SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for Quarterly period ended
September 30, 1996
( ) Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from ______ to _______.
No. 0-24114
(Commission File Number)
BCB FINANCIAL SERVICES CORPORATION
(Exact Name of Registrant as Specified in its Charter)
PENNSYLVANIA 232444807
(State of Incorporation) (IRS Employer ID Number)
400 WASHINGTON STREET, READING, PA 19603
(Address of Principal Executive Offices) (Zip Code)
(610) 376-5933
(Registrant's Telephone Number)
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 preceding 12 months
(or for such shorter period 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
--- ---
Number of Shares Outstanding as of October 30, 1996
COMMON STOCK ($2.50 Par Value) 1,724,830
(Title of Class) (Outstanding Shares)
<PAGE>
BCB FINANCIAL SERVICES CORPORATION
FORM 10-QSB
For the Quarter Ended September 30, 1996
Contents
Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited) as
of September 30, 1996 and December 31,
1995
Consolidated Statements of Income
(Unaudited) for the Nine and Three-
Month Periods ended September 30,
1996 and 1995
Consolidated Statements of Stockholders'
Equity (Unaudited) for the Nine-Month
Period Ended September 30, 1996
Consolidated Statements of Cash Flows
(Unaudited) for the Nine-Month
Periods Ended September 30, 1996 and
1995
Notes to Consolidated Financial Statements
(Unaudited)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
PART II OTHER INFORMATION
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
BCB FINANCIAL SERVICES CORPORATION
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERKS COUNTY BANK
CONSOLIDATED BALANCE SHEETS (Unaudited)
ASSETS September 30, December 31,
1996 1995
Cash and due from banks $ 12,536,846 $ 7,656,846
Interest-bearing deposits with
banks 3,545,457 10,043,324
Federal funds sold 1,324,000 3,045,000
Securities available for sale 43,530,497 20,359,157
Securities held to maturity, fair
value September 30, 1996
$31,614,803; December 31, 1995
$ 9,366,552 31,761,463 9,207,069
Loans receivable, net of
allowance for loan losses
September 30, 1996 $1,960,132;
December 31, 1995 $1,674,057 180,195,480 146,290,946
Mortgages held for sale 472,769 452,900
Due from mortgage investors 1,792,601 3,204,383
Bank premises and equipment, net 4,280,235 3,494,618
Accrued interest receivable 1,897,704 1,226,026
Other real estate owned 1,277,532 1,315,532
Prepaid expenses and other assets 294,695 168,752
Deferred income taxes 422,842 208,712
TOTAL ASSETS $283,332,121 $206,673,265
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Deposits:
Demand, non-interest bearing $ 28,310,386 $ 18,421,557
Demand, interest bearing 81,527,917 48,024,548
Savings 11,314,986 9,418,076
Time, $100,000 and over 11,358,977 8,377,643
Time, other 102,761,398 95,696,046
TOTAL DEPOSITS 235,273,664 179,937,870
Accrued interest payable and
other liabilities 7,952,185 2,020,915
Short-term borrowings 11,044,153 2,289,940
Obligations under capital lease 960,731 ---
Long-term borrowings 9,000,000 4,000,000
TOTAL LIABILITIES 264,230,733 188,248,725
<PAGE>
Redeemable common stock, issued
and outstanding December 31,
1995 12,539 shares --- 129,969
Stockholders' equity:
Common stock, par value $2.50
per share; authorized
3,000,000 shares; issued and
outstanding September 30,
1996 1,724,830 shares;
December 31,1995 1,710,389
shares 4,312,075 4,275,973
Surplus 10,736,586 10,628,354
Retained earnings 4,240,847 3,233,574
Net unrealized appreciation
(depreciation) on securities
available for sale, net of
taxes (188,120) 156,670
TOTAL STOCKHOLDERS' EQUITY 19,101,388 18,294,571
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $283,332,121 $206,673,265
See Notes to Consolidated Financial Statements
<PAGE>
BCB FINANCIAL SERVICES CORPORATION
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERKS COUNTY BANK
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended For the Three Months Ended
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest Income:
Loan Receivable, including fees $10,144,603 $8,222,046 $3,646,723 $2,879,326
Interest and dividends on investment securities:
U.S. Treasury 199,167 289,498 60,854 89,931
U.S. Government agencies and corporations 958,824 262,643 499,875 101,540
State and political subdivisions, tax exempt 855,860 236,396 344,605 111,650
Dividends 60,706 54,788 22,793 17,211
Interest-bearing deposits with banks 372,898 424,522 84,604 242,644
Interest on federal funds sold 105,884 44,850 21,027 21,680
Total interest income 12,697,942 9,534,743 4,680,481 3,463,982
Interest expense:
Interest on deposits 6,541,738 4,696,468 2,340,563 1,821,236
Interest on borrowed funds 293,086 348,765 153,882 79,971
Total interest expense 6,834,824 5,045,233 2,494,445 1,901,207
Net interest income 5,863,118 4,489,510 2,186,036 1,562,775
Provision for loan losses 485,000 372,500 160,000 210,000
Net interest income after provision for loan losses 5,378,118 4,117,010 2,026,036 1,352,775
Other income:
Customer service fees 489,469 343,980 177,566 133,817
Mortgage banking activities 419,833 366,180 160,565 169,998
Net realized loss on sale of securities (682) (24,020) --- ---
Other 14,104 13,749 4,489 9,932
Total other income 922,724 699,889 342,620 313,747
Other expenses:
Salaries and wages 1,570,199 1,456,473 582,491 505,063
Employee benefits 408,905 348,364 143,314 111,218
Occupancy 432,112 342,108 157,808 127,350
Equipment depreciation and maintenance 313,939 286,718 109,048 89,189
Other operating expense 1,959,338 1,417,225 719,628 435,247
Total other expenses 4,684,493 3,850,888 1,712,289 1,268,067
Income before income taxes 1,616,349 966,011 656,367 398,455
Federal income taxes 298,652 284,618 117,601 103,240
Net Income $ 1,317,697 $ 681,393 $ 538,766 $ 295,215
=========== ========== ========== ==========
Earnings per common and common
equivalent share $ 0.76 $ 0.39 $ 0.31 $ 0.17
=========== ========== ========== ==========
Weighted average common and common equivalent shares outstanding 1,739,459 1,727,765 1,740,079 1,731,867
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
BCB FINANCIAL SERVICES CORPORATION
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERKS COUNTY BANK
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
For the Nine Months Ended September 30, 1996 (Unaudited)
<TABLE>
<CAPTION> Net unrealized
Appreciation
(Depreciation)
On Securities
Common Retained Available for
Stock Surplus Earnings Sale Total
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $4,275,973 $10,628,354 $3,233,574 $156,670 $18,294,571
Issuance of common stock upon exercise of stock options 4,755 13,065 --- --- 17,820
Net change in unrealized depreciation on securities
available for sale, net of taxes --- --- --- (344,790) (344,790)
Transfer 12,539 shares of redeemable common stock upon
expiration of statute of limitations 31,347 98,624 --- --- 129,971
Cash dividends --- --- (310,424) --- (310,424)
Payment of discount on DRIP --- (3,457) --- --- (3,457)
Net income --- --- 1,317,697 --- 1,317,697
Balance, September 30, 1996 $4,312,075 $10,736,586 $4,240,847 $(188,120) $19,101,388
========== =========== ========== ========= ===========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
BCB FINANCIAL SERVICES CORPORATION
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERKS COUNTY BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Nine Months Ended
September 30, September 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,317,697 $ 681,393
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for loan and other
real estate losses 491,103 372,500
Provision for depreciation 278,963 246,762
(Gain) Loss on sale of bank
equipment (1,071) 26,855
Net realized loss on sale of
securities 682 24,020
Net loss on sale of loans 11,685 ---
Net amortization of security
premiums and discounts (59,852) (44,790)
Change in assets and liabilities:
(Increase) decrease in:
Due from mortgage investors 1,411,782 (2,224,654)
Accrued interest receivable (671,678) (267,730)
Prepaid expenses and other
assets (125,943) (76,396)
Deferred income taxes (36,512) 10,443
Increase (decrease) in:
Accrued interest payable
and other liabilities 5,913,926 692,552
Net cash provided by
(used in) operating
activities 8,530,782 (559,045)
<PAGE>
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of and
principal repayments on
available for sale securities 1,133,078 1,263,574
Proceeds from sales of securities
available for sale 2,882,065 1,502,786
Proceeds from maturities of
securities held to maturity 1,385,000 850,000
Purchases of available for sale
securities (27,679,867) (6,497,626)
Purchases of held to maturity
securities (23,909,248) (4,534,663)
(Increase) decrease in interest-
bearing deposits with banks 6,497,867 (12,401,549)
Federal funds sold, net 1,721,000 (750,000)
Loans made to customers, net of
principal collected (34,536,107) (12,753,230)
Proceeds for sales of other real
estate owned 146,916 132,326
Proceeds for sales of bank
premises and equipment 2,895 ---
Purchases of bank premises and
equipment (103,239) (1,541,250)
Net cash used in investing
activities (72,459,640) (34,729,632)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits $ 55,335,794 $ 43,437,183
Net increase in short-term
borrowings 8,754,213 ---
Payments of capital lease
obligations (2,434) ---
Proceeds from long term borrowings 5,000,000 9,000,000
Principal payments of Federal
Home Loan Bank borrowings --- (14,000,000)
Proceeds from exercise of stock
options 17,820 20,806
Payment of 5% discount - DRIP (3,457) ---
Cash dividends (293,078) (246,025)
Net cash provided by financing
activities 68,808,858 38,211,964
Increase in cash and due from
banks 4,880,000 2,923,287
Cash and due from banks:
Beginning 7,656,846 5,318,720
Ending $ 12,536,846 $ 8,242,007
<PAGE>
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash payments for:
Interest $ 6,666,830 $ 4,825,878
Income taxes $ 355,000 $ 258,091
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Other Real Estate acquired in
settlement of loans $ 159,782 $ 739,532
Land acquired under obligations
of capital lease $ 963,165 $ ---
See Notes to Consolidated Financial Statements
<PAGE>
BCB FINANCIAL SERVICES CORPORATION
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERKS COUNTY BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1996
NOTE A. BASIS OF PRESENTATION
The financial statements include the accounts of the BCB
Financial Services Corporation and its wholly-owned
subsidiary, Berks County Bank. All significant intercompany
accounts and transactions have been eliminated.
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting
principles for complete financial statements. In the
opinion of management, all adjustments considered necessary
for fair presentation have been included. Operating results
of the nine-month period ended September 30, 1996 are not
necessarily indicative of the results that may be expected
for the year ended December 31, 1996.
NOTE B. EARNINGS PER SHARE
Primary and fully diluted earnings per share are computed
based on the weighted average number of common shares
outstanding during the period. Common share equivalents
included in the computations represent shares issuable upon
the assumed exercise of outstanding stock option and grants
that have an exercise price less than market price. These
common stock equivalents had a dilutive effect for the nine
months ended September 30, 1996 and 1995. The number of
common shares outstanding was increased by the number of
shares issuable under the common stock options and grants
and was reduced by the number of common shares which are
assumed to have been repurchased with the proceeds from the
exercise of the options.
NOTE C: OTHER EXPENSES
The following represents the most significant categories of
other expenses for the nine and three month periods ended
September 30, 1996 and 1995:
<TABLE>
<CAPTION>
For the Nine Months Ended For the Three Months Ended
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Advertising $ 472,746 $ 222,144 $136,261 $ 52,826
EDP outsourcing and MAC fees 253,055 179,344 97,066 66,622
Office Supplies and expense 265,422 249,596 87,712 91,493
Other real estate owned expenses 229,406 6,221 122,818 11,413
All other expenses 738,709 759,920 275,771 212,893
$1,959,338 $1,417,225 $719,628 $435,247
========== ========== ======== ========
</TABLE>
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
FINANCIAL CONDITION
The following discussion and analysis is intended to assist
in understanding and evaluating the major changes in the
financial condition and earnings performance of BCB Financial
Services Corporation (the "Company") with a primary focus on an
analysis of operating results.
Total assets increased to $283,332,121 at September 30,
1996, an increase of $76,658,856, or 37.09%, from $206,673,265 at
December 31, 1995. The increase in assets is due to higher
levels of loans and securities.
Loans, net of allowance for possible loan losses of
$1,960,132 at September 30, 1996 and $1,674,057 at December 31,
1995, increased to $180,195,480 at September 30, 1996 from
$146,290,946 at December 31, 1995. The increase of $33,904,534,
or 23.18%, was primarily from an increase in commercial loans of
$15,883,568 to $80,103,533 at September 30, 1996 from $64,219,965
at December 31, 1995, and an increase in fixed rate residential
mortgage loans of $6,708,773 to $56,073,050 at September 30, 1996
from $49,364,277 at December 31, 1995.
Securities increased to $75,291,960 at September 30, 1996
from $29,566,226 at December 31, 1995. The increase of
$45,725,734, or 154.66% was due primarily to the purchase of
$27,679,867 in available for sale securities and $23,909,248 in
held to maturity securities as part of an arbitrage strategy by
the bank to increase earnings.
Cash and due from banks, including interest-bearing deposits
with banks of $3,545,457 at September 30, 1996 and $10,043,324 at
December 31, 1995, decreased to $16,082,303 at September 30,
1996, from $17,700,170 at December 31, 1995. The $1,617,867
decrease resulted due to an increase in loans and securities, a
use of funds, over the increase in deposits, a major source of
funds at September 30, 1996.
The Company's primary source of funds, deposits, aggregated
$235,273,664, at September 30, 1996, an increase of $55,335,794,
or 30.75%, from $179,937,870 at December 31, 1995. The increase
came primarily in moneymarket savings accounts, classified within
"Demand, interest bearing", and checking accounts, classified as
"Demand, non-interest bearing," on the September 30, 1996
consolidated balance sheet. Moneymarket savings accounts
increased $31,595,813, or 76.51%, from $41,297,520 at
December 31, 1995 to $72,893,333 at September 30, 1996. Non-
interest bearing demand (checking) increased $9,888,829, or
53.68%, from $18,421,557 at December 31, 1995 to $28,310,386 at
September 30, 1996. Time deposits less than $100,000 increased
$7,065,352 from $95,696,046 at December 31, 1995 to $102,761,398
at September 30, 1996, an increase of 7.38%. Time deposits of
$100,000 and over increased $2,981,334 from $8,377,643 at
December 31, 1995 to $11,358,977 at September 30, 1996. It is
the bank's policy not to accept any brokered deposits. The
significant increase in most of the deposit categories is
attributable to (a) the added convenience and new market
locations provided by the Pottstown and Wyomissing branches, both
of which opened in the second quarter of 1995, (b) deposit fee
and rate pricing that was better for customers than at the
Company's bank and thrift competition, (c) continued aggressive
account promotion and advertising in response to the CoreStates
acquisition of Meridian, which occurred in the second quarter of
1996.
Accrued interest payable and other liabilities increased to
$7,952,185 at September 30, 1996, an increase of $5,931,270 or
293.49%, from $2,020,915 at December 31, 1995. The increase was
attributable to the $5,830,199 of securities traded but not yet
settled at September 30, 1996. Generally accepted accounting
principles require that a security be recorded as an asset and an
offsetting liability on the date the security trades.
Short-term borrowings increased $8,754,215, or 382.29%, from
$2,289,940 at December 31, 1995 to $11,044,153 at September 30,
1996. The increase primarily resulted from an additional
$10,000,000 in advances less than 1 year from the Federal Home
Loan Bank of Pittsburgh (FHLB).
Obligations under capital lease increased from $0 at
December 31, 1995 to $960,731 at September 30, 1996. The capital
leases were for land for two future branch locations. On
August 13, 1996, bank officials signed an Option and Lease/
Purchase Agreement for land located in Cumru Township for the
bank's fifth-full service branch. The total amount capitalized
for the land and the related obligation under capital lease was
$536,135. On August 30, 1996, bank officials signed an Option and
Lease/Purchase Agreement for land located in Muhlenberg Township
for the bank's sixth full service branch. The total amount
capitalized and the related obligation under capital lease was
$427,247. See Item 5, Other Information, for more details on the
capital leases.
Long-term borrowings increased $5,000,000, or 125.0%, from
$4,000,000 at December 31, 1995 to $9,000,000 at September 30,
1996. The company borrowed $5,000,000 from the FHLB during the
third quarter of 1996.
Stockholders' equity increased $806,817, or 4.41%, from
$18,294,571 at December 31, 1995 to $19,101,388 at September 30,
1996. The increase was primarily attributable to the retention
of earnings, net of cash dividends declared of $310,424, and the
transfer of 12,539 shares, or $129,971, from redeemable common
stock back to stockholders' equity. The transfer from redeemable
common stock was due to the expiration of the three-year statute
of limitations applicable to the sale of shares in unregistered
transactions. The change in net unrealized appreciation
(depreciation) on securities available for sale went from
$156,670 appreciation at December 31, 1995 to ($188,120)
depreciation at September 30, 1996. FASB 115 requires companies
to record the net unrealized appreciation (depreciation) on
securities available-for-sale, net of taxes, as an adjustment to
stockholders' equity. Thus, when interest rates rise, equity is
reduced and when interest rates fall, equity is increased. The
fluctuations are temporary and stockholders' equity would only be
permanently reduced if the securities were sold at losses, or
reclassified as held-to-maturity during a period of time when the
market value is less than book value for these securities.
Average realized return on equity for the first nine months
(annualized) of 1996 and 1995 was 9.40% and 5.07%, respectively.
Average realized return on equity excludes the effect of the
equity adjustment for FASB 115. Average return on equity,
including the FASB 115 adjustment, for the first nine months
(annualized) of 1996 and 1995 was 9.47% and 5.12%, respectively.
Retained Earnings increased $1,007,273, or 31.15%, to
$4,240,847 at September 30, 1996 from $3,233,574 at December 31,
1995. The increase was the result of the retention of $1,317,697
of earnings less the declaration of $310,424 in cash dividends.
RESULTS OF OPERATIONS
Net income for the three months ended September 30, 1996 was
$538,766, 82.50% more than the $295,215 reported for the same
period in 1995. For the nine months ended September 30, 1996,
net income was $1,317,697, an increase of $636,304, or 93,38%,
from the $681,393 reported for the same period in 1995. These
increases were primarily due to an increase in net interest
margin.
Net Interest Income
Net interest income is the difference between interest
income on assets and interest expense on liabilities. Net
interest income was $2,186,036 for the quarter ended
September 30, 1996, an increase of $623,261, or 39.88%, from the
$1,562,775 reported for the same period ended September 30, 1995.
For the nine months ended September 30, 1996, net interest income
was $5,863,118, a $1,373,608 increase over the $4,489,510
reported for the same period ended September 30, 1995. Calculated
on a tax-equivalent basis, net interest income was $2,346,335 for
the quarter ended September 30, 1996 versus $1,610,811 for the
quarter ended September 30, 1995 and $6,254,540 for the nine
months ended September 30, 1996 versus $4,594,150 for the same
period ended September 30, 1995. The increase in net interest
income was primarily due to an increase in average interest-
earning assets.
Net interest margin increased 23 basis points to 3.86% in
the third quarter of 1996 compared to 3.63% in the third quarter
of 1995, calculated on a tax-equivalent basis. Net interest
margin on a tax equivalent basis decreased 5 basis points to
3.77% for the first nine months of 1996 versus 3.82% for the
first nine months of 1995. Net interest margin is the difference
between interest earned and interest paid, divided by average
total interest-earning assets.
Average total interest-earning assets increased $65,984,000,
or 37.50%, to $241,936,000 for the third quarter of 1996 compared
to $175,952,000 for the third quarter of 1995. The yield on
average interest-earning assets, calculated on a tax-equivalent
basis, increased 4 basis points, or .51%, to 7.96% for the third
quarter of 1996 compared to 7.92% for the third quarter of 1995.
Average total interest-earning assets increased $60,792,000, or
37.76%, to $221,793,000 for the first nine months of 1996
compared to $161,001,000 for the first nine months of 1995. The
yield on average interest-earning assets decreased 12 basis
points, or 1.5%, to 7.88% for the first nine months of 1996
compared to 8.00% for the first nine months of 1995, calculated
on a tax-equivalent basis. The primary reason for the decline
was the lower prime rate for the first nine months of 1996 versus
the first nine months of 1995.
Interest expense increased $593,238, or 31.20%, to
$2,494,445 for the third quarter of 1996 versus $1,901,207 for
the same period in 1995. This increase was due primarily to an
increase in the volume of average interest-bearing liabilities of
$66,970,000, or 40.44%, to $232,573,000 for the quarter ended
September 30, 1996 versus $165,603,000 for the quarter ended
September 30, 1995. Interest expense increased $1,789,591, or
35.47% to $6,834,824 for the first nine months of 1996 versus
$5,045,233 for the first nine months of 1995. This increase was
due primarily to an increase in the volume of average interest-
bearing liabilities of $60,275,000, or 39.18%, to $214,104,000
for the first nine months of 1996 compared to $153,829,000 for
the same period in 1995.
The average rate paid on average interest-bearing
liabilities decreased 28 basis points, or 6.15%, to 4.27% in the
third quarter of 1996 compared to 4.55% in the third quarter of
1995. The average rate paid on average interest-bearing
liabilities decreased 14 basis points, or 3.18, to 4.26% for the
first nine months of 1996 compared to 4.40% for the first nine
months of 1995. The reason for the decrease in average rates
paid on average interest-bearing liabilities is that the deposit
growth of the Bank was primarily in non-interest bearing deposits
and low-rate money market savings accounts versus higher-rate
certificates of deposit. During the first nine months of 1996,
low-rate demand and savings deposits increased $45,289,108 while
high-rate certificates of deposit increased only $10,046,686.
This increase was achieved as a result of offering free checking
to individuals and businesses and also offering up to a 4.11%
interest rate (4.20% annual percentage yield) on money market
savings accounts in order to increase its share of these lower-
rate core deposits. Certificates of deposits, on the average,
pay over 5.00%.
Provision for Loan Losses
The Company's provision for possible loan losses was
$160,000 in the third quarter of 1996 versus $210,000 in the
third quarter of 1995. For the first nine months of 1996, the
Company's provision for possible loan losses was $485,000 versus
$372,500 for the same period in 1995. The increases reflect the
increase in the size of the bank's loan portfolio.
Other Income
Other income increased $28,873, or 9.20%, in the third
quarter of 1996 versus the third quarter of 1995, to $342,620
from $313,747. The increase was due primarily to an increase in
customer service fees, which are primarily derived from deposit
services, of $43,749. Offsetting the increase in customer service
fees was a slight decrease in mortgage banking activities of
$9,433.
For the first nine months of 1996, other income increased
$222,835, or 31.84%, to $922,724 from $699,889 for the same
period in 1995. The primary reasons for the increase were an
increase in customer service fees of $145,489, an increase in
fees from mortgage banking activities of $53,653, and a reduction
in net realized losses on the sale of securities of $23,338.
Other Expenses
Total other expenses increased $444,222, or 35.03%, during
the third quarter of 1996 versus the same period in 1995, to
$1,712,289 from $1,268,067. Total other expenses also increased
during the first nine months of 1996 versus the first nine months
of 1995, by $833,605, or 21.65%, to $4,684,493 from $3,850,888.
The increases in total other expenses reflect the growth of the
bank, and compares favorably with the 37.09% increase in total
assets, from $206,673,265 at December 31, 1995 to $283,332,121 at
September 30, 1996.
Salaries, wages and employee benefits increased $109,524, or
17.78%, from $616,281 for the three months ended September 30,
1995 to $725,805 for the same period in 1996. For the first nine
months of 1996, salaries, wages and benefits increased $174,267,
or 9.66%, to $1,979,104 versus $1,804,837 for the same period in
1995.
Occupancy expense increased $30,458, or 23.92%, to $157,808
for the three months ended September 30, 1996 versus $127,350 for
the three months ended September 30, 1995. For the first nine
months of 1996, occupancy expense was $432,112 versus $342,108
for the same period in 1995, an increase of $90,004, or 26.31%.
These increases resulted from the increased expenses relating to
the depreciation, utilities, real estate taxes and other
occupancy expenses for the new Pottstown and Wyomissing branches
which opened in the second quarter of 1995. Also, on
September 24, 1996, the company paid $19,883.50 for the lease
termination of the facilities located at 1566 Medical Drive in
Lower Pottsgrove Township.
Equipment depreciation and maintenance expenses increased
$19,859, or 22.27%, to $109,048 for the third quarter of 1996
versus $89,189 for the third quarter of 1995. For the first nine
months of 1996, equipment depreciation and maintenance expenses
increased $27,221, or 9.49%, to $313,939 from $286,718 for the
same period in 1995. The increase resulted from repairs and
maintenance on the existing equipment as well as an increase in
maintenance agreements for newly purchased equipment.
Other operating expenses increased in the third quarter of
1996 versus the second quarter of 1995, to $719,628 from
$435,247, an increase of $284,381, or 65.34%. The increase was
due primarily to: (1) an $111,405 increase in other real estate
owned expenses, from $11,413 during the third quarter of 1995 to
$122,818 for the third quarter of 1996, (2) an $83,435, or
157.94%, increase in advertising from $52,826 in the third
quarter of 1995 to $136,261 in the third quarter of 1996 and
(3) an $30,444, or 45.70%, increase in EDP outsourcing and MAC
Fees from $66,622 in the third quarter of 1995 to $97,066 in the
third quarter of 1996. Partially offsetting these increases was
the reduction of FDIC premiums in 1996. For the first nine
months of 1996, other operating expenses increased $542,113, or
38.25%, to $1,959,338 versus $1,417,225 for the same period of
1995. This increase was as a result of (1) a $250,602 increase
in advertising expense, (2) a $73,711 increase in EDP outsourcing
and MAC Fees, (3) a $223,185 increase in other real estate owned
expenses and (4) a $15,826 increase in office supplies and
expense. Offsetting these increases were (1) a $134,837 decrease
in FDIC insurance premiums and (2) a $21,211 decrease in "other"
operating expenses. "Other" operating expenses include items
such as legal and accounting fees, insurance, telephone, travel
and entertainment and other corporate taxes.
The Company elected to increase its advertising expenses in
order to increase its market share in response to the Corestates
acquisition of Meridian. Starting January 1, 1996, FDIC
insurance premiums for all well-capitalized banks, were reduced
to $2,000 a year. However, on September 30, 1996, the President
signed into law a bill designed to "fix" the current situation
with the BIF (Bank insured fund) and the SAIF (Savings
Association Insured Fund). Commercial banks, including Berks
County Bank, were not effected by the one-time assessment to
recapitalize the SAIF. See Item 5 - Other Information for more
details on the BIF/SAIF situation. The other real estate owned
expenses increase included provisions for charge-downs and
increases in related expenses for maintenance, repairs, and real
estate taxes. EDP outsourcing and MAC fees increases were
attributable to the growth of the Company and the introduction of
the BCB Checkcard in January, 1996.
Provision for Income Taxes
The provision for income taxes was $117,601 for the third
quarter of 1996 versus $103,240 for the third quarter of 1995.
The provision for income taxes was $298,652 for the first nine
months of 1996 versus $284,618 for the first nine months of 1995.
For the first nine months of 1996, the Company's effective tax
rate was 18.48% versus an effective tax rate of 29.46% for the
same period in 1995. The significant decrease in 1996's
effective tax rate from the statutory tax rate of 34% and 1995's
effective tax rate was due to the significant increase in bank-
qualified municipal securities' interest income. This increased
$232,955, or 208.65%, during the third quarter of 1996 to
$344,605 from $111,650 during the same period of 1995. For the
first nine months of 1996, bank-qualified municipal securities'
interest income increased $619,464, or 262.05%, to $855,860 from
$236,396 during the same period in 1995.
Asset Quality
Non-performing assets increased 29.44% to $3,705,709 as of
September 30, 1996 compared to $2,862,794 as of December 31,
1995. The ratio of the allowance for possible loan losses to
non-performing assets was 52.89% at September 30, 1996 compared
to 58.48% at December 31, 1995. The bank elected to charge-off
approximately $285,000 of previously non-performing assets during
the first nine months of 1996 versus approximately $194,000 in
the first nine months of 1995. Non-performing assets are
comprised of non-accrual loans and other real estate owned
(assets acquired in foreclosures) and restructured loans. It is
the Company's policy to classify a loan, other than a loan
insured for credit loss, as non-accrual within ten days after the
month end in which the loan becomes 90 days past due for either
principal or interest. At September 30, 1996, non-performing
assets were 1.31% of total assets. At December 31, 1995, non-
performing assets were 1.39% of total assets.
The balance in the allowance for possible loan losses was
$1,960,132, or 1.08% of total loans at September 30, 1996
compared to $1,674,057, or 1.13% of total loans at December 31,
1995.
As a financial institution which assumes lending and credit
risks as a principal element of its business, the Company
anticipates that credit losses will be experienced in the normal
course of business. Accordingly, management of the Company makes
a quarterly determination as to an appropriate provision from
earnings necessary to maintain an allowance for loan losses that
is adequate for potential yet undetermined losses. The amount
charged against earnings is based upon several factors including,
at a minimum, each of the following:
* a continuing review of delinquent, classified and non-
accrual loans, large loans, and overall portfolio
quality. This continuous review assesses the risk
characteristics of both individual loans and the total
loan portfolio.
* regular examinations and reviews of the loan portfolio
by representatives of the regulatory authorities.
* analytical review of loan charge-off experience,
delinquency rate, and other relevant historical and
peer statistical ratios.
* management's judgement with respect to local and
general economic conditions and their impact on the
existing loan portfolio.
When it is determined that the prospects for recovery of the
principal of a loan have significantly diminished, the loan is
immediately charged against the allowance account, subsequent
recoveries, if any, are credited to the allowance account. In
addition, non-accrual and large delinquent loans are reviewed
monthly to determine potential losses.
Management believes the allowance for loan losses was
adequate to cover risks inherent in its loan portfolio at
September 30, 1996. However, there can be no assurance that the
Company will not have to increase its provision for loan losses
in the future as a result of changes in economic conditions or
for other reasons. Any such increase could adversely affect the
Company's results of operations.
The Company's policy is to carry other real estate owned
properties at their lower of cost or fair market value minus
estimated costs to sell. Fair value is determined from recent
appraisal reports. While the Company believes this is a prudent
and reasonable estimate of the properties' values, the
possibility remains that market conditions can change and that
actual sales prices might ultimately fall below recent appraised
values, or that future appraisals may be less than most current
ones. Should either of those events occur, the Company would
have to recognize further losses.
Liquidity and Capital Resources
Financial institutions must maintain liquidity to meet day-
to-day requirements of depositors and borrowers, take advantage
of market opportunities, and provide a cushion against unforeseen
needs. Liquidity needs can be met by either reducing assets or
increasing liabilities. Sources of asset liquidity are provided
by short-term investment securities, cash and amounts due from
banks, interest-bearing deposits with banks, and federal funds
sold. These assets totaled $19,062,103 at September 30, 1996
compared to $24,123,507 at December 31, 1995. This decrease was
due to an increase in loans and long-term investment securities.
Liability liquidity can be met by attracting deposits with
competitive rates, buying federal funds or utilizing the
facilities of the Federal Reserve System or the Federal Home Loan
Bank System. The Company utilizes a variety of these methods of
liability liquidity. At September 30, 1996, the Company had
approximately $94.0 million of unused lines of credit available
under informal arrangements with correspondent banks compared to
$70.4 million at December 31, 1995. These lines of credit enable
the Company to purchase funds for short-term needs at current
market rates.
Capital
Total stockholders' equity increased $806,817, or 4.41%, to
$19,101,388 at September 30, 1996 from $18,294,571 at
December 31, 1995. The ratio of stockholders' equity to total
assets decreased to 6.74% at September 30, 1996 compared to 8.85%
at December 31, 1995. The increase in total stockholders' equity
was primarily the result of the increase in retained earnings of
$1,007,273. Retained earnings increased by the amount of the
first nine months of earnings of $1,317,697, less cash dividends
declared in the amount of $310,424. Other changes to
stockholders' equity were an increase of $129,971 due to the
transfer of 12,539 shares from redeemable common stock, and the
increase in unrealized depreciation on securities available-for-
sale at September 30, 1996, as was previously mentioned herein.
The ratio of stockholders' equity to total assets decreased
because the rate of growth in assets exceeded the rate of growth
in stockholders' equity during the first nine months of 1996.
The Company's consolidated capital ratios at September 30,
1996 exceed all regulatory requirements. The Federal Reserve
Board requires a bank holding company, such as the Company, to
maintain a Tier 1 capital to risk-adjusted assets ratio of 4.00%,
a total capital to risk-adjusted assets ratio of 8.00% and a
leverage ratio of 3.00% plus a cushion of at least 100 to 200
basis points. The Company's Tier 1 capital to risk-weighted
assets ratio was 11.18% at September 30, 1996 compared to 12.43%
at December 31, 1995. The Company's total capital to risk-
weighted assets ratio was 12.32% at September 30, 1996 compared
to 13.58% at December 31, 1995. The Company's leverage ratio was
7.57% at September 30, 1996 versus 10.29% at December 31, 1995.
The Company was categorized as "well-capitalized" under
applicable regulatory guidelines as of September 30, 1996.
Federal Reserve Board guidelines define a "well-capitalized
institution as having a Tier 1 capital to risk-adjusted assets
ratio of 6.00% or more, a total capital to risk-adjusted assets
ratio of 10.00% or more, and a leverage ratio of 5.00% or more.
<PAGE>
PART II
Item 5. OTHER INFORMATION
New Branch Sites
Berks County Bank, the Company's wholly-owned subsidiary,
has received approval from the Federal Reserve Board and the
Pennsylvania Department of Banking to open a fifth full service
branch office in Cumru Township, Shillington, a southern suburb
of Reading. The Bank has entered into an Option and Lease/
Purchase Agreement on land for the Cumru Township branch. The
Option to Lease/Purchase fee is $2,000 per month for an initial
six-month period, with a one three-month extension. Upon the
exercise of the option to lease/purchase, the lease will commence
for a period of ten years, at the fixed rate of $4,000 per month
for the entire ten year lease. Upon the expiration of the lease
period of ten years, the Bank will purchase the land, and all
improvements, for a fixed purchase price of $400,000.
The Bank has also received approval from the Federal
Reserve Board and the Pennsylvania Department of Banking to open
a sixth full-service branch office in Muhlenberg Township, a
northern suburb of Reading. The Bank has entered into an Option
and Lease/Purchase Agreement on land for the Muhlenberg Township
branch. The option to lease/purchase fee is $2,000 per month
for a six month period. Upon the exercise of the option to
lease/purchase, the lease will commence for a period of three
years at the fixed rate of $3,750 per month. The Bank exercised
its option to lease on October 22, 1996. The lease will
commence November 1, 1996. Upon expiration of the lease period,
whether through the expiration of the three year lease period or
through acceleration of the lease period by giving 60 days
written notice, the Bank will purchase the land, and all
improvements, for a fixed purchase price of $375,000.
Stock Split
On October 24, 1996, the Board of directors declared a
6 for 5 stock split, effectuated in the form of a stock
dividend, with a record date of November 5, 1996 payable on
November 19, 1996.
Recapitalization of BIF/SAIF
On September 30, 1996, the President signed into law, a bill
designed to remedy the BIF/SAIF situation. The first part of the
bill calls for the SAIF to be capitalized by a one-time
assessment on all SAIF-insured deposits held as of March 31,
1995. This assessment, which will be 65.7 cents per $100 in
deposits, will raise approximately $4.7 billion to bring the
SAIF up to its required 1.25 reserve ratio. This special
assessment will be payable November 30 and will have no effect on
Berks County Bank. The second part of the bill remedies the
payment of the FICO interest. For 1997 through 1999, the
banking industry will help pay for the FICO interest payments at
an assessment rate that is 1/5 the rate paid by thrifts. The
FICO assessment on BIF-insured deposits will be approximately
1.29 cents per $100 in deposits; for SAIF-insured deposits it
will be 6.44 cents. Beginning January 1, 2000, the FICO
interest payments will be paid pro-rata by banks and thrifts
based on deposits.
Director Resignation
On October 10, 1996, Donald F. Specht resigned from the
board of directors of BCB Financial Services Corporation to
pursue other career opportunities.
<PAGE>
Item 6. Exhibits and Reports on Form 8 - K
(a) Exhibits
10.1 Option and Lease/Purchase Agreement, dated
August 13, 1996, by and between Berks County Bank
and Richard J. Webb.
10.2 Option and Lease/Purchase Agreement, dated
August 30, 1996, by and between Berks County Bank
and John C. Gordon and Betty L. Gordon.
11. Statement regarding computation of per share
earnings (is included in Note B to Consolidated
Financial Statements (Unaudited)).
27. Financial Data Schedule.
(b) Reports on Form 8 - K
On August 29, 1996, the Company filed a Current
Report on Form 8-K, dated August 29, 1996, to
report information under Items 5 and 7(a). No
financial statements were filed with the Current
Report.
On September 18, 1996, the Company filed a Current
Report on form 8-K, dated September 17, 1996, to
report information under Items 5 and 7(a). No
financial statements were filed with the Current
Report.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
November 12, 1996 BCB FINANCIAL SERVICES CORPORATION
(Registrant)
By/s/ Robert D. McHugh, Jr.
Robert D. McHugh, Jr.,
Senior Vice President and
Treasurer (Authorized Officer
and Principal Financial
Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
10.1 Option and Lease/Purchase Agreement, dated
August 13, 1996, by and between Berks County Bank
and Richard J. Webb.
10.2 Option and Lease/Purchase Agreement, dated
August 30, 1996, by and between Berks County Bank
and John C. Gordon and Betty L. Gordon.
11 Statement regarding computation of per share
earnings (is included in Note B to consolidated
Financial Statements (Unaudited)).
27 Financial Data Schedule.
Exhibit 10.1
OPTION AND LEASE/PURCHASE AGREEMENT
This Option and Lease/Purchase Agreement ("Agreement"), made
this 13th day of August, 1996, by and between RICHARD J. WEBB, an
adult individual, sui juris (hereinafter referred to as the
"Lessor")
AND
BERKS COUNTY BANK, a Pennsylvania banking corporation, with its
principal place of business located at 400 Washington Street,
Reading, Berks County, Pennsylvania (hereinafter referred to as
the "Lessee").
WITNESSETH:
WHEREAS, Lessor is the owner of certain real property, with
existing improvements ("Existing Improvements") situate thereon,
located at K-Mart Shopping Plaza, Parkside Avenue, Cumru
Township, Berks County, Pennsylvania, being Lot No. 2, as
designated in the Reading Medical Subdivision Preliminary Plan,
File No. 17-8352, Plan #96-109-17-D-001 dated February 20, 1996,
and consisting of 1.282 acres of land, more or less, and as more
fully described in Exhibit "A" attached hereto and made a part
hereof (hereinafter referred to as the "Premises"); and
WHEREAS, the Lessor deems it advantageous to himself to
grant to the Lessee certain options as concerns the Premises,
including the option to lease the Premises, exercisable during
the "Option to Lease/Purchase Period", as hereafter defined, and
to purchase the Premises upon the terms hereafter set forth; and
to provide for the terms of the leasing and purchase of the
Premises by the Lessee, in the event of the exercise of said
option; and
WHEREAS, the Lessee proposes to seek municipal, as well as
federal and state bank regulatory, approval for the construction
and operation of a bank branch at and upon the Premises during
the "Option to Lease/Purchase Period", and, in the event of the
exercise of the option to lease/purchase, lease the Premises on a
triple net basis from Lessor; to construct certain facilities
thereon; to purchase the Premises, plus all improvements thereon,
at the expiration of the Lease Period, as hereafter defined; and
to avail itself of certain privileges, rights and uses,
pertaining thereto; and
WHEREAS, the parties hereto now wish to memorialize their
present understandings and agreements, as hereafter set forth.
NOW, THEREFORE, INTENDING TO BE LEGALLY BOUND HEREBY, and
for and in consideration of the terms, conditions, and mutual
covenants contained herein, the Lessor and the Lessee hereby
agree as follows:
ARTICLE I. OPTION TO LEASE AND PURCHASE
1.1 Beginning upon the date of the execution of this
Agreement, and continuing until 11:59 p.m., on February 13, 1997,
the Lessor hereby grants unto Lessee an exclusive option to lease
and purchase the Premises ("Option to Lease/Purchase") upon the
terms and conditions hereinafter set forth. Said term shall be
subject to extension, as hereafter set forth. Said six (6) month
period, and any extensions thereof, shall herein be referred to
as the "Option to Lease/Purchase Period". Lessee shall have the
right to one (1) three (3) month extension of the initial six (6)
month term of the Option to Lease/Purchase Period, upon the same
terms and payment of the monthly Option Fee as applicable during
the initial six (6) month term of the Option to Lease/Purchase
Period, exercisable by Lessee notifying the Lessor of such
election, in accordance with Section 5.7 of this Agreement, prior
to the expiration of the initial 6 month term of the Option to
Lease/Purchase Period.
1.2 During the Option to Lease/Purchase Period, Lessee
shall pay to Lessor an option fee ("Option Fee") of Two Thousand
and 00/100 Dollars ($2,000.00) per month, commencing on the date
of this Agreement, and on the same day of each consecutive month
thereafter, until the end of the Option to Lease/Purchase Period,
as hereafter set forth, or, if earlier, the termination or
exercise of the Option to Lease/Purchase by Lessee, consistent
with the terms and provisions of this Agreement.
1.3 During the Option to Lease/Purchase Period, Lessee, and
Lessee's agents and representatives, as well as agents and
representatives of federal, state, and local bank and/or other
regulatory or municipal agencies, shall have such access to the
Premises as may be reasonably necessary to conduct inspections,
testing, and/or other views of the Premises for the purpose of
applying for and seeking municipal and/or regulatory approval of
the use, operation, and/or construction of a bank branch on the
Premises by the Lessee, for no additional consideration.
1.4 At any time during the Option to Lease/Purchase Period,
and any extension thereof, the Lessee may (i) terminate this
Agreement for any reason whatsoever, including, without
limitation, an event of default by Lessor or denial of
subdivision approval for the Premises, at Lessee's sole
discretion; or (ii) exercise Lessee's Option to Lease/Purchase
the Premises, by notifying the Lessor, in writing, of such
termination or exercise, in accordance with Paragraph 5.7 hereof.
In the event that the Lessee does not exercise the Option to
Lease/Purchase within the Option to Lease/Purchase Period, or any
extension thereof, as herein provided, or terminates the
Agreement as set forth above, this Agreement, and the duties and
obligations of the parties hereto, including, without limitation,
payment of the Option Fee by Lessee, shall thereupon terminate.
1.5 During the Option to Lease/Purchase Period, the Lessor
shall, diligently and in good faith, and solely at Lessor's
expense, proceed to secure final subdivision approval of Lessor's
real property, of which the Premises is a part. Lessor
represents that a Preliminary Subdivision Plan for the Lessor's
property, including the Premises, was submitted to the
appropriate planning authorities on or about March 5, 1996, and
that final subdivision approval will be diligently pursued by
Lessor, to be obtained prior to the end of the Option to Lease/
Purchase Period, from which an appeal has not, and cannot, be
taken. During the Option to Lease/Purchase Period, Lessor shall
not change the dimensions of the Premises in the subdivision
plan, or make any other material modifications to the subdivision
plan, as concerns the Premises, without the prior written
approval of Lessee. Notwithstanding the above, Lessor and Lessee
agree that there will be no provision in the subdivision plan
providing for shared parking between the subdivision lots; that
Lessor will amend the subdivision plan to delete all references
to shared parking between said lots; and that Lessee will have
exclusive rights to all parking on the Premises.
1.6 During the Option to Lease/Purchase Period, the Lessee
shall not be responsible for real estate taxes, insurance, or any
other expenses, assessments, taxes, or charges of any nature
whatsoever, as concerns the Premises, other than the Option Fee.
Notwithstanding the above, Lessee shall be responsible, either by
direct payment or reimbursement, for municipal assessments
against the Premises made during the Option to Lease/Purchase
Period, but only in the event Lessee exercises the Option to
Lease/Purchase in accordance with Paragraph 1.4 hereof.
1.7 During the Option to Lease/Purchase Period, the Lessee
shall, at Lessee's expense, have the right to have the Premises
studied and tested by one or more reputable enterprises involved
in the business of hazardous waste studies and/or clean up to
determine, and estimate the cost of, the existence and/or
remediation, clean up, and/or removal of any Hazardous Waste, as
defined under applicable federal, state and local environmental
statutes, and/or underground storage tanks. Lessor represents
and warrants that Lessor has no knowledge of the existence of any
hazardous waste and/or underground storage tanks at, on, or under
the Premises.
ARTICLE II. LEASE OF PREMISES
2.1 In the event that the Lessee exercises the Lessee's
Option to Lease/Purchase, in accordance with the provisions of
Article I of this Agreement, then, and only then, the Lessor
agrees to lease and let to the Lessee, and Lessee agrees to lease
and let from the Lessor, upon and subject to the terms,
provisions, covenants and conditions of this Agreement, the
Premises, as more fully described in Exhibit "A", attached hereto
and made a part hereof, together with any and all improvements,
pertinent rights, privileges and easements benefiting, belonging
or pertaining thereto, and any right, title and interest of
Lessor in and to any land lying in the bed of any street, road or
highway (existing or proposed) to the center line thereof, in
front of or adjoining said Premises.
2.2 Subject to the terms and conditions herein provided,
the Premises may be used by Lessee for any lawful purpose,
including, without limitation, construction and operation of a
branch of Lessee bank.
2.3 The term of the Lease shall be for a period of ten (10)
years, commencing on the first day of the month following the
exercise of the Option to Lease/Purchase by the Lessee, pursuant
to the provisions of Article I of this Agreement (the
"Commencement Date"). Hereafter, said initial ten (10) year
lease term, and any extensions thereof, shall be referred to as
the "Lease Period".
2.4 During the Lease Period, the Lessee shall pay to
Lessor, on a Triple Net basis, rent ("Rent"), equal to the sum of
Four Thousand and 00/100 Dollars ($4,000.00) per month, beginning
on the Commencement Date, and on the same day of each consecutive
month thereafter.
ARTICLE III. GENERAL PROVISIONS
3.1 Lessee's Occupancy. Lessee, its sublessees and assigns
may occupy the Premises upon the Commencement Date and remain in
peaceable possession of the same until termination of this
Agreement at the end of the term hereof, or for conditions or
covenants of this Agreement broken by Lessee, as herein provided.
Lessee agrees its occupancy of the Premises shall be for the
purposes of the operation of a branch bank, other banking uses
and other business and commercial uses. Lessee, its sublessees
and assignees, in the operation of any business and occupancy of
the Premises, shall adhere to all governmental or administrative
agency laws, rules, regulations, and ordinances and shall not
permit the conduct of any illegal activity on the Premises.
3.2 Construction of Improvements.
(A) Construction of Improvements. In the event that
the Lessee exercises Lessee's Option to Lease/Purchase, in
accordance with the provisions of Article I hereof, Lessee shall
have the right to remove any or all of the Existing Improvements,
and to construct buildings and improvements for a branch bank on
the Premises, in compliance with any approved land development
plan, and other business and commercial uses without the prior
approval of Lessor. Lessee shall bear all costs incurred in or
related to the removal of the Existing Improvements, approval of
a land development plan, and the construction of such buildings
and improvements, and Lessee shall be responsible for
constructing and installing all improvements, on or off the
Premises, required by any governmental authority or agency as a
condition to any approvals sought or obtained by Lessee or to the
granting of any land development and/or building permit with
respect to such improvements, or otherwise required with respect
to Lessee's proposed use of the Premises.
(B) Construction Standards. All construction and
alterations shall be accomplished as promptly as possible (unless
delayed by conditions beyond the control of Lessee) with first-
class materials, in a good and workmanlike manner, and in
compliance with all applicable governmental ordinances, statutes
and regulations. Before the commencement of any construction or
repair on the Premises, the cost of which exceeds Ten Thousand
and 00/100 Dollars ($10,000.00), Lessee shall require the general
contractor responsible for such work to file a stipulation
against mechanic's liens sufficient to prohibit the filing of a
mechanic's lien against the Premises or any part thereof.
(C) Cooperation of Landlord. Lessor, during the
period of this Lease or any extension thereof, shall cooperate
with Lessee in obtaining any permits or approvals necessary for
the construction of such building and improvements on the
Premises, including, but not limited to, building permits and
land development approval, and Lessor will sign any application
or applications necessary to obtain such permit and approvals;
provided, however, that Lessee will pay all costs incurred in
obtaining such permits and approvals, and Lessor will have no
liability regarding such permits and approvals. If utility
companies or authorities require easements to provide utility
service for the construction, development or alternation of
buildings and improvements on the Premises, the Lessor shall
execute in recordable form easement agreements and other
documents allowing the installation of utility and other required
services to and/or through the Premises, provided, however, that
Lessee will be responsible for the cost of preparation of any
necessary documents regarding such easements.
(D) Mechanics and Materialmen's Liens. In the event
any liens of mechanics or materialmen attributable to the Lessee
shall be filed against the Premises or any part thereof during
the term hereof, the Lessee shall at its own cost and expense
discharge the same by payment or bonding or take such other
action as is reasonable to eliminate such lien within fifteen
(15) days after it has received notice of the filing of such
lien. Notwithstanding anything herein to the contrary, Lessee
shall be permitted to contest such lien in good faith by legal
proceedings but shall save Lessor harmless from loss or liability
by reason of such lien or said contest thereof. Nothing
contained in this Lease is intended to authorize Lessee to do or
cause any work or labor to be done or any materials to be
supplied for the account of Lessor, all of the same to be solely
for Lessee's account and at Lessee's risk and expense. Lessee
shall indemnify and hold Lessor harmless for any reasonable
expense or legal liability incurred by Lessor as a result of such
mechanics liens, claims, or their removal.
3.3 Insurance. Lessee, at its expense, shall maintain
landlord-tenant liability insurance on the Premises in the amount
of no less than One Million and 00/100 Dollars ($1,000,000.00)
per person and Two Million and 00/100 Dollars ($2,000,000.00) per
occurrence, and shall maintain fire and extended coverage
insurance in an amount of at least the replacement value of the
improvements on and from time to time constructed on the
Premises. All such insurance shall provide coverage during and
for all construction undertaken by Lessee on the Premises as well
as during the entire term and any renewal terms hereunder. The
insureds under the liability policy shall be the Lessor and the
Lessee, as their interests may appear. The insurer under the
aforesaid insurance policies shall be acceptable to Lessor. Both
Lessor and Lessee shall obtain waivers of subrogation against the
other from any insurance companies providing coverage relating to
the Premises.
3.4 Signs. Lessee may erect signs on the Premises. Upon
the termination of this Agreement at the end of the term hereof
or by virtue of a covenant or condition of this Agreement being
broken by Lessee, Lessee shall remove all signs and repair all
damage done by the erection or removal of signs. No signs shall
be attached or affixed to the Premises in violation of any
ordinances or of any law enacted by any governmental body.
3.5 Waste and Damage. Lessee shall not cause or permit any
waste or damage or injury to the Premises. Lessee at its expense
shall keep the Premises as now or hereafter constituted with all
improvements made thereto and any adjoining sidewalks, curbs,
walls, parking areas, landscaping, and access roads clean and in
good condition, (reasonable wear and tear excepted) and shall
make all repairs, replacements and renewals, whether ordinary or
extraordinary, seen or unseen, and all structural repairs
necessary to maintain the Premises. The Lessee shall indemnify
the Lessor against all costs, expenses, liabilities, damages,
suits, fines, penalties, claims and demands because of Lessee's
failure to comply with the foregoing. The Lessee shall not call
upon the Lessor for any disbursement or outlay whatsoever in
connection therewith, and Lessee hereby expressly releases and
discharges the Lessor from any liability therefor.
3.6 Maintenance In Clean and Orderly Condition. Lessee
shall maintain all portions of the Premises in a clean and
orderly condition, free of dirt, rubbish, snow, ice and unlawful
obstruction. Furthermore, in addition to Rent to be paid by
Lessee to Lessor hereunder, Lessee, during the Lease Period, on
an annual basis as billed by Lessor, shall pay to the Lessor an
amount equal to Lessee's prorated share of road frontage
maintenance charges of Marcorp Associates Three, a Pennsylvania
Limited Partnership. Lessee's prorated share shall be based upon
the percentage of the road frontage applicable to the Premises to
the total road frontage of the Lessor's property for which road
frontage maintenance is paid to Marcorp.
3.7 Assignment. Lessee shall not assign its interest in
this Agreement without the written consent of Lessor, which
consent shall not be unreasonably withheld, and upon such
consensual assignment, Lessee shall remain liable and responsible
for all covenants and conditions of this Agreement to be
performed by Lessee and the improvements on the Premises shall be
used as a branch bank or for other commercial purposes. The
merger, acquisition or consolidation of Lessee shall not be
considered an assignment hereunder. In the event Lessee is taken
over by Federal or State bank regulators, such regulators shall
have the right to assume this Agreement or terminate the same.
3.8 Destruction of Improvements. In the event of partial
or total destruction of the improvements on the Premises by fire
or the perils of extended coverage during the Lease Period,
Lessee, as its expense, shall repair and restore the improvements
to the same condition as before such destruction. Any insurance
proceeds received by virtue of fire or extended coverage damage
shall be placed in an escrow fund in the name of Lessor and
Lessee and shall be made available to Lessee for payment to the
contractor or contractors making such repair or restoration of
the improvements. Provided that any part of the bank facilities
are built to the same condition as before such destruction, any
excess insurance proceeds shall be paid to Lessee. There shall
be no abatement of Rent or of any other obligations of Lessee
hereunder.
3.9 Condemnation.
(A) Definitions.
(a) The term "Taking" means the taking of or
condemnation of all or part of the Premises as a result of
the exercise any power of eminent domain or condemnation or
purchase under threat thereof, or a change in grade of any
street abutting the Premises.
(b) The term "Taking Date" means the date of the
vesting of title to all or part of the Premises in a
condemning authority, or the date upon which construction
commences to effectuate a change of grade of any street
abutting the Premises.
(B) Taking of Entire Premises. In the event of a
Taking of the entire Premises during the Lease Period, this
Agreement shall terminate as of the Taking Date. Promptly after
such Taking Date, Lessor shall refund to Lessee any prepaid but
unearned Rent.
(C) Partial Taking. In the event that a portion of
the Premises shall be taken and the remaining portion of the
Premises shall not be sufficient, in Lessee's judgment reasonably
exercised, for the conduct of normal operations, Lessee shall
have the right to sublease the Premises for other commercial
purposes; and if the remaining portion of the Premises shall not
be sufficient, in Lessee's judgment reasonably exercised, for the
conduct of commercial operations, Lessee shall have the right to
cancel this Agreement by giving notice thereof to Lessor within
six (6) months of the Taking Date. Such notice of termination
shall specify a termination date of not less than sixty (60) days
after Lessor's receipt of such notice, upon which date this
Agreement shall become null and void.
(D) Disposition of Proceeds of Taking. In the event
this Agreement is terminated or canceled pursuant to the
preceding sections of this Paragraph, the proceeds of awards of
the Taking shall be divided between Lessor and Lessee based on
their respective interests in the Premises and the improvements
thereon, so that Lessor is compensated for his interest in the
Premises taken, and Lessee is compensated for its interest in the
improvements taken. If the parties are unable to agree to their
respective shares of the proceeds or awards of the taking, the
matter shall be submitted to arbitration pursuant to
Paragraph 5.6 hereof.
(E) Restoration After Partial Taking. In the event of
a Taking of a portion of the Premises by reason of which this
Agreement is not canceled pursuant to the preceding section of
this Article, Lessee shall be required to restore the Premises to
as nearly similar a condition as existed prior to the
condemnation and shall be entitled to the proceeds of the
condemnation to the extent it is reasonably required to do such
restoration provided that no restoration shall be required with a
cost in excess of the amount of the award.
(F) Possession of the Premises After Taking.
Notwithstanding anything to the contrary, Lessee may continue in
possession of all or any portion of the Premises, or any part
thereof, which is the subject of a Taking, until the condemning
authority has taken possession thereof.
3.10 Default. Lessee shall be deemed in default under this
Agreement if:
(A) Lessee fails to make payment of Rent within ten
(10) days after the same is due, provided, however, that Lessor
is required to give Lessee fifteen (15) days written notice of
such Rent default after the expiration of said ten (10) day
period, pursuant to Paragraph 5.7 hereof, before he can exercise
any of his remedies hereunder.
(B) Lessee defaults under other covenants and
conditions of this Agreement and such default remains uncured, or
Lessee has failed to undertake reasonably to cure such default,
after thirty (30) days written notice of such default given by
Lessor to Lessee.
(C) Lessee voluntarily enters or involuntarily is
placed into any receivership or bankruptcy proceeding or if
Lessee makes an assignment for the benefit of creditors, which
proceeding is not discontinued within thirty (30) days of the
commencement of such proceeding.
3.11 Remedies. Upon the occurrence of a default by Lessee
without cure within the time specified under this Agreement,
Lessor may:
028 Perform any covenant or condition under this
Agreement which is the responsibility of Lessee. Upon written
notice by Lessor to Lessee, Lessee shall pay within ten (10) days
of the receipt of such written demand, an amount equal to the sum
of:
(i) A reasonable amount incurred by Lessor for
such performance; and
(ii) All reasonable out-of-pocket expenses, if
any, incurred by Lessor in connection with such performance,
plus interest at the rate of six percent (6%) per annum.
(B) Lessor may declare to be immediately due and
payable the balance of Rent due for the then current term of the
Lease, less any Rent received by Lessor from the re-rental of the
Premises, net of any taxes, insurance or other reasonable and
customary expenses incurred by Lessor. Lessor shall take
reasonable steps to re-rent the Premises. Lessee waives the
right of inquisition in any real estate that may be levied upon
to collect any judgment entered in such action and does hereby
voluntarily condemn the same and authorizes the entry of a writ
or writs of execution thereon.
(C) Lessor may terminate this Agreement, and Lessee,
upon Lessor's termination, shall peacefully surrender the
Premises, free and clear of liens and/or security interests.
(D) Lessor may enter upon and repossess the Premises.
If Lessor elects to exercise the remedy set forth in the
preceding sentence, Lessee authorizes any Prothonotary, clerk or
attorney of any court of record, as attorney for Lessee, to sign
an agreement for entering and to enter in any court of competent
jurisdiction an amicable action and judgment in ejectment against
Lessee and all persons claiming under Lessee for restoration of
possession of the Premises to Lessor, for damages and for costs
and expenses (including reasonable counsel fees) incurred in
connection with such action and the entry of such judgment, for
which authorization this Agreement shall be sufficient warrant.
Lessee agrees that upon the entry of such judgment, a writ or
writs of execution may issue forthwith, without prior proceedings
or leave of court.
(E) The rights under this Paragraph 3.11 given to
Lessor in the event of Lessee's default shall be cumulative and
the exercise of one right hereunder shall not prohibit Lessor
from exercising any other right it might have by this Agreement
or by law, but in no event shall Lessor receive more than the sum
of said balance of Rent and expenses incurred and attorney's
commission for collection.
3.12 Lessor's Covenants.
(A) Covenants of Title. Lessor represents, warrants
and covenants that Lessor has the full, unrestricted and
exclusive right to lease and sell the Premises upon the
provisions herein set forth and the execution hereof does not
require the approval or joinder of any other firm, person or
corporation.
(B) Delivery of Possession. Lessor shall deliver
actual and exclusive possession of the Premises to Lessee on the
Commencement Date, free and clear of all tenancies, occupancies,
mortgages, liens, encumbrances, easements, servitudes, and
encroachments, except those otherwise disclosed by any title
report received by Lessee prior to the execution of this
Agreement and those revealed by a visible inspection of the
Premises. During the Option to Lease/Purchase Period and the
Lease Period, Lessor shall not cause the Premises to suffer any
liens or encumbrances of any nature whatsoever, other than those
liens and/or encumbrances in favor of Lessee.
(C) Covenant of Quiet Enjoyment. Lessor covenants
that during the Lease Period, Lessee shall peacefully and quietly
have, hold, enjoy and possess the Premises and all improvements
and appurtenances thereto. Lessor shall have the right of
reasonable inspection of the Premises during Lessee's regular
business hours, upon reasonable prior notice to, and accompanied
by, Lessee or its agents, and subject to Lessee's obligations
under state and federal bank privacy acts and regulations.
3.13 Recording. Lessee shall be entitled to record a
memorandum of this Agreement, in the Office of the Recorder of
Deeds of Berks County, Pennsylvania, and, upon request, Lessor
shall execute and acknowledge the same for recording purposes.
Lessee shall bear the cost of recording of such memorandum.
3.14 Indemnification of Lessor. After the Commencement
Date, Lessee shall have exclusive possession and control of the
Premises and shall be solely responsible for preventing damage to
property and injury to persons on the Premises. Lessee shall,
after notice thereof, assume the burden and expense of defending
and will protect, indemnify and save harmless Lessor, its agents,
representatives and servants, from all suits brought and claims
made against Lessor arising from events after this Agreement is
executed, for injury to any person or damage to any property
which shall occur, or is alleged to have occurred, on or about
the Premises, or as a result of the existence or maintenance of
the Premises, or improvements to be erected thereon, and Lessee
shall bear, pay and discharge all judgments which result
therefrom, when and as the same becomes due and payable.
ARTICLE IV. PURCHASE OF PREMISES
4.1 Purchase of Premises. Upon the expiration of the Lease
Period, Lessee shall purchase the Premises, and all improvements
thereon, free and clear of all liens and encumbrances, for the
fixed purchase price ("Purchase Price") of Four Hundred Thousand
and 00/100 Dollars ($400,000.00), payable as set forth herein,
upon the terms and provisions hereafter set forth. In the event
that fee title to the Premises, and all improvements thereon,
cannot be conveyed to Lessee free and clear of all liens and
encumbrances, in accordance with the terms of Paragraph 4.2
hereof, the Lease Period shall be deemed to be extended from the
initial Lease Period expiration date, subject to the same terms
and provisions applicable during the Lease Period. Said
extension of the Lease Period shall continue until such time as
the Lessor can convey the Premises, and all improvements thereon,
to Lessee, free and clear of all liens and encumbrances. It is
the express intent of the Lessor and the Lessee that in no event
will the term of the Lease Period, and any extensions thereof,
exceed the total duration of twenty-nine (29) years, eleven (11)
months. In addition, in the event that fee title to the
Premises, and all improvements thereon, cannot be conveyed to
Lessee free and clear of all liens and encumbrances, as
aforesaid, Lessee shall have the option, at its sole discretion,
to pay such amounts to the holders of such liens and encumbrances
as may be necessary to remove said liens and/or encumbrances from
the Premises, and all improvements thereon, and any such amounts
so paid by Lessee shall be deducted, dollar for dollar, from the
Purchase Price.
4.2 Terms of Purchase. Purchase of the Premises, and all
improvements thereon, by Lessee shall be in accordance with the
following:
(A) Settlement shall be held, the Purchase Price fully
paid, and the Deed delivered at the office of a title company
doing business in Berks County, Pennsylvania, or at such other
place as the parties hereto shall hereafter agree in writing,
within thirty (30) days after the expiration of the Lease Period
(the "Settlement").
(B) Time shall be of the essence of this Agreement.
(C) Formal tender of the Deed and Purchase Price is
hereby waived.
(D) The title shall be such as a Title Insurance
Company doing business in Berks County, Pennsylvania, will insure
as a good and marketable title at regular rates.
(E) The Premises shall be conveyed by special warranty
deed (the "Deed"), in proper recordable form, free and clear of
all liens and encumbrances, excepting existing restrictions and
easements of record.
(F) The Premises are being sold subject to existing
zoning and other municipal ordinances and regulations.
(G) Real estate taxes shall be apportioned on the
basis of the fiscal year.
(H) The expenses of the conveyance shall be paid as
follows:
(i) Drawing of the Deed and acknowledgments
thereon by the Lessor;
(ii) Recording of the Deed by the Lessee;
(iii) State and local revenue or transfer taxes
by the Lessor and Lessee in equal portions; and
(iv) All other expenses, including title charges,
by the Lessee.
ARTICLE V. MISCELLANEOUS
5.1 Contingency. This Agreement is conditioned and
contingent upon (A) the Lessee obtaining a building permit to
construct a branch bank on the Premises conforming with the
setback and land use requirements of the Borough of Cumru
Township Zoning Ordinance, and the approval of the proper banking
and municipal authorities of the location of a branch bank on the
Premises, on or before February 1, 1997. Lessee shall make
expeditious application for such building permits and approval of
applicable regulatory and municipal authorities, and shall make
good faith attempts to obtain the same. If such approvals are
not obtained by Lessee on or before February 1, 1997, Lessee may,
at its option, and upon written notice to Lessor, terminate this
Agreement, subject to the terms and obligations set forth in
Article I hereof; and (B) the execution, receipt by Lessee and,
where applicable, recording of Nondisturbance and Attornment
Agreements, written consents to this Agreement, and written
unconditional commitments to release all liens and encumbrances
at or prior to settlement of the purchase of the Premises by
Lessee, all in form and substance satisfactory to Lessee and its
counsel, to be executed by National Penn Bank, South Eastern
Economic Development Company of Pennsylvania, and the Small
Business Administration, and/or any other existing holders of
liens and/or encumbrances on the Premises.
5.2 Removal of Fixtures. At the termination of this
Agreement, or at any other time during the Lease Period, Lessee
shall have the right to remove from the Premises the building,
and all fixtures, trade fixtures and equipment of any kind,
including the vault and drive up facilities, which have been
installed or placed upon the Premises by Lessee at any time,
provided that Lessee shall repair any damage to the Premises
resulting from such removal. Any such items not removed by
Lessee as aforesaid within a reasonable time shall, after thirty
(30) days written notice to Lessee, become the exclusive property
of Lessor and remain as part of the Premises without any further
right, title, interest, or claim in favor of Lessee, or Lessee's
successors or assigns, thereto.
5.3 Entire Agreement and Amendment. It is expressly
understood and agreed by Lessor and Lessee that this Agreement
sets forth all of the promises, agreements, conditions and
understandings between the parties regarding the Premises and
that there are no promises, agreements, conditions or
understandings, either oral or written, between them, other than
as are herein set forth. It is further agreed that no subsequent
alteration, amendment, change or addition to this Agreement shall
be binding upon either party unless reduced to writing and signed
by both.
5.4 Binding on Successors and Assigns. All provisions of
this Agreement shall be binding upon and inure to the benefit of
the heirs, executors, administrators, personal representatives,
successors and assigns of the parties hereto.
5.5 Headings. The headings to the Article and Paragraphs
of this Agreement are inserted only for convenience of reference
and are not intended, nor shall they construe, to modify, define,
limit or expand the intent of the parties as expressed herein.
5.6 Arbitration. Any matter to be determined by
arbitration under Paragraph 3.9 above and any disagreement
between the parties with respect to the interpretation or
application of this Agreement or the obligations of the parties
hereunder shall be determined by arbitration. Such arbitration
shall be conducted, upon request of either the Lessor or the
Lessee, before one (1) arbitrator designated by the American
Arbitration Association and in accordance with the rules of such
association. The arbitrator designated and acting under this
Agreement shall make his award in strict conformity with such
rules and shall have no power to depart from or change any of the
provisions thereof. The expense of arbitration proceedings
conducted hereunder shall be borne equally by the parties. All
arbitration proceedings hereunder shall be conducted in Reading,
Berks County, Pennsylvania. The decision of the arbitrator, upon
being made and delivered in writing, shall be final, binding and
conclusive upon the parties, their respective heirs, personal
representatives and assigns, and judgment may be entered upon
such award. This agreement to arbitration law which, for
purposes of this agreement, shall be the Uniform Arbitration Act,
42 P.C.S.A. 7301, et seq. Any proceeding conducted pursuant to
this arbitration clause shall be deemed to be, for all purposes,
a common law arbitration.
5.7 Notice. Any notice required by this Agreement shall be
deemed given, upon mailing and not delivery, if sent by certified
or registered mail, return receipt requested, post paid,
TO LESSOR: Mr. Richard J. Webb
Reading Medical West
K-Mart Shopping Plaza
6-A Parkside Avenue
Shillington, PA 19607-1198
TO LESSEE: Berks County Bank
400 Washington Street
P.O. Box 1097
Reading, PA 19603
Attn: President
or such other address or person as other party shall designate by
giving written notice thereof to the other.
5.8 Controlling Law. The parties agree that this Agreement
shall be construed and enforced in accordance with the laws of
the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF and intending to legally bind their
heirs, executors, successors and assigns, the undersigned,
intending to be legally bound, have caused this Agreement to be
executed and their respective seals to be affixed the day and
year first above written.
/s/ Richard J. Webb
Richard J. Webb
"LESSOR"
BERKS COUNTY BANK
By /s/ Nelson R. Oswald
Nelson R. Oswald, President
"LESSEE"
<PAGE>
EXHIBIT "A"
DESCRIPTION OF LOT NUMBER 2
READING MEDICAL SUBDIVISION
BEGINNING AT AN IRON PIN, said pin being at the intersection
of the Right-of-Way Line of State Route 724 (known as Revere
Blvd.) and a forty foot wide Access Easement. Thence along
SR 724 the following three (3) courses and distances:
1. S 64 08' 50" E 170.00 feet to an iron pin,
2. S 25 31' 10" W 20.00 feet to an iron pin,
3. S 64 08' 50" E 250.52 feet to a point.
THENCE along the boundary line between lots 1 and 2 of the
Reading Medical Subdivision S 25 51' 10" W 70.07 feet to a point,
thence continuing along the same S 71 26' 41" W 233.68 feet to a
point on the aforesaid forty foot access easement.
THENCE along said easement N 19 08' 50" W 358.63 feet to the
point of beginning.
CONTAINING 55,843.92 SQUARE FEET
1.282 ACRES
Exhibit 10.2
OPTION AND LEASE/PURCHASE AGREEMENT
This Option and Lease/Purchase Agreement ("Agreement"), made
this 30th day of August, 1996, by and between JOHN C. GORDON and
BETTY L. GORDON, husband and wife, adult individuals (hereinafter
individually and collectively referred to as the "Lessor")
AND
BERKS COUNTY BANK, a Pennsylvania banking corporation, with its
principal place of business located at 400 Washington Street,
Reading, Berks County, Pennsylvania (hereinafter referred to as
the "Lessee").
WITNESSETH:
WHEREAS, Lessor is the owner of certain real property, with
existing improvements ("Existing Improvements") situate thereon,
known as Lot No. 3, 4453 Fifth Street Highway, Muhlenberg
Township, Berks County, Pennsylvania, and as more fully described
in Exhibit "A" attached hereto and made a part hereof
(hereinafter referred to as the "Premises:); and
WHEREAS, the Lessor deems it advantageous to himself to
grant to the Lessee certain options as concerns the Premises,
including the option to lease the Premises, exercisable during
the "Option to Lease/Purchase Period", as hereafter defined, and
to purchase the Premises upon the terms hereafter set forth; and
to provide for the terms of the leasing and purchase of the
Premises by the Lessee, in the event of the exercise of said
option; and
WHEREAS, the Lessee proposes to seek municipal, as well as
federal and state bank regulatory, approval for the construction
and operation of a bank branch at and upon the Premises during
the "Option to Lease/Purchase Period", and, in the event of the
exercise of the option to lease/purchase, lease the Premises on a
triple net basis from Lessor; to construct certain facilities
thereon; to purchase the Premises, plus all improvements thereon,
at the expiration of the Lease Period, as hereafter defined; and
to avail itself of certain privileges, rights and uses,
pertaining thereto; and
WHEREAS, the parties hereto now wish to memorialize their
present understandings and agreements, as hereafter set forth.
NOW, THEREFORE, INTENDING TO BE LEGALLY BOUND HEREBY, and
for and in consideration of the terms, conditions, and mutual
covenants contained herein, the Lessor and the Lessee hereby
agree as follows:
ARTICLE I. OPTION TO LEASE AND PURCHASE
1.1 Beginning upon the date of the execution of this
Agreement, and continuing until 11:59 p.m., on February 28, 1997,
the Lessor hereby grants unto Lessee an exclusive option to lease
and purchase the Premises ("Option to Lease/Purchase") upon the
terms and conditions hereinafter set forth. Said six (6) month
period shall herein be referred to as the "Option to Lease/
Purchase Period".
1.2 During the Option to Lease/Purchase Period, Lessee
shall pay to Lessor an option fee ("Option Fee") of Two Thousand
and 00/100 Dollars ($2,000.00) per month, commencing on the date
of this Agreement, and on the same day of each consecutive month
thereafter, until the end of the Option to Lease/Purchase Period,
as hereafter set forth, or, if earlier, the termination or
exercise of the Option to Lease/Purchase by Lessee, consistent
with the terms and provisions of this Agreement.
1.3 During the Option to Lease/Purchase Period, Lessee, and
Lessee's agents and representatives, as well as agents and
representatives of federal, state, and local bank and/or other
regulatory or municipal agencies, shall have such access to the
Premises as may be reasonably necessary to conduct inspections,
testing, and/or other views of the Premises for the purpose of
applying for and seeking municipal and/or regulatory approval of
the use, operation, and/or construction of a bank branch on the
Premises by the Lessee, for no additional consideration.
1.4 At any time during the Option to Lease/Purchase Period,
the Lessee may (i) terminate this Agreement for any reason
whatsoever, including, without limitation, an event of default by
Lessor or denial of the aforesaid municipal and/or federal and
state bank regulatory approvals for the Premises, at Lessee's
sole discretion; or (ii) exercise Lessee's Option to Lease/
Purchase the Premises, by notifying the Lessor, in writing, of
such termination or exercise, in accordance with Paragraph 5.7
hereof. In the event that the Lessee does not exercise the
Option to Lease/Purchase within the Option to Lease/Purchase
Period, as herein provided, or terminates the Agreement as set
forth above, this Agreement, and the duties and obligations of
the parties hereto, including, without limitation, obligations to
make future payments of the Option Fee by Lessee, shall thereupon
terminate.
1.5 During the Option to Lease/Purchase Period, the Lessee
shall not be responsible for real estate taxes, insurance, or any
other expenses, assessments, taxes, or charges of any nature
whatsoever, as concerns the Premises, other than the Option Fee.
Notwithstanding the above, Lessee shall be responsible, either by
direct payment or reimbursement, for municipal assessments
against the Premises made during the Option to Lease/Purchase
Period, but only in the event Lessee exercises the Option to
Lease/Purchase in accordance with Paragraph 1.4 hereof.
1.6 During the Option to Lease/Purchase Period, the Lessee
shall, at Lessee's expense, have the right to have the Premises
studied and tested by one or more reputable enterprises involved
in the business of hazardous waste studies and/or clean up to
determine, and estimate the cost of, the existence and/or
remediation, clean up, and/or removal of any Hazardous Waste, as
defined under applicable federal, state and local environmental
statutes, and/or underground storage tanks. Lessor represents
and warrants that Lessor has no knowledge of the existence of any
hazardous waste and/or underground storage tanks at, on, or under
the Premises.
ARTICLE II. LEASE OF PREMISES
2.1 In the event that the Lessee exercises the Lessee's
Option to Lease/Purchase, in accordance with the provisions of
Article I of this Agreement, then, and only then, the Lessor
agrees to lease and let to the Lessee, and Lessee agrees to lease
and let from the Lessor, upon and subject to the terms,
provisions, covenants and conditions of this Agreement, the
Premises, as more fully described in Exhibit "A", attached hereto
and made a part hereof, together with any and all improvements,
pertinent rights, privileges and easements benefiting, belonging
or pertaining thereto, and any right, title and interest of
Lessor in and to any land lying in the bed of any street, road or
highway (existing or proposed) to the center line thereof, in
front of or adjoining said Premises.
2.2 Subject to the terms and conditions herein provided,
the Premises may be used by Lessee for any lawful purpose,
including, without limitation, construction and operation of a
branch of Lessee bank.
2.3 The term of the Lease shall be for a period of three
(3) years, commencing on the first day of the month following the
exercise of the Option to Lease/Purchase by the Lessee, pursuant
to the provisions of Article I of this Agreement (the
"Commencement Date"), subject to the provisions of Paragraph 2.5
hereof. Hereafter, said lease term shall be referred to as the
"Lease Period".
2.4 During the Lease Period, the Lessee shall pay to
Lessor, on a Triple Net basis, in advance, rent ("Rent") equal to
the sum of Three Thousand Seven Hundred Fifty and 00/100 Dollars
($3,750.00) per month, provided, however, that Lessee shall,
beginning on the Commencement Date, prepay Rent for the initial
twelve (12) months of the Lease Period in the total amount of
Forty-Five Thousand and 00/100 Dollars ($45,000.00). In the
event that Settlement of the purchase of the Premises, as
hereinafter provided, occurs during said initial twelve (12)
months of the Lease Period, all unaccrued Rent prepaid by Lessee
as herein provided shall be credited, dollar for dollar, to the
Purchase Price.
2.5 Lessor shall have the right to accelerate the
expiration of the Lease Period, and, consequently, the date of
Settlement, as set forth in Article IV of this Agreement, after
the Commencement Date, by giving Lessee sixty (60) days prior
written notice thereof in accordance with Paragraph 5.7 hereof.
The Lease Period shall thereupon expire upon the earlier of
(i) the expiration of said sixty (60) day notice; or (ii) a date
three (3) years after the Commencement Date. Any such expiration
of the Lease Period is subject to extension in accordance with
Paragraph 4.1 hereof.
ARTICLE III. GENERAL PROVISIONS
3.1 Lessee's Occupancy. Lessee, its sublessees and assigns
may occupy the Premises upon the Commencement Date and remain in
peaceable possession of the same until termination of this
Agreement at the end of the term hereof, or for conditions or
covenants of this Agreement broken by Lessee, as herein provided.
Lessee, its sublessees and assignees, in the operation of any
business and occupancy of the Premises, shall adhere to all
governmental or administrative agency laws, rules, regulations,
and ordinances and shall not permit the conduct of any illegal
activity on the Premises.
3.2 Construction of Improvements.
(A) Construction of Improvements. In the event that
the Lessee exercises Lessee's Option to Lease/Purchase, in
accordance with the provisions of Article I hereof, Lessee shall
have the right to remove any or all of the Existing Improvements,
and to construct buildings and improvements for a branch bank on
the Premises, in compliance with any approved land development
plan, and other business and commercial uses without the prior
approval of Lessor. Lessee shall bear all costs incurred in or
related to the removal of the Existing Improvements, approval of
a land development plan, and the construction of such buildings
and improvements, and Lessee shall be responsible for
constructing and installing all improvements, on or off the
Premises, required by any governmental authority or agency as a
condition to any approvals sought or obtained by Lessee or to the
granting of any land development and/or building permit with
respect to such improvements, or otherwise required with respect
to Lessee's proposed use of the Premises.
(B) Construction Standards. All construction and
alterations shall be accomplished as promptly as possible (unless
delayed by conditions beyond the control of Lessee) with first-
class materials, in a good and workmanlike manner, and in
compliance with all applicable governmental ordinances, statutes
and regulations. Before the commencement of any construction or
repair on the Premises, the cost of which exceeds Ten Thousand
and 00/100 Dollars ($10,000.00), Lessee shall require the general
contractor responsible for such work to file a stipulation
against mechanic's liens sufficient to prohibit the filing of a
mechanic's lien against the Premises or any part thereof.
(C) Cooperation of Landlord. Lessor, during the Lease
Period or any extension thereof, shall cooperate with Lessee in
obtaining any permits or approvals necessary for the construction
of such building and improvements on the Premises, including, but
not limited to, building permits and land development approval,
and Lessor will sign any application or applications necessary to
obtain such permit and approvals; provided, however, that Lessee
will pay all costs incurred in obtaining such permits and
approvals, and Lessor will have no liability regarding such
permits and approvals. If utility companies or authorities
require easements to provide utility service for the
construction, development or alternation of buildings and
improvements on the Premises, the Lessor shall execute in
recordable form easement agreements and other documents allowing
the installation of utility and other required services to and/or
through the Premises, provided, however, that Lessee will be
responsible for the cost of preparation of any necessary
documents regarding such easements.
(D) Mechanics and Materialmen's Liens. In the event
any liens of mechanics or materialmen attributable to the Lessee
shall be filed against the Premises or any part thereof during
the term hereof, the Lessee shall at its own cost and expense
discharge the same by payment or bonding or take such other
action as is reasonable to eliminate such lien within fifteen
(15) days after it has received notice of the filing of such
lien. Notwithstanding anything herein to the contrary, Lessee
shall be permitted to contest such lien in good faith by legal
proceedings but shall save Lessor harmless from loss or liability
by reason of such lien or said contest thereof. Nothing
contained in this Lease is intended to authorize Lessee to do or
cause any work or labor to be done or any materials to be
supplied for the account of Lessor, all of the same to be solely
for Lessee's account and at Lessee's risk and expense. Lessee
shall indemnify and hold Lessor harmless for any reasonable
expense or legal liability incurred by Lessor as a result of such
mechanics liens, claims, or their removal.
3.3 Insurance. Lessee, at its expense, shall maintain
landlord-tenant liability insurance on the Premises in the amount
of no less than One Million and 00/100 Dollars ($1,000,000.00)
per person and Two Million and 00/100 Dollars ($2,000,000.00) per
occurrence, and shall maintain fire and extended coverage
insurance in an amount of at least the replacement value of the
improvements on and from time to time constructed on the
Premises. All such insurance shall provide coverage during and
for all construction undertaken by Lessee on the Premises as well
as during the entire term and any renewal terms hereunder. The
insureds under the liability policy shall be the Lessor and the
Lessee, as their interests may appear. Both Lessor and Lessee
shall obtain waivers of subrogation against the other from any
insurance companies providing coverage relating to the Premises.
3.4 Signs. At any time during the term of this Agreement,
Lessee may erect signs on the Premises. Upon the termination of
this Agreement at the end of the term hereof or by virtue of a
covenant or condition of this Agreement being broken by Lessee,
Lessee shall remove all signs and repair all damage done by the
erection or removal of signs. No signs shall be attached or
affixed to the Premises in violation of any ordinances or of any
law enacted by any governmental body.
3.5 Waste and Damage. Lessee shall not cause or permit any
waste or damage or injury to the Premises. Lessee at its expense
shall keep the Premises as now or hereafter constituted with all
improvements made thereto and any adjoining sidewalks, curbs,
walls, parking areas, landscaping, and access roads clean and in
good condition, (reasonable wear and tear excepted) and shall
make all repairs, replacements and renewals, whether ordinary or
extraordinary, seen or unseen, and all structural repairs
necessary to maintain the Premises. The Lessee shall indemnify
the Lessor against all costs, expenses, liabilities, damages,
suits, fines, penalties, claims and demands because of Lessee's
failure to comply with the foregoing. The Lessee shall not call
upon the Lessor for any disbursement or outlay whatsoever in
connection therewith, and Lessee hereby expressly releases and
discharges the Lessor from any liability therefor.
3.6 Maintenance In Clean and Orderly Condition. Lessee
shall maintain all portions of the Premises in a clean and
orderly condition, free of dirt, rubbish, snow, ice and unlawful
obstruction.
3.7 Assignment. Lessee shall not assign its interest in
this Agreement without the written consent of Lessor, which
consent shall not be unreasonably withheld, and upon such
consensual assignment, Lessee shall remain liable and responsible
for all covenants and conditions of this Agreement to be
performed by Lessee and the improvements on the Premises shall be
used as a branch bank or for other commercial purposes. The
merger, acquisition or consolidation of Lessee shall not be
considered an assignment hereunder. In the event Lessee is taken
over by Federal or State bank regulators, such regulators shall
have the right to assume this Agreement or terminate the same.
3.8 Destruction of Improvements. In the event of partial
or total destruction of the improvements on the Premises by fire
or the perils of extended coverage during the Lease Period,
Lessee, as its expense, shall repair and restore the improvements
to the same condition as before such destruction. Any insurance
proceeds received by virtue of fire or extended coverage damage
shall be placed in an escrow fund in the name of Lessee and shall
be made available to Lessee for payment to the contractor or
contractors making such repair or restoration of the
improvements. Provided that any part of the bank facilities are
built to the same condition as before such destruction, any
excess insurance proceeds shall be paid to Lessee. There shall
be no abatement of Rent or of any other obligations of Lessee
hereunder.
3.9 Condemnation.
(A) Definitions.
(a) The term "Taking" means the taking of or
condemnation of all or part of the Premises as a result of
the exercise any power of eminent domain or condemnation or
purchase under threat thereof, or a change in grade of any
street abutting the Premises.
(b) The term "Taking Date" means the date of the
vesting of title to all or part of the Premises in a
condemning authority, or the date upon which construction
commences to effectuate a change of grade of any street
abutting the Premises.
(B) Taking of Entire Premises. In the event of a
Taking of the entire Premises during the Lease Period, this
Agreement shall terminate as of the Taking Date. Promptly after
such Taking Date, Lessor shall refund to Lessee any prepaid but
unearned Rent.
(C) Partial Taking. In the event that a portion of
the Premises shall be taken and the remaining portion of the
Premises shall not be sufficient, in Lessee's judgment reasonably
exercised, for the conduct of normal operations, Lessee shall
have the right to sublease the Premises for other commercial
purposes; and if the remaining portion of the Premises shall not
be sufficient, in Lessee's judgment reasonably exercised, for the
conduct of commercial operations, Lessee shall have the right to
cancel this Agreement by giving notice thereof to Lessor within
six (6) months of the Taking Date. Such notice of termination
shall specify a termination date of not less than sixty (60) days
after Lessor's receipt of such notice, upon which date this
Agreement shall become null and void.
(D) Disposition of Proceeds of Taking. In the event
this Agreement is terminated or canceled pursuant to the
preceding sections of this Paragraph, the proceeds of awards of
the Taking shall be divided between Lessor and Lessee based on
their respective interests in the Premises and the improvements
thereon, so that Lessor is compensated for his interest in the
Premises taken, and Lessee is compensated for its interest in the
improvements taken. If the parties are unable to agree to their
respective shares of the proceeds or awards of the taking, the
matter shall be submitted to arbitration pursuant to
Paragraph 5.6 hereof.
(E) Possession of the Premises After Taking.
Notwithstanding anything to the contrary, Lessee may continue in
possession of all or any portion of the Premises, or any part
thereof, which is the subject of a Taking, until the condemning
authority has taken possession thereof.
3.10 Default. Lessee shall be deemed in default under this
Agreement if:
(A) Lessee fails to make payment of Rent within ten
(10) days after the same is due, provided, however, that Lessor
is required to give Lessee fifteen (15) days written notice of
such Rent default after the expiration of said ten (10) day
period, pursuant to Paragraph 5.7 hereof, before Lessor can
exercise any of Lessors' remedies hereunder.
(B) Lessee defaults under other covenants and
conditions of this Agreement and such default remains uncured, or
Lessee has failed to undertake reasonably to cure such default,
after thirty (30) days written notice of such default given by
Lessor to Lessee.
(C) Lessee voluntarily enters or involuntarily is
placed into any receivership or bankruptcy proceeding or if
Lessee makes an assignment for the benefit of creditors, which
proceeding is not discontinued within thirty (30) days of the
commencement of such proceeding.
3.11 Remedies. Upon the occurrence of a default by Lessee
without cure within the time specified under this Agreement,
Lessor may:
(A) Perform any covenant or condition under this
Agreement which is the responsibility of Lessee. Upon written
notice by Lessor to Lessee, Lessee shall pay within ten (10) days
of the receipt of such written demand, an amount equal to the sum
of:
(i) A reasonable amount incurred by Lessor for
such performance; and
(ii) All reasonable out-of-pocket expenses, if
any, incurred by Lessor in connection with such performance,
plus interest at the rate of six percent (6%) per annum.
(B) Lessor may declare to be immediately due and
payable the balance of Rent due for the then current term of the
Lease, less any Rent received by Lessor from the re-rental of the
Premises, net of any taxes, insurance or other reasonable and
customary expenses incurred by Lessor. Lessor shall take
reasonable steps to re-rent the Premises. Lessee waives the
right of inquisition in any real estate that may be levied upon
to collect any judgment entered in such action and does hereby
voluntarily condemn the same and authorizes the entry of a writ
or writs of execution thereon.
(C) Lessor may terminate this Agreement, and Lessee,
upon Lessor's termination, shall peacefully surrender the
Premises, free and clear of liens and/or security interests.
(D) Lessor may enter upon and repossess the Premises.
If Lessor elects to exercise the remedy set forth in the
preceding sentence, Lessee authorizes any Prothonotary, clerk or
attorney of any court of record, as attorney for Lessee, to sign
an agreement for entering and to enter in any court of competent
jurisdiction an amicable action and judgment in ejectment against
Lessee and all persons claiming under Lessee for restoration of
possession of the Premises to Lessor, for damages and for costs
and expenses (including reasonable counsel fees) incurred in
connection with such action and the entry of such judgment, for
which authorization this Agreement shall be sufficient warrant.
Lessee agrees that upon the entry of such judgment, a writ or
writs of execution may issue forthwith, without prior proceedings
or leave of court.
(E) The rights under this Paragraph 3.11 given to
Lessor in the event of Lessee's default shall be cumulative and
the exercise of one right hereunder shall not prohibit Lessor
from exercising any other right it might have by this Agreement
or by law, but in no event shall Lessor receive more than the sum
of said balance of Rent and expenses incurred and attorney's
commission for collection.
3.12 Lessor's Covenants.
(A) Covenants of Title. Lessor represents, warrants
and covenants that Lessor has the full, unrestricted and
exclusive right to lease and sell the Premises upon the
provisions herein set forth and the execution hereof does not
require the approval or joinder of any other firm, person or
corporation.
(B) Delivery of Possession. Lessor shall deliver
actual and exclusive possession of the Premises to Lessee on the
Commencement Date, free and clear of all tenancies, occupancies,
mortgages, liens, encumbrances, easements, servitudes, and
encroachments, except those otherwise disclosed by any title
report received by Lessee prior to the execution of this
Agreement and those revealed by a visible inspection of the
Premises. During the Option to Lease/Purchase Period and the
Lease Period, Lessor shall not cause the Premises to suffer any
liens or encumbrances of any nature whatsoever, other than those
liens and/or encumbrances in favor of Lessee.
(C) Covenant of Quiet Enjoyment. Lessor covenants
that during the Lease Period, Lessee shall peacefully and quietly
have, hold, enjoy and possess the Premises and all improvements
and appurtenances thereto. Lessor shall have the right of
reasonable inspection of the Premises during Lessee's regular
business hours, upon reasonable prior notice to, and accompanied
by, Lessee or its agents, and subject to Lessee's obligations
under state and federal bank privacy acts and regulations.
(D) Recording. Lessee shall be entitled to record a
memorandum of this Agreement, in the Office of the Recorder of
Deeds of Berks County, Pennsylvania, and, upon request, Lessor
shall execute and acknowledge the same for recording purposes.
Lessee shall bear the cost of recording of such memorandum.
(E) Indemnification of Lessor. After the Commencement
Date, Lessee shall have exclusive possession and control of the
Premises and shall be solely responsible for preventing damage to
property and injury to persons on the Premises. Lessee shall,
after notice thereof, assume the burden and expense of defending
and will protect, indemnify and save harmless Lessor, its agents,
representatives and servants, from all suits brought and claims
made against Lessor arising from events after this Agreement is
executed, for injury to any person or damage to any property
which shall occur, or is alleged to have occurred, on or about
the Premises, or as a result of the existence or maintenance of
the Premises, or improvements to be erected thereon, and Lessee
shall bear, pay and discharge all judgments which result
therefrom, when and as the same becomes due and payable.
ARTICLE IV. PURCHASE OF PREMISES
4.1 Purchase of Premises. Upon the expiration of the Lease
Period, whether or not through acceleration under Paragraph 2.5
hereof, Lessee shall purchase the Premises, and all improvements
thereon, free and clear of all liens and encumbrances, for the
fixed purchase price ("Purchase Price") of Three Hundred Seventy-
Five Thousand and 00/100 Dollars ($375,000.00), payable as set
forth herein, upon the terms and provisions hereafter set forth.
In the event that fee title to the Premises, and all improvements
thereon, cannot be conveyed to Lessee free and clear of all liens
and encumbrances, in accordance with the terms of Paragraph 4.2
hereof, the Lease Period shall be deemed to be extended from the
initial Lease Period expiration date, subject to the same terms
and provisions applicable during the Lease Period. Said
extension of the Lease Period shall continue until such time as
the Lessor can convey the Premises, and all improvements thereon,
to Lessee, free and clear of all liens and encumbrances. It is
the express intent of the Lessor and the Lessee that in no event
will the term of the Lease Period, and any extensions thereof,
exceed the total duration of twenty-nine (29) years, eleven (11)
months. In addition, in the event that fee title to the
Premises, and all improvements thereon, cannot be conveyed to
Lessee free and clear of all liens and encumbrances, as
aforesaid, Lessee shall have the option, at its sole discretion,
to pay such amounts to the holders of such liens and encumbrances
as may be necessary to remove said liens and/or encumbrances from
the Premises, and all improvements thereon, and any such amounts
so paid by Lessee shall be deducted, dollar for dollar, from the
Purchase Price.
4.2 Terms of Purchase. Purchase of the Premises, and all
improvements thereon, by Lessee shall be in accordance with the
following:
(A) Settlement shall be held, the Purchase Price fully
paid, and the Deed delivered at the office of a title company
doing business in Berks County, Pennsylvania, or at such other
place as the parties hereto shall hereafter agree in writing,
within thirty (30) days after the expiration of the Lease Period
(the "Settlement").
(B) Time shall be of the essence of this Agreement.
(C) Formal tender of the Deed and Purchase Price is
hereby waived.
(D) The title shall be such as a Title Insurance
Company doing business in Berks County, Pennsylvania, will insure
as a good and marketable title at regular rates.
(E) The Premises shall be conveyed by special warranty
deed (the "Deed"), in proper recordable form, free and clear of
all liens and encumbrances, excepting existing restrictions and
easements of record.
(F) The Premises are being sold subject to existing
zoning and other municipal ordinances and regulations.
(G) Real estate taxes shall be apportioned on the
basis of the fiscal year.
(H) The expenses of the conveyance shall be paid as
follows:
(i) Drawing of the Deed and acknowledgments
thereon by the Lessor;
(ii) Recording of the Deed by the Lessee;
(iii) State and local revenue or transfer taxes
by the Lessor and Lessee in equal portions; and
(iv) All other expenses, including title charges,
by the Lessee.
ARTICLE V. MISCELLANEOUS
5.1 Contingency. This Agreement is conditioned and
contingent upon the execution, receipt by Lessee and, where
applicable, recording of Nondisturbance and Attornment
Agreements, written consents to this Agreement, and written
unconditional commitments to release all liens and encumbrances
at or prior to settlement of the purchase of the Premises by
Lessee, all in form and substance satisfactory to Lessee and its
counsel, to be executed by any existing holders of liens and/or
encumbrances on the Premises.
5.2 Removal of Fixtures. At the termination of this
Agreement, or at any other time during the Lease Period, Lessee
shall have the right to remove from the Premises the building,
and all fixtures, trade fixtures and equipment of any kind,
including the vault and drive up facilities, which have been
installed or placed upon the Premises by Lessee at any time,
provided that Lessee shall repair any damage to the Premises
resulting from such removal. Any such items not removed by
Lessee as aforesaid within a reasonable time shall, after thirty
(30) days written notice to Lessee, become the exclusive property
of Lessor and remain as part of the Premises without any further
right, title, interest, or claim in favor of Lessee, or Lessee's
successors or assigns, thereto.
5.3 Entire Agreement and Amendment. It is expressly
understood and agreed by Lessor and Lessee that this Agreement
sets forth all of the promises, agreements, conditions and
understandings between the parties regarding the Premises and
that there are no promises, agreements, conditions or
understandings, either oral or written, between them, other than
as are herein set forth. It is further agreed that no subsequent
alteration, amendment, change or addition to this Agreement shall
be binding upon either party unless reduced to writing and signed
by both.
5.4 Binding on Successors and Assigns. All provisions of
this Agreement shall be binding upon and inure to the benefit of
the heirs, executors, administrators, personal representatives,
successors and assigns of the parties hereto.
5.5 Headings. The headings to the Article and Paragraphs
of this Agreement are inserted only for convenience of reference
and are not intended, nor shall they construe, to modify, define,
limit or expand the intent of the parties as expressed herein.
5.6 Arbitration. Any matter to be determined by
arbitration under Paragraph 3.9 above and any disagreement
between the parties with respect to the interpretation or
application of this Agreement or the obligations of the parties
hereunder shall be determined by arbitration. Such arbitration
shall be conducted, upon request of either the Lessor or the
Lessee, before one (1) arbitrator designated by the American
Arbitration Association and in accordance with the rules of such
association. The arbitrator designated and acting under this
Agreement shall make his award in strict conformity with such
rules and shall have no power to depart from or change any of the
provisions thereof. The expense of arbitration proceedings
conducted hereunder shall be borne equally by the parties. All
arbitration proceedings hereunder shall be conducted in Reading,
Berks County, Pennsylvania. The decision of the arbitrator, upon
being made and delivered in writing, shall be final, binding and
conclusive upon the parties, their respective heirs, personal
representatives and assigns, and judgment may be entered upon
such award. This agreement to arbitration law which, for
purposes of this agreement, shall be the Uniform Arbitration Act,
42 P.C.S.A. 7301, et seq. Any proceeding conducted pursuant to
this arbitration clause shall be deemed to be, for all purposes,
a common law arbitration.
5.7 Notice. Any notice required by this Agreement shall be
deemed given, upon mailing and not delivery, if sent by certified
or registered mail, return receipt requested, post paid,
TO LESSOR: Mr. John C. Gordon
Ms. Betty L. Gordon
2 Buckingham Drive
Reading, PA 19605-1098
TO LESSEE: Berks County Bank
400 Washington Street
P.O. Box 1097
Reading, PA 19603
Attn: President
or such other address or person as other party shall designate by
giving written notice thereof to the other.
5.8 Controlling Law. The parties agree that this Agreement
shall be construed and enforced in accordance with the laws of
the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF and intending to legally bind their
heirs, executors, successors and assigns, the undersigned,
intending to be legally bound, have caused this Agreement to be
executed and their respective seals to be affixed the day and
year first above written.
/s/ John C. Gordon (SEAL)
John C. Gordon
/s/ Betty L. Gordon (SEAL)
Betty L. Gordon
"LESSOR"
BERKS COUNTY BANK
By /s/ Nelson R. Oswald
Nelson R. Oswald, President
"LESSEE"
<PAGE>
EXHIBIT "A"
ALL THAT CERTAIN lot or piece of ground together with the
improvements thereon erected, situate on the Easterly side of
Pennsylvania State Highway Route 222, known as William Penn
Highway, leading from Reading to Kutztown, between Darby Avenue
and North Temple Boulevard, as shown on the Plan of Section No. 2
of South Temple, laid out for W.A. Sharp in April, 1929, by
E. Kurtz Wells, Registered Professional Engineer of Reading,
situate in the Township of Muhlenberg, County of Berks and
Commonwealth of Pennsylvania, bounded and described as follows,
to wit:
BEGINNING at an iron pin at the intersection of the Easterly
lot line of William Penn Highway (one hundred twenty feet wide)
with the Southerly lot line of Darby Avenue (forty-seven feet
wide); thence extending in an Easterly direction along the
Southerly lot line of Darby Avenue forming a right angle with the
Easterly lot line of William Penn Highway a distance of one
hundred seventy-two feet and four hundredths of one foot
(172.04') to a point; thence extending in a Southerly direction,
forming a right angle with the last described line a distance of
two hundred feet (200') to a point; thence in a Westerly
direction, forming a right angle to the last described line, a
distance of one hundred seventy-two and four hundredths of one
feet (172.04') to a point in the Easterly lot line of William
Penn Highway; thence in a Northerly direction, forming a right
angle to the last described line, and along the said highway a
distance of two hundred (200') to the place of beginning.
BEING THE SAME PREMISES which Lee Heffner, Inc., a
Pennsylvania corporation, by deed dated July 23, 1982 and
recorded in Deed Book Volume 1818, Page 525, Berks County
Records, granted and conveyed unto John C. Gordon and Betty L.
Gordon, his wife.
<PAGE>
FIRST ADDENDUM TO OPTION AND
LEASE/PURCHASE AGREEMENT
THIS FIRST ADDENDUM TO OPTION AND LEASE/PURCHASE
AGREEMENT ("First Addendum"), made this 1st day of November,
1996, by and between JOHN C. GORDON and BETTY L, GORDON, husband
and wife, adult individuals (hereinafter individually and
collectively referred to as "Lessor")
AND
BERKS COUNTY BANK, a Pennsylvania banking corporation, with its
principal place of business located at 400 Washington Street,
Reading, Berks County, Pennsylvania (hereinafter referred to as
"Lessee").
WITNESSETH:
WHEREAS, the Lessor and the Lessee entered into a
certain Option and Lease/Purchase Agreement dated August 30,
1996, concerning the Premises known as Lot #3, 4453 Fifth Street
Highway, Muhlenberg Township, Berks County, Pennsylvania
("Agreement"), the terms and provisions of which are incorporated
herein by reference thereto; and
WHEREAS, by letter dated October 22, 1996, the Lessee
exercised its option to lease/purchase the said Premises,
pursuant to Paragraph 1.4 of the Agreement; and
WHEREAS, the parties hereto have agreed to modify the
terms and provisions of Paragraph 2.4 of the Agreement, as
hereafter set forth.
NOW, THEREFORE, intending to be legally bound hereby,
and in consideration of the agreements and covenants herein set
forth, as well as set forth in the Agreement, the parties hereto
do hereby agree as follows:
1. The aforesaid recitals are incorporated herein as
a substantive part of the within First Addendum.
2. Paragraph 2.4 of the Agreement is hereby deleted
and, in substitution thereof, the following shall constitute
Paragraph 2.4 of the Agreement:
2.4 During the Lease Period, the Lessee
shall pay to Lessor, on a Triple Net basis, in advance,
rent ("Rent") equal to the sum of Three Thousand Seven
Hundred Fifty and 00/100 Dollars ($3,750.00) per month,
provided, however, that the Lessee shall, beginning on
the Commencement Date, prepay rent for the months of
November, 1996 and December, 1996 in the total amount
of Seven Thousand Five Hundred and 00/100 Dollars
($7,500.00). In the event that Settlement of the
purchase of the Premises, as hereinafter provided,
occurs during said initial two (2) months of the Lease
Period, all accrued Rent prepaid by Lessee as herein
provided shall be credited, dollar for dollar, to the
Purchase Price. In addition, in the event that
Settlement of the purchase of the Premises, as
hereinafter provided, occurs prior to the end of a
particular month during the Lease Period for which Rent
has been paid in advance, any such Rent for said month
that accrues after the date of Settlement shall be
credited, dollar for dollar, to the Purchase Price.
3. As modified hereby, the terms and provisions of
the Agreement shall remain in full force and effect, and shall be
binding upon and inure to the benefit of the parties hereto, and
their respective heirs, executors, successors and assigns.
IN WITNESS WHEREOF, and intending to legally bind their
heirs, executors, successors and assigns, the undersigned,
intending to be legally bound, have caused this First Addendum to
be executed and their respective seals to be affixed on the day
and year first above written.
/s/ John C. Gordon (SEAL)
John C. Gordon
/s/ Betty L. Gordon (SEAL)
Betty L. Gordon
"Lessor"
BERKS COUNTY BANK
By/s/ Nelson R. Oswald
Nelson R. Oswald, President
"Lessee"
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 12,537
<INT-BEARING-DEPOSITS> 3,545
<FED-FUNDS-SOLD> 1,324
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 43,530
<INVESTMENTS-CARRYING> 31,761
<INVESTMENTS-MARKET> 31,615
<LOANS> 182,156
<ALLOWANCE> 1,960
<TOTAL-ASSETS> 283,332
<DEPOSITS> 235,274
<SHORT-TERM> 11,044
<LIABILITIES-OTHER> 8,914
<LONG-TERM> 9,000
0
0
<COMMON> 4,312
<OTHER-SE> 14,789
<TOTAL-LIABILITIES-AND-EQUITY> 283,332
<INTEREST-LOAN> 10,145
<INTEREST-INVEST> 2,075
<INTEREST-OTHER> 479
<INTEREST-TOTAL> 12,698
<INTEREST-DEPOSIT> 6,542
<INTEREST-EXPENSE> 6,835
<INTEREST-INCOME-NET> 5,863
<LOAN-LOSSES> 485
<SECURITIES-GAINS> (1)
<EXPENSE-OTHER> 4,684
<INCOME-PRETAX> 1,616
<INCOME-PRE-EXTRAORDINARY> 1,318
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,318
<EPS-PRIMARY> .76
<EPS-DILUTED> .76
<YIELD-ACTUAL> 3.53
<LOANS-NON> 2,360
<LOANS-PAST> 31
<LOANS-TROUBLED> 81
<LOANS-PROBLEM> 1,030
<ALLOWANCE-OPEN> 1,674
<CHARGE-OFFS> 285
<RECOVERIES> 86
<ALLOWANCE-CLOSE> 1,960
<ALLOWANCE-DOMESTIC> 1,960
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
