Yardville National Bancorp Continues Expansion, Reports First Quarter 2006 Results

HAMILTON, N.J., April 21 /PRNewswire-FirstCall/ -- Yardville National Bancorp (NASDAQ: YANB) today announced net income of $5.2 million and diluted earnings per share of $0.46 for the first quarter of 2006. These results included the effects of the ongoing implementation of key strategies to further build out the company's footprint and develop revenue sources for continuing growth.

Total loans increased 8.8% and net interest income increased 6.8% compared to the same period last year. Total deposits increased $130.8 million, or 7.1%, to $1.97 billion at March 31, 2006, compared to $1.84 billion at March 31, 2005, indicating continued progress as a result of the company's retail network expansion.

"Our first quarter bottom line results were in line with our expectations," said YNB Chief Executive Officer Patrick M. Ryan. "Our commercial loan pipeline remains healthy despite the current competitive marketplace for commercial loans and deposits," he added. "We are confident that we can increase net income and enhance shareholder value by continuing to add profitable commercial loans, opening new branches and attracting core deposits."

"We remain focused on the continued execution of our retail strategy," added YNB President and Chief Operating Officer F. Kevin Tylus. "We continue to see positive results from opening YNB branches in new and emerging markets and the expansion of our 'Simply Better' suite of products that offer greater convenience and value to customers," he noted. "In the first quarter, we rolled out our Simply Better Money Market product with excellent results throughout our markets. Since introducing Simply Better Checking two years ago, the overall Simply Better suite of products has reached a total of $369.0 million in core deposits at March 31, 2006," he said.

YNB continued its expansion into new markets in 2006 with the opening of its first branch in Ocean County during the first quarter, and expects to continue growing its retail footprint during 2006 and 2007. Branch offices in Ringoes and Readington, both in dynamic Hunterdon County, are scheduled to be opened in the third and fourth quarters of 2006, respectively.

"These locations have highly attractive demographics," Mr. Tylus explained. "In addition to penetrating new markets with much promise, these new branches should help YNB achieve its retail strategy goals."

During the first quarter, YNB also retooled its retail lending division and launched a new unit dedicated to growing market share in the small business segment. YNB's larger branch network enhances the platform available to add accounts and grow loans in the retail and small business lines.

Commercial loan growth resulted in a $161.8 million increase in total loans to $1.99 billion at March 31, 2006, compared to $1.83 billion at March 31, 2005 and $1.97 billion at December 31, 2005.

"Commercial loan growth was slower than we typically experience in the first quarter, due primarily to timing factors," Mr. Ryan added. "Based on what we see in our loan pipeline, we expect commercial loan growth to improve during the remainder of the year," he said.

On a linked quarter basis, nonperforming assets declined $2.4 million in the first quarter of 2006 compared to the fourth quarter of 2005. Nonperforming assets totaled $16.2 million at March 31, 2006, compared to $9.0 million at March 31, 2005. For the three-month period ended March 31, 2006, YNB's provision for loan losses was $2.4 million, compared with $1.5 million for the same period in 2005, contributing to lower net income in the first quarter of 2006 compared to the same period in 2005. At March 31, 2006, YNB's allowance for loan losses was 1.13% of total loans, covering 138.1% of total nonperforming loans.

"We believe we have controls in place to address problem credits should they arise. In the first quarter, this has resulted in a higher provision for loan losses and net charge offs compared to the same period last year," Mr. Ryan noted.

YNB's capital position increased and strengthened for the quarter ended March 31, 2006. Total risk-based capital was 11.9%, Tier 1 risk-based capital was 11.0%, and the leverage ratio was 8.6%. During the first quarter, YNB paid its 49th consecutive cash dividend.

"Slower than expected commercial loan growth and higher deposit costs have resulted in pressure on our net interest margin," added Stephen F. Carman, YNB's Chief Financial Officer and Treasurer. "On a linked quarter basis, our tax equivalent margin was down two basis points to 3.08% but is seven basis points higher than in the first quarter of 2005," he explained.

"YNB's strategic plan continues to provide us with our roadmap for future success," Mr. Ryan concluded. "Our markets are outstanding, we have a solid organization, and excellent systems are in place. We believe that the investments we have made in personnel and infrastructure will position YNB for solid growth in revenue, net income, and earnings per share, and should produce excellent results for our shareholders as we move forward."

With $2.96 billion in assets as of March 31, 2006, 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; proxy contests and litigation; 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 March 31, (in thousands, except per share amounts) 2006 2005 Stock Information: Weighted average shares outstanding: Basic 10,884 10,518 Diluted 11,313 10,976 Shares outstanding end of period 10,954 10,532 Earnings per share: Basic $0.47 $0.53 Diluted 0.46 0.51 Dividends paid per share 0.115 0.115 Book value per share 16.36 14.99 Tangible book value per share 16.21 14.82 Closing price per share 36.80 32.62 Closing price to tangible book value 227.02 % 220.11 % Key Ratios: Return on average assets 0.71 % 0.80 % Return on average stockholders' equity 11.55 14.05 Net interest margin 3.00 2.94 Net interest margin (tax equivalent) (1) 3.08 3.01 Efficiency ratio 58.49 54.95 Equity-to-assets at period end 6.03 5.60 Tier 1 leverage ratio (2) 8.62 7.81 Asset Quality Data: Net loan charge-offs $2,661 $390 Nonperforming assets as a percentage of total assets 0.55 % 0.32 % Allowance for loan losses at period end as a percent of: Total loans 1.13 1.16 Nonperforming loans 138.13 236.84 Nonperforming assets at period end: Nonperforming loans $16,211 $8,962 Other real estate - - Total nonperforming assets $16,211 $8,962 (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 $601,000 and $468,000 for the three month periods ended March 31, 2006 and 2005, 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 March 31, (in thousands, except per share amounts) 2006 2005 INTEREST INCOME: Interest and fees on loans $35,421 $28,802 Interest on deposits with banks 230 157 Interest on securities available for sale 8,962 9,016 Interest on investment securities: Taxable 23 26 Exempt from Federal income tax 1,010 885 Interest on Federal funds sold 128 147 Total Interest Income 45,774 39,033 INTEREST EXPENSE: Interest on savings account deposits 6,147 4,455 Interest on certificates of deposit of $100,000 or more 2,284 1,193 Interest on other time deposits 5,520 3,194 Interest on borrowed funds 9,304 9,220 Interest on subordinated debentures 1,306 1,107 Total Interest Expense 24,561 19,169 Net Interest Income 21,213 19,864 Less provision for loan losses 2,350 1,500 Net Interest Income After Provision for Loan Losses 18,863 18,364 NON-INTEREST INCOME: Service charges on deposit accounts 659 661 Securities gains, net - 193 Income on bank owned life insurance 421 443 Other non-interest income 581 420 Total Non-Interest Income 1,661 1,717 NON-INTEREST EXPENSE: Salaries and employee benefits 7,651 6,829 Occupancy expense, net 1,427 1,189 Equipment expense 796 776 Other non-interest expense 3,504 3,064 Total Non-Interest Expense 13,378 11,858 Income before income tax expense 7,146 8,223 Income tax expense 1,978 2,610 Net Income $5,168 $5,613 EARNINGS PER SHARE: Basic $0.47 $0.53 Diluted 0.46 0.51 Weighted average shares outstanding: Basic 10,884 10,518 Diluted 11,313 10,976 Yardville National Bancorp and Subsidiaries Consolidated Statements of Condition (Unaudited) March 31, Dec. 31, (in thousands) 2006 2005 2005 Assets: Cash and due from banks $38,165 $28,717 $52,686 Federal funds sold 16,675 36,135 10,800 Cash and Cash Equivalents 54,840 64,852 63,486 Interest bearing deposits with banks 18,226 3,178 16,408 Securities available for sale 722,530 771,364 741,668 Investment securities 92,786 81,262 89,026 Loans 1,990,285 1,828,488 1,972,840 Less: Allowance for loan losses (22,392) (21,226) (22,703) Loans, net 1,967,893 1,807,262 1,950,137 Bank premises and equipment, net 11,436 10,399 11,697 Bank owned life insurance 46,573 44,945 46,152 Other assets 43,892 34,593 38,157 Total Assets $2,958,176 $2,817,855 $2,956,731 Liabilities and Stockholders' Equity: Deposits Non-interest bearing $210,646 $205,332 $232,269 Interest bearing 1,762,373 1,636,913 1,740,448 Total Deposits 1,973,019 1,842,245 1,972,717 Borrowed funds Securities sold under agreements to repurchase 10,000 10,000 10,000 Federal Home Loan Bank advances 704,000 722,000 704,000 Subordinated debentures 62,892 62,892 62,892 Obligation for Employee Stock Ownership Plan (ESOP) 2,109 283 2,250 Other 695 505 1,870 Total Borrowed Funds 779,696 795,680 781,012 Other liabilities 27,065 22,060 25,544 Total Liabilities $2,779,780 $2,659,985 $2,779,273 Stockholders' equity: Common stock: no par value 105,937 92,050 105,122 Surplus 2,205 2,205 2,205 Undivided profits 89,807 74,264 85,896 Treasury stock, at cost (3,160) (3,160) (3,160) Unallocated ESOP shares (2,109) (283) (2,250) Accumulated other comprehensive loss (14,284) (7,206) (10,355) Total Stockholders' Equity 178,396 157,870 177,458 Total Liabilities and Stockholders' Equity $2,958,176 $2,817,855 $2,956,731 Financial Summary Average Balances, Yields and Costs (Unaudited) Three Months Ended Three Months Ended March 31, 2006 March 31, 2005 Average Average Average Balance Interest Yield/ Average Yield/ Cost Balance Interest Cost (in thousands) INTEREST EARNING ASSETS: Interest bearing deposits with banks $19,747 $230 4.66% $25,430 $157 2.47% Federal funds sold 11,674 128 4.39 24,156 147 2.43 Securities 825,547 9,995 4.84 850,768 9,927 4.67 Loans (1) 1,975,212 35,421 7.17 1,798,947 28,802 6.40 Total interest earning assets $2,832,180 $45,774 6.46% $2,699,301 $39,033 5.78% NON-INTEREST EARNING ASSETS: Cash and due from banks $36,033 $30,888 Allowance for loan losses (23,202) (20,575) Premises and equipment, net 11,715 10,433 Other assets 71,078 75,546 Total non- interest earning assets 95,624 96,292 Total assets $2,927,804 $2,795,593 INTEREST BEARING LIABILITIES: Deposits: Savings, money markets, and interest bearing demand $956,632 $6,147 2.57% $978,068 $4,455 1.82% Certificates of deposit of $100,000 or more 237,477 2,284 3.85 169,060 1,193 2.82 Other time deposits 553,489 5,520 3.99 469,718 3,194 2.72 Total interest bearing deposits 1,747,598 13,951 3.19 1,616,846 8,842 2.19 Borrowed funds 717,677 9,304 5.19 734,259 9,220 5.02 Subordinated debentures 62,892 1,306 8.31 62,892 1,107 7.04 Total interest bearing liabilities $2,528,167 $24,561 3.89% $2,413,997 $19,169 3.18% NON-INTEREST BEARING LIABILITIES: Demand deposits $210,775 $198,985 Other liabilities 9,880 22,807 Stockholders' equity 178,982 159,804 Total non-interest bearing liabilities and stockholders' equity $399,637 $381,596 Total liabilities and stockholders' equity $2,927,804 $2,795,593 Interest rate spread (2) 2.57% 2.60% Net interest income and margin (3) $21,213 3.00% $19,864 2.94% Net interest income and margin (tax equivalent basis)(4) $21,814 3.08% $20,332 3.01% (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 $601,000 and $468,000 for the three month periods ended March 31, 2006 and 2005, respectively. CONTACT: Stephen F. Carman, VP/Treasurer, (609)631-6222 carmans@ynb.com Patrick M. Ryan, 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/