<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 1996
Commission file number 0-1739
-------------
MADISON BANCSHARES GROUP, LTD.
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issue as Specified In Its Charter)
Pennsylvania 23-2512079
- ------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
1767 Sentry Parkway West, Blue Bell, PA 19422
- ---------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(215) 641-1111
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter periods that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the Issuer's classes
of common stock, as of the latest practicable date.
971,360 shares of Issuer's Common Stock, par value $1 per share, issued and
outstanding as of August 12,1996.
<PAGE>
PART 1
ITEM 1 - FINANCIAL STATEMENTS
SEE ANNEX A
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Presented herein are the results of operations of Madison Bancshares
Group, Ltd. (the "Company") and its wholly owned subsidiary, The
Madison Bank (the "Bank"), for the quarters ended June 30, 1996 and
1995, respectively.
CAPITAL RESOURCES
The total shares of common stock outstanding on June 30, 1996 was
971,360 as compared to 897,574 at December 31, 1995. On May 5, 1995,
58,728 shares were issued in conjunction with a 7% stock dividend
declared on April 18, 1995. On February 15, 1996 an additional 67,185
shares were issued in conjunction with a 7-1/2% stock dividend
declared on January 11, 1996. The book value per share of the
Company's common stock on December 31, 1995, was $7.66 and at June 30,
1996, was $7.87, after giving effect to the stock dividend.
During the six month period, January 1, 1996 to June 30, 1996, the
Bank's total assets increased by approximately $4.3 million or
approximately 5% to $95,625,074.
The chart below depicts various capital ratios applicable to state
chartered Federal Reserve member banks and compares the Bank's actual
ratios at June 30, 1996 and December 31, 1995, respectively, which
exceeded the levels required for a bank to be classified as well-
capitalized.
Regulatory Actual Actual
Ratio Minimum 12/31/95 6/30/96
----- ---------- -------- -------
Qualifying Total Capital to
Risk Weighted Assets 8.0% 10.75% 11.74%
Tier 1 Capital, net of intangibles
to Risk Weighted Assets 4.0% 9.75% 10.68%
Tier 1 Leverage Ratio of Capital to
Total Adjusted Average Assets 4.0% 9.05% 8.49%
The Company's capital-to-assets ratio decreased from 8.62% as of
December 31, 1995 to 8.49% as of June 30, 1996. The decrease in the
capital-to-assets ratio for the quarter ended June 30, 1996, was
attributable to the growth of assets at a faster rate than retained
earnings. Management anticipates that its capital-to-assets ratio
will decline in future periods as the Company's assets continue to
grow. The Company's average return on equity as of December 31, 1995,
was 7.73%; and its return on average assets was .70%. As of June
30,1996, the Company's average return on equity was 8.07% and its
return on average assets was .65%.
<PAGE>
LIQUIDITY
The Bank's Asset/Liability Management Committee, comprised of the
members of the Bank's Executive Committee and its Treasurer, is
responsible for managing the liquidity position and interest
sensitivity of the Bank. The Committee's function is to balance the
Bank's interest-sensitive assets and liabilities, while providing
adequate liquidity for projected needs. The primary objective of the
Asset/Liability Management Committee is to maximize net interest
margin in an ever changing rate environment.
Management continues to believe that short-term market instruments,
such as 90-day United States Treasury bills, federal funds, and a
combination of fixed rate and floating rate commercial loans are the
most appropriate means to meet the Bank's liquidity needs.
Management is able to quickly increase yields on its interest earning
assets, primarily floating rate loans. As a result, the effect of
increases in interest rates generally, reflecting a higher cost of
funds, is minimal due to the asset-sensitive position the
Bank has structured through its asset-liability management strategy.
However, the recent decrease in the net interest spread reflects the
effect of a decrease in interest rates. Due to the asset sensitive
position of the Bank's balance sheet in the immediately repriceable
category, loans and federal funds were priced downward and the Bank's
liabilities were repriced over a 6 month period and are continuing to
be repriced. At June 30, 1996 the risk managment review indicates
that, going forward, the general effect of the Bank's gap position
within a one year period would be a plus or minus (+ or -) effect of
$34,000 on profits, or .02 basis points. In the event interest rates
further decline, the effect on the Company's gap position would be
negative. Management believes that any impact will not be
significant. As of June 30, 1996, the Bank's net interest spread was
approximately 4.00% as compared to 4.20% at December 31, 1995.
RESULTS OF OPERATIONS
As of June 30, 1996, the Company held deposits aggregating
$77,179,968, which reflects a decrease from deposits of $82,870,620
held at December 31, 1995. The 7% decline in deposits was the result
of the Bank not renewing Certificates of Deposit bearing rates that
were higher than the Bank was then offering and, as a result, the Bank
increased its borrowings. Of the $77,179,968 deposits held at June
30, 1996, $14,330,560, or approximately 19%, were non-interest bearing
deposits. Total deposit accounts numbered 4,997 at June 30, 1996. As
of the same date, outstanding loans receivable in connection with
loans made to 1,160 loan accounts totaled approximately $79,331,298
(excluding loan loss reserve and deferred loan fees). The following
tables and graphs set forth a comparative breakdown of the Company's
deposits and loans outstanding as of June 30, 1996 and December 31,
1995, respectively.
<PAGE>
DEPOSIT LIABILITIES
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
% of % of
Type of Account Balance Portfolio Balance Portfolio
--------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Non-Interest bearing (1) 14,330,560 19% 14,452,481 17%
Interest bearing (2) 3,802,031 5 3,262,291 4
Money Market (3) 13,876,674 18 16,376,099 20
Savings (4) 4,792,131 6 4,900,299 6
CD's Under 100M (5) 23,308,954 30 18,992,236 23
CD's Over 100M (6) 17,069,618 22 24,887,214 30
----------- --- ----------- ---
Totals $77,179,968 100% $82,870,620 100%
----------- --- ----------- ---
----------- --- ----------- ---
</TABLE>
[GRAPH]
LOANS OUTSTANDING
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
% of % of
Type of Account Balance Portfolio Balance Portfolio
--------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Real Estate Loans, Mortgages(1) $35,803,301 45% $32,000,817 44%
Commercial Loans (2) 35,104,886 44 34,201,976 47
Consumer Loans (3) 7,326,728 9 6,004,835 8
Residential Loans Held for
Sale (4) 1,096,383 2 500,540 1
----------- ---- ------------ ----
Totals $79,331,298 100% $72,708,168 100%
----------- ---- ------------ ----
----------- ---- ------------ ----
</TABLE>
[GRAPH]
<PAGE>
Net interest income, the difference between the interest earned on
loans and other investments and the interest paid on deposits and
other borrowings, is the primary source of the Bank's and the
Company's earnings.
The graph below sets forth the Bank's interest income and interest
expense growth for the period from June 30, 1995, through June 30,
1996:
[GRAPH]
For the six months ended June 30, 1996, the Company had a profit of
$260,914, or $.27 per share, as compared to a profit of $.28 per share
during the six month period ended June 30, 1995. For the quarter
ended June 30, 1996, the Company had a profit of $101,973 or $.11 per
share as compared to $131,378, or $.14 per share for the quarter ended
June 30, 1995. The decrease from the quarter and six months ended
June 30, 1996 compared to June 30, 1995 was attributable to certain
non-recurring expenses related to the proxy solicitation for the
annual shareholders meeting.
The Bank's net interest income, after provision for loan losses for
the six months ended June 30, 1996 and June 30, 1995, was $2,037,833
and $1,670,650, respectively. Interest income was $3,896,429 for the
six months ended June 30, 1996, as compared to $3,194,761 the six
months ended June 30, 1995. For the quarters ended June 30, 1996 and
1995, the Bank's interest income was $1,029,747 and $881,638, an
increase of 17% over 1995. Interest expense on deposits and borrowed
funds increased from $1,397,111, at June 30, 1995 to $1,641,096 as of
June 30, 1996, a 17% increase.
<PAGE>
The increase in interest income was due primarily to growth in loans,
as the graph below depicts.
[GRAPH]
As of December 31, 1995 the Bank had a $750,318 allowance for loan
losses which represented 1.04% of outstanding loans receivable. During
the first six months of 1996, the Bank added $217,500 to the reserve
which represented .97% of outstanding loans receivable. Loans charged
off against the reserve during the second quarter of 1996 amounted to
$203,745. The allowance for loan loss reserve is $766,365 as of June
30, 1996. Management believes that the allowance for loan losses is
reasonable and adequate to cover any known losses or any losses
reasonably expected in the portfolio.
Other real estate owned at June 30, 1996 represents an original loan
balance of $75,000 which was secured by a junior lien collateral
mortgage on a property located in Bryn Mawr, Pennsylvania. The loan
balance has since been reduced to $59,000 and payments continue to be
made on a monthly basis. The propertly was sold at sheriff's sale and
management bid on the property in order to protect the bank's lien
position resulting in a carrying value on the property at June 30,
1996 in the amount of $552,349. The Company has determined that loans
totaling $720,451 were "impaired" and the related allowance for loan
losses, for such loans previously established, was approximately
$232,326.
During the period from January 1, 1996, to June 30, 1996, non-interest
expenses were $1,840,994 as compared to $1,471,136 during the same
period in 1995. Of this amount, $832,835, or approximately 45%, was
attributable to salary and related employee benefits as compared to
$698,922, or 48% during the first six months of fiscal 1995.
<PAGE>
For the quarter ended June 30, 1996, non-interest expense totaled
$970,172 as compared to $782,423 during the same quarter of 1995, an
increase of 24%. Salary expenses were $397,772 for the second
quarter 1996 as compared to $349,190 in the second quarter 1995. The
increase in salary and related expenses was due to increased staffing
for the two new branches the Bank has opened since June 1995.
Occupancy and equipment expenses combined for the six months ended
June 30, 1996 were $352,832 as compared to $239,944 during the same
period in 1995. For the quarter ended June 30, 1996, occupancy and
equipment expenses were $181,520 as compared to $122,922 for the
quarter ended June 30, 1995. The increase was due to annual increases
in rent expenses and the addition of the two new branches.
Proxy related expenses totaled $90,000 for the quarter and six months
ended June 30, 1996. The expense is anticipated to be a non-recurring
expense and is a result of the proxy contest with respect to the
Company's Annual Meeting which resulted in additional expense for
legal and outside advisory services (See Item 4).
For the six months ended June 30, 1996, other operating expenses
totaled $248,350, or approximately 13% of total other expenses, as
compared to $196,726, or 13%, during the same period in 1995. For the
quarter ended June 30, 1996, these expenses totaled $138,112 as
compared to $124,791 for the quarter ended June 30, 1995. The overall
increase in operating expenses was due to the increased growth of the
Bank and the addition of two branches. Other operating expenses were
comprised primarily of professional fees, Director fees, business
promotional, telephone, fidelity insurance premium, and loan taxes.
Income tax expense for the six months and quarter ended June 30, 1996
was $147,475 and $68,415 as compared to $131,217 and $60,919 for the
six months and quarter ended June 30, 1995. The tax provision
increased 12% due to slightly increased profits.
Interest income on federal funds sold increased from $15,408 for the
quarter ended June 30, 1995 to $22,005 for the quarter ended June 30,
1996. For the six months ended June 30, 1995 interest income on
federal funds sold was $20,831, or less than 1% of gross interest
income as compared to $60,883 or less than 2% of gross interest income
for the six months ended June 30, 1996. Interest income on investment
securities for the quarter and six months ended June 30, 1995 was
$129,175 and $300,253 respectively. For the quarter and six months
ended June 30, 1996 interest income on investment securities was
$82,708 and $175,983, respectively. The decrease was a direct result
of an increase in the funding of loans versus investment in secondary
investments.
During the quarter ended June 30, 1996, interest and fees on loans was
$1,854,505 as compared to $1,554,400 in 1995. For the six months
ended June 30, 1996, and June 30, 1995, interest income on loans was
$3,659,563, or 94% of gross interest income, and $2,873,677, or 90% of
gross interest
<PAGE>
income, respectively. The increase in interest income on loans is due
to the overall growth in the portfolio.
Other income of $211,550 for the period from January 1, 1996, to
June 30, 1996, was primarily comprised of service charges on deposit
accounts and gains on sales of mortgage loans in the secondary market.
During the same period in 1995, other income totaled $201,245. The
increase over the same period in 1995 was due to refinancings of
mortgage loans and growth in service charges on deposit accounts. For
the quarter ended June 30, 1996, other income was $110,813 as compared
to $93,082 for the quarter ended June 30, 1995, primarily due to
growth of service charges on deposit accounts.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
Not Applicable.
ITEM 2 CHANGES IN SECURITIES
Not Applicable.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On May 21, 1996 the Company held its Annual Meeting of
Stockholders. As of the record date the total number of votes
eligible to cast at the Annual Meeting was 964,759. The following
proposals were presented for a vote by the company's stockholders:
PROPOSAL I - Election of Four (4) Directors.
PROPOSAL II - Ratification of the Appointment of Deloitte &
Touche LLP as the Company's independent auditors for the 1996
fiscal year.
(b) At the Company's Annual Meeting the following directors were re-
elected to a three year term:
1. Peter DePaul
2. Arnold M. Katz
3. Lorraince C. King, M.D.
4. Michael O'Donoghue
The term of each of the following directors continued after the Annual
Meeting:
1. Vito A. DeLisi
2. John P. Horton
3. Francis R. Iacobucci
4. Donald J. Reape
5. Alan T. Schiffman
6. Gary E. Daniels
<PAGE>
7. Philip E. Hughes, Jr.
8. Kathleen A. Kucer, M.D.
9. Blaine W. Scott, III
(c) PROPOSAL I. ELECTION OF DIRECTORS. Four directors were nominated by
the Company to stand for re-election to the Board. In addition, four
persons were nominated in opposition to such directors by certain of
the Company's shareholders, including Alan T. Schiffman, a director
and former Chairman of the Board. As set forth below each of the
Company's nominees were re-elected.
Name of Nominee Votes For Votes Withheld Abstain
--------------- --------- -------------- -------
Peter DePaul 628,713 3,390 0
Arnold M. Katz 632,047 56 0
Lorraince C. King, M.D. 632,103 0 0
Michael O'Donoghue 632,103 0 0
Arthur R. Schmauder 229,506 0 0
Michael C. Erlbaum 229,506 0 0
Larry J. Kraft 229,506 0 0
John Connolly 229,506 0 0
PROPOSAL II. RATIFICATION OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE 1996 FISCAL YEAR.
Votes For Votes Withheld Abstain
--------- -------------- -------
855,463 1,000 5,146
ITEM 5 OTHER INFORMATION
On or about August 5, 1996 The Madison Bank opened its fourth branch
located at 600 W. Lancaster Avenue, Strafford, Pennsylvania.
<PAGE>
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Filed
Page Number in
Exhibit Number Sequential Numbering System
- -------------- ---------------------------
2 None ----
4 Amended and Restated Articles *
of Incorporation, as amended, and
Amended and Restated Bylaws of
the Issuer
10 Lease by and between The Madison
Bank and Michael A. Massarella,
Trustee, dated May 14, 1996 ----
11 Not Applicable ----
15 Not Applicable ----
18 Not Applicable ----
19 None ----
20 None ----
23 None ----
24 None ----
25 None ----
27 Financial Data Schedule ----
28 None ----
- --------------------
* Incorporated by reference from the Issuer's Registration Statement on
Form S-1 No. 33-27146
(b) Reports on Form 8-K
On May 29, 1996, the Company filed a Report on Form 8-K with
respect to its annual meeting of Shareholders.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Issuer
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Madison Bancshares Group, Ltd.
/s/ Vito A. Delrsi
-----------------------------------
Vito A. DeLisi
Executive Vice President
/s/ E. Cheryl Hinkle
-----------------------------------
E. Cheryl Hinkle
Vice President
Date Executed: August 16, 1995
<PAGE>
ANNEX A
<PAGE>
MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
<S> <C> <C>
CASH AND CASH EQUIVALENTS:
CASH AND AMOUNTS DUE FROM BANKS $ 4,081,922 $ 3,788,002
FEDERAL FUNDS SOLD 3,670,000 6,685,000
------------- -------------
TOTAL CASH AND CASH EQUIVALENTS 7,751,922 10,473,002
INVESTMENT SECURITIES:
HELD TO MATURITY (FAIR VALUE - 1996 $2,559,503;
1995 $4,213,449) 2,609,547 4,209,744
AVAILABLE FOR SALE (AMORTIZED COST
1996 $4,750,585; 1995 $2,945,533) 4,719,524 2,942,869
LOANS (NET OF ALLOWANCE FOR LOAN LOSSES -
1996, $766,364; 1995, $750,318) 77,269,465 71,257,282
MORTGAGE LOANS HELD FOR SALE 1,096,383 500,540
REAL ESTATE OWNED 555,539 552,349
FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS 527,141 497,045
ACCRUED INTEREST RECEIVABLE 625,999 604,093
OTHER ASSETS 469,554 190,774
------------- -------------
TOTAL $ 95,625,074 $ 91,227,698
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS:
NONINTEREST-BEARING DEMAND DEPOSITS $ 14,330,561 $ 14,452,481
INTEREST-BEARING DEMAND DEPOSITS 3,802,031 3,262,291
SAVINGS DEPOSITS 4,792,131 4,900,299
MONEY MARKET DEPOSITS 13,876,673 16,376,099
TIME DEPOSITS 40,378,572 43,879,450
------------- -------------
TOTAL DEPOSITS 77,179,968 82,870,620
BORROWED FUNDS 10,000,000
ACCRUED INTEREST PAYABLE 664,854 656,895
ACCRUED EXPENSES AND OTHER LIABILITIES 99,286 307,468
------------- -------------
TOTAL LIABILITIES 87,944,108 83,834,983
------------- -------------
COMMITMENTS
SHAREHOLDERS EQUITY:
PREFERRED STOCK, $5 PAR VALUE - AUTHORIZED 5,000,000
SHARES; ISSUED AND OUTSTANDING, 0 SHARES.
COMMON STOCK, $1 PAR VALUE - AUTHORIZED 20,000,000
SHARES; ISSUED AND OUTSTANDING, 1996, 971,360 SHARES;
1995, 897,574 SHARES 971,360 897,574
CAPITAL SURPLUS 7,185,686 6,709,506
ACCUMULATED DEFICIT (455,580) (212,606)
NET UNREALIZED LOSSES ON AVAILABLE FOR SALE SECURITIES (20,500) (1,759)
------------- -------------
TOTAL SHAREHOLDERS' EQUITY 7,680,966 7,392,715
------------- -------------
TOTAL $ 95,625,074 $ 91,227,698
------------- -------------
------------- -------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
INTEREST AND FEES ON LOANS $ 1,854,505 $ 1,554,400 $ 3,659,563 $ 2,873,677
INTEREST AND DIVIDENDS ON INVESTMENT SECURITIES:
US GOVERNMENT OBLIGATIONS 60,506 109,760 134,641 261,120
MUNICIPAL BONDS 12,225 12,251 24,456 24,509
OTHER SECURITIES 9,977 7,164 16,886 14,624
INTEREST ON TEMPORARY INVESTMENTS 22,005 15,408 60,883 20,831
------------ ------------ ------------ ------------
1,959,218 1,698,983 3,896,429 3,194,761
------------ ------------ ------------ ------------
INTEREST EXPENSE:
INTEREST ON:
DEMAND DEPOSITS 19,988 19,437 38,420 34,246
SAVINGS AND MONEY MARKET DEPOSITS 156,557 233,042 318,524 467,352
TIME DEPOSITS 594,448 484,825 1,253,105 841,558
FEDERAL FUNDS PURCHASED 30,978 3,041 31,047 53,955
------------ ------------ ------------ ------------
801,971 740,345 1,641,096 1,397,111
------------ ------------ ------------ ------------
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES 1,157,247 958,638 2,255,333 1,797,650
PROVISION FOR LOAN LOSSES 127,500 77,000 217,500 127,000
------------ ------------ ------------ ------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,029,747 881,638 2,037,833 1,670,650
------------ ------------ ------------ ------------
OTHER NONINTEREST INCOME:
GAIN ON SALE OF MORTGAGE LOANS 13,531 8,775 29,150 16,345
SERVICE CHARGES ON DEPOSIT ACCOUNTS 82,957 77,252 153,123 149,437
GAIN (LOSS) ON SALE OF INVESTMENTS 15,812
OTHER 14,325 7,055 29,277 19,651
------------ ------------ ------------ ------------
TOTAL NONINTEREST INCOME 110,813 93,082 211,550 201,245
------------ ------------ ------------ ------------
OTHER NONINTEREST EXPENSES:
SALARY AND EMPLOYEE BENEFITS 397,772 349,190 832,835 698,922
OCCUPANCY 130,221 91,821 256,563 179,912
EQUIPMENT 51,299 31,101 96,269 60,082
COMPUTER PROCESSING 51,694 43,631 101,341 85,918
DEPOSIT INSURANCE 1,000 34,820 1,500 69,639
LEGAL 32,391 11,997 49,826 15,594
PROFESSIONAL FEES 14,255 22,000 33,880 44,800
BUSINESS DEVELOPMENT 29,572 31,525 56,957 47,922
OFFICE AND STATIONARY SUPPLIES 20,026 21,294 39,878 37,995
ADVERTISING 13,830 20,253 33,595 33,626
PROXY RELATED EXPENSES 90,000 90,000
OTHER OPERATING 138,112 124,791 248,350 196,726
------------ ------------ ------------ ------------
TOTAL OTHER NONINTEREST EXPENSES 970,172 782,423 1,840,994 1,471,136
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 170,388 192,297 408,389 400,759
PROVISION FOR INCOME TAXES 68,415 60,919 147,475 131,217
------------ ------------ ------------ ------------
NET INCOME $ 101,973 $ 131,378 $ 260,914 $ 269,542
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
NET INCOME PER COMMON SHARE $ 0.11 $ 0.14 $ 0.27 $ 0.28
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
WEIGHTED AVERAGE NUMBER OF SHARES 966,551 964,759 966,551 964,759
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
NET INCOME $ 101,973 131,378 $ 260,914 269,542
ADJUSTMENTS FOR NON-CASH ITEMS INCLUDED IN
NET INCOME:
DEPRECIATION AND AMORTIZATION 35,437 21,606 66,898 42,428
PROVISION FOR LOAN LOSSES 127,500 77,000 217,500 127,000
NET AMORTIZATION OF BOND PREMIUM/DISCOUNT 9,046 (12,851) 9,232 (40,958)
AMORTIZATION OF DEFERRED FEES & COSTS, NET 2,857 135,857 (42,604) 78,814
GAIN ON SALE OF MORTGAGE NOTES (13,531) (8,776) (29,150) (16,346)
GAIN ON SALE OF INVESTMENTS (15,812)
CHANGES IN ASSETS AND LIABILITIES WHICH PROVIDED
(USED) CASH:
MORTGAGE LOANS HELD FOR RESALE 588,674 (1,112,137) (566,693) (699,365)
INTEREST RECEIVABLE (29,229) (54,974) (21,906) (29,040)
OTHER ASSETS (70,098) 9,808 (278,780) (12,499)
ACCRUED INTEREST PAYABLE (235,274) 204,895 7,959 299,881
ACCRUED EXPENSES AND OTHER LIABILITIES 70,527 24,973 (208,182) (16,899)
------------ ------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 587,882 (583,221) (584,812) (13,254)
------------ ------------ ------------ ------------
INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF INVESTMENT SECURITIES 4,041,138
PROCEEDS FROM MATURITY OF INVESTMENT SECURITIES 500,000 3,000,000 2,600,000 3,500,000
PURCHASE OF INVESTMENT SECURITIES (2,698,431) (2,804,431)
NET CHANGE IN LOANS TO CUSTOMERS (2,367,268) (4,250,957) (6,187,079) (11,325,050)
PURCHASE OF FURNITURE, EQUIPMENT AND LEASEHOLD
IMPROVEMENTS (35,939) 5,882 (96,995) (41,872)
ADDITIONS TO REAL ESTATE OWNED (3,190) (569,816) (3,190) (569,816)
------------ ------------ ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (4,604,828) (1,814,891) (6,491,695) (4,395,600)
------------ ------------ ------------ ------------
FINANCING ACTIVITIES:
INCREASE (DECREASE) IN DEMAND, SAVINGS AND
TIME DEPOSITS (6,079,520) 2,896,811 (5,690,651) 7,959,146
INCREASE (DECREASE) IN BORROWED FUNDS 10,000,000 10,000,000 (3,675,000)
PROCEEDS FROM ISSUANCE OF COMMON STOCK 46,078 46,078 50,000
------------ ------------ ------------ ------------
NET CASH PROVIDED FINANCING ACTIVITIES 3,966,558 2,896,811 4,355,427 4,334,146
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (50,388) 498,699 (2,721,080) (74,708)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 7,802,310 3,402,732 10,473,002 3,976,139
------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 7,751,922 $ 3,901,431 $ 7,751,922 $ 3,901,431
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
INTEREST PAID $ 1,037,245 $ 535,450 $ 1,633,137 $ 1,097,230
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
TAXES PAID $ 100,000 $ 65,000 $ 461,527 $ 65,000
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING ACTIVITIES
UNREALIZED LOSS (GAIN) ON AVAILABLE FOR SALE SECURITIES $ 3,847 $ (19,250) $ 18,741 $ 14,602
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
1. BASIS OF PRESENTATION:
THE ACCOMPANYING UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS WERE PREPARED
IN ACCORDANCE WITH INSTRUCTIONS FOR QUARTERLY REPORTS ON FORM 10-Q AND,
THEREFORE, DO NOT INCLUDE INFORMATION OR FOOTNOTES NECESSARY FOR A COMPLETE
PRESENTATION OF FINANCIAL CONDITION, RESULTS OF OPERATIONS, SHAREHOLDERS'
EQUITY AND CASH FLOWS IN CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES. HOWEVER, THE FINANCIAL STATEMENTS REFLECT ALL ADJUSTMENTS
WHICH IN THE OPINION OF MANAGEMENT ARE NECESSARY FOR FAIR STATEMENT OF
FINANCIAL RESULTS AND THAT ALL ADJUSTMENTS ARE OF A NORMAL RECURRING
NATURE. THE RESULTS OF OPERATIONS FOR THE SIX MONTH PERIODS ENDED JUNE 30,
1996 AND 1995 ARE NOT NECESSARILY INDICATIVE OF THE RESULTS WHICH MAY BE
EXPECTED FOR THE ENTIRE FISCAL YEAR.
2. PRINCIPLES OF CONSOLIDATION:
THE CONSOLIDATED FINANCIAL STATEMENTS INCLUDE THE ACCOUNTS OF MADISON
BANCSHARES GROUP, LTD. AND ITS WHOLLY OWNED SUBSIDIARY, MADISON BANK (THE
BANK). ALL MATERIAL INTERCOMPANY BALANCES AND TRANSACTIONS HAVE BEEN
ELIMINATED.
3. STOCK DIVIDENDS:
ON JANUARY 11, 1996, THE BOARD OF DIRECTORS DECLARED A 7-1/2% STOCK
DIVIDEND ON COMMON STOCK OUTSTANDING. THE DIVIDEND WAS PAID ON FEBRUARY
15, 1996 TO SHAREHOLDERS OF RECORD ON JANUARY 31, 1996. THIS RESULTED IN
AN ADDITIONAL ISSUANCE OF 67,185 SHARES OF COMMON STOCK.
THE STOCK DIVIDENDS WERE RECORDED AT FAIR MARKET VALUE. AVERAGE SHARES AND
ALL PER SHARE AMOUNTS INCLUDED IN THE FINANCIAL STATEMENTS FOR 1996 AND
1995 ARE BASED ON THE INCREASED NUMBER OF SHARES GIVING RETROACTIVE EFFECT
TO THIS STOCK DIVIDEND.
4. PROVISION FOR INCOME TAXES:
THE PROVISION FOR INCOME TAXES IS COMPUTED IN ACCORDANCE WITH STATEMENT OF
FINANCIAL ACCOUNTING STANDARDS (SFAS) NO. 109.
THREE MONTHS ENDED SIX MONTHS ENDED
6/30/96 6/30/95 6/30/96 6/30/95
------------------ -----------------
PROVISION FOR CURRENT INCOME TAXES $ 89,415 $ 37,048 $168,475 $ 99,948
PROVISION FOR DEFERRED INCOME TAXES (21,000) 23,871 (21,000) 31,269
-------- -------- -------- --------
TOTAL $ 68,415 $ 60,919 $147,475 $131,217
-------- -------- -------- --------
-------- -------- -------- --------
5. NET INCOME PER SHARE:
NET INCOME PER SHARE OF COMMON STOCK IS BASED UPON THE WEIGHTED AVERAGE
NUMBER OF SHARES OUTSTANDING DURING THE PERIOD OF 966,551 IN JUNE, 1996 AND
964,759 IN JUNE, 1995, AFTER GIVING EFFECT TO THE STOCK ISSUANCE OF 6,601
SHARES IN EXERCISED OPTIONS AND PRIOR STOCK DIVIDENDS.
<PAGE>
ANNEX TO FORM 10-QSB
(Description of Charts)
1. Pie Chart setting forth Deposit Liabilities June 30, 1996 and December 31,
1995 indexed to the table of Deposit Liabilities.
2. Pie Chart setting forth Loans Outstanding at June 30, 1996 and December 31,
1995 indexed to the table of Loans Outstanding.
3. Graph showing interest growth and interest expense growth for the period
June 30, 1995 through June 30, 1996.
1995 Net Interest Income Total Non-Interest Expense
---- ------------------- --------------------------
June 362 273
July 334 260
August 345 259
September 345 234
October 352 279
November 371 344
December 409 289
1996
January 389 303
February 367 301
March 383 298
April 391 288
May 400 307
June 398 275
<PAGE>
4. Graph showing growth in Loans and Deposits for the period June 30, 1995
through June 30, 1996.
1995 Loans Deposits
---- ----- --------
June 64,863 69,897
July 65,620 69,266
August 67,094 72,403
September 69,062 72,486
October 70,344 80,169
November 71,272 80,051
December 72,514 82,904
1996
January 74,051 77,793
February 77,391 83,711
March 77,699 83,269
April 78,021 80,831
May 79,629 79,001
June 79,331 77,194
<PAGE>
LEASE AGREEMENT
This Agreement, made the 14th day of May one thousand nine hundred and
ninety six (1996), by and between MICHAEL A. MASSARELLA, Trustee under Deed of
Trust of MILDRED C. MASSARELLA dated June 28, 1983 (hereinafter called Lessor),
of the one part, and MADISON BANK, a Pennsylvania corporation (hereinafter
called Lessee) of the other part.
1-4. WITNESSETH THAT: Lessor does hereby demise and let unto Lessee all that
certain lot or piece of ground together with the improvements erected thereon,
known as 600 West Lancaster Avenue, situated at the southwest corner of
Lancaster Avenue and Sugartown Road, Wayne, Radnor Township in the county of
Delaware, State of Pennsylvania, to be used and occupied as a banking facility
and for no other purpose, for the term of ten (10) years beginning the 27th day
of July, one thousand nine hundred and ninety six (1996), and ending the 26th
day of July, two thousand and six (2006), for the minimum monthly rental as set
forth in the Rider hereto, lawful money of the United States of America, payable
in monthly installments in advance during the said term of this lease, or any
renewal hereof, in sums as set forth in the Rider hereto on the 27th day of each
month, rent to begin from the 27th day of July, 1996, the first installment to
be paid at the time of signing this lease. The first rental payment to be made
during the occupancy of the premises shall be adjusted to pro-rata a partial
month of occupancy, if any, at the inception of this lease.
5. If Lessor is unable to give Lessee possession of the demised premises as
herein provided, by reason of the holding over of a previous occupant, or by
reason of any cause beyond the control of the Lessor, the Lessor shall not be
liable in damages to the Lessee therefor, and during the period that the Lessor
is unable to give possession, all rights and remedies of both parties hereunder
shall be suspended, and if Lessor is unable for any reason to give possession of
the demised premises within 5 days of Lessee's demand therefor following
commencement of the term hereof Lessee shall have the opinion, by notice to
Lessor to cancel this lease agreement and receive return of any prepaid rents
and security deposit in full and final settlement of any and all claims against
Lessor.
6. (a) Lessee agrees to pay as rent in addition to the minimum rental herein
reserved any and all sums which may become due by reason of the failure of
Lessee to comply with all of the covenants of this lease and any and all
damages, costs and expenses which the Lessor may suffer or incur by reason of
any default of the Lessee or failure on his part to comply with the covenants of
the lease, and each of them, and also any and all damages to the demised
premises caused by any act or neglect of the Lessee.
7. All rent shall be payable without prior notice or demand at the office of
Lessor, 626 Berwyn-Baptist Road, Devon, Pennsylvania 19333 or at such other
place as Lessor may from time to time designate by notice in writing.
8. Lessee covenants and agrees that he will without demand
<PAGE>
(a) Pay the rent and all other charges herein reserved as rent at the
times and at the place that the same are payable, without fail; and if Lessor
shall at any time or times accept said rent or rent charges after the same shall
have become delinquent, such acceptance shall not excuse delay upon subsequent
occasions, or constitute or be construed as a waiver of any of Lessor's rights.
Lessee agrees that any charge or payment herein reserved, included, or agreed to
be treated or collected as rent and/or any other charges, expenses, or costs
herein agreed to be paid by Lessee may be preceded for and recovered by Lessor
by legal process in the same manner as rent due and in arrears.
(b) Keep the demised premises clean and free from all ashes, dirt and
other refuse matter; replace all glass windows, doors, etc., broken; keep all
waste and drain pipes open; repair all damage to plumbing and to the premises in
general; keep the same in good order and repair as they are now, reasonable wear
and tear and damage by accidental fire or other casualty not occurring through
negligence of Lessee or those employed by or acting for Lessee alone excepted.
The Lessee agrees to surrender the demised premises in the same condition in
which Lessee has herein agreed to deep the same during the continuance of this
lease.
(c) Comply with any requirements of any of the constituted public
authorities, and with the terms of any State or Federal statute or local
ordinance or regulation applicable to Lessee or his use of the demised premises,
and save Lessor harmless from penalties, fines, costs or damages resulting from
failure so to do.
(d) Use every reasonable precaution against fire.
(f) Peaceably deliver up and surrender possession of the demised premises
to the Lessor at the expiration or sooner termination of this lease, promptly
delivering to Lessor at his office all keys for the demised premises.
(g) Give to Lessor prompt written notice of any accident, fire, or damage
occurring on or to the demised premises.
(h) Lessee shall be responsible for the condition of the pavement, curb,
cellar doors, awnings and other erections in the pavement during the term of
this lease; shall keep the pavement free from snow and ice; and shall be and
hereby agrees that Lessee is solely liable for any accidents, due or alleged to
be due to their defective condition, or to any accumulations of snow and ice.
(i) The Lessee agrees that if, with the permission in writing of Lessor,
Lessee shall vacate or decide at any time during the term of this lease, or any
renewal thereof, to vacate the herein demised premises prior to the expiration
of this lease, or any renewal hereof, Lessee will not cause or allow any other
agent to represent Lessee in any sub-letting or reletting of the demised
premises other than an agent approved by the Lessor and that should Lessee do
so, or attempt to do so, the Lessor may remove any signs that may be placed on
or about the demised premises by such other
-2-
<PAGE>
agent without any liability to Lessor or to said agent, the Lessee assuming all
responsibility for such action.
(j) Indemnify and save Lessor harmless from any and all loss occasioned by
Lessee's breach of any of the covenants, terms and conditions of this lease, or
caused by his family, guests, visitors, agents and employees.
9. Lessor covenants and agrees that he will do none of the following things
without first obtaining the consent in writing of Lessor, which consent, Lessor
shall not unreasonably withhold, and without providing Lessor with reimbursement
for any expenses incurred or incidental to Lessee's proposed action.
(a) Occupy the demised premises in any other manner or for any other
purpose than as above set forth.
(b) Assign, mortgage or pledge this lease or under-let or sub-lease the
demised premises, or any part thereof, or permit any other person, firm or
corporation to occupy the demised premises, or any part thereof; nor shall any
assignee or sub-lessee assign, mortgage or pledge this lease or such sub-lease,
without an additional written consent by the Lessor, and without such consent no
such assignment, mortgage or pledge shall be valid. If the Lessee becomes
embarrassed or insolvent, or makes an assignment for the benefit of creditors,
or if a petition in bankruptcy is filed by or against the Lessee or a bill in
equity or other proceeding for the appointment of a receiver for the Lessee is
filed, or if the real or personal property of the lessee shall be sold or levied
upon by any Sheriff, Marshal or Constable, the same shall be a violation of this
covenant.
(c) Place or allow to be placed any stand, booth, sign or show case upon
the doorsteps, vestibules or outside walls or pavements of said premises, or
paint, place, erect or cause to be painted, placed or erected any sign,
projection or device on or in any part of the premises. Lessee shall remove any
sign, projection or device painted, placed or erected, of permission has been
granted and restore the walls, etc., to their former conditions, at or prior to
the expiration of the lease. In case of the breach of this covenant (in
addition to all other remedies given to Lessor in case of the breach of any
conditions or covenants of this lease) Lessor shall have the privilege of
removing said stand, booth, sign, show case, projection or device, and restoring
said walls, etc., to their former condition, and Lessee, at Lessor's opinion,
shall be liable to Lessor for any and all expenses so incurred by Lessor.
(d) Make any alterations, improvements, or additions to the demised
premises. All alterations, improvements, additions or fixtures, whether
installed before or alter the execution of this lease, shall remain upon the
premises at the expiration or sooner determination of this lease and become the
property of Lessor, unless Lessor shall, prior to the determination of this
lease, have given written notice to Lessee to remove the same, in which event
Lessee will remove such alterations, improvements and additions and restore the
premises to the same good order and
-3-
<PAGE>
condition in which they now are. Should Lessee fail so to do, Lessor may do so,
collecting, at Lessor's opinion, the cost and expense thereof from Lessee as
additional rent.
(e) Use or operate any machinery that, in Lessor's opinion, is harmful to
the building or disturbing to other tenants occupying other parts thereof.
(f) Place any weights in any portion of the demised premises beyond the
safe carrying capacity of the structure.
(g) Do or suffer to be done, any act, matter or thing objectionable to the
fire insurance companies whereby the fire insurance or any other insurance now
in force or hereafter to be placed on the demised premises, or any part thereof,
or on the building of which the demised premises may be a part, shall become
void or suspended, or whereby the same shall be rated as a more hazardous risk
than at the date of execution of this lease, or employ and person or persons
objectionable to the fire insurance companies or carry or have any benzine or
explosive matter of any kind in and about the demised premises. In case of a
breach of this covenant (in addition to all other remedies given to Lessor in
case of the breach of any of the conditions or covenants of this lease) Lessee
agrees to pay to Lessor as additional rent any and all increase or increases of
premiums on insurance carried by Lessor on the demised premises, or any part
thereof, or on the building of which the demised premises may be a part, caused
in any way by the occupancy of Lessee.
(h) Remove, attempt to remove or manifest an intention to remove Lessee's
goods or property from or out of the demised premises otherwise than in the
ordinary and usual course of business, without having first paid and satisfied
Lessor for all rent which may become due during the entire term of this lease.
(i) Vacate or desert said premises during the term of this lease, or
permit the same to be empty and unoccupied.
Lessee covenants and agrees that Lessor shall have the right to do the
following things and matters in and about the demised premises:
10. (a) At all reasonable times by himself or his duty authorized agents to go
upon and inspect the demised premises and every part thereof, and/or at his
option to make repairs, alterations and additions to the demised premises or the
building of which the demised premises is a part.
(c) To display a "For Sale" sign at any time, and also, after notice from
either party of intention to determine this lease, or at anytime within three
(3) months prior to the expiration of this lease, a "For Rent" sign, or both
"For Rent" and "For Sale" signs; and all of said signs shall be placed upon such
part of the premises as Lessor may elect and may contain such matter as Lessor
shall require. Persons authorized by Lessor may inspect the premises at
reasonable hours during the said periods.
-4-
<PAGE>
(d) Lessor may discontinue at any time, any or all facilities furnished
and services rendered by Lessor not expressly covenanted for herein or required
to be furnished or rendered by law; it being understood that they constitute no
part of the consideration for this lease.
11. (a) Lessee agrees to relieve and hereby relieves the Lessor from all
liability by reason of any injury or damage to any person or property in the
demised premises, whether belonging to the Lessee or any other person caused by
any fire, breakage, or leakage in any part or portion of the building of which
the demised premises is a part or from water, rain or snow that may leak into,
issue or flow from any part of the said premises, or of the building of which
the demised premises is a part, from the drains, pipes, or plumbing work of the
same or from any place or quarter, unless such breakage, leakage, injury or
damage be caused by or result from the negligence of Lessor or its servants or
agents.
(b) Lessee also agrees to relieve and hereby relieves Lessor from all
liability by reason of any damage or injury to any property or to Lessee or
Lessee's guests, servants or employees which may arise from or be due to the
use, misuse or abuse of all or any of the elevators, hatches, openings,
stairways, hallways of any kind whatsoever which may exist or hereafter be
erected or constructed on the said premises or the sidewalks surrounding the
building of which may arise from defective construction, failure of water
supply, light, power, electric wiring, plumbing or machinery, wind, lighting,
storm or any other cause whatsoever on the said premises or the building of
which the demised premises is a part, unless such damage, injury, use, misuse or
abuse be caused by or result from the negligence of Lessor, its servants or
agents.
12. (a) In the event the demised premises are totally destroyed or so damaged
by fire or other casualty that, in the opinion of a licensed architect retained
by Lessor, the same cannot be repaired and restored within ninety days from the
happening of such injury this lease shall absolutely cease and determine, and
the rent shall abate for the balance of the term.
(b) If the damage be only partial and such that the premises can be
restored, in the opinion of a licensed architect retained by Lessor, to
approximately their former condition within ninety days from the date of the
casualty loss Lessor may, at Lessor's option, restore the same with reasonable
promptness, reserving the right to enter upon the demised premises for that
purpose. Lessor also reserves the right to enter upon the demised premises
whenever necessary to repair damage, caused by fire or other casualty to the
building of which the demised premises is a part, even though the effect of such
entry be to render the demised premises or a part thereof untenantable. In
either event the rent shall be apportioned and suspended during the time Lessor
is in possession, taking into account the proportion of the demised premises
rendered untenantable and the duration of Lessor's possession. If a dispute
arises as to the amount of rent due under this clause, Lessee agrees to pay the
full amount claimed by Lessor, but Lessee shall have the right to proceed by law
to recover the excess payment, if any.
-5-
<PAGE>
(c) Lessor shall make such election to repair the premises or terminate
this lease by giving notice thereof to Lessee at the leased premises within
thirty days form the day Lessor received notice that the demised premises had
been destroyed or damaged by fire or other casualty
(d) Except to the extent hereinbefore provided, Lessor shall not be liable
for any damage, compensation, or claim by reason of the necessity of repairing
any portion of the building, the interruption in the use of the premises, any
inconvenience or annoyance arising as a result of such repairs or interruption,
or the termination of this lease by reason of damage to or destruction of the
premises.
(e) Lessor has let the demised premises in their present "as is" condition
and without any representations, other than those specifically endorsed hereon
by Lessor, through its officers, employees, servants and/or agents. It is
understood and agreed that Lessor is under no duty to make repairs, alterations,
or decorations at the inception of this lease or at any time thereafter unless
such duty of Lessor shall be set forth in writing endorsed hereon.
(f) It is understood and agreed that the Lessor hereof does not warrant or
undertake that the Lessee shall be able to obtain a permit under any Zoning
Ordinance or Regulation for such use as Lessee intends to make of the said
premises, and nothing in this lease contained shall obligate the Lessor to
assist Lessee in obtaining said permit; the Lessee further agrees that in the
event a permit cannot be obtained by Lessee under any Zoning Ordinance or
Regulation, this lease shall not terminate without Lessor's consent, and the
Lessee shall use the premises only in a manner permitted under such Zoning
Ordinance or Regulation.
13. (a) No contract entered into or that may be subsequently entered into by
Lessor with Lessee, relative to any alterations, additions, improvements or
repairs, nor the failure of Lessor to make such alterations, additions,
improvements or repairs as required by any such contract, nor the making by
Lessor or his agents or contractors of such alterations, additions, improvements
or repairs shall in any way affect the payment of the rent or said other charges
at the time specified in this lease, except to the extent and in the manner
hereinbefore provided.
(c) It is hereby covenanted and agreed, any law, usage or custom to the
contrary notwithstanding, that Lessor shall have the right at all times to
enforce the covenants and provisions of this lease in strict accordance with the
terms hereof, notwithstanding any conduct or custom on the part of the Lessor in
refraining from so doing at any time or times; and, further, that the failure of
Lessor at any time or times to enforce his rights under said covenants and
provisions strictly in accordance with the same shall not be construed as having
created a custom in any way or manner contrary to the specific terms, provisions
and covenants of this lease or as having in any way or manner modified the same.
. (d) This lease is granted upon the express condition that Lessee and/or
the occupants of the premises herein leased shall not conduct themselves in a
manner which is improper or objectionable, and if at any time during the term of
this lease or any extension or continuation
-6-
<PAGE>
thereof Lessee or any occupier of the said premises hall have conducted himself
in a manner which is improper or objectionable, Lessee shall be taken to have
broken the covenants and conditions of this lease, and Lessor will be entitled
to all of the rights and remedies granted and reserved herein, for the Lessee's
failure to observe all of the covenants and conditions of this lease.
(e) In the event of the failure of Lessee promptly to perform the
covenants of Section 8(b) hereof, Lessor may go upon the demised premises and
perform such covenants, the cost thereof, at the sole option of Lessor, to be
charged to Lessee as additional and delinquent rent.
14. If the Lessee
(a) Does not pay in full when due any and all installments of rent and/or
any other charge or payment herein reserved, included, or agreed to be treated
or collected as rent and/or any other charge, expense, or cost herein agreed to
be paid by the Lessee, or
(b) Violates or fails to perform or otherwise breaks any covenant or
agreement herein contained; or
(c) Vacates the demised premises or removes or attempts to remove or
manifests an intention to remove any goods or property therefrom otherwise than
in the ordinary and usual course of business without having first paid and
satisfied the Lessor in full for all rent and other charges then due or that may
thereafter become due until the expiration of the then current term, above
mentioned; or
(d) Becomes embarrassed or insolvent, or makes an assignment for the
benefit of creditors, or if a petition in bankruptcy is filed by or against
Lessee or a complaint in equity or other proceedings for the appointment of a
receiver for Lessee is filed, or if proceedings for reorganization or for
composition with creditors under any State or Federal law be instituted by or
against Lessee, or if the real or personal property of Lessee shall be levied
upon or be sold, or if for any other reason Lessor shall, in good faith, believe
that Lessee's ability to comply with the covenants of this lease, including the
prompt payment of rent hereunder, is or may become impaired;
thereupon:
(1) The whole balance of rent and other charges, payments, costs, and
expenses herein agreed to be paid by Lessee, or any part thereof, and also all
costs and officers' commission including watchmen's wages shall be taken to be
due and payable and in arrears as if by the terms and provisions of this lease
said balance of rent and other charges, payment, taxes, costs and expenses were
on that date, payable in advance. Further, if this lease or any part thereof is
assigned, or if the premises, or any part thereof is sub-let, Lessee hereby
irrevocably constitutes and appoints Lessor as Lessee's agent to collect the
rents due from such assignee or sub-lessee and apply the same to the rent due
hereunder without in any way affecting Lessee's obligation to pay any unpaid
balance of rent due hereunder; or
-7-
<PAGE>
(2) At the option of Lessor, this lease and the terms hereby created
shall determine and become absolutely void without any right on the part of
Lessee to reinstate this lease by payment of any sum due or by other performance
of any condition, term, or covenant broken; whereupon, Lessor shall be entitled
to recover damages for such breach in an amount equal to the amount of rent
reserved for the balance of the term of this lease, less the fair rental value
of the said demised premises for the remainder of the lease term.
15. In the event of any default as above set forth in Section 14, Lessor, or
anyone action on Lessor's behalf, at Lessor's option:
(a) May let said premises or any part or parts thereof to such person or
persons as may, in Lessor's discretion, be best; and Lessee shall be liable for
any loss of rent for the balance of the then current term. Any such re-entry or
re-letting by Lessor under the terms hereof shall be without prejudice to
Lessor's claim for actual damages, and shall under no circumstances, release
Lessee from liability for such damages arising out of the breach of any of the
covenants, terms, and conditions of this lease.
(c) May have and exercise any and all other rights and/or remedies,
granted or allowed landlords by any existing or future Statute, Act of Assembly,
or other law of this state in cases where a landlord seeks to enforce rights
arising under a lease agreement against a tenant who has defaulted or otherwise
breached the terms of such lease agreement; subject, however, to all of the
rights granted or created by any such Statute, Act of Assembly, or other law of
this state existing for the protection and benefit of tenants; and
(d) May have and exercise any and all other rights and remedies contained
in this lease agreement, including the rights and remedies provided by Sections
16 and 17 hereof.
16. Lessee covenants and agrees that if the rent and/or any charges reserved in
this lease as rent (including all accelerations of rent permissible under the
provisions of this lease) shall remain unpaid five (5)days after the same is
required to be paid, then and in that event, Lessor may cause Judgment to be
entered against Lessee, and for that purpose Lessee hereby authorizes and
empowers Lessor or any Prothonotary, Clerk of Court or Attorney of any Court of
Record to appear for and confess judgment against Lessee and agrees that Lessor
may commence an action pursuant to Pennsylvania Rules of Civil Procedure No.
2950 et seq. for the recovery from Lessee of all rent hereunder (including all
acceleration of rent permissible under the provisions of this lease) and/or for
all charges reserved hereunder as rent, as well as for interest and costs and
Attorney's commission, for which authorization to confess judgment, this lease,
or a true and correct copy thereof, shall be sufficient warrant. Such Judgment
may be confessed against Lessee for the amount of rent in arrears (including all
accelerations of rent permissible under the provisions of this lease) and/or for
all charges reserved hereunder as rent, as well as for interest and costs;
together with an attorney's commission of five percent (5%) of the full amount
of Lessor's claim against Lessee. Neither the right to institute an action
pursuant to Pennsylvania Rules of Civil Procedure No. 2950 et seq. Nor the
authority to confess judgment granted herein shall be exhausted by one or more
exercises thereof,
-8-
<PAGE>
but successive complaints may be filed and successive judgments may be entered
for the aforedescribed sums five days or more after they become due as well as
after the expiration of the original term and/or during or after expiration of
any extension or renewal of this lease.
17. Lessee covenants and agrees that if this lease shall be terminated (either
because of condition broken during the term of this lease or any renewal or
extension thereof and/or when the term hereby created or any extension thereof
shall have expired) then, and in that event, Lessor may cause a judgment in
ejectment to be entered against Lessee for possession of the demised premises,
and for that purpose Lessee hereby authorizes and empowers any Prothonotary,
Clerk of Court or Attorney of any Court of Record to appear for Lessee and to
confess judgment against Lessee in Ejectment for possession of the herein
demised premises, and agrees that Lessor may commence an action pursuant to
Pennsylvania Rules of Procedure No. 2970 et. seq. for the entity of an order in
Ejectment for the possession of real property, and Lessee further agrees that a
Writ of Possession pursuant thereto may issue forthwith, for which authorization
to confess judgment and for the issuance of a writ or writs of possession
pursuant thereto, this lease, or a true and correct copy thereof, shall be
sufficient warrant. Lessee further covenants and agrees, that if for any reason
whatsoever, after said action shall have commenced the action shall be
terminated and the possession of the premises demised hereunder shall remain in
or be restored to Lessee, Lessor shall have the right upon any subsequent
default or defaults, or upon the termination of this lease as above set forth to
commence successive actions for possession of real property and to cause the
entry of successive judgments by confession in Ejectment for possession of the
premises demised hereunder.
18. In any procedure or action to enter Judgment by Confession for Money
pursuant to Section 16 hereof, or to enter Judgment by Confession in Ejectment
for possession of real property pursuant to Section 17 hereof, if Lessor shall
first cause to be filed in such action an affidavit or averment of the facts
constituting the default or occurrence of the condition precedent, or event, the
happening of which default, occurrence, or event authorizes and empowers Lessor
to cause the entry of judgment by confession, such affidavit or averment shall
be conclusive evidence of such facts, defaults, occurrences, conditions
precedent, or events; and if a true copy of this lease (and of the truth of
which such affidavit or averment shall be sufficient evidence) be filed in such
procedure or action, it shall not be necessary to file the original as a Warrant
of Attorney, any rule of court, custom, or practice to the contrary not
withstanding.
19. Lessee hereby releases to Lessor and to any and all attorneys who may
appear for Lessee all errors in any procedure or action to enter Judgment by
Confession by virtue of the warrants of attorney contained in this lease, and
all liability therefor, Lessee further authorizes the Prothonotary or any Clerk
of any Court of Record to issue a Writ of Execution or other process, and
further agrees that real estate may be sold on a Writ of Execution or other
process. If proceedings shall be commenced to recover possession of the demised
premises either at the end of the term or sooner termination of this lease, or
for non-payment of rent or for any other reason, Lessee specifically waives the
right to the three (3) months' notice to quit and/or the fifteen (15) or thirty
(30) days' notice to quit required by the Act of April 1951, P.L. 69, as
amended, and agrees that five (5) days' notice shall be sufficient in either or
any such case.
-9-
<PAGE>
20. The right to enter judgment against Lessee by confession and to enforce all
of the other provisions of this lease herein provided for may at the option of
any assignee of this lease, be exercised by any assignee of this lease, be
exercised by any assignee of the Lessor's right, title and interest in this
lease in his, her, or their own name, any statute, rule of court, custom, or
practice to the contrary notwithstanding.
21. All of the remedies hereinbefore given to Lessor and all rights and
remedies given to it by law and equity shall be cumulative and concurrent. No
determination of this lease or the taking or recovering possession of the
premises shall deprived Lessor of any of its remedies or actions against the
Lessee for rent due at the time or which, under the terms hereof would in the
future become due as if there had been no determination, nor shall the bringing
of any action (or rent or breach of covenant, or the resort to any other remedy
herein provided for the recovery or rent be construed as a waiver of the right
to obtain possession of the premises.
22. In the event that the premises demised herein, or any part three, if taken
or condemned for a public or quasi-public use, this lease, shall as to the part
so taken, terminate as of the date title shall vest in the condemnor, and rent
shall abate in proportion to the square feet of leased spaced taken or condemned
or shall cease if the entire premises be so taken. In either event the Lessee
waives all claims against the Lessor by reason of the complete or partial taking
of the demised premises.
23. This Agreement of Lease and all its terms, covenants and provisions are and
each of them is subject and subordinate to any and all mortgages and other
encumbrances now or hereafter placed upon the demised premises or upon the land
and/or the buildings contained the same; and Lessee expressly agrees that if
Lessor's control, or right to possession shall terminate either by forfeiture or
otherwise, then this lease shall thereupon immediately terminate and the Lessee
shall, thereupon, give immediate possession; and Lessee hereby waives and all
claims for damages or otherwise by reason of such termination as aforesaid.
25. All notices must be given by certified mail, return receipt requested.
26. It is expressly understood and agreed by and between the parties hereto
that this lease and the riders attached hereto and forming a part hereof set
forth all the promises, agreements, conditions and understandings between Lessor
or his Agent and Lessor relative to the demised premises, and that there are not
promises, agreements, conditions or understandings, either oral or written,
between them other than herein set forth. It is further understood and agreed
that, except as herein otherwise provided, no subsequent alteration, amendment,
change or addition to this lease shall be binding upon Lessor or Lessee unless
reduced to writing and signed by them.
27. All rights and liabilities herein given to, or imposed upon, the respective
parties hereto shall extend to and bind the several and respective heirs,
executors, administrators, successors and assigns of said parties; and if there
shall be more than one Lessee, they shall all be bound jointly and severally by
the terms, covenants and agreements herein, and the word "Lessee" shall be
deemed and taken to mean each and every person or party mentioned as a Lessee
herein, be (the same one or
-10-
<PAGE>
more; and if there shall be more than one Lessee, any notice required or
permitted by the terms of this lease may be given by or to any one thereof, and
shall have the same force and effect as if given by or to all thereof. The
words "his" and "him" wherever stated herein, shall be deemed to refer to the
"Lessor" or "Lessee" whether such Lessor and Lessee be singular or plural and
irrespective of gender. No rights, however, shall inure to the benefit of any
assignee of Lessee unless the assignment to such assignee has ben approved by
Lessor in writing as aforesaid.
29. Any headings preceding the text of the several paragraphs and sub-
paragraphs hereof are inserted solely for convenience of reference and shall not
constitute a part of this lease nor shall they affect its meaning, construction
or effect.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereby have executed these presents the day
and year first above written, and intend to be legally bound thereby.
SEALED AND DELIVERED IN THE PRESENCE OF
/s/ MICHAEL A. MASSARELLA
- --------------------------------- ----------------------------
MICHAEL A. MASSARELLA, Trustee under
Deed of Trust of Mildred C. Massarella
dated June 8, 1983
MADISON BANK
By: /s/ VITO A. DELISI
----------------------------
Attest: /s/ WANDA M. RICHARDS, ESQ.
----------------------------
FOR VALUE RECEIVED ________________________________________
_____________________________________________________________________ Executors,
Administrators and assigns all ______________ rights, title and interest in the
within _____________________ and all benefit and advantages to be derived
therefrom.
WITNESS ________________ hand and seal this _____ day of
_______________ A.D. 19____
SEALED IN THE PRESENCE OF
_______________________________
-12-
<PAGE>
RIDER TO LEASE AGREEMENT
------------------------
This Rider is attached to and forms a part of the Lease Agreement dated May
14, 1996, between MICHAEL A. MASSARELLA, Trustee under Deed of Trust of Mildred
C. Massarella dated June 28, 1983, and MADISON BANK, a Pennsylvania corporation,
for the lease of premises situate at the southwest corner of Lancaster Avenue ad
Sugartown Road, Wayne, Radnor Township, Delaware County, Pennsylvania, known as
600 West Lancaster Avenue
1. Lessor and Lessee agree that this lease is contingent upon Lessor
obtaining, on or before July 27, 1996, Bank Regulatory approval to operate a
bank branch at the demised premises. Within five (5) days after the date of
execution of this lease, Lessee shall submit to the appropriate governmental or
quasi-governmental authorities having jurisdiction, and pursue with due
diligence, all applications and other documents necessary to obtain such Bank
Regulatory approval on or before July 27, 1996. If such approval has not been
received on July 27, 1996, all deposits made by Lessee shall be returned to
Lessee, this lease agreement shall be void and of no further force and effect
and all copies thereof shall be returned to Lessor.
2. The minimum monthly rental payable to Lessee during the first three
(3) years of the term hereof shall be Five Thousand Two Hundred ($5,200.00)
Dollars. The minimum monthly rental payable subsequent to the first three (3)
years of the term shall be determined as follows:
(a) The minimum monthly rental payable during the fourth year of the
term shall be determined by increasing $5,200.00 by the percentage by which the
Consumer Price Index, All Urban Consumers, All Items Philadelphia, base year
1982-1984 = 100 (which, for purposes of illustration was 161.2 for February,
1996 and which is hereinafter called "CPI"), popularly known as the Cost of
Living Index and presently published monthly by the Bureau of Labor Statistics
of the United States Department of Labor, increases from July 1, 1998 through
June 30, 1999, or by four (4%) percent whichever is greater.
(b) Similarly the minimum monthly rental payable during each
subsequent year of the term and during renewals or extensions of the term shall
be determined by increasing the minimum monthly rental payable during the
immediately preceding year of the term by the percentage by which the CPI
increases from July 1 of the immediately preceding year of the term through June
30 of the immediately preceding year of the term, or by four (4%) percent, which
is greater. For purposes of illustration, it is agreed that if the CPI
increases by five (5%) percent from July 1, 1999 through June 30, 2000, the
monthly rental payable for the lease year July 27, 2000 through July 26, 2001
shall be determined by adding five (5%) percent to the monthly rental payable
for the lease year July 27, 1999 through July 26, 2000.
(c) Lessor and Lessee agree that if CPI information is not available
in time to determine the increase in rental to be paid for any month an increase
of four (4%) percent of the prior
<PAGE>
year's monthly rental shall be paid until such time as the CPI information
becomes available, at which time additional rental for the months involved shall
be paid by Lessee in the event the increase in the CPI for the period of time
involved was greater than four (4%) percent.
(d) Lessor and Lessee agree that in no event shall application of the
CPI result in the monthly rental for any given year being decreased from the
amount paid during the preceding year.
(e) In the event that the CPI is discontinued, the successor index
shall be utilized, or, if no successor index is established, a similar index
selected by the parties shall be used in determining any rental adjustments
pursuant thereto.
3. If permitted by the provisions of the Radnor Township Zoning Ordinance
and all other applications ordinances, rules and regulations, Lessee may erect a
business identification sign or signs on the demised premises and/or the
building located there. All signs shall be subject to all applicable
provisions of the Radnor Township Zoning Ordinance and all other applicable
ordinances, rules and regulations, and no such signs may be erected or used
unless permits therefor are first obtained from Radnor Township and all other
governing bodies having jurisdiction. In the event a permit for a sign desired
by Lessee cannot be obtained by Lessee, this lease shall continue in full force
and effect, unaffected and unaltered by Lessee's inability to obtain any such
permit.
4. Lessee shall be solely responsible for the payment for all utility
services furnished to the demised premises, including, but not limited to, all
charges for electricity, heat, gas, air conditioning, water, sewer rental and
telephone. Lessee shall also be solely responsible for: (i) maintaining and
repairing the parking lot and sidewalks located on the demised premises and the
entrance to and exit from the demised premises, including removing snow and ice
from said areas, and Lessee shall be solely liable for any accidents due or
alleged to be due to their defective condition or to any accumulation of snow
and ice; and (ii) all grass cutting and trimming and caring for bushes, trees
and other plantings located on the demised premises.
5. In addition to the minimum rental specified in Paragraph 1 of this
Rider, during the term of the lease Lessee shall pay the following to Lessor as
rent: premiums paid by Lessor for (i) property insurance upon the building
erected on the demised premises covering the interest of Lessor therein and
insuring Lessor against the perils of fire and extended coverage; (ii) liability
insurance insuring Lessor against liability arising out of ownership,
maintenance or use of the demised premises. Payment of said premiums shall be
made by Lessee to Lessor within thirty (30) days from the date Lessor mails or
delivers a copy of the bill therefor to Lessee.
6. Lessee shall pay before they become delinquent all county, municipal
and school real estate taxes levied against the demised premises. Lessee shall
make arrangements to have the aforementioned taxing bodies send bills for such
taxes directly to Lessee and shall provide Lessor with copies of each receipted
tax bill within fifteen (15) days after payment thereof is made by Lessee.
Lessee acknowledges it is responsible for payment of the entire Radnor Township
School
2
<PAGE>
District tax bill for the fiscal year July 1, 1996 -- June 30, 1997, and agrees
to pay the same in accordance with the provisions of this paragraph.
7. Lessee shall, at its cost and expense, maintain the interior and
exterior of the building erected on the demised premises in good order and
condition, including, without limitation, interior and exterior walls and roof,
all windows and doors and all heating, plumbing and air conditioning equipment
and systems, it being agreed that Lessor shall have no obligation in connection
with the care, maintenance, operation, repair or replacement of the demised
premises or any part thereof, or any building, equipment, fixtures or personal
property therein or thereon, except as set forth herein.
8. Lessor and Lessee agree that immediately after taking possession of
the demised premises, Lessee shall at it sole expense hire a reputable
inspection agent to inspect the heating and cooling system at the demised
premises. It is further agreed that Lessor shall pay for any major repairs
which such inspection indicates are found to be necessary for the routine
operation of the heating and cooling system. A copy of the inspection report
shall be furnished to Lessor immediately after it is received by Lessee.
9. Lessor and Lessee represent and warrant that neither has dealt with
any broker, agent, finder or other intermediary in connection with the
transactions contemplated by this lease. Lessor and Lessee each agree to
indemnify and hold the other harmless from and against and in respect of any
claim for brokerage or other commissions relating to this lease or to the
transaction contemplated hereby based in any way upon agreements, arrangements
or undertakings claimed to have been made by themselves and any third party.
10. It is understood and agreed that this lease is a net-net-net lease to
Lessor, meaning that Lessor is under no obligation to pay for repairs,
maintenance, insurance, real estate taxes or utilities, or to bear any expense
whatsoever in connection with the demised premises unless such obligation on the
part of the Lessor is expressly set forth herein.
11. In the event of the failure of Lessee to perform any of the covenants
contained in this lease or Rider, Lessor may perform such covenants and the cost
of doing so may, at the sole option of Lessor, be charged to Lessee as
additional and delinquent rent.
12. Whenever this lease requires consent by either party, such consent
shall not be unreasonably withheld or delayed.
13. All times referred to in this lease and Rider for the performance of
any of the obligations hereunder are hereby agreed to be of the essence of this
lease and Rider.
14. Lessee has been advised Lessor Michael A. Massarella is a licensed
Pennsylvania Realtor and that this transaction is not for the portfolio or
benefit of a client or customer of his.
3
<PAGE>
15. Notices hereunder shall be mailed to the following addresses or to
such other addresses as may be designated in writing from time to time by either
party to the other:
To Lessor: Michael A. Massarella
626 Berwyn-Baptist Road
Devon, PA 19333
To Lessee: Vito A. DeLisi, President, CEO
Madison Bank
Madison Bank Building
1767 Sentry Parkway West
Blue Bell, PA 19422
16. Provided it is not in default hereunder, Lessee shall have the right
to extend the term of this lease for a five (5) year period by giving written
notice of such extension to Lessor at least ninety (90) days prior to the
expiration of the initial ten (10) year term. Upon extension of the term hereof
and conditions as herein contained. In the event Lessee does not extend the
term of this lease prior to the end of the initial ten (10) year term as
aforesaid, this lease shall terminate at the end of the initial ten (10) year
term.
/s/ MICHAEL A. MASSARELLA (SEAL)
------------------------------
Michael A. Massarella, Trustee
MADISON BANK
By: /s/ VITO A DELISI (SEAL)
---------------------------
Dated: May 13, 1996 Attest: /s/ WANDA M. RICHARDS, ESQ.(SEAL)
---------------------------
4
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