Yardville National Bancorp Announces Fourth Quarter and 2005 Results

HAMILTON, N.J., Jan. 30 /PRNewswire-FirstCall/ -- Yardville National Bancorp, (NASDAQ: YANB) following its established strategic business plan, reported strong results for 2005, today announcing a double digit increase in net income for 2005 when compared to the prior year. For the full year, net income increased $2.4 million to $20.9 million, a 13.0 percent gain from the $18.5 million reported in 2004. Diluted earnings per share for the full year increased 10.5 percent to $1.89 when compared with the prior year.

Despite the flattening of the yield curve and increased competition, YNB raised its net interest income 17.7 percent for 2005. In addition, YNB was also able to improve its 2005 tax-equivalent net interest margin 7.8 percent to 3.05 percent from 2.83 percent for the prior year, through effective pricing of loans and deposits in a rising interest rate environment.

Net income and diluted earnings per share for the fourth quarter were reduced by 8.5 percent and 9.3 percent, respectively, when compared with the fourth quarter of 2004. The primary factor for the decline was a $2.0 million higher provision for loan losses in the fourth quarter of 2005 compared to the same quarter in 2004. Net income was $4.3 million and diluted earnings per share totaled $0.39 for the quarter ended December 31, 2005.

YNB's growth and profitability is based on the success of its dynamic retail strategy, and that continued unabated as the year concluded. The bank opened its second Bucks County office in Morrisville, PA in the fourth quarter of 2005, and an additional branch in Lawrence Township, Mercer County, NJ in the Route 1 corridor. YNB also opened its first branch in Ocean County, NJ in January 2006. Coupling this geographic expansion with new products and innovative marketing campaigns has enabled YNB to increase deposits and, as a result, has contributed to the growth in net interest income. Total deposits at December 31, 2005 increased to $1.97 billion from $1.81 billion a year ago.

"We are pleased that our strategy of retail growth to support further expansion of commercial lending produced positive results in 2005," stated YNB COO F. Kevin Tylus. "Although we function in an increasingly competitive marketplace, YNB's relationship-based community banking model of local decision making and access to top management allows us to grow and thrive. We have a well-defined strategic plan for the future, and feel confident that it can be accomplished," he concluded.

Increased competition continues to be a factor in the marketplace, yet total loans for 2005, led by commercial loans, increased a respectable 10.7 percent, year over year, totaling $1.97 billion compared to $1.78 billion at the end of 2004. Nonperforming assets increased to $18.6 million, or 0.63 percent of total assets at December 31, 2005, compared to $10.0 million, or 0.36 percent of total assets at the same date in 2004. The increase in nonperforming assets was due in large part to an $8.7 million commercial loan relationship that became nonperforming in the fourth quarter. In connection with the chargeoff of $4.5 million associated with that loan, YNB increased its provision for loan losses in the fourth quarter of 2005. The allowance for loan losses at December 31, 2005 totaled $22.7 million, or 1.15 percent of total loans, and covered 122.0 percent of total nonperforming loans.

"We have said for some time that we expected and planned for slowing loan growth," explained YNB CEO Patrick M. Ryan. "We therefore find the ongoing double digit increase in our total loans gratifying, given market conditions," he added. "The increase in the loan loss provision and the partial chargeoff of a large loan in the fourth quarter showed our aggressive approach to resolving this issue and putting it behind us as we moved into 2006," Mr. Ryan said.

"Our core business strategy is working well," Mr. Ryan added. "On a long-term basis, YNB is still demonstrating our strength and potential for continued growth in both the commercial and retail sectors," he concluded.

"With the competitive landscape and a flat yield curve, 2006 promises to be a challenging year," stated Stephen F. Carman, YNB CFO. "That said, we expect net income growth of 8 to 10 percent and earnings per share growth of 5 to 8 percent in 2006. Earnings per share growth estimates reflect the additional shares issued in 2005," he explained.

"There are several critical assumptions that underlie our financial projections," he continued. "We expect moderate commercial loan growth in 2006 and anticipate an improving asset quality profile. As we open new branches, effectively managing our cost of funds will be a significant factor in achieving net interest margin objectives," Mr. Carman said. "With these assumptions in mind, we are projecting our tax-equivalent net interest margin to modestly improve during 2006, averaging 3.10 percent for the year. Loan growth is expected to be in the 6 to 10 percent range based on the environment in which we operate today. Even with our projected retail expansion, we expect our efficiency ratio to be relatively stable at 55 percent for 2006," he concluded.

Shareholders continued to benefit from YNB's financial performance in the year just concluded, as YNB paid cash dividends totaling $0.46 in 2005. YNB has paid dividends for the past 48 consecutive quarters.

With $2.96 billion in assets as of December 31, 2005, YNB serves individuals and small-to mid-sized businesses in the dynamic New York City- Philadelphia corridor through a network of 28 branches in Mercer, Hunterdon, Somerset, Middlesex, Burlington, and Ocean counties in New Jersey and Bucks County in Pennsylvania. Headquartered in Mercer County, YNB emphasizes commercial lending and offers a broad range of lending, deposit and other financial products and services.

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, adequacy of the allowance for loan losses, plans for growth, interest rate sensitivity, market risk, regulatory compliance, and financial and other goals. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be achieved. 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; continued levels of our loan quality and origination volume; 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; adverse changes in the market price of our common stock; compliance with laws and regulatory requirements, including our agreement with the Office of the Comptroller of the Currency, and Nasdaq standards; and other risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission, as well as other risks and uncertainties detailed from time to time in statements made by our management. The Company assumes no obligation to update or supplement forward- looking statements that become untrue because of subsequent events.

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 Twelve Months Ended December 31, December 31, (in thousands, except per share amounts) 2005 2004 2005 2004 Stock Information: Weighted average shares outstanding: Basic 10,760 10,483 10,609 10,455 Diluted 11,199 10,952 11,057 10,861 Shares outstanding end of period 10,915 10,511 Earnings per share: Basic $0.40 $0.45 $1.97 $1.77 Diluted 0.39 0.43 1.89 1.71 Dividends paid per share 0.115 0.115 0.46 0.46 Book value per share 16.35 15.27 Tangible book value per share 16.21 15.09 Closing price per share 34.65 34.26 Closing price to tangible book value 213.77 % 227.04 % Key Ratios: Return on average assets 0.58 % 0.68 % 0.72 % 0.70 % Return on average stockholders' equity 10.13 12.00 12.57 12.38 Net interest margin 3.03 2.90 2.98 2.76 Net interest margin (tax equivalent) (1) 3.10 2.97 3.05 2.83 Efficiency ratio 53.41 52.93 54.69 54.19 Equity-to-assets at period end 6.00 5.71 Tier 1 leverage ratio (2) 8.32 7.99 Asset Quality Data: Net loan charge-offs $4,799 $2,265 $7,943 $6,804 Nonperforming assets as a percentage of total assets 0.63 % 0.36 % Allowance for loan losses at period end as a percent of: Total loans 1.15 1.13 Nonperforming loans 121.97 201.00 Nonperforming assets at period end: Nonperforming loans $18,613 $10,008 Other real estate - - Total nonperforming assets $18,613 $10,008 (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 $513,000 and $423,000 for the three months and $1,974,000 and $1,678,000 for the twelve month periods ended December 31, 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 Twelve Months Ended December 31, December 31, (in thousands, except per share amounts) 2005 2004 2005 2004 INTEREST INCOME: Interest and fees on loans $34,980 $27,504 $127,684 $100,506 Interest on deposits with banks 279 166 1,027 371 Interest on securities available for sale 9,498 9,224 36,983 35,282 Interest on investment securities: Taxable 27 33 109 137 Exempt from Federal income tax 973 851 3,734 3,221 Interest on Federal funds sold 154 119 730 347 Total Interest Income 45,911 37,897 170,267 139,864 INTEREST EXPENSE: Interest on savings account deposits 5,675 3,875 20,757 12,929 Interest on certificates of deposit of $100,000 or more 2,416 1,145 6,992 4,165 Interest on other time deposits 5,250 3,097 16,432 12,269 Interest on borrowed funds 9,557 9,237 38,114 36,071 Interest on subordinated debentures 1,279 1,057 4,759 3,711 Total Interest Expense 24,177 18,411 87,054 69,145 Net Interest Income 21,734 19,486 83,213 70,719 Less provision for loan losses 4,830 2,800 10,530 9,625 Net Interest Income After Provision for Loan Losses 16,904 16,686 72,683 61,094 NON-INTEREST INCOME: Service charges on deposit accounts 709 734 2,819 3,134 Securities gains, net 112 93 862 1,297 Income on bank owned life insurance 396 309 1,651 1,766 Other non-interest income 587 457 2,158 1,782 Total Non-Interest Income 1,804 1,593 7,490 7,979 NON-INTEREST EXPENSE: Salaries and employee benefits 6,352 5,832 27,654 23,476 Occupancy expense, net 1,315 1,044 4,934 4,283 Equipment expense 889 764 3,173 3,123 Other non-interest expense 4,015 3,517 13,841 11,767 Total Non-Interest Expense 12,571 11,157 49,602 42,649 Income before income tax expense 6,137 7,122 30,571 26,424 Income tax expense 1,804 2,386 9,637 7,899 Net Income $4,333 $4,736 $20,934 $18,525 EARNINGS PER SHARE: Basic $0.40 $0.45 $1.97 $1.77 Diluted 0.39 0.43 1.89 1.71 Weighted average shares outstanding: Basic 10,760 10,483 10,609 10,455 Diluted 11,199 10,952 11,057 10,861 Yardville National Bancorp and Subsidiaries Consolidated Statements of Condition (Unaudited) December 31, (in thousands) 2005 2004 Assets: Cash and due from banks $52,686 $32,115 Federal funds sold 10,800 6,769 Cash and Cash Equivalents 63,486 38,884 Interest bearing deposits with banks 16,408 41,297 Securities available for sale 741,668 802,525 Investment securities 89,026 78,257 Loans 1,972,840 1,782,592 Less: Allowance for loan losses (22,703) (20,116) Loans, net 1,950,137 1,762,476 Bank premises and equipment, net 11,697 10,431 Bank owned life insurance 46,152 44,501 Other assets 38,157 27,546 Total Assets $2,956,731 $2,805,917 Liabilities and Stockholders' Equity: Deposits Non-interest bearing $191,692 $202,196 Interest bearing 1,781,025 1,607,808 Total Deposits 1,972,717 1,810,004 Borrowed funds Securities sold under agreements to repurchase 10,000 10,000 Federal Home Loan Bank advances 704,000 742,000 Subordinated debentures 62,892 62,892 Obligation for Employee Stock Ownership Plan (ESOP) 2,250 377 Other 1,870 753 Total Borrowed Funds 781,012 816,022 Other liabilities 25,544 19,733 Total Liabilities $2,779,273 $2,645,759 Stockholders' equity: Common stock: no par value 105,122 91,658 Surplus 2,205 2,205 Undivided profits 85,896 69,860 Treasury stock, at cost (3,160) (3,160) Unallocated ESOP shares (2,250) (377) Accumulated other comprehensive loss (10,355) (28) Total Stockholders' Equity 177,458 160,158 Total Liabilities and Stockholders' Equity $2,956,731 $2,805,917 Financial Summary Average Balances, Yields and Costs (Unaudited) Three Months Ended December 31, 2005 Average Average Yield / (in thousands) Balance Interest Cost INTEREST EARNING ASSETS: Interest bearing deposits with banks $26,672 $279 4.18 % Federal funds sold 15,494 154 3.98 Securities 867,286 10,498 4.84 Loans (1) 1,964,298 34,980 7.12 Total interest earning assets $2,873,750 $45,911 6.39 % NON-INTEREST EARNING ASSETS: Cash and due from banks $36,418 Allowance for loan losses (23,451) Premises and equipment, net 11,536 Other assets 76,253 Total non-interest earning assets 100,756 Total assets $2,974,506 INTEREST BEARING LIABILITIES: Deposits: Savings, money markets, and interest bearing demand $968,662 $5,675 2.34 % Certificates of deposit of $100,000 or more 254,718 2,416 3.79 Other time deposits 544,365 5,250 3.86 Total interest bearing deposits 1,767,745 13,341 3.02 Borrowed funds 728,896 9,557 5.24 Subordinated debentures 62,892 1,279 8.13 Total interest bearing liabilities $2,559,533 $24,177 3.78 % NON-INTEREST BEARING LIABILITIES: Demand deposits $221,452 Other liabilities 22,430 Stockholders' equity 171,091 Total non-interest bearing liabilities and stockholders' equity $414,973 Total liabilities and stockholders' equity $2,974,506 Interest rate spread (2) 2.61 % Net interest income and margin (3) $21,734 3.03 % Net interest income and margin (tax equivalent basis)(4) $22,247 3.10 % Three Months Ended December 31, 2004 Average Average Yield / (in thousands) Balance Interest Cost INTEREST EARNING ASSETS: Interest bearing deposits with banks $31,566 $166 2.10 % Federal funds sold 23,868 119 1.99 Securities 892,738 10,108 4.53 Loans (1) 1,736,965 27,504 6.33 Total interest earning assets $2,685,137 $37,897 5.65 % NON-INTEREST EARNING ASSETS: Cash and due from banks $31,662 Allowance for loan losses (19,881) Premises and equipment, net 10,496 Other assets 73,068 Total non-interest earning assets 95,345 Total assets $2,780,482 INTEREST BEARING LIABILITIES: Deposits: Savings, money markets, and interest bearing demand $950,890 $3,875 1.63 % Certificates of deposit of $100,000 or more 170,617 1,145 2.68 Other time deposits 473,988 3,097 2.61 Total interest bearing deposits 1,595,495 8,117 2.03 Borrowed funds 737,122 9,237 5.01 Subordinated debentures 62,892 1,057 6.72 Total interest bearing liabilities $2,395,509 $18,411 3.07 % NON-INTEREST BEARING LIABILITIES: Demand deposits $202,110 Other liabilities 24,936 Stockholders' equity 157,927 Total non-interest bearing liabilities and stockholders' equity $384,973 Total liabilities and stockholders' equity $2,780,482 Interest rate spread (2) 2.58 % Net interest income and margin (3) $19,486 2.90 % Net interest income and margin (tax equivalent basis)(4) $19,909 2.97 % (1) Loan origination fees are considered an adjustment to interest income. For the purpose of calculating loan yields, average loan balance 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 $513,000 and $423,000 for the three month periods ended December 31, 2005 and 2004, respectively. Financial Summary Average Balances, Yields and Costs (Unaudited) Twelve Months Ended December 31, 2005 Average Average Yield / (in thousands) Balance Interest Cost INTEREST EARNING ASSETS: Interest bearing deposits with banks $30,534 $1,027 3.36 % Federal funds sold 23,112 730 3.16 Securities 860,430 40,826 4.74 Loans (1) 1,880,166 127,684 6.79 Total interest earning assets $2,794,242 $170,267 6.09 % NON-INTEREST EARNING ASSETS: Cash and due from banks $32,939 Allowance for loan losses (21,823) Premises and equipment, net 10,716 Other assets 76,561 Total non-interest earning assets 98,393 Total assets $2,892,635 INTEREST BEARING LIABILITIES: Deposits: Savings, money markets, and interest bearing demand $985,570 $20,757 2.11 % Certificates of deposit of $100,000 or more 208,521 6,992 3.35 Other time deposits 497,530 16,432 3.30 Total interest bearing deposits 1,691,621 44,181 2.61 Borrowed funds 740,075 38,114 5.15 Subordinated debentures 62,892 4,759 7.57 Total interest bearing liabilities $2,494,588 $87,054 3.49 % NON-INTEREST BEARING LIABILITIES: Demand deposits $209,179 Other liabilities 22,296 Stockholders' equity 166,572 Total non-interest bearing liabilities and stockholders' equity $398,047 Total liabilities and stockholders' equity $2,892,635 Interest rate spread (2) 2.60 % Net interest income and margin (3) $83,213 2.98 % Net interest income and margin (tax equivalent basis)(4) $85,187 3.05 % Twelve Months Ended December 31, 2004 Average Average Yield / (in thousands) Balance Interest Cost INTEREST EARNING ASSETS: Interest bearing deposits with banks $25,545 $371 1.45 % Federal funds sold 26,198 347 1.32 Securities 879,794 38,640 4.39 Loans (1) 1,626,477 100,506 6.18 Total interest earning assets $2,558,014 $139,864 5.47 % NON-INTEREST EARNING ASSETS: Cash and due from banks $29,026 Allowance for loan losses (18,805) Premises and equipment, net 11,200 Other assets 73,045 Total non-interest earning assets 94,466 Total assets $2,652,480 INTEREST BEARING LIABILITIES: Deposits: Savings, money markets, and interest bearing demand $880,130 $12,929 1.47 % Certificates of deposit of $100,000 or more 161,065 4,165 2.59 Other time deposits 460,694 12,269 2.66 Total interest bearing deposits 1,501,889 29,363 1.96 Borrowed funds 738,110 36,071 4.89 Subordinated debentures 55,718 3,711 6.66 Total interest bearing liabilities $2,295,717 $69,145 3.01 % NON-INTEREST BEARING LIABILITIES: Demand deposits $185,443 Other liabilities 21,679 Stockholders' equity 149,641 Total non-interest bearing liabilities and stockholders' equity $356,763 Total liabilities and stockholders' equity $2,652,480 Interest rate spread (2) 2.46 % Net interest income and margin (3) $70,719 2.76 % Net interest income and margin (tax equivalent basis)(4) $72,397 2.83 % (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 $1,974,000 and $1,678,000 for the twelve month periods ended December 31, 2005 and 2004, respectively. Contact: Stephen F. Carman, Treasurer (609) 631-6222 or carmans@ynb.com Patrick M. Ryan, CEO (609) 631-6177 Leonardo G. Zangani (908) 788-9660 or office@zangani.com YNB's website http://www.ynb.com/ Investor Relations website http://www.zangani.com/

First Call Analyst: FCMN Contact: kevin@zangani.com