-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HWeYjfkh7+0soBtCMRoN987Fq+mIMBMJAgTbuceRPtTXcMwprBG02JPQ6DuOb6Hf srGd5ElZgWUZb/gKC9qnSg== /in/edgar/work/0000914317-00-000776/0000914317-00-000776.txt : 20001115 0000914317-00-000776.hdr.sgml : 20001115 ACCESSION NUMBER: 0000914317-00-000776 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IPSWICH BANCSHARES INC CENTRAL INDEX KEY: 0001089857 STANDARD INDUSTRIAL CLASSIFICATION: [6770 ] IRS NUMBER: 043459169 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26663 FILM NUMBER: 764492 BUSINESS ADDRESS: STREET 1: 23 MARKET STREET CITY: IPSWICH STATE: MA ZIP: 01938 BUSINESS PHONE: 9783567777 MAIL ADDRESS: STREET 1: 23 MARKET STREET CITY: IPSWICH STATE: MA ZIP: 01938 10-Q 1 0001.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10Q - QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) {X} Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 2000. { } Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number: (0-26663) IPSWICH BANCSHARES, INC. ----------------------- (Exact name of Registrant as specified in its charter) Massachusetts 04-3459169 - -------------------------------------------------------------------------------- (State or other jurisdiction of I.R.S. Employer incorporation or organization) Identification No.) 23 Market Street, Ipswich, Massachusetts 01938 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (978) 356-7777 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Title of each class: Name of each exchange on which registered: Common Stock, $0.10 par value NASDAQ National Market 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 requirement for the past 90 days. Yes X No ___ Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by court. Yes___ No ___ The number of shares outstanding of the Registrant's common stock as of November 8, 2000 was 2,137,352. IPSWICH BANCSHARES, INC. AND SUBSIDIARY Consolidated Balance Sheets (Dollars in thousands, except per share data)
September 30, December 31, 2000 1999 --------------------- ---------------------- ((unaudited) (unaudited) Assets Cash and due from banks $8,547 $6,552 Interest-bearing deposits and federal funds sold 0 1,707 Investment and mortgage-backed securities available for sale 39,669 39,502 Investment and mortgage-backed securities held to maturity 27,325 28,069 Loans held for sale 2,358 0 Loans: Residential fixed rate 70,554 77,490 Residential adjustable rate 98,837 86,519 Home equity 28,296 23,385 Commercial 5,461 4,873 Consumer 1,057 1,060 --------------------- ---------------------- Total gross loans 204,205 193,327 Allowance for possible loan losses -1,823 -1,798 --------------------- ---------------------- Net loans 202,382 191,529 Stock in FHLB of Boston 3,000 3,977 Savings Bank Life Insurance Company stock 253 253 Banking premises and equipment, net 3,046 3,168 Other real estate owned 0 111 Accrued interest receivable 1,615 1,248 Other assets 356 182 --------------------- ---------------------- Total assets $288,551 $276,298 ===================== ====================== Liabilities and Stockholders' Equity Liabilities: Deposits: Non-interest-bearing checking accounts $20,464 $15,209 Interest-bearing checking accounts 31,711 27,481 Savings accounts 36,989 37,704 Money market accounts 62,563 62,859 Certificates of deposit 73,549 66,829 --------------------- ---------------------- Total deposits 225,276 210,082 Borrowed funds 42,584 45,000 Mortgagors' escrow accounts 972 993 Deferred income tax liability, accrued expenses and other liabilities 3,433 3,248 --------------------- ---------------------- Total liabilities 272,265 259,323 Equity capital 18,278 16,965 Treasury stock (262,400 shares) -2,295 0 Unrealized gain on investment securities available for sale 303 10 --------------------- ---------------------- Total stockholders' equity 16,286 16,975 --------------------- ---------------------- Total liabilities and stockholders' equity $288,551 $276,298 ===================== ====================== Shares outstanding 2,263,027 2,525,427 Selected data (end of period): - --------------------------------------------------------- Equity to assets (in %) 5.64 6.14 Total equity to risk-weighted assets (in %) 12.67 14.38 Total non-performing assets, net $27 $142 Book value per share $7.20 $6.72
Page -2- IPSWICH BANCSHARES, INC. AND SUBSIDIARY Consolidated Statements of Income (Dollars in thousands, except per share data)
Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 ---------------- -------------- -------------- -------------- (unaudited) (unaudited) (unaudited) (unaudited) Interest and dividend income: Loans $3,854 $3,586 $10,993 $10,815 Investment securities available for sale 719 539 2,089 1,612 Investment securities held to maturity 467 344 1,410 803 Federal funds and interest bearing deposits 74 65 266 137 ---------------- -------------- -------------- -------------- Total interest and dividend income 5,114 4,534 14,758 13,367 Interest expense: Deposits 2,076 1,623 5,876 4,844 Borrowed funds 790 633 2,230 2,081 ---------------- -------------- -------------- -------------- Total interest expense 2,866 2,256 8,106 6,925 ---------------- -------------- -------------- -------------- Net interest and dividend income 2,248 2,278 6,652 6,442 Provision for possible loan losses 15 10 45 100 ---------------- -------------- -------------- -------------- Net interest and dividend income after provision for possible loan losses 2,233 2,268 6,607 6,342 Non-interest income: Mortgage banking revenues, net -78 436 14 1,195 Retail banking fees 449 380 1,250 1,106 Net gain/(loss) on sales of securities 0 0 2 65 Other -1 4 10 11 ---------------- -------------- -------------- -------------- Total non-interest income 370 820 1,276 2,377 ---------------- -------------- -------------- -------------- Net interest, dividend and non-interest income 2,603 3,088 7,883 8,719 Non-interest expenses: Salaries and employee benefits 834 834 2,483 2,396 Occupancy and equipment expenses 229 226 681 676 Data processing services 211 205 655 564 Marketing expense 103 102 407 368 Professional fees 82 71 260 611 Office expense 92 100 276 294 Other 103 80 323 409 ---------------- -------------- -------------- -------------- Total non-interest expenses 1,654 1,618 5,085 5,318 ---------------- -------------- -------------- -------------- Income before income taxes 949 1,470 2,798 3,401 Income tax expense 332 442 789 1,021 ---------------- -------------- -------------- -------------- Net income $617 $1,028 $2,009 $2,380 ================ ============== ============== ============== Basic earnings per share $0.26 $0.41 $0.82 $0.97 Diluted earnings per share $0.26 $0.40 $0.81 $0.94 Dividends per share $0.10 $0.05 $0.30 $0.15 Weighted average common shares outstanding (basic) 2,369,795 2,525,227 2,454,597 2,460,572 Weighted average common shares outstanding (diluted) 2,395,805 2,550,388 2,478,903 2,539,217 Selected performance data: - --------------------------------------------------- (Expense ratios exclude one time charges) Return on average equity (in %) 14.58 25.74 15.53 20.78 Return on average assets (in %) 0.85 1.52 0.94 1.18 Net interest margin (in %) 3.18 3.51 3.20 3.27 Expenses to average assets (in %) 2.26 2.40 2.38 2.44 Efficiency ratio (in %) 60.09 53.35 63.33 56.84 Mortgage and equity loan production $20,145 $23,076 $50,711 $96,189
Page -3- IPSWICH BANCSHARES, INC. AND SUBSIDIARY Consolidated Statements of Changes in Stockholders' Equity Nine Months Ended September 30, 2000 and 1999 (Dollars in thousands, except for share data) (unaudited)
Accumulated Additional other Total Shares Common paid-in Retained Treasury comprehensive stockholders' outstanding stock capital earnings stock income equity ------------ ------- -------- -------- -------- --------- ----------- Balance at December 31, 1998 2,392,286 $ 239 $ 2,009 $ 11,790 $ 0 $ 185 $14,223 Stock options exercised 133,141 14 226 240 Issuance of stock rights 19 19 Cash dividends ($.15 per share) -372 -372 Comprehensive income: 2,380 2,380 Net income Other comprehensive income: Unrealized holding gains on -129 securities, net of taxes of $86 Reclassification adjustment for amounts included in net 78 income, net of taxes of $52 --------- -51 -51 Other comprehensive income --------- Total comprehensive income 2,329 ---------- ------- ---------- --------- -------- ------- --------- Balance at September 30, 1999 2,525,427 253 2,254 13,798 0 134 16,439 Issuance of stock rights 8 8 Cash dividends ($.10 per share) -257 -257 Comprehensive income: Net income Other comprehensive income: 909 909 Unrealized holding gains on securities, net of taxes of $64 -94 Reclassification adjustment for amounts included in net income, net of taxes of ($19) -30 --------- Other comprehensive income -124 -124 --------- Total comprehensive income 785 ---------- ------- ---------- --------- -------- ------- --------- Balance at December 31, 1999 2,525,427 253 2,262 14,450 0 10 16,975 Issuance of stock rights 27 27 Purchase of treasury stock -262,400 -2,295 -2,295 Cash dividends ($.30 per share) -723 -723 Comprehensive income: Net income Other comprehensive income: 2,009 2,009 Unrealized holding gains on securities, net of taxes of $178 267 Reclassification adjustment for amounts included in net income, net of taxes of $10 26 --------- Other comprehensive income 293 293 --------- Total comprehensive income 2,302 ---------- ------- ---------- --------- -------- ------- --------- Balance at September 30, 2000 2,263,027 $ 253 $ 2,289 $ 15,736 $-2,295 $ 303 $16,286 ========== ======= ========== ========= ======== ======= =========
Page -4- IPSWICH BANCSHARES, INC. AND SUBSIDIARY Consolidated Statements of Cash Flows Nine Months Ended September 30, 2000 and 1999 (Dollars in thousands) (unaudited)
2000 1999 ------------------- ------------------ Net cash flows from operating activities: Net income $2,009 $2,380 Adjustments to reconcile net income to net cash provided (used) by operating activities: Provision for possible loan losses 45 100 Depreciation expense 259 252 Amortization of premiums on investment securities, net 41 129 (Gain) Loss on sale of loans, net 78 -977 Loss on sale of real estate acquired by foreclosure 1 0 (Gain) on sale of investment securities available for sale, net -2 -65 Origination of loans held for sale -16,014 -72,592 Proceeds from sale of loans 3,459 11,544 Proceeds from sale of securitized loans 9,544 76,954 (Increase) in loan origination fees -275 -170 (Decrease) in loan discounts -4 -2 (Increase) in deferred premium on loans sold and mortgage servicing rights -97 -1,097 (Increase) in accrued interest receivable -367 -248 (Increase)decrease in other assets, net -77 33 Increase (decrease) in accrued expenses and other liabilities -5 489 ------------------- ------------------ Net cash provided (used) by operating activities -1,405 16,730 Net cash flows from investing activities: Purchase of investment securities available for sale -13,329 -13,380 Principal paydowns on mortgage-backed investment securities available for sale 7,197 10,674 Proceeds from the sale of investment securities available for sale 6,985 4,860 Purchase of investment securities held to maturity 0 -13,926 Principal paydowns on mortgage-backed investment securities held to maturity 743 736 Principal from the call of investment securities held to maturity 0 2,000 Redemption (purchase) of stock in FHLB of Boston 977 -1,072 Net (increase) in loans -10,619 -2,047 Proceeds from sale of real estate acquired by foreclosure 110 0 Purchases of equipment, net -137 -155 ------------------- ------------------ Net cash (used) by investing activities -8,073 -12,310 Cash flows from financing activities: Net proceeds from the issuance of common stock 27 259 Purchase of treasury stock -2,295 0 Cash dividends -723 -372 Net increase in deposits 15,194 3,266 Proceeds from Federal Home Loan Bank advances 53,454 69,500 Repayment of Federal Home Loan Bank advances -55,870 -74,500 (Decrease) increase in mortgagors' escrow accounts -21 4 ------------------- ------------------ Net cash (used) provided by financing activities 9,766 -1,843 ------------------- ------------------ Net increase in cash and cash equivalents 288 2,577 Cash and cash equivalents at beginning of period 8,259 12,095 ------------------- ------------------ Cash and cash equivalents at end of period $8,547 $14,672 =================== ================== Supplemental disclosure of cash flow information: Cash paid for: Interest on deposit accounts $5,876 $4,844 Interest on borrowed funds 2,230 2,081 Income tax expense, net 789 1,021 Supplemental schedule of non-cash investing and financing activities: Net change required by Statement of Financial Accounting Standards No. 115: Investment securities 483 -91 Deferred income tax liability -190 40 Net unrealized gain (loss) on investment securities available for sale 293 -51 Conversion of residential real estate loans to mortgage-backed securities 5,008 67,100 Transfer of securitized mortgage loans to mortgage-backed securities available for sale 575 8,996
Page -5- IPSWICH BANCSHARES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) September 30, 2000 and 1999 Basis of Presentation The consolidated financial statements include the accounts of Ipswich Bancshares, Inc. and its wholly owned subsidiary, Ipswich Savings Bank (the Bank) and the Bank's subsidiaries, Ipswich Preferred Capital Corporation, Ipswich Securities Corporation and North Shore Financial Services, Inc. (collectively herein referred to as the Company). All significant intercompany accounts and transactions have been eliminated in consolidation. Ipswich Preferred Capital Corporation (IPCC) was formed in 1999 as a Massachusetts business corporation which elected to be taxed as a real estate investment trust for Federal and Massachusetts tax purposes. IPCC is 99% owned by Ipswich Savings Bank. IPCC holds mortgage loans which were previously originated by the Company. Ipswich Securities Corporation was formed to exclusively transact in securities on its own behalf as a wholly-owned subsidiary of the Bank. North Shore Financial Services, Inc. was incorporated for the purpose of holding direct investments in real estate and foreclosed real estate. The consolidated financial statements have been prepared in conformity with generally accepted accounting principles. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for possible loan losses, the valuation of real estate acquired by foreclosure, and the valuation of originated mortgage servicing rights. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. 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 (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 2000 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2000. For further information, refer to the audited consolidated financial statements and footnotes thereto for the fiscal year ended December 31, 1999 included in the Company's Annual Report on Form 10-K. A substantial portion of the Company's loans are secured by real estate in Essex County in Massachusetts. In addition, other real estate owned is located in that market. Accordingly, the ultimate collectibility of a substantial portion of the Company's loan portfolio and the recovery of the carrying amount of other real estate owned are susceptible to changes in market conditions in its geographic area. Page -6- Earnings Per Share The computation of basic earnings per share is based on the weighted average number of shares of common stock outstanding during each period. The computation of diluted earnings per share is based on the weighted average number of shares of common stock outstanding and dilutive potential common stock equivalents outstanding during each period. Stock option grants are included only in periods when the results are dilutive. Nine Months Ended September 30, 2000 Income Shares Per-Share (Numerator) (Denominator) Amount -------------------------------------------- Basic EPS $2,009 2,455 $0.82 Effect of stock options -- 24 (.01) -------------------------------------------- Diluted EPS $2,009 2,479 $0.81 ============================================ 1999 Basic EPS $2,380 2,461 $0.97 Effect of stock options -- 78 (.03) -------------------------------------------- Diluted EPS $2,380 2,539 $0.94 ============================================ Three Months Ended September 30, 2000 Income Shares Per-Share (Numerator) (Denominator) Amount -------------------------------------------- Basic EPS $617 2,370 $0.26 Effect of stock options -- 26 -- -------------------------------------------- Diluted EPS $617 2,396 $0.26 ============================================ 1999 Basic EPS $1,028 2,525 $0.41 Effect of stock options -- 25 (.01) -------------------------------------------- Diluted EPS $1,028 2,550 $0.40 ============================================ Other Comprehensive Income Accumulated other comprehensive income consists solely of unrealized appreciation on investment securities available for sale, net of taxes. Page -7- ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements in this Form 10-Q constitute "forward looking statements", as that term is defined under the Private Securities Litigation Reform Act of 1995. The words "believe", "expect", "anticipate", "intend", "plan", "assume", and other similar expressions which are predictions of or indicate future events and trends and which do not relate to historical matters identify forward looking statements. Reliance should not be placed on forward looking statements because they involve known and unknown risks, uncertainties and other factors, which are in some cases beyond the control of the Company and may cause the actual results, performance, or achievements of the Company to differ materially from anticipated future results, performance or achievements expressed or implied by such forward looking statements. Certain factors that may cause such differences include, but are not limited to the following: interest rates may increase, adversely affecting the ability of borrowers to repay adjustable rate loans and the Company's earnings and income which derive in significant part from loans to borrowers; unemployment in the Company's market area may increase, adversely affecting the ability of individual borrowers to re-pay loans; property values may decline, adversely affecting the ability of borrowers to re-pay loans and the value of real estate securing repayment of loans; general economic and market conditions in the Company's market area may decline, adversely affecting the ability of borrowers to re-pay loans, the value of real estate securing payment of loans and the Company's ability to make profitable loans; adverse legislation or regulatory requirements may be adopted; and competitive pressure among depository institutions may increase. Any of the above may also result in lower interest income, increased loan losses, additional charge-offs and write-downs and higher operating expenses. The Company disclaims any intent or obligation to update publicly any of the forward looking statements herein, whether in response to new information, future events or otherwise. GENERAL Ipswich Bancshares, Inc. (the Company) is a Massachusetts corporation whose primary business is serving as the holding company for Ipswich Savings Bank (the Bank). On July 1, 1999, in connection with the formation of the Company as the holding company for the Bank, each share of the Bank's common stock previously outstanding was converted automatically into one share of common stock of the Company, and the Bank became a wholly owned subsidiary of the Company. The reorganization had no impact on the consolidated financial statements. The Company's operating results for the three and nine months ended September 30, 2000 reflect the operations of the Company and its direct and indirect subsidiaries, Ipswich Savings Bank, Ipswich Preferred Capital Corporation, Ipswich Securities Corporation and North Shore Financial Services. The Company is in the business of making residential mortgage loans, while attracting deposits from the general public to fund those loans. The Company operates out of its main office located at 23 Market Street, Ipswich, Essex County, Massachusetts, and its seven full-service retail branch offices, located in Beverly, Essex, Marblehead, North Andover, Rowley, Reading and Salem, Massachusetts. The Company operates Automatic Teller Machines at its Main Office and each of its full-service retail branch offices. As a bank holding company, the Company is subject to regulation, supervision and examination by the Board of Governors of the Federal Reserve (the Federal Reserve) and the Bank is subject to regulation, supervision and examination by the Federal Page -8- Deposit Insurance Corporation (the FDIC) and the Massachusetts Commissioner of Banks (the Commissioner). ASSET / LIABILITY MANAGEMENT The Company does not use static GAP analysis to manage its interest rate risk. It believes that simulation modeling more accurately encompasses the impact of changes in interest rates on the earnings of the Company over time. However, the Company prepares a GAP schedule to measure its static position. Assets and liabilities are classified as interest rate sensitive if they have a remaining term to maturity of 0-12 months, or are subject to interest rate adjustment in those time periods. Adjustable rate loans and mortgage backed securities are shown as if the entire balance comes due on the repricing date. Estimates of fixed rate loan amortization prepayments are included with rate sensitive assets. Because regular savings, demand deposits, money market accounts and NOW accounts may be withdrawn at any time and are subject to interest rate adjustments at any time, they are presented based upon assumed maturity structures. As a result of this analysis, the static GAP position in the 0 to 12 months range is a negative $13.1 million at September 30, 2000. Interest rate sensitivity statistics are static measures that do not necessarily take into consideration external factors which may affect the sensitivity of assets and liabilities, and consequently can not be used alone to predict the operating results of a financial institution in a changing environment. LIQUIDITY The Company seeks to ensure that sufficient liquidity is available to meet cash requirements while earning a return on liquid assets. The Company uses its liquidity primarily to fund loans and investment commitments, to supplement deposit outflows, to fund its share repurchase program and to meet operating expenses. The primary sources of liquidity are interest and principal amortization from loans, mortgage backed securities and investments, the sales and maturities of investments, loan sales, deposits, and Federal Home Loan Bank of Boston (the FHLBB) advances, which includes a $3.2 million overnight line of credit. The Company also uses longer term borrowed facilities within its total available credit line with the FHLBB. Advances from the FHLBB were $42.6 million at September 30, 2000. During 2000 the primary sources of liquidity were $13.0 million in loan sales, principal amortization from mortgage backed securities of $7.9 million, payoffs and principal amortization is the loan portfolio of $11.9 million and the sale of investment securities of $7.0 million. The primary uses of funds were $38.1 million in residential first mortgage loan originations and $13.3 million in investment purchases. CAPITAL RESOURCES Total stockholders' equity at September 30, 2000 was $16.3 million, a decrease of $689,000 from $17.0 million at the end of 1999. Included in stockholders' equity at September 30, 2000 is an unrealized gain on marketable securities available for sale, net of taxes, of $303,000, an increase of $293,000 as compared to $10,000 at December 31, 1999. Future interest rate increases could reduce the market value of these securities and reduce stockholders' equity. Page -9- The Company completed a stock repurchase plan of 10% of the outstanding shares announced March 2000. Through September 30, 2000, the Company had repurchased 262,400 or 10% of the outstanding shares at an average price of $8.75 totaling $2.3 million, which is reflected as a decrease to equity. Subsequently, the Company announced a second 10% stock repurchase plan on October 19, 2000. The Federal Reserve's and the FDIC's capital guidelines require the Company and the Bank, respectively, generally to maintain a minimum Tier 1 leverage capital ratio of at least 4% (5% to be classified as "well-capitalized"). At September 30, 2000 Tier 1 leverage capital ratio for the Company was 5.48% compared to 6.33% at December 31, 1999 and 5.49% and 6.29% for the Bank on September 30, 2000 and December 31, 1999, respectively. The Federal Reserve and the FDIC have also imposed risk-based capital requirements on the Company and the Bank, respectively, which give different risk weightings to assets and to off balance sheet assets, such as loan commitments. The Federal Reserve's and the FDIC's risk-based capital guidelines require the Company and the Bank, respectively, to maintain a minimum total risk-based capital ratio of 8% (10% to be classified as "well-capitalized") and a Tier 1 risk-based capital ratio of 4% (6% to be classified as "well-capitalized"). At September 30, 2000, the Company's total and Tier 1 risk-based capital ratios were 12.66% and 11.41% (compared to 14.38% and 13.13% at December 31, 1999). At September 30, 2000, the Bank's total and Tier 1 risk based capital ratios were 12.61% and 11.42% (compared to 14.29% and 13.04% at December 31, 1999). As of September 30, 2000, the Bank was considered "well-capitalized" under applicable regulatory capital guidelines. FINANCIAL CONDITION The Company's total assets at September 30, 2000 were $288.6 million, an increase of $12.3 million from December 31, 1999 assets of $276.3 million. The increase was largely due to the addition of $10.9 million in total loans, $2.4 million in mortgages held for sale, and $12.4 million in adjustable rate mortgaged backed securities. Funding the increase in assets for the first nine months of 2000 was deposit growth of $15.2 million, primarily in checking accounts and certificates of deposit. Conversely, borrowed funds decrease by $2.4 million in 2000 from year-end 1999. Federal Funds Sold Interest-bearing deposits and federal funds sold at September 30, 2000 was zero, versus $1.7 million at December 31, 1999. The decrease in fed funds sold was primarily due to the payoff of borrowings that matured in the first nine months of 2000. Investment and Mortgage-Backed Securities Total investments and mortgage backed securities available for sale at September 30, 2000 was $39.7 million, an increase of $167,000 in 2000. The increase was primarily the result of the purchase of $12.4 million in adjustable rate mortgage-backed securities, and $920,000 of equity securities and the securitization from the loan portfolio of $575,000 of fixed rate mortgages, offset by $7.0 million in sales and $7.2 million in principal amortization. The unrealized gain on the portfolio of available for sale securities, was $510,000 at September 30, 2000. The increase in value is principally in the portfolio of adjustable rate mortgage-backed securities, which in a rising rate environment, will increase in yield as the underlying loans reprice. The repricing aspect of these securities helps to sustain the market values. Page -10- Total investments and mortgage-backed securities held to maturity were $27.3 million at September 30, 2000, versus $28.1 million at December 31, 1999. The decline is due to principal amortization on the portfolio of mortgage-backed securities of $743,000. Loans and Loans Held for Sale Loans held for sale increased to $2.4 million at September 30, 2000, versus $0 at year-end 1999. The Company's portfolio of mortgages held for sale increased due to the recent origination of fixed rate loans. The loan portfolio at September 30, 2000 was $204.2 million, an increase of $10.9 million in comparison to the portfolio at December 31, 1999 of $193.3 million. The increase was principally in adjustable rate mortgages, which are written for portfolio versus sale in the secondary market. The Company will continue to place adjustable rate mortgages in its portfolio as a result of the more favorable interest rate risk profile for these loans in comparison to fixed rate loans. Current originations of fixed rate loans are sold in the secondary market. CREDIT QUALITY Non-Performing Loans Loans placed on non-performing status at September 30, 2000 was $27,000, substantially unchanged since year-end. Accrual of interest on loans is discontinued either when a reasonable doubt exists, as to the full timely collection of principal and interest, or when a loan comes contractually past due by ninety (90) days or more, unless the loan is adequately secured and in the process of collection. When a loan is placed on non-accrual status, all interest previously accrued, but not collected, is reversed against current period interest income. Income on such loans is recognized to the extent that cash is received and the ultimate collection of principal and interest is probable. Following collection procedures, the Company generally institutes appropriate actions to foreclose the property. Real Estate Acquired by Foreclosure Real estate acquired by foreclosure totaled $0 at September 30, 2000, a decrease of $111,000 since year-end 1999. The decrease is due to the sale of OREO during the first half of the year. The Company owns two parcels of land which have previously been written down to $1 each. Real estate acquired by foreclosure is reflected at the lower of the net carrying value, or fair value, of the property, less estimated costs of disposition. Allowance for Loan Loss The allowance for loan loss at September 30, 2000 was $1.8 million, unchanged since year-end 1999. The entire allowance for loan losses is available to absorb charge-offs in any category of loans. Loan losses are charged against the allowance when management believes that the collectibility of the loan principal is unlikely. The allowance for possible loan losses is established by management to absorb future charge-offs of loans deemed uncollectible. The allowance is increased by provisions charged to operating expense and by recoveries on loans previously charged-off. In evaluating current information and events regarding borrowers ability to repay their obligations, management considers commercial loans over $200,000 to be impaired when it is probable that the Company will be unable to collect all amounts due, according to the contractual terms of the note agreement; other loans are evaluated collectively for impairment. When a loan is considered to be impaired, the amount of the impairment is measured based on the present value of expected future Page -11- cash flows discounted at the loan's effective interest rate or the fair value of collateral, if the loan is collateral-dependent. Impairment losses are included in the allowance for loan losses through a charge to the provision for loan losses. Management believes that the allowance for possible loan losses is adequate as of September 30, 2000. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary. Liabilities Deposits increased by $15.2 million in the nine months of 2000, to end September 30, 2000 at $225.3 million. Deposits totaled $210.1 million at December 31, 1999. The increase in deposits resulted from the Company's ongoing checking account program which generated an increase of $9.5 million in checking accounts balances in 2000. In addition, certificates of deposit increased by $6.7 million as rising rates made CDs a more attractive investment vehicle for depositors. Federal Home Loan Bank of Boston advances decreased by $2.4 million in 2000 to $42.6 million at September 30, 2000. Borrowed funds are typically used to manage the liquidity of the Company and the utilization of borrowings is dependent on cash flows from other assets and liabilities. The Company extended a substantial portion of its borrowings in the first six months of 2000 to hedge its risk against rising interest rates. The weighted average maturity of its borrowings is approximately 1.5 years at September 30, 2000. Equity Capital Equity capital decreased by $689,000 to $16.3 million at September 30, 2000. Equity was principally impacted by earnings for the first nine months of the year of $2.0 million and an increase in the unrealized gain or loss on investment securities of $293,000, net of taxes. Offsetting these increases were payments of cash dividends to shareholders which totaled $723,000 in 2000. Additionally, the Company repurchased 262,400 shares or 10% of its outstanding shares in executing its previously announced 10% share repurchase plan. The average price per share was $8.75 totaling $2.3 million. The cost of the shares as reflected in the equity capital section of the balance sheet as "Treasury Stock". Subsequent to quarter end, on October 19, 2000, the Company announced a second 10% share repurchase program. Page -12- RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 1999 General The Company reported net income of $617,000 or $.26 per fully diluted share for the third quarter of 2000. This compares with $1.0 million or $.40 per fully diluted share for the third quarter of 1999. The third quarter 2000 earnings were impacted by a pre-tax charge of $153,000 resulting from a restructuring of a portion of the loan portfolio consisting of the sale of $6.0 million of below market loans in the secondary market and the reinvestment of those funds in higher rate loans with less interest rate risk. Return on equity for the third quarter of 2000 was 14.58%, versus 25.74% for the same quarter of 1999. The third quarter of 2000 return on assets was .85% versus 1.52% for the same quarter in 1999. Net Interest and Dividend Income Net interest income for the third quarter of 2000 was $2.2 million, versus $2.3 million for the same time frame in 1999. The net interest margin percentage was 3.18% for the third quarter of 2000 versus 3.51% for the same quarter the previous year. As a result of the Company's interest rate risk position, net interest margins have experienced compression during the current quarter. This compression resulted from the rates on borrowings and deposits increasing at a faster rate than those on loans and investment. Non-interest Income Non-interest income for the third quarter of 2000 was $370,000 versus $820,000 in the third quarter of 1999. Non-interest income was substantially lower in 2000, as a result of lower mortgage banking revenues and a pre-tax charge of $153,000 taken from a partial restructuring of the loan portfolio. Mortgage banking revenues are principally generated from the sale of fixed rate loans in the secondary market. As a result of the current interest rate environment, the Company is originating primarily adjustable rate mortgages for portfolio versus fixed rate loans to sell in the secondary market. The resulting impact is that mortgage banking revenues for the third quarter of 2000 was ($78,000) versus $436,000 for the third quarter of 1999 when the Company sold a significant amount of mortgages in the secondary market. Retail banking fees for the third quarter of 2000 was $449,000 versus $380,000 for the same quarter in 1999. This 18.2% increase is principally the result of the Company's successful efforts to acquire checking account customers in its market place, which generates fee income. Non-interest Expense Total non-interest expenses were $1.7 million for the third quarter of 2000 versus $1.6 million for the same time frame in 1999. Expenses which exhibited increases included data processing costs which increased $6,000, or 2.9% in the current quarter versus the same quarter in 1999 and professional fees which increased by $11,000 or 15.5% in the current quarter versus the previous. Income Tax Expense The second quarter of 2000 effective tax rate was 35% versus 30% for the third quarter of 1999. A tax rate of 35% in 2000 is expected to continue through the remainder of the year. Page -13- RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 1999 General The Company reported net income of $2.0 million or $.81 per fully diluted share for the first nine months of 2000. This compares with $2.4 million or $.94 per fully diluted share for the first nine months of 1999. Return on equity for the first nine months of 2000 was 15.53%, versus 20.78% for the same time frame in 1999. The first nine months of 2000 return on assets was .94% versus 1.18% for the time frame in 1999. Net Interest and Dividend Income Net interest income for the first nine months of 2000 was $6.7 million, versus $6.4 million for the same time frame in 1999. The net interest margin percentage was 3.20% versus 3.27% for the same time frame the previous year. The net interest income was positively impacted by growth of the balance sheet from $272.3 million at September 30, 1999 to $288.6 million at September 30, 2000. Non-interest Income Non-interest income for the first nine months of 2000 was $1.3 million versus $2.4 million in the first nine months of 1999. Non-interest income declined as a result of lower mortgage banking revenues and a pre-tax charge of $153,000 resulting from the partial restructuring of the loan portfolio. Mortgage banking revenues are generated from the sale of fixed rate loans in the secondary market. Due to the current interest rate environment, the Company is originating primarily adjustable rate loans for portfolio versus fixed rate loans which are sold in the secondary market. Total mortgage banking revenues for the first nine months of 2000 were $14,000 versus $1.2 million for the same time frame in 1999. Retail banking fees totaled $1.3 million for the first nine months of 2000 versus $1.1 million for the same time frame in 1999, an increase of $144,000 or 13%. Retail banking fees have increased as a result of the Company's emphasis on generating checking accounts in its retail branch network which contributes significantly to fee income. Non-interest Expense Total non-interest expense was $5.1 million for the first nine months of 2000 versus $5.3 million for the same time frame in 1999. The 1999 expenses were impacted by a $380,000 charge to form the holding company, and its Residential Real Estate Investment Trust. Non-interest expenses line items which increased in 2000 over 1999 were salaries and benefits, an increase of $87,000 or 3.6%, and data processing expenses which increased by $91,000 or 16.1%. These cost increases are a result of the Company's successful efforts to generate checking accounts for which the branch staff is incented, and corresponding data processing costs to support these new accounts. Income Tax Expense The first nine months of 2000 effective tax rate was 28.2% versus 30% for the same time frame in 1999. The tax rate in 2000 was impacted by the Company's realization of a $190,000 tax benefit resulting from a reduction in its valuation reserve. Excluding the one-time credit, the tax rate in 2000 is expected to be 35% versus 28.7% in 1999, which was impacted by one-time tax benefits. Page -14- ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's success is dependent upon its ability to manage interest rate risk. Interest rate risk can be defined as the exposure of the Company's net interest income to adverse movements in interest rates. Although the Company manages other risks, as in credit and liquidity risk, in the normal course of its business, management considers interest rate risk to be its most significant market risk and could potentially have the largest material effect on the Company's financial condition and results of operations. Because the Company does not maintain a trading portfolio, it is not exposed to significant market risk from trading activities. The Company's interest rate risk management is the responsibility of the Asset/Liability Management Committee (ALCO). ALCO establishes policies that monitor and coordinate the Company's sources, uses and pricing of funds. The Company seeks to reduce the volatility of its net interest income by managing the relationship of interest-rate sensitive assets to interest-rate sensitive liabilities. In recent years, the focus has been to originate adjustable-rate residential loans for portfolio, which reprice more quickly than fixed-rate residential loans. The Company's adjustable-rate loans are primarily tied to published indices, such as the one-year Constant Maturity Treasury (CMT). The Company utilizes a simulation model to analyze net interest income sensitivity to movements in interest rates. The simulation model projects net interest income based on both a rise or fall in interest rates (rate shock) over twelve and twenty-four month periods. The model is based on the actual maturity and repricing characteristics of interest-rate sensitive assets and liabilities. The model incorporates assumptions regarding the impact of changing interest rates on the prepayment rate of certain assets and liabilities. The assumptions are based on nationally published prepayment speeds on assets and liabilities when interest rates increase or decrease by 200 basis points or greater. The model factors in projections for anticipated activity levels by product lines offered by the Company. The simulation model also takes into account the Company's increased ability to control the rates on deposit products more so than adjustable-rate loans tied to published indices. Interest rate risk represents the sensitivity of earnings to changes in market interest rates. As interest rates change the interest income and expense streams associated with the Company's financial instruments also change, thereby impacting net interest income (NII), the primary component of the Company's earnings. ALCO utilizes the results of the simulation model and static GAP reports to quantify the estimated exposure of NII to sustained interest rate changes. The following reflects the Company's NII sensitivity analysis over a twelve month period: Rate Change Estimated NII Sensitivity Over Twelve Months September 30, 2000 September 30, 1999 +200bp -5.05% -4.67% - -200bp -3.88% +5.08% The preceding sensitivity analysis does not represent the Company's forecast and should not be relied upon as being indicative of expected operating results. These hypothetical estimates are based upon numerous assumptions including: the nature and timing of interest rate levels including yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment/replacement of asset and Page -15- 0 liability cash flows, and others. While assumptions are developed based upon current economic and local market conditions, the Company cannot make any assurances as to the predictive nature of these assumptions including how customer preferences or competitor influences might change. Also, as market conditions vary from those assumed in the sensitivity analysis, actual results will also differ due to: prepayment/refinancing levels likely deviating from those assumed, the varying impact of interest rate change caps or floors on adjustable-rate assets, the potential effect of changing debt service levels on customers with adjustable-rate loans, depositor early withdrawals and product preference changes, and other internal/external variables. Furthermore, the sensitivity analysis does not reflect actions that ALCO might take in responding to or anticipating changes in interest rates. Page -16- IPSWICH BANCSHARES, INC. AND SUBSIDIARY PART II - OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities and Use of Proceeds None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K a. Exhibits b. Reports on Form 8-K None c. Exhibits 2.1 Plan of Reorganization and Acquisition dated as of February 17, 1999 between the Company and Ipswich Savings Bank incorporated by reference to the Company's Form 8-K filed on July 9, 1999. 3.1 Articles of Organization of the Company dated February 12, 1999 and incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 3.2 By-laws of the Company is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 4.1 Specimen stock certificate for the Company's Common Stock is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.1 Lease dated April 25, 1994 for premises located at 451 Andover Street, North Andover, Massachusetts is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.2 Lease dated March 4, 1996 for premises located at 588 Cabot Street, Beverly, Massachusetts is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.3 Lease dated July 27, 1997 for premises located at 600 Loring Avenue, Salem, Massachusetts is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. Page -17- 10.4 Lease dated February 27, 1998 for premises located at 89 Pleasant Street, Marblehead, Massachusetts is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.5 Lease dated June 12, 1998 for premises located at 470 Main Street, Reading, Massachusetts is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.6* Incentive Compensation Plan for Senior Management and certain other officers dated September 15, 1995 is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.7* Director Recognition and Retirement Plan adopted as of May 18, 1999 is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.8* Merger and Severance Benefits Program dated February 18, 1998 is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.9* Amended and Restated Employment and Severance Agreement dated May 18, 1999 between Ipswich Savings Bank and David L. Grey is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.10* Amended and Restated Employment and Severance Agreement dated May 18, 1999 between Ipswich Savings Bank and Francis Kenney is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.11* Amended and Restated Severance Agreement dated May 18, 1999 between Ipswich Savings Bank and Thomas R. Girard is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.12* Employment Agreement dated June 18, 1998 between Ipswich Savings Bank and Richard P. Duffett is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.13(a)*Amended and Restated Split Dollar Agreement dated May 18, 1999 among Ipswich Savings Bank, Eastern Bank and David L. Grey is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.13(b)*Amended and Restated Ipswich Irrevocable Insurance Trust dated as of May 18, 1999 by and between Ipswich Savings Bank and Eastern Bank is incorporated by reference herein from the Company's June 30, 1999 Form10-Q. 10.14 Contract with Bank's data processor dated February 14, 1997 is incorporated by reference herein from the Company's June 30, 1999 Form 10-Q. 10.15* 1992 Incentive and Non-qualified Stock Option Plan incorporated by reference to the Company's Registration Statement on Form S-8 filed on July 22, 1999. Page -18- 10.16* 1996 Stock Incentive Plan incorporated by reference to the Company's Registration Statement on Form S-8 filed on July 22, 1999. 10.17* 1998 Stock Incentive Plan incorporated by reference to the Company's Registration Statement on Form S-8 filed on July 22, 1999. 10.18* Deferred Compensation Plan for Directors incorporated by reference to the Company's Form S-8 filed on July 22, 1999. 10.19 Contract dated April 6, 2000 with U.S. Bancorp for ATM processing services incorporated by reference to the Company's March 31, 2000 Form 10-Q. 10.20* Severance Agreement dated August 8, 2000 between Ipswich Savings Bank and Mark E. Foley is incorporated by reference herein from the Company's June 30, 2000 Form 10-Q. 10.21 Lease dated September 15, 2000 for premises located at Routes 133 and 1, Rowley, Massachusetts. 11. A statement regarding the computation of earnings per share is included in the Notes to Consolidated Financial Statements. 12. Not applicable. 27. Financial Data Schedule. * Denotes Management Contract or Compensation Plan. 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. IPSWICH BANCSHARES, INC. By: /s/ David L. Grey Date: November 13, 2000 ---------------------------- David L. Grey President and Chief Executive Officer By: /s/ Francis Kenney Date: November 13, 2000 ----------------------- Francis Kenney Treasurer (Principal Financial Officer and Principal Accounting Officer) Page -19- EX-10 2 0002.txt COMMERCIAL LEASE COMMERCIAL LEASE Indenture of Lease made as of the 15th day of September 2000, by and between LOUIS J. GALANIS, Trustee of Five Jays Realty Trust, under Declaration of Trust dated January 9, 1985, of Rowley, Massachusetts, (hereinafter referred to as "Landlord"), and IPSWICH SAVINGS BANK, a Massachusetts corporation, having a place of business in Ipswich, Massachusetts (hereinafter referred to as "Tenant"). WITNESSETH 1. EXHIBITS 1.1 The following exhibits are attached to this Lease and made a part hereof: Exhibit A--Description of Premises. Exhibit A-1--Floor Plan of Premises. Exhibit B--Rent Payments. Exhibit C--Terms of Extension Options. 2. PREMISES AND USE 2.1 Landlord hereby demises and leases unto Tenant and Tenant hereby hires from Landlord, subject to the conditions hereinbelow set forth, the premises described in Exhibit A (hereinafter called "the Premises"), being Unit #2 of the Rowley Mall (hereinafter referred to as "Shopping Center") with a street address of 174 Newburyport Turnpike, Rowley, MA 01969. The Premises include areas on the first floor and basement of the building and the drive-up teller area as shown in Exhibit A-1. 1 3. TERM 3.1. To have and to hold the Premises for an original term of five (5) years commencing on August 1, 2000, unless sooner terminated or extended as hereinafter provided for use as a bank and related operations and functions. 4 RENT 4.1. Tenant agrees to pay Landlord as rent for the Premises the amounts set forth in Exhibit B. Until further notice from Landlord all rent and other payments due hereunder to Landlord shall be by check payable to "Five Jays Realty Trust" and mailed to said payee at P.O. Box 756, Rowley, MA 01969. 5. EXTENSION OPTION 5.1. Tenant shall have two (2) successive options to extend the term of this Lease for two separate extension periods of five (5) lease years each (each such period being hereinafter called an "Extension Period") commencing upon the day after the expiration date of the then original term or Extension Period, as the case may be, provided that Tenant shall not be in terminable default under any of the terms of this Lease beyond applicable grace periods, at the time of the exercise of any option, and that Tenant continues to occupy the Premises. If Tenant elects to exercise any one or more of said options, it shall do so by giving notice of such election to Landlord at any time during the term of this Lease (including any Extension Periods) on or before the date which is six (6) months prior to the commencement of the Extension Period for which such election is exercised. Such Extension Periods shall be upon the terms and conditions set forth in Exhibit C of this Lease. 6. ADDITIONAL RENT--TAXES/INTEREST 6.1. Tenant further agrees that during the original 2 term of this Lease and any Extension Period and for such further time as Tenant shall hold the Premises, or any part thereof. Tenant shall pay to Landlord as additional rent all taxes and assessments whatsoever (except betterment assessments, so-called,) which may be payable for or in respect of the Premises (being one-sixth of the Shopping Center), or any part thereof, during the term of this Lease, and for such further time as Tenant shall hold the Premises or any part thereof. Landlord hereby agreeing to furnish Tenant with copies of all bills for such taxes and assessments. 6.2. All payments for real estate taxes shall be made quarterly to Landlord after tax installment bills have been issued, but in any event in a manner sufficient to provide for an amount adequate.jto pay said taxes as and when they are due and payable. If Tenant shall fail to make such payment, then in addition to all other rights and remedies to which Landlord may be entitled, Tenant shall be liable for any interest or penalty charges which may result from late payment of said taxes by Tenant. Landlord shall provide evidence of payment of said taxes to Tenant within fourteen (14) days of payment. In addition to the foregoing. Tenant shall be solely responsible for all personal property taxes of every nature imposed upon all fixtures, equipment and other personal property of every nature on the Premises belonging to Tenant. 6.3. In the event the Landlord shall receive any abatement or refund of said taxes for any tax year for which Tenant shall have paid to Landlord any amount for said taxes. Tenant shall be entitled to receive from Landlord the amount thereof, less, however, the reasonable expenses (including reasonable attorney's fees) of Landlord incurred in obtaining such abatement. 6.4. Landlord, upon written request of Tenant duly made, shall make and prosecute applications for abatement of taxes. If, however. Landlord fails 3 to commence or thereafter diligently continue the prosecution of applications for abatement of taxes within fifteen (15) days of Tenant's written request so to prosecute, then Tenant shall have the right to prosecute said applications for abatement of taxes in the name of Landlord or Tenant, provided, however, that the expenses of prosecuting such applications shall be borne by Tenant. At Tenant's request, Landlord shall furnish Tenant with all data and information in Landlord's possession concerning the Premises, and shall execute and deliver all documents necessary for Tenant's application. 7. LANDLORD'S WARRANTY/QUIET POSSESSION 7.1. Landlord represents and warrants to Tenant that Landlord has the lawful right and authority.. to enter into this Lease for the entire term hereof (including each Extension Period). 7.2. Landlord covenants and agrees that Tenant, upon performance of its obligations under this Lease, shall peaceable and quietly have, hold and enjoy the Premises throughout the original term of this Lease and all Extension Periods. 8. TENANT'S FIXTURES/ALTERATIONS 8.1. Tenant may install in the Premises such fixtures (trade or otherwise) and equipment, and make such non-structural interior alterations as Tenant deems desirable and all of said items shall remain Tenant's property and Tenant may remove, and/or replace, said fixtures and equipment, in the Premises, at any time and from time to time during the term or any Extension Period hereof. Landlord shall not mortgage, pledge or encumber said fixtures or equipment. Tenant shall make all repairs or replacements at Tenant's expense in connection with the removal of any fixtures or equipment, installed as provided in this paragraph. 4 8.2. All signs, counters, shelving, trade and 1ight fixtures, contents, and other store equipment, which may at any time be installed or placed in or upon the Premises, by or at the expense of Tenant, are and shall remain the property of Tenant, and Tenant shall remove the same and repair all damage to the Premises caused by such installation and removal prior to or at the expiration date of the term or the Extension period of this Lease. 9. ASSIGNING AND SUBLETTING 9.1. Except as provided herein. Tenant shall not assign this Lease of any interest therein without the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed, but Tenant shall remain liable to..- Landlord during the original term and any Extension Period for the payment of rent and performance of all obligations of Tenant hereunder. 9.2. Notwithstanding the above. Tenant shall have the right, without the consent of Landlord, to assign this Lease or sublet the Premises or any part thereof to any entity incidental to the merger or consolidation or sale of substantially all the assets of Tenant in which the surviving or acquiring corporation after acquisition shall have a net worth computed in accordance with generally accepted accounting principles not less than that of Tenant immediately prior to such merger or consolidation or acquisition. 10. HOLDING OVER 10.1. If Tenant holds over or remains in possession of Premises after expiration of the original term or any Extension Period of this Lease, without any new lease of said premises being entered into between the parties hereof, or any option herein contained being exercised by written notice, such holding over or continued possession shall create a tenancy at will only at the last monthly rental 5 and upon the terms (other than length of tdirm, or option for extension) herein specified, which may at any time be terminated by either party by one (1) month's written notice to the other party. 11. UTILITIES 11.1. Tenant shall pay when due, so long as they are separately metered at the Premises, all charges for gas, electricity and other utilities it uses at the Premises. Landlord shall furnish and pay water and sewer charges, and include same in CAM charges, as the same are defined in Article 12. Notwithstanding the foregoing to the contrary however, should an audit of the water and sewer portion of the CAM charges reveal that the proportionate share paid by Tenant for water and sewer service has exceeded Tenant's reasonat,)3Ly estimated usage of water and sewer service by more than twenty (20%) percent, then in that event. Landlord, at its sole cost and expense, shall install a water sub-meter dedicated to the Leased Premises and, thereafter. Tenant shall pay to Landlord water and sewer service charges as measured by said meter and there shall be deducted from Tenant's proportionate share of CAM charges, any charges for water and sewer. 12. MAINTENANCE; PAYMENT 12.1. Landlord covenants and agrees to maintain in good condition and repair the structural elements of the Premises, including the roof, and foundations of the Premises, and any and all utility lines, systems and components located within or passing through but not exclusively serving the Premises including but not limited to electrical, plumbing and sewer lines, components and connections, as well as any and all utility systems, lines and components 'located outside of any serving the Premises. Acknowledging that Tenant's ability to generate business revenue from which to satisfy Tenant's rental obligation to Landlord hereunder is dependent in part, upon Landlord fulfilling its maintenance and repair obligations as soon as 6 reasonably possible. Landlord hereby agreed that in order to prevent a material disruption of, or interference with, the conduct of Tenant's business in the Premises, Landlord shall complete all maintenance and/or repairs required of Landlord hereunder promptly following notification from Tenant to Landlord of the need for same. Should Tenant notify the Landlord in person, by telephone or by facsimile transmission of any needed repairs (which are normally the responsibility of Landlord hereunder), which are required due to a condition of damage or disrepair which materially interferes with access to or use of the Premises by Tenant, its employees, contractors, agents, visitors or invitees, or which otherwise poses a threat of injury or damage to persons of property, and should Landlord fail to initiate any such needed repairs as soon as reasonably possible, following notice from Tenant for the need for same then, in that event. Tenant shall have a right of self help and may undertake such repairs. Tenant shall have the right of setoff or to deduct any costs or expenses incurred to complete said repairs if Landlord fails to reimburse Tenant for same within fourteen (14) days of receipt of Tenant's itemized expenses. Notwithstanding the foregoing. Tenant shall pay for repair of any damage to the structural elements caused by Tenant. 12.2. Tenant shall, at all times, maintain the demised premises (including all exterior entrances and the inside and outside of all glass in the doors and windows and show window moldings) and all partitions, doors and window frames, fixtures, equipment and appurtenances thereto (including, but not limited to, all electrical plumbing fixtures, heating, air-conditioning and other mechanical' installations therein) in good order, condition, and normal repair at its own expense. In the event that the heating or air conditioning installation on the Premises require major repairs or entire replacement, the costs of such repair or replacements shall be paid by Landlord. 7 Landlord shall be responsible for the plowing of snow and control of ice in the parking lot; Tenant shall be responsible for the removal of snow and the control of ice on the sidewalks abutting the Premises. If Tenant refuses or neglects to repair property as required hereunder and to the reasonable satisfaction of Landlord as soon as reasonably possible after written demand, Landlord may make such repairs without liability to Tenant for any loss or damage that may accrue to Tenant's merchandise, fixtures, or other property or to Tenant's business by reason thereof, and upon completion thereof. Tenant shall pay Landlord's costs for making such repairs, upon presentation of bill therefor, as additional rent. 12.3. Landlord agrees to hard surface, mark, properly drain, adequately light and landscape the parking area, together with the necessary access roads. Landlord agrees to operate, manage, and maintain during the term of the Lease, and any extension thereof, the common areas including all parking areas, and roads in the Shopping Center. The manner in which such areas and facilities shall be maintained, and the expenditures therefor, shall be at the sole discretion of Landlord, commensurate with commonly accepted standards applicable to shopping centers in New England of a like size and nature including, but not limited to, the prompt removal of ice, snow and debris from the parking and loading areas of the Shopping Center, and the use of such areas and facilities shall be subject to such reasonable regulations as Landlord shall make from time to time. Landlord may at any time, expand, alter or close temporarily common areas to make repairs or changes and may do such other acts in and to common areas as in its reasonable judgment may be desirable, so long as such actions do not result in (a) a reduction in the total number of Shopping Center parking spaces by more than ten (10%) percent; nor (b) material interference with 8 access to or visibility of the Premises, including but not limited to a change in traffic flow affecting the drive-up teller area described in Exhibit A-1, or otherwise with the operation of Tenant's business in the Premises in the normal course. Tenant agrees to pay, upon demand, but not more often than once each calendar month, in addition to rent. Tenant's proportionate share, being one sixth, of all the reasonable and necessary costs and expenses of maintaining and operating the parking areas, and all other common areas. Such operating and maintenance costs ("CAM Charges") shall include all costs and expenses of operating and maintaining such areas and facilities in such manner as Landlord may from time to time reasonably deem appropriate and for the best_ interests of the tenants of the Shopping Center, including without limitation, providing private police protection, security patrol, or night watchmen for the Shopping Center, labor for landscaping, maintenance or snow removal, compensation insurance, payroll taxes, materials, supplies, and all other costs of operating, repairing, lighting, cleaning, sweeping, painting, removing of rubbish or debris, and all casualty and such other insurance in such amounts and covering hazards reasonably deemed appropriate by Landlord, and all costs other than those which are properly charged to capital account under generally accepted accounting principles, including replacement of paving and repaving of parking lot, curbs, walkways, remarking, directional or other signals, landscaping, drainage, and lighting facilities and the cost to Landlord of obtaining supervisory services for and maintaining the fire sprinkler system. There shall be excluded from CAM charges the cost of construction of improvements to such common areas which is properly chargeable to capital account 9 and depreciation of the original cost of \ construction of such common areas, as well as general off-site overhead, initial construction and advertising expenses, real estate commissions, leasing salaries and expenses, and bonuses to employees. In the event that the Shopping Center is expanded, an appropriate adjustment shall be made in common area charges to include the expanded area. 12.4. Tenant's share of such costs and expenses of maintaining and operating such common areas may be reasonably estimated by Landlord subject to adjustment in future billing to Tenant. Such operating and maintenance costs shall be computed on an accrual basis under generally accepted accounting principles. On or before February 28 of each year. Landlord shall determine (and furnish to Tenant a statement showing in reasonable detail) the costs and expenses of maintaining such areas referred to in this subparagraph during the preceding year ending December 31". To the extent Tenant's proportionate share of such costs and expenses is greater or less than the sum actually billed to and paid by Tenant therefor, as the case may be, during said year, the difference shall be billed or refunded to Tenant, as the case may be. Tenant shall have the right upon fourteen (14) days notice, to review and copy all of the Landlord's applicable books and records with respect to operation the common areas. Landlord hereby agreeing to make available to Tenant such information in reasonable detail as may be reasonably necessary for Tenant to establish the accuracy and reasonableness of the CAM charges. 12.5. Should Landlord be notified during the Term of this lease or any extension thereto by any federal, state, city or municipal agency having proper jurisdiction of a requirement to make changes or alterations to bring the building containing the Premises or the Shopping Center property into compliance in response to changes in any of the aforementioned laws, codes, 10 ordinances or requirements then, in that event, Landlord agrees to promptly make such changes or alterations required in a timely fashion, and include the cost of same in CAM charges, unless such requirement (s) for changes or alterations directly results from Tenant's use of the Leased Premises, in which event Tenant agrees to promptly make such required changes or alterations as aforesaid. 13. RESERVED 14. INSURANCE 14.1. Tenant agrees, at its own expense, to maintain in full force during the leased term a policy or policies of comprehensive liability insurance, including property damage, written by one or. more responsible insurance companies licensed to do business in Massachusetts, which will insure Tenant and Landlord (and such other persons, firms or corporations as are designated by Landlord) against liability for injury to persons and/or property and death of any person or persons occurring in or about the Premises. Each such policy shall be approved as to form and insurance company by Landlord. The liability under such insurance shall not be less than $300,000.00 for any one person injured or killed, and not less than $500,000.00 for any one accident and not less than $50,000.00 property damage. If, in the considered opinion of Landlord's insurance advisor, the amount of such coverage in not adequate. Tenant agrees to increase said coverage to such reasonable amounts as Landlord's advisor shall deem adequate. Tenant shall also maintain and keep in force plate glass insurance coverage on all exterior plate glass in the Premises. The insurance in this subparagraph provided may be covered by general policies covering all of Tenant's offices. Tenant shall provide Landlord with copies of certificates of all said policies 11 including an endorsement which states that such insurance shall not be cancelled after thirty (30) days' notice in writing to Landlord. 14.2. Tenant agrees that it will at all times during the leased term maintain in force on all its fixtures and equipment in the premises a policy or policies of fire insurance with a standard extended coverage endorsement attached to the extent of at least eighty percent (80%) of their insurable value, the proceeds of which will, so long as this lease is in effect, be used for the repair or replacement of the fixtures and equipment so insured. It is understood that Landlord shall have no interest in the insurance upon Tenant's equipment and fixtures, and will sign all documents necessary or proper in connection with the settlement of any claim of loss by Tenant. Tenant shall have the right, at its sole option, to self-insure its fixtures and equipment. 14.3. Reserved. 14.4.1. In case the Premises shall be partially or totally destroyed by fire or other casualty insurable under full standard extended risk insurance as to become partially or totally untenantable, the same shall be repaired as speedily as possible at the expense of Landlord, unless Landlord shall not elect to rebuild as hereinafter provided, and (should there be a substantial interference with Tenant's business) a just and proportionate part of the fixed rent shall be abated until so repaired. 14.4.1.2.If less than fifty (50%) percent of the Premises shall be destroyed or damaged by fire or other casualty as to become wholly untenantable, then, in such event. Landlord must rebuild or put said building in good condition and fit for occupancy, within a reasonable time after such destruction or damage, unless Tenant releases in writing Landlord from such obligation. 12 14.4.1.3.If more than fifty (50%) percent of the Premises shall be destroyed or so damaged by fire, or other casualty insurable under full standard extended risk insurance, as to become wholly untenantable or in the event the Premises shall be partially or totally destroyed by a cause or casualty other than those covered by fire and extended coverage risk insurance then, in any such event. Landlord may, if it so elects, rebuild or put the Premises in good condition and fit for occupancy, within a reasonable time after such destruction or damage, or may give notice in writing terminating this lease as of a date not later than ninety (90) days after any such damage or destruction. If Landlord elects to repair or rebuild the Premises, it shall, within ninety (90) days after such injury, give the Tenant notice of its intention to repair and then to_ proceed with reasonable speed to make such repairs. Unless Landlord elects to terminate this lease, this Lease shall remain in full force and effect and the parties waive the provisions of any law to the contrary. 14.4.1.4.Landlord's obligation (should it elect or be obligated to repair or rebuild) shall be limited to the basic building, store front, and interior work and Tenant shall forthwith replace or fully repair all exterior signs, trade fixtures, equipment, display cases and other installations originally installed by Tenant at its expense. 14.4.1.5.In addition to the insurance which Tenant is required to maintain pursuant to Article 14 of this Lease, included within the terms of extensions of this Lease, Tenant shall pay to Landlord as additional rent one sixth of the total premium paid by Landlord for fire insurance (including the so-called "extended coverage endorsement") and comprehensive public liability upon Landlord's buildings and improvements in the Shopping Center. The amount of fire insurance to be maintained by Landlord shall be not less than eighty (80%) percent and not more than one hundred (100%) percent of the actual cash value 13 of Landlord's buildings and improvements in the center as such value may exist from time to time. 15. EMINENT DOMAIN 15.1. In the event of any taking for any public or quasi-public use by exercise of the right of eminent domain or by deed in lieu thereof between Landlord and those having the authority to exercise such right (hereinafter called "Taking") of the whole of the Premises then this Lease and the term hereof shall cease and expire as of the date of such Taking and the base rent under Exhibit B and any additional rent and all other charges paid for a period after such Taking shall be refunded to Tenant upon demand. 15.2. In the event of Taking of more than one-fifth (1/5) of the Premises or in the event of a Taking so as to prevent or substantially prevent adequate access to Premises, then Tenant may elect to terminate this Lease by giving notice of termination to Landlord on or before the date which is ninety (90) days after receipt by Tenant of notice that the Taking or denial or diminishing of access or termination of the Tenant's lease shall have occurred. Upon the date specified in such notice of termination this Lease and the term hereof shall cease and expire, and the base rent under Exhibit B and any additional rent and charges paid for a period after such date of termination shall be refunded to Tenant upon demand. 15.3. If this Lease is not terminated or if Tenant does not elect to terminate this Lease as aforesaid then the award or payment for the Taking shall be paid to and used by Landlord for restoration as hereinafter- set forth and Landlord shall promptly commence and with due diligence continue to restore the Premises remaining after the Taking to substantially the same condition and tenantability as existed immediately preceding the Taking. During the period of any 14 restoration, the base rent under Exhibit B, additional rent, and other charges shall be abated justly and equitably. Nothing herein contained shall be deemed or construed to prevent either Landlord or Tenant from enforcing and prosecuting a claim for the value of its respective interest in any condemnation proceedings. 15.4. Tenant's right to recover damages in case of any Taking, shall not be affected, prejudiced, restricted or limited whether or not this Lease has been terminated because of such Taking or is subject to termination. Nothing herein contained shall prohibit Tenant (in addition to the foregoing) from interposing and prosecuting in any condemnation proceeding, independent of any claim of Landlord, claims for which the Tenant; may be entitled to recover. 16 MORTGAGES 16.1. This Lease shall be subject and subordinate in all respects to the first mortgage granted by Landlord to Ipswich Savings Bank. Except for such encumbrance, this Lease shall be subject and subordinate in all respects to all mortgages to recognized lending institutions which may hereafter affect the Premises and each and every of the advances which have heretofore been made or which may hereafter be made thereunder, and to all renewals, modifications, consolidations, replacements and extensions thereof, provided that the holder of any such mortgage delivers to Tenant a written agreement in recordable form consenting to this Lease and agreeing that Tenant shall not be disturbed or canceled at any time, except in the event Landlord shall have the right to terminate this Lease under the terms and provisions 'set forth herein, and agreeing further that proceeds of insurance and taking awards be applied as provided for in this Lease. In confirmation of such subordination. Tenant shall 15 execute promptly, without cost or charge, 8ny instruments or certificates that Landlord or any mortgagee may require. 16.2. Landlord shall make all payments required to be made under the provisions of any mortgage affecting the Premises in default of which Tenant shall have the right, but not the obligation, to cure any such default and to deduct the cost thereof from the base rent or additional rental or other charges becoming due under this Lease or to require the payment of such cost from Landlord upon demand. 17. TENANT'S CONVENANTS 17.1. In addition to all other covenants and agreements of Tenant contained herein. Tenant hereby covenants with Landlord that Tenant during the said term and for such further time as it shall hold the Premises or any part thereof will save landlord harmless from all loss and damage occasioned by the use of water in or escape of water from the Premises or by the bursting or cracking of the water pipes, including the sprinkler system, if any, except for such loss or damage as is caused by the negligence of Landlord, its agents, employees, servants, or contractors or Landlord's failure to properly make repairs required to be made by Landlord hereunder; at the expiration of said term will surrender the Premises in the same condition as the Premises were in upon delivery of possession thereto under this Lease, reasonable wear and tear excepted, and damage by unavoidable casualty excepted, and shall surrender all keys for the leased premises to Landlord at the place then fixed for the payment of rent and shall inform Landlord of all combinations on locks, safes, and vaults, if any, in the Premises; remove all of its trade fixtures, and any alterations or improvements before surrendering the Premises as aforesaid and shall repair any damage to the leased premises caused thereby (Tenant's obligations to observe or perform this covenant 16 shall survive the expiration or other termination of the terms of this Lease); will not commit any nuisance on the Premises; will not overload the Premises; will not carry on any business, trade or occupation upon the Premises or make any use thereof which shall be unlawful or offensive or contrary or any law or ordinance for the time being in force; will not do any act or thing upon the Premises which will make them uninsurable against fire or which is liable to increase the premium for fire insurance on the Premises over the normal premium at the time in question for the stipulated use of the Premises, and if such premiums are increased. Tenant shall pay the amount of such increase; and will keep the Premises equipped with all safety appliances required by law or ordinance, or any order or regulation of any public authority because of the use made of the Premises; except only for the structures on the Premises, repairs to which are to be made by Landlord, will make all repairs, alterations, and replacements so required; will procure any authorizations or licenses required for Tenant's use or repair of the Premises; that Landlord or its agents may during the term during normal business hours and with Tenant's prior approval which approval Tenant agrees not to unreasonably withhold or delay (or at any time in the event of an emergency) enter to view the Premises and make repairs or improvements, but Landlord will not be required to do so, except as otherwise expressly provided in this Lease; and Landlord may show Premises to others at mutually agreeable times during normal business hours, and at any time during normal business hours within one hundred eighty (180) days before the expiration of the term (as the same may be extended), may affix to any suitable part of the exterior of the Premises a notice of reasonable size for letting or selling the Premises and keep the same as affixed without molestation by Tenant. 17 18. TENANT'S DEFAULT 18.1. If any sum or sums due as rent or additional rent as herein provided and set forth or any part thereof shall be unpaid for a period of fourteen (14) days after written notice of such default has been given by Landlord to Tenant, or if Tenant shall violate or be in default in its observances or performance of any of its covenants herein contained, except default in the payment of base rent or additional rent, and shall have failed to take and prosecute appropriate steps to remedy such breach or default within twenty (20) days after written notice of such breach or default has been given by Landlord to Tenant, or if the estate hereby created shall be taken on execution or other process of law and shall not be redeemed for_ twenty (20) days after Landlord shall have given Tenant written notice of such taking, or if Tenant be declared bankrupt or insolvent according to law, or if any assignment shall be made of its property for the benefit of creditors, then, and in each of the said cases (after the expiration of the aforesaid fourteen (14) day or twenty (20) day period if applicable), Landlord lawfully may (notwithstanding any waiver of any former breach of covenant or waiver of the benefit hereof or consent in a former instance) immediately or at any time thereafter while such default or other stipulation aforesaid continues and without further demand or notice enter into and upon the Premises or any part thereof in the name of the whole and repossess the same as of its former estate and expel Tenant and those claiming through or under it and remove its effects (forcibly if necessary) without being deemed guilty of any manner to trespass and without prejudice to any remedies which might otherwise be used for arrears of rent or preceding breach of covenant, and upon entry as aforesaid this Lease shall terminate and Tenant covenants that in case of such termination under the provisions of statute by reason of the default of Tenant, 18 Tenant will forthwith pay Landlord as damages a sum equal to the amount by which the base- rent, additional rent, and other payments called for hereunder of the remainder of the original term or of any extensions thereof, and, in addition thereto, will during the remainder of the original term and of any extensions thereof pay to Landlord on the last day of each calendar month the difference, if any, between rental which would have been due for such month had there been no such termination and the sum of the amount being received by Landlord as rent from occupants of the Premises, if any, and the applicable pro rated amount of the damages previously paid to Landlord, Landlord hereby agreeing to use reasonable efforts to minimize damages. 19. USE AND OCCUPANCY 19.1. The Premises may be used and occupied for a bank, including a drive-up teller area, general business purposes, and general office purposes, provided any such use is permitted under applicable Federal, state and municipal laws and regulations. 20. SIGNS 20.1. Tenant shall have the right to install, maintain and replace, at its own cost and expense, after the prior written consent of Landlord in each instance, such signs on the Premises and in common areas such as driveways, parking areas and sidewalks as it determines, provided the same shall be in compliance with all laws, orders, rules and regulations of all governmental authorities having jurisdiction thereof. 21. NOTICES 21.1. Every notice, approval, consent or other communication authorized or required by this Lease shall not be effective unless in writing and sent by United States registered or certified 19 mail, return receipt requested, directed, if to Tenant to the address listed below; and if to Landlord at the address listed herein or such other address as either party may designate by notice from time to time. Landlord: Five Jays Realty Trust P.O. Box 756 Rowley, MA 01969 Tenant: Ipswich Savings Bank, Attn: President 23 Market Street Ipswich, MA 01938 22. WAIVER 22.1. One or more waivers of any covenant or condition by Landlord or Tenant shall not be construed. 3.3 a waiver of a subsequent breach of the same or any other covenant or condition, and the consent or approval by Landlord requiring the other party's consent or approval to or of any similar subsequent act. The failure of either party to seek redress for violation of, or to insist upon strict performance of, any term, covenant or condition in this Lease shall not prevent a similar subsequent act from constituting a default under this Lease. 23. INVALIDITY OF CERTAIN PROVISIONS 23.1. If any provision of this Lease shall be invalid or unenforceable, the remainder of the provisions of this Lease shall not be affected thereby and each and every provision of this Lease shall be enforceable to the fullest extent permitted by law. 24. LANDLORD'S INTEREST 24.1. Landlord reserves the right to assign or transfer any and all of its rights, title and interest under this Lease, including but not limited to the benefit of all covenants of the Tenant hereunder. Notwithstanding anything contained in 20 this Lease to the contrary, it is specifically understood and agreed that the obligations imposed upon Landlord hereunder shall be binding upon Landlord and Landlord's successors in interest only with respect to breaches occurring during Landlord's successors' respective ownership of Landlord's interest hereunder, and Landlord and its said successors in interest shall not be liable for acts and occurrences arising from and after the transfer of their interest as Landlord hereunder. 24.2. If all or any part of Landlord's interest in this Lease shall be held by a trust at any time or times, no trustee, shareholder or beneficiary of said trust shall be personally liable for any of the covenants or agreements, express or implied, hereunder; the Landlord's covenants and agreements shall be binding upon the trustees of said trust as trustee, as aforesaid, and not individually and shall be binding upon the trust estate. Nothing contained in the foregoing shall limit or restrict Tenant's rights to obtain injunctive relief against Landlord. 25. INDEMNIFICATION 25.1. Tenant and Landlord agree to indemnify and defend each other against, and to save each other harmless from, any and all claims of whatever nature for injury or damage to persons or property in or about the Premises caused by their respective negligence or intentional conduct or by the negligence or intentional conduct of their respective employees, agents or contractors. 26. NOTICE OF LEASE 26.1 Tenant and Landlord agree to execute a Notice of Lease, setting forth the essential elements of this lease, to be recorded in the Essex South District Registry of Deeds. 21 27. NET LEASE 27.1. It is understood and agreed that Tenant, during the term hereof, is to do all things and make all payments connected with the Premises or arising out of any occupation of the Premises or any part thereof or its appurtenances, except as otherwise expressly provided in this Lease, and under no condition or contingency is Landlord to be called upon to do or perform any act or action or be subject to any liability or responsibility or to make any payments with respect to the Premises or any part thereof, except as otherwise expressly provided in this Lease, all so that this Lease shall yield net to Landlord the rent specified in this Lease, except as otherwise expressly provided in this Lease. WITNESS the execution hereof under seal the day and year first written above. FIVE JAYS REALTY TRUST By: /s/ LOUIS J. GALANIS ---------------------------------------- LOUIS J. GALANIS, Trustee IPSWICH SAVINGS BANK By: /s/ David L. Grey --------------------------------------- Its: President, not individually ---------------------------------- 22 EXHIBIT A DESCRIPTION OF PREMISES A certain parcel of land with the buildings thereon, bounded and described as follows: Beginning at the Westerly corner by Haverhill Street at a nail in a stump, thence running N 24 03' 47" E, 511.17 feet, by land now or formerly of the Town of Rowley, to an iron pipe; Thence running S 67 39' 46" E, 270.6 feet, more or less, by land now or formerly of Thomas Warren, to the middle of a stream; Thence running by the thread of the stream and by land now or formerly of said Warren, Southeasterly, about 86 feet more or less, to the Newburyport Turnpike; Thence running by the State Highway layout line of the Newburyport Turnpike S 26 29' 48" W, 410.5 feet more or less, to a Massachusetts Highway bound point; Thence running on the curve of Newburyport Turnpike and Haverhill Street, 115.77 feet, to a Massachusetts Highway bound point on Haverhill Street; and Thence running by Haverhill Street, N 63 14' 19" W, 248.63 feet, to the point of beginning. Said parcel containing 3.74 acres, more or less. Being the same premises shown on "Plan of Land in Rowley, Mass. Owned by Five Jays Realty Trust, Scale I" = 40', January 7, 1985, H.P.E. Associates, Consulting Engineers, 21 Gregg Street, Beverly, Mass.", recorded in the Essex South District Registry of Deeds with the deed referred to below. The above description is intended to describe the land shown as "Area = 162,900+/- S. F. (3.74+/-acres)" upon said Plan, and in the event of any discrepancies the plan shall control. For title reference see the deed of Andrew J. Galanis, et al, dated January II, 1985, recorded in said Registry, Book 7635, Page 299. 23 EXHIBIT B RENT PAYMENTS The annual rent for each of the first five years of the original term of this Lease due from Tenant to Landlord shall be as follows, payable in advance in equal monthly installments on the first day of each month during the term of this Lease: Annual Rent Monthly Installments $41,250.00 $3,437.50 24 EXHIBIT C TERMS OF EXTENSION OPTION Each extension period resulting from the exercise of an option contained in Article 5 shall be upon the same terms and conditions as the original term of the Lease, except for the annual rent which will be determined as follows: A. First Extension Period (August 1, 2005, to July 31, 2010) The annual rent during the first extension period shall be obtained by increasing the annual rent reserved during the initial term to reflect the increases in the cost of living between August 1, 2000, and July 31(degree)", 2005. However, in no event shall the total rent increase for the first extension period exceed twenty (20%) percent of the rent charged during the initial term. The percentage of increase in the cost of living during the aforesaid period shall be determined by the Consumer Price Index, All Urban Consumers (CPI-U), Boston-Brockton-Nashua (original base 1982-84 = 100). The annual rent for the first extended term shall be computed as follows: The initial rent of $41,250.00 shall be multiplied by the percentage by which the cost of living increased between August 1, 2000, and July 31, 2005, to arrive at the cost of living increase. The cost of living increase shall be added to the initial annual rent before adjustment ($41,250.00) to obtain the annual rent after adjustment. However, in no event shall the annual rent after adjustment exceed $49,500.00. The annual rent after adjustment shall be payable in equal monthly installments on the first day of each month, in advance, the first such payment to be made on or before August 1, 2001. B. Second Extension Period (August 1, 2010, to July 31, 2015) The annual rent during the second extension period shall be obtained by increasing the annual rent reserved during the first extended term to reflect the increases in the cost of living between August 1, 2005, and July 31, 2010. However, in no event shall the total rent increase for the second extended term exceed 25 EX-27 3 0003.txt FINANCIAL DATA SCHEDULE
9 1,000 9-MOS DEC-31-2000 SEP-30-2000 8,547 0 0 0 39,669 27,325 26,762 204,205 1,823 288,551 225,276 15,584 4,405 27,000 0 0 253 16,033 288,551 10,993 3,499 266 14,758 5,876 8,106 6,652 45 2 5,085 2,798 2,009 0 0 2,009 .82 .81 7.14 0 335 27 0 1,798 46 26 1,823 1,823 0 63
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