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, 1997
( ) 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 19601
(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 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 31, 1997
COMMON STOCK ($2.50 Par Value) 3,469,930
(Title of Class) (Outstanding Shares)
<PAGE>
BCB FINANCIAL SERVICES CORPORATION
FORM 10-QSB
For the Quarter Ended September 30, 1997
Contents
PART I FINANCIAL INFORMATION Page No.
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets
as of September 30, 1997 and
December 31, 1996 3
Consolidated Statements of Income
for the Nine and Three Month
Periods ended September 30, 1997 and 1996 5
Consolidated Statement of Stockholders'
Equity for the Nine-Month Period
Ended September 30, 1997 6
Consolidated Statements of Cash Flows
for the Nine-Month Periods Ended
September 30, 1997 and 1996 7
Notes to Consolidated Financial Statements 9-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11-26
PART II OTHER INFORMATION
Item 1. Legal Proceedings 27
Item 2. Changes in Securities 27
Item 3. Defaults Upon Senior Securities 27
Item 4. Submission of Matters to a
Vote of Security Holders 27
Item 5. Other Information 27
Item 6. Exhibits and Reports on Form 8-K 27
<PAGE>
BCB FINANCIAL SERVICES CORPORATION
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERKS COUNTY BANK
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS September 30, December 31,
1997 1996
(Unaudited)
<S> <C> <C>
Cash and due from banks $10,306,403 $ 8,984,814
Interest-bearing deposits with banks 20,287 21,407,097
Federal funds sold 270,000 1,290,000
Securities available for sale 113,833,934 53,488,975
Securities held to maturity, fair value
September 30, 1997 $60,980,607
December 31, 1996 $35,147,354 60,532,393 35,065,480
Loans receivable, net of allowance for
loan losses September 30, 1997
$2,532,942; December 31, 1996 $2,000,612 236,654,641 192,147,673
Mortgages held for sale 477,608 609,397
Due from mortgage investors 7,949,038 3,478,353
Bank premises and equipment, net 6,354,642 4,394,797
Accrued interest receivable 3,362,345 2,129,185
Foreclosed real estate 290,772 761,500
Deferred income taxes 83,974 245,935
Prepaid expenses and other assets 754,183 519,096
TOTAL ASSETS $440,890,220 $324,522,302
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand, non-interest bearing $ 35,924,014 $ 29,048,391
Demand, interest bearing 152,243,885 100,846,581
Savings 9,425,539 12,123,061
Time deposits 137,547,998 122,305,298
TOTAL DEPOSITS 335,141,436 264,323,331
Accrued interest payable and other
liabilities 6,774,749 4,776,903
Other borrowed funds 43,888,794 13,718,399
Long-term debt 12,000,000 22,000,000
TOTAL LIABILITIES 397,804,979 304,818,633
Stockholders' equity:
Common stock, par value $2.50 per share;
authorized 20,000,000 shares; issued
and outstanding September 30, 1997
3,467,380 shares; December 31, 1996
2,070,385 shares 8,668,451 5,175,963
Surplus 27,514,686 9,876,483
Retained earnings 6,312,797 4,700,631
Net unrealized appreciation
(depreciation) on securities available
for sale, net of taxes 589,307 (49,408)
TOTAL STOCKHOLDERS' EQUITY 43,085,241 19,703,669
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $440,890,220 $324,522,302
</TABLE>
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 Three Months Ended For the Nine Months Ended
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Interest Income:
Loan Receivable, including fees $ 4,880,866 $3,646,723 $13,398,084 $10,144,603
Interest and dividends on securities:
U.S. Treasury 38,052 60,854 142,736 199,167
U.S. Government agencies and corporations 1,843,687 499,875 4,130,387 958,824
State and political subdivisions, tax exempt 435,153 344,605 1,341,056 855,860
Dividends 90,409 22,793 208,120 60,706
Interest-bearing deposits with banks 14,911 84,604 201,138 372,898
Interest on federal funds sold 6,596 21,027 27,638 105,884
Total interest income 7,309,674 4,680,481 19,449,159 12,697,942
Interest expense:
Deposits 3,500,451 2,340,563 9,591,263 6,541,738
Other borrowed funds 343,824 87,846 652,796 127,164
Long-term debt 175,682 60,470 637,379 160,356
Total interest expense 4,019,957 2,488,879 10,881,438 6,829,258
Net interest income 3,289,717 2,191,602 8,567,721 5,868,684
Provision for loan losses 270,000 160,000 771,500 485,000
Net interest income after provision
for loan losses 3,019,717 2,031,602 7,796,221 5,383,684
Other income:
Customer service fees 248,216 177,566 700,911 489,469
Mortgage banking activities 267,586 160,565 611,615 419,833
Net realized (loss) on sale of securities --- --- (4,465) (682)
Other 8,042 4,489 29,510 14,104
Total other income 523,844 342,620 1,337,571 922,724
Other expenses:
Salaries and wages 1,042,573 582,491 2,672,451 1,570,199
Employee benefits 228,817 143,314 629,144 408,905
Occupancy 187,831 163,374 510,701 437,678
Equipment depreciation and maintenance 138,278 109,048 390,800 313,939
Other operating expenses 716,115 719,628 2,235,452 1,959,338
Total other expenses 2,313,614 1,717,855 6,438,548 4,690,059
Income before income taxes 1,229,947 656,367 2,695,244 1,616,349
Federal income taxes 246,426 117,601 515,186 298,652
Net Income $ 983,521 $ 538,766 $2,180,058 $ 1,317,697
=========== ========== ========== ===========
Earnings per common and common equivalent share $ 0.31 $ 0.26 $ 0.87 $ 0.63
=========== ========== ========== ===========
Weighted average common and common equivalent
shares outstanding 3,146,731 2,085,024 2,465,584 2,084,303
=========== ========== ========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
BCB FINANCIAL SERVICES CORPORATION
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERKS COUNTY BANK
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Nine Months Ended September 30, 1997 (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, 1996 $5,175,963 $ 9,876,483 $4,700,631 $(49,408) $19,703,669
Issuance of 2,464 shares of common
stock upon exercise of stock
options 6,160 11,570 --- --- 17,730
Issuance of 14,531 shares of
common stock under dividend
reinvestment plan 36,328 211,902 --- --- 248,230
Issuance of 1,380,000 shares of
common stock upon completion of
stock offering 3,450,000 19,147,500 --- --- 22,597,500
Expense relating to stock offering (1,732,769) (1,732,769)
Net change in unrealized
appreciation (depreciation) on
securities available for sale,
net of taxes --- --- --- 638,715 638,715
Cash dividends --- --- (567,892) --- (567,892)
Net income --- --- 2,180,058 --- 2,180,058
Balance, September 30, 1997 $8,668,451 $27,514,686 $6,312,797 $589,307 $43,085,241
========== =========== ========== ======== ===========
</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)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30, September 30,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,180,058 $ 1,317,697
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for loan and foreclosed real estate losses 881,816 528,000
Provision for depreciation and amortization 376,832 278,963
(Gain) Loss on sale of equipment 42 (1,071)
Net realized loss on sale of securities 4,465 682
Proceeds from sale of mortgage loans 34,230,375 24,654,465
Net (gain) loss on sale of mortgage loans (13,442) 11,685
Mortgage loans originated for sale (34,233,325) (24,666,150)
Net amortization of securities premiums and discounts 2,132 (59,852)
(Increase) decrease in:
Due from mortgage investors (4,470,685) 1,411,782
Accrued interest receivable (1,233,160) (671,678)
Deferred income taxes (167,075) (36,512)
Prepaid expenses and other assets 4,866 (197,943)
Increase in accrued interest payable and other liabilities 776,765 1,044,538
Net cash provided (used in) by operating activities (1,660,336) 3,614,606
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sales of securities available for sale 4,197,254 1,133,078
Proceeds from maturities of and principal repayments on securities available for sale 21,437,154 2,882,065
Proceeds from maturities of securities held to maturity 4,645,000 1,385,000
Purchases of securities available for sale (84,208,103) (22,679,867)
Purchases of securities held to maturity (30,094,062) (23,079,129)
Decrease in interest-bearing deposits with banks 21,386,810 6,497,867
Net decrease in federal funds sold 1,020,000 1,721,000
Loans made to customers, net of principal collected (46,134,794) (34,489,319)
Proceeds from sales of foreclosed real estate 1,364,919 146,916
Proceeds from sales of bank premises and equipment --- 2,895
Purchases of premises and equipment (2,336,719) (1,066,404)
Net cash used in investing activities (108,722,541) (67,545,898)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 70,818,105 55,335,794
Proceeds from other borrowed funds 30,170,395 8,754,213
Proceeds from long term borrowings --- 5,000,000
Principal payments of long-term borrowings (10,000,000) ---
Proceeds from exercise of stock options 17,730 17,820
Proceeds from issuance of stock under the dividend reinvestment plan 248,230 ---
Net proceeds from stock offering 20,864,731 ---
Cash dividends (414,725) (296,535)
Net cash provided by financing activities 111,704,466 68,811,292
Increase in cash and due from banks 1,321,589 4,880,000
Cash and due from banks:
Beginning 8,984,814 7,656,846
Ending $ 10,306,403 $ 12,536,846
============= ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $ 10,628,284 $ 666,830
============= ============
Income taxes $ 430,000 $ 355,000
============= ============
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES
Foreclosed real estate acquired in settlement of loans $ 829,586 $ 159,782
============= ============
</TABLE>
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, 1997
NOTE A. BASIS OF PRESENTATION
The unaudited consolidated 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, 1997 are not
necessarily indicative of the results that may be expected
for the year ending December 31, 1997.
NOTE B. EARNINGS PER SHARE
Earnings per common and common equivalent share are computed
based on the weighted average number of common shares and
common equivalent 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, 1997 and 1996. 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. Weighted average number of common shares and
common equivalent shares outstanding have been adjusted for
all stock dividends and stock splits effected through
September 30, 1997.
NOTE C: OTHER EXPENSES
The following represents the most significant categories of
other expenses for the nine month period ended September 30,
1997 and 1996:
For the Nine Months Ended
September 30, September 30,
1997 1996
Advertising $ 487,979 $ 472,746
EDP outsourcing and MAC fees 347,926 253,055
Office Supplies and expense 434,827 265,422
Foreclosed real estate expenses (101,435) 229,406
All other expenses 1,065,155 738,709
$2,234,452 $1,959,338
Note D: Reclassifications
Certain items in the September 30, 1996 financial statements
have been reclassified to conform to the September 30, 1997
financial statement presentation format. These
reclassifications had no effect on net income.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
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.
FINANCIAL CONDITION HIGHLIGHTS
Total assets increased to $440,890,220 at September 30,
1997, an increase of $116,367,918, or 35.86%, from $324,522,302
at December 31, 1996. The increase in assets is the result of
higher levels of loans and securities, which were funded by the
increase in deposits for the first nine months.
Loans, net of allowance for loan losses of $2,532,942 at
September 30, 1997 and $2,000,612 at December 31, 1996, increased
to $236,654,641 at September 30, 1997 from $192,147,673 at
December 31, 1996. The increase of $44,506,968, or 23.16%, was
primarily from an increase in commercial loans of $24,358,855 to
$112,681,777 at September 30, 1997 from $88,322,922 at
December 31, 1996, and an increase in residential mortgage loans
of $16,757,474 to $106,267,384 at September 30, 1997 from
$89,509,910 at December 31, 1996.
Securities increased to $174,366,327 at September 30, 1997
from $88,554,455 at December 31, 1996. The increase of
$85,811,872, or 96.90%, was due primarily to the purchase of
approximately $84,000,000 in available for sale securities as
part of matched funding programs employed to increase earnings.
These matched funding programs are further discussed under
"Analysis of Net Interest Income," Available for sale securities
increased $60,344,959 and held to maturity securities increased
$25,466,913 during the first nine months of 1997.
Cash and due from banks, interest-bearing deposits (which
are held at the Federal Home Loan Bank, "FHLB"), and federal
funds sold are all liquid funds. The aggregate amount in these
three categories decreased by $21,085,221 to $10,596,690 at
September 30, 1997 from $31,681,911 at December 31, 1996, because
the Company redeployed these funds into higher yielding loans and
securities. See "Analysis of Net Interest Income" for a
discussion of the matched funding programs employed by the
Company.
Amounts due from mortgage investors increased to $7,949,038
at September 30, 1997 from $3,478,353 at December 31, 1996.
These amounts represent loans originated by the Bank for other
mortgage investors/lenders under standing commitments. These
loans are temporarily funded for such investors for periods
ranging from three to forty-five days after origination.
Bank premises and equipment, net of accumulated
depreciation, increased from $4,394,797 at year-end 1996 to
$6,354,642 at September 30, 1997. The increase of $1,959,845 was
mainly attributable to the construction of the Muhlenberg and
Shillington offices. Muhlenberg opened on March 29, 1997 and
Shillington opened on May 3, 1997.
Foreclosed real estate decreased from $761,500 at
December 31, 1996 to $290,772 at September 30, 1997. Foreclosed
real estate is comprised of property acquired through a
foreclosure proceeding or acceptance of a deed-in-lieu of
foreclosure.
Total liabilities increased by $92,986,346, or 30.51%, from
$304,818,633 at year-end 1996 to $397,804,979 at September 30,
1997. During this period, deposits, the Company's primary source
of funds, increased by 26.79%, from $264,323,331 at year-end 1996
to $335,141,436 at September 30, 1997. The deposit mix changed
considerably during 1996 and that trend continued during the
first nine months of 1997. The change in the deposit mix
occurred because the Bank placed greater emphasis upon the
generation of money market deposits, accomplished by offering an
above-market rate of 4.20% APY (annual percentage yield) for
balances above $1,000. The Bank also changed its deposit mix by
offering no-fee, "free" personal and business checking while many
competitors charged fees for these products. The aggregate
amount of demand and savings deposits, which are lower in rate
than time deposits, increased $55,575,405, or 39.13%, from
$142,018,033 at December 31, 1996 to $197,593,438 at
September 30, 1997. As a percentage of total deposits, aggregate
demand and savings deposits increased from 53.73% at December 31,
1996 to 58.96 % at September 30, 1997. Aggregate demand deposits
include non-interest bearing demand, interest checking (NOW) and
money market deposits. Certificates of deposit increased
$15,242,700, or 12.46%, from $122,305,298 at year-end 1996 to
$137,547,998 at September 30, 1997. As a percentage of total
deposits, certificates of deposit decreased from 46.27% at
December 31, 1996 to 41.04% at September 30, 1997. The proceeds
from the net increase in deposits were used to fund new loans,
new securities purchases and increases in bank premises and
equipment.
Other borrowed funds and long term debt increased
$20,170,395 from $35,718,399 at year-end 1996 to $55,888,794 at
September 30, 1997. The increase was primarily used to fund new
loans and new security purchases.
Stockholders' equity increased $23,381,572, or 118.67%, to
$43,085,241 at September 30, 1997 compared to $19,703,669 at
December 31, 1996. The increase in stockholders' equity is
primarily attributable to the completion of the Company's
secondary public offering in which the Company sold 1,380,000
shares at $16.375 per share. Net proceeds to the Company, after
deducting expenses of $1,732,769, were $20,864,731. Also,
contributing to the increase was the retention of earnings of
$2,180,058, net of cash dividends declared of $567,892, and the
change in net unrealized appreciation (depreciation) on
securities available for sale, net of taxes. The change in net
unrealized appreciation (depreciation) on securities available
for sale, net of taxes, was $638,715, from ($49,408) depreciation
at December 31, 1996 compared to $589,307 appreciation at
September 30, 1997. This increase was caused by the general
decrease in interest rates during the period. When interest
rates fall, the fair value of debt securities generally
increases, thereby increasing equity.
RESULTS OF OPERATIONS
Overview
The Company's net income for the third quarter of 1997 was
$983,521, an increase of $444,755, or 82.55%, from $538,766 for
the third quarter of 1996. Net income for the nine months ended
September 30, 1997 was $2,180,058, 65.44% more than the
$1,317,697 reported for the same period in 1996. The earnings
for the third quarter and nine months of 1997 increased from the
corresponding prior year periods primarily due to an increase in
net interest income.
Analysis of Net Interest Income
Historically, the Company's earnings have depended primarily
upon the Bank's net interest income, which is the difference
between interest earned on interest-earning assets and interest
paid on interest-bearing liabilities. The Company's net interest
income, calculated on a tax-equivalent basis, increased
$1,135,000, or 48.17%, to $3,491,000 during the third quarter of
1997 from $2,356,000 during the third quarter of 1996. For the
first nine months of 1997, net interest income, calculated on a
tax-equivalent basis, increased $2,918,000, or 46.58%, to
$9,182,000 from $6,264,000 during the first nine months of 1996.
The increase in net interest income was primarily due to an
increase in average interest-earning assets. Interest income, on
a tax equivalent basis, increased $2,667,000, or 55.05%, from
$4,845,000 for the third quarter of 1996 to $7,512,000 for the
third quarter of 1997, while interest expense increased
$1,532,000, or 61.55%, from $2,489,000 for the third quarter of
1996 to $4,021,000 for the third quarter of 1997. For the first
nine months of 1997, interest income, on a tax equivalent basis,
increased $6,971,000, or 53.24%, to $20,064,000 from $13,093,000
for the first nine months of 1996, while interest expense
increased $4,053,000, or 59.35%, from $6,829,000 for the first
nine months of 1996 to $10,882,000 for the first nine months of
1997.
Net interest margin decreased 25 basis points from 3.89% in
the third quarter of 1996 to 3.64% in the third quarter of 1997,
calculated on a tax-equivalent basis. Net interest margin
decreased 19 basis points from 3.80% for the first nine months of
1996 versus 3.61% for the nine months ended September 30, 1997,
calculated on a tax-equivalent basis. Net interest margin is the
difference between interest earned and interest paid, divided by
average total interest-earning assets. Net interest margin
decreased primarily due to a decrease in the yield on average
securities and to an increase in the average rate paid on average
interest-bearing liabilities. For the third quarter of 1997, the
average rate paid on average interest-bearing liabilities,
increased 10 basis points to 4.83% from 4.73% for the quarter-
ended September 30, 1996. For the first nine months of 1997, the
average rate paid on average interest-bearing liabilities
increased 9 basis points to 4.85% from 4.76% for the first nine
months of 1996. The decrease in yield on average securities was
due to the purchase of $30,000,000 of one year CMT, adjustable
rate mortgage (ARM) government agencies currently earning low
teaser rates that should reprice up 100 or more basis points in
1998. The increase in the average rate paid on average interest-
bearing liabilities was caused primarily by the increase in the
volume and rate from other borrowed funds and long-term debt for
both periods.
To the extent that the Company chooses to invest in tax-free
securities or extend tax-free loans, the Company's tax expense
can be reduced from the statutory rate of 34% to an effective
rate below that level. The amount of tax that is saved by the
acquisition of tax-free assets is included in interest income for
purposes of calculating the tax-equivalent yield on earning
assets. During 1996, the Company significantly increased its
investments in State and Municipal Securities, which are
substantially tax-free, except for the disallowance of the
deduction of twenty percent of interest expense on deposits or
liabilities used to fund these investments, in accordance with
the Federal tax laws governing bank qualified securities. The
bulk of these investments in State and Municipal Securities were
maintained in the portfolio during the first nine months of 1997.
Net interest income is affected by changes in the mix of the
volume and rates of interest-earning assets and interest-bearing
liabilities. The following tables provide an analysis of net
interest income on a tax-equivalent basis, setting forth for the
periods (i) average assets, liabilities and stockholders' equity,
(ii) interest income earned on interest-earning assets and
interest expense paid on interest-bearing liabilities,
(iii) average yields earned on interest-earning assets and
average rates paid on interest-bearing liabilities, and (iv) the
Bank's net interest margin (net interest income as a percentage
of average total interest-earning assets).
<PAGE>
Average Balances, Average Rates, and Net Interest Margin
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1997 September 30, 1996
Interest Interest
(Dollars in thousands) Average Income/ Yield/ Average Income Yield
Balance Expense(1) Rate(2) Balance Expense(1) Rate(2)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Interest-bearing deposits at banks $ 920 $ 15 6.46% $ 5,591 $ 85 6.05%
U.S. Treasury 2,104 38 7.17 3,862 61 6.28
U.S. Government agencies 107,202 1,844 6.82 27,892 500 7.13
State and municipal (3) 31,679 627 7.85 24,566 497 8.05
Other bonds and securities 6,289 90 5.68 1,685 23 5.43
Total securities 147,274 2,599 7.00 58,005 1,081 7.41
Federal funds sold 468 7 5.93 1,324 21 6.31
Commercial loans (3) 108,173 2,374 8.71 78,743 1,838 9.29
Mortgage loans 103,520 2,058 7.89 82,257 1,469 7.10
Installment loans 20,026 459 9.09 14,937 351 9.35
Total loans(4) 231,719 4,891 8.37 175,937 3,658 8.27
Total interest-earning assets 380,381 7,512 7.83 240,857 4,845 8.00
Unrealized depreciation on available for sale securities (285) (458)
Allowance for loan losses (2,355) (1,921)
Non-interest earning assets 24,565 15,482
Total assets $402,306 $253,960
======== ========
INTEREST-BEARING LIABILITIES:
Demand deposits, interest-bearing $146,856 1,439 3.89 74,112 698 3.75
Savings deposits 9,430 63 2.65 11,018 85 3.07
Other time deposits 138,033 1,999 5.75 112,742 1,558 5.50
Total deposits 294,319 3,501 4.72 197,872 2,341 4.71
Other borrowed funds 23,711 344 5.76 6,625 88 5.28
Long-term borrowings 12,000 176 5.82 4,652 60 5.13
Total interest-bearing liabilities 330,030 4,021 4.83 209,149 2,489 4.73
Demand deposits, non-interest bearing 33,636 23,117
Other non-interest bearing liabilities 4,363 2,962
Total liabilities 368,029 235,228
Stockholders' equity 34,277 18,732
Total liabilities, redeemable common stock and
stockholders' equity $402,306 $253,960
======== ========
Net interest income $3,491 $2,356
====== ======
Net interest margin (5) 3.64% 3.89%
==== ====
</TABLE>
(1) Includes loan fee income.
(2) Yields on investments are calculated on amortized cost; all
yields are annualized.
(3) Taxable, equivalent basis, using a 34% statutory tax rate,
and adjusted for the disallowance of the deduction for
interest expense to carry bank eligible tax-exempt
securities and loans.
(4) Loans outstanding include non-accruing loans.
(5) Represents the difference between interest earned and
interest paid, divided by average total interest-earning
assets.
<PAGE>
Average Balances, Average Rates, and Net Interest Margin
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1996
Interest Interest
(Dollars in thousands) Average Income/ Yield/ Average Income Yield
Balance Expense(1) Rate(2) Balance Expense(1) Rate(2)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Interest-bearing deposits at banks $ 4,802 $ 201 5.60% $ 9,084 $ 373 5.48%
U.S. Treasury 2,734 143 6.99 4,406 199 6.03
U.S. Government agencies 78,964 4,131 6.99 18,310 959 7.00
State and municipal (3) 32,711 1,921 7.88 20,617 1,238 8.00
Other bonds and securities 4,747 208 5.86 1,383 61 5.89
Total securities 119,156 6,403 7.18 44,716 2,457 7.34
Federal funds sold 690 28 5.43 2,689 106 5.27
Commercial loans (3) 100,416 6,560 8.73 73,273 5,184 9.45
Mortgage loans 97,288 5,622 7.73 75,501 4,020 7.11
Installment loans 18,156 1,250 9.20 14,946 953 8.52
Total loans(4) 215,860 13,432 8.32 163,720 10,157 8.29
Total interest-earning assets 340,508 20,064 7.88 220,209 13,093 7.94
Unrealized depreciation on available for sale securities (444) (209)
Allowance for loan losses (2,196) (1,819)
Non-interest earning assets 21,186 14,756
Total assets $359,054 $232,937
======== ========
INTEREST-BEARING LIABILITIES:
Demand deposits, interest bearing $123,085 $ 3,578 3.89 $ 63,108 $ 1,764 3.73
Savings deposits 13,469 341 3.38 10,221 226 2.95
Other time deposits 132,553 5,673 5.72 110,712 4,552 5.49
Total deposits 269,107 9,592 4.77 184,041 6,542 4.75
Other borrowed funds 15,583 653 5.60 3,424 127 4.95
Long-term borrowings 15,113 637 5.64 4,219 160 5.07
Total interest-bearing liabilities 299,803 10,882 4.85 191,684 6,829 4.76
Demand deposits, non-interest bearing 30,091 20,118
Other non-interest bearing liabilities 4,532 2,576
Total liabilities 334,426 214,378
Redeemable common stock --- 14
Stockholders' equity 24,628 18,545
Total liabilities, redeemable common stock and
stockholders' equity $359,054 $232,937
======== ========
Net interest income $ 9,182 $ 6,264
======= =======
Net interest margin 3.61% 3.80%
==== ====
</TABLE>
(1) Includes loan fee income.
(2) Yields on investments are calculated on amortized cost; all
yields are annualized.
(3) Taxable, equivalent basis, using a 34% statutory tax rate,
and adjusted for the disallowance of the deduction for
interest expense to carry bank eligible tax-exempt
securities and loans.
(4) Loans outstanding include non-accruing loans.
(5) Represents the difference between interest earned and
interest paid, divided by average total interest-earning
assets.
<PAGE>
The Company's total interest income on a tax-equivalent
basis increased by $2,667,000 during the third quarter of 1997
over the third quarter of 1996, from $4,845,000 in 1996 to
$7,512,000 in 1997. Interest and fees on loans, on a tax-
equivalent basis, increased $1,233,000 from $3,658,000 during the
third quarter of 1996 to $4,891,000 at September 30, 1997, which
was as a result of an increase in average loan balances, from
$175,937,000 at September 30, 1996 to $231,719,000 at
September 30, 1997. Also contributing to the increase in total
interest income was an increase in interest and dividend income
on securities of $1,518,000, from $1,081,000 for the third
quarter of 1996, to $2,599,000 for the third quarter of 1997,
calculated on a tax-equivalent basis. This increase in
investment income was the result of an increase in the average
balance of securities owned for the third quarter of 1997 versus
the third quarter of 1996, from $58,005,000 to $147,274,000.
Total interest income on a tax-equivalent basis increased by
$6,971,000 for the first nine months of 1997 to $20,064,000
versus $13,093,000 for the first nine months of 1996. Interest
and fees on loans, on a tax-equivalent basis, increased
$3,275,000, from $10,157,000 for the first nine months of 1996,
to $13,432,000 for the first nine months of 1997. Total interest
and dividend income on securities also increased significantly
from $2,457,000 for the first nine months of 1996 to $6,403,000
for the first nine months of 1997, calculated on a tax-equivalent
basis. The average balance of securities increased from
$44,716,000 for the first nine months ended September 30, 1996 to
$119,156,000 for the first nine months of 1997.
The increase in the average balance of securities is the
result of matched funding programs employed by the Company that
use FHLB advances and the significant deposit inflows at existing
and new branches to fund loan originations and securities
purchases. The purpose of these programs is to target earnings
growth and net interest margin increases while managing
liquidity, credit, market and interest rate risk. From time to
time, a specific matched funding program may attempt to achieve
current earnings benefits from future growth in deposits that
management is reasonably confident will occur by funding current
loan and security portfolio increases partially with short-term
FHLB advances. For example, management may elect to use short-
term FHLB advances during the quarter prior to the opening of a
new branch. Once the new branch opens, management then may elect
to pay off these short-term FHLB advances with lower cost deposit
growth, or convert short-term FHLB debt to long-term debt or
rollover short-term debt if market conditions are favorable.
The Company's total interest expense increased $1,532,000,
or 61.55%, to $4,021,000 during the third quarter of 1997
compared to $2,489,000 during the third quarter of 1996. Total
interest expense for the nine months of 1997 increased
$4,053,000, or 59.35%, to $10,882,000 compared to $6,829,000 for
the first nine months of 1996. This increase in interest expense
was due to an increase in the volume of average interest-bearing
liabilities of $120,881,000, or 57.80% to $330,030,000 for the
quarter ended September 30, 1997 versus $209,149,000 for the
quarter ended September 30, 1996. The volume of average
interest-bearing liabilities increased $108,119,000, or 56.40%,
to $299,803,000 for the first nine months of 1997 versus
$191,684,000 for the first nine months of 1996. The average rate
paid on interest-bearing liabilities increased 10 basis points
from 4.73% for the third quarter of 1996 compared to 4.83% for
the third quarter of 1997. The average rate paid on interest-
bearing liabilities increased 9 basis points from 4.76% for the
first nine months of 1996 to 4.85% for the first nine months of
1997.
In September of 1996 the Company elected to increase the
annual percentage yield on money market savings deposits to
4.20%. The Company currently guarantees this minimum yield
through June 30, 1998 for all new money market savings accounts
opened having balances of $1,000 or more. The Bank's total
balance in money market savings deposits increased $50,456,733
during the first nine months of 1997, or 55.70%, from $90,586,393
at December 31, 1996 to $141,043,126 at September 30, 1997. This
strategy contributed to the increase in the Company's interest
expense during the first nine months of 1997 versus the first
nine months of 1996. However, the Company believes the higher
rate is justified because the Company has historically had
comparatively low money market deposit balances compared to many
banks and instead relied more heavily on higher rate time
deposits as a funding source. The above market yield on the
money market account was a conscious strategy designed to change
the Company's deposit composition by significantly increasing
money market account balances while at the same time attracting
funds at a yield lower than that which would have been paid on
time deposits. At December 31, 1996, total money market savings
deposits were 34.3% of total deposits and 38.5% of total
interest-bearing deposits. At September 30, 1997, the percentage
that total money market savings deposits were of total deposits
and total interest-bearing deposits, increased to 42.1% and
47.1%, respectively.
Interest expense on certificates of deposit increased
$441,000, or 28.31%, from $1,558,000 during the third quarter of
1996 to $1,999,000 during the third quarter of 1997. Interest
expense on certificates of deposit increased $1,121,000, or
24.63%, from $4,552,000 during the first nine month of 1996 to
$5,673,000 during the first nine months of 1997. This increase
was due to an increase in the average volume of certificates of
deposit in the amount of $25,291,000, or 22.43%, from
$112,742,000 for the quarter ended September 30, 1996 to
$138,033,000 for the quarter ended September 30, 1997. For the
nine months ended September 30, 1997, the average volume of
certificates of deposits increased $21,841,000, or 19.73%, to
$132,553,000 versus $110,712,000 for the first nine months of
1996.
Interest expense on other borrowed funds and long-term debt
increased for the third quarter of 1997 to $520,000 from $148,000
for the third quarter of 1996 because the average balance of
borrowed funds and long-term debt increased to $35,711,000 for
the third quarter of 1997 from $11,277,000 for the third quarter
of 1996. For the first nine months of 1997, interest expense on
other borrowed funds and long-term debt increased to $1,290,000
from $287,000 for the first nine months of 1996. The average
balance of borrowed funds and long-term debt increased to
$30,696,000 for the first nine months of 1997 versus $7,643,000
for the first nine months of 1996. The increase, along with the
increase in deposits, funded purchases of securities and loans as
part of an on-going matched-funding program that's designed for
the primary purpose of increasing earnings while also managing
interest rate risk and liquidity. Another integral part of this
strategy is to aggressively promote "free" non-interest bearing
business and personal demand (checking) accounts. This strategy
will continue throughout 1997 in an on-going effort by the
Company to lower its overall cost of funds.
Provision For Loan Losses
The provision for loan losses is charged to operations to
bring the total allowance for loan losses to a level considered
appropriate by management. The level of the allowance for loan
losses is determined by management of the Bank based upon its
evaluation of the known as well as inherent risks within the
Bank's loan portfolio. Management's periodic evaluation is based
upon an examination of the portfolio, past loss experience,
current economic conditions, the results of the most recent
regulatory examinations and other relevant factors (See
discussion under "Asset Quality"). The provision for loan losses
was $270,000 for the third quarter of 1997 compared to $160,000
for the third quarter 1996. For the first nine months of 1997,
the loan loss provision was $771,500 compared to $485,000 for the
first nine months of 1996. The reason for the increase in the
third quarter of 1997 versus 1996 was to replace that portion of
the allowance for loan losses used to fund loan charge-offs, as
well as to build the allowance for loan losses to a level deemed
to be satisfactory given the growth in the size of the loan
portfolio during the first nine months of 1997. Non-performing
assets were 1.01% of total assets at September 30, 1997, compared
to 1.12% at December 31, 1996. Delinquencies were 1.9% of total
loans at September 30, 1997, compared to 2.7% at December 31,
1996.
Other Income
Total other income increased $181,224, or 52.89%, from
$342,620 during the third quarter 1996 to $523,844 during the
third quarter 1997. The increase was due primarily to a $70,650
increase in customer service fees for services such as merchant
card fee income, overdraft and NSF (non-sufficient funds)
charges, safe deposit box rentals, and other miscellaneous fees
which are primarily deposit driven and a $107,021 increase in
income from mortgage banking activities.
For the first nine months of 1997, other income increased
$414,847, or 44.96%, to $1,337,571 from $922,724 for the same
period in 1996. The primary reasons for the increase were an
increase in customer service fees of $211,442, an increase in
fees from mortgage banking activities of $191,782 and a slight
increase in other income of $15,406.
Other Expenses
Total other expenses increased $595,759, or 34.68%, during
the third quarter of 1997 versus the same period in 1996, to
$2,313,614 from $1,717,855. Total other expenses also increased
during the first nine months of 1997 versus the first nine months
of 1996, by $1,748,489, or 37.28%, to $6,438,548 from $4,690,059.
The increases in total other expenses reflect the growth of the
bank, especially from the opening of the Muhlenberg and
Shillington offices on March 29, 1997 and May 3, 1997,
respectively, and compares favorably with the 55.61% increase in
total assets, from $283,332,121 at September 30, 1996 to
$440,890,220 at September 30, 1997.
Salaries, wages and employee benefits increased from
$725,805 for the quarter ended September 30, 1996 to $1,271,390
for the same period in 1997. For the first nine months of 1997,
salaries, wages and benefits increased $1,322,491, or 66.82%, to
$3,301,595 versus $1,979,104 for the same period in 1996.
Salaries, wages and employee benefits increased due to the growth
of the bank, especially from the opening of the new Muhlenberg
and Shillington branches.
Occupancy expense increased $24,457, or 14.97%, to $187,831
for the quarter ended September 30, 1997 versus $163,374 for the
quarter ended September 30, 1996. For the first nine months of
1997, occupancy expense was $510,701 versus $437,678 for the same
period in 1996, an increase of $73,023, or 16.68%. These
increases reflect step-up rates in lease contracts, due to
inflation escalators, and to building, lease, and other occupancy
expenses related to the operation of the new Muhlenberg and
Shillington offices for the third quarter of 1997.
Equipment depreciation and maintenance expenses increased
$29,230, or 26.80%, from $109,048 for the third quarter of 1996
to $138,278 for the third quarter of 1997. For the first nine
months of 1997, equipment depreciation and maintenance expenses
increased $76,861, or 24.48%, to $390,800 from $313,939 for the
same period in 1996. Equipment depreciation and maintenance
increased due primarily to the depreciation on the new Muhlenberg
and Shillington branches.
Other operating expenses decreased slightly in the third
quarter of 1997 versus the third quarter of 1996, from $719,628
to $716,115, a decrease of $3,513, or .49%. For the first nine
months of 1997, other expenses increased $276,114, or 14.09%, to
$2,235,452 compared to $1,959,338 for the first nine months of
1996. Significant changes for the first nine months of 1997
compared to the first nine months of 1996 occurred in EDP
outsourcing and MAC Fees, office supplies and expense, foreclosed
real estate expenses and other loan expenses. EDP outsourcing
and MAC fees increased $94,871, or 37.49%, to $347,926 for the
first nine months of 1997 versus $253,055 for the first nine
months of 1996. The increase was a result of expenses relating
to the Bank's Visa Checkcard associated with volume increases in
cards outstanding. Office supplies and expenses increased
$169,405, or 63.82%, to $434,827 for the first nine months of
1997 compared to $265,422 for the first nine months of 1996. The
increase was due to the growth of the Bank and the need to stock
the two new branches. Foreclosed real estate expenses decreased
$330,841, or 144.22%, to $(101,435) for the first nine months of
1997 from $229,406 for the first nine months of 1996. The large
decrease was due to the recognition of a $150,000 gain on the
sale of one of the properties during the third quarter of 1997.
Other loan expenses increased $96,987, or 96.09%, to $197,924 for
the first nine months of 1997 compared to $100,937 for the first
nine months of 1996. The increase was due to a home equity
promotion in 1997 whereby all costs were absorbed by the Company.
Provision For Income Taxes
The provision for income taxes was $246,426 for the third
quarter of 1997 versus $117,601 for the third quarter of 1996.
The provision for income taxes was $515,186 for the first nine
months of 1997 versus $298,652 for the first nine months of 1996.
For the first nine months of 1997, the Company's effective tax
rate was 19.11% versus an effective tax rate of 18.48% for the
same period in 1996. The significant decrease in 1997's and
1996's effective tax rate from the statutory tax rate of 34% was
due to the significant amount of tax-exempt interest income
earned on bank-qualified municipal securities and tax-free loans.
This increased $485,196, or 56.69%, during the first nine months
of 1997 to $1,341,056 from $855,860 during the same period of
1996.
Asset Quality
Non-performing assets as a percentage of total assets
decreased from 1.12% at December 31, 1996 to 1.01% at
September 30, 1997. Non-performing assets increased 22.68%, from
$3,630,587 at December 31, 1996 to $4,453,929 at September 30,
1997. The ratio of the allowance for loan losses to non-
performing assets was 55.10% at December 31, 1996 compared to
56.87% at September 30, 1997. Non-performing assets are
comprised of non-accrual loans, accruing loans that are 90 days
or more past due which are insured for credit loss, foreclosed
real estate (assets acquired in foreclosures), and restructured
loans. It is the Bank'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.
The balance in the allowance for loan losses was $2,532,932,
or 1.06% of total loans at September 30, 1997 compared with
$2,000,612, or 1.03%, of total loans at December 31, 1996. The
balance in the allowance for loan losses was 1.91% of total loans
excluding residential mortgages at September 30, 1997, compared
to 1.83% at December 31, 1996. It has been the Bank's experience
that the percentage of loan losses have been substantially less
in its residential mortgage portfolio than its commercial loan
portfolio. At September 30, 1997, 44.4% of the Bank's loan
portfolio was in residential mortgage loans, compared to 43.7% at
December 31, 1996.
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;
- analytical review of loan charge-off experience,
delinquency rates and other relevant historical and peer
statistical ratios;
- management's judgment with respect to local and general
economic conditions and their impact on the existing loan
portfolio;
- regular examinations and reviews of the loan portfolio by
the bank regulators.
When it is determined that the prospect for recovery of the
principal of a loan has significantly diminished, that portion of
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, 1997. 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.
Interest-Rate Risk Management
Interest-rate risk management involves managing the extent
to which interest-sensitive assets and interest-sensitive
liabilities are matched. The Bank typically defines interest-
sensitive assets and interest-sensitive liabilities as those that
reprice within one year or less. Maintaining an appropriate
match is a method of avoiding wide fluctuations in net-interest
margin during periods of changing interest rates.
The difference between interest-sensitive assets and
interest- sensitive liabilities is known as the "interest-
sensitivity gap" ("GAP"). A positive GAP occurs when interest-
sensitive assets exceed interest-sensitive liabilities repricing
in the same time periods, and, a negative GAP occurs when
interest-sensitive liabilities exceed interest-sensitive assets
repricing in the same time periods. A negative GAP ratio
suggests that a financial institution may be better positioned to
take advantage of declining interest rates rather than increasing
interest rates, and a positive GAP ratio suggests the converse.
The Bank attempts to manage its assets and liabilities in a
manner that stabilizes net interest income and net economic value
under a broad range of interest rate environments. Adjustments
to the mix of assets and liabilities are made periodically in an
effort to give the Bank dependable and steady growth in net
interest income regardless of the behavior of interest rates in
the economy.
Shortcomings are inherent in a simplified and static GAP
analysis that may result in an institution with a negative GAP
having interest rate behavior associated with an asset-sensitive
balance sheet. For example, although certain assets and
liabilities may have similar maturities or periods to repricing,
they may react in different degrees to changes in market interest
rates. Furthermore, repricing characteristics of certain assets
and liabilities may vary substantially within a given time
period. In the event of a change in interest rates, prepayment
and early withdrawal levels could also deviate significantly from
those assumed in calculating GAP in the manner presented in the
table.
The traditional static GAP analysis implicitly assumes that
the interest rates on all assets and liabilities that reprice
within a given repricing period change by the same amount as the
change in the market interest rate of the same duration. For
example, if the Federal funds rate increased by 100 basis points,
a static GAP model assumes that the prime rate and the rate paid
on money-market deposits will each change by 100 basis points.
However, experience suggests that such an analysis is not
accurate. For example, if the Federal funds rate changes by
100 basis points, the prime rate may only change by 90 basis
points and the rate paid on money-market accounts may only change
by 40 basis points.
More sophisticated asset/liability management models attempt
to adjust for this defect in the static GAP model. Accordingly,
the Bank measures its interest-rate risk by conducting various
analyses in addition to the traditional static GAP report,
including repricing matrices, beta-adjusted GAP reports,
simulation modeling and duration analyses.
Beta is the measure of the relative sensitivity of the
amount of change in the interest rate on a given asset or
liability with the amount of change in another independent
financial instrument. For example, an asset or liability with a
beta of .75 means that a 100 basis point change in the
independent variable (e.g. Federal funds) will result in a
75 basis point change in the rate of the asset or liability. A
beta is assigned to each key rate for each asset and liability
account; and, the volume of assets and liabilities that reprice
within a repricing period are adjusted by this beta factor. The
result is a beta-adjusted GAP position. This data is also
organized into a repricing matrix to give a graphical
presentation of the GAP position. Results of these analyses as
of September 30, 1997 indicate that despite the negative GAP
balance, the Bank does not have material interest-rate risk in
the event that interest rates rise or fall as much as 200 basis
points over the next twelve months.
Capital
The Company's Tier 1 capital to risk-weighted assets ratio
at September 30, 1997 was 16.98% compared to 10.39% at
December 31, 1996. These ratios far exceeded the Tier 1
regulatory capital requirement of 4.00%. The Company's total
capital to risk-weighted assets ratio at September 30, 1997 was
17.99% compared to 11.44% at December 31, 1996. These ratios
exceeded the total risk-based capital regulatory requirement of
8.00%. At September 30, 1997, the Company's leverage ratio was
10.58% versus 6.82% at December 31, 1996. The Company is
categorized as "well capitalized" under applicable Federal
regulations. The Company's capital performance, as measured by
its annualized return on average equity ratio (ROAE), decreased
slightly to 11.38% for the third quarter of 1997 from 11.44% for
the third quarter of 1996. For the first nine months of 1997,
ROAE increased to 11.84%, from 9.49% for the first nine months of
1996. This increase was primarily caused by the net proceeds
from the secondary stock offering completed in July of 1997. The
Company sold 1,380,000 shares at $16.375 per share. Net proceeds
after deducting expenses, was $20.8 million.
Banking laws and regulations limit the amount of dividends
that may be paid. Under current banking laws, the Bank would be
limited to approximately $2,900,000 of dividends in 1997 plus an
additional amount equal to the Bank's net profit for 1997, up to
the date of any such dividend declaration. In September 1997,
the Company declared a $ .08 per share cash dividend to
stockholders of record on October 6, 1997, payable October 20,
1997.
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 liquid assets totaled $13.6 million at September 30,
1997 compared to $35.0 million at December 31, 1996. Maturing
and repaying loans are another source of asset liquidity. At
September 30, 1997, the Bank estimated that an additional
$17.1 million of loans will mature or repay in the next six-month
period ended March 31, 1998.
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 Bank utilizes a variety of these methods of
liability liquidity. At September 30,1997, the Bank had
approximately $144.7 million in unused lines of credit available
to it under informal arrangements with correspondent banks
compared to $98.5 million at December 31, 1996. These lines of
credit enable the Bank to purchase funds for short-term needs at
current market rates. The bulk of these unused lines of credit
were with the FHLB.
Liquidity can be further analyzed by reference to the
Unaudited Consolidated Statements of Cash Flows. Net cash
provided by (used in) operating activities during the first nine
months of September 30, 1997 and 1996 was ($1,660,336) and
$3,614,606, respectively. The decrease from 1996 to 1997 was due
primarily to an increase in proceeds due from mortgage investors.
Proceeds due from mortgage investors increased due to the
increase in volume of mortgages originated for the secondary
market. The Company's cash flows from financing activities
increased from $68,811,292 at September 30, 1996 to $111,704,466
at September 30, 1997, due primarily to the increase in deposits.
The net increase in deposits was $70,818,105 at September 30,
1997 versus $55,335,794 at September 30, 1996. The Company
utilized $108,722,541 in cash for investing activities through
September 30, 1997 versus $67,545,898 through September 30,1996.
The increase in cash utilized for investing activities was
primarily due to an increase in purchases of securities. For the
nine months ended September 30, 1997, the Company purchased a
total of $114,302,165 in securities versus $45,758,996 for the
first nine months of 1996. Other significant changes in cash
flows from investing activities include $21,437,154 in proceeds
from maturities of and principal repayments on securities
available for sale for the nine months ended September 30, 1997
versus $2,882,065 for the nine months ended September 30, 1996
and a $21,386,810 decrease in interest-bearing deposits with
banks at September 30, 1997 versus a $6,497,867 decrease at
September 30, 1996. The changes in cash flows resulted in a net
increase of internally generated cash of $1,321,589 during the
nine months ended September 30, 1997 compared to a net increase
of $4,880,000 for the nine months ended September 30, 1996.
Effects of Inflation
The Bank's asset and liability structure is primarily
monetary in nature. As such, the Bank's assets and liabilities
tend to move in concert with inflation. While changes in
interest rates may have a significant impact on financial
performance, interest rates do not necessarily move in the same
direction or in the same magnitude as prices of other goods and
services and may frequently reflect government policy initiatives
or economic factors not measured by a price index.
<PAGE>
PART II
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders -
None
Item 5. Other Information
On October 10, 1997, BCB Financial Services Corporation
entered into an agreement of sale to purchase the 150,000 square
foot Penn Square Center located at 601 Penn Street, Reading, PA.
The building will become the Company's and the Bank's new
operation center. The Company plans to occupy four floors of the
ten story building and lease out the remaining floors.
The total purchase price for the building is $2,475,000 and
includes an ATM machine, and certain furniture, fixtures and
equipment. The Company has a 45 day due diligence period to
review certain documentation relating to the purchase of this
building and may, if conditions are unsatisfactory, declare the
agreement to be null and void.
The Company expects to reduce its occupancy expense by
approximately $50,000 in 1998 and $180,000 in 1999 through the
discontinuance of leases of space currently being occupied by the
bank for operations. The Company expects lease income on the
Penn Square Center building to offset administrative expenses of
operating the building once the building is fully occupied.
Item 6. Exhibits and Reports on Form 8 - K
(a) Exhibits
10.30. Agreement of Sale, dated October 10,
1997 by and between Meridian Properties,
Inc. and BCB Financial Services
Corporation.
11. Statement regarding computation of per
share earnings.
27. Financial Data Schedule.
(b) Reports on Form 8 - K
None
<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, 1997 BCB FINANCIAL SERVICES CORPORATION
(Registrant)
By/s/ Robert D. McHugh, Jr.
Robert D. McHugh, Jr.,
Senior Vice President and
Treasurer
(Principal Financial Officer)
By/s/ Donna L. Rickert
Donna L. Rickert, CPA,
Vice President and Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
10.30 Agreement of Sale, dated
October 10, 1997 by and between
Meridian Properties, Inc. and BCB
Financial Services Corporation.
11 Statement regarding computation of
per share earnings.
27 Financial Data Schedule.
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (the "Agreement") made this 10th
day of October, 1997 by and between Meridian Properties, Inc.,
herein named "Meridian" or "Seller", a Pennsylvania corporation,
with offices c/o CoreStates Bank, N.A. at 1345 Chestnut Street,
FC 1-1-18-2, Philadelphia, PA, and BCB Financial Services
Corporation ("BCB"), a Pennsylvania corporation, with offices at
400 Washington Street, P.O. Box 1097, Reading, PA 19603, herein
named the "Buyer".
WITNESSETH:
1. Agreement to Sell and Purchase. Seller agrees to
sell and convey to Buyer, and Buyer agrees to purchase from
Seller upon the terms and conditions contained herein, all that
parcel of land and the building and other improvements located at
601 Penn Street, Reading, Berks County, Pennsylvania, identified
as Tax Parcel #5307-83-80-5330, more fully described in, and as
shown on the plan attached hereto as Exhibit "A", including,
without limitation, one (1) NCR automatic teller machine
currently situate on site on the first floor retail lobby
("ATM"), and all related equipment and machinery (the "Real
Property"), together with such furniture, fixtures and equipment
identified in Exhibit "B" that are designated by Buyer pursuant
to Paragraph 5 below (the "Personal Property"). The Real Property
and the Personal Property are sometimes hereinafter collectively
referred to as the "Property".
2. Purchase Price. The purchase price for the
Property (the "Purchase Price") shall be Two Million Four Hundred
Seventy Five Thousand Dollars ($2,475,000.00), allocated as set
forth in Exhibit "C" attached hereto and incorporated herein.
3. Payment of Purchase Price. The Purchase Price
shall be payable by Buyer to Seller as follows:
(a) Payment of the sum of Fifty Thousand Dollars
($50,000.00), upon full execution of this Agreement by both
parties, on account of the Purchase Price as deposit monies (the
"Deposit Monies").
(b) At Closing (as hereinafter defined), the
balance of the Purchase Price by certified check, title company
check, or by wire transfer of immediately available funds.
4. Deposit Monies. The Deposit Monies shall be held
in an escrow account by Trammell Crow NE, Inc. in an interest-
bearing account at a federally insured banking institution.
Buyer's federal tax ID number is 23-2444807. Interest thereon
shall be payable to the Buyer at Closing. The Deposit Monies
shall be paid to the Seller at Closing and applied on account of
the Purchase Price. In the event of default under this
Agreement, which default is not cured within fifteen (15) days of
written notice thereof, the escrow agent shall pay the Deposit
Monies to the non-defaulting party, either as liquidated damages
or as payment on account of the Purchase Price.
5. Buyer's Due Diligence. As provided in Paragraph
6(a) hereof, Meridian, at Meridian's sole expense, shall provide
Buyer with the following documentation:
(a) Phase I Environmental Study;
(b) Copies of all existing leases;
(c) Seller certified income and expense operating
statements on the property for calendar year 1996;
(d) Any title work previously done by or on
behalf of Seller;
(e) Surveys, engineering reports and any other
material information relating to the building in Seller's
possession;
(f) Copies of all contracts with service
providers, including, but not limited to, those more particularly
set forth in Exhibit "D"; and
(g) City of Reading Code Enforcement Office
inspection of the Real Property satisfactory to the Buyer.
In the event that any of the foregoing documentation
reveals conditions which are deemed by Buyer to be
unsatisfactory, then the Buyer shall, within 45 days of the date
of the Agreement, deliver written notification thereof to the
Seller and thereupon, at Buyer's sole option, Buyer may declare
this Agreement, in writing, to be null and void and all Deposit
Monies, together with all interest thereon, shall thereupon be
returned forthwith to Buyer with no further obligations or
liabilities on either party. If no such declaration is submitted
by the Buyer within said 45 day period, this contingency will be
waived and all other terms and conditions will remain in full
effect. In addition, Buyer shall designate, in writing, the items
set forth in Exhibit "B" that shall constitute the Personal
Property, and shall deliver such designation to Seller within
twenty (20) days of the date of this Agreement. Seller shall use
reasonable efforts to deliver all of the Personal Property to
Buyer, however, Seller's failure to deliver all of the Personal
Property to Buyer shall not be an event of default hereunder, nor
shall it affect Buyer's obligation to pay the full Purchase
Price, so long as Seller delivers substantially all of the
Personal Property to Buyer at the time of Closing.
6. Conditions to Closing. The obligation of Buyer to
close the purchase and sale of the Property is subject to the
following conditions, each of which are for the benefit of and
may be waived by Buyer, but only if such waiver is made expressly
and in writing:
(a) Meridian shall timely submit, as soon as
received by Meridian, at Meridian's sole expense, to the Buyer
the documents referenced in Paragraph 5(a) through (g) above;
(b) Within thirty (30) days from the date of this
Agreement, Seller shall provide Buyer and its counsel with a
letter or other writing from the Solicitor for the Berks County
Industrial Development Authority ("BCIDA"), confirming the
authority and intent of the BCIDA to join in the conveyance of
the Property to the Buyer, upon terms consistent with the terms
of this Agreement.
(c) Seller shall pay all property taxes,
utilities and other routine charges up to the date of Closing.
Absent an event of default by Seller under this subparagraph,
Buyer agrees to accept title to the Property subject to all
municipal liens and assessments for improvements levied from and
after the date of this Agreement. Seller warrants that it has not
received notice of any pending improvement assessments, and will
immediately send a copy to Buyer of any such notice it shall
receive prior to Closing, and will take no action as concerns the
Property that shall cause any improvement assessments to be made
prior to Closing;
(d) Seller shall terminate all building service,
supply, utility, management, and/or other contracts as of the
date of Closing, unless otherwise instructed by Buyer, provided,
however, that Seller shall not terminate or materially modify the
terms of any currently existing building service contracts prior
to Closing without the prior written consent of Buyer;
(e) Seller shall deliver the Real Property in
broom clean condition on the date of Closing, and shall cause to
be removed prior to Closing, at Seller's expense, all items
listed in Exhibit "B" hereof which are not designated in writing
by Buyer, as set forth in Paragraph 5 above;
(f) The timely material performance by Seller of
each and every obligation imposed upon Seller hereunder;
(g) The truth and accuracy in all material
respects as of the date hereof and the date of Closing of each
and every warranty and representation herein made by Seller;
(h) The satisfactory completion by Buyer of its
examination, testing and review of the Property, documents and
other items as specified in Section 5 hereof;
(i) Satisfactory pre-settlement inspection by
Buyer within three (3) days of settlement, confirming to Buyer
(i) that substantially all of the Personal Property is located at
or about the Real Property, (ii) that Seller has been operating
the Property in substantially the same manner as of the date of
this Agreement, and (iii) that the Seller has materially
performed its duties and obligations under this Agreement;
(j) Receipt by Buyer of fully dated and executed
Tenant Estoppel Certificates, in form acceptable to Buyer and its
counsel, from Bingaman, Hess, Coblentz & Bell; BARTA; and James
Dastra Hair Salon. Seller will endeavor to obtain said Tenant
Estoppel Certificates from all other tenants listed in Exhibit
"E" hereof, at or before Closing; and
(k) At Closing, Meridian shall execute and
deliver to Buyer or cause to be executed and delivered to Buyer,
as the case may be:
(i) an affidavit by Meridian stating, under
penalty of perjury, Seller's United States taxpayer
identification number and stating that Seller is not a
foreign person, pursuant to Section 1445 of the Internal
Revenue Code;
(ii) an owner's affidavit in form and
substance sufficient to permit the issuance of the Title
Policy, consistent with the provisions of Paragraph 7
hereof;
(iii) an acknowledgment and restatement by
certificate of the representations and warranties of Seller
in this Agreement; and
(iv) evidence that all real estate taxes and
assessments for which Seller is responsible, and all other
expenses associated with the Property for which Seller is
responsible, have been paid in full.
7. Condition of Title. Title shall be a good and
marketable fee simple title, free and clear of all liens and
encumbrances subject however to existing visible easements,
easement restrictions, rights of way of record, accuracy of
description, rights of public utilities, building and development
restrictions, zoning laws and rules, regulations, laws and
directives of federal, state, municipal or other governing
authorities, and rights of tenants as shown on Exhibit "E", and
shall be insurable as such at regular rates by a title insurance
company doing business in Berks County, Pennsylvania. Within
thirty (30) days after the date hereof, Buyer shall deliver to
Seller a title binder for the Property from the title company
which will so insure Buyer's title hereunder and shall notify
Seller in writing of any title matters contained therein which do
not satisfy the foregoing title requirements. If the title
binder and exceptions are not delivered to Seller within the
aforesaid thirty (30) day period, title shall be deemed
acceptable to Buyer.
8. Conveyance. Conveyance shall be by special
warranty deed ("Deed") to Buyer, together with an assignment of
all tenant leases in the form attached hereto as Exhibit "F".
9. Covenants, Warranties and Representations of
Seller. Seller covenants, represents and warrants to Buyer, both
as of the date hereof and as of the date of Closing, as follows:
A. Seller has the right, power and authority to
enter into this Agreement and to sell the Property in accordance
with the terms and conditions hereof, and shall give such
evidence thereof as may be reasonably required by Buyer's legal
counsel;
B. Seller has received no notice and has no
knowledge of any pending or contemplated condemnation,
requisition, zoning change or similar proceeding affecting the
Property or any part thereof;
C. Seller shall provide at Closing any and all
documentation or affidavits (relating to matters known to Seller
or resulting from Seller's acts) reasonably deemed necessary for
issuance of the Title Policy without exception for mechanics' and
materialmen's liens;
D. There is no litigation or other proceeding
pending or, to the best of Seller's knowledge, threatened which
relates to the Property or any part thereof or which affects
Seller's right to sell the Property or any part thereof;
E. To the best of Seller's knowledge, there
exist no violations of any law, ordinances, order or requirements
affecting the Property;
F.To the best of Seller's knowledge (except as
otherwise expressly set forth herein), the Property has not been
used as a landfill to receive solid waste, whether or not
hazardous, nor have any "hazardous substances," "hazardous
materials," or "toxic substances" as such terms are defined in
the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et.
seq. (as amended); the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et. seq.; the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, et. seq.; Toxic
Substances Control Act, 15 U.S.C. Section 2601 et. seq.; Water
Pollution Control Act, Federal Clean Water Act of 1977, 33 U.S.C.
Section 1251 et. seq.; and the Safe Drinking Water Act, 42 U.S.C.
Section 300 (F) et. seq.; as amended, and in the regulations
adopted, published, and/or promulgated pursuant to said laws
(collectively, the "Environmental Laws"), been generated,
released, stored or deposited in, on, over or beneath the
Premises or any part thereof. With the exception of one (1)
existing 8000 gallon registered underground storage tank, there
are no underground storage tanks and/or associated piping on or
under the Property. Seller shall provide Buyer with evidence
that all financial responsibility and other requirements relating
to the removal of past underground storage tanks on the Property,
if any, have been satisfied. Seller shall provide Buyer with
copies of all records relating to any underground storage tanks
that were required to be maintained by any applicable Federal,
state or local statutes or regulations.
G. So long as this Agreement is in effect Seller
shall not, without Buyer's prior written consent, make, create or
allow any transfer, lien, lease, encumbrance, easement,
restriction, reservation, contractual or other right, license or
interest involving the Property or any part thereof or act in
such a way as would deprive or hinder Seller from transferring
the Property to Buyer in accordance with terms and conditions of
this Agreement;
H. Seller is not involved in any bankruptcy,
reorganization or insolvency proceedings;
I. All taxes, water charges and sewer charges
affecting the property due and payable at the time of the Closing
shall have been paid and all special assessments which are or
will become a lien known to Seller at the date of this Agreement
shall also have been paid and discharged whether or not payable
in installments;
J. All work done or materials furnished or to be
furnished by or on behalf of Seller for the Property have been
completed and paid for in full or shall be completed and paid for
in full at the time of Closing;
K. To the best of Seller's knowledge, after
reasonable investigation, there are no parties in possession of
the Property or entitled to possession thereof, or any part
thereof, other than Seller and the Tenants listed in Exhibit "E"
hereof;
L. Seller will not cause or knowingly permit any
action to be taken which would cause any of the foregoing
representations or warranties to be materially untrue as of
Closing.
10. Closing Adjustments. The parties agree to
apportion the following costs:
(a) The Buyer and Meridian shall each pay one-
half of the Pennsylvania and local real estate transfer taxes as
concerns the Real Property.
(b) Real estate taxes shall be apportioned
between the parties as of the day of Closing based on the then
current assessment.
(c) Sewer, water, gas and other utility charges
shall be determined by final meter reading on the day of Closing
and all charges occurring up to the Closing date shall be
Meridian's responsibility. Meridian shall be given a credit for
oil remaining in the tank on the day of Closing based on the cost
per gallon shown on Meridian's most current bill.
(d) All rents shall be pro-rated as of the date
of Closing and all security deposits shall be payable to Buyer
together with any applicable interest earned by the tenant(s) at
time of Closing. A list of current leases is attached hereto as
Schedule "E". At Closing, Seller shall assign all of Seller's
right, title, and interest in and to all tenant leases and Buyer
shall assume all of Seller's duties under said leases from and
after the Closing.
11. Condition of Property. Acceptance of the Deed and
payment of the Purchase Price shall constitute Buyer's
acknowledgment that Buyer has had the opportunity to inspect the
physical condition of the Property to the extent deemed necessary
by Buyer, and Buyer agrees that, with the exception of the
express covenants, representations, and warranties set forth in
this Agreement, neither Seller nor anyone on Seller's behalf has
made any representation or warranty with respect to the physical
condition of the Property or otherwise, and Buyer agrees to
purchase the Property "AS IS", in its present condition, subject
only to said express covenants, representations and warranties.
12. Inspection. Buyer, its agents, employees,
independent contractors and representatives, at Buyer's expense,
shall have the right at any reasonable time and from time to time
before Closing, upon giving reasonable notice to Seller and
affected tenants, to enter the Real Property for the purpose of
planning and designing. Buyer hereby agrees to indemnify Seller
for any costs, expenses or damages resulting from the acts of
Buyer or its agents, employees, independent contractors,
representatives or invitees during any such entry.
13. Condemnation. If, at any time prior to Closing
hereunder, any action or proceeding is filed, or threatened,
under which the Real Property, or any portion thereof may be
taken pursuant to any law, ordinance or regulation or by
condemnation or the right of eminent domain, then at the option
of Buyer:
A. This Agreement shall be terminated; or
B. This Agreement shall remain in full force and
effect and Seller, at the time of the Closing hereunder, shall
transfer and assign to Buyer all of the Seller's right, title and
interest in and to any proceeds received or which may be received
by Seller by reason of such taking. Said option shall be
exercisable by Buyer delivering to Seller written notice of such
exercise on or before the fifteenth (15th) day following the date
on which Buyer receives written notice from Seller that such
action or proceeding has been filed or is threatened. Should
said fifteen (15) day period extend beyond the date of
settlement, as herein provided, Buyer shall have the right to
extend the date of Closing, to allow Buyer the full fifteen (15)
days provided by this Paragraph 13 in which to exercise its
options under this Paragraph 13.
14. Destruction of Improvements. If all or any
material part of the improvements located on the Real Property
are destroyed or damaged (excluding normal wear and tear) prior
to Closing, Meridian shall give notice to Buyer of such damage or
destruction and of Meridian's insurance coverage. Buyer shall
elect within thirty (30) days of such notice to either:
A. Terminate this Agreement; or
B. Close the transaction contemplated hereby, in
which event the Purchase Price shall not be reduced except for a
reduction by the amount of any deductible amount applicable to
insurance proceeds and Seller shall assign to Buyer, Seller's
rights to any insurance proceeds paid or payable to Seller in
connection with such damage or destruction.
If Buyer does not timely notify Seller of Buyer's
election, Buyer shall be deemed to have elected to close the
transaction contemplated hereby in accordance with clause (B)
above. Seller agrees until Closing to maintain any improvements
in their existing condition, normal wear and tear and damage by
condemnation, fire or other casualty excepted, and to keep the
improvements on the Real Property insured in an amount equal to
one hundred percent (100%) of the replacement cost thereof.
15. Third Party Brokerage. Seller and Buyer
acknowledge that Trammell Crow NE, Inc., 601 Penn Street,
Reading, Pennsylvania is the agent for the Seller, and RE/MAX of
Reading is the agent for the Buyer. The Seller agrees to pay a
total sales commission on the sale of the Property of $139,000.00
to be split equally between Trammell Crow NE, Inc. and RE/MAX of
Reading. Buyer and Seller each warrant and represent to the
other that they have not dealt with any agent/broker other than
Trammell Crow NE, Inc. for the Seller, and RE/MAX of Reading, for
the Buyer, and each party agrees to indemnify, defend, and hold
harmless, the other party from anyone claiming a commission by,
through, or under them.
16. Closing. Closing (the "Closing") shall be made
within thirty (30) days after satisfaction of all contingencies
hereunder, including, but not limited to, the satisfaction of all
BCIDA requirements. Closing will take place at the offices of a
title insurance company of Buyer's choice in Berks County,
Pennsylvania at a specific time mutually agreeable by Seller and
Buyer. In the event that said thirty (30) day period after
satisfaction of all contingencies does not expire on or before
March 31, 1998, then this Agreement shall expire on March 31,
1998, and thereupon all Deposit Monies, and any interest thereon,
shall be returned to Buyer, and the parties hereto shall have no
further duties or responsibilities to each other pursuant to this
Agreement.
17. Delivery of Deed, Bill of Sale, and Possession of
Property. The Seller shall deliver the Deed, and a Bill of Sale,
in form satisfactory to Buyer, and possession of the Property at
the Closing. Formal tender of deed is hereby waived.
18. Time of Essence. It is agreed by the parties that
time shall be of the essence of this Agreement, unless extended
by mutual consent in writing.
19. Entire Agreement, Modifications. This Agreement
constitutes the entire contract between the parties hereto and
there are no other understandings, representations or warranties,
oral or written, relating to the subject matter hereof. This
Agreement may not be changed, modified or amended, in whole or in
part, except in writing, signed by all parties.
20. Confidentiality. The Parties agree to keep the
terms and conditions of this Agreement and any materials supplied
to Buyer by Seller or to agents in connection with the sale,
confidential and not disclose any parts to any third party,
except their respective consultants for advice and discussion.
The Buyer agrees to insert a similar obligation in its agreements
with its consultants so that its consultants are bound to this
clause. Notwithstanding the above, prior to Closing Buyer may
issue an appropriate press release upon the execution of this
Agreement, provided, however, that Buyer shall provide Seller, by
hand delivery or fax transmission, a draft of such press release
prior to release, and Seller shall have the right to delete any
reasonably objectionable provisions thereof that specifically
reference the Seller, without any additions, upon notification to
Buyer within one business day of receipt of such draft by Seller.
Absent such notification by Seller, such right of deletion shall
be deemed waived.
21. Notices. Notices given pursuant to this Agreement
shall be in writing, and shall be given by actual delivery to the
party entitled thereto at the addresses set forth below or at
such other address as any party may designate in writing to any
other party pursuant to the provisions of this paragraph.
Notices shall be given by mail sent by United States mail,
certified or registered, return receipt requested or by overnight
courier providing proof of delivery. Notices shall be deemed to
be received on the date of actual receipt. Notices shall be
served or mailed to the following addresses, subject to change as
provided above:
If to the Seller:
Corporate Real Estate Department
CoreStates Bank, N.A.
Attn: John L. Cover, V.P.
FC 1-1-18-2
1345 Chestnut Street
Philadelphia, PA 19107
If to the Buyer:
BCB Financial Services Corporation
c/o Berks County Bank
Attn: Nelson R. Oswald, President
400 Washington Street
P.O. Box 1097
Reading, PA 19603
22. Survival of Covenants. Notwithstanding any
presumption to the contrary, the covenants, conditions,
warranties, and representations contained in this Agreement shall
survive Closing and not merge therein.
23. No Recording. This Agreement shall not be filed
for record in any public office. Any recording or attempted
recordation of this Agreement by either party, shall be deemed a
default hereunder.
24. Assignability: Binding Effect. Buyer shall have
the right to assign this Agreement at or prior to Closing to
another entity or successor in which it has a controlling
interest upon notice in writing to the Seller. Except as
otherwise provided in the immediately foregoing sentence, this
Agreement is not assignable by Buyer or Seller without prior
written consent of the other party, which consent shall not be
unreasonably withheld. This Agreement and all of it's terms and
conditions shall extend to and be binding upon the parties hereto
and upon their respective heirs, executors, administrators,
successors and permitted assigns.
25Seller's default hereunder, which default is not cured within
fifteen (15) days of written notice thereof to Seller, Buyer
shall be entitled to exercise all rights and remedies available
to Buyer at law or in equity, in addition to the remedies set
forth in Paragraph 4 hereof.
26. Seller's Remedies upon Default. In the event
of Buyer's default hereunder, which default is not cured within
fifteen (15) days of written notice thereof to Buyer, Seller
shall be entitled to exercise all rights and remedies available
to Seller at law or in equity, in addition to the remedies set
forth in Paragraph 4 hereof.
27. Limitation of Liability. Notwithstanding anything
to the contrary herein contained, BCIDA's liability under this
Agreement shall be enforceable only out of the real estate
covered by this Agreement and the rents, issues and profits
thereof, and the lien of any judgment against it arising out of
this Agreement shall be limited thereto. Nothing herein,
however, shall limit Buyer's rights against any person, firm or
corporation other than BCIDA.
28. Contingency. Buyer's obligations to close the
purchase and sale of the Property is contingent upon Buyer's
receipt of all necessary approvals from the Pennsylvania
Department of Banking and the Federal Reserve.
29. Leasing. During the period between the date of
this Agreement of Sale and the date of Closing, or earlier
termination of this Agreement:
(a) Buyer shall have the right to approve any
newly originated lease(s) and the renewal of any existing
lease(s) under terms and conditions satisfactory to the Buyer.
(b) Buyer, or its agent, may show the Property to
prospective tenants. Buyer shall not commit to any leases
without the consent of Meridian.
30. Reservation of Space Option. Meridian reserves
the option to lease ("Option to Lease") all or any portion (but
not less than 50 percent) of the Fifth Floor of the Real
Property, and in the event that Meridian exercises the Option to
Lease all of the Fifth Floor, as aforesaid, Meridian shall
thereupon have the Option to Lease all or any portion (but not
less than 50 percent) of the fourth floor of the Real Property
("Fourth Floor") as well. The Fifth Floor and the Fourth Floor
each contain 11,020 rentable square feet of space. The exercise
of the Option to Lease all or any part of the Fifth Floor, and
all or any part of the Fourth Floor, as aforesaid, may be
exercised by Meridian at one time only, by notices hereafter
provided. The term of any such lease shall be for a period of no
less than six (6) months, and, at the option of Meridian, in
additional increments of six (6) months each, but no greater than
an aggregate term of two (2) years from the date of exercise,
provided, however, that Meridian shall have the right, upon
thirty (30) days prior written notice to Buyer, of terminating
said lease effective six (6) months prior to the end of the
applicable lease term. Meridian shall lease all or any portion
of the Fifth Floor, and/or the Fourth Floor, conditioned as
above, at the rate of $10.00 per square foot, with services as
provided in accordance with the provisions of Exhibit "G".
Meridian shall exercise its Option to Lease, as aforesaid, by
written notification to Buyer no more than sixty (60) days from
the date of this Agreement, which notification shall specifically
designate the floor and square footage of space to be leased.
The terms and provisions of the lease shall be substantially in
the form of Exhibit "G" attached hereto and incorporated herein
by reference thereto. The written lease shall be completed and
executed by the parties thereto no more than ten (10) days
following any exercise of the Option to Lease, as hereinabove
provided. In the event that Meridian exercises said option, the
tenant under the lease may be Meridian Properties, Inc. and/or
its parent company, CoreStates Bank, N.A., and may be occupied by
consultants of CoreStates Bank, N.A. or other third party service
providers. Meridian's Option to Lease, as herein set forth,
shall not be assignable absent prior written consent of the
Buyer. In addition, in the event that Meridian exercises its
option to lease as aforesaid, the tenant under said lease shall
have no right to sublease the Property without the prior written
consent of the Buyer. Notwithstanding the above, in no event
shall the Option to Lease reserved to Meridian be exercised later
than Closing. In the event that the Option to Lease is exercised
by Meridian, any fit up for the leased premises shall be done at
the expense of Meridian and/or the tenant under the said lease,
pursuant to plans and specifications acceptable to Meridian
and/or the tenant under lease, on the one hand, and the Buyer.
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound hereby, have caused this Agreement of Sale to be
duly executed, and their seals affixed, on the day hereinabove
first written.
MERIDIAN PROPERTIES, INC.
By: /s/ John L. Cover
("Seller")
BCB FINANCIAL SERVICES CORPORATION
By: /s/ Nelson R. Oswald
("Buyer")
Exhibit (11) - Statement Re: Computation of Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Primary:
Average shares outstanding 3,091,499 2,069,673 2,413,131 2,069,066
Net effect of dilutive stock options - based on the treasury
stock method using average market price 55,232 15,351 52,453 15,237
Total 3,146,731 2,085,024 2,465,584 2,084,303
========== ========== ========== ==========
Net income $ 983,521 $ 538,766 $2,180,058 $1,317,697
========== ========== ========== ==========
Per share amount $ 0.31 $ 0.26 $ 0.87 $ 0.63
========== ========== ========== ==========
Fully diluted:
Average shares outstanding 3,091,499 2,069,673 2,413,131 2,069,066
Net effect of dilutive stock options - based on the treasury
stock method using average market price which is greater
than quarter-end market price 65,294 15,482 56,154 15,798
Total 3,156,793 2,085,155 2,469,285 2,084,864
========== ========== ========== ==========
Net income $ 983,521 $ 538,766 $2,180,058 $1,317,697
========== ========== ========== ==========
Per share amount $ 0.31 $ 0.26 $ 0.87 $ 0.63
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 10,306
<INT-BEARING-DEPOSITS> 20
<FED-FUNDS-SOLD> 270
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 113,834
<INVESTMENTS-CARRYING> 60,532
<INVESTMENTS-MARKET> 60,981
<LOANS> 239,188
<ALLOWANCE> 2,533
<TOTAL-ASSETS> 440,890
<DEPOSITS> 335,141
<SHORT-TERM> 43,889
<LIABILITIES-OTHER> 6,775
<LONG-TERM> 12,000
0
0
<COMMON> 8,668
<OTHER-SE> 34,417
<TOTAL-LIABILITIES-AND-EQUITY> 440,890
<INTEREST-LOAN> 13,398
<INTEREST-INVEST> 5,822
<INTEREST-OTHER> 229
<INTEREST-TOTAL> 19,449
<INTEREST-DEPOSIT> 9,591
<INTEREST-EXPENSE> 10,881
<INTEREST-INCOME-NET> 8,568
<LOAN-LOSSES> 771
<SECURITIES-GAINS> (4)
<EXPENSE-OTHER> 6,439
<INCOME-PRETAX> 2,695
<INCOME-PRE-EXTRAORDINARY> 2,180
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,180
<EPS-PRIMARY> .87
<EPS-DILUTED> .87
<YIELD-ACTUAL> 2.52
<LOANS-NON> 3,313
<LOANS-PAST> 775
<LOANS-TROUBLED> 75
<LOANS-PROBLEM> 551
<ALLOWANCE-OPEN> 2,001
<CHARGE-OFFS> 311
<RECOVERIES> 72
<ALLOWANCE-CLOSE> 2,533
<ALLOWANCE-DOMESTIC> 907
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,626
</TABLE>
