed from time to time in statements made by our management.

L.G. Zangani, LLC provides financial public relations service to the Company. As such, L.G. Zangani, LLC and/or its officers, agents and employees, receives remuneration for public relations and/or other services performed for the Company. This remuneration may take the form of cash, capital stock in the Company, or warrants and/or options to purchase stock in the Company.

Yardville National Bancorp Summary of Financial Information (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, (in thousands, except per share amounts) 2005 2004 2005 2004 Stock Information: Weighted average shares outstanding: Basic 10,602 10,464 10,558 10,445 Diluted 11,050 10,842 11,011 10,847 Shares outstanding end of period 10,572 10,492 Earnings per share: Basic $0.50 $0.52 $1.57 $1.32 Diluted 0.48 0.50 1.51 1.27 Dividends paid per share 0.115 0.115 0.345 0.345 Book value per share 15.97 14.84 Tangible book value per share 15.81 14.66 Closing price per share 35.25 29.10 Closing price to tangible book value 222.96 % 198.50 % Key Ratios: Return on average assets 0.73 % 0.80 % 0.77 % 0.70 % Return on average stockholders' equity 12.61 14.57 13.41 12.52 Net interest margin 2.94 2.82 2.96 2.72 Net interest margin (tax equivalent) (1) 3.01 2.89 3.03 2.78 Efficiency ratio 56.40 51.03 55.13 54.66 Equity-to-assets at period end 5.62 5.64 Tier 1 leverage ratio (2) 7.91 7.59 Asset Quality Data: Net loan charge-offs $1,148 $1,363 $3,144 $4,539 Nonperforming assets as a percentage of total assets 0.47 % 0.34 % Allowance for loan losses at period end as a percent of: Total loans 1.15 1.15 Nonperforming loans 162.00 208.82 Nonperforming assets at period end: Nonperforming loans $13,995 $9,377 Other real estate - - Total nonperforming assets $13,995 $9,377 (1) The net interest margin is equal to net interest income divided by average interest earning assets. In order to present pre-tax income and resultant yields on tax-exempt investments and loans on a basis comparable to those on taxable investments and loans, a tax equivalent adjustment is made to interest income. The tax equivalent adjustment has been computed using a Federal income tax rate of 35% and has the effect of increasing interest income by $503,000 and $453,000 for the three months and $1,461,000 and $1,251,000 for the nine month periods ended September 30, 2005 and 2004, respectively. (2) Tier 1 leverage ratio is Tier 1 capital to adjusted quarterly average assets. Yardville National Bancorp and Subsidiaries Consolidated Statements of Income (Unaudited) Three Months Ended Nine Months Ended (in thousands, except per share September 30, September 30, amounts) 2005 2004 2005 2004 INTEREST INCOME: Interest and fees on loans $32,785 $25,754 $92,704 $73,002 Interest on deposits with banks 397 95 748 205 Interest on securities available for sale 9,315 9,262 27,485 26,058 Interest on investment securities: Taxable 26 29 82 104 Exempt from Federal income tax 957 806 2,761 2,370 Interest on Federal funds sold 274 102 576 228 Total Interest Income 43,754 36,048 124,356 101,967 INTEREST EXPENSE: Interest on savings account deposits 5,632 3,502 15,082 9,054 Interest on certificates of deposit of $100,000 or more 1,983 1,063 4,576 3,020 Interest on other time deposits 4,296 2,879 11,182 9,172 Interest on borrowed funds 9,737 9,081 28,557 26,834 Interest on subordinated debentures 1,217 1,004 3,480 2,654 Total Interest Expense 22,865 17,529 62,877 50,734 Net Interest Income 20,889 18,519 61,479 51,233 Less provision for loan losses 2,100 2,400 5,700 6,825 Net Interest Income After Provision for Loan Losses 18,789 16,119 55,779 44,408 NON-INTEREST INCOME: Service charges on deposit accounts 762 750 2,110 2,400 Securities gains, net 274 618 750 1,204 Income on bank owned life insurance 451 480 1,255 1,457 Other non-interest income 555 448 1,571 1,325 Total Non-Interest Income 2,042 2,296 5,686 6,386 NON-INTEREST EXPENSE: Salaries and employee benefits 7,439 6,169 21,302 17,644 Occupancy expense, net 1,175 1,072 3,550 3,239 Equipment expense 820 749 2,353 2,359 Other non-interest expense 3,499 2,632 9,826 8,250 Total Non-Interest Expense 12,933 10,622 37,031 31,492 Income before income tax expense 7,898 7,793 24,434 19,302 Income tax expense 2,546 2,344 7,833 5,513 Net Income $5,352 $5,449 $16,601 $13,789 EARNINGS PER SHARE: Basic $0.50 $0.52 $1.57 $1.32 Diluted 0.48 0.50 1.51 1.27 Weighted average shares outstanding: Basic 10,602 10,464 10,558 10,445 Diluted 11,050 10,842 11,011 10,847 Yardville National Bancorp and Subsidiaries Consolidated Statements of Condition (Unaudited) September 30, Dec. 31, (in thousands) 2005 2004 2004 Assets: Cash and due from banks $39,645 $25,784 $32,115 Federal funds sold 14,200 11,775 6,769 Cash and Cash Equivalents 53,845 37,559 38,884 Interest bearing deposits with banks 22,835 45,712 41,297 Securities available for sale 795,107 830,430 802,525 Investment securities 87,817 74,684 78,257 Loans 1,974,155 1,702,610 1,782,592 Less: Allowance for loan losses (22,672) (19,581) (20,116) Loans, net 1,951,483 1,683,029 1,762,476 Bank premises and equipment, net 11,193 10,574 10,431 Bank owned life insurance 45,756 44,221 44,501 Other assets 37,474 29,401 27,546 Total Assets $3,005,510 $2,755,610 $2,805,917 Liabilities and Stockholders' Equity: Deposits Non-interest bearing $240,148 $202,975 $202,196 Interest bearing 1,774,097 1,573,488 1,607,808 Total Deposits 2,014,245 1,776,463 1,810,004 Borrowed funds Securities sold under agreements to repurchase 10,000 10,000 10,000 Federal Home Loan Bank advances 724,000 726,000 742,000 Subordinated debentures 62,892 62,892 62,892 Obligation for Employee Stock Ownership Plan (ESOP) 94 472 377 Other 1,271 978 753 Total Borrowed Funds 798,257 800,342 816,022 Other liabilities 24,204 23,403 19,733 Total Liabilities $2,836,706 $2,600,208 $2,645,759 Stockholders' equity: Common stock: no par value 93,755 91,105 91,658 Surplus 2,205 2,205 2,205 Undivided profits 82,816 66,332 69,860 Treasury stock, at cost (3,160) (3,160) (3,160) Unallocated ESOP shares (94) (472) (377) Accumulated other comprehensive loss (6,718) (608) (28) Total Stockholders' Equity 168,804 155,402 160,158 Total Liabilities and Stockholders' Equity $3,005,510 $2,755,610 $2,805,917 Financial Summary Average Balances, Yields and Costs (Unaudited) Three Months Ended September 30, 2005 Average Average Yield/ (in thousands) Balance Interest Cost INTEREST EARNING ASSETS: Interest bearing deposits with banks $44,856 $397 3.54% Federal funds sold 31,730 274 3.45 Securities 865,708 10,298 4.76 Loans (1) 1,897,451 32,785 6.91 Total interest earning assets $2,839,745 $43,754 6.16% NON-INTEREST EARNING ASSETS: Cash and due from banks $32,582 Allowance for loan losses (21,992) Premises and equipment, net 10,495 Other assets 77,729 Total non-interest earning assets 98,814 Total assets $2,938,559 INTEREST BEARING LIABILITIES: Deposits: Savings, money markets, and interest bearing demand $1,007,863 $5,632 2.24% Certificates of deposit of $100,000 or more 229,898 1,983 3.45 Other time deposits 496,127 4,296 3.46 Total interest bearing deposits 1,733,888 11,911 2.75 Borrowed funds 740,330 9,737 5.26 Subordinated debentures 62,892 1,217 7.74 Total interest bearing liabilities $2,537,110 $22,865 3.60% NON-INTEREST BEARING LIABILITIES: Demand deposits $210,439 Other liabilities 21,304 Stockholders' equity 169,706 Total non-interest bearing liabilities and stockholders' equity $401,449 Total liabilities and stockholders' equity $2,938,559 Interest rate spread (2) 2.56% Net interest income and margin (3) $20,889 2.94% Net interest income and margin (tax equivalent basis)(4) $21,392 3.01% Financial Summary Average Balances, Yields and Costs (Unaudited) Three Months Ended September 30, 2004 Average Average Yield/ (in thousands) Balance Interest Cost INTEREST EARNING ASSETS: Interest bearing deposits with banks $25,070 $95 1.52% Federal funds sold 29,295 102 1.39 Securities 899,156 10,097 4.49 Loans (1) 1,672,321 25,754 6.16 Total interest earning assets $2,625,842 $36,048 5.49% NON-INTEREST EARNING ASSETS: Cash and due from banks $29,277 Allowance for loan losses (19,193) Premises and equipment, net 10,808 Other assets 72,734 Total non-interest earning assets 93,626 Total assets $2,719,468 INTEREST BEARING LIABILITIES: Deposits: Savings, money markets, and interest bearing demand $927,276 $3,502 1.51% Certificates of deposit of $100,000 or more 164,437 1,063 2.59 Other time deposits 460,936 2,879 2.50 Total interest bearing deposits 1,552,649 7,444 1.92 Borrowed funds 740,418 9,081 4.91 Subordinated debentures 62,892 1,004 6.39 Total interest bearing liabilities $2,355,959 $17,529 2.98% NON-INTEREST BEARING LIABILITIES: Demand deposits $193,957 Other liabilities 20,002 Stockholders' equity 149,550 Total non-interest bearing liabilities and stockholders' equity $363,509 Total liabilities and stockholders' equity $2,719,468 Interest rate spread (2) 2.51% Net interest income and margin (3) $18,519 2.82% Net interest income and margin (tax equivalent basis)(4) $18,972 2.89% (1) Loan origination fees are considered an adjustment to interest income. For the purpose of calculating loan yields, average loan balances include nonaccrual loans with no related interest income. (2) The interest rate spread is the difference between the average yield on interest earning assets and the average rate paid on interest bearing liabilities. (3) The net interest margin is equal to net interest income divided by average interest earning assets. (4) In order to present pre-tax income and resultant yields on tax-exempt investments and loans on a basis comparable to those on taxable investments and loans, a tax equivalent adjustment is made to interest income. The tax equivalent adjustment has been computed using a Federal income tax rate of 35% and has the effect of increasing interest income by $503,000 and $453,000 for the three month periods ended September 30, 2005 and 2004, respectively. Financial Summary Average Balances, Yields and Costs (Unaudited) Nine Months Ended September 30, 2005 Average Average Yield / (in thousands) Balance Interest Cost INTEREST EARNING ASSETS: Interest bearing deposits with banks $31,821 $748 3.13% Federal funds sold 25,651 576 2.99 Securities 858,144 30,328 4.71 Loans (1) 1,852,123 92,704 6.67 Total interest earning assets $2,767,739 $124,356 5.99% NON-INTEREST EARNING ASSETS: Cash and due from banks $31,779 Allowance for loan losses (21,280) Premises and equipment, net 10,443 Other assets 76,663 Total non-interest earning assets 97,605 Total assets $2,865,344 INTEREST BEARING LIABILITIES: Deposits: Savings, money markets, and interest bearing demand $991,206 $15,082 2.03% Certificates of deposit of $100,000 or more 193,123 4,576 3.16 Other time deposits 481,918 11,182 3.09 Total interest bearing deposits 1,666,247 30,840 2.47 Borrowed funds 743,801 28,557 5.12 Subordinated debentures 62,892 3,480 7.38 Total interest bearing liabilities $2,472,940 $62,877 3.39% NON-INTEREST BEARING LIABILITIES: Demand deposits $205,088 Other liabilities 22,251 Stockholders' equity 165,065 Total non-interest bearing liabilities and stockholders' equity $392,404 Total liabilities and stockholders' equity $2,865,344 Interest rate spread (2) 2.60% Net interest income and margin (3) $61,479 2.96% Net interest income and margin (tax equivalent basis)(4) $62,940 3.03% Financial Summary Average Balances, Yields and Costs (Unaudited) Nine Months Ended September 30, 2004 Average Average Yield/ (in thousands) Balance Interest Cost INTEREST EARNING ASSETS: Interest bearing deposits with banks $23,538 $205 1.16% Federal funds sold 26,974 228 1.13 Securities 875,480 28,532 4.35 Loans (1) 1,589,647 73,002 6.12 Total interest earning assets $2,515,639 $101,967 5.40% NON-INTEREST EARNING ASSETS: Cash and due from banks $28,147 Allowance for loan losses (18,446) Premises and equipment, net 11,434 Other assets 73,038 Total non-interest earning assets 94,173 Total assets $2,609,812 INTEREST BEARING LIABILITIES: Deposits: Savings, money markets, and interest bearing demand $856,543 $9,054 1.41% Certificates of deposit of $100,000 or more 157,881 3,020 2.55 Other time deposits 456,262 9,172 2.68 Total interest bearing deposits 1,470,686 21,246 1.93 Borrowed funds 738,439 26,834 4.85 Subordinated debentures 53,327 2,654 6.64 Total interest bearing liabilities $2,262,452 $50,734 2.99% NON-INTEREST BEARING LIABILITIES: Demand deposits 179,887 Other liabilities 20,595 Stockholders' equity 146,878 Total non-interest bearing liabilities and stockholders' equity $347,360 Total liabilities and stockholders' equity 2,609,812 Interest rate spread (2) 2.41% Net interest income and margin (3) $51,233 2.72% Net interest income and margin (tax equivalent basis)(4) $52,488 2.78% (1) Loan origination fees are considered an adjustment to interest income. For the purpose of calculating loan yields, average loan balances include nonaccrual loans with no related interest income. (2) The interest rate spread is the difference between the average yield on interest earning assets and the average rate paid on interest bearing liabilities. (3) The net interest margin is equal to net interest income divided by average interest earning assets. (4) In order to present pre-tax income and resultant yields on tax-exempt investments and loans on a basis comparable to those on taxable investments and loans, a tax equivalent adjustment is made to interest income. The tax equivalent adjustment has been computed using a Federal income tax rate of 35% and has the effect of increasing interest income by $1,461,000 and $1,255,000 for the nine month periods ended September 30, 2005 and 2004, respectively. Contact: Stephen F. Carman, VP/Treasurer (609) 631-6222 carmans@ynb.com Patrick M. Ryan, President and CEO (609) 631-6177 Leonardo G. Zangani (908) 788- 9660 office@zangani.com YNB's website http://www.ynb.com/ Investor Relations website http://www.zangani.com/