SCHEDULE 14A
(Rule 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14 (a) of the
Securities Exchange Act of 1934
(Amendment No.1)
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
Preliminary Proxy Statement [X]
Confidential, for Use
of the Commission Only (as permitted by Rule 14a-6(e) (2) [ ]
Definitive Proxy Statement [ ]
Definitive Additional Materials [ ]
Soliciting Material Pursuant to Rule 14a-11 (c) or Rule 14a-12
YARDVILLE NATIONAL BANCORP
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(Name of Registrant as Specified In Its Charter)
COMMITTEE TO PRESERVE SHAREHOLDER VALUE
Seidman and Associates, L.L.C.
Seidman Investment Partnership, L.P.
Seidman Investment Partnership II, L.P.
Broad Park Investors, L.L.C.
Federal Holdings, L.L.C.
Pollack Investment Partnership, L.P.
Lawrence Seidman
Dennis Pollack
Patrick Robinson
Harold Schechter
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(Name of Person (s) filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14 (a)-6(i) (4) and
0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total Fee Paid:
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[ ] Fee paid previously with preliminary materials
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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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YARDVILLE NATIONAL BANCORP
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ANNUAL MEETING OF SHAREHOLDERS
May 3, 2006
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PROXY STATEMENT OF THE YARDVILLE NATIONAL BANCORP
COMMITTEE TO PRESERVE SHAREHOLDER VALUE (THE "COMMITTEE")
[OPPOSES THE BOARD OF DIRECTORS OF YARDVILLE NATIONAL BANCORP]
This Proxy Statement and WHITE proxy card are being furnished to holders of the
common stock (the "Shareholders"),(the "Common Stock") of Yardville National
Bancorp (the "Company") a New Jersey Corporation, in connection with the
solicitation of proxies (the "Proxy Solicitation") by the Yardville National
Bancorp Committee to Preserve Shareholder Value (the "Committee"). The Annual
Meeting of Shareholders is to be held on May 3, 2006. Please refer to the
Company's proxy statement for the time and location of this meeting (the "Annual
Meeting"). Shareholders who own the Common Stock on March 17, 2006 will be
entitled to vote ("Annual Meeting Record Date"). The Company's principal
executive offices are located at 2465 Kuser Road, Hamilton, NJ 08690.
At the Annual Meeting, the Company will be seeking (i) the election of three
Directors for a term of three years or until a successor has been elected and
qualified* and (ii) ratification of the appointment of KPMG, LLP independent
auditors.
The Committee members own approximately 903,039 shares, which represents 8.26%
of the Company's outstanding Common Stock, as of March 7, 2006, based upon the
Company's Preliminary Proxy Statement and are soliciting the votes of other
Shareholders to elect three (3) Directors for a three year term at this year's
Annual Meeting in opposition to the three (3) directors nominated for election
by the Company. The Committee is soliciting your proxy in support of the
election of Lawrence Seidman (Seidman), or if Mr. Seidman is not eligible ,
Harold Schechter (Schechter) will be the nominee, Dennis Pollack (Pollack), and
Patrick Robinson (Robinson) (the "Committee Nominees") to the Company's Board of
Directors.
On January 25, 2006, the Company's Board of Directors amended its By-laws and
added Article II, Section 10 to its By-laws, which provided for certain
qualifications of directors. See Form 8-K dated January 25, 2006, and filed on
January 31, 2006.** It is the Company's position that the By-laws prohibit Mr.
Seidman from being a director because he had a Cease and Desist Order entered
against him which is covered by the amended By-laws. It is Mr. Seidman's
counsel's opinion that the By-law amendment is unenforceable and not applicable
to Mr. Seidman because he nominated himself before the amended By-laws were
approved and because his Cease and Desist Order is not covered by the amended
By-laws. A lawsuit challenging the By-law has been instituted by way of an Order
to Show Cause in the Superior Court of New Jersey (Chancery Division) Passaic
County. Therefore, Mr. Seidman's ability to be a nominee will be decided by the
Court. Therefore, four (4) nominees have been nominated and if Mr. Seidman is
eligible to be a director, Schechter's nomination will be withdrawn. If not, Mr.
Schechter will be the nominee.
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* On or about December 21, 2005, the Company's Board of Directors reduced the
size of the Board of Directors of the Company and its principal subsidiary,
The Yardville National Bank ("the Bank"), from fifteen (15) to thirteen
(13). The Company's By-laws and Certificate of Incorporation require that
the directors of the Company be divided into three classes, as nearly equal
in members as possible, therefore, if there is a change in the number of
directors up for election in 2006, the Committee may nominate a fourth
candidate. (See Form 8-K dated December 21, 2005, and filed on December 28,
2005.
** Article II Section 10(b) of the amended By-laws provides:
Director Qualifications. A person is not qualified to serve as a director
if he or she ....(b) is a person against whom a federal or state bank
regulatory agency has issued a cease and desist order for conduct involving
an unsafe or unsound practice in conducting the affairs of an insured
depository institution, dishonesty, breach of trust, or money laundering,
which order is final and not subject to appeal...
1
The Committee consists of the Committee Nominees, Seidman and Associates,
L.L.C.("SAL"), a New Jersey Limited Liability Company; Seidman Investment
Partnership, L.P.; ("SIP"), a New Jersey Limited Partnership; Seidman Investment
Partnership II, L.P.("SIP II"), a New Jersey Limited Partnership; Broad Park
Investors, L.L.C., a New Jersey Limited Liability Company ("Broad Park"),
Federal Holdings, LLC ("Federal"), a New York Limited Liability Company; Pollack
Investment Partnership, LP ("PIP"), a New Jersey Limited Partnership, Seidman,
Pollack, Robinson, and Schechter. This Proxy Statement and WHITE proxy card are
being first mailed or furnished to Shareholders on or about March ____, 2006.
The Committee's goal is to preserve shareholder value and it is the opinion of
the Committee that one of the best ways to accomplish this goal is through the
representation of a significant shareholder on the Board of Directors. Mr.
Seidman requested that the Board be expanded by one (1) and that Pollack be
added to the Board. This would have avoided the need for a time consuming and
expensive proxy contest. The Company refused this request. Through
representation on the Board of Directors, the Committee's Nominees will attempt
to persuade the Board of Directors to: (i) implement a share repurchase program;
and (ii) retain an investment banker to determine the value of the Company in a
sale versus remaining independent.
Remember, your last dated proxy is the only one that counts, so return the WHITE
card even if you delivered a prior proxy. We urge you not to return any proxy
card sent to you by the Company.
Your vote is important, no matter how many or how few shares you hold. If your
shares are held in the name of a brokerage firm, bank, or nominee, only they can
vote your shares, and only upon receipt of your specific instructions.
Accordingly, please return the WHITE proxy card in the envelope provided by your
Bank or Broker or contact the person responsible for your account and give
instructions for such shares to be voted for the Committee Nominees. Every
Shareholder should be aware that if his shares are held through a bank,
brokerage firm, or other nominee, they will not be able to change their vote at
the Annual Meeting, unless they obtain a legal proxy from the bank, brokerage
firm, or other nominee. Since this is a contested election for directors, there
should not be any broker non-votes. Broker non-votes occur when a bank or
brokerage firm holding shares on behalf of a shareholder does not receive voting
instructions from the shareholder by a specified date before the Annual Meeting
and the bank or brokerage firm is not permitted to vote those undirected shares
on specified matters under applicable stock exchange rules. Thus, if you do not
give your broker specific instructions, your shares may not be voted on those
matters and will not be counted in determining the number of shares necessary
for approval.
If your shares are registered in more than one name, the WHITE proxy card should
be signed by all such persons to ensure that all shares are voted for the
Committee's Nominees.
Holders of record of shares of Common Stock on the Annual Meeting Record Date
are urged to submit a proxy, even if such shares have been sold after that date.
The number of shares of Common Stock outstanding as of the Annual Meeting Record
Date is disclosed in the Company's proxy statement. Each share of Common Stock
is entitled to one vote at the Annual Meeting.
If you have any questions or need assistance in voting your shares, please call:
D. F. King & Co.
Attn: Richard Grubaugh
48 Wall Street
New York, New York 10005
(Call Toll Free (888)644-6071)
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THE COMMITTEE'S GOAL:
OUR GOAL IS TO MAXIMIZE THE VALUE
OF THE COMPANY'S STOCK FOR ALL
SHAREHOLDERS
The Committee believes its fellow Shareholders have the same goal: to maximize
the value of the Company's stock they purchased. The Committee believes that the
Company should immediately retain an investment banker to analyze the Company's
value in a sale versus remaining independent to assist the Company's Board in
reaching an informed decision on how to maximize shareholder value. An
investment banking firm would be able to provide the Board with invaluable
statistical and market data that the Company could not obtain on their own. This
information should assist the Board in making an informed financial decision. In
addition, the investment banker would also be asked to evaluate whether the
Company can make in-market acquisitions that are accretive (acquisitions that
will add to the earnings per share of the Company within one year) and hopefully
suggest ways to improve the Company's efficiency ratio.
The only way the Committee can be assured that its proposals receive appropriate
consideration is through Board representation. The Committee has urged
management to pursue acquisition/merger discussions with potentially interested
banks so the Company could properly compare the economic benefits of an
acquisition of other financial institutions to a sale of the Company.
No guarantee, or assurance, can be given that the Committee's proposals would
result in a maximization of shareholder value. It is simply, and solely, the
Committee's opinion that these proposals are likely to produce positive results
for all Shareholders.
THE CONSULTING AGREEMENT AND MR. SEIDMAN'S
CORRESPONDENCE WITH THE COMPANY
On February 18, 2005, Mr. Seidman and the Company entered into a Consulting
Agreement (Agreement) that terminated on January 31, 2006. Pursuant to the
Agreement, Mr. Seidman was to provide consulting services and the Company was to
consider Mr. Seidman for a future Board seat. (See Schedule 13D, Amendment No. 1
filed on February 18, 2005 and Form 8-K filed by the Company on February 18,
2005.)
As required by the Company's nominating procedures for Board consideration, on
May 4, 2005 and June 16, 2005, Mr. Seidman sent a letter to Patrick M. Ryan
(Ryan), President and Chief Executive Officer of the Company, and Daniel J.
O'Donnell, Secretary of the Company, respectively, requesting to be considered
for the Board pursuant to the terms of the Agreement. (See Schedule 13D,
Amendment No. 2 and No. 4 filed on May 4, 2005 and June 17, 2005 respectively.)
On August 15, 2005, Mr. Seidman sent a letter to Mr. Ryan requesting a meeting
with the entire Board for August 31, 2005. This was Mr. Seidman's second
request. (See Schedule 13D, Amendment No. 5 filed on August 16, 2005.)
On November 9, 2005, Mr. Seidman sent a letter to Mr. Ryan requesting that the
Agreement be terminated because the entire Board had refused to meet with him
and the Company had not provided Mr. Seidman with any information to enable him
to properly perform his consulting services pursuant to the Agreement. In
addition, Mr. Seidman expressed his surprise by the regulatory agreement entered
into by the Company with the Office of the Comptroller of the Currency (OCC).
(See Schedule 13D, Amendment No. 6 filed on November 10, 2005.)
On November 30, 2005, Mr. Seidman wrote a letter to Mr. Ryan to correct
statements made by Mr. Ryan in an article published on SNL Interactive and to
again assert that in Mr. Seidman's opinion, the Company violated the Agreement.
Mr. Seidman's opinion is based upon the Company's refusal to allow him to meet
with the Board of Directors, or attend any meetings with investment bankers he
recommended to the
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Company. The Company also would not provide Mr. Seidman with requested
information so he could respond to certain issues he had raised. Mr. Seidman
also responded to Mr. Ryan's statement at a November investor conference that
the Company was a growth company. Mr. Seidman pointed out that at this time in
the credit cycle, being a growth company may not be the best course of action
for the Company on a risk/reward benefit analysis basis. (See Schedule 13D,
Amendment No. 7 filed on December 1, 2005.)
THE COMPANY HAS INCURRED SEVERAL PROBLEMS
Mr. Ryan has described several of the Bank's past operational difficulties as
"bumps in the road." The following are situations which, in Mr. Seidman's
opinion, were not beneficial to the Company. The only incident listed below
specifically referred to by Mr. Ryan as a "bump in the road" was the raising of
the $700 million described herein." Mr. Ryan has stated to Mr. Seidman that
significantly increasing the Federal Funds borrowing in or about 1999, for a
term of approximately ten (10) years by approximately $700 million, was a major
mistake for which he takes full responsibility. This strategy caused the
Company's earning to be reduced when the interest earned on its assets declined
while the cost of the borrowing did not decline in the same manner.
In 2001, when earnings per share declined to $1.11 from $1.47 in 2000. In 2001,
the long-term, high-cost borrowings on the balance sheet were matched against
loans and securities that had falling yields due to declining short-term
interest rates. As a result, the Company's net interest margin was badly
squeezed, falling to 2.17% from 3.07% in 2000. Additionally, to improve its
interest rate risk position, the Company paid off $50.0 million in Federal Home
Loan Bank advances, incurring an extraordinary after-tax loss of $0.19 per
share.
In the fourth quarter of 2003. The Company only earned $0.02 per share, down
from $0.29 in the third quarter of 2003. This time, the blame can be attributed
to inadequate credit risk management. Net charge-offs, most of which came from
two commercial loan relationships, skyrocketed to $6.9 million from $848,000 in
the previous quarter, leading to a $4.8 million increase in the loan loss
provision.
The interest rate increases that began in June 2004 helped mitigate the
asset/liability mismatch and spurred earnings growth up through the first half
of 2005. But the bad news resurfaced on August 31, 2005, when the Company's
principal subsidiary, The Yardville National Bank ("Bank") entered into an
agreement with the Office of the Comptroller of the Currency (OCC). The
regulatory agency found deficiencies with the bank's capital levels, internal
audit, board and management supervision, and credit and risk management. As set
forth in the Agreement, the Bank is not classified as "well capitalized" or as a
"financial holding company." (See the Agreement attached hereto as an Exhibit
and Form 8-K dated August 31, 2005, filed on September 2, 2005.)
One of the Company's responses to the agreement was to raise $8.7 million in a
private placement completed on November 3, 2005 (See Form 8-K dated November 3,
2005, filed on November 7, 2005.) While this will most likely bring the Bank
into compliance with the OCC's required capital levels, it was dilutive to
Shareholders, increasing the shares outstanding by 2.17%. Mr. Seidman
recommended to Mr. Ryan that the Company consider shrinking the Company's
balance sheet through the sale of loans, most likely at a profit, to achieve
compliance with the OCC capital requirements. Mr. Seidman, supposedly a
consultant to the Company, also requested to review certain information to help
refine his recommendation and have the opportunity to express his views on this
matter to the entire Board. Both of Mr. Seidman's requests were denied.
The most recent negative announcement came on November 8, 2005, when the Company
placed $8.7 million of loans, representing a single relationship to a
contracting company on non-accrual status. This non-performing loan principally
caused the Company to increase the fourth quarter charge-offs and loan loss
provision in
4
comparison to the third quarter of 2005, and fourth quarter of 2004 as shown
below. (See Form 10-Q for the period ended September 30, 2005, Section 9
"Subsequent Events.")
This loan also principally caused the Company's non-performing loans to
significantly increase as shown below.
4th Quarter 2005 3rd Quarter 2005 4th Quarter 2004
---------------- ---------------- ----------------
Net loan charge-offs $ 4,799,000 $ 1,148,000 $ 2,265,000
Non-performing loans $ 18,613,000 $ 13,995,000 $ 10,008,000
Loan loss provision $ 4,830,000 $ 2,100,000 $ 2,800,000
(See the Company's January 30th Earning Release and Form 10-Q for the period
ended September 30, 2005.)
To examine the relative financial performance of the Company, Mr. Seidman
constructed a peer group of 63 publicly-traded commercial banks with between $2
billion and $4 billion in total assets. The peer group median for return on
average assets for the last twelve months, from December 31, 2005, was 1.14%,
compared to just 0.72% for the Company. The peers had a median return on average
tangible equity of 17.29% for the last twelve months, versus 12.78% for the
Company.
So in the last few years, the Company has experienced two blow-ups in credit
quality, taken on significant interest rate risk that adversely affected its net
income and received a vote of no-confidence from its primary regulatory agency.
That's too many bumps in the road. Hopefully, the Company Shareholders won't get
knocked off the road from the extreme turbulence.
THE OFFICE OF THE COMPTROLLER
OF THE CURRENCY AGREEMENT
As stated above, on August 31, 2005, the Bank entered into an Agreement with the
OCC. A copy of the entire Agreement is attached hereto as Exhibit A for each
Shareholder to review.
F. Kevin Tylus (Tylus) has been a Board member since 1992, and therefore served
on the Board during the above described "bumps in the road." He has also been a
member of the Audit Committee (from January 1, 1995 to September 27, 1995), the
Organization and Compensation Committee (from 1996 to September 2004), and the
Nominating Committee (from April 2004, to November 2004). Instead of being
reprimanded for the Company failures, Mr. Tylus was rewarded by the Company and
hired in October 2004 as Senior Executive Vice President and Chief
Administration Officer. In February 2005, he was promoted to Senior Executive
Vice President and Chief Operating Officer of the Company. On January 27, 2006,
Mr. Tylus was appointed President of the Company. It appears that Mr. Tylus was
hired to cure the deficiencies and problems pointed out by the OCC that occurred
while he was a director of the Company. This is analogous to putting the fox in
the hen house to fix the hen house.
POTENTIAL CONFLICTS
OF INTEREST BETWEEN THE DIRECTORS,
THE COMPANY, AND ITS SHAREHOLDERS
Sidney L. Hofing (Hofing) was a member of the board since 1997 and resigned on
December 21, 2005. Samuel D. Marrazzo (Marrazzo) is presently a member of the
Board seeking re-election. Christopher S. Vernon (Vernon) is a member of the
Board but is not seeking re-election at the 2006 Annual Meeting. All three
individuals have had material business relationships with the Company. (See the
2005 Proxy Statement Section IX Certain Transactions with Directors and Officers
and Form 8-K dated January 24, 2006 and filed on January 30, 2006.)
5
Mr. Hofing's material business relationships with the Company are as follows:
In October 1999, upon expiration of the initial five-year term, the Bank
renewed its lease for a five-year period for its Trenton, New Jersey
branch office, which is owned by the Lalor Urban Renewal Limited
Partnership. The Lalor Corporation, which is the general partner of the
limited partnership, is owned by Sidney L. Hofing. Under the lease, the
Bank is obligated to pay approximately, $2,000 per month, excluding
utilities and maintenance expenses.
In July 2000, the Bank signed a ten-year lease with four five-year
renewal options for its Lawrence, New Jersey branch office. The property
is owned by Union Properties, LLC. Sidney L. Hofing has an ownership
interest in Union Properties, LLC. Under the terms of the lease, the
Bank is obligated to pay approximately $7,300 per month, excluding
utilities and maintenance expenses.
In May 2001, the Bank signed a ten-year lease with three five-year
renewal options for its Bordentown, New Jersey branch office. The Bank
acquired the property from the bankruptcy estate of a borrower and sold
the property to BYN, LLC, a limited liability company of which Sidney L.
Hofing is a member. The purchase price was $537,000. Under the terms of
the lease, the Bank is obligated to pay approximately $7,000 per month,
excluding utilities and maintenance expenses.
In October 2001, the Bank signed a fifteen-year lease with three
five-year renewal options for its Hunterdon County Regional
Headquarters. The property is owned by FYNB, LLC. Sidney L. Hofing had
an ownership interest in FYNB, LLC, but several members of Mr. Hofing's
family including his spouse continue to have an ownership interest.
Under the terms of the lease, the Bank is obligated to pay approximately
$17,500 per month, excluding utilities and maintenance expenses.
In April 2005, the Bank signed a fifteen-year lease with two five-year
renewal options for a branch to be constructed and located in West
Windsor, New Jersey. The property is owned by WWM Properties, LLC.
Sidney L. Hofing has an ownership interest in WWM Properties, LLC. Under
the terms of the lease, the Bank is obligated to pay (upon commencement)
$11,250 per month, excluding utilities and maintenance expenses.
In April 2005, the Bank signed a fifteen-year lease with two five-year
renewal options for a branch to be constructed and located in Falls
Township, Pennsylvania. The property is owned by MYNB, LLC. Sidney L.
Hofing has an ownership interest in MYNB, LLC. Under the terms of the
lease, the Bank is obligated to pay (upon commencement) $9,421 per
month, excluding utilities and maintenance expenses.
Mr. Ryan told Mr. Seidman that the Bank intends to enter into several
more leases with entities in which Mr. Hofing, or his family, have an
ownership interest.
Mr. Marrazzo's material business relationship with the Company is as follows:
In April 2000, the Bank signed a five-year lease with three five-year
renewal options for its branch in Marrazzo'a Thriftway in West Trenton,
New Jersey. The property is owned by Serenity Point, LLC. Samuel D.
Marrazzo, has an ownership interest in Serenity Point, LLC and owns and
operates Marrazzo's Thriftway. Under the terms of the lease, which was
executed prior to Mr. Marrazzo becoming a member of the Board, the Bank
is obligated to pay $2,100 per month, excluding utilities and
maintenance expenses.
6
Mr. Vernon's material business relationships with the Company are as follows:
In January 2005, the Bank signed a five-year lease with two five-year
renewal options for its storage and maintenance facility. The property
is owned by Lalor Storage, LLC. Mr. Vernon has an ownership interest in
Lalor Storage, LLC. Under the terms of the lease, the Bank is required
to pay $14,984 per month, including utilities and maintenance expenses.
In June 2005, the Bank sold its former operations building to Mr.
Vernon. The purchase price was $650,000 and the Board recorded a gain of
$429,000. The Bank leased the basement of the building from June 2003 to
January 2005. Under the terms of the lease, the board paid $2,783 per
month, including utilities and maintenance expenses.
On January 24, 2006, the Board entered into a lease with Vernon Holdings
101837, LLC for certain premises located in the Cream Ridge Mews
Shopping Center, 403 Route 539, Cream Ridge (Plumsted Township), New
Jersey. Mr. Vernon has an ownership interest in Vernon Holdings 101837,
LLC. The lease provides for an initial term through November 30, 2006,
followed by a month- to-month tenancy that will continue until the
earliest of the relocation of the Bank to another site on the same
property, a re-negotiation of the lease for the subject premises, or
sixty-days notice by either party. During the initial term of the lease,
the Bank is obligated to pay monthly fixed rent of $3,483.33, plus
taxes, insurance premiums and common area costs allocated to the subject
premises, as well as utilities and maintenance expenses.
The Company disclosed that certain of its officers, directors, and their
associates have outstanding loans from the Bank. Mr. Seidman was told that Mr.
Hofing does have outstanding loans from the Bank. The Company should disclose
the payment terms, interest rates and nature of collateral (if any) of those
loans to Mr. Hofing and if Mr. Marrazzo, Mr. Vernon, or any other director has
any loans, the same information should be disclosed for them. In addition, the
Company should disclose whether any loans made to Messrs. Hofing, Mazarro, or
Vernon are secured by any of the properties leased by the Company from them.
This information is especially important with reference to the Bordentown branch
that was sold to Mr. Hofing by the Company. (See May, 2001 lease description
above.)
It is the Committee's position that its Nominees, since it is expected that they
will not have any material business relationships with the Company or Bank, will
be more independent and will better represent the interest of all the
Shareholders. If elected, the Committee Nominees will conduct a review of the
above lease transactions to determine if, in their opinion, they were entered
into on terms at least as favorable as those available from third parties. The
Committee Nominees are not asserting that there were any improprieties in
connection with the above leases.
THE PRICE RECEIVED BY ALL NEW JERSEY BANKS
IN THE LAST TWO CALENDAR YEARS COMPARED TO
THE COMPANY'S FINANCIAL RESULTS
The Company's stock, based upon its closing price of $36.93 on February 27,
2006, is trading at 2.26 times its December 31, 2005 approximate $16.35 book
value and 19.54 times its twelve month December 31, 2005 diluted earnings per
share of $1.89. The Company's return on average equity for calendar year 2005
was 12.57%. In the opinion of the Committee, unless the Company can do a
material accretive acquisition, or significantly increase its earnings per share
and return on equity, a sale of the Company at this time may be more
economically beneficial than the Company remaining an independent financial
institution. These facts are supported by the following chart, which reflects
the mean and median price to book value, price to last twelve months earnings
multiple and deposit premium paid for New Jersey commercial banks acquired in
2005 and 2004.
7
NEW JERSEY MERGER ACTIVITY 2004 IN EXCESS OF $25 MILLION DEAL VALUE
FRANCHISE
PRICE/ PREMIUM/
DEAL PRICE/ LTM (1)PRICE/ CORE
Buyer/ ANNOUNCE VALUE BOOK EARNINGS DEPOSIT DEPOSITS
BANKS Seller DATE ($M) VALUE (x) (1)(3) (2)(3)
- ------------------------------------------------------- -------- ------- ------ -------- --------- ---------
1.
Sun Bancorp Inc./Community Bancorp of NJ 2/16/04 83.2 316.15 33.36 25.53 20.23
Fulton Financial Corp./First Washington Fin. Corp. 6/14/04 127.2 318.15 25.51 31.76 23.42
Monmouth Community Bancorp/Allaire Community Bank 6/30/04 53.0 NM NM NM NM
Valley National Bancorp/NorCrown Bank 11/9/04 141.0 317.30 24.15 25.49 19.70
Valley National Bancorp/Shrewsbury Bancorp 12/2/04 136.0 213.24 22.99 40.10 22.90
Center Bancorp Inc./Red Oak Bank 12/17/04 27.0 221.32 40.27 36.25 24.79
MEAN 94.6 277.2 29.3 31.8 22.2
MEDIAN 105.2 316.2 25.5 31.8 22.9
NEW JERSEY MERGER ACTIVITY 2005 IN EXCESS OF $25 MILLION DEAL VALUE
FRANCHISE
PRICE/ PREMIUM/
DEAL PRICE/ LTM (1)PRICE/ CORE
Buyer/ ANNOUNCE VALUE BOOK EARNINGS DEPOSIT DEPOSITS
BANKS Seller DATE ($M) VALUE (x) (1)(3) (2)(3)
- ------------------------------------------------------- -------- ------- ------ -------- --------- ---------
1.
Fulton Financial Corp./SVB Financial Services Inc. 1/11/05 89.6 302.28 25.88 21.29 15.90
Interchange Financial Svcs./Franklin Bank 6/23/05 25.3 241.72 18.22 36.18 22.93
TD Banknorth, Inc./Hudson United Bancorp 7/11/05 1,898.7 360.35 15.12 30.36 27.34
Two River Community Bank/Town Bank 8/16/05 39.0 258.65 25.00 29.93 23.30
Sun Bancorp, Inc./Advantage Bank 8/25/05 37.0 244.20 42.85 24.42 17.99
Susquehanna Bancshares,Inc./Minotola National Bank 11/04/05 166.1 205.68 25.48 30.80 17.23
MEAN 376.0 268.8 25.4 28.8 20.8
MEDIAN 64.3 251.4 25.2 30.1 20.5
The source of the above ratios is SNL Financial DataSource. SNL Financial is a
nationally recognized company which collects, organizes, and distributes
financial data for financial companies. The Committee has used SNL Financial
instead of the ratios provided by individual financial institutions, or its own
calculations, because of SNL Financial's standardized methodology for
calculating the ratios in contrast to various methods to calculate the ratios
used by different individuals and institutions. The Committee has not
independently verified the accuracy of the SNL Financial ratios.
Based upon the bank 2004 mean and median valuations, shown above, the Company
based upon an approximate $16.35 book value, $1.89 diluted earnings per share
and $1,972,717 billion in total deposits and $1,739,739 in core deposits for the
Calendar Year ending 2004, is worth the following per share dollar amounts:
8
Price/ Franchise Premium/
Deposit Core Deposits
Book Value LTM Earning (1)(3) (2)(3)
---------- ----------- ------- ------------------
MEAN 45.33 55.29 50.69 51.49
MEDIAN 51.69 48.21 50.69 52.61
Based upon the bank 2005 mean and median valuations, shown above, the Company
based upon an approximate $16.35 book value, $1.89 diluted earnings per share
and $1,972,717 billion in total deposits and $1,739,739 in core deposits for the
Calendar Year 2005, is worth the following per share dollar amounts:
Price/ Franchise Premium/
Deposit Core Deposits
Book Value LTM Earning (1)(3) (2)(3)
---------- ----------- ------- ------------------
MEAN 43.95 48.05 45.90 49.26
MEDIAN 41.11 47.70 47.98 48.78
- ----------
(1)PRICE/DEPOSIT - Deal Value as a percentage of the Entity Sold's total
deposits. If the Buyer acquires less than 100% of the Entity Sold's Equity, the
denominator of the ratio is multiplied by the percent acquired.
DEAL VALUE -- Aggregate price paid for the equity of the Entity Sold in the
transaction, as of the event in question. Where available, Deal Value is
calculated as the number of fully diluted shares outstanding, less the number of
shares excluded from the transaction, multiplied by the deal value per share,
less the number of "in the money" options/warrants/stock appreciation rights
times the weighted average strike price of the options/warrants/stock
appreciation rights. Deal Value excludes debt assumed and employee retention
pools.
(2)FRANCHISE PREMIUM/CORE DEPOSITS - (Deal Value - Entity Sold's Tangible
Book)/Entity Sold's Core Deposits.
CORE DEPOSITS - Federally insured Bank deposits, excluding accounts with
balances over $100,000 and brokered deposits.
TANGIBLE EQUITY - Total Equity less Total Intangible Assets.
(3) The source for the above ratios and definitions is SNL Financial.
There can be no assurance or guarantee that the Company would receive a price
equal to or greater than the mean or median ratio stated above.
THEREFORE A VOTE FOR THE COMMITTEE NOMINEES IS A VOTE TO
START THE PROCESS TO COMMENCE A SHARE REPURCHASE PROGRAM,
ATTEMPT TO DO AN ACCRETIVE ACQUISITION, AND IF NOT POSSIBLE,
SELL THE COMPANY FOR A PREMIUM PRICE, WHICH IS OPPOSED BY
THE PRESENT BOARD AND MANAGEMENT
Each Shareholder should be aware that the present election is only to elect
three Directors to the Board of Directors of the Company (the Committee is
running three nominees) and has nothing to do with the election of Directors for
the Bank, the principal operating subsidiary of the Company. The present
Directors of the Company, even if the Committee Nominees win this election, will
still be able to appoint the Board of Directors of the Bank, including the
Company Nominees, even if they lose the election.
If a sale of the Company is not possible at a satisfactory price, the Committee
Nominees, if elected, will (i) review in detail the Company's business plan,
9
(ii) discuss the Company's business plan with the Company's management,
advisors, and the other directors and (iii) based upon their past business
experience, make recommendations they believe will have the effect of increasing
the Company's net income, earnings per share, earning assets and deposits. There
is no assurance that the Committee Nominees would have any suggestions that the
Company had not already considered. Furthermore, there is no assurance that any
suggestions made by the Committee Nominees would be approved by a majority of
the Company's Board. The Committee Nominees would however, request that the
Company implement an aggressive stock repurchase program. In addition, the
Committee Nominees would attempt to persuade the Company to pursue an accretive
acquisition. The Board of Directors of the Company would have to determine a
satisfactory price, which could be either all cash or stock or a combination of
cash and stock. (The Board would have to make the same determination with
respect to the consideration to be received in connection with a sale of the
Company.) To accomplish the Committee's goal, the Committee Nominees, if
elected, will need the cooperation of four of the other Directors. Furthermore,
the Committee Nominees' plans could change, subject to the fiduciary duty they
will owe to all Shareholders, if elected.
The Committee bases its position that the Board of Directors and Management of
the Company oppose a sale of the Company upon statements by Mr. Ryan to Mr.
Seidman during several of their meetings and subsequent phone conversations. Mr.
Ryan stated that at the present time, the Board is not interested in pursuing a
sale of the Company and would prefer remaining independent.
Shareholders will not be afforded a separate opportunity to vote on the
implementation of a stock repurchase program. Shareholders will be required to
vote on certain sales or mergers involving stock, but a cash acquisition may not
require Shareholder approval.
MR. SEIDMAN'S PAST HISTORY WITH CERTAIN FINANCIAL INSTITUTIONS
The following is Mr. Seidman's history with respect to certain financial
institutions. Shareholders should not imply a correlation between Mr. Seidman's
actions and the actions taken by the following financial institutions. It must
be remembered, that with respect to the companies where Mr. Seidman, or his
nominees, were on the board, they were a minority on the board. Where a company
was sold after Mr. Seidman filed a Schedule 13D, and Mr. Seidman had no nominees
on the Board, Mr. Seidman could not exert any influence on the board with
respect to any decisions.
Seidman has been involved in proxy contests in connection with the following ten
separate companies since 1995, IBS Financial Corp. ("IBSF"), Wayne Bancorp, Inc.
("WYNE"), South Jersey Financial Corp., Inc. ("SJFC"), Citizens First Financial
Corp. ("CFSB"), Yonkers Financial Corp. ("YFCB"), First Federal Savings and Loan
Association of East Hartford ("FFES"), Vista Bancorp, Inc. ("Vista"), United
National Bancorp ("UNBJ"), GA Financial, Inc. ("GAF") and Kankakee Bancorp, Inc.
("KNK") seeking to maximize shareholder value by either an accretive acquisition
or sale of the respective companies. IBSF, WYNE, FFES, VBNJ, UNBJ, GAF, YFCB and
SJFC were sold at significant premiums to their book value and earnings, as
shown by the following chart:
LTM
Multiples [X] EPS
Seller Buyer Book Value % [X] Director Nominees
- ---------- ---------------------------- ------------- ------ ------------------------------------
WYNE Valley National Bancorp 2.00 35.1 Seidman nominee on Board
IBSF Hudson United Bancorp 1.87 38.4 No Seidman director on Board
SJFC Richmond Cty. Fin. Corp. 1.16 24.7 Seidman and Seidman nominee on Board
FFES Connecticut Bancshares, Inc. 1.37 13.5 Seidman on Board by consent
VBNJ United National Bancorp 2.52 19.6 No Seidman director on Board
UNBJ PNC Fin. Svcs. Group, Inc. 2.37 21.9 No Seidman director on Board
GAF First Commonwealth Financial 1.84 24.3 No Seidman director on Board
YFCB Atlantic Bank of New York 1.52 16.2 No Seidman director on Board
10
Seidman was not successful in his proxy contest with CFSB, VBNJ, UNBJ, YFCB or
KNK. However, Seidman was successful in having CFSB conduct a Dutch Auction for
15% of its outstanding shares. Seidman had proposed this Dutch Auction and, in
an agreement with CFSB, agreed to tender the shares he controlled into the
auction and to execute a standstill agreement. CFSB's counsel told Mr. Seidman
that unless he was willing to tender his shares and enter into the Standstill
Agreement, CFSB would not conduct the Dutch Auction. Thus, the Dutch Auction
resulted in large measure from proposals made by, and actions undertaken, by
Seidman. With respect to YFCB, Seidman continually pushed YFCB to sell. On
November 14, 2001, YFCB announced a sale to Atlantic Bank of New York at $29.00
cash per share, based upon the above ratios.
The Board of Directors of FFES, CNYF and AHCI, each agreed voluntarily to
increase by one (1) the size of the Board and Seidman was added to each
respective Board. With respect to FFES, Seidman conducted a proxy contest to
have the FFES Shareholders vote to rescind certain By-laws amendments. This
proxy contest was successful. Thereafter, Seidman was added to the Board. CNYF
was sold to Niagara Bancorp, Inc. at a premium price of 1.30 times book and
27.57 times its last twelve (12) month earnings. AHCI was sold to Hudson River
Bancorp, Inc. at a premium price of 1.25 times book and 25.60 times its last
twelve (12) months earnings.
In addition, Seidman filed a Schedule 13D disclosing a plan to maximize
shareholder value through an accretive acquisition or sale of 1st Bergen
Bancorp, Inc. ("FBER"), Eagle BancGroup, Inc. ("EGLB"), Jade Financial
Corporation ("IGAF") and Alliance Bancorp of New England, Inc. ("ANE"). All four
institutions were sold after the respective announcements. FBER was sold to
Kearney Savings Bank for 1.78 % of book value and 28.6 times earnings. EGLB was
sold to First Busey Corporation ("FBC") for 1.41% of book value and 30.3 times
earnings. IGAF was sold to PSB Bancorp, Inc. for 92% of book value and 26.06
times earnings. ANE was sold to New Alliance Bancshares, Inc. for 2.46% of book
value and 19.39 times earnings. Except for IGAF, these companies were sold at a
significant premium to book value and earnings and its prevailing stock price.
In addition, Mr. Seidman filed a Schedule 13D disclosing a plan to maximize
shareholder value through an accretive acquisition or sale of First Federal
Bancshares, Inc. ("FFBI") and Central Bancorp, Inc. ("CEBK"). FFBI conducted a
Dutch Auction for approximately 30% of its outstanding shares at $33.50. Mr.
Seidman tendered his shares into the Dutch Auction selling a significant
percentage of his position at a significant profit and therefore was no longer
required to file a Schedule 13D. Mr. Seidman after significant litigation with
CEBK sold his entire position through public market sales at an approximate
break-even price. Both companies are still publicly traded today.
On December 6, 2002, Michael A. Griffith was appointed to the KNK Board of
Directors. His appointment was part of an agreement with an investor group led
by Jeffrey L. Gendell, which owned approximately 9.8% of KNK's outstanding
shares. On January 17, 2003, KNK announced, among other things the resignation
of Larry Huffman, the President and Chief Executive Officer and the election of
Mr. Griffith as the new KNK Chairman.
Mr. Seidman conducted a vote "No" campaign against SE Financial Corp. ("SEFL").
SEFL was seeking approval of the SE Financial Corp. 2005 Stock Option Plan and
SE Financial Corp. 2005 Restricted Stock Plan. SEFL withdrew those matters from
consideration the morning of the annual Shareholders meeting at which these
matters were to be voted upon.
The source of the above ratios is SNL Financial DataSource. SNL Financial is a
nationally recognized company which collects, organizes, and distributes
financial data for financial companies. The Committee has used SNL Financial
instead of the ratios provided by individual financial institutions, or its own
calculations, because of SNL Financial's standardized methodology for
calculating the ratios in contrast to various methods to calculate the ratios
used by different individuals
11
and institutions. The Committee has not independently verified the accuracy of
the SNL Financial ratios.
There is no guarantee or representation made by Mr. Seidman or the Committee
that the Company can be sold for a premium equal to or greater than the premium
paid for the commercial banks and thrifts mentioned in this proxy statement.
Furthermore, there can be no assurance that the Company could obtain a similar
sales price to any of the above companies in the event the Company pursued a
sale. There is also no assurance that the Committee Nominee's election to the
Board will, on its own, enhance shareholder value. However, it will send an
appropriate message to the Company's management and present Board that the
Shareholders desire representation on the Board by significant Shareholders.
ELECTION OF COMMITTEE NOMINEES
When you return the Committee's proxy card you are only voting for Seidman,
Pollack, Robinson and Schechter. Messrs. Seidman, Pollack, Robinson and
Schechter have consented to being named in this Proxy statement and have agreed
to serve as a Director, if elected.
Lawrence Seidman is 58 years of age and his residence address is 19 Veteri
Place, Wayne, New Jersey 07470. He was graduated from Saint Peter's College in
1969 with a Bachelor of Science degree in Business (concentration in Marketing
Management) and from the Washington College of Law with a Jurist Doctor degree
in 1973. Mr. Seidman also attended the Georgetown University Tax Masters
Program. For more than the past 10 years, Mr. Seidman has been the manager of
various investment vehicles, principally involved in the purchase and sale of
publicly traded bank and thrift stocks. From November 1991 to December 31, 2005,
he was also a consultant, President and General Counsel to Menlo Acquisition
Corporation, a holding company for an environmental consulting and remediation
company and a laboratory company. Prior to 1989, Mr. Seidman was an attorney
with the Securities and Exchange Commission, an associate in two law firms and
the founding member and principal shareholder of his own law firm. Mr. Seidman
was the founder and President of the Israel Sports Exchange (1990-Present), a
Trustee of the YM-YWHA of North Jersey (1994-Present) and a Member of the Board
of Directors of Shomrei Torah (1986-1992). Mr. Seidman's present business
address is 100 Misty Lane, Parsippany, New Jersey 07054.
Dennis Pollack is 55 years of age and his residence address is 47 Blueberry
Drive, Woodcliff Lake, New Jersey 07677. Mr. Pollack is currently a consultant
to Paulson & Company, Inc., a hedge fund located at 590 Madison Avenue, New
York, New York, 10022, and from June 2004 to February 28, 2006, Mr. Pollack was
the Chief Operating Officer for Paulson & Company. From December 2001 to May,
2004, Mr. Pollack was a Vice President at Valley National Bank. From May, 2001
to December, 2001, Mr. Pollack was the new business development officer for
Mohawk Community Bank. For more than five years prior thereto, Mr. Pollack held
various positions at Connecticut Bank of Commerce, Stamford, Connecticut, most
recently as Vice Chairman and a consultant to the bank.
Patrick A. Robinson is 55 years of age and his residence address is 123 Woods
End Drive, Basking Ridge, New Jersey 07920. For more than five years prior
hereto, he has been the managing partner of Robinson, Burns & McCarthy Esquires,
a law firm located at 586 East Main Street Bridgewater, NJ 08807.
Harold Schechter is 61 years of age and his residence address is 38 Rillo Drive,
Wayne, New Jersey 07470. Since January 2005, Mr. Schechter has been Vice
President and Chief Financial Officer of Global Design Concepts, Inc., a mid
size importer and distributor of accessories and handbags, located at 34 33rd
Street, New York, New York. From September 2004, to January 2005, Mr. Schechter
was the Chief Financial Officer of Diamond Chemical Inc., a national
manufacturer of housekeeping and industrial products. From May 2001 through
September 2004, Mr. Schechter was the Vice President, Chief Operating Officer
and Chief Financial Officer of Creative Salon Concepts, a wholesale distributor
and retailer of imported and domestic beauty products. For more than five years
prior thereto,
12
Mr. Schechter was the Executive Vice President, Chief Operating Officer and
Chief Financial Officer for Verdi Travelware Ltd./Monarch Luggage, a mid sized
importer and distributor of luggage, accessories and bags. From 2003 to the
present, he has been the Director and Chairman of the Audit Committee for
Jaclyn, Inc., an American Stock Exchange listed importer and distributor of
apparel. Mr. Schechter has been a Certified Public Accountant since 1977.
None of the Committee Nominees has ever been employed by the Company in any
capacity or have they ever been a director of the Company.
The members of the Committee have agreed to act in concert; however, they have
expressly reserved the right to terminate their agreement to act in concert.
During the last ten (10) years: (i) none of the Committee members has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors); (ii) none of the Committee members, has been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree, or final
order enjoining future violations of, or prohibiting activities subject to,
federal or state securities laws, or finding any violation with respect to such
laws; (iii) the Committee members, other than SIPII, Pollack, PIP, Broad Park
and the Committee Nominees, other than Seidman, were parties to a civil
proceeding which ultimately mandated activities that were subject to federal
securities laws. Specifically, a civil action was filed by IBSF, during a proxy
contest with certain members of the Committee, in the U.S. District Court. This
litigation named the members of the Committee, as Defendants; except, SIPII,
Pollack, PIP, Broad Park and the Committee Nominees, other than Seidman. The
claim was made that three members on the Committee did not make all of the
disclosures required by the Securities Exchange Act of 1934. The District Court
entered a Judgment dismissing the claims made by IBSF. The Third Circuit Court
of Appeals reversed in part, and remanded the matter, determining that two (2)
additional disclosures should have been made. Pending the remand, an Amended
Schedule 13D was filed making additional disclosures with regard to Seidcal
Associates and Kevin Moore concerning the background, biographical and
employment information on Brant Cali of Seidcal and Kevin Moore of Federal.
Thereafter, in April, 1998, the District Court entered a Judgment After Remand
which directed the inclusion of these disclosures in the Schedule 13D.
None of the Committee members is, or was within the past year, a party to any
contract, arrangements or understandings with any person with respect to any
securities of the registrant, including, but not limited to joint ventures, loan
or option arrangements, puts or calls, guarantees against loss or guarantees of
profit, division of losses or profits, or the giving or withholding of proxies.
In addition none of the Committee members or any associates of the Committee
members has or within the past year has had any arrangement or understanding
with any person (a) with respect to any future employment by the Company or its
affiliates; or (b) with respect to any future transactions to which the Company
or any of its affiliates will or may be a party.
Mr. Seidman is the manager of SAL, General Partner of PIP, and is the President
of the Corporate General Partner of SIP and SIPII and the investment manager for
Broad Park and Federal; and, in that capacity, Mr. Seidman has the authority to
cause those entities to acquire, hold, trade, and vote these securities and with
respect to PIP, Seidman shares these functions with Pollack. SAL, SIP, SIPII,
Broad Park, PIP and Federal were all created to acquire, hold, and sell
publicly-traded securities. None of these entities was formed to solely acquire,
hold, and sell the Company's securities. Each of these entities owns securities
issued by one or more companies other than the Company. The members and limited
partners in SIP, SIPII, SAL, Broad Park, PIP and Federal are all passive
investors, who do not - and cannot - directly, or indirectly, participate in the
management of these entities, including without limitation proxy contests.
Seidman's total compensation is dependent upon the profitability of the
operations of these entities, but no provision is made to compensate Seidman
solely based upon the profits resulting from transactions from the Company's
securities. In SAL, Seidman
13
receives an approximate $1,100,000 annual salary and a percentage of the
profits, after the Members receive a return on their investment. In SIP, SIP II,
Broad Park, Federal and PIP, Seidman receives an annual fee, which is payable
quarterly, based upon a valuation of the assets, and he receives a percentage of
the profits.
On November 8, 1995, the acting Director of the Office of Thrift Supervision
("OTS") issued a Cease and Desist Order against Seidman ("C & D"), after finding
that Seidman recklessly engaged in unsafe and unsound practices in the business
of an insured institution. The C & D actions complained of were Seidman's
allegedly obstructing an OTS investigation. The C & D ordered him to cease and
desist from (i) any attempts to hinder the OTS in the discharge of its
regulatory responsibilities, including the conduct of any OTS examination or
investigation; and (ii) any attempts to induce any person to withhold material
information from the OTS related to the performance of its regulatory
responsibilities. The Order also provides that for a period of no less than
three (3) years if Seidman becomes an institution-affiliated party of any
insured depository institution subject to the jurisdiction of the OTS, to the
extent that his responsibilities include the preparation or review of any
reports, documents, or other information that would be submitted or reviewed by
the OTS in the discharge of its regulatory functions, all such reports,
documents, and other information shall, prior to submission to, or review by the
OTS, be independently reviewed by the Board of Directors or a duly appointed
committee of the Board to ensure that all material information and facts have
been fully and adequately disclosed. In addition, a civil money penalty in the
amount of $20,812 was assessed.
The voting power over the Company's securities is not subject to any
contingencies beyond standard provisions for entities of this nature (i.e.,
limited partnerships and limited liability companies) which govern the
replacement of a manager or a general partner. Specifically, the shares held by
each of the named entities are voted in the manner that Seidman elects, in his
non-reviewable discretion.
Additional Information concerning the Committee is set forth in Appendices A and
B hereto. Each of the individuals listed on Appendix A attached hereto is a
citizen of the United States.
AUDITORS
The Committee has no objection to the ratification of the appointment of KPMG,
LLP, as independent accountants for the Company for the fiscal year ending
December 31, 2006.
SOLICITATION; EXPENSES
Proxies may be solicited by the Committee by mail, advertisement, telephone,
facsimile, telegraph, and personal solicitation. Phone calls will be made to
individual Shareholders by all the individual Committee members, and employees
of D. F. King & Co. Certain of Seidman's employees will perform secretarial work
in connection with the solicitation of proxies, for which no additional
compensation will be paid. Banks, brokerage houses, and other custodians,
nominees and fiduciaries will be requested to forward the Committee's
solicitation material to their customers for whom they hold shares and the
Committee will reimburse them for their reasonable out-of-pocket expenses. The
Committee has retained D. F. King & Co. to assist in the solicitation of proxies
and for related services. The Committee will pay D. F. King & Co. a fee of up to
$25,000 and has agreed to reimburse it for its reasonable out-of-pocket
expenses. In addition, the Committee has also agreed to indemnify D. F. King &
Co. against certain liabilities and expenses, including liabilities and expenses
under the federal securities laws. The Securities and Exchange Commission deems
such an indemnification to be against public policy. Approximately twenty-five
(25) persons will be used by D. F. King & Co. in its solicitation efforts.
14
The entire expense of preparing, assembling, printing, and mailing this Proxy
Statement and related materials and the cost of soliciting proxies will be borne
by SAL, SIP, PIP, Federal, Broad Park and SIP II. (The Committee does not intend
to solicit proxies via the Internet.)
Although no precise estimate can be made at the present time, the Committee
currently estimates that the total expenditures relating to the Proxy
Solicitation incurred by the Committee will be approximately $50,000 of which $0
has been incurred to date. The Committee intends to seek reimbursement from the
Company for those expenses incurred by the Committee, if the Committee's
Nominees are elected, but does not intend to submit the question of such
reimbursement to a vote of the Shareholders.
For the proxy solicited hereby to be voted, the enclosed WHITE proxy card must
be signed, dated, and returned to the Committee, c/o D. F. King & Co. Inc., in
the enclosed envelope in time to be voted at the Annual Meeting. If you wish to
vote for the Committee Nominees, you must submit the enclosed WHITE proxy card
and must NOT submit the Company's proxy card. If you have already returned the
Company's proxy card, you have the right to revoke it as to all matters covered
thereby and may do so by subsequently signing, dating, and mailing the enclosed
WHITE proxy card. ONLY YOUR LATEST DATED PROXY WILL COUNT AT THE ANNUAL MEETING.
Execution of a WHITE proxy card will not affect your right to attend the Annual
Meeting and to vote in person. Any proxy may be revoked as to all matters
covered thereby at any time prior to the time a vote is taken by (i) filing with
the Secretary of the Company a later dated written revocation; (ii) submitting a
duly executed proxy bearing a later date to the Committee; or (iii) attending
and voting at the Annual Meeting in person. Attendance at the Annual Meeting
will not in and of itself constitute a revocation.
Shares of Common Stock represented by a valid, unrevoked WHITE proxy card will
be voted as specified. You may vote for the Committee's Nominees or withhold
authority to vote for the Committee's Nominees by marking the proper box on the
WHITE proxy card. Shares represented by a WHITE proxy card where no
specification has been made will be voted for the Committee's Nominees and for
KPMG, LLP.
Except as set forth in this Proxy Statement, the Committee is not aware of any
other matter to be considered at the Annual Meeting. The persons named as
proxies on the enclosed WHITE proxy card will, however, have discretionary
voting authority as such proxies regarding any other business that may properly
come before the Annual Meeting.
If your shares are held in the name of a brokerage firm, bank, or nominee, only
they can vote such shares and only upon receipt of your specific instructions.
Accordingly, please return the proxy in the envelope provided to you or contact
the person responsible for your account and instruct that person to execute on
your behalf the WHITE proxy card.
Only holders of record of Common Stock on the Annual Meeting Record Date will be
entitled to vote at the Annual Meeting. If you are a Shareholder of record on
the Annual Meeting Record Date, you will retain the voting rights in connection
with the Annual Meeting even if you sell such shares after the Annual Meeting
Record Date. Accordingly, it is important that you vote the shares of Common
Stock held by you on the Annual Meeting Record Date, or grant a proxy to vote
such shares on the WHITE proxy card, even if you sell such shares after such
date.
The Committee believes that it is in your best interest to elect the Committee's
Nominees as Directors at the Annual Meeting. THE COMMITTEE STRONGLY RECOMMENDS A
VOTE FOR THE COMMITTEE NOMINEES AND FOR THE PROPOSED AUDITORS.
YARDVILLE NATIONAL BANCORP COMMITTEE TO PRESERVE SHAREHOLDER VALUE.
15
I M P O R T A N T !!!
If your shares are held in "Street Name," only your bank or broker can vote your
shares and only upon receipt of your specific instructions. Please return the
proxy provided to you or contact the person responsible for your account and
instruct them to vote for the Committee's Nominees on the WHITE proxy card.
If you have any questions, or need further assistance, please call Lawrence
Seidman at 973-560-1400, Extension 108, or, our proxy solicitor: D. F. King &
Co., Attn: Richard Grubaugh, 48 Wall Street, New York, New York 10005, at
(888)644-6071.
16
APPENDIX A
THE COMMITTEE TO PRESERVE SHAREHOLDER
VALUE AND ITS NOMINEES
The participants who comprise the Committee own in the aggregate 903,039 shares
of Common Stock, representing approximately 8.26% of the shares outstanding and
are as follows:
Seidman and Associates, L.L.C. ("SAL"), is a New Jersey limited liability
company, organized to invest in securities, whose principal and executive
offices are located at 19 Veteri Place, Wayne, New Jersey 07470. Lawrence
Seidman is the Manager of SAL and has sole investment discretion and voting
authority with respect to such securities.
Seidman Investment Partnership, L.P. ("SIP"), is a New Jersey limited
partnership, whose principal and executive offices are located at 19 Veteri
Place, Wayne, NJ 07470. Veteri Place Corporation is the sole General Partner of
SIP and Lawrence Seidman is the only shareholder director and officer of Veteri
Place Corporation. Seidman has sole investment discretion and voting authority
with respect to such securities.
Seidman Investment Partnership II, L.P. ("SIPII"), is a New Jersey limited
partnership, whose principal and executive offices are located at 19 Veteri
Place, Wayne, New Jersey 07470. Veteri Place Corporation is the sole General
Partner of SIPII and Lawrence Seidman is the only shareholder director and
officer of Veteri Place Corporation. Seidman has sole investment discretion and
voting authority with respect to such securities.
Broad Park Investors, L.L.C. ("Broad Park") is a New Jersey limited liability
company, formed, in part, to invest in stock of public companies whose principal
and executive offices are located at 80 Main Street, West Orange, New Jersey
07052. Lawrence Seidman has the sole investment discretion and voting authority
with respect to such securities until August 31, 2007.
Federal Holdings L.L.C. ("Federal"), is a New York limited liability company,
organized to invest in securities, whose principal and executive offices are
located at One Rockefeller Plaza, 31st Floor, New York, NY 10020. Lawrence B.
Seidman is the Manager of Federal and has sole investment discretion and voting
authority with respect to such securities.
Pollack Investment Partnership ("PIP") is a New Jersey limited partnership whose
principal and executive offices are located at 100 Misty Lane, Parsippany, NJ
07054. Seidman is the general partner of PIP and has the investment discretion
and voting authority with respect to such securities.
Lawrence Seidman is a private investor, with discretion over certain client
accounts and is the Manager of SAL, the President of the Corporate General
Partner of SIP and SIP II, general partner of PIP and the investment manager of
Federal and Broad Park. See below for information concerning regulatory action.
See "Election of Committee Nominees" for complete resume.
Dennis Pollack is a businessman and a private investor with sole discretion on
all the shares owned by him and his family members. See "Election of Committee
Nominees" for complete resume.
Patrick Robinson is a lawyer and private investor with sole discretion on all
shares he and his wife own. See "Election of Committee Nominees" for complete
resume.
Harold Schechter is a Certified Public Accountant and private investor with sole
discretion on all shares he and his wife own. See "Election of Committee
Nominees" for complete resume.
17
The following sets forth the name, business address, and the number of shares of
Common Stock of the Company beneficially owned as of March 7, 2006, by each of
the Committee Members [The actual stock purchase transactions are set forth on
Exhibit B.]
Number of Shares
of Common Stock
Beneficially
Owned & Owned Percent
Name Class Business Address in Record Name of
- ------------------------------ ------------------------ ---------------- -------
1. Seidman and Associates Lanidex Center, 268,684 2.46%
L.L.C.(SAL) 100 Misty Lane
Parsippany, NJ 07054
2. Seidman Investment 19 Veteri Place 237,256 2.17%
Partnership, L.P.(SIP) Wayne, NJ 07470
3. Seidman Investment 19 Veteri Place 121,351 1.11%
Partnership II, L.P. Wayne, NJ 07470
(SIPII)
4. Lawrence Seidman and 19 Veteri Place 884,149 8.04%
discretionary clients (1) Wayne, NJ 07470
5. Federal Holdings, LLC One Rockefeller Plaza 85,196 (3)
(Federal) New York, NY 10020
6. Broad Park Investor, LLC 80 Main St. 63,334 (3)
(Broad Park) West Orange, NJ 07052
7. Pollack Investment 47 Blueberry Drive 66,778 (3)
Partnership, L.P. (PIP) Woodcliff Lake, NJ 07677
8. Dennis Pollack (2) 47 Blueberry Drive 18,045 (3)
(Pollack) Woodcliff Lake, NJ 07677
10. Patrick Robinson(2) 123 Woods End Drive 745 (3)
Basking Ridge, NJ 07920
11. Harold Schechter(2) 38 Rillo Drive 100 (3)
Wayne, NJ 07470
- ----------
(1) Includes all shares owed by SAL, SIP, SIPII, Federal, Broad Park, and PIP.
(2) The individual has sole voting and dispositive power for the shares he
owns.
(3) Less than 1%.
Seidman may be deemed to have sole voting power and dispositive power as to
884,149 shares beneficially owned by SIP, SIP II, SAL, Broad Park and Federal
and his discretionary clients. On November 8, 1995, the acting director of the
Office of Thrift Supervision (OTS) issued a Cease and Desist Order against
Seidman ("C & D") after finding that Seidman recklessly engaged in unsafe and
unsound practices in the business of an insured institution. The C & D actions
complained of were Seidman's allegedly obstructing an OTS investigation. The C &
D ordered him to cease and desist from (i) any attempts to hinder the OTS in the
discharge of its regulatory responsibilities, including the conduct of any OTS
examination or investigation; and (ii) any attempts to induce any person to
withhold material information from the OTS related to the performance of its
regulatory responsibilities. The Order also provides that for a period of no
less than three (3) years if Seidman becomes an institution-affiliated party of
any insured depository institution subject to the jurisdiction of the OTS, to
the extent that his responsibilities include the preparation or review of any
reports, documents, or other information that would be submitted or reviewed by
the OTS in the discharge of its regulatory functions, all such reports,
documents, and other information shall, prior to submission to, or review by the
OTS, be independently reviewed by the Board of Directors or a duly appointed
committee of the Board to ensure that all material information and facts have
been fully and adequately disclosed. In addition, a civil money penalty in the
amount of $20,812 was assessed.
18
EXHIBIT B
COST
DATE PER
ENTITY PURCH SHARE COST SHARES
- ------------------------------ ---------- -------- ------------ -------
SAL 8/6/2003 18.7210 79,470.60 4,245
SAL 8/7/2003 18.3338 60,501.58 3,300
SAL 10/1/2003 21.1100 63,330.00 3,000
SAL 3/8/2004 23.9600 29,710.40 1,240
SAL 3/11/2004 23.9475 148,474.50 6,200
SAL 3/16/2004 23.6163 23,427.37 992
SAL 3/19/2004 23.6417 87,947.12 3,720
SAL 3/23/2004 23.6300 57,869.87 2,449
SAL 3/24/2004 23.6400 58,627.20 2,480
SAL 4/13/2004 24.0000 26,040.00 1,085
SAL 4/14/2004 23.9900 124,939.92 5,208
SAL 4/15/2004 24.0200 45,421.82 1,891
SAL 4/19/2004 24.0500 31,313.10 1,302
SAL 5/6/2004 24.2288 60,087.42 2,480
SAL 5/7/2004 24.1000 41,090.50 1,705
SAL 5/10/2004 24.0451 152,806.61 6,355
SAL 5/11/2004 23.8760 185,039.00 7,750
SAL 5/12/2004 23.7959 130,568.10 5,487
SAL 5/18/2004 23.8500 13,308.30 558
SAL 6/2/2004 24.0383 44,711.24 1,860
SAL 6/7/2004 24.4300 302,932.00 12,400
SAL 6/9/2004 24.3500 566,137.50 23,250
SAL 6/22/2004 23.9857 52,048.97 2,170
SAL 7/1/2004 24.9012 66,386.60 2,666
SAL 7/7/2004 24.0232 221,926.32 9,238
SAL 7/8/2004 23.8830 336,869.72 14,105
SAL 7/9/2004 23.8500 147,870.00 6,200
SAL 7/20/2004 23.7633 7,129.00 300
SAL 7/22/2004 23.7389 64,094.98 2,700
SAL 7/26/2004 23.8857 1,000,165.92 41,873
SAL 9/14/2004 28.8000 208,800.00 7,250
SAL 9/15/2004 28.7938 83,502.02 2,900
SAL 10/1/2004 29.5500 88,650.00 3,000
SAL 10/1/2004 29.5500 177,300.00 6,000
SAL 10/1/2004 29.5500 29,550.00 1,000
SAL 1/4/2005 33.4396 138,506.82 4,142
SAL 1/5/2005 33.0083 75,258.92 2,280
SAL 1/7/2005 33.0500 43,956.50 1,330
SAL 1/10/2005 32.8662 56,201.20 1,710
SAL 1/12/2005 32.7473 62,219.87 1,900
SAL 1/13/2005 32.5883 74,301.32 2,280
SAL 1/14/2005 32.5430 97,629.10 3,000
SAL 1/20/2005 32.0215 60,840.85 1,900
SAL 1/20/2005 31.9021 60,614.00 1,900
SAL 2/18/2005 33.2464 63,168.16 1,900
SAL 2/22/2005 32.9467 118,212.76 3,588
SAL 2/23/2005 32.5352 68,519.13 2,106
SAL 3/10/2005 32.5127 44,379.84 1,365
SAL 3/16/2005 32.5300 44,403.45 1,365
SAL 4/28/2005 32.5011 114,371.50 3,519
SAL 7/26/2005 35.6500 51,478.60 1,444
SAL 8/2/2005 35.6163 120,454.33 3,382
SAL 8/5/2005 35.5153 121,462.33 3,420
SAL 8/9/2005 35.3609 64,498.28 1,824
SAL 8/15/2005 35.2225 136,522.41 3,876
19
EXHIBIT B
COST
DATE PER
ENTITY PURCH SHARE COST SHARES
- ------------------------------ ---------- -------- ------------ -------
SAL 8/26/2005 34.8000 45,309.60 1,302
SAL 9/23/2005 34.8154 45,260.00 1,300
SAL 12/8/2005 35.0644 48599.3 1,386
SAL 12/21/2005 35.0453 70651.37 2,016
SAL 12/27/2005 34.8548 127359.3 3,654
SAL 12/29/2005 34.5967 98808.18 2,856
SAL 12/30/2005 34.4533 166409.6 4,830
SAL 1/3/2006 34.6616 59687.3 1,722
SAL 1/11/2006 34.9905 17285.3 494
SAL 1/12/2006 34.9138 53557.83 1,534
Total 7,167,861.91 267,684
SAL certificate 7/26/2004 23.8857 23,885.70 1,000
Total 23,885.70 1,000
SIP 8/6/2003 18.7211 57,492.60 3,071
SIP 8/7/2003 18.3340 51,335.28 2,800
SIP 10/1/2003 21.1100 50,664.00 2,400
SIP 3/8/2004 23.9600 23,960.00 1,000
SIP 3/11/2004 23.9475 119,737.50 5,000
SIP 3/16/2004 23.6163 18,893.04 800
SIP 3/19/2004 23.6417 70,925.10 3,000
SIP 3/23/2004 23.6300 46,669.25 1,975
SIP 3/24/2004 23.6400 47,280.00 2,000
SIP 4/13/2004 24.0000 21,000.00 875
SIP 4/14/2004 23.9900 100,758.00 4,200
SIP 4/15/2004 24.0200 36,630.50 1,525
SIP 4/19/2004 24.0500 25,252.50 1,050
SIP 5/6/2004 24.2288 48,457.60 2,000
SIP 5/7/2004 24.1000 33,137.50 1,375
SIP 5/10/2004 24.0451 123,231.14 5,125
SIP 5/11/2004 23.8760 149,225.00 6,250
SIP 5/12/2004 23.7959 105,296.86 4,425
SIP 5/18/2004 23.8500 10,732.50 450
SIP 6/2/2004 24.0383 36,057.45 1,500
SIP 6/7/2004 24.4300 244,300.00 10,000
SIP 6/9/2004 24.3500 456,562.50 18,750
SIP 6/22/2004 23.9857 41,974.98 1,750
SIP 7/1/2004 24.9012 53,537.58 2,150
SIP 7/7/2004 24.0232 178,972.84 7,450
SIP 7/8/2004 23.8830 271,669.13 11,375
SIP 7/9/2004 23.8500 119,250.00 5,000
SIP 7/20/2004 23.7700 4,754.00 200
SIP 7/22/2004 23.7395 45,105.06 1,900
SIP 7/26/2004 23.8857 825,848.08 34,575
SIP 9/14/2004 28.8000 172,800.00 6,000
SIP 9/15/2004 28.7938 69,105.12 2,400
SIP 1/4/2005 33.4396 76,543.24 2,289
SIP 1/5/2005 33.0083 41,590.46 1,260
SIP 1/7/2005 33.0500 24,291.75 735
SIP 1/10/2005 32.8662 31,058.56 945
SIP 1/12/2005 32.7473 34,384.67 1,050
SIP 1/13/2005 32.5883 41,061.26 1,260
SIP 1/19/2005 32.4564 134,953.55 4,158
20
EXHIBIT B
COST
DATE PER
ENTITY PURCH SHARE COST SHARES
- ------------------------------ ---------- -------- ------------ -------
SIP 1/20/2005 32.0215 33,622.58 1,050
SIP 1/20/2005 31.9038 33,499.00 1,050
SIP 2/18/2005 33.2464 34,908.72 1,050
SIP 2/22/2005 32.9467 63,653.02 1,932
SIP 2/23/2005 32.5352 36,894.92 1,134
SIP 3/10/2005 32.5127 23,896.83 735
SIP 3/16/2005 32.5300 23,909.55 735
SIP 4/27/2005 32.5023 56,749.00 1,746
SIP 5/2/2005 32.3078 16,573.90 513
SIP 7/26/2005 35.6500 32,512.80 912
SIP 7/27/2005 35.6500 71,300.00 2,000
SIP 8/2/2005 35.6163 76,076.42 2,136
SIP 8/5/2005 35.5153 76,713.05 2,160
SIP 8/9/2005 35.3609 40,735.76 1,152
SIP 8/15/2005 35.2225 86,224.68 2,448
SIP 8/26/2005 34.8000 30,206.40 868
SIP 9/22/2005 34.8000 41,760.00 1,200
SIP 12/8/2005 35.0716 32,406.20 924
SIP 12/21/2005 35.0503 47,107.58 1344
SIP 12/27/2005 34.8575 84,912.89 2436
SIP 12/29/2005 34.6002 65,878.79 1904
SIP 12/30/2005 34.4554 110,946.40 3220
SIP 1/3/2006 34.65 1,300,034.00 37519
SIP 1/3/2006 34.6674 39,798.20 1148
SIP 1/11/2006 34.9939 15,957.20 456
SIP 1/12/2006 34.9149 49,439.53 1416
Total 6,570,216.04 237,256
SIPII 8/6/2003 18.7220 35,028.80 1,871
SIPII 8/7/2003 18.3355 25,669.64 1,400
SIPII 10/1/2003 21.1100 25,332.00 1,200
SIPII 3/8/2004 23.9600 13,417.60 560
SIPII 3/11/2004 23.9475 67,053.00 2,800
SIPII 3/16/2004 23.6163 10,580.10 448
SIPII 3/19/2004 23.6417 39,718.06 1,680
SIPII 3/23/2004 23.6300 26,134.78 1,106
SIPII 3/24/2004 23.6400 26,476.80 1,120
SIPII 4/13/2004 24.0000 11,760.00 490
SIPII 4/14/2004 23.9900 56,424.48 2,352
SIPII 4/15/2004 24.0200 20,513.08 854
SIPII 4/19/2004 24.0500 14,141.40 588
SIPII 5/6/2004 24.2288 27,136.26 1,120
SIPII 5/7/2004 24.1000 18,557.00 770
SIPII 5/10/2004 24.0451 69,009.44 2,870
SIPII 5/11/2004 23.8760 83,566.00 3,500
SIPII 5/12/2004 23.7959 58,966.24 2,478
SIPII 5/18/2004 23.8500 6,010.20 252
SIPII 6/2/2004 24.0383 20,192.17 840
SIPII 6/7/2004 24.4300 136,808.00 5,600
SIPII 6/9/2004 24.3500 255,675.00 10,500
SIPII 6/22/2004 23.9857 23,505.99 980
SIPII 7/1/2004 24.9012 29,981.04 1,204
SIPII 7/7/2004 24.0232 100,224.79 4,172
SIPII 7/8/2004 23.8830 152,134.71 6,370
SIPII 7/9/2004 23.8500 66,780.00 2,800
21
EXHIBIT B
COST
DATE PER
ENTITY PURCH SHARE COST SHARES
- ------------------------------ ---------- -------- ------------ -------
SIPII 7/20/2004 23.7681 5,252.75 221
SIPII 7/22/2004 23.7414 23,741.40 1,000
SIPII 7/26/2004 23.8857 462,474.92 19,362
SIPII 9/14/2004 28.8000 93,600.00 3,250
SIPII 9/15/2004 28.7938 37,431.94 1,300
SIPII 1/4/2005 33.4396 47,383.91 1,417
SIPII 1/5/2005 33.0083 25,746.47 780
SIPII 1/7/2005 33.0500 15,037.75 455
SIPII 1/10/2005 32.8662 19,226.73 585
SIPII 1/12/2005 32.7473 21,285.75 650
SIPII 1/13/2005 32.5883 25,418.87 780
SIPII 1/20/2005 32.0215 20,813.98 650
SIPII 1/20/2005 31.9062 20,739.00 650
SIPII 1/21/2005 32.2526 80,631.50 2,500
SIPII 2/18/2005 33.2464 21,610.16 650
SIPII 2/22/2005 32.9467 39,404.25 1,196
SIPII 2/23/2005 32.5352 22,839.71 702
SIPII 3/10/2005 32.5127 14,793.28 455
SIPII 3/16/2005 32.5300 14,801.15 455
SIPII 4/28/2005 32.5011 113,754.00 3,500
SIPII 7/26/2005 35.6500 17,611.10 494
SIPII 8/2/2005 35.6163 41,208.06 1,157
SIPII 8/5/2005 35.5153 41,552.90 1,170
SIPII 8/9/2005 35.3609 22,065.20 624
SIPII 8/15/2005 35.2225 46,705.04 1,326
SIPII 8/26/2005 34.8000 16,182.00 465
SIPII 11/21/2005 34.8111 62,660.00 1,800
SIPII 12/8/2005 35.0904 17,369.75 495
SIPII 12/21/2005 35.0632 25,245.49 720
SIPII 12/27/2005 34.8646 45,498.34 1,305
SIPII 12/29/2005 34.6093 35,301.49 1,020
SIPII 12/30/2005 34.4608 59,444.87 1,725
SIPII 1/3/2006 34.6825 21,329.75 615
SIPII 1/11/2006 34.981 22,597.70 646
SIPII 1/12/2006 34.9108 70,031.00 2,006
SIPII 1/17/2006 34.8543 132,446.20 3,800
SIPII 2/6/2006 35.0633 52,595.00 1,500
Total 3,276,627.99 121,351
Seidman & Clients 4/27/2004 24.05 40885 1700
Seidman & Clients 7/13/2004 24 192000 8000
Seidman & Clients 7/9/2004 23.8516 59629 2500
Seidman & Clients 7/9/2004 23.8516 59629 2500
Seidman & Clients 10/1/2003 21.815 10907.5 500
Seidman & Clients 12/15/2005 36.0421 3604.21 100
Seidman & Clients 10/1/2003 21.815 10907.5 500
Seidman & Clients 7/13/2004 24.016 24015.95 1000
Seidman & Clients 10/1/2003 21.7502 21750.15 1000
Seidman & Clients 7/13/2004 24.0137 38421.95 1600
Seidman & Clients 10/17/2005 34.5392 17269.6 500
Seidman & Clients 12/15/2005 35.6164 8904.1 250
Seidman & Clients 10/1/2003 21.7502 21750.15 1000
Seidman & Clients 7/13/2004 24.0635 15039.7 625
Seidman & Clients 10/17/2005 34.4733 34473.25 1000
Seidman & Clients 12/20/2005 35.4036 35403.55 1000
22
EXHIBIT B
COST
DATE PER
ENTITY PURCH SHARE COST SHARES
- ------------------------------ ---------- -------- ------------ -------
Seidman & Clients 10/1/2003 21.7502 21750.15 1000
Seidman & Clients 7/13/2004 24.0635 15039.7 625
Seidman & Clients 10/17/2005 34.4733 34473.25 1000
Seidman & Clients 12/20/2005 35.3966 53094.85 1500
Seidman & Clients 3/30/2004 24.5124 49024.85 2000
Seidman & Clients 7/13/2004 24.013 48025.95 2000
Seidman & Clients 10/1/2003 21.815 10907.5 500
Seidman & Clients 7/13/2004 24.0446 18033.45 750
Seidman & Clients 12/15/2005 35.4036 35403.55 1000
Seidman & Clients 7/13/2004 24.1274 9650.95 400
Seidman & Clients 7/9/2004 23.852 47704 2000
Seidman & Clients 8/3/2004 28.6703 4300.55 150
Seidman & Clients 7/9/2004 23.8518 53404.15 2239
Seidman & Clients 7/15/2004 23.9948 18260.01 761
Seidman & Clients 8/6/2003 18.37 5511 300
Seidman & Clients 7/8/2004 23.9965 20397 850
Total 1,064,375.29 41,550
Broad Park 1/4/2005 33.4396 25,514.41 763
Broad Park 1/5/2005 33.0083 13,863.49 420
Broad Park 1/7/2005 33.0500 8,097.25 245
Broad Park 1/10/2005 32.8662 10,352.85 315
Broad Park 1/12/2005 32.7473 11,461.56 350
Broad Park 1/13/2005 32.5883 13,687.09 420
Broad Park 1/20/2005 32.0215 11,207.53 350
Broad Park 1/20/2005 31.9114 11,169.00 350
Broad Park 2/18/2005 33.2464 11,636.24 350
Broad Park 2/22/2005 32.9467 18,186.58 552
Broad Park 2/23/2005 32.5352 10,541.40 324
Broad Park 3/10/2005 32.5127 6,827.67 210
Broad Park 3/16/2005 32.5300 6,831.30 210
Broad Park 4/8/2005 33.7500 198,281.25 5,875
Broad Park 4/29/2005 32.3710 99,767.42 3,082
Broad Park 7/1/2005 35.7500 339,053.00 9,484
Broad Park 7/26/2005 35.6500 6,773.50 190
Broad Park 8/2/2005 35.6163 15,849.25 445
Broad Park 8/5/2005 35.5153 15,981.89 450
Broad Park 8/9/2005 35.3609 8,486.62 240
Broad Park 8/15/2005 35.2225 17,963.48 510
Broad Park 8/26/2005 34.8000 5,394.00 155
Broad Park 10/5/2005 33.8800 1,000,747.00 29,538
Broad Park 12/8/2005 35.1712 5,803.25 165
Broad Park 12/21/2005 35.1188 8,428.50 240
Broad Park 12/27/2005 34.8953 15,179.45 435
Broad Park 12/29/2005 34.6485 11,780.50 340
Broad Park 12/30/2005 34.4840 19,828.29 575
Broad Park 1/3/2006 34.7476 7,123.25 205
Broad Park 1/11/2006 35.1004 4,668.35 133
Broad Park 1/12/2006 34.9492 14,434.03 413
Broad Park 3/6/2006 35.7353 214,412.00 6,000
Total 2,169,331.40 63,334
Federal 8/6/2003 18.7221 33,156.87 1,771
Federal 8/7/2003 18.3357 23,836.38 1,300
Federal 10/1/2003 21.1100 21,110.00 1,000
23
EXHIBIT B
COST
DATE PER
ENTITY PURCH SHARE COST SHARES
- ------------------------------ ---------- -------- ------------ -------
Federal 3/8/2004 23.9600 10,542.40 440
Federal 3/11/2004 23.9475 52,684.50 2,200
Federal 3/16/2004 23.6163 8,312.94 352
Federal 3/19/2004 23.6417 31,207.04 1,320
Federal 3/23/2004 23.6300 20,534.47 869
Federal 3/24/2004 23.6400 20,803.20 880
Federal 4/13/2004 24.0000 9,240.00 385
Federal 4/14/2004 23.9900 44,333.52 1,848
Federal 4/15/2004 24.0200 16,117.42 671
Federal 4/19/2004 24.0500 11,111.10 462
Federal 5/6/2004 24.2288 21,321.34 880
Federal 5/7/2004 24.1000 14,580.50 605
Federal 5/10/2004 24.0451 54,221.70 2,255
Federal 5/11/2004 23.8760 65,659.00 2,750
Federal 5/12/2004 23.7959 46,330.62 1,947
Federal 5/18/2004 23.8500 4,722.30 198
Federal 6/2/2004 24.0383 15,865.28 660
Federal 6/7/2004 24.4300 107,492.00 4,400
Federal 6/9/2004 24.3500 200,887.50 8,250
Federal 6/22/2004 23.9857 18,468.99 770
Federal 7/1/2004 24.9012 23,556.54 946
Federal 7/7/2004 24.0232 78,748.05 3,278
Federal 7/8/2004 23.8830 119,534.42 5,005
Federal 7/9/2004 23.8500 52,470.00 2,200
Federal 7/22/2004 23.7414 23,741.40 1,000
Federal 7/26/2004 23.8857 363,373.15 15,213
Federal 9/14/2004 28.8000 72,000.00 2,500
Federal 9/15/2004 28.7938 28,793.80 1,000
Federal 1/4/2005 33.4396 32,804.25 981
Federal 1/5/2005 33.0083 17,824.48 540
Federal 1/7/2005 33.0500 10,410.75 315
Federal 1/10/2005 32.8662 13,310.81 405
Federal 1/12/2005 32.7473 14,736.29 450
Federal 1/13/2005 32.5883 17,597.68 540
Federal 1/20/2005 32.0215 14,409.68 450
Federal 1/20/2005 31.9089 14,359.00 450
Federal 2/18/2005 33.2464 14,960.88 450
Federal 2/22/2005 32.9467 27,279.87 828
Federal 2/23/2005 32.5352 15,812.11 486
Federal 3/10/2005 32.5127 10,241.50 315
Federal 3/16/2005 32.5300 10,246.95 315
Federal 4/29/2005 32.3710 99,735.05 3,081
Federal 7/26/2005 35.6500 12,192.30 342
Federal 8/2/2005 35.6163 28,528.66 801
Federal 8/5/2005 35.5153 28,767.39 810
Federal 8/9/2005 35.3609 15,275.91 432
Federal 8/15/2005 35.2225 32,334.26 918
Federal 8/26/2005 34.8000 10,788.00 310
Federal 12/8/2005 35.1106 11,586.50 330
Federal 12/21/2005 35.0771 16,836.99 480
Federal 12/27/2005 34.8723 30,338.89 870
Federal 12/29/2005 34.6191 23,541.00 680
Federal 12/30/2005 34.4666 39,636.58 1,150
Federal 1/3/2006 34.6988 14,226.50 410
Federal 1/11/2006 35.0670 5,996.45 171
24
EXHIBIT B
COST
DATE PER
ENTITY PURCH SHARE COST SHARES
- ------------------------------ ---------- -------- ------------ -------
Federal 1/12/2006 34.9385 18,552.32 531
Total 2,217,087.48 85,196
PIP 8/6/2003 18.7217 38,772.70 2,071
PIP 8/7/2003 18.3351 29,336.16 1,600
PIP 10/1/2003 21.1100 31,665.00 1,500
PIP 3/8/2004 23.9600 14,376.00 600
PIP 3/11/2004 23.9475 71,842.50 3,000
PIP 3/16/2004 23.6163 11,335.82 480
PIP 3/19/2004 23.6417 42,555.06 1,800
PIP 3/23/2004 23.6300 28,001.55 1,185
PIP 3/24/2004 23.6400 28,368.00 1,200
PIP 4/13/2004 24.0000 12,600.00 525
PIP 4/14/2004 23.9900 60,454.80 2,520
PIP 4/15/2004 24.0200 21,978.30 915
PIP 4/19/2004 24.0500 15,151.50 630
PIP 5/6/2004 24.2288 29,074.56 1,200
PIP 5/7/2004 24.1000 19,882.50 825
PIP 5/10/2004 24.0451 73,938.68 3,075
PIP 5/11/2004 23.8760 89,535.00 3,750
PIP 5/12/2004 23.7959 63,178.11 2,655
PIP 5/18/2004 23.8500 6,439.50 270
PIP 6/2/2004 24.0383 21,634.47 900
PIP 6/7/2004 24.4300 146,580.00 6,000
PIP 6/9/2004 24.3500 273,937.50 11,250
PIP 6/22/2004 23.9857 25,184.99 1,050
PIP 7/1/2004 24.9012 32,122.55 1,290
PIP 7/7/2004 24.0232 107,383.70 4,470
PIP 7/8/2004 23.8830 163,001.48 6,825
PIP 7/9/2004 23.8500 71,550.00 3,000
PIP 7/20/2004 23.7700 4,754.00 200
PIP 7/22/2004 23.7401 35,111.61 1,479
PIP 7/26/2004 23.8857 495,508.85 20,745
PIP 9/14/2004 28.8000 93,600.00 3,250
PIP 9/15/2004 28.7938 37,431.94 1,300
PIP 1/4/2005 33.4396 43,739.00 1,308
PIP 1/5/2005 33.0083 23,765.98 720
PIP 1/7/2005 33.0500 13,881.00 420
PIP 1/10/2005 32.8662 17,747.75 540
PIP 1/12/2005 32.7473 19,648.38 600
PIP 1/13/2005 32.5883 23,463.58 720
PIP 1/20/2005 32.0215 19,212.90 600
PIP 1/20/2005 31.9067 19,144.00 600
PIP 2/18/2005 33.2464 19,947.84 600
PIP 2/22/2005 32.9467 36,373.16 1,104
PIP 2/23/2005 32.5352 21,082.81 648
PIP 3/10/2005 32.5127 13,655.33 420
PIP 3/16/2005 32.5300 13,662.60 420
PIP 7/26/2005 35.6500 14,901.70 418
PIP 8/2/2005 35.6163 34,868.36 979
PIP 8/5/2005 35.5153 35,160.15 990
PIP 8/9/2005 35.3609 18,670.56 528
PIP 8/15/2005 35.2225 39,519.65 1,122
PIP 1/3/2006 23.3647 -876,621.00 -37,519
Total 1,748,110.58 66,778
25
EXHIBIT B
COST
DATE PER
ENTITY PURCH SHARE COST SHARES
- ------------------------------ ---------- -------- ------------- -------
Dennis Pollack & Family 2/28/2003 16.9513 3,390.25 200
Dennis Pollack & Family 3/7/2003 16.9316 13,545.25 800
Dennis Pollack & Family 1/28/2004 25.0678 25,067.75 1,000
Dennis Pollack & Family 3/24/2004 23.8204 3,334.85 140
Dennis Pollack & Family 3/31/2004 24.5695 15,577.08 634
Dennis Pollack & Family 4/8/2004 24.5756 8,994.67 366
Dennis Pollack & Family 4/8/2004 24.6205 12,310.25 500
Dennis Pollack & Family 4/21/2004 24.3007 14,580.40 600
Dennis Pollack & Family 4/21/2004 24.3107 4,667.65 192
Dennis Pollack & Family 4/21/2004 24.3581 17,245.52 708
Dennis Pollack & Family 5/12/2004 23.7500 14,250.00 600
Dennis Pollack & Family 5/12/2004 23.8105 11,905.25 500
Dennis Pollack & Family 5/21/2004 24.8171 24,817.13 1,000
Dennis Pollack & Family 6/2/2004 24.5665 24,566.50 1,000
Dennis Pollack & Family 7/9/2004 24.0575 16,840.25 700
Dennis Pollack & Family 7/12/2004 24.0550 25,498.25 1,060
Dennis Pollack & Family 7/12/2004 24.1105 12,055.25 500
Dennis Pollack & Family 7/12/2004 24.1105 12,055.25 500
Dennis Pollack & Family 7/12/2004 24.1105 12,055.25 500
Dennis Pollack & Family 7/15/2004 24.0405 12,020.25 500
Dennis Pollack & Family 7/15/2004 24.1205 12,060.25 500
Dennis Pollack & Family 7/15/2004 24.1305 12,065.25 500
Dennis Pollack & Family 1/28/2005 31.5820 15,791.00 500
Dennis Pollack & Family 1/28/2005 31.5600 15,780.00 500
Dennis Pollack & Family 1/28/2005 31.6900 15,845.00 500
Dennis Pollack & Family 1/28/2005 31.6600 15,830.00 500
Dennis Pollack & Family 10/10/2005 33.7347 36,264.75 1,075
Dennis Pollack & Family 10/10/2005 33.7800 1,689.00 50
Dennis Pollack & Family 10/10/2005 33.7460 12,654.75 375
Dennis Pollack & Family 1/31/2006 36.3401 21,804.06 600
Dennis Pollack & Family 1/31/2006 36.3330 27,249.75 750
Dennis Pollack & Family 1/31/2006 36.6518 4,031.70 110
Dennis Pollack & Family 1/31/2006 36.7641 3,124.95 85
Total 478,967.51 18,045
Robinson Patrick A.* 2/23/06 36.5900 14,526.23 397
Robinson Patrick A.* 2/24/06 36.5700 12,726.36 348
Total 27,252.59 745
Schechter Harold** 2/23/06 37.0300 3,758.95 100
Total 3,758.95 100
Grand Total 24,747,475.44 903,039
*These shares are owned jointly with Mr. Robinson's wife. Mr. Robinson has sole
dispositive and voting discretion regarding these shares.
**These shares are owned jointly with Mr. Schechter's wife. Mr. Schechter has
sole dispositive and voting discretion regarding these shares.
26
P R O X Y
THIS PROXY IS SOLICITED IN OPPOSITION TO THE BOARD OF DIRECTORS OF YARDVILLE
NATIONAL BANCORP BY THE COMMITTEE TO PRESERVE SHAREHOLDER VALUE AND FOR THE
COMMITTEE NOMINEES LISTED BELOW.
ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints Lawrence Seidman and Arthur Wein, with full
power of substitution as proxy for the undersigned, to vote all shares of common
stock, of Yardville National Bancorp,(the "Company"), which the undersigned is
entitled to vote at the Annual Meeting of Shareholders to be held on May 3,
2006, or any adjournment(s) or postponement(s) thereof (the "Meeting"), as
follows:
1. ELECTION OF DIRECTORS - To elect
LAWRENCE SEIDMAN OR HAROLD SCHECHTER DENNIS POLLACK PATRICK ROBINSON
- -- FOR -- WITHHOLD -- FOR -- WITHHOLD -- FOR -- WITHHOLD -- FOR --WITHHOLD
To withhold authority to vote for the election of Lawrence Seidman, Dennis
Pollack, Patrick Robinson, or Harold Schechter, write the respective name(s) in
the following space(s) or withhold authority for either by placing an X next to
Withhold.
UNTIL THE ISSUE OF MR. SEIDMAN'S ELIGIBILITY IS DETERMINED BY THE SUPERIOR COURT
OF NEW JERSEY, CHANCERY COURT OF PASSAIC COUNTY, IF YOU VOTE FOR MR. SEIDMAN,
AND HE IS NOT ELIGIBLE, YOUR VOTE WILL BE CAST FOR MR. SCHECHTER. IF MR. SEIDMAN
IS ELIGIBLE, THEN YOUR VOTE WILL BE CAST FOR MR. SEIDMAN.
2. APPOINTMENT OF KPMG, LLP, AS INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2006:
For ___ Against ___ Abstain __
IMPORTANT: PLEASE SIGN AND DATE ON THE REVERSE SIDE.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned Shareholder. Unless otherwise specified, this proxy will be
voted "FOR" the election of the Committee's Nominees as a Director and "FOR" the
appointment of KPMG, LLP, the independent accountants. This proxy revokes all
prior proxies given by the undersigned.
In his discretion, the proxy is authorized to vote upon such other business as
may properly come before the meeting, or any adjournments or postponements
thereof, as provided in the proxy statement provided herewith.
Please sign exactly as your name appears hereon or on your proxy cards
previously sent to you. When shares are held by joint tenants, both should sign.
When signing as an attorney, executor, administrator, trustee, or guardian,
please give full title as such. If a corporation, please sign in full
27
corporation name by the President or other duly authorized officer. If a
partnership, please sign in partnership name by authorized person. This proxy
card votes all shares held in all capacities.
Dated:
----------------------------------
-----------------------------------------
(Signature)
-----------------------------------------
(Signature, if jointly held)
Title:
----------------------------------
PLEASE SIGN, DATE, AND MAIL THIS PROXY CARD TODAY.
28
Exhibit A
AGREEMENT BY AND BETWEEN
Yardville National Bank
Yardville, New Jersey
and
The Office of the Comptroller of the Currency
Yardville National Bank, Yardville, New Jersey ("Bank") and the Comptroller of
the Currency of the United States of America ("Comptroller") wish to protect the
interests of the depositors, other customers, and Shareholders of the Bank, and,
toward that end, wish the Bank to operate safely and soundly and in accordance
with all applicable laws, rules and regulations.
The Comptroller, through his/her National Bank Examiner, has examined the Bank,
and his/her findings are contained in the Report of Examination ("ROE") for the
examination that commenced on January 3, 2005.
In consideration of the above premises, it is agreed, between the Bank, by and
through its duly elected and Board of Directors ("Board"), and the Comptroller,
through his authorized representative, that the Bank shall operate at all times
in compliance with the articles of this Agreement.
ARTICLE I
JURISDICTION
(1) This Agreement shall be construed to be a "written agreement entered into
with the agency" within the meaning of 12 U.S.C. Section 1818(b)(1).
(2) This Agreement shall be construed to be a "written agreement between such
depository institution and such agency" within the meaning of 12
U.S.C. Section 1818(e)(1) and 12 U.S.C. Section 1818(i)(2).
(3) This Agreement shall be construed to be a "formal written agreement" within
the meaning of 12 C.F.R. Section 5.51(c)(6)(ii). See 12 U.S.C. Section 1831i.
(4) This Agreement shall be construed to be a "written agreement" within the
meaning of 12 U.S.C. Section 1818(u)(1)(A).
(5) All reports or plans which the Bank or Board has agreed to submit to the
Assistant Deputy Comptroller pursuant to this Agreement shall be forwarded to:
Kristin A. Kiefer
Assistant Deputy Comptroller
New York Metro West
343 Thornall Street, Suite 610
Edison, New Jersey 08837
ARTICLE II
COMPLIANCE COMMITTEE
(1) Within sixty (60) days, the Board shall appoint a Compliance Committee of at
least six (6) Directors, of which no more than three (3) shall be employees of
the Bank or any of its affiliates (as the term "affiliate" is defined in 12
U.S.C. Section 371c(b)(1)), or a family member of any such person. Upon
appointment, the names of the members of the Compliance Committee shall be
submitted in writing to the Assistant Deputy Comptroller. The Compliance
Committee shall be responsible for
29
Exhibit A
monitoring and coordinating the Bank's adherence to the provisions of this
Agreement.
(2) The Compliance Committee shall meet at least monthly.
(3) Within thirty (30) days of the appointment of the Committee and quarterly
thereafter, the Compliance Committee shall submit a written progress report to
the Board setting forth in detail:
(a) Actions taken to comply with each Article of this Agreement; and
(b) The results of those actions.
(c) A description of the actions needed to achieve full compliance with
each Article of this Agreement.
(4) The Board shall forward a copy of the Compliance Committee's report, with
any additional comments by the Board, to the Assistant Deputy Comptroller.
ARTICLE III
BOARD AND MANAGEMENT SUPERVISION
(1) Within ninety (90) days, the Board and management shall strengthen
supervision presently being provided to the Bank by assessing the Board of
Director's effectiveness, the Bank's management structure, and staffing
requirements in light of the Bank's present condition. At a minimum, the Board
and management shall assess:
(a) For the Board:
(i) The Board's strengths and weaknesses, including an analysis of
the necessary qualifications and skills for individual members
to serve as effective directors and properly supervise the
bank's affairs;
(ii) An assessment of the Board committees, especially the Audit
Committee, to ensure members are knowledgeable of what is
required to establish an effective audit program and capable
of implementing this program;
(iii) An assessment of individual members qualifications and skills
compared to necessary qualifications and skills to properly
supervise the bank's affairs;
(iv) An assessment of whether Board members are receiving adequate
information on the operation of the Bank to enable them to
fulfill their fiduciary responsibilities and other
responsibilities under law;
(v) Recommendations to correct or eliminate any other deficiencies
in the supervision or organizational structure of the Bank.
30
Exhibit A
(b) For management:
(i) The identification of present and future management and
staffing requirements of each area of the Bank, with
particular emphasis given to the commercial lending, credit
administration, loan workout, compliance (especially Bank
Secrecy Act area), audit, risk management, and financial
areas;
(ii) An evaluation of current lines of authority, reporting
responsibilities and delegation of duties for all officers,
including identification of any overlapping duties or
responsibilities;
(iii) An evaluation of each senior officer's qualifications and
abilities, at a minimum for senior vice president and above,
and a determination of whether each of these individuals
possesses the experience and other qualifications required to
perform present and anticipated duties of his/her officer
position;
(iv) An evaluation of each objective by which management's
effectiveness will be measured;
(v) Recommendations as to whether management or staffing changes
should be made, including the need for additions to or
deletions from the current management team; and
(vi) A training program to address identified weaknesses in the
skills and abilities of the Bank's staff and management team.
(2) Within (90) days, the Board shall ensure that the bank has completed a bank
wide risk assessment that discusses and reviews all risks relevant to the bank
(e.g. credit, interest rate, liquidity, price, transaction, compliance,
strategic, and reputation) and including new products and services being
considered. The risk assessment should describe for each risk the current risk
position, the likely direction of risk over the next twelve months, and the
controls in place to mitigate risks. Findings from the risk assessment should be
submitted to and reviewed by the Board.
(3) Within ninety (90) days the Board shall develop, implement, and thereafter
ensure Bank adherence to a written plan, with specific time frames, that will
correct any deficiencies identified as part of the reviews required.
(4) The Board shall ensure that the Bank has satisfactory processes, personnel,
and control systems to ensure implementation of and adherence to the plan
developed pursuant to this Article.
(5) Copies of the Board's written plan shall be forwarded to the Assistant
Deputy Comptroller. The Assistant Deputy Comptroller shall retain the right to
determine the adequacy of the report and its compliance with the terms of this
Agreement. In the event the written plan, or any portion thereof, is not
implemented, the Board
31
Exhibit A
shall immediately advise the Assistant Deputy Comptroller, in writing, of
specific reasons for deviating from the plan.
ARTICLE IV
CREDIT RISK
(1) Within sixty (60) days, the Board shall develop, implement, and thereafter
ensure Bank adherence to a written program to improve credit risk processes,
especially for problem loan management. The program shall include, but not be
limited to:
(a) Review and/or development of adequate procedures to ensure accuracy of
risk ratings and proper and timely problem loan identification;
(b) Review and/or development of adequate procedures to ensure appropriate
non accrual designations, along with proper accounting treatment;
(c) Review and/or development of adequate procedures to obtain independent
valuations, including liquidation values with sales and marketing
costs deducted, for collateral on problem loans;
(d) Review and/or development of adequate procedures to ensure sufficient
specific loan loss allocations as part of the impairment analysis
required by FAS 114 on loan impairment; and
(e) Review and/or development of adequate procedures to ensure timely
recognition of loan losses, within the quarter of discovery, and in
accordance with SFAS 5.
(2) Within sixty (60) days, the Board shall develop, implement, and thereafter
ensure Bank adherence to a written program to improve problem loan management.
The program shall include, but not be limited to:
(a) Procedures for improving the overall quality, including substance and
specificity, of the problem loan reports i.e. Classified Credit
Memoranda (CCM's) for the following:
(i) Brief description of the borrower's background, causes of
problems, and delinquency and accrual status.
(ii) Basis for the criticism with specific triggering events and
timeframes for upgrading or downgrading risk ratings.
32
Exhibit A
(iii) Specific workout strategies to remove the basis for criticism,
target dates, and performance criteria to measure progress
toward resolution. Reasons why an objective was not met and
alternative courses of action in the event the primary
strategy is not feasible.
(iv) Rationale supporting specific loan loss allocations as
required by FAS 114 for loan impairment.
(v) Losses taken to date and estimates of possible additional
losses in succeeding quarters or the full year.
(3) Within sixty (60) days, the Board shall develop, implement, and thereafter
ensure Bank adherence to a written program to strengthen general loan
administration. The program shall include, but not be limited to:
(a) Complete revision of the general credit policy, submit the final
version to the Board for approval, and ensure it is effectively
implemented.
(b) Amend policies to include the frequency and type (e.g. compilation,
review, or CPA audited) of financial statements required based on the
loan size and risk. Also, clarify interim financial statement
requirements.
(c) Improve quality and timeliness of credit analysis in credit approvals
and ongoing analysis when updated financials are received,
specifically for business operations, management, markets,
competition, etc. and discuss reasons for changes in performance.
(d) Review reasonableness of concentrations of credit to the nursing home
and hospitality industries and make changes as appropriate. At a
minimum, adopt aggregate Board approved limits for these
concentrations of credit due to their larger size and the specialized
nature of the industries.
(e) Ensure the credit administration officer's lending authority, carried
over from a prior position, is promptly retracted to improve
separation of the credit line management from credit administration.
(f) Review adequacy of policies and procedures to ensure adherence with
Banking Circular 181 -- Purchases of Loans in Whole or In
Part-Participations, dated August 2, 1984.
33
Exhibit A
(g) Review adequacy of policies and practices governing loan covenants to
ensure they effectively are used to obtain necessary and satisfactory
financial information and require borrower's to comply with key
financial items like debt service coverage, leverage, minimum working
capital, minimum net worth, etc. Also, policies should discuss the
process for tracking covenants and documenting covenant noncompliance.
(h) Improve credit file documentation to reflect the borrower's current
status, analysis of repayment ability, and general written memos
supporting account officer's conclusions.
(i) Review adequacy of procedures for tracking and following up on open
credit file documentation items to ensure they are sufficient to
include tasks outsourced to attorneys.
(4) Within sixty (60) days, the Board shall develop, implement, and thereafter
ensure Bank adherence to a written program to enhance the Allowance for Loan and
Lease Losses (ALLL). The program shall include, but not be limited to:
(a) Improve analysis of the ALLL by segmenting the large "Commercial
General" migration loan pool into several smaller pools consisting of
loans with similar risk characteristics, which would provide more
meaningful and accurate analysis.
(b) Expand use of impairment analyses on individual loans as required in
FAS 114, which typically would include loans classified doubtful,
large loans classified substandard, non-accrual loans, and other large
exposures with unique risks. Also, clear documentation must be
maintained supporting the basis for impairment amounts (uniform
template forms may help facilitate the analysis).
(c) Amend the ALLL policy to describe loans requiring impairment analyses,
line officer/line management responsibilities for developing
impairment calculations, and requirements for documentation supporting
impairment analyses.
(d) Expand ALLL information forwarded to the Board to include qualitative
factors impacting ALLL adequacy.
(5) The Board shall submit a copy of the above revised programs to the Assistant
Deputy Comptroller.
(6) At least quarterly, the Board shall prepare a written assessment of the
bank's credit risk, which shall evaluate the Bank's progress under the
aforementioned programs. The Board shall submit a copy of this assessment to the
Assistant Deputy Comptroller.
(7) The Board shall ensure that the Bank has sufficient processes, personnel,
and control systems to ensure implementation of and adherence to the programs
developed pursuant to this Article.
34
Exhibit A
ARTICLE V
MATTERS REQUIRING ATTENTION
Within ninety (90) days, the Board and management shall address the Matters
Requiring Attention cited in the Report of Examination that relate to Compliance
Management and Information Security.
ARTICLE VI
INTERNAL AUDIT
(1) Within sixty (60) days, the Board shall adopt, implement, and thereafter
ensure Bank adherence to an independent, internal audit program that includes
the following:
(a) Revise policies and procedures to improve effectiveness of Board Audit
Committee oversight to ensure an adequate internal audit program,
qualified and sufficient internal audit staff, timely correction of
identified deficiencies, and an effectively administered audit
program.
(b) Strengthen the internal audit program by performing the following:
(i) Engage an independent firm to review the recently completed
self-assessments of Audit Committee members to determine
adequacy of their qualifications and their independence;
(ii) Engage an independent firm to evaluate qualifications of the
internal audit manager and internal audit staff as well as the
audit manager's administrative capabilities;
(iii) Revise the internal audit risk assessment and resulting
schedule to ensure they are risk based and include all
significant areas of bank operations and important processes;
(iv) Review and revise procedures to ensure they are sufficient to
properly enforce management accountability for correcting
identified deficiencies;
(v) Improve the quality of internal audit reports to ensure the
scope and coverage is clear and reasonable, provide useful and
specific recommendations, and detail individual loans or other
matters with deficiencies.
(2) As part of this audit program, the Board shall evaluate the audit reports of
any third party providing services to the Bank, and shall assess the impact on
the Bank of any audit deficiencies cited in such reports.
(3) The Board shall ensure that the audit function is supported by an adequately
staffed department or outside firm, with respect to both the experience level
and number of the individuals employed.
35
Exhibit A
(4) The Board shall ensure that the audit program is independent. The persons
responsible for implementing the internal audit program described above shall
report directly to the Audit Committee of the Board, which shall have the sole
power to direct their activities. All reports prepared by the audit staff shall
be filed directly with the Board and not through any intervening party.
(5) If the Board becomes aware of one or more "material weaknesses" in the
"internal control structure and procedures for financial reporting," and if the
weaknesses are not corrected within the quarter identified, the Board must
notify the management of the Yardville National Bancorp of the existence of the
"material weaknesses." For purposes of this Article, "material weaknesses" and
"internal control structure and procedures for financial reporting," have the
same meaning as the terms are used in Section 404 of the Sarbanes-Oxley Act of
2002 and Statement on Auditing Standards No. 60 ("SAS 60"), respectively.
(6) Upon adoption, a copy of the internal audit program shall be promptly
submitted to the Assistant Deputy Comptroller.
ARTICLE VII
CAPITAL ADEQUACY
(1) The Bank shall achieve by November 30, 2005 and thereafter maintain the
following capital levels (as defined in 12 C.F.R. Part 3):
(a) Total risk based capital equal to ten and three quarter percent
(10.75%);
(b) Tier 1 capital at least equal to nine and three quarter percent
(9.75%) of risk-weighted assets;
(c) Tier 1 capital at least equal to seven and one half percent (7.5%) of
adjusted total assets.
(2) The requirement in this Agreement to meet and maintain a specific capital
level means that the Bank may not be deemed to be "well capitalized" for
purposes of 12 U.S.C. Section 1831o and 12 C.F.R. Part 6 pursuant to 12
C.F.R. Section 6.4(b)(1)(iv).
(3) The Board shall not declare and the Bank may not pay a dividend except as
provided by 12 U.S.C.Sections 56 and 60 and with the prior written approval of
the Assistant Deputy Comptroller.
ARTICLE VIII
CLOSING
(1) Although the Board has agreed to submit certain programs and reports to the
Assistant Deputy Comptroller for review or prior written determination of no
supervisory objection, the Board has the ultimate responsibility for proper and
sound management of the Bank.
(2) It is expressly and clearly understood that if, at any time, the Comptroller
deems it appropriate in fulfilling the responsibilities placed upon him by the
several laws of the United States of America to undertake any action affecting
the Bank, nothing in this Agreement shall in any way inhibit, estop, bar, or
otherwise prevent the Comptroller from so doing.
36
Exhibit A
(3) Any time limitations imposed by this Agreement shall begin to run from the
effective date of this Agreement. Such time requirements may be extended in
writing by the Assistant Deputy Comptroller for good cause upon written
application by the Board.
(4) The provisions of this Agreement shall be effective upon execution by the
parties hereto and its provisions shall continue in full force and effect unless
or until such provisions are amended in writing by mutual consent of the parties
to the Agreement or excepted, waived, or terminated in writing by the
Comptroller.
(5) This Agreement is intended to be, and shall be construed to be, a
supervisory "written agreement entered into with the agency" as contemplated by
12 U.S.C. Section 1818(b)(1), and expressly does not form, and may not be
construed to form, a contract binding on the OCC or the United States.
Notwithstanding the absence of mutuality of obligation, or of consideration, or
of a contract, the OCC may enforce any of the commitments or obligations herein
undertaken by the Bank under its supervisory powers, including 12 U.S.C. Section
1818(b)(1), and not as a matter of contract law. The Bank expressly acknowledges
that neither the Bank nor the OCC has any intention to enter into a contract.
The Bank also expressly acknowledges that no OCC officer or employee has
statutory or other authority to bind the United States, the U.S. Treasury
Department, the OCC, or any other federal bank regulatory agency or entity, or
any officer or employee of any of those entities
to a contract affecting the OCC's exercise of its supervisory responsibilities.
The terms of this Agreement, including this paragraph, are not subject to
amendment or modification by any extraneous expression, prior agreements or
prior arrangements between the parties, whether oral or written.
IN TESTIMONY WHEREOF, the undersigned, authorized by the Comptroller, has
hereunto set his/her hand on behalf of the Comptroller.
Kristin A. Kiefer August 31, 2005
Kristin A. Kiefer Date
Assistant Deputy Comptroller
New York Metro West
IN TESTIMONY WHEREOF, the undersigned, as the duly elected and Board of
Directors of the Bank, have hereunto set their hands on behalf of the Bank.
James E. Bartolomei August 31, 2005
James E. Bartolomei Date
Elbert G. Basolis, Jr. August 31, 2005
37
Exhibit A
Elbert G. Basolis, Jr. Date
Lorraine Buklad August 31, 2005
Lorraine Buklad Date
Jay G. Destribats August 31, 2005
Jay G. Destribats Date
Anthony M. Giampetro, MD August 31, 2005
Anthony M. Giampetro, MD Date
Sidney L. Hofing August 31, 2005
Sidney L. Hofing Date
Gilbert W. Lugossy August 31, 2005
Gilbert W. Lugossy Date
Samuel D. Marrazzo Date
Louis R. Matlack, PhD August 31, 2005
Louis R. Matlack, PhD Date
George D. Muller Date
Patrick M. Ryan August 31, 2005
38
Exhibit A
Patrick M. Ryan Date
Martin Tuchman August 31, 2005
Martin Tuchman Date
F. Kevin Tylus August 31, 2005
F. Kevin Tylus Date
Christopher S. Vernon August 31, 2005
Christopher S. Vernon Date
Robert Workman August 31, 2005
Robert Workman Date
39